DiscoverIE : Preliminary results for the year ended 31 March 2023

07 June 2023

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Strong growth in sales & earnings; medium-term operating margin target raised to 15%

discoverIE Group plc (LSE: DSCV, "discoverIE" or the "Group"), a leading international designer and manufacturer of customised electronics to industry, today announces its results for the year ended 31 March 2023 ("FY 2022/23" or the "year").

	FY 2022/23	FY 2021/22	Growth %	CER(2) growth %
Revenue	£448.9m	£379.2m	+18%	+15%
Underlying operating profit(1)	£51.8m	£41.4m	+25%	+20%
Underlying operating margin(1)	11.5%	10.9%	+0.6ppts	+0.5ppts
Underlying profit before tax(1)	£46.3m	£37.6m	+23%
Underlying EPS(1)	35.2p	29.4p	+20%
Reported profit before tax	£29.1m	£17.1m	+70%
Reported fully diluted EPS (continuing business)	21.7p	10.1p	+115%
Full year dividend per share	11.45p	10.80p	+6%

Highlights

• Strong financial performance driven by sales growth with operating efficiencies
  • Group sales up 18%, with organic⁽³⁾ sales up 10%, (divisional growth M&C: +11%; S&C: +8%)/li>
  • Organic gross margins robust despite inflation headwinds
  • Underlying operating profit increased by 25%
  • Underlying EPS increased by 20%

• Further progress made towards key targets
  • Underlying operating margin increased by 0.6ppts to 11.5%.
  • Sales into UN SDG-aligned target markets⁽⁴⁾ increased by 1ppt to 77%
  • ROCE⁽⁵⁾ increased by 1.2ppts to 15.9%
  • Free cash flow⁽⁶⁾ up 51% to £33.0m with a conversion of 95% of underlying earnings

• Operating margin target raised to 15% over the medium term
  • Remaining on track to reach 13.5% by FY25

• Two earnings-accretive acquisitions completed for £23m
  • Magnasphere and CDT; integrations underway and progressing as planned

• Excellent progress on ESG initiatives
  • Absolute carbon emissions reduced by 35% since CY 2021 (v new 65% target by CY 2025)⁽⁷⁾
  • SBTi aligned net zero carbon emissions commitment by 2030⁽⁸⁾ announced in Nov 22

• Group well positioned for further growth
  • Strong order book of £223m and design wins up 11% to £273m
  • Strong pipeline of acquisition opportunities in development
  • Year-end gearing⁽⁹⁾ of 0.7x, significant funding headroom available

Nick Jefferies, Group Chief Executive, commented:

"The Group has made further good progress towards our medium-term goals, with excellent sales growth and significant operational efficiencies resulting in 20% growth in underlying earnings per share.

We continue to focus on generating organic growth in high momentum, sustainable markets, enhanced by earnings-accretive acquisitions whilst reducing our carbon footprint. Our carbon emissions have reduced by 35% in absolute terms since CY 2021 and in November 2022 we announced our target to reach net zero by 2030.

The new financial year has started well with continued organic sales growth over last year. The order book remains at a higher than expected level, in line with last year, providing good visibility of demand. As previously guided, the order book has been normalising from the record level in September 2022 and, as expected, this trend is continuing in the new financial year as global supply chain lead times return to normal.

discoverIE is well positioned in a changing world. Our products are designed-in and essential in customers' applications whilst amounting to only a small proportion of their overall spend, providing us with revenue visibility and stable margins. Additionally, our broad international footprint enables us to respond quickly to regional production movements.

The discoverIE business model has proven to be very resilient through difficult market conditions. With a strong pipeline of acquisition opportunities and a robust balance sheet, the Group is well positioned to make further good progress."

Analyst and investor presentation:

A results briefing for sell side analysts and investors will be held today at 9.30am (BST at the offices of Peel Hunt. If you would like to join in person or via the live webinar, please contact Buchanan at [e-mail].

A webcast for US based analyst investors will be hosted at 3.30pm BST; for dial-in details, please contact [e-mail].

Enquiries:

[e-mail]		01483 544 500
Nick Jefferies Simon Gibbins Lili Huang	Group Chief Executive Group Finance Director Head of Investor Relations

Buchanan	020 7466 5000
Chris Lane, Toto Berger, Jack Devoy [e-mail]

Notes:

(1) 'Underlying operating profit', 'Underlying operating margin", 'Underlying EBITDA', 'Underlying profit before tax', 'Underlying EPS', 'Underlying operating cash flow' and 'Free cash flow' are non-IFRS financial measures used by the Directors to assess the underlying performance of the Group. These measures exclude acquisition-related costs (amortisation of acquired intangible assets of £15.8m and acquisition & disposal expenses of £1.4m) totalling £17.2m. Equivalent underlying adjustments within the FY 2021/22 underlying results totalled £20.5m. For further information, see note 5 of the attached consolidated financial statements.
(2) Growth rates at constant exchange rates ("CER"). For the year ended 31 March 2023, the average sterling rate of exchange weakened 2% against the Euro and 12% against the US Dollar compared with the average rates for last year, whilst strengthening 2% on average against the three Nordic currencies.
(3) Organic growth for the Group compared with last year is calculated at constant exchange rates ("CER") and is shown excluding the first 12 months of acquisitions post completion (CPI in May 2021, Antenova in August 2021, Beacon in September 2021, CDT in June 2022 and Magnasphere in January 2023).
(4) Target markets are renewable energy, medical, transportation, and industrial & connectivity.
(5) ROCE is defined as underlying operating profit from continuing operations including the annualisation of acquisitions as a percentage of net assets excluding net debt, deferred consideration related to discontinued operations and legacy defined benefit pension asset/(liability).
(6) Free cash flow is cash flow before dividends, acquisitions and equity fund-raising.
(7) Original target was to reduce scope 1 & 2 carbon emissions intensity in CY 2019 by 50% on a like-for-like basis by CY 2025. Achieved target three years early. New target introduced this year for an absolute carbon emissions reduction of 65% by CY 2025 since CY 2021.
(8) Net zero carbon emissions by 2030 defined as Net Zero Scope 1 & 2 emissions as defined by SBTi along with a commitment to achieve Net Zero Scope 3 emissions by 2040.
(9) Gearing ratio is defined as net debt divided by underlying EBITDA (including lease payments; annualised for acquisitions).
(10)Unless stated, growth rates refer to the comparable period last year.
(11) The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulation, Article 7 of EU Regulation 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

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