30 NOVEMBER 2021

 

discoverIE Group plc

 

Interim results for the six months ended 30 September 2021

 

Record growth and order book, targets upgraded

 

 

discoverIE Group plc (LSE: DSCV, "discoverIE" or "the Group"), a leading international designer and manufacturer of customised electronics to industry, today announces its interim results for the six months ended 30 September 2021 ("H1 2021/22" or "the period").

 

Continuing Operations(1)	H1 2021/22	H1 2020/21	Growth %		H1 2019/20	Growth %
Revenue	£174.3m	£143.8m	+21%		£149.4m	+17%
Underlying operating profit(2)	£18.0m	£13.6m	+32%		£14.2m	+27%
Underlying operating margin(2)	10.3%	9.5%	+0.8ppts		9.5%	+0.8ppts
Underlying profit before tax(2)	£16.1m	£11.7m	+38%		£12.0m	+34%
Underlying EPS(2)	13.0p	9.5p	+37%		11.0p	+18%
Reported profit before tax	£6.4m	£5.6m	+14%		£6.8m	(6%)
Total Operations
Reported fully diluted EPS	6.6p	5.8p	+14%		9.1p	(27%)
Interim dividend per share	3.35p	3.15p	+6%		2.97p	+13%

 

 

Highlights

 

·      Record growth in orders and sales driving strong financial performance   

o  Organic⁽³⁾ orders: +64% (v H1 2020/21) and +34% (v pre-Covid period H1 2019/20)    

o  Organic sales: +15% (v H1 2020/21) and +8% (v H1 2019/20)   

o  Underlying operating profit from continuing operations: +32%

o  Underlying EPS from continuing operations: +37%

 

·      Further progress made towards key targets; strategic targets now upgraded

o  Underlying operating margin increased to 10.3% (with target increased to 13.5%)

o  Good progress towards carbon emissions target reduction of 50% by 2025

o  Sales beyond Europe increased to 38% of total sales (with target increased to 45%)

o  Sales into target markets⁽⁴⁾ of 77% (H1 2020/21: 68%)    

o  Excellent free cash conversion⁽⁵⁾ of 95% of PAT, well ahead of 85% target   

 

·      Three international acquisitions completed for £85m

o  Beacon, Antenova and CPI acquired; integrations progressing well   

o  Well supported equity placing in Sept 2021 raising a net £53m

 

·      Group well positioned for further growth   

o  Announced sale of Acal BFi business for £50m concludes exit from distribution business

o  Record order book of £198m (organic: +71% v Sept 2020; +54% v Sept 2019)

o  Further acquisition opportunities developing with considerable funding headroom

o  Proforma gearing⁽⁶⁾ post Acal BFi sale of 0.9x, well below our target of 1.5x to 2.0x

 

 

 

 

Nick Jefferies, Group Chief Executive, commented:

 

"These strong results demonstrate the strength of the discoverIE business model, with record growth in orders, order book and underlying earnings per share, which increased by 37% and follows a resilient performance last year through Covid. Revenues and earnings are now well ahead of the pre-Covid period and I would like to thank all employees around the Group for their tremendous effort and flexibility over the last 18 months that has led to these results.

 

The announced sale of Acal BFi earlier this month concludes the Group's exit from the business of distribution, with discoverIE now becoming a solely focused global designer and manufacturer of customised electronics. We have raised our medium-term strategic targets accordingly and our continuing focus is on achieving organic growth with new design wins in sustainable target markets, together with accretive acquisitions.

 

The second half has started well with continued order and sales growth over the same period last year and two years ago, and the Group is on track to deliver full year underlying earnings for the continuing operations ahead of the Board's previous expectations despite ongoing supply chain and foreign exchange headwinds.

 

With a clear strategy focused on long-term, high quality, structural growth markets across Europe, North America and Asia, a diversified customer base, a record order book and a strong pipeline of acquisition opportunities, the Group is well positioned to make further progress on its key priorities."

 

 

Analyst and investor presentation

 

A virtual results briefing for analysts and investors will be held today at 9.30am (UK time) via a live webinar.

 

If you would like to join the webinar, please contact Buchanan at [email protected].

 

Enquiries:

 

discoverIE Group plc                           Nick Jefferies                Group Chief Executive Simon Gibbins              Group Finance Director Lili Huang                      Head of Investor Relations	01483 544 500
Buchanan                                                         Chris Lane, Toto Berger, Jack Devoy [email protected]	020 7466 5000

 

 

Notes:

 

(1)   Continuing operations excludes the results of the Acal BFi and Vertec SA businesses following their post period-end disposal announcements. These two businesses comprise the discontinued operations.

 

(2)   'Underlying Operating Profit', 'Underlying Operating Margin", 'Underlying Operating Expenses', 'Underlying Profit before Tax' and 'Underlying EPS' are non-IFRS financial measures used by the Directors to assess the underlying performance of the Group. These measures relate to continuing operations and exclude acquisition-related costs (amortisation of acquired intangible assets of £6.4m and acquisition & disposal expenses of £3.3m) totalling £9.7m. Equivalent underlying adjustments within the H1 2020/21 underlying results totalled £6.1m. For further information, see notes 2 and 5 of the attached summary financial statements.

 

(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 (Phoenix was acquired in October 2020, Limitor in February 2021, CPI in May 2021, Antenova in August 2021 and Beacon in September 2021). Organic growth compared with two years ago excludes the first 24 months of acquisitions so also excludes Sens-Tech acquired in October 2019. The average sterling rate of exchange strengthened 4% against the Euro compared with the average rate for the first half last year and strengthened 10% against the US Dollar while remaining in line on average against the three Nordic currencies.

 

(4)   Target markets are renewable energy, medical, transportation, industrial & connectivity.

                 

(5)   Free cash flow is cash flow before dividends, acquisitions and equity fund raising.

 

(6)   Gearing ratio is defined as net debt divided by underlying EBITDA (annualised for acquisitions).

 

(7)   Unless stated, growth rates refer to the comparable prior year period.

 

(8)  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.

 

 

Notes to Editors:

 

About discoverIE Group plc

 

discoverIE Group plc is an international group of businesses that designs and manufactures innovative components for electronic applications.

 

The Group provides application-specific components to original equipment manufacturers ("OEMs") internationally. 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 key markets driven by structural growth and increasing electronic content, namely renewable energy, medical, transportation and industrial & connectivity, the Group aims to achieve organic growth that is well ahead of GDP and to supplement that with targeted complementary acquisitions. The Group has an ongoing commitment to reducing the impact of its operations on the environment, while its key markets are aligned with a sustainable future.

 

The Group's continuing operations employs c.4,500 people and its principal operating units are located in Continental Europe, the UK, China, Sri Lanka, India and North America.

 

The Group 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.

 

 

 

Strategic, Operational and Financial Review

 

Overview

 

The first half saw strong organic growth compared with both the Covid-impacted prior year, and the pre-Covid period two years ago, building on the progress of previous years. Over the last four years as the D&M strategy has gathered momentum, ongoing Group organic sales have grown by 9% CAGR while underlying EPS of continuing operations have grown by 17% CAGR, excluding the Covid year.

 

With the announcement in November 2021 of the sale of the Acal BFi distribution business, discoverIE is now solely focused on the design and manufacture of customised, innovative electronics. Five higher margin acquisitions were made over the last year (three during the period), further progressing us towards our medium-term goals of becoming a higher margin Group, focused on international and sustainably-aligned target markets, and delivering strong cash generation. To reflect this, our key strategic targets have been upgraded, as detailed in the Key Strategic and Performance Indicators section below. Meanwhile, our low gearing leaves us with considerable headroom for further acquisitions.   

 

First half continuing Group sales increased by 21%, being 15% higher organically than last year and 8% higher than the pre-Covid period two years ago. Performance in our target markets, which now account for 77% of Group sales, has been much stronger than other markets, helping to deliver an underlying operating margin of over 10% for the first time.

 

Orders grew by 64% organically compared with last year and by 34% compared with two years ago following the build-up of a strong pipeline of design wins over several years. This resulted in a record period-end order book of £198m, respectively 71% and 54% higher organically than 12 months and 24 months previously.

 

The Group is managing widespread supply chain challenges effectively. While these conditions are expected to continue during the second half, the period has started well with continuing organic growth in orders and sales and the Group is on track to deliver full year underlying earnings for the continuing operations ahead of the Board's previous expectations. To ensure that the Group can continue to grow well into the future, production capacity is being expanded in the US, Germany and India, and production has begun as scheduled at the Group's new larger facility in Nogales, Mexico.

 

 

Carbon emissions

 

Last year the Group introduced a target to reduce carbon emissions by 50% on a like for like basis across the Group by 2025. With numerous manufacturing locations internationally, the primary source (73%) of emissions is from purchased electricity (Scope 2 emissions). The remaining emissions are mainly from vehicles, as well as natural gas and oil consumed on site (Scope 1). Good progress towards our reductions target was made in calendar year 2020 with a 6% like-for-like reduction in underlying carbon emissions and we anticipate further progress when measurements are taken at the end of this calendar year. 

 

Sourcing electricity from clean and lower or zero carbon sources where possible, or installing renewable power generation on site, as well as adopting more energy efficient practices, are the key steps to achieving our emissions target. Of the Group's 30 manufacturing sites, the largest eight are responsible for c.60% of the Group's carbon emissions. Two of these eight sites have now switched to renewable energy tariffs, while the Sri Lankan facility has completed the first phase of solar panel installation and one in Poland has installed a natural source heat pump. When complete, these latter two initiatives alone are expected to reduce the Group's carbon emissions by around 10%. Phase 2 and 3 of the solar panel project in Sri Lanka are both planned for 2022 and, when complete, will reduce site carbon emissions by c. 75%.  

 

Additionally, the switch to electric and hybrid vehicles is underway and EV chargers are being installed at a number of sites around the Group. Likewise, there is an ongoing reduction in flights with the Group's businesses encouraged to use flights only where necessary, continuing with video communication and other channels where possible.

 

For newly acquired businesses, we aim to increase renewable energy to at least 50% of their total energy consumption within the first five years post acquisition. This target is being integrated into their business plans. Emission audits with the three acquisitions this Period are expected to complete by the year end.

 

 

Group Results Summary

 

Continuing Group sales for the first half increased by 21% to £174.3m (+24% CER), with first half underlying operating profit, which excludes acquisition & disposal-related costs, increasing by 32% to £18.0m. Underlying profit before tax increased by 38% to £16.1m, with underlying earnings per share for the period increasing by 37% to 13.0p (H1 2020/21: 9.5p).

 

After underlying adjustments for acquisition costs, together with taxation costs and the inclusion of net profits from the discontinued operation, profit after tax for the period on a reported basis increased by 17% to £6.2m (H1 2020/21: £5.3m) with fully diluted earnings per share increasing by 14% to 6.6p (H1 2020/21: 5.8p).

 

Strong free cash flow of £28.1m over the last 12 months represented 95% of PAT, well ahead of the 85% target. Net debt at 30 September 2021 was £75.6m (30 September 2020: £42.1m) with a gearing ratio of 1.3x, being net debt divided by underlying EBITDA (annualised for acquisitions). Including our post period-end announced disposals of Acal BFi and Vertec SA, proforma gearing at the end of September reduced to 0.9x, well below our target range of 1.5x to 2.0x, leaving considerable headroom for further accretive acquisitions.

 

Alongside the acquisitions of Antenova in August 2021 and Beacon in September 2021, the balance sheet was strengthened in the period by way of a well-supported equity placing that raised net proceeds of £53.4m. Together with strong organic cash flows, these provide the Group with an excellent platform from which to continue to execute its growth strategy. On behalf of the Board, we would like to thank shareholders for their support.

 

 

Increased Dividend

 

The Board is pleased to declare an increase in the interim dividend of 6% to 3.35p per share (H1 2020/21: 3.15p per share). Since 2010, the annual dividend per share has doubled and the total dividend payment has increased by nearly 400%.

 

The Board believes that, as an acquisitive growth company, maintaining a progressive dividend policy is appropriate along with a long-term dividend cover of over three times on an underlying basis. This approach will enable funding of both sustainable dividend growth and a higher level of investment in acquisitions from internally generated resources.

 

The interim dividend is payable on 14 January 2022 to shareholders registered on 17 December 2021.

 

 

Board and Group Executive Committee Strengthened

 

The Board is pleased to report that to support the continued development of the business, two additional senior level appointments have been made.

 

Rosalind Kainyah MBE will join the Board in January 2022 as a Non-Executive Director. Rosalind brings many years of senior management, executive and board experience in international environments. She has extensive experience in sustainability matters and currently runs Kina Advisory, a consultancy advising on environmental, social and governance matters for businesses. Previously, Rosalind held senior executive roles at Tullow Oil, as Vice President, External Affairs & Corporate Social Responsibility and De Beers SA with various roles, latterly as President of its US business.

 

Following a period of introduction, Rosalind will chair a new ESG committee of the Board with responsibility for the ESG strategy, policies and performance of discoverIE and helping to drive further progress.

 

Paul Hill joins the Group Executive Committee (GEC) in December 2021 as Group Commercial Director overseeing a number of the Group's D&M businesses. Paul brings extensive experience in the electronics and technology sector having held senior operational roles in both hardware and software companies. Having started his career in electronics engineering, Paul has worked in electronic components, smart card systems and electronic design and manufacturing businesses. More recently Paul has led private equity held businesses and joins from Antenova, our recent acquisition, where he was Chief Executive Officer.

 

Following a period of introduction, Paul will also have Groupwide responsibility for evolving our approach to developing design opportunities.

 

 

Sustainability and Social Responsibility

 

The Group provides innovative electronics that help customers create new technologies for a sustainable world. Applications which use our products help to reduce power consumption and increase efficiency, such as wind turbines for renewable energy, charging infrastructure for vehicle electrification and wireless and fibre optic communications. This focus on sustainability forms the core of our target markets where, through targeted growth initiatives, we aim to grow our revenues organically. These trends are reported in our key strategic indicators as target market sales. Additionally, the Group has reduced focus on market areas that are inconsistent with a long-term sustainability agenda.

 

Our target sales markets are well aligned to the UNGC Sustainable Development Goals with our aim being to achieve 85% of sales from those target markets by the end of FY 2024/25. By the end of this period, sales from target markets were 77% of continuing Group sales, an increase of 9ppts in the last two years. We also aim to increase the proportion of the Group's operations covered by ISO14001, the international standard for environmental management, from 31% in FY 2020/21 to 80% by CY 2025. Please refer to the Group's Impact Report which is published online and which illustrates how the Group is helping meet the sustainability challenges facing the world today.

 

Also during the period a number of initiatives were undertaken to improve our sustainability and diversity. As mentioned above a new Non-Executive Director has been appointed, Rosalind Kainyah MBE, who will lead a new ESG committee of the Board, to be established in the coming months which will accelerate our progress on ESG matters. We are also prioritising diversity in our businesses with a broader range of inputs and more collaborative working practices. During the period, in addition to a number of new appointments, further work has been undertaken to increase diversity in our operating companies. This is an ongoing and long-term objective.

 

A range of other ESG activities have taken place, including:

 

i)          Environmental

-     Initiated Group Environmental Policy;

-     Work commenced on ISO14001 certification in Sri Lanka and Denmark;

-     Completed first of three phases to install solar panels in Sri Lanka;

-     Natural source heat pump fitted in Poland;  

-     Continued phase out of R22 refrigerant in Sri Lanka;

-     Installed electric car chargers at sites in Norway and at Group's UK headquarters by end of 2021;

-   Several sites in Finland, the UK and Denmark switched to renewable tariffs in addition to the two Poland sites;

-   Introduced other energy efficient measures such as installing sun screens to reduce the need for cooling and heat exchangers to reduce emissions from heating; and

-   Exploring options for grid supply of clean energy and site specific renewable power generation in China.

 

 

ii)          Social

-     Launched Supplier Code of Conduct with Group wide supplier audits due to commence in December 2021;

-    Integrated diversity principles into Group hiring practice, starting with the search for female leaders and engineers in the electronics industry;

-     Improved health & safety incident reporting;

-     Initiated Group policies on Human Rights, Conflict Minerals and Freedom of Association; and

-   Initiated and supported the Funder Plus Programme through Community Foundation for Surrey, a longstanding partner of the Group.

 

iii)         Governance

-     Set up the first externally-facilitated Board evaluation;

-     Board Diversity Policy adopted;

-    Anti-Bribery and Corruption programme on track - policy updated, benchmarking and risk assessment completed;

-  Completed preliminary scoping exercise for BEIS UK Sox proposal and created a roadmap for implementation;

-     Continued roll-out of enhanced cyber security software throughout the Group;

-     Internal controls manual reviewed. Roll-out of updated policy, including self-assessment surveys.

-     Subsidiary risk reporting and Group risk register updated.

 

 

Group Strategy

 

The Group designs and manufactures customised electronics, operating internationally and focusing on structurally growing markets which are driven by increasing electronic content and where there is an essential need for our products. With our target markets and global customer base, the business is expanding both in Europe and beyond, with 38% of first half continuing Group sales being outside Europe, as we build a geographically diverse electronics group.

 

Acquisitions have made a significant contribution to the development of the Group and, over the past 11 years, we have acquired 19 specialist, high margin design and manufacturing businesses which have been integrated successfully, augmenting our growth alongside our important organic focus. We have a well-developed and disciplined approach to acquisitions and the use of capital, and we see significant scope for further expansion of the Group with a number of acquisition opportunities in development.

 

Following the announced disposals of the Acal BFi and Vertec SA businesses, the Group's strategy continues to comprise four elements:

 

 

1.         Grow sales well ahead of GDP over the economic cycle by focussing on the structural growth     markets that form our target markets;

 

2.         Move up the value chain into higher margin products;

 

3.         Acquire businesses with attractive growth prospects and strong operating margins;

 

4.         Further internationalise the business by developing operations in North America and Asia.

 

These elements are underpinned by a core objective of generating strong cash flows from a capital-light business model, and delivering long-term sustainable returns.

 

 

Target Markets

 

Our four focus target markets of renewable energy, medical, transportation, and industrial & connectivity account for 77% of continuing Group sales. These markets are expected to drive the Group's organic revenue growth well ahead of GDP over the economic cycle and create acquisition opportunities. With continuing sales growing organically by 8% over the pre-Covid period two years ago, target market sales have grown by 13% organically in this time while non-target markets have declined by 6%.

 

Growth in these target markets is driven by increasing electronic content and by global trends such as the accelerating need for renewable sources of energy, an ageing affluent population, vehicle electrification and industrial automation.

 

 

Key Strategic and Performance Indicators

 

Since 2014, the Group's progress with its strategic objectives and its financial performance has been measured through key strategic indicators ("KSIs") and key performance indicators ("KPIs"). The KSI targets have been raised each time they are achieved, and in June 2020, upwardly revised targets for FY 2024/25 were set. With the announcement in November 2021 of the planned sale of Acal BFi, the targets have again been upwardly revised. For tracking purposes, these KSIs and KPIs remain as reported at the time rather than adjusted for the recently announced disposals. Given the one-off impact of Covid last year, we have shown this period's growth relative to the pre-Covid period two years ago (H1 2019/20) to illustrate the underlying development of the Group.

 

Key Strategic Indicators - targets now upwardly revised

 

		FY14	FY15	FY16	FY17	FY18	FY19	H1 20	H1 22(1)	Prior FY25 Targets	Revised FY25 Targets
	1. Increase share of Group revenue from D&M(2)	18%	37%	48%	52%	57%	61%	63%	100%	>75%	100%
	2. Increase underlying operating margin	3.4%	4.9%	5.7%	5.9%	6.3%	7.0%	7.6%	10.3%	12.5%	13.5%
	3. Build sales beyond Europe(2)	5%	12%	17%	19%	19%	21%	24%	38%	40%	45%
	4. Target market sales(2)				56%	62%	66%	66%	77%	85%	85%

 

(1)   Continuing operations

(2)      As a percentage of Group revenue

  

 

The Group made further significant progress against its KSIs during this period. Alongside strong organic growth, the announced exit from distribution by way of the disposals of Acal BFi and Vertec South Africa has resulted in a positive step change in the KSIs, which is explained as follows:

 

-   Following this exit, the Group is now wholly focused on the design and manufacture of customised electronics.

 

-   First half underlying operating margin exceeded 10% for the first time benefiting both from the strong organic sales growth delivered during the period and the planned exit from the lower margin distribution business. With this exit, the FY2024/25 margin target has been increased to 13.5%.

 

-     Sales beyond Europe in the first half increased by 10ppts to 38% of Group revenue from 28% last year (24% two years ago) driven by three factors. Firstly, the planned exit from distribution which is a UK/European focused business (c.7ppts increase); secondly, the five acquisitions in the last year (c.2ppts) in particular Beacon, Phoenix and CPI which are all US based; thirdly, organic growth during the period was strongest in Asia accounting for 22% of ongoing Group sales (c.1ppt).  On an annualised basis, the recent acquisitions increase our sales beyond Europe to 40% and accordingly the target for FY2024/25 has been increased to 45%.

 

-     Target market sales in the first half increased by 9ppts to 77% of Group revenue from 68% last year (66% two years ago) of which 5ppts reflects the planned exit from the distribution businesses. A further 4ppts improvement has been delivered through a combination of organic growth being more weighted to these long-term structural growth markets and from the five acquisitions in the last year which are well aligned with these markets.

-    

Key Performance Indicators

 

		FY14	FY15	FY16	FY17	FY18	FY19	H1 20	H1 22(1)	Target
	1. Sales growth
	CER	17%	36%	14%	6%	11%	14%	9%	20%	Well ahead of GDP
	Continuing organic	3%	9%	3%	(1%)	11%	10%	7%	8%
	2. Underlying EPS growth	20%	31%	10%	13%	16%	22%	11%	18%	>10%
	3. Dividend growth	10%	11%	6%	6%	6%	6%	6%(2)	6%	Progressive
	4. ROCE(3)	15.2%	12.0%	11.6%	13.0%	13.7%	15.4%	15.8%	14.8%(4)	>15%
	5. Operating profit conversion(3)	100%	104%	100%	136%	85%	93%	101%	124%	>85% of underlying operating profit
	6. Free cash conversion(3)						94%	104%	125%	>85% of underlying PAT
	7.Carbon emissions								Annual test(5)	50% reduction v CY19

 

(1)  Continuing operations. H1 2021/22 shown as growth over the pre-Covid period H1 2019/20 to illustrate the underlying growth of the business

(2)  6% increase in the H1 2019/20 interim dividend; a final dividend was not proposed for FY 2019/20 due to Covid

(3)  Defined in note 2 of the attached summary financial statements; operating cash conversions are calculated based on the last 12 months

(4)  Excludes the acquisitions of Beacon and Antenova which only completed towards the end of the period

(5)  Annual carbon emissions for CY 2020 reduced by 19% (like-for-like) compared to CY 2019 and by 6% on an underlying basis (adjusted to normalise the impact of Covid).

 

The Group made further significant progress against its KPIs during this period. Given the one-off impact of Covid last year, this period's growth is shown relative to the pre-Covid period H1 2019/20 thus illustrating the underlying development of the Group.

 

The performance of each of our Group KPIs for this period are as follows:

 

-     Organic sales increased by 8% compared with the pre-Covid period H1 2019/20 (comprising 15% organic growth this year offsetting an 8% organic reduction during the Covid period). This follows average annual organic growth of 9% for the preceding three years and illustrates the strong through cycle organic growth of the business.

 

-    Underlying EPS increased by 18% compared with the pre-Covid period H1 2019/20 (comprising 37% growth this year offsetting a 14% reduction during the Covid period).

 

-   The dividend is being increased by 6%, continuing our progressive policy whilst providing for a higher proportion of investment in acquisitions from internally generated resources. This progressive policy has seen a doubling of the dividend over the last 11 years, whilst dividend cover on an underlying basis has increased.

 

-   ROCE of the continuing operations for the period was 14.8% compared with 15.8% two years ago, and was 2.5ppts higher than that for the Covid-impacted last year (H1 2020/21: 12.3%).

The reduction compared to two years ago is as a result of recent larger acquisitions and the discontinuation of Custom Supply.

 

-   Operating profit conversion into cash has been very strong again at 124% of underlying operating profit on average over the last 24 months (comprising 95% in the last 12 months during a period of strong organic growth with the need for increased working capital, and 159% in the prior 12 month (Covid) period during which working capital was released). This is significantly above the 85% target, reflecting tight management of working capital and expenditure during this period. Over the last nine years, operating cash conversion has been consistently strong.  

 

-   Free cash conversion has also been very strong at 125% of underlying profit after tax, on average over the last 24 months (comprising 95% conversion in the last 12 months and 174% conversion in the prior 12 month period). Again, this is significantly above the 85% target. This is an important metric as we seek to increasingly self-fund acquisitions.

 

-   A new target was introduced last year for the reduction of carbon emissions from the Group's existing businesses by 50% over five years. Additionally, for new acquisitions, we are targeting that within the first five years of ownership, at least 50% of their energy demand is generated from renewable sources. For calendar year 2020, carbon emissions reduced by 19% and by 6% on an underlying basis adjusted for the effects of Covid. During this period, capital has been invested in projects to reduce carbon emissions by switching to clean energy, including solar panel installations in Sri Lanka, and an air source heat pump in Poland, two of the Group's major manufacturing facilities.

 

 

Divisional Results (Continuing Group)

 

The divisional results and results for the Continuing Group for the half year ended 30 September 2021 are set out and reviewed below.

 

	H1 2021/22			H1 2020/21			Revenue growth	Organic revenue growth	Organic order growth
	Revenue £m	Underlying operating profit (1) £m	Margin	Revenue £m	Underlying operating profit (1) £m	Margin
D&M(2)	174.3	23.9	13.7%	140.5	17.3	12.3%	24%	15%	64%
Unallocated costs		(5.9)			(3.9)
FX				3.3	0.2		(3%)
Total	174.3	18.0	10.3%	143.8	13.6	9.5%	21%	15%	64%

 

(1)   Underlying operating profit excludes acquisition-related costs and results of the discontinued operations

(2)   The residual ongoing business within Custom Supply has been transferred to D&M with sales in H1 2020/21 of £2.5m, underlying operating profit of £0.3m

 

 

Orders and Order Book

 

Organic orders grew very strongly in the period, increasing by 64% organically to £221.2m with a book to bill ratio of 1.27:1. Compared with the pre-Covid period two years ago, orders have grown by 34% organically.

 

During the period, the Group order book for continuing operations also grew very strongly and finished the period at a record level of £198m, being 108% (CER) higher than a year ago. Organically the order book increased by 71% in a year and by 54% compared with 30 September 2019, prior to the start of Covid. Sequentially, the order book increased by 44% (CER) since the year end.

 

Since the second half of last year, customers resumed placing longer term orders. Over 80% of the order book is for delivery within twelve months from the time of order.

 

 

Divisional Revenue and Operating profit

 

The strong order performance has led to sales increasing organically by 15%. Combined with a 9% sales increase from acquisitions, overall sales increased by 24% CER. Including the impact of translation, reported divisional revenue increased by 21% to £174.3m (H1 2020/21: £143.8m).

 

Compared to the pre-Covid period two years ago, sales grew by 8% organically. Growth was widespread across the Group although in certain businesses was offset by supply chain shortages of raw materials and external components and a slower post Covid recovery in some of our UK based businesses.

 

Underlying operating profit of £23.9m was £6.6m (+38% CER) higher than last year (H1 2020/21: £17.3m at CER) with an underlying operating margin of 13.7%, 1.4ppts higher than last year (H1 2020/21: 12.3% at CER) reflecting the positive effect of organic growth and higher margin acquisitions. On an organic basis, operating margin increased by 0.5ppt.

 

 

Design Wins

 

Project design wins are a measurement of new business creation. By working with customers at an early stage in their project design cycle, opportunities are identified for our products to be specified into their designs, which in turn lead to future recurring revenue streams.

 

The Group has a strong bank of design wins built up over several years that creates the basis for the strong through cycle growth and the growth in orders and sales now being experienced. During the period, design wins increased by 56% over the prior year and by 10% on the pre-Covid period two years prior. 80% were in the Group's target markets, led by the renewable energy and industrial & connectivity sectors.

 

Additionally, during the period, new project design activity increased strongly, being broad based across all markets. The total pipeline of ongoing projects in development is now at a record high level.

 

 

Operations

 

The D&M division designs, manufactures and supplies highly differentiated, innovative components for electronic applications. Over 85% of the products are manufactured in-house, with the division's principal manufacturing facilities being in China, Hungary, India, Mexico, the Netherlands, Poland, Slovakia, Sri Lanka, Thailand, the US and the UK. Geographically, 11% of sales are in the UK, 51% in Europe, 16% in North America and 22% in Asia. 77% of sales in the period were made into the Group's target markets.

 

The Group's production facilities have established "new normal" ways of operating after the disruption of Covid. Some sites are still feeling the effects of higher absence rates but overall, the Group's production has returned to output growth capable of satisfying the strong sales growth rates. To meet future growth, capacity is being expanded in the US, Germany and India, and production has begun as scheduled at the Group's new larger facility in Nogales, Mexico. 

 

 

Acquisitions

 

The businesses we acquire are typically led by entrepreneurs who wish to remain following acquisition. We encourage this as it helps retain a decentralised, entrepreneurial, dynamic culture. The market is highly fragmented with many opportunities to acquire and consolidate.

 

We acquire businesses that are successful and profitable with good growth prospects and where we invest for growth and operational performance development. According to the circumstances, we add value in some of or all of the following areas:

           

-    Internationalising sales channels and expanding the customer base, including via cross-selling initiatives and focussing sales development onto target market areas;

-     Developing and expanding the product range;

-     Investing in management capability ('scaling up') and succession planning;

-     Implementing ESG initiatives;

-     Capital investment in manufacturing and infrastructure;

-     Improving manufacturing efficiency;

-     Enabling growth with larger customers;

-     Infrastructure efficiencies, such as warehousing and freight;

-    Finance & administrative support, such as treasury, banking, legal, pension, tax, insurance, risk & control; and

-     Expanding the business through further acquisitions.

 

During the period, the Group completed three acquisitions:-

 

1)    In May 2021, Control Products Inc ("CPI"), a New Jersey, US-based designer and manufacturer of custom, rugged sensors and switches, for $11.4m (£8.1m) on a debt free, cash free basis.  

 

2)   In August 2021, Antenova, a UK-based designer and manufacturer of antennas and radio frequency (RF) modules for industrial connectivity applications, for £18.2m on a debt free, cash free basis. 

 

3)    In September 2021, Beacon EmbeddedWorks ("Beacon"), a US-based designer, manufacturer and supplier of custom System-on-Module (SOM) embedded computing boards and related software, principally supplying the medical and industrial markets in the US. Beacon was acquired for $80.5m (£58.8m) on a debt free, cash free basis.

 

All three have retained their distinct brand identities and high-quality management. Their complementary product ranges and wider access to customers will create cross-selling opportunities in our target markets which are expected to drive further growth.

 

The Group has completed 19 acquisitions since 2011, contributing to growth in continuing Group revenues from £15m in FY 2012/13 to £303m in FY 2020/21. The Group's operating model is well established and has facilitated the smooth integration of acquired businesses. Through a combination of investment in efficiency and leveraging of the broader Group's commercial infrastructure, the businesses acquired since 2011 and owned for at least two years delivered an average return on investment of 16% by FY 2020/21 over the life of those acquisitions, ahead of our target of 15%.

 

 

Group Financial Results

 

Revenue and Orders

 

Continuing Group sales of £174.3m were 15% higher organically than last year (H1 2020/21: £143.8m), and with acquired businesses (Phoenix and Limitor acquired last year, and CPI, Antenova and Beacon added this year) adding 9%, continuing sales increased by 24% CER.  A stronger Sterling during the period, particularly compared with the US Dollar and Euro, reduced sales by 3% on translation for a net growth in reported continuing Group sales of 21%. Compared with two years ago, sales increased by 20% CER with 8% organic growth and 12% through acquisitions (the five acquisitions above together with Sens-Tech which was acquired in the last two years).    

 

 

Continuing Revenue (£m)	H1 2021/22	H1 2020/21	%		H1 2021/22	H1 2019/20	%
Reported	174.3	143.8	21%		174.3	149.4	17%
FX translation impact		(3.3)				(4.6)
Underlying (CER)	174.3	140.5	24%		174.3	144.8	20%
Acquisitions: last 12mths	(12.9)
Acquisitions: last 24mths					(18.1)
Organic	161.4	140.5	15%		156.2	144.8	8%

 

 

Sales were driven by very strong order rates. Continuing orders increased by 75% CER to £221.2m, and by 64% organically compared with the Covid-impacted prior period and importantly, by 49% CER and 34% organically compared with the pre-Covid period 2 years ago.  

 

The book to bill ratio for the period was 1.27:1 building on the improvement seen in the second half last year (book to bill: 1.16:1) as the Group recovered from the sharp impact of Covid in the first half last year (book to bill: 0.90:1). Two years ago the comparable book to bill ratio was 1.02:1.

 

 

Continuing Group Gross Margin and Gross Profit

 

The continuing Group's gross margin increased 1.1ppts in the first half to 38.6% (H1 2020/21: 37.5%). Organically, gross margin decreased by 0.1ppts, with higher gross margin acquisitions adding 1.2ppts.

 

Gross profit for the period was £67.2m, 25% higher than last year (H1 2020/21: £53.9m), being a combination of the 21% increase in continuing reported sales with 4% from the improvements in the continuing Group gross margin.   

 

The Group continues with its policy of currency hedging transactional exposures from the point of order through to payment, typically hedging around six months of the order book.

 

 

Underlying Operating Costs

 

At the outset of Covid last year, the Group took prudent actions to preserve cash and reduce expenditure including deferral of discretionary spend, deferral of pay rises, a hiring freeze, and a three month 20% salary reduction for the Board and Group Executive Committee, the cumulative effect of which was to reduce Group underlying operating costs by 4% organically and by 7% sequentially (H2 2019/20 to H1 2020/21).

 

£m		H1 2021/22		H1 2020/21			%
Organic operating costs (pre LTIP/HO)		42.8		39.8			8%
Incremental LTIP related charges		1.6
Central team investment		0.7
Operating costs (inc LTIP/HO)		45.1		39.8			13%
Acquisition operating costs		4.1
Underlying operating costs (CER)		49.2		39.8			24%
FX translation				0.5
Underlying adjustments (see below)		9.7		6.1
Reported operating costs		58.9		46.4			27%
£m		H1 2021/22			H1 2020/21
Selling and distribution costs		18.0			15.3
Administrative expenses		40.9			31.1
Reported operating costs		58.9			46.4

 

 

This period we have invested carefully in operating expenditure to ensure capacity to deliver strong sales growth, this year and in future, with costs increasing by 5% organically compared with the pre-Covid period, H1 2019/20, and 8% relative to last year. This excludes upscaling of central capabilities and incremental LTIP related charges.

 

We have invested in additional central resource to support our growth plans, including M&A, risk & internal audit, and ESG. Further investment is anticipated in the next 12 months in particular additional Board and Group Executive Committee members as referred to above and additional IT resources to support D&M system upgrades.

 

With a share price which, by 30 September 2021, had risen 60% since the start of the year and 150% since the start of last year, the accrued cost of national insurance contributions ("NIC") on LTIPs, the increased rate of NIC from April 2022 and the EPS growth impact on share based payment accruals, has added an additional cost of £1.6m relative to last year.    

 

 

Continuing Group Operating Profit and Margin

 

Continuing Group underlying operating profit for the period was £18.0m, a 32% increase on last year (H1 2020/21: £13.6m), delivering an underlying operating margin of 10.3%, 0.8ppts higher than last year (H1 2020/21: 9.5%).

 

Reported Group continuing operating profit for the period (after accounting for the underlying adjustments discussed below) was £8.3m, £0.8m (+11%) higher than last year.  

 

 

Continuing operations £m	H1 2021/22			H1 2020/21
	Operating profit	Finance Cost	Profit before tax	Operating profit	Finance cost	Profit before tax
Underlying	18.0	(1.9)	16.1	13.6	(1.9)	11.7
Underlying adjustments
Acquisition expenses	(3.3)	-	(3.3)	(0.6)	-	(0.6)
Amortisation of acquired intangibles	(6.4)	-	(6.4)	(5.3)	-	(5.3)
IAS 19 pension cost				(0.2)	-	(0.2)
Reported	8.3	(1.9)	6.4	7.5	(1.9)	5.6

 

 

Underlying Adjustments

 

Underlying adjustments for the period comprise acquisition expenses of £3.3m (H1 2020/21: £0.6m), and the amortisation of acquired intangibles of £6.4m (H1 2020/21: £5.3m). From this period, the IAS 19 pension cost of £0.3m has been taken as a continuing cost of the business. 

 

Acquisition expenses of £3.3m are the costs associated with the acquisitions during the period of CPI, Antenova and Beacon (£1.6m), accrued contingent consideration costs of £1.3m (mainly relating to the acquisitions of Cursor and Limitor) and the integration of Hobart into Noratel (£0.4m). The £1.1m increase in the amortisation charge since last year to £6.4m relates to the amortisation of intangibles relating to the five acquisitions since the first half last year. The annualised amortisation charge for next year is approximately £16.5m.

 

Financing Costs

 

Net finance costs for the period were £1.9m (H1 2020/21: £1.9m) and include a £0.4m charge for leased assets under IFRS 16 (H1 2020/21: £0.3m). Finance costs related to our banking facilities of £1.5m (H1 2020/21: £1.6m) reflect marginally lower average net debt during the period.  

 

 

Underlying Tax Rate

 

The underlying effective tax rate for continuing operations in the first half was 25%, in line with last year's rate.

 

The overall effective tax rate for continuing operations was 53% (H1 2020/21: 34%). This was higher than the underlying effective tax rate due to there being tax relief on only a small amount of acquisition-related expenses and a lower rate of tax relief on the amortisation of acquired intangibles (both within underlying adjustments above). The effective tax rate ("ETR") on intangibles was further impacted this period by the enactment of the increase in the UK corporate tax rate from 1 April 2023, resulting in a one-off increase in the deferred tax liability (a non-cash item).

 

 

£m	H1 2021/22		H1 2020/21
	PBT	ETR	PBT	ETR
Continuing operations	16.1	25%	11.7	25%
Acquisition expenses	(3.3)	4%	(0.6)	0%
Amortisation of acquired intangibles	(6.4)	7%	(5.3)	19%
IAS 19 pension cost			(0.2)	19%
Total reported	6.4	53%	5.6	34%

 

 

Continuing Group Profit Before Tax and EPS

 

Underlying profit before tax for the period of £16.1m was £4.4m higher (+38%) than last year (H1 2020/21: £11.7m), with underlying EPS for the period increasing by 37% to 13.0p (H1 2020/21: 9.5p). The increase in underlying EPS was slightly lower than that for underlying profit before tax due to the issuance of new equity in September 2021 increasing fully diluted shares by 1% to 93.3m shares (H1: 2020/21: 92.2m shares). The annualised fully diluted shares for the full year is expected to be c. 96m shares.   

 

After the underlying adjustments above, reported profit before tax on continuing operations was £6.4m, an increase of £0.8m (+14%) compared with last year (H1 2020/21: £5.6m). With the reported effective tax rate for the period of 53% being higher than last year's rate of 34% (for the reasons mentioned above), the resulting reported fully diluted earnings per share on continuing operations was 3.2p, 0.8p lower than last year (H1 2020/21: 4.0p).

 

 

Continuing operations £m	H1 2021/22		H1 2020/21
	PBT	EPS	PBT	EPS
Underlying	16.1	13.0p	11.7	9.5p
Underlying adjustments
Acquisition expenses	(3.3)		(0.6)
Amortisation of acquired intangibles	(6.4)		(5.3)
IAS 19 pension cost			(0.2)
Reported	6.4	3.2p	5.6	4.0p

 

 

Discontinued Operations

 

Since the end of the period, the Group has announced the disposals of the Acal BFi and Vertec SA distribution businesses which have been treated for accounting purposes together as a discontinued operation. In accordance with IFRS 5, net profits of the discontinued operation have been shown separately to the results of the continuing operations.

 

£m	H1 2021/22		H1 2020/21
	PAT	EPS	PAT	EPS
Continuing operations	3.0	3.2p	3.7	4.0p
Discontinued operations	3.2	3.4p	1.6	1.8p
Total operations	6.2	6.6p	5.3	5.8p

 

 

In accordance with IFRS 5, net assets of the discontinued operation of £55.8m as at 30 September 2021 (including cash in the operation of £26.2m) have been categorised on the Group balance sheet as assets held for sale comprising assets of £91.2m and liabilities of £35.4m.

Working Capital

 

D&M divisional working capital at 30 September 2021 was £60.5m, equivalent to 16.9% of sales, an efficiency improvement of 0.8ppts since last year (30 September 2020: £48.4m of working capital at 17.7% of sales). Absolute working capital has increased to support the strong organic growth in sales, and also by incorporating the working capital of five acquisitions since the first half last year. Working capital KPIs have remained robust with debtors days of 50, creditor days of 71 and stock turns of 3.3.   

 

 

Cash Flow

 

Net debt at 30 September 2021 was £75.6m compared with £47.2m at 31 March 2021 and £42.1m at 30 September 2020. Excluding dividends, acquisitions and equity raised, free cash flow over the last 12 months was £28.1m, at 95% of underlying profit after tax (including disposals), demonstrating continuing strong cash generation by the Group.

 

	H1 2021/22	H1 2020/21		Last 12 Months
Opening net debt	(47.2)	(61.3)		(42.1)
Free cash flow (see table below)	10.6	20.1		28.1
Acquisition-related costs	(86.7)	(0.2)		(108.3)
Equity issuance	53.4	-		53.5
Dividends	(6.2)	-		(9.0)
Foreign exchange impact	0.5	(0.7)		2.2
Net debt at 30 Sept	(75.6)	(42.1)		(75.6)

 

Net acquisition-related costs of £86.7m in the period comprised £58.8m for the acquisition of Beacon in September 2021, £18.2m for Antenova in August 2021 and £8.1m for CPI in May 2021 (all on debt free, cash free bases). Additionally there were £1.6m of expenses associated with acquisitions and disposals during the period. Together with the acquisitions of Phoenix and Limitor during the six month period ended 31 March 2021, a total of £108.3m has been spent on acquisitions during the last 12 months.  

 

A 6% placing of shares in September 2021 raised net equity proceeds of £53.4m, while the final dividend for the last financial year of £6.2m was paid in July 2021, being a 6% increase on the final dividend for the year ended 31 March 2019; no final dividend was declared for the year ended 31 March 2020 as management sought to preserve cash at the outset of Covid.  

 

Operating cash flow and free cash flow (see definitions in note 2 to the interim financial statements) for the period, compared with the first half of last year, and for the last 12 months, are shown below:

 

£m	H1 2021/22	H1 2020/21		Last 12 Months
Underlying profit before tax	16.1	11.7		32.3
Discontinued profit before tax	4.6	2.1		6.1
Total profit before tax	20.7	13.8		38.4
Net finance costs	2.0	2.0		3.7
Non-cash items	7.8	6.9		14.1
Total EBITDA	30.5	22.7		56.2
IFRS 16	(3.5)	(3.4)		(6.8)
EBITDA (pre IFRS16)	27.0	19.3		49.4
Working capital	(8.1)	7.9		(4.4)
Capital expenditure	(2.8)	(1.5)		(4.9)
Operating cash flow	16.1	25.7		40.1
Finance costs	(1.6)	(1.7)		(3.0)
Taxation	(3.0)	(3.0)		(7.2)
Legacy pensions	(0.9)	(0.9)		(1.8)
Free cash flow	10.6	20.1		28.1

 

Total EBITDA of £30.5m was 34% higher than the Covid-impacted last year (H1 2020/21: £22.7m) and 26% higher than the pre-Covid period two years ago (H1 2019/20: £24.2m) reflecting strong organic sales growth combined with contributions from the five acquisitions made since the first half last year.

 

During the period, the Group invested £8.1m in working capital to support the organic sales growth contrasting with last year's £7.9m inflow resulting from the reduction in sales following the onset of the Covid. In total, a net £4.4m has been invested in working capital in the last 12 months.

 

Capital expenditure of £2.8m was invested during the period including capacity expansions in Mexico and on ESG initiatives including solar panels in Sri Lanka, the largest Group facility. While ahead of last year (£1.5m), when expenditure was reduced to maintenance spend only, this was still below our spend of two years ago (H1 2019/20: £3.2m). Capital expenditure levels are expected to increase in the second half to around £8.0m for the full year as we continue to invest in additional capacity and roll out of our ESG initiatives.  

 

£16.1m of operating cash was generated in the first half; together with £24.0m generated in the second half of last year, a total of £40.1m of operating cash was generated over the last 12 months. While this was below last year's £55.8m, this was due to  working capital inflows last year of £18.0m resulting from the reduction in sales due to Covid. Excluding working capital, operating cash in the last 12 months was up 18% on last year. It was also 19% higher than for the pre-Covid 12-month period two years ago (12 month operating cash to 30 Sept 2019: £33.8m). £40.1m of operating cash flow represents 95% of underlying operating profit during the last 12 months (including disposals), above our 85% target. Over the last eight years, the Group has consistently achieved high levels of cash conversion, averaging in excess of 100%. 

 

Finance cash costs of £1.6m were marginally below last year while corporate income tax payments of £3.0m were in line with last year. Further payment of taxes in the second half of c.£4m are expected.

 

Free cash flow (being cash flow before dividends, acquisitions and equity) for the last 12 months was £28.1m. which was 29% higher than last year excluding working capital. Compared with the pre-Covid period two years ago, free cash flow was up 16% (12 month free cash flow to 30 Sept 2019: £24.2m). Our free cash conversion over the last 12 months was 95% of underlying profit after tax (including disposals), again well ahead of our 85% target.   

 

 

Banking Facilities

 

The Group has a £180m syndicated banking facility which extends to June 2024, together with a £60m accordion increasing the total facility to £240m if required. The syndicated facility is available both for acquisitions and for working capital purposes.  

 

With net debt at 30 September 2021 of £75.6m, the Group's gearing ratio at the end of the period (being net debt divided by underlying EBITDA as annualised for acquisitions) was 1.3x. Including the announced disposals of the Acal BFi and Vertec South Africa distribution businesses, pro-forma gearing at 30 September 2021 reduced to 0.9x, with our target gearing range being between 1.5x and 2.0x, leaving plenty of funding capacity for future acquisitions. 

 

Balance Sheet

 

Net assets of £269.3m at 30 September 2021 were £60.5m higher than at the end of the last financial year (31 March 2021: £208.8m). The increase primarily relates to the net issuance of equity of £53.5m, nearly all being the placing in September 2021, with net profit after tax for the period of £6.2m being offset by last year's final dividend of £6.2m paid this period. The movement in net assets is summarised below:

 

 

£m	H1 2021/22
Net assets at 31 March 2021	208.8
Net profit after tax	6.2
Dividend paid	(6.2)
Net equity issuance	53.5
Currency net assets - translation impact	2.7
Gain on defined benefit scheme	0.3
Share based payments (inc tax)	4.0
Net assets at 30 September 2021	269.3

 

 

Defined Benefit Pension Scheme

 

The Group's IAS 19 pension liability, associated with its legacy defined benefit pension scheme, reduced during the last 12 months by £1.2m from a liability of £1.1m at 30 September 2020 to an asset of £0.1m at 30 September 2021, the key driver being the annual payment made during the year of £1.8m.

 

An annual payment of £1.9m is currently payable, growing by 3% each year until September 2022 in accordance with the plan agreed with the pension trustees as part of the last agreed triennial valuation dated 31 March 2018. The next triennial valuation as at 31 March 2021 is currently being assessed.   

 

Risks and Uncertainties

 

The principal risks faced by the Group are set out on pages 47 to 52 of the Group's Annual Report for year ended 31 March 2021, a copy of which is available on the Group's website: www.discoverieplc.com. These risks comprise: the economic environment, particularly linked to the impact of Covid; the impact arising from the UK's decision to leave the European Union; the performance of acquired companies; climate-related risks; loss of major customers or suppliers; technological change; major business disruption; cyber security; loss of key personnel; inventory obsolescence; product liability; liquidity and debt covenants; exposure to adverse foreign currency movements; obligations in respect of a legacy defined benefit pension scheme; and non-compliance with legal and regulatory requirements.

 

The Board has continued to review the Group's existing and emerging risks and the mitigating actions and processes in place in the first half of the financial year, taking specific consideration of the impact of Covid. Following this review the Board believes there has been no material change to the relative importance or quantum of the Group's principal risks in the first half of the current financial year. The risk assessment and review are an ongoing process, and the Board will continue to monitor risks and the mitigating actions in place.

 

The Group's risk management processes cover identification, impact assessment, likely occurrence and mitigation actions where practicable. Some level of risk, however, will always be present. The Group is well positioned to manage such risks and uncertainties, if they arise, given its strong balance sheet, committed banking facility of £180m and the adaptability we have as an organisation.

 

Summary and Outlook

These strong results demonstrate the strength of the discoverIE business model, with record growth in orders, order book and underlying earnings per share, which increased by 37% and follows a resilient performance last year through Covid. Revenues and earnings are now well ahead of the pre-Covid period and I would like to thank all employees around the Group for their tremendous effort and flexibility over the last 18 months that has led to these results.

 

The announced sale of Acal BFi earlier this month concludes the Group's exit from the business of distribution, with discoverIE now becoming a solely focused global designer and manufacturer of customised electronics. We have raised our medium-term strategic targets accordingly and our continuing focus is on achieving organic growth with new design wins in sustainable target markets, together with accretive acquisitions.

 

The second half has started well with continued order and sales growth over the same period last year and two years ago, and the Group is on track to deliver full year underlying earnings for the continuing operations ahead of the Board's previous expectations despite ongoing supply chain and foreign exchange headwinds.

 

With a clear strategy focused on long-term, high quality, structural growth markets across Europe, North America and Asia, a diversified customer base, a record order book and a strong pipeline of acquisition opportunities, the Group is well positioned to make further progress on its key priorities.

 

 

 

Nick Jefferies

Group Chief Executive

 

Simon Gibbins

Group Finance Director

 

30 November 2021