discoverIE Group PLC · LSE:DSCV
discoverIE — FY2021 Earnings Presentation
40 slides from discoverIE's earnings presentation, Jun 3, 2021
Slide 1: Preliminary results Year ended 31 March 2021
Preliminary results Year ended 31 March 2021 GROWTH RESILIENCE SUSTAINABILITY 3 June 2021 discoverIE Group plc Preliminary results FY21 – 3 June 2021
Slide 2: Strong second half recovery, record order book and excellent cash generation
Strong second half recovery, record order book and excellent cash generation ◼ Strong H2 order growth (+12% organic) returning monthly sales to organic growth by year end; earnings ahead of expectations ◼ Record year end order book, up 15% year-on-year ◼ Resilient margins despite lower revenue ◼ Exc
Slide 3: Focused on delivery of strategic targets
TARGET MARKETS Focused on delivery of strategic targets ◼ Key strategic indicators – on track to FY2024/25 targets ◼ Increase share of Group revenue from higher margin D&M division (1) ◼ Increase underlying operating margin ◼ Increase sales into target markets(1) ◼ Build sales beyond Europe(1) D&M S
Slide 4: Financial Review
FINANCIAL REVIEW discoverIE Group plc Preliminary results FY21 – 3 June 2021
Slide 5: Resilient financial performance
Resilient financial performance ◼ Operating profit 5% lower CER FY21 FY20 Movement ◼ Reflects decisive actions to mitigate Movement effects of covid Orders £480.0m £476.4m 1% 0% ◼ Gross margin up 0.6ppts Revenue £454.3m £466.4m (3%) (4%) ◼ Op margin 7.7% (0.3ppts lower) Underlying operating profit (
Slide 6: Return to organic growth by year end
Return to organic growth by year end Revenue REVENUE growth FY21 6% ◼ H2 improving trend (3%) 13% Organic(1) (6%) ◼ H2 organic orders +12% (H1: -18%) 15% Acq 2% ◼ H2 organic sales 3% lower (H1: -8%) 18% CER (4%) ◼ Return to sales growth in L2M 6% 28% £466m £454m Currency 1% ◼ H2 EBIT% at 8.1% (H1: 7
Slide 7: Underlying Operating Profit impact minimised
Underlying Operating Profit impact minimised UNDERLYING OPERATING PROFIT ◼ Cost reductions and acquisitions offset lower revenue £3.8m £0.2m (£8.8m) ◼ Organic revenue 6% lower £2.4m £0.5m ◼ Gross margin up 0.6ppts to 34.2% ◼ GM up 0.1ppts organically £37.1m £35.2m ◼ Tight management of opex reduced
Slide 8: Resilience across both divisions
Resilience across both divisions £m FY21 FY20 (CER) Revenue growth ( 1) EBIT ( 1) ( 1) ( 2) growth Revenue EBIT % Revenue EBIT % Actual CER Organic % D&M 296.6 37.7 12.7% 299.7 38.2 12.7% (0%) (1%) (4%) (1%) Custom Supply 157.7 5.6 3.6% 171.3 7.4 4.3% (6%) (8%) (8%) (24%) Head Office (8.1) (8.3) Tot
Slide 9: Second half PBT ahead of last year
Second half PBT ahead of last year £m FY 21 FY 20 Gro wth ◼ H2 PBT up £0.5m on last year (1) Underlying operating profit 35 .2 37.1 (5%) Finance costs (3.7) (4.3) ◼ Finance costs reflect lower net debt ◼ Underlying PBT for the year 4% lower Underlying PBT(1) 31.5 32.8 (4%) Effective tax rate 24% 20%
Slide 10: Excellent cash generation
Excellent cash generation £11.6m (£3.6m) (£6.7m) FREE CASH FLOW(1) £48.4m £49.7m (£3.1m) (£7.2m) ◼ Strong operating cash flow(1) ◼ £49.7m up 26% (£1.8m) £37.6m ◼ 141% of underlying operating profit ◼ Consistently high conversion rate ◼ . . . and free cash flow(1) ◼ £37.6m up 38% ◼ 157% of underlying
Slide 11: Working capital efficiencies
Working capital efficiencies WORKING CAPITAL(1) £71m £67m ◼ WC reduced by 13% £62m £62m ◼ WC at 13.1% of sales(2), 1.3ppts better than FY20 £53m £55m ◼ D&M improved by 0.7ppts to 17.0% ◼ CS improved by 1.5pts to 9.6% 25.0% 19.4% 20.3% 18.7% 19.1% ◼ Robust KPIs 17.7% 17.0% ◼ Debtor days: 48 (FY20: 52
Slide 12: Progressive dividend policy resumed
Progressive dividend policy resumed D 10.15p 9.55p ◼ Dividend increased by 6% Covid cash protection action 9.00p 8.50p over FY19 8.05p 7.60p ◼ 2.6 x cover (underlying) and 1.3x 6.80p cover (reported) 6.18p 7.00p 5.81p 6.75p 5.43p 6.35p ◼ Progressive policy remains 5.09p 6.05p 5.72p 5.40p ◼ To exceed
Slide 13: Key strategic & performance targets
Key strategic & performance targets Key Strategic Indicators FY25 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Targets 1. Increase share of Group revenue from D&M (1) 18% 37% 48% 52% 57% 61% 64% 65% >75% 2. Increase underlying operating margin 3.4% 4.9% 5.7% 5.9% 6.3% 7.0% 8.0% 7.7% 12.5% (1) 3. Build sa
Slide 14: Operating Review
OPERATING REVIEW discoverIE Group plc Preliminary results FY21 – 3 June 2021
Slide 15: Design & Manufacturing division
OPERATING REVIEW Design & Manufacturing division REVENUE 64% 65% 57% 61% Growth FY21 ◼ Significant H2 recovery £298m £297m 52% Organic (4%) ◼ Strong H2 order growth up 10% organic 48% £266m £223m Acquisitions 3% ◼ Book to Bill ratio 1.16:1 37% £176m CER (1%) ◼ Annual profits 2% lower £137m 18% £101m
Slide 16: D&M target markets proving resilient
OPERATING REVIEW D&M target markets proving resilient REVENUE FROM TARGET MARKETS ORGANIC GROWTH BY MARKET(1) (% of total revenue) (3%) Target Markets Other Industrial & Connectivity (9%) Other Markets Transport Medical Renewable (4%) Total energy 75% ▪ Target markets perform well ahead of wider ind
Slide 17: D&M sales profile
OPERATING REVIEW D&M sales profile HALF YEARLY ORGANIC REVENUE BY REGION ORGANIC GROWTH BY SALES GROWTH REGION(1) 11% 12% UK 11% 10% 10% Asia 10% 9% 23% Germany 7% 12% (1%) 5% (3%) (4%) 3% (8%) N. America (2%) 13% Nordic 24% (15%) (17%) (7%) R.O.E. 18% UK Germany Nordic R.O.E. N. Asia Total Q4 17 H1
Slide 18: Acquisition case study – Noratel Group
Acquisition case study – Noratel Group Noratel FY15-21 ◼ Acquired July 2014 Noratel Revenue growth FY15-21 7% CAGR ◼ Products – Power Transformers Revenue growth Operating margin 10% → 14% 7% CAGR ◼ Developments since acquisition: Operating ROCE margin 10% →→ 24% 12% 14% ◼ Developed long term strate
Slide 19: Custom Supply division
OPERATING REVIEW Custom Supply division REVENUE ◼ Strong H2 recovery in orders ◼ H2 orders up 16% organic and up 40% on H1 ◼ Resilient annual performance £173m £170m £163m £165m £173m £169m £158m £150m ◼ FY orders in line with last year ◼ Organic sales 8% lower (H2 5% lower) ◼ Book to Bill 1.09:1 FY
Slide 20: Record year end order book
OPERATING REVIEW Record year end order book £181m ◼ £181m order book £158m £141m ◼ 15% higher than FY20 CER £122m ◼ Organic +11% £109m £85m £73m ◼ High proportion of recurring £65m £52m £50m revenues ◼ Driven by ◼ H2 recovery ◼ New project design wins discoverIE Group plc Preliminary results FY21 –
Slide 21: Project activity starting to recover
OPERATING REVIEW Project activity starting to recover DESIGN ▪ H2 new project activity up on H1 WINS ▪ ▪ But still lower than prior year Design wins of £219m ELV(1), down 15% ▪ H1 -19%, H2 -12% ▪ Reflecting Covid disruption ▪ Represents 16% of current revenue ▪ Expected to recover in FY22 ▪ >90% of
Slide 22: Acquisitions proving resilient
OPERATING REVIEW Acquisitions proving resilient ◼ High quality acquisitions over 11 years ◼ £280m invested in 17 D&M acquisitions, £135m new equity ◼ Developed sustainable growth business 66% ahead of market Average EBIT ROI(1) ◼ Generating strong returns ◼ Overall average EBIT ROI of 16% 43% ◼ Well
Slide 23: Strategy Update
STRATEGY UPDATE discoverIE Group plc Preliminary results FY21 – 3 June 2021
Slide 24: Consistent, proven strategy
STRATEGY UPDATE 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
Slide 25: Focused on sustainable growth markets
STRATEGY UPDATE ▪ Global trends driving structural growth FOCUSED ON ▪ Product development driven by technology SUSTAINABLE ▪ Increasing electronic content GROWTH MARKETS ▪ Essential products ▪ Markets aligned with UN SDG(1) Renewable Transportation Medical Industrial & Energy Connectivity Artificia
Slide 26: Sustainability in action
STRATEGY UPDATE Sustainability in action Advancing the Electrification of Transportation discoverIE Group plc Preliminary results FY21 – 3 June 2021 25
Slide 27: Our planet, Our people, Our products
STRATEGY UPDATE Our planet, Our people, Our products Environmental, Social & Governance (ESG) priorities for a better world Environment Health & Safety Diversity Governance Tonnes CO2/£m turnover Accidents per employee Gender split Internal audit covers 80% Head office staff Group EBIT & 67% Group 2
Slide 28: Outlook
Outlook ◼ New year has started well: ◼ Further strong organic order growth ◼ Organic growth in sales v last year and two years ago ◼ Bolt on US acquisition ◼ Record order book continuing to build ◼ Pipeline of acquisition opportunities, and low gearing ◼ Expect to make good progress in the year ahea
Slide 29: Q & A session
Q & A session If you have any questions: ▪ Please raise your hand via Webinar ▪ We will take one question at a time ▪ Webinar will unmute your microphone when we are ready for your question discoverIE Group plc Preliminary results FY21 – 3 June 2021
Slide 30: Appendices
APPENDICES
Slide 31: Underlying to IFRS reconciliation
APPENDIX I Underlying to IFRS reconciliation FY21 (£m) U nd er lying A cqs A mo rt IA S 19 IFRS Gross profit 155.3 155.3 S&D costs (57.8) (57.8) Admin expenses (62.3) (2.0) (11.1) (1.4) (76.8) ◼ Management believe the adjustments enable a better understanding of the Operating profit 35 .2 (2.0 ) (11
Slide 32: Efficiency drives operating margin
APPENDIX II Efficiency drives operating margin Gross margin % FY21 34.2% FY20 33.6% GM at its highest level FY19 33.0% ◼ GM has increased 8ppts since strategy FY18 32.7% began FY17 32.8% FY16 32.2% FY15 31.1% FY14 29.8% Opex % FY21 26.5% FY20 25.6% Operating costs up 0.9ppts as % of sales FY19 26.0%
Slide 33: Underlying adjustments & net assets
APPENDIX III Underlying adjustments & net assets UNDERLYING ADJUSTMENTS (£m) NET ASSETS (£m) FY21 FY20 N et A sset s At 3 1 March 2020 200.5 Acquisition & merger costs (2.0) (4.0) Net profit after tax 12.0 Amortisation of acquired intangibles (11.1) (9.0) Dividend paid (2.8) Legacy pension - IAS19 (
Slide 34: Cash flow & net debt
APPENDIX IV Cash flow & net debt NET DEBT (£m) FY21 FY20 CASH FLOW (£m) FY21 FY20 Net debt at 1 April (61.3) (63.3) Underlying profit before tax 31.5 32.8 Free cash flow 37.6 27.3 Finance costs 3.7 4.3 (1) Dividends (2.8) (8.1) Non cash items 13.2 13.5 Acquisition related cash flow (21.8) (75.9) Und
Slide 35: Foreign exchange effects
APPENDIX V Foreign exchange effects Translation effects Operational effects ◼ Sterling weaken in FY21 against € and average ◼ Sterling has strengthened against US$ in FY21. Nordic currencies however it has strengthened against US$. This has an impact to the Group on £/$ translation of overseas sales
Slide 36: Our business
APPENDIX VI 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 ▪ Des
Slide 37: Essential products into growth markets
APPENDIX VII Essential products into growth markets Technology discoverIE Mega trends Market drivers integration solutions Decarbonisation ◼ Geopolitical consensus ◼ Increasing scale of wind ◼ Power inductors ◼ Growing public awareness turbines ◼ Turbine blade pitch & Diversification ◼ Legislative a
Slide 38: Design & Manufacturing division
APPENDIX VIII Design & Manufacturing division REVENUE FROM TARGET MARKETS ▪ 65% of Group Revenue REVENUE BY BY REGION (% of total revenue) REVENUE REGION ▪ 6% Organic CAGR over last 5 years (pre FY21) ▪ 75% in faster growing target markets UK UK 10% ▪ Generating 87% of FY21 Group profit contribution
Slide 39: Sustainability in action
APPENDIX IX Sustainability in action Enhancing the Quality of life and care for people discoverIE Group plc Preliminary results FY21 – 3 June 2021 38
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