Strategy Delivering Further Strong Growth 4 th December 2018 Interim - - PowerPoint PPT Presentation

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Strategy Delivering Further Strong Growth 4 th December 2018 Interim - - PowerPoint PPT Presentation

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Interim results Half year ended 30 th September 2018 Strategy Delivering Further Strong Growth 4 th December 2018 Interim results FY19 4 th December 2018 discoverIE Group plc A strong first half Group sales up 11% Organic D&M

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SLIDE 1

Interim results FY19 – 4th December 2018 discoverIE Group plc

Interim results Half year ended 30th September 2018 4th December 2018

Strategy Delivering Further Strong Growth

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SLIDE 2

Interim results FY19 – 4th December 2018 discoverIE Group plc (1) Estimated lifetime sales value of projects

A strong first half

Group sales up 11%

 Organic D&M excl acquisitions +10% 

Record order book +18% (CER)

New project design wins +40%(1)

Underlying operating profit +23%

Underlying EPS +24%

Since the half year end – the acquisition of Cursor Controls for £19m

1

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SLIDE 3

Interim results FY19 – 4th December 2018 discoverIE Group plc discoverIE Group plc

Since ce FY13 :

Sales up > 2x

Underlying EPS up > 2x

Operating profits up > 4x

Share price growth 21% CAGR(2)

Dividend growth 7.4% CAGR(3)

(1) Group revenue, excluding disposed businesses (2) Growth from 2009 to Nov 2018 (3) Growth from 2010 - 2018

Our aim is to double e EPS in 5 years

H1 19 EPS up 24%

We aim to provi

  • vide

de inves vestor tors with

Returns of 15 – 20% pa

A progressive dividend

FY13 FY14 FY15 FY16 FY17 FY18 FY19

SA SALE LES(1)

FY13 FY14 FY15 FY16 FY17 FY18 FY19

UNDERLY LYIN ING OPERATIN ING PROFIT IT & & EPS

Underlying Operating Profit EPS

Growth Company

2

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SLIDE 4

Interim results FY19 – 4th December 2018 discoverIE Group plc

FINANCIAL REVIEW

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SLIDE 5

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Higher

er gross margin

 Up 0.8ppts to 33.0%

 Increa

easing operati ting margin

 Up 0.6ppts to 6.8%

 Gener

erati ting cash

 84% operating cash

conversion in the last 12 months (£22.9m)

 Growin

wing ROCE E

 Up 1.3ppts to 14.8%

(1) Underlying profits exclude acquisition-related costs and exceptional items (see Appendices I & II) (2) ROCE is underlying operating profit as a percentage of net assets plus net debt (including acquisitions). FY18 ROCE of 15.5% excluded acquisitions

Financial Review

Strong first half performance

4

H1 19 H1 18 Growth CER Growth Revenue £211.7m £190.2m +11% +12% Underlying operating profit(1) £14.5m £11.8m +23% +25% Underlying profit before tax(1) £12.9m £10.4m +24% Underlying EPS(1) 13.0p 10.5p +24% Interim dividend per share 2.80p 2.65p +6%

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SLIDE 6

Interim results FY19 – 4th December 2018 discoverIE Group plc

Revenue up 112% in 5 years (16% CAGR) Financial Review

Revenue more than doubled in 5yrs

5

£100m £121m £142m £157m £190m £212m +20% +18% +10% +21% +11% H1 14 H1 15 H1 16 H1 17 H1 18 H1 19

REVENUE

Growth th H1 19 Organic(1) 7% Acq 5% CER 12% Currency

  • 1%

Actual 11%

(1) Organic growth (excluding acquisitions). Including acquisitions, organic growth was 3% (see Santon p16)

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SLIDE 7

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Under

erlying operati ting profi fit(1

(1) )

  • f £14.5m

 Up £2.7m on H1 18 (+23%, +25% CER)  39% CAGR in 5 years

 Under

erlying operati ting margin

  • f 6.8%

 Up 0.6ppts on H1 18  Up 4.0ppts in 5yrs  Progress towards 8.5% target(2)

(1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and II). (2) Mid term target by Nov 21

Financial Review

Strong increase in profitability

£2.8m £5.5m 5m £7.6m £8.8m £11.8m £14.5m 2.8% 4.5% 5.4% 5.6% 6.2% 6.8% H1 14 H1 15 H1 16 H1 17 H1 18 H1 19

UNDERLYING G OPE PERATING G PR PROFI FIT & MARGI GIN

6

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SLIDE 8

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Under

erlying ing operati ating profit fit up 25% CER

 Strong revenue growth  Gross margin up 0.7ppts organically  Opex increase mainly D&M related  Santon impacted by Chinese tariff

reductions  EBIT

T drop thru of 20% 20%(2)

(1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and II). (2) Increase in profits as a percentage of sales growth (Excluding acquisitions)

Financial Review

Profits driven by higher value products and good operating leverage

7

£11.8m £4.3m £1.5m (£2.8m) (£0.1m 1m) (£0.2m) £14.5m

H1 18 REVENUE GM GM OPEX ACQS FX FX H1 19

UNDERLYING G OPE PERATING G PR PROFI FIT

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SLIDE 9

Interim results FY19 – 4th December 2018 discoverIE Group plc (1) UOP is underlying operating profit (2) Organic growth excludes acquisitions (D&M)

Financial Review

CUSTO TOM SUPPLY DESIGN & MANUFACTU CTURING

Profit growth across both divisions…

Operati ting profit t up 22% 22% CER

 Margin up 0.2ppts to 11.1%

Operati ting profit up 18% CER

 Margin up 0.6ppts to 4.6%

8

£m D&M 127.8 14.2 11.1% 106.7 11.6 10.9% 18% 20% 10% 22% Custom Supply 83.9 3.9 4.6% 81.9 3.3 4.0% 2% 2% 2% 18% Unallocated (3.6) (3.3) Total (CER) 211.7 14.5 6.8% 188.6 11.6 6.2% 11% 12% 7% 25% FX 1.7 0.2 Total (reported) 211.7 14.5 6.8% 190.2 11.8 6.2%

Revenue UOP(1) UOP growth %

Revenue growth

Organic (2 ) % Actual CER

H1 18 (CER)

Revenue UOP(1) %

H1 19

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SLIDE 10

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Unde

derlying ying PBT up 24%

 Under

derlyi ying ng EPS up 24% 24%

Up c.170% in 5 yrs (22% CAGR)

(1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and II).

Financial Review

… driving further EPS growth

9

4.8p 6.5p 7.7p 8.5p 10.5p 5p 13.0p +35% +18% +10% +24% +24% H1 14 H1 15 H1 16 H1 17 H1 18 H1 19

UNDERLY LYIN ING EPS

£m H1 19 H1 18 Underlying operating profit(1) 14.5 11.8 Finance costs(1) (1.6) (1.4) Underlying PBT(1) 12.9 10.4 Effective tax rate 25% 24% Underlying PAT 9.7 7.9 Fully diluted shares (m) 74.5 75.0 Underlying EPS (p) 13.0p 10.5p

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SLIDE 11

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Operati

ating ng cas ash flow(1

(1) ) of £22.9m

9m

  • ver

er last t 12 months (LTM)

 £22.9m for LTM, up 5%  84% of underlying operating profit  100% average conversion rate over

the last 6 years.

 Net

t debt t at 30 Sep 18 of £62.6m 6m

 £2.3m reduction since last year (ex

acquisitions)

 Gearing ratio(2) of 1.85x (target range

1.5x – 2.0x)

 Revol

volvi ving ng credi edit t faci cility ty of £120m

 Plus £30m accordion; term to Jul 21  Available for acquisitions and working

capital

(1) Operating cash flow defined as EBITDA less working capital and capex – see Appendix III (2) Net debt at 30 Sep 18 as a ratio of adjusted EBITDA (Group underlying EBITDA for last 12 months adjusted for a full year of the underlying EBITDA from acquisitions).

OPERATING CASH FLOW(1) in last 12 months (£m)

Financial Review

Financing and cash flow

10

H1 14 H1 15 H1 16 H1 17 H1 18 H1 19 Target 100% 104% 106% 107% 95% 84% 85% % Underlying Operating Profit 6.1 9.9 16.5 18.6 21.9 22.9

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SLIDE 12

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Similar WC/sales

es ratio

  • to last year

 17.3% of annualised Q2 sales (v 16.7% LY)  Reflects increasing proportion of D&M

(D&M WC at 22% of sales, CS WC at 13%

  • f sales)

 WC up £5.3m

3m organically y in LTM

 Strong organic growth in Q2 of 9%

(£36m annualised sales) = 14% WC rate below Group average  £2

£2-3m Brexit stock k building H2

 Customer committed inventory

Working capital increases to support growth

Financial Review

(1) Cash to cash cycle (C2C) is the average net number of days from remitting cash to suppliers to receipt of cash from customers (stock days – creditor days + debtor days) (2) Working capital is defined as net inventory, trade & other receivables and trade & other payables. Unallocated working capital is not represented in this chart.

11

£22 22m C2C 54 4 £23 23m C2C 44 4 £21 21m C2C 53 £24 24m C2C 48 £33 33m C2C 91 £38 38m C2C 100 £47 47m C2C 97 £55 55m C2C 86 86 16.1% 17.4% 4% 16.7% 17.3% 3% 46% 52% 57% 60% H1 16 H1 17 H1 18 H1 19

WORKING CAPITAL(2)

CS D&M Group SWC% Sales D&M Sales%

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SLIDE 13

Interim results FY19 – 4th December 2018 discoverIE Group plc discoverIE Group plc

 Inter

erim divi vidend end up 6%

 77% growth FY dividend in 8yrs  7.4% CAGR

 Mainta

taining progres essive ve policy

 2 to 3x cover (underlying basis)  FY18: 2.5x cover (underlying) and

1.8x cover (reported)

Financial Review

Increasing dividend

1.69p 9p 1.69p 9p 1.82p 1.82p 1.82p 2.20p 2.33p 2.45p 2.65p 2.80p 3.40p 3.74p 3.99p 9p 4.36p 4.98p 5.40p 5.72p 6.05p 6.35p

5.09p 5.43p 5.81p 6.18p 6.80p 7.60p 8.05p 8.50p 9.00p FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

12

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SLIDE 14

Interim results FY19 – 4th December 2018 discoverIE Group plc

OPERATING REVIEW

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SLIDE 15

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Stron

  • ng organi

anic c growth th

 Sales (excl acqs) +10%  Orders (excl acqs) +13%

 Operating

ating profit up 24%

 Operating leverage (23% EBIT

drop thru)

 Enlar

arged ed produ ducti ction n faci ciliti ties es now operati ational nal (5.5k 5ksqm, qm, +11%) 1%)

 Magnetics – Bangalore, India  Fibre optics – Bratislava, Slovakia  Shielding – Seoul, Korea

 Expans

ansion

  • n in China

na underwa way

 Magnetics (+3.6k sqm)

 Flexible

e produ ducti ction n minimises es effec ects ts of tariffs into

  • USA

USA

Note: At constant exchange rates (CER)

Operating Review

Design & Manufacturing division

14

Growth H1 19 Organic 10% Acquisitions 10% CER 20% Currency

  • 2%

Actual 18%

£2.1m £5.3m £8.9m £10.4m £11.6m £14.2m 43% 61% 75% 85% 78% 78% H1 14 H1 15 H1 16 H1 17 H1 18 H1 19 Underlying Operating Profit % Group profit contribution £18m £41m £76m £86m £107m £128m 19% 34% 46% 52% 57% 60% H1 14 H1 15 H1 16 H1 17 H1 18 H1 19 Sales % Group total

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SLIDE 16

Interim results FY19 – 4th December 2018 discoverIE Group plc

Widespre pread, , strong organic growth th

(1) Sales destination, excluding acquisitions (2) D&M organic growth excluding acquisitions

Operating Review

Strong D&M organic growth

15

UK UK 15% Germany 11% 11% Nordic 27% R.O.E. 20%

  • N. America

9% 9% Asia 18%

REVENUE BY REGI GION

UK UK Germany Nordic R.O.E. N. N. America Asia Total 4% 4% 14% 7% 7% 7% 7% 11% 11% 25% 10%

ORGA GANIC GR GROWTH BY REGI GION(1)

9% 9% 9% 9% 14% 11% 11% 11% 11% 11% 11% 10% Q4 17 Q1 18 Q2 2 18 Q3 18 Q4 18 Q1 19 Q2 2 19

QUARTERLY ORGANIC SALES GROWTH(2)

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SLIDE 17

Interim results FY19 – 4th December 2018 discoverIE Group plc

 DC & AC switch

ching for elect ctroni

  • nic & elect

ctrica cal applicat ations

  • ns

 Solar & energy storage  Transport – rail & electric vehicles  Industrial

 High perfor

  • rma

manc nce e product ucts with signi nifican ant potent ential

 c.€25m sales p.a.  2 divisions – Solar, Industrial

 Solar

ar inver erter er market

 Slowed in H1, will recover  Changes to solar subsidy in China

 Trans

nspor

  • rtat

ation n and Indus ustrial al

 Growing strongly

Santon acquisition - high performance switching

Operating Review

16

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SLIDE 18

Interim results FY19 – 4th December 2018 discoverIE Group plc (1) Sales growth excluding acquisitions. Target markets are renewable energy, transportation, medical and industrial connectivity

Operating Review

Target markets leading growth

Up from 56% @ year end

17

Target Markets £78m 61%

D&M REVENUE FROM TARGET MARKETS (% of total Group revenue)

13% 6% 10% Target Markets Other Markets Total

ORGANIC GROWTH BY MARKET(1) 13%

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SLIDE 19

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Good

  • d organi

anic c grow

  • wth

th

 Sales +2% (despite a large one-off prior year shipment)  Underlying sales +6%

 Operati

ating ng profit up 18%

 Operating leverage (30% EBIT drop through)

 Perfor

  • rman

ance ce driven ven by Germany, any, Italy & Neth ther erlands ands

 UK returned to growth in Q2

 Cross

  • ss selling

ng up 17% to £4.9m 9m

 Higher gross margins (c.+10ppts v CS GM)

Note: At constant exchange rates (CER)

Operating Review

Custom Supply division

£2.8m £3.4m £3.0m £1.9m £3.3m £3.9m H1 14 H1 15 H1 16 H1 17 H1 18 H1 19

UNDERLYING OPERATING PROFIT

18

£76m 6m £79m £88m 8m £79m £82m 2m £84m £6m £8m £1m H1 14 H1 15 H1 16 H1 17 H1 18 H1 19

REVENUE

Ongoing Discontinued

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SLIDE 20

Interim results FY19 – 4th December 2018 discoverIE Group plc

 £131m recor

  • rd

d order der book

 CER +18% v H1 18  Organic +13% v H1 18

 High propor

  • rti

tion

  • n of recurring

ng revenu venues es

 Drive

ven n by

 New project design wins  Repeat revenue growth

FY13 FY14 FY15 FY16 FY17 FY18 8 FY19

Operating Review

Record order book underpins H2

19

£52m £50m £65m £73m £85m £109m £124m £131m

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SLIDE 21

Interim results FY19 – 4th December 2018 discoverIE Group plc

Focused on growth markets

 Technology revolution driving new product development  Global trends underpinning structural growth  Applications necessitating increased electronic content  Essential customers requirement for application-specific solutions

Tra Trans nsport rtatio ion Medic ical Renewa newable le Ener nergy gy Industria ndustrial l Conn nnectivit ivity

Automotive circuit sales es expected ed to rise CAGR 13.4% (2016- 2021) IC Insights Medical l elec ectronic nics s to grow CAGR 6.8% (2017 -2022) ) Research+Markets Two thirds global l investmen ent in power generation to 2040 will l be into renewable ble energy World Energy Outlook 2017 Overall l market size for global l machine-to to-machine e connec ections s to rise 13.2% CAGR (2016-2021) 21) Markets-and-Markets

20

Operating Review

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SLIDE 22

Interim results FY19 – 4th December 2018 discoverIE Group plc

Essential products into growth markets

Medical edical Rene enewab able le Ener nergy gy Indus Industrial ial Conn nnect ectivit ivity

 Charging  Sensing systems  Power control  Cabin monitoring &

control

 Increasing scale of wind

turbines

 Diversification of solar

systems

 Wireless telematics  Fibre optic connectivity  AI communication  Wireless robotics control  Monitoring & control  Automation & robotics  Advanced surgery  Electric vehicles  Mass transit & route

vehicles

 Autonomous vehicles  High speed rail

Transportation

discoverIE solutions Market drivers Mega trends

Decarboni nisa sation & & Diversi sification

  • n

Electrification n & Autonomo mous s vehicles Conn nnectivity y & Industr strial Internet of Thing ngs Artificial intelligenc nce, , sensi sing ng & analytics

 Power inductors  Turbine blade pitch

control

 Airflow measurement  Embedded diagnostics  Interface device & cabling  Power systems  Automation & robotics  ‘Smart factories’  Artificial intelligence

Technology integration

 Decarbonisation  ‘Safety-centric’ agenda  Mass transit & route

vehicles

 Proactive & preventative

medicine

 Technological & biological

fusion

 Predictive analytics  Geopolitical consensus  Growing public awareness  Legislative and regulatory

regimes

 Cost of energy  Operational efficiency and

flexibility

 Quality control  Competition from

Technology companies

21

Operating Review

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SLIDE 23

Interim results FY19 – 4th December 2018 discoverIE Group plc

Case study: Our unique solutions for Renewable energy

Power r inductors rs Pitch ch controller ler Airflo low mea easureme rement nt

  • 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

Operating Review

22

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SLIDE 24

Interim results FY19 – 4th December 2018 discoverIE Group plc discoverIE Group plc

Renewable energy

Transportation

DESIGN WINS

Creatin ating g future ture growth th

£126m in new project wins

(est lifetime value or ELV)

+40% increase on prior year c.80% in target markets

(1) Estimated lifetime sales value of projects, - estimate

Operating Review

23

Medical Industrial Connectivity

£40m £52m £70m £57m £90m £100m £126m

H1 16* H2 2 16* H1 17 H2 2 17 H1 18 H2 2 18 H1 19

Design wins - ELV(1)(£m)

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SLIDE 25

Interim results FY19 – 4th December 2018 discoverIE Group plc

Operating Review

Consistent, proven strategy

 Sales growth

h well ahead ad of GDP over the economic ic cycle

 Move

e up the value e chain into

  • higher

er margin products ts

 Acquir

ire e busin ines esses es with attrac activ tive e growth h prospects pects and strong operati ting margins

 Inter

ernati tion

  • nalise

e the busines ess

24

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SLIDE 26

Interim results FY19 – 4th December 2018 discoverIE Group plc (1) As a percentage of Group revenue (2) Mid-term is a 3 to 5 year period starting in Nov 16 (3) Growth excluding acquisitions; 3% with acquisitions. (4) Annualised sales (5) Based on last 12 months

Repeat the performance of the last 5 years

85% 10% 40% Long term ambition

Operating Review

Good progress towards targets

25

Key St Strategic ic In Indic icators

Mid term Target(2) 1. Increase share of Group revenue from D&M(1) 18% 37% 48% 52% 57% 60% 75%

  • 2. Increase underlying operating margin

3.4% 4.9% 5.7% 5.9% 6.3% 6.8% 8.5%

  • 3. Build sales beyond Europe(1)

5% 12% 17% 19% 19% 20% 30%

Key P Performance In Indic icators

3 yr target (FY20) 1. Sales growth CER 17% 36% 14% 6% 11% 12% Organic 2% 3% 3%

  • 1%

6% 7%(3)

  • 2. Increase cross-selling

£0.3m £0.9m £3.0m £4.6m £8.8m £9.7m(4) £10m p.a.

  • 3. Underlying EPS growth

20% 31% 10% 13% 16% 24% >10%

  • 4. Dividend growth

10% 11% 6% 6% 6% 6% Progressive

  • 5. ROCE(5)

15.2% 12.0% 11.6% 13.0% 13.5% 14.8% >15%

  • 6. Operating cash flow(5)

100% 104% 100% 136% 85% 84% >85% of Op profit FY15 FY15 FY16 FY18 FY18 H1 19 H1 19 Well ahead

  • f GDP

FY14 FY16 FY17 FY17 FY14

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SLIDE 27

Interim results FY19 – 4th December 2018 discoverIE Group plc

 12 D&M acqu

quisiti tions ns, £170m spen end d since nce 2011

 EBIT ROI of D&M acquisitions(1) of

20%, up from 18% LY (v 15% target)

 Consistent profitable growth from

earlier acquisitions

 Organi

anic c growth th with operati ating ng leverag age

 Organic sales growth of 6% pa  Organic profit growth of 9% pa

Acquisitions performing well

(1) ROI defined as annualised H1 19 operating profit attributable to the business over acquisition cost comprising up-front consideration, acquisition expenses, earn-out (once earned), and integration costs (2)Percentage growth since FY18 (3)Excludes Santon as less than one year since acquisition

Operating Review

26

90% 66% 66% 32% 32% 23% 22% 22% 21% 14% 13% 11% 11% 20% +13% +4% +8% +18% +3% +1% +10% +1% +6%

  • 8%

8% +3% A B C D E F G H I J Overall

EBIT IT ROI(1) % of H1 19

Target t 15% 5% (2)

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SLIDE 28

Interim results FY19 – 4th December 2018 discoverIE Group plc

Busine ness fundamen amentals als

  • Growth markets
  • Designed-in products, difficult to replace
  • Distinct business, competitive advantage
  • Low customer concentration
  • Good gross margin
  • Low capital investment requirements
  • Acquisitions at the right price

Attrac activ ive e rewa wards

  • GDP++ organic growth
  • High levels of repeating revenue
  • Sustainable margins
  • Reduced risk
  • Cash generative
  • Self-funding growth
  • Earnings accretion

Our business

Operating Review

27

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SLIDE 29

Interim results FY19 – 4th December 2018 discoverIE Group plc

Operating Review

Outlook

 H2 has started well with further strong growth , and the fundamentals are

in place for this to continue

Record order book

High level of design wins  On track to deliver full year performance in line with our expectations  Healthy acquisition pipeline 28

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SLIDE 30

APPENDICES

slide-31
SLIDE 31

Interim results FY19 – 4th December 2018 discoverIE Group plc

 Management believe the adjustments enable a

better understanding of the underlying performance of the business

 Adjustments made to IFRS results are:

 Acquisition/disposal related costs (transaction costs,

earn-outs, amortisation of acquired intangibles, gain or loss on acquisition or disposal, IAS 19 pension charge related to legacy scheme)

 Exceptional items (restructuring, integration, one offs)

Appendix I

Underlying to IFRS reconciliation

30

H1 19 (£m) UOP Excep. Acqs Amort IAS19 IFRS Gross profit 69.9 69.9 S&D costs (27.8) (27.8) Admin expenses (27.6) (2.9) (0.4) (2.9) (0.2) (34.0) Operating profit 14.5 (2.9) (0.4) (2.9) (0.2) 8.1 Net finance costs (1.6) (0.1) (1.7) Profit before tax 12.9 (2.9) (0.4) (2.9) (0.3) 6.4 Taxation (3.2) 0.8 0.7 (1.7) Profit after tax 9.7 (2.1) (0.4) (2.2) (0.3) 4.7 Effective tax rate 25% 27% EPS 13.0p 6.3p H1 18 (£m) UOP Excep. Acqs Amort IAS19 IFRS Gross profit 61.2 61.2 S&D costs (26.4) (26.4) Admin expenses (23.0)

  • (1.1)

(2.2) (0.1) (26.4) Operating profit 11.8

  • (1.1)

(2.2) (0.1) 8.4 Net finance costs (1.4) (0.1) (1.5) Profit before tax 10.4

  • (1.1)

(2.2) (0.2) 6.9 Taxation (2.5) 0.5 (2.0) Profit after tax 7.9

  • (1.1)

(1.7) (0.2) 4.9 Effective tax rate 24% 29% EPS 10.5p 6.5p

slide-32
SLIDE 32

Interim results FY19 – 4th December 2018 discoverIE Group plc

UNDERLYING ADJUSTMENTS (£m) NET ASSETS (£m) Appendix II

Underlying adjustments & net assets

31

Net Assets

At 31 March 2018 129.3 Net profit after tax 4.7 Dividend paid (4.7) Currency net assets - translation impact 2.7 Gain on defined benefit scheme 0.5 Shares issued 0.1 Share-based payments (incl tax) 0.4 At 30 September 2018 133.0 H1 19 H1 18 Acquisition costs (0.4) (1.1) Exceptional items (2.9)

  • Amortisation of acquired intangibles

(2.9) (2.2) Legacy pension - IAS19 (0.3) (0.2) Underlying adjustments (6.5) (3.5) Tax impact of adjustments 1.5 0.5 After tax adjustments (5.0) (3.0)

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SLIDE 33

Interim results FY19 – 4th December 2018 discoverIE Group plc (1) Non-cash items are depreciation, amortisation and share based payments. (2) Operating cash flow as a percentage of underlying operating profit. (3) Free cash as a percentage of underlying profit after tax.

Appendix III

Cash flow & net debt

NET DEBT (£m) CASH FLOW (£m)

32

H1 19 H1 18 Opening net debt (52.4) (30.0) (37.6) Free cash flow 2.1

  • 16.7

Acquisition related cash flow (2.3) (0.4) (27.3) Executive options issuance (1.1)

  • (1.1)

Net settlement expense

  • (1.5)

Exceptional payments (2.9) (0.7) (4.0) Legacy pension (0.9) (0.8) (1.8) Dividends (4.7) (4.3) (6.6) Foreign exchange impact (0.4) (1.4) 0.6 Net debt at 30 Sept (62.6) (37.6) (62.6) Last 12 mths H1 19 H1 18 Underlying profit before tax 12.9 10.4 24.4 Finance costs 1.6 1.4 2.8 Non cash items(1) 3.0 2.2 5.6 Underlying EBITDA 17.5 14.0 32.8 Working capital (10.2) (9.0) (5.3) Capital expenditure (1.9) (1.6) (4.6) Operating cash flow 5.4 3.4 22.9 Finance costs (1.6) (1.4) (2.8) Taxation (1.7) (2.0) (3.4) Free cash 2.1

  • 16.7

Target Operating cash flow %(2) 84% 85% Free cash flow %(3) 91% 90% Last 12 mths

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SLIDE 34

Interim results FY19 – 4th December 2018 discoverIE Group plc

Translation

  • n effec

ects ts

 Sterling weakened significantly in FY17 and FY18

but rose slightly overall in H1 19 impacting the Group on translation of overseas results into Sterling by c1%.

 c.85% of Group revenues are non-UK

(mainly € and Nordic).

 Translation impact for H1 19:  Sales £1.7m  Underlying operating profit £0.2m

(1) Nordic rate is a weighted average combination of £/NOK, £/SEK and £/DKK rates based on Group sales in each territory.

Operati tion

  • nal effec

ects ts

 Sterling weakened significantly against US$ in FY17.

Although strengthening throughout FY18 and H1 19, it still remains well below the FY16 average rate.

 Approximately 90% of UK cost of goods are non-

Sterling, so impacts on purchase pricing .

 The Group hedges material transactional exposures

for around six months.

 Protects GM at FX rate at time of order.

Appendix IV

Foreign exchange effects

£/€ £/Nordic (1) H1 19 v H1 18

  • 1%

4% FY18 v FY17

  • 5%
  • 2%

FY17 v FY16

  • 13%
  • 12%

33

£/$ €/$ H1 19 v H1 18 3% FY18 v FY17 1% FY17 v FY16

  • 13%
slide-35
SLIDE 35

Interim results FY19 – 4th December 2018 discoverIE Group plc

Opex % Gross margin % Operat atin ing costs ts up 0.2ppts ppts

Investment in D&M to fund growth (in H1 and in the future)

Operating margin % Operat atin ing margin in of 6.8%

0.6ppts improvement from H1 18

Up 3.8ppts in 5 years

Towards target of 8.5%

H1 14 H1 15 H1 16 H1 17 H1 18 H1 19

29.9% 30.9% 31.5% 32.9% 32.2% 33.0%

H1 14 H1 15 H1 16 H1 17 H1 18 H1 19

26.9% 26.5% 26.1% 27.3% 3% 26.0% 26.2%

H1 14 H1 15 H1 16 H1 17 H1 18 H1 19

3.0% 4.4% 5.4% 5.6% 6.2% 6.8%

Efficiency drives operating margin

34

GM back to its highes hest t level

Impact of weaker sterling v $ rates on import costs in H1 18, reversed with better pricing

Appendix V