Interim results Half year ended 30 th September 2018 Strategy Delivering Further Strong Growth 4 th December 2018 Interim results FY19 – 4 th December 2018 discoverIE Group plc
A strong first half Group sales up 11% Organic D&M excl acquisitions +10% Record order book +18% (CER) New project design wins +40% (1) Underlying operating profit +23% Underlying EPS +24% Since the half year end – the acquisition of Cursor Controls for £19m (1) Estimated lifetime sales value of projects Interim results FY19 – 4 th December 2018 discoverIE Group plc 1
Growth Company SALE SA LES (1) We aim to provi ovide de inves vestor tors with Returns of 15 – 20% pa A progressive dividend Since ce FY13 : FY13 FY14 FY15 FY16 FY17 FY18 FY19 Sales up > 2x Underlying EPS up > 2x UNDERLY LYIN ING OPERATIN ING Operating profits up > 4x PROFIT IT & & EPS Share price growth 21% CAGR (2) Dividend growth 7.4% CAGR (3) Our aim is to double e EPS in 5 years H1 19 EPS up 24% FY13 FY14 FY15 FY16 FY17 FY18 FY19 Underlying Operating Profit EPS (1) Group revenue, excluding disposed businesses (2) Growth from 2009 to Nov 2018 (3) Growth from 2010 - 2018 Interim results FY19 – 4 th December 2018 discoverIE Group plc discoverIE Group plc 2
FINANCIAL REVIEW Interim results FY19 – 4 th December 2018 discoverIE Group plc
Financial Review Strong first half performance Higher er gross margin Up 0.8ppts to 33.0% CER H1 19 H1 18 Growth Increa easing operati ting Growth margin £211.7m £190.2m Revenue +11% +12% Up 0.6ppts to 6.8% £14.5m £11.8m Underlying operating profit (1) +23% +25% Gener erati ting cash Underlying profit before tax (1) £12.9m £10.4m +24% 84% operating cash Underlying EPS (1) 13.0p 10.5p +24% conversion in the last 12 months (£22.9m) Interim dividend per share 2.80p 2.65p +6% Growin wing ROCE E Up 1.3ppts to 14.8% (1) Underlying profits exclude acquisition-related costs and exceptional items (see Appendices I & II) (2) ROCE is underlying operating profit as a percentage of net assets plus net debt (including acquisitions). FY18 ROCE of 15.5% excluded acquisitions Interim results FY19 – 4 th December 2018 discoverIE Group plc 4
Financial Review Revenue more than doubled in 5yrs REVENUE Growth th H1 19 +11% Organic (1) 7% +21% Acq 5% CER 12% +10% +18% Currency -1% +20% £212m Actual 11% £190m £157m £142m £121m £100m H1 14 H1 15 H1 16 H1 17 H1 18 H1 19 Revenue up 112% in 5 years ( 16% CAGR) (1) Organic growth (excluding acquisitions). Including acquisitions, organic growth was 3% (see Santon p16) Interim results FY19 – 4 th December 2018 discoverIE Group plc 5
Financial Review Strong increase in profitability UNDERLYING G OPE PERATING G PR PROFI FIT & Under erlying operati ting profi fit (1 (1) ) MARGI GIN of £14.5m 6.8% Up £2.7m on H1 18 (+23%, +25% CER) 6.2% £14.5m 39% CAGR in 5 years 5.6% 5.4% £11.8m 4.5% Under erlying operati ting margin £8.8m of 6.8% £7.6m Up 0.6ppts on H1 18 £5.5m 5m 2.8% Up 4.0ppts in 5yrs £2.8m Progress towards 8.5% target (2) H1 14 H1 15 H1 16 H1 17 H1 18 H1 19 (1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and II). (2) Mid term target by Nov 21 Interim results FY19 – 4 th December 2018 discoverIE Group plc 6
Financial Review Profits driven by higher value products and good operating leverage UNDERLYING G OPE PERATING G PR PROFI FIT Under erlying ing operati ating profit fit up 25% CER £1.5m (£2.8m) (£0.1m 1m) (£0.2m) Strong revenue growth £4.3m Gross margin up 0.7ppts organically Opex increase mainly D&M related Santon impacted by Chinese tariff £14.5m £11.8m reductions EBIT T drop thru of 20% 20% (2) H1 18 REVENUE GM GM OPEX ACQS FX FX H1 19 (1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and II). (2) Increase in profits as a percentage of sales growth (Excluding acquisitions) Interim results FY19 – 4 th December 2018 discoverIE Group plc 7
Financial Review Profit growth across both divisions… £m H1 19 H1 18 (CER) Revenue growth UOP growth UOP (1) UOP (1) Organic (2 ) Revenue % Revenue % Actual CER % D&M 127.8 14.2 11.1% 106.7 11.6 10.9% 18% 20% 10% 22% Custom Supply 83.9 3.9 4.6% 81.9 3.3 4.0% 2% 2% 2% 18% Unallocated (3.6) (3.3) Total (CER) 211.7 14.5 6.8% 188.6 11.6 6.2% 11% 12% 7% 25% FX 1.7 0.2 Total (reported) 211.7 14.5 6.8% 190.2 11.8 6.2% DESIGN & CUSTO TOM MANUFACTU CTURING SUPPLY Operati ting profit up 18% CER Operati ting profit t up 22% 22% CER Margin up 0.6ppts to 4.6% Margin up 0.2ppts to 11.1% (1) UOP is underlying operating profit (2) Organic growth excludes acquisitions (D&M) Interim results FY19 – 4 th December 2018 discoverIE Group plc 8
Financial Review … driving further EPS growth Unde derlying ying PBT up 24% Under derlyi ying ng EPS up 24% 24% £m H1 19 H1 18 Up c.170% in 5 yrs (22% CAGR) Underlying operating profit (1) 14.5 11.8 Finance costs (1) (1.6) (1.4) UNDERLY LYIN ING EPS Underlying PBT (1) 12.9 10.4 +24% Effective tax rate 25% 24% +24% Underlying PAT 9.7 7.9 +10% +18% +35% Fully diluted shares (m) 74.5 75.0 13.0p 10.5p 5p 8.5p 7.7p Underlying EPS (p) 13.0p 10.5p 6.5p 4.8p H1 14 H1 15 H1 16 H1 17 H1 18 H1 19 (1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and II). Interim results FY19 – 4 th December 2018 discoverIE Group plc 9
Financial Review Financing and cash flow OPERATING CASH FLOW (1) Operati ating ng cas ash flow (1 (1) ) of £22.9m 9m in last 12 months (£m) over er last t 12 months (LTM) £22.9m for LTM, up 5% 22.9 84% of underlying operating profit 21.9 100% average conversion rate over the last 6 years. 18.6 16.5 Net t debt t at 30 Sep 18 of £62.6m 6m £2.3m reduction since last year (ex 9.9 acquisitions) Gearing ratio (2) of 1.85x (target range 6.1 1.5x – 2.0x) H1 14 H1 15 H1 16 H1 17 H1 18 H1 19 Target Revol volvi ving ng credi edit t faci cility ty of £120m % Underlying 100% 104% 106% 107% 95% 84% 85% Plus £30m accordion; term to Jul 21 Operating Profit Available for acquisitions and working capital (1) Operating cash flow defined as EBITDA less working capital and capex – see Appendix III (2) Net debt at 30 Sep 18 as a ratio of adjusted EBITDA (Group underlying EBITDA for last 12 months adjusted for a full year of the underlying EBITDA from acquisitions ). Interim results FY19 – 4 th December 2018 discoverIE Group plc 10
Financial Review Working capital increases to support growth WORKING CAPITAL (2) Similar WC/sales es ratio o to last year 60% 17.3% of annualised Q2 sales (v 16.7% LY) 57% Reflects increasing proportion of D&M 52% (D&M WC at 22% of sales, CS WC at 13% 46% £55 55m of sales) C2C 86 86 £47 47m C2C 97 £38 38m WC up £5.3m 3m organically y in LTM C2C 100 £33 33m Strong organic growth in Q2 of 9% C2C 91 (£36m annualised sales) = 14% WC rate 17.4% 4% 17.3% 3% 16.7% 16.1% below Group average £2 £2-3m Brexit stock k building H2 £22 22m £23 23m £21 21m £24 24m C2C 54 4 C2C 44 4 C2C 53 C2C 48 Customer committed inventory H1 16 H1 17 H1 18 H1 19 CS D&M Group SWC% Sales D&M Sales% (1) Cash to cash cycle (C2C) is the average net number of days from remitting cash to suppliers to receipt of cash from customers (stock days – creditor days + debtor days) (2) Working capital is defined as net inventory, trade & other receivables and trade & other payables. Unallocated working capital is not represented in this chart. Interim results FY19 – 4 th December 2018 discoverIE Group plc 11
Financial Review Increasing dividend 9.00p 8.50p Inter erim divi vidend end up 6% 8.05p 7.60p 77% growth FY dividend in 8yrs 6.80p 7.4% CAGR 6.18p 5.81p Mainta taining progres essive ve 5.43p 6.35p 5.09p 6.05p 5.72p policy 5.40p 4.98p 2 to 3x cover (underlying basis) 4.36p 3.99p 9p 3.74p FY18: 2.5x cover (underlying) and 3.40p 1.8x cover (reported) 2.80p 2.65p 2.45p 2.33p 2.20p 1.82p 1.82p 1.82p 1.69p 9p 1.69p 9p FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Interim results FY19 – 4 th December 2018 discoverIE Group plc discoverIE Group plc 12
OPERATING REVIEW Interim results FY19 – 4 th December 2018 discoverIE Group plc
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