REG - discoverIE Group plc - First Half Trading Update

DiscoverieAnnouncement

11/10/2023 07:00

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RNS Number : 6908P  discoverIE Group plc  11 October 2023

For Release

7.00am, 11 October 2023

 

discoverIE Group plc

 

First Half Trading Update

 

Sustained positive trading momentum, with significant margin progress

 

 

discoverIE Group plc (LSE: DSCV, "discoverIE" or "the Group"), a leading
international designer and manufacturer of customised electronics to industry,
today issues a trading update for the first six months of the financial year
ending 31 March 2024 ("the Period").

 

The Group continues to make good financial and strategic progress and is on
track to deliver full year underlying earnings in-line with the Board's
recently upgraded expectations.

 

Group sales in the Period were 4% ahead of last year(1) at CER(2), comprising
1% organic(3) growth and 3% from acquisitions. After foreign exchange effects
of 3%, reported sales were 1% ahead of last year. Sales increased by 2%
organically in the Magnetics & Controls division and by 1% organically in
the Sensing & Connectivity division. Whilst, as expected, we have seen
some normalisation of order books, our focus on a diverse range of industrial
customers in our four target markets (renewable energy, electrification of
transportation, medical and industrial & connectivity) provides us with
long term, structural growth in less cyclical markets which has led to
resilient overall demand and sustained positive trading momentum.

 

Orders in the second quarter increased by 2% sequentially, with the book to
bill ratio increasing from 0.84 in the first quarter, to 0.91 in the second
quarter. The order book at 30 September 2023 represents just over five months
coverage, remaining ahead of historic levels and providing good visibility for
the second half of the year.

 

Through a combination of initiatives including improving sales mix, cost and
efficiency actions, operating margins continue to strengthen. Operating
margins during the Period are expected to increase by around 100 basis points
year-on-year, making excellent progress towards our FY25 target of 13.5% and
mid-term target of 15%. The benefits of this margin improvement will more than
offset both rising interest charges and foreign exchange translation impacts,
with the Group expecting to report record underlying earnings per share for
the Period.

 

Design wins increased strongly in the Period, by 23%, with an estimated
lifetime value of £190m and with 89% being in our target growth markets.
Design wins are a key driver of future organic revenues and we have a strong
pipeline of future opportunities in development.

 

The acquisitions of Silvertel on 31 August 2023 and 2J Antennas on 18
September 2023 are performing well with integrations proceeding as expected.

 

With continuing good operating cash flow, gearing(4) at 30 September 2023 was
1.6x, the lower end of the Group's target gearing range of 1.5x to 2.0x.

 

Outlook

 

Following a strong performance in the Period and with good orderbook
visibility into the second half, the Group is on track to deliver full year
underlying earnings in-line with the Board's recently upgraded expectations.

 

With a clear strategy focused on structural and sustainable international
growth, a diversified customer base, a healthy order book and pipeline of
design wins and acquisition opportunities, the Group has a resilient business
model that, despite varied market conditions,  is well positioned to make
further good progress on its key priorities.

 

The Group will release its interim results on 5 December 2023.

 

For further information, please contact:

 discoverIE Group
 plc

 01483 544 500

 Nick Jefferies             Group Chief Executive

 Simon Gibbins            Group Finance Director

 Lili Huang                   Head of Investor Relations

 Buchanan
 020 7466 5000

 Chris Lane, Toto Berger, Jack Devoy

 discoverIE@buchanan.uk.com (mailto:discoverIE@buchanan.uk.com)

 

Notes

1.     Growth rates refer to the comparable prior year period unless
stated.

 

2.     Growth rates at constant exchange rates ("CER"). In calculating CER
for the Period, the average Sterling rate of exchange weakened 2% against the
Euro while strengthening 3% against the US Dollar compared with the average
rates for last year and 9% on average against the three Nordic currencies.

 

3.     Organic growth for the Group compared with last year is calculated
at CER and is shown excluding the first 12 months of acquisitions post
completion (CDT in June 2022, Magnasphere in January 2023, Silvertel in August
2023 and 2J in September 2023).

 

4.     Gearing is defined as net debt divided by underlying EBITDA
(excluding IFRS 16, annualised for acquisitions).

 

5.     This trading update is based upon unaudited management accounts and
has been prepared solely to provide additional information on trading to the
shareholders of discoverIE Group plc. It should not be relied on by any other
party for other purposes. Certain statements made in this update are forward
looking statements. Such statements have been made by the Directors in good
faith using information available up until the date that they approved this
update. Forward looking statements should be regarded with caution because of
the inherent uncertainties in economic trends and business risks.

 

 

 

Notes to Editors:

 

discoverIE Group plc is an international group of businesses that design and
manufacture innovative electronic components for industrial applications.

 

The Group provides application-specific components to original equipment
manufacturers ("OEMs") internationally through its two divisions, Magnetics
& Controls, and Sensing & Connectivity. By designing components that
meet customers' unique requirements, which are then manufactured and supplied
throughout the life of their production, a high level of repeating revenue is
generated with long-term customer relationships.

 

With a focus on sustainable key markets driven by structural growth and
increasing electronic content, namely renewable energy, medical,
electrification of transportation, and industrial automation &
connectivity, the Group aims to achieve organic growth that is well ahead of
GDP and to supplement that with complementary acquisitions. The Group is
committed to reducing the impact of its operations on the environment with an
SBTi aligned plan to reach net zero. With its key markets aligned with a
sustainable future, the Group has been awarded an ESG "AA" rating by MSCI and
is Regional (Europe) Top Rated by Sustainalytics.

 

The Group employs c.4,900 people across 20 countries with its principal
operating units located in Continental Europe, the UK, China, Sri Lanka, India
and North America.

 

discoverIE is listed on the Main Market of the London Stock Exchange and is a
member of the FTSE250, classified within the Electrical Components and
Equipment subsector.

 

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