REG - discoverIE Group plc - Full Year Trading Update

DiscoverieAnnouncement

18/04/2024 07:00

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RNS Number : 0285L  discoverIE Group plc  18 April 2024

For Release

7.00am, 18 April 2024

 

discoverIE Group plc

 

Full Year Trading Update

 

Good finish to year - further margin progress with results in-line

 

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 its financial year ended 31 March 2024,
ahead of the announcement of its preliminary results on 5 June 2024.

 

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

 

Group sales for the year were 1% ahead of last year at CER((1)), following two
years of strong growth when sales increased by 48%. Net revenue growth of 2%
this year from acquisitions, less disposals, was partly offset by a 1%
reduction in organic sales((2)) with customers processing inventory reductions
in the middle part of the year. Sterling strength during the year impacted
Group sales by c.4%, with reported Group revenue being 3% below last year.
Organic sales in the Sensing & Connectivity Division ("S&C") increased
by 2% for the year offset by a 2% reduction in the Magnetics & Controls
Division ("M&C").

 

As expected, the Group returned to organic growth in the latter part of the
year delivering fourth quarter organic sales growth of 2% year-on-year and 11%
sequentially. Year-on-year fourth quarter growth comprised 7% organic growth
in S&C driven by strong performance in the sensing businesses, partly
offset by a 1% reduction in M&C, where demand recovery in the industrial
magnetics businesses has been at a slower pace.

 

The year-end order book has reverted to normalised levels of around 4.5 months
of sales which, together with a continuing strong pipeline of design wins,
provides good visibility of demand into the new year.

 

Operational performance continues to be strong, with the Group benefiting from
its broad footprint and decentralised model, as the global trend to regional
production progresses. With robust gross margins and tight control of
operating expenses, the Group continues to perform well through the cycle with
full year underlying profit higher than last year organically and augmented by
the contribution from acquisitions.

 

Second half underlying operating margin is expected to be ahead of the first
half (H1 2023/24: 12.9%), making further good progress towards our medium term
target of 15%.

 

In March 2024, the Group made a bolt-on acquisition for the Beacon cluster in
North America and another for the Foss cluster, both acquired for mid-single
digit EBIT multiples. In addition, the Group's Santon business has reached an
agreement to dispose of its lower margin solar switches production unit
enabling it to focus on its industrial and transportation business. The
disposal is expected to complete during the new financial year and along with
the recent higher margin acquisitions will be accretive to Group operating
margins.

 

The acquisitions made this year are all performing as expected with
integrations proceeding well and as planned. The Group is well funded, and
free cash flow continues to be strong with gearing at the year end of 1.5x.

 

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

 

Change of Auditor

 

In line with corporate governance best practice, the Group has undertaken a
formal tender process for its audit, which has resulted in a recommendation to
appoint Deloitte LLP as the Group's auditor for the year ending 31 March 2025.
A resolution will be put to shareholders for approval at the 2024 Annual
General Meeting. A description of the tender process will be included in the
Annual Report and Accounts for the year ended 31 March 2024.

 

PricewaterhouseCoopers LLP will continue as the Group's auditor until that
time and will undertake the Group audit for the year ending 31 March 2024.

 

 

 

 

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

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

 

Notes

 

1.     Growth rates at constant exchange rates ("CER") exclude the impact
of nil margin, pass-thru costs in FY 2022/23 totaling £5.0m. The average
Sterling rate of exchange was unchanged against the Euro compared with the
average rate for the same period last year, while strengthening 4% against the
US Dollar and 7% on average against the three Nordic currencies. For the final
quarter ended 31 March 2024, the average Sterling rate of exchange
strengthened 3% against the Euro compared with the average rate for the same
period last year, 5% against the US Dollar and 5% on average against the three
Nordic currencies. Growth rates refer to the comparable prior year period
unless stated.

 

2.     Organic growth for the Group's continuing operations compared with
last year is calculated at CER and is shown excluding the first 12 months of
acquisitions post completion (including Magnasphere in January 2023, Silvertel
in August 2023 and 2J in September 2023) and excluding the disposal of the
Santon solar switches production unit.

 

3.     Gearing ratio is defined as net debt divided by underlying EBITDA
(including the annualisation of acquired businesses, adjusted for lease
payments).

 

4.     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:

 

About discoverIE Group plc

 

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.4,500 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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