Investor presentation September 2021 - discoverIE Group plc
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Investor presentation
September 2021
discoverIE Group plc September 2021
Introduction to discoverIE
International specialist electronic engineering firm
Designing, manufacturing & supplying customised electronic components
Highly differentiated products
Supplying Original Equipment Manufacturers (OEMs)
Essential products, repeating revenue
Sustainable growth markets
Renewable energy, transportation, medical, industrial & connectivity
Revenue of £454m, operating profit(1) of £35.2m
Operating in 24 countries
Acquisitive
Fragmented market – 19 D&M acquisitions in last 11 yrs
(1) Underlying profit for y/e 31 Mar 21
.
discoverIE Group plc September 2021 2
Sustainable growth Company,
resilient in tough conditions
SALES (2)
We aim to provide investors with
Returns of 15 – 20% pa +23% CAGR(1)
A progressive dividend +6% CAGR(1)
COVID y ear
In 5yrs to FY18:
Sales(2) up > 2x
Underlying EPS up > 2x (3)
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Operating profits up > 4x
UNDERLYING OPERATING
PROFIT & EPS
Since FY19 our aim has been to double
underlying EPS in 5 years
FY19 + FY20 op profits up 51%
COVID y ear
FY19 + FY20 EPS up 35%
Covid actions minimise impact to only 5% &
14% lower respectively
(3)
(1) Share price and dividend growth from Apr 12 to Sep 21 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
(2) Group revenue, excluding disposed businesses Un d erlyin g Op erating Profit EPS
(3) Consensus at 13 Sep 21 of 6 analysts submitting a latest forecast
discoverIE Group
discoverIE Group plc
plc September 2021 3
Our business
Business fundamentals Attractive rewards
Growth markets GDP++ organic growth
Designed-in products, difficult to replace High levels of repeating revenue
Distinct business, competitive advantage Sustainable margins
Low customer concentration Reduced risk
Design, not price led Increasing margins
Low capital requirements Cash generative
Multiple manufacturing sites & technologies Reduced risk
Acquisitions at the right price Earnings accretion
Underpinned with high standards of Environmental, Social & Governance for a better world
discoverIE Group plc September 2021 4
Consistent, proven strategy
Sales growth well ahead of GDP over the economic cycle
Move up the value chain into higher margin products
Acquire businesses with attractive growth prospects and strong
operating margins
Further internationalise the business
Generate strong cash flows and long term sustainable returns
while reducing impact on the environment
discoverIE Group plc September 2021 5
Focused on delivering key targets
Key St rat egic Indicat ors FY25
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Target s
1. Increase share of Group revenue from D&M (1) 18% 37% 48% 52% 57% 61% 64% 65% >75%
2. Increase und erlying op erat ing m argin 3.4% 4.9% 5.7% 5.9% 6.3% 7.0 % 8.0 % 7.7% 12.5%
3. Build sales b eyond Europ e (1) 5% 12% 17% 19% 19% 21% 27% 28% 40 %
4. Target M arket Sales(1) n/d n/d n/d 56% 62% 66% 68% 70 % 85%
Key Perform ance Indicat ors
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Target s
1. Sales grow t h
CER 17% 36% 14% 6% 11% 14% 8% (4%) W ell ahead
D&M Organic 3% 9% 3% (1%) 11% 10 % 5% (4%) of GDP
Group Organic 2% 3% 3% (1%) 6% 8% 2% (6%)
2. Und erlying EPS grow t h 20 % 31% 10 % 13% 16% 22% 11% (14%) >10 %
3. Divid end grow t h 10 % 11% 6% 6% 6% 6% 6% (2)
6% (3)
Progressive
4. ROCE 15.2% 12.0 % 11.6% 13.0 % 13.7% 15.4% 16.0 % 14.5% >15%
>85% of Op
5. Op erat ing p rofit conversion 10 0 % 10 4% 10 0 % 136% 85% 93% 10 6% 141%
p rofit
6. Free cash conversion n/d n/d n/d n/d n/d 94% 10 4% 157% >85% of PAT
50 % red uct ion
7. Carb on em issions (6%)(4)
b y CY25
(1) As a percentage of Group revenue
(2) Increase in the interim dividend, a final dividend was not proposed due to COVID-19
(3) Increase over FY 2018/19, the last full dividend
(4) Carbon emissions reduced by 19% including the effects of Covid, 6% reduction on an underlying basis
n/d – not previously disclosed
discoverIE Group plc September 2021 6
Global trends driving structural growth
FOCUSED ON SUSTAINABLE Product development driven by technology
GROWTH MARKETS
Increasing electronic content
Essential products
Markets aligned with UN SDG(1)
Renewable Transportation Medical Industrial &
Energy Connectivity
Connectivity,
Mega Decarbonisation Electrification
Artificial
intelligence, sensing automation &
Trends & Diversification & Autonomous
vehicles
and analytics Industrial
Internet of Things
(1)UN SDG United Nations Sustainable Development Goals
discoverIE Group plc September 2021 7
Our planet, Our people, Our products
Environmental, Social & Governance (ESG) priorities for a better world
Environment Health & Safety Diversity Governance
Tonnes CO2/£m t urnover Accident s per em ployee Gender split Internal audit covers 80% Group
Head office staff
EBIT & 67% Group Stock over two
22.91 -19% 64% 61% 62% years
0 .0 22
18.52
0 .0 20 39% 38% Employee engagement programs
36%
focused on communication, health &
0 .0 19 well being
FY19 FY20 FY21
Community outreach
20 19 20 20 FY19 FY20 FY21 M ale Fem ale
Community Foundation Surrey
Manufacturing for the disabled
• 19% fall in CO2 emissions • >6500 hours of H&S training • Focused on increasing our diversity
• 6% underlying fall ex-covid • >90 H&S reps Group wide • 38% Head Office staff gender
• Targeting 50% reduction by CY25, • Targeting >80% of global diversity
with c.£3m investment workforce to be under ISO45001 • 13% Head Office staff ethnic
• ISO14001 accreditation program by 2025 diversity
underway for 80% target by 2025, • Targeting 33% board gender
currently 31% diversity
discoverIE Group plc September 2021 8
Design & Manufacturing division
REVENUE FROM TA RGET
M A RK ETS
65% of Group Revenue (% of t ot al revenue)
REVENUE BY REGION
6% Organic CAGR over last 5 years (pre FY21)
75% in faster growing target markets UK
10 %
Generating 87% of FY21 Group profit contribution Asia
23% Germ any Ot h er
13% operating margin 12% Ind ust rial &
Connect ivit y
19 acquisitions completed since 2011 N. Am erica
13% Nordic
Increasing specialist capability and international reach 24% Transp ort
R.O.E.
M ed ical
18% Renew ab le
Capital light model with capex c.2%of revenue
energy
75%
R&D investment c. 2%/rev
29 manufacturing sites / 18 countries
HA LF YEA RLY ORGA NIC
SA LES GROW TH
12%
11%
10 % 10 %
9%
7%
5%
3%
(2%)
(7%)
Q4 17 H1 18 H2 18 H1 19 H2 19 H1 20 H2 20 H1 21 H2 21
With out COVID-19 With COVID-19
discoverIE Group plc September 2021 9
Strong cash flow and returns
Operating cash flow Strong growth in operating & free
Free cash flow cash flows
Operating & £49 .7m
free cash flow Consistently high conversion rate
£39 .3m £37.6m Aiming to be self sufficient in funding
over time
£28 .6m £27.3m
£27.1m
£22.1m
£16 .3m
£19 .2m
High quality acquisitions over 11
£13.9m £13.2m
£9 .6m years
£7.1m £7.2m
O p e rat in g cash flow % £360m invested in 19 D&M acquisitions,
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Target
£190m new equity
10 0 % 10 4% 10 0 % 136% 90 % 93% 10 6% 141% 85% Generating strong returns
Well ahead of cost of capital
66% Higher margin, capital-lite, cash
Average EBIT ROI generative
43% Average EBIT ROI(1) of acquisitions of
16%
25% 25% Targeting EBIT ROI > 15%
22%
17% 17% 16%
15% 15%
Target 12% 10 % 10 % Clear approach to acquisitions
3%
Must have discoverIE DNA
A B C D E F G H I J K L M TOTA L
Group ROCE for FY21 of 14.5%
(1) Average ROI defined as average operating profit attributable to the business since acquisition to FY21, over acquisition cost (comprising up-front consideration, acquisition expenses,
earn-out (once earned), and integration costs) H2 15.6%
(2) All D&M businesses included acquired more than 2yrs ago. Excludes recent acquisitions: Sens-Tech, Limitor, Phoenix , CPI, Beacon and Antenova
discoverIE Group plc September 2021 10Acquisition case study – Noratel Group
Acquired July 2014
N orat e l FY15 - 21
Products – Power Transformers
Revenue grow th 7% CAGR
Op erating m argin 10 % → 14% Developments since acquisition:
Developed long term strategic plan
ROCE 12% → 24%
Organic growth in target markets
ROI 14% → 21% Upscaled production facilities to support growth
including new Indian facility
Working cap ital % 29 % → 14%
Manufacturing rationalisation
Target m arket % 6 2% → 75 %
2 bolt on acquisitions in North America (Plitron and
International sales % 28 % → 47% Hobart)
Working capital optimisation
Bolt on acq uisitions 2
Upscaled finance team
Integrated Group risk, control & ESG policies
Transitioned to new CEO
discoverIE Group plc September 2021 11Latest trading, financing & dividends
Latest recommendations (1)
Q1 22 Trading Update
Latest Rec Date
Strong organic orders & sales growth v last year (+83% &
Peel Hun t 1,20 0 p Bu y Sep -21 +16%) and v pre covid period 2yrs ago (+35% & +10%).
Beren b erg 1,220 p Bu y Sep -21
Fundamentals in place for long term growth to continue:
Jefferies 1,19 0 p H old Sep -21 record order book, good levels of design wins, pipeline of
Pan m ure 1,30 4p Bu y Sep -21 acquisitions
St iefel 1,20 0 p H old Sep -21
Average 1,223p
10 .15p Financing
9.55p
9.0 0 p
Net debt of £47m at 31 Mar 21 with gearing of 1.1x
8.50 p
8.0 5p Proforma gearing of 1.6x following latest acquisitions of
7.60 p Covid cash protection action Beacon, Antenova and CPI.
6.80 p
6.18p 7.0 0 p £180m committed facility (to Jun 24) plus a £60m accordion.
5.81p 6 .75p
5.43p 6 .35p
5.0 9p 6 .0 5p
5.72p
5.40 p
4.98p Dividend
4.36p
3.99p
3.40 p 3.74p Progressive dividend policy.
100% dividend increase in 11yrs to FY21 (7% CAGR)
3.15p
2.20 p 2.33p 2.45p 2.6 5p 2.8 0 p 2.97p
Long term: >3x cover (underlying basis); FY21 2.5x
1.69p 1.69p 1.8 2p 1.8 2p 1.8 2p
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
(1) Recommendations as at 10 Sep 2021
discoverIE Group plc September 2021 12APPENDIX Board, GEC & History
Board of Directors
M M Diamond MBE - Chairman
B M Thompson – Senior Non-Executive Director
Malcolm was appointed a Non-Executive Director in November 2015 and became Chairman Bruce joined the Board as a Non-Executive Director in February 2018. He is also
in April 2017. Malcolm was previously Chief Executive of Trifast plc and then Non Executive Chairman of Avon Rubber plc. He retired in 2018 as Chief Executive Officer of Diploma plc
Chairman for a combined period of 30 years. Other previous roles include Non-Executive after 22 years. Bruce brings a wide range of strategic and leadership expertise to the
Chairman of Flowtech Fluidpower plc and Senior Non-Executive Director of Dechra Board with proven experience of growing international industrial businesses.
Pharmaceuticals plc.
N J Jefferies – Group Chief Executive T Graham - Non-Executive Director
Nick was appointed Group Chief Executive in January 2009. His experience of electronics
and the components industry comes from holding senior positions for over 15 years with Tracey joined the Board as a Non-Executive Director in November 2015. She is also a
leading international distributors of electronic components and computer products, such Non-Executive Director at Ibstock plc, Royal London Mutual Building Society and Link
as Electrocomponents plc and Arrow Electronics. Nick originally trained as an Electronics Scheme Limited. Among other previous appointments, she was a non-Executive
Design Engineer with Racal Defence (now part of Thales plc). Director at RPS Group plc. During her executive career, she was Chief Executive of
Talaris Limited and Managing Director of De La Rue Cash Systems.
S M Gibbins – Group Finance Director C Watson - Non-Executive Director
Simon was appointed as Group Finance Director in July 2010. A Chartered Accountant, he
Clive, a Chartered Accountant, became a Non-Executive Director and Chair of the Audit &
was previously Global Head of Finance and Deputy CFO at Shire plc. Prior to joining Shire
Risk Committee in September 2019. He is a also a Non-Executive Director at Breedon
in 2000, he spent 6 years with ICI plc in various senior finance roles, both in the UK and
Group plc, Kier Group plc and Trifast plc and was Non-Executive Director and Chair of the
overseas. His earlier career was spent with Coopers & Lybrand in London
Audit Committee at Spirax-Sarco Engineering plc for 9 years. During his executive career
he was Group Finance Director of Spectris plc for 13 years until 2019.
discoverIE Group
discoverIE Group plc
plc September 2021 14Group Executive Management
N J Jefferies – Group Chief Executive* S M Gibbins – Group Finance Director*
Nick was appointed Group Chief Executive in January 2009. His experience of electronics Simon was appointed as Group Finance Director in July 2010. A Chartered Accountant, he
and the components industry comes from holding senior positions for over 15 years with was previously Global Head of Finance and Deputy CFO at Shire plc. Prior to joining Shire
leading international distributors of electronic components and computer products, such in 2000, he spent 6 years with ICI plc in various senior finance roles, both in the UK and
as Electrocomponents plc and Arrow Electronics. Nick originally trained as an Electronics overseas. His earlier career was spent with Coopers & Lybrand in London
Design Engineer with Racal Defence (now part of Thales plc)
P H Neville - Group Commercial Director M F Pangels - Group Development Director
Paul was appointed Group Commercial Director in March 2009. A Chartered Accountant, he Martin is Group Strategy and Development Director. He joined discoverIE in July 2010
has over 15 years experience of working in senior management positions for listed public after working as an advisor to the business. Prior to joining discoverIE, Martin spent 9
companies, including Wincanton plc and Uniq plc. Prior to joining discoverIE he was Group years at Electrocomponents plc, where he was Regional General Manager for Europe,
Chief Executive of an AIM listed software development company. and 6 years with Bain & Company as a strategy consultant.
J J Morcom – Group Head of Corporate Development P G Webster - Group Director – Acal BFi and Cross Selling
Jeremy was appointed Group Head of Corporate Development in March 2017. A physicist Paul joined discoverIE in June 2010 as Managing Director, Acal BFi UK. He has many years
by background, he has extensive experience in mergers and acquisitions, having held experience in senior management roles, including Head of Product Management for
M&A leadership roles at Spectris plc and Invensys plc preceded by over a decade spent Electronics globally at Electrocomponents plc. He began his career as a design engineer
in investment banking. for Plessey Avionics (now part of BAE Systems).
G D Davidson – Group General Counsel & Company Secretary
Greg joined discoverIE in November 2019 and is responsible for legal and company
secretarial affairs. He is a qualified lawyer with extensive experience of technology,
corporate and commercial matters. His experience includes 5 years at Wiggin & Co LLP,
with clients focused predominantly in the technology sector and, prior to joining
discoverIE, 16 years at RM plc, with 7 years as General Counsel & Company Secretary
* Denotes membership of the Board
discoverIE Group plc 15History since incorporation
Incorporation Compotron, Myrra, YEG & Variohm
BFi Optilas SAS Noratel Flux Cursor Controls Sens-Tech Limitor Beacon (£59m) &
Hectronic & MTC RSG Holdings
(£13m) (£71m) (£3m) (£19m) (£58m) (£13m) Antenova (£18m)
(total £9m) (total £13m) (£12m)
Admission to the
official list of the Sale of AES
Foss Contour (£17m) Santon Hobart (£12m) & Phoenix CPI
London Stock Sale of ATM Parts Sale of UK Parts (completes exit from
Exchange IT Supply Chain £12m (£8m) and Plitron (£2m) (£24m) Positek (£4m) (£9m) (£8m)
total)
New
management: Sale of EAF Parts £32m placing
NJ joins as CEO
SG as CFO
(Jul 10)
£6m placing £55m rights issue £14m placing £28m placing £55m placing
Jan Jan Jun Jul Jan Nov Jan/Feb Jan Jan Oct Apr Oct Oct Feb May Aug/Sep
1986 1994 2009 2009 2010 2011 2013 2013 2014 2014 2015 2015 2016 2017 2018 2018 2019 2019 2020 2021 2021 2021
Acquisitions
Disposals
Fundraising
High Quality Shareholders
Top 5 (33%) –Standard Life Aberdeen, Black Rock, Kempen, Montanaro, Canaccord
Next 15 (37%) – Amati, Axa, Charles Stanley, Colombia Threadneedle, Danske, Franklin Templeton, Herald, Invesco, Kabouter, L&G, Rathbones, Royal London,
Royce, Schroders, Swedbank
27% of shareholder now across US and Europe.
Directors/management: 4%
discoverIE Group plc September 2021 16APPENDIX Sales model and customers
Our engineering led sales model
Customer needs
Helping customers solve their technical challenges to create more efficient,
productive and sustainable equipment and comply with increasingly
stringent environmental, health, safety and performance requirements.
Enduring customer relationships
Our model gains a unique understanding of customers’ needs and builds
long term relationships that last for many years.
Engineering led solutions
By applying our extensive technical knowledge of applications and design
our engineers create unique products for customers’ specific needs
Recurring revenues
Our designs are specified into our customers’ system designs for production,
leading to multiple years of repeated monthly demand, creating stable,
recurring revenue streams
Regional manufacturing
Manufacturing locations in Europe, Asia and the Americas provides regional
supply for customers, reducing transit times, costs and environmental
impact as well as reducing risk of disruption
discoverIE Group plc September 2021 18Our customers
& the European ‘Mittelstand’
discoverIE Group plc September 2021 19APPENDIX Target Markets
Essential products into growth markets
Technology
Mega trends Market drivers discoverIE solutions
integration
Decarbonisation Geopolitical consensus Increasing scale of wind Power inductors
Growing public awareness turbines Turbine blade pitch control
& Diversification
Legislative and regulatory Diversification of solar systems Airflow measurement
regimes
Cost of energy
Renewable Energy
Electrification Decarbonisation Electric vehicles Charging
& Autonomous vehicles ‘Safety-centric’ agenda Mass transit & route vehicles Sensing systems
Mass transit & route vehicles Autonomous vehicles Power control
High speed rail Cabin monitoring & control
Transportation
Artificial intelligence, Proactive & preventative Monitoring & control Embedded diagnostics
sensing & analytics medicine Automation & robotics Interface device & cabling
Technological & biological Advanced surgery Power systems
fusion
Predictive analytics
Medical
Connectivity & Industrial Operational efficiency and Automation & robotics Wireless telematics
flexibility ‘Smart factories’ Fibre optic connectivity
Internet of Things
Quality control Artificial intelligence AI communication
Competition from Technology Wireless robotics control
companies
Industrial & Connectivity
discoverIE Group plc September 2021 21Renewable Energy
Applications
Airflow, temperature and
pressure switches
Wind measurement and
pitch controller
Turbine power converters
and inductors
High voltage, high current
DC and AC switches
Power supply for
pitch controller
discoverIE Group plc September 2021 22Medical
Applications
Embedded computers
and displays
Foot switches to control the height and
position of the operating table
Cabling and connectors for medical
equipment
Toroidal isolation transformers used in
C-Arm X-ray machines and X-ray
generators
Power isolator and protection
for operating theatres
discoverIE Group plc September 2021 23Transportation
Applications
Rail carriage door
controls and connectors
Driver desk indicators and controls,
speedometer and monitors
Vehicle electrification
charging infrastructure
Drum switches
and connectors
Transformers and inductors, smaller
battery solutions
for in-train power
discoverIE Group plc September 2021 24Industrial & Connectivity
Applications
Power unit for
satellite propulsion
Wireless communications for industrial
metering
Telematics for remote control of
industrial equipment
Power & signal electronics for industrial
drive unit
Position sensor
for extensometers
Fibre optic switching module for testing
fibre optic cables
discoverIE Group plc September 2021 25Refining our industrial market focus
Growth areas where electronics will drive efficiency, intelligence and sustainability
Industrial applications that
support & enable sustainability
Energy efficiency, automation &
communication
Industrial & Connectivity
Focus on improvement
Enablers of new sustainable
capabilities
Smart agriculture
Industrial &
Connectivity Example: Efficient food manufacturing
Resource systems
Optimisation Efficient water use/management
Water quality improvement
discoverIE Group plc September 2021 26Case study: Our unique solutions for Renewable energy
Strong and trusted customer relationships across supply chain
Providing innovation-led, bespoke solutions to essential customer requirements
Multi-year design cycles provide strong visibility & recurring revenues
Complementary technologies create cross-selling opportunities
Airflow measurement Pitch controller
Power inductors
discoverIE Group plc September 2021 27APPENDIX Sustainability in action
Sustainability in action
Advancing the Electrification of Transportation
discoverIE Group plc September 2021 29Sustainability in action
Enhancing the Quality of life and care for people
discoverIE Group plc September 2021 30END
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