TIDMDSCV
RNS Number : 9719M
discoverIE Group plc
15 May 2020
For Release
7.00am, 15 May 2020
discoverIE Group plc
Year-end & COVID-19 Trading Update
discoverIE Group plc (LSE: DSCV, "discoverIE" or the "Group"), a
leading international designer, manufacturer and supplier of
customised electronics to industry, today issues a trading update
for the year ending 31 March 2020.
Further to the update of 19 March 2020, trading in China at the
end of the final quarter was stronger than expected at the time,
with a quicker recovery in the region following the reopening of
our facilities there. Consequently, with trading elsewhere in the
Group at the end of the year as anticipated, Group sales for the
year increased by 8% CER(1) (up 6% reported) with organic(2) sales
growth of 2%, driven by 5% organic growth in our D&M division.
Accordingly, earnings for the year are expected to be slightly
ahead of our revised expectations set in March. Orders remained
ahead of sales driving an order book up 7% organically to GBP159m,
a record year-end high.
The Group has responded decisively to the COVID-19 pandemic,
prioritising the safety of employees and trading partners, and
preserving the Group's financial resources.
Operational update
The Group operates a diversified and flexible footprint with 27
manufacturing facilities across 17 countries in Europe, Asia and
the Americas. After re-establishing operations in China, four
facilities across Sri Lanka, India and the US were required by
local government mandate to close for a period. All four have since
re-opened with limited, but growing capacity. All other sites have
remained open, several with essential supplier status and a number
operating at reduced capacity during the disruption.
With the Group's decentralised structure , we have been able to
quickly adapt to the evolving circumstances and adopt new ways of
working, with each of our businesses implementing an operating plan
developed to suit its local market and welfare requirements. Over
650 employees are working from home and across all our locations
there has been an overriding priority to establish safe working
practices.
Our supply chains, which are continuously monitored, have
remained resilient, enabling us to maintain high levels of customer
service across the Group. Furthermore, significant effort has been
deployed to support customers in the rapid development and supply
of key components for virus related medical products such as
ventilators and testing instruments. Over 50 such customer projects
have been developed during March and April alone.
Balance sheet and liquidity
The Group's financial position is strong with a committed
syndicated bank facility of GBP180m and nearly GBP120m of undrawn
headroom. Gearing(3) at the year-end reduced to 1.3x (from 1.5x at
31 December 2019) following further strong cash generation, and
interest cover was 12x, both comfortably within the limits required
under our facility agreements.
Whilst our financial position is strong, we have taken prudent
action to preserve cash and reduce operating expenses with a number
of initiatives, including:
- Deferral of non-essential capital expenditure and other discretionary spend
- Deferral of bonuses and pay rises, together with a new hiring freeze
- 20% salary reduction for the Board and Group Executive for three months
- Continued focus on working capital, with customer credit monitoring intensified
- All acquisitions deferred, but pipeline development continues
In light of the current uncertainty, the Board does not intend
to propose a final dividend at the time of the full year results.
The Board will continue to monitor the situation and re-introduce
distributions once there is greater clarity of trading
conditions.
Preliminary results
We expect to publish our results on 24 June. This ensures that
the Group and its auditors have adequate time to complete their
standard procedures given the current challenges posed by social
distancing and remote working.
Current trading & outlook
Sales to date for the first quarter of the new year are running
10% lower on an organic basis compared with last year, partly as a
result of the short term impact of the facility closures
experienced in March and April. Customer demand remains relatively
resilient with a book to bill ratio of 0.95:1. The Group has a
strong order book and its core market focus of renewable energy,
medical, electrification of transportation and industrial &
connectivity, should help to reduce the ongoing impact from
COVID-19 .
The duration and breadth of the market disruption arising from
this situation remains unclear and therefore we do not believe it
is appropriate to provide financial guidance for the current year
at this early stage. Nevertheless, we are encouraged by the
continued demand for our differentiated products and the response
by our businesses which has enabled us to continue to operate
effectively.
The Board believes that there will be significant scope for the
Group to progress its successful acquisition strategy as the
situation stabilises and a good pipeline of opportunities continues
to be developed.
The discoverIE business model is resilient and flexible,
underpinned by a clear strategy focused on high quality growth
markets. With a strong funnel of design wins and acquisition
targets, the Group is well positioned for a return to strong growth
as conditions recover.
For further information, please contact:
discoverIE Group plc
Nick Jefferies - Group Chief Executive 01483 544 500
Simon Gibbins - Group Finance Director
Instinctif
Mark Garraway
James Gray 020 7457 2020
Notes
1. Growth rates at constant exchange rates ("CER"). The average
sterling rate of exchange strengthened 1% against the Euro compared
with the average rate for last year and weakened 3% against the US
Dollar while strengthening by 4% on average against the three
Nordic currencies.
2. Organic growth for the Group is calculated at CER and is
shown excluding the first 12 months of acquisitions (Cursor
Controls was acquired last financial year on 16 October 2018;
Hobart and Positek were both acquired on 15 April 2019 and
Sens-Tech was acquired on 16 October 2019).
3. Gearing defined as net debt divided by underlying EBITDA, annualised for acquisitions.
4. This trading update is based upon unaudited management
accounts and has been prepared solely to provide additional
information on trading to the shareholders of discoverIE Group plc.
It should not be relied on by any other party for other purposes.
Certain statements made in this update are forward looking
statements. Such statements have been made by the Directors in good
faith using information available up until the date that they
approved this update. Forward looking statements should be regarded
with caution because of the inherent uncertainties in economic
trends and business risks.
5. 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, manufactures and supplies 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.
By focusing on key markets driven by structural growth and
increasing electronic content, namely renewable energy,
transportation, medical 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 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 in the top quartile of the FTSE Small Cap Index,
classified within the Electrical Components and Equipment
subsector, and has revenues of over GBP400m. Over the last five
years, underlying earnings per share has nearly doubled.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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