DELIVERING
INNOVATION
WITH PURPOSE
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
WELCOME TO THE
2021 ANNUAL REPORT
discoverIE is an
international leader in
customised electronics,
focusing on markets with
sustained growth prospects
and increasing electronic
content, where there is
an essential need for our
products.
Innovation with purpose
discoverIE’s purpose is to create innovative
electronics that help to improve the world
and people’s lives.
Read more about our purpose, mission
and values on pages 04 to 05.
Read more about our approach to
sustainability on pages 58 to 69.
Visit our investor website
www.discoverIEplc.com
It contains a wide range of
information of interest to institutional
and private investors, including:
■ Latest news and press releases
■ Reports and presentations
Annual Report and Accounts
for the year ended 31 March 2021
TABLE OF
CONTENTS
Strategic report
Highlights
Investment case
Group at a glance
Chairman’s statement
Our business model
Market review
Our strategy
Innovation with purpose
Key strategic indicators
Key performance indicators
Strategic and operational review
Finance review
Risk management
Viability and going concern
statements
Principal risks and uncertainties
Stakeholder engagement
Sustainability report
Corporate governance
The Board
The Group Executive Committee
Corporate governance report
Audit and risk committee report
Nomination Committee report
Directors’ report
Directors’ remuneration report
Directors’ responsibilities statement
02
03
04
10
14
16
18
20
22
23
24
34
40
46
47
53
58
70
72
74
85
90
92
94
119
130
120
130
Financial statements
Independent auditors’ report
to the members of discoverIE
Group plc
Consolidated income statement
Supplementary income statement
information
Consolidated statement of
comprehensive income
Consolidated statement of
financial position
Consolidated statement of
changes in equity
133
Consolidated statement of cash flows 134
Notes to the Group financial
statements
Company balance sheet
Company statement of changes
in equity
Notes to the Company
financial statements
135
182
184
183
132
131
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Other information
Five year record
Principal locations
Financial calendar 2020/21
Corporate information
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01
Read our Impact Report 2021
We are focused on providing
electronics that help the planet
and its people. This report seeks
to demonstrate some of the key
benefits that our products provide in
helping tackle climate change and
improving healthcare.
Innovative Electronics
www.discoverIEplc.comStock Code: DSCV
HIGHLIGHTS
REVENUE
£454.3m
-3%
(FY20: £466.4m)
UNDERLYING
OPERATING PROFIT1
£35.2m
-5%
(FY20: £37.1m)
UNDERLYING
EPS1
26.0p
-14%
(FY20: 30.2p)
FREE CASH
FLOW2
£37.6m
+38%
(FY20: £27.3m)
REPORTED PROFIT
BEFORE TAX
£17.0m
-13%
(FY20: £19.5m)
FULL YEAR DIVIDEND
PER SHARE3
10.15p
+242%
(FY20: £2.97p)
Strong second half order growth4 with sales
returning to organic growth5 by year end
■ H2 orders up 12% organically and 40% above H1
■ H2 sales up 10% on H1 and returned to organic growth for the last two
months
■ Record year end order book, up 11% organically to £181m
Resilient trading during pandemic reflects strength
of operating model and target market6 focus
■ Group adapted quickly to pandemic, creating safe working practices
and maintaining service levels
■ Full year Group sales 6% lower organically with target markets well
ahead of wider markets
■ Gross margin increased by 0.6ppts to 34.2% (FY 2019/20: 33.6%)
■ Underlying operating expenses reduced by 2% and working capital by 13%
■ Underlying PBT recovered to be 3% higher than last year in H2, and 4%
lower for the year
■ EPS of 26.0p, ahead of expectations
Excellent cash generation with resumption of
acquisitions and dividends in H2
■ £38m of free cash flow, up 38% on last year and 157% of post-tax profit
■ Two acquisitions completed during H2 for £21m (Phoenix and Limitor)
■ ROCE7 for the year recovered well to 14.5% (H2: 15.6%; H1 12.7%)
■ Year-end gearing down to 1.1x, well below target range of 1.5x to 2.0x
■ Full year dividend increased by 6% over FY 2018/19 (last full dividend
payment)
Key strategic initiatives on track towards FY 2024/25
targets
■ 65% of Group sales in D&M8, up 1ppt, with a target of greater than 75%
■ Sales in target markets of 70%, up 2ppts, with a target of 85%
■ Carbon emissions reduced by 19% and by 6% underlying9
■ Underlying operating margin of 7.7%, 0.3ppts lower, with a target
of 12.5%
New year has started well with record order book
■ Strong order intake continues and ahead of sales
■ Organic sales growth over the last two years
■ Completed US sensor acquisition (Control Products Inc) in May 2021
■ Strong pipeline of acquisition opportunities
02
discoverIE Group plc
Notes
1.
‘Underlying Operating Profit’, ‘Underlying EBITDA’,
‘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 exclude acquisition-related costs
(amortisation of acquired intangible assets of
£11.1m, acquisition and merger expenses of £2.0m
and the IAS19 pension charge relating to a legacy
defined benefit scheme of £1.4m) totalling £14.5m.
Equivalent underlying adjustments within the FY
2019/20 underlying results totalled £13.3m.
2. Free cash flow is cash flow before dividends,
acquisitions and equity fund raising.
3. No final dividend declared for FY 2019/20 as part of
COVID-19 cash saving measures. The final dividend
for this year is 6% higher than the last full dividend
declared in FY 2018/19.
4. Growth rates are at constant exchange rates (“CER”)
and refer to the comparable prior year period unless
stated. The average sterling rate of exchange against
the Euro weakened by 2% compared with the
average rate last year, and by 2% on average against
the three Nordic currencies, but strengthened by 3%
compared with the US dollar rate for last year.
5. Organic growth for the Group is calculated at
CER and is shown excluding the first 12 months
of acquisitions post completion (Sens-Tech was
acquired in October 2019, Phoenix in October 2020
and Limitor in February 2021).
6. Target markets are renewable energy, medical,
transportation, industrial & connectivity.
7. Return on capital employed (“ROCE”) is defined as
underlying operating profit as a percentage of net
assets plus net debt, including an annualisation of
acquisitions.
8. D&M is the Group’s Design & Manufacturing division.
9. Carbon emission reductions were 19% from CY
2019 to CY 2020 on a like-for-like basis excluding
acquisitions in CY2020; on an underlying basis (i.e.
with emissions adjusted to normalise the impact of
COVID-19), carbon emission reductions were 6%.
Annual Report and Accountsfor the year ended 31 March 2021 INVESTMENT CASE
Focus on customised electronics
Attractive growth markets
Highly differentiated
electronic products with
optimised performance
for the applications of our
customers
Markets with increasing
electronic content
Long term growth driven
by both technology trends
and economic factors
Read more about our customised
electronics on pages 20 and 21
Read more about our market review on
pages 16 and 17
Drivers of future performance
■ Project wins and new opportunities
driving future organic growth
■ Order book
■ Cross-selling opportunities between our businesses
Strong financials
■ Solid balance sheet
■ Progressive dividend policy
■ Sustainable, profitable growth
■ Excellent cash generation
■ International expansion
■ Proactive management of ESG-related matters
■ Good track record of value-accretive acquisitions,
with a robust acquisition pipeline
Order Book (£m)
Operating Cash Flow (£m)
m
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Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
03
Other InformationFinancial StatementsCorporate GovernanceStrategic Report
GROUP AT
A GLANCE
Our framework for creating sustainable value
discoverIE is an international group of businesses that designs, manufactures and
supplies innovative components for electronic applications. We offer customers
differentiated products in key growth markets on a global scale.
OUR PURPOSE
OUR VISION
OUR MISSION
Why we exist
What we want to be
What we set out to do
To create innovative electronics
that help to improve the world and
people’s lives
To be a leading innovator in
electronics across the globe
To design and supply innovative
customised electronics that help our
customers create ever better technical
solutions around the world
O u r V a lues and Culture
O u r Strategy
n
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Purpos
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Our Stra t e g y
Our Values a n d C u l
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u r
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We aim to achieve our mission through a motivated, entrepreneurial and empowered workforce that adheres to the
highest ethical and quality standards. In doing so we expect to create value for shareholders, while being seen as an
attractive and responsible employer and a trusted partner for customers and suppliers.
Read more on pages 66 to 69
04
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
OUR STRATEGY
OUR VALUES
How we will deliver our mission
To grow our business in customised
electronics by focusing on markets
with sustained growth prospects,
driven by increasing electronic content
and where there is an essential need
for our products
The key pillars of our strategy
Our strategy is currently broken down into
four strategic priorities:
Fundamental beliefs that guide
decision-making
■ To operate with the highest ethical standards and
integrity
■ To strive for the highest performance standards, not
accepting of mediocrity
■ To support the protection of the environment through
our products and solutions while minimising our direct
environmental impact
■ To be a responsible employer, with a safe working
environment
■ To respect, empower, engage and develop our employees
in an entrepreneurial environment
■ To add value and be a trusted partner to customers,
suppliers and shareholders
Grow sales well
ahead of GDP
Continue building
revenues in the higher
margin D&M division
Acquire high quality
businesses
Further internationalise
the business
Read about our strategy on pages 18 to 19
Our culture
The culture we aim to embed
across the Group:
■ Honest, reliable and trusting
■ Decentralised decision-making close to the customer
■ Open, constructive communication and willingness
to listen
■ Non-political, non-bureaucratic
■ Performance, target and results driven
05
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics GROUP AT
A GLANCE
Our divisions
Custom Supply
discoverIE operates across two
divisions: Design & Manufacturing
and Custom Supply. The Group’s
increasing focus on design and
manufacturing is reflected in both
revenue and underlying profit.
Reported revenue
.
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Custom Supply
Design & Manufacturing
06
discoverIE Group plc
The Custom Supply division provides technically demanding,
customised electronic, photonic and medical products from
a range of high-quality third-party international suppliers,
as well as from discoverIE’s own Design & Manufacturing
division. A high degree of technical knowledge is required
in the sales process. Approximately half of the division’s
employees are technically qualified.
UNDERLYING
OPERATING MARGIN
NUMBER OF
EMPLOYEES
3.6%
396
Acal BFi
Vertec
Communications, magnetics,
power and sensors
Imaging, biopsy and
radiology systems
End use example:
■ Internet of things
and sensing
End use example:
■ Medical systems
Watch our Corporate film at:
www.discoverIEplc.com
Annual Report and Accountsfor the year ended 31 March 2021 Design & Manufacturing
The Design & Manufacturing division supplies custom
electronic products which are designed uniquely to
customer specifications to over 5,000 customers.
UNDERLYING
OPERATING MARGIN
NUMBER OF
EMPLOYEES
12.7%
3,831
Contour
Connectors and cable assemblies
Cursor Controls
Keyboards and trackballs
Flux
Magnetics and power supplies
Foss
Fibre optics
End use example:
■ Medical operating
theatres
End use example:
■ Medical equipment
End use example:
■ Trains
End use example:
■ Data centres
Hectronic
Embedded computers
Hobart
Linear transformers
Limitor
Thermal & energy sensors
MTC
EMC-shielding
End use example:
■ Transportation
End use example:
■ Solar power
End use example:
■ Professional coffee
machines
End use examples:
■ PCs, servers and
peripherals
Myrra
Transformers and
power supplies
End use example:
■ Electric vehicle
chargers
Santon
Switches
Noratel
Power transformers
Phoenix
Magnetic sensors & encoders
Positek
Linear transducers
End use example:
■ Wind turbines
End use example:
■ Motion control & sensing
End use example:
■ Specialised vehicles &
transportation
Sens-Tech
Sensors and detector boards
Stortech
Cable assemblies, batteries,
switches & CCTV
Variohm
Sensors and transducers
End use example:
■ Solar panels
End use example:
■ Medical (X-Ray)
End use examples:
■ Mobility / Buses
End use example:
■ Agricultural production
07
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics GROUP AT
A GLANCE
Our global reach
Our two divisions
operate across 24
countries. 28% of Group
sales for the year were
beyond Europe.
During the year, the
Group acquired new
facilities in the USA,
Germany and Hungary.
We expanded facilities
in Bangalore and plans
are underway to expand
capacity in Mexico and
Norway.
As a global supplier,
we are able to follow
the opportunities
of our customers
internationally,
matching our product
diversity with quality,
flexibility and technical
engineering wherever
there is a need for our
solutions.
COUNTRIES
+24
DESIGN & MANUFACTURING
Hectronic He
Sweden
Hobart Ho
USA
Mexico
Limitor L
Germany
Hungary
MTC M
Germany
South Korea
Myrra My
France
China
Poland
Germany
Hong Kong
Contour Co
UK
Hong Kong
Cursor
Controls Cu
UK
Belgium
Flux Fl
Denmark
Thailand
Foss Fo
Norway
Slovakia
Noratel N
Norway
China
India
Sri Lanka
Poland
Germany
Sweden
UK
Denmark
Finland
USA
Canada
Phoenix Ph
USA
Positek Po
UK
Santon Sa
Netherlands
UK
Germany
Sens-Tech Se
UK
Stortech St
UK
Variohm Va
UK
Germany
N
Ho
Ph
N
N
Ho
Ho
Ho
North America
Read more about the
internationalisation of
our business on page 19
08
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
UK
N
A
N
Fo
A
N
A
He
A
N
Fl
Cu
Po
N
Sa
Va
A
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ACo
Se
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A
Sa
Cu
A
A
Sa
L
MA
N
My
N
Fo
Va
L
A
A
M
N
My
My
Co
Fl
N
N
Europe
Ve
Asia
Africa
CUSTOM SUPPLY
Vertec Ve
UK
South Africa
Acal BFi A
UK
Germany
France
Netherlands
Denmark
Finland
Norway
Sweden
Italy
Belgium
Spain
M
N
My
My
Co
Fl
UK
Cu
Po
N
Sa
Va
A
Se
St
Ve
ACo
N
A
N
Fo
A
N
A
He
A
N
Fl
A
Sa
Cu
A
A
Sa
L
MA
N
Va
My
N
Fo
L
A
A
N
N
N
Ho
Ph
N
N
Ho
Ho
Ho
North America
Europe
Ve
Asia
Africa
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
09
Other InformationFinancial StatementsCorporate GovernanceStrategic Report
CHAIRMAN’S
STATEMENT
“ The Group has
demonstrated the quality
and resilience of its
businesses and is well
positioned for continued
growth in the year ahead.”
Malcolm Diamond MBE
Chairman
2021 HIGHLIGHTS
GROUP REVENUE
£454.3m
UNDERLYING
OPERATING PROFIT
£35.2m
This year coincided
with the unprecedented
COVID-19 pandemic,
testing every aspect
of the Group’s business.
The Group’s multiple operations around the world
responded quickly, establishing safe working practices
and maintaining continuity. While the effects of the
pandemic are evident in these results, the Group’s ability
to mitigate the impact and to rebound strongly in the
second half represents a very creditable performance,
while continuing to make progress on the strategic
priorities.
Cash generation was very strong, reflecting both the
quality of earnings generated by the business and the
efficient nature of the Group’s operating model. This,
together with a number of prudent actions taken in the
first half, such as suspending acquisitions and dividends,
served to reduce gearing to the lowest level in seven
years, minimised risk and enabled a strong recovery as
conditions improved in the second half.
The Group is committed to reducing the impact of
its business operations on the environment. Along
with its focus on selling into markets that are aligned
with a sustainable future, the Group has introduced
an important sustainability target this year, to reduce
its carbon emissions by 50% over five years, and good
progress has been made to date.
Throughout the year, the Group has demonstrated
the quality and resilience of its businesses and with
good levels of operational and funding capacity, is well
positioned for continued growth in the year ahead.
10
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
Strategy
discoverIE is a customised electronics business operating
internationally, focusing on structurally growing markets
driven by increasing electronic content and where there
is an essential need for our products. The Group’s product
range is highly differentiated, being customised for specific
applications.
With our target markets being worldwide and major
customers operating internationally, the business is
expanding both within and beyond Europe, building an
international electronics group supplying complex, value-
added solutions for international customers.
Alongside organic growth, acquisitions have made a
significant contribution to the development of the D&M
division and over the 11 years to 31 March 2021, we have
acquired 16 specialist, high margin D&M businesses which
have been integrated successfully, helping to drive our
growth. An additional business has been acquired since
the year end. We have a well-developed and disciplined
approach to acquisitions and continue to see significant
scope for further expansion of the D&M division with several
acquisition opportunities in development.
The Group’s capital-light model delivers strong cash flows
which we look to reinvest into accelerating the strategy and
delivering further value creation for shareholders.
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 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 emphasis in market
areas that are inconsistent with a long term sustainable
agenda.
The Group also aims to be a socially responsible employer,
adhering to the highest ethical standards both internally
and externally through its supply chain, with excellent
employee relations and a commitment to increasing
diversity in the workplace.
Reporting to the Board, the Group Executive Committee has
responsibility for ESG implementation around the Group
and each member has the achievement of ESG objectives
included in their bonus plans.
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
11
Other InformationFinancial StatementsCorporate GovernanceStrategic Report
CHAIRMAN’S
STATEMENT
Group Results Summary
COVID-19
The Group responded decisively to the coronavirus pandemic
at the beginning of the year, prioritising the well-being of
employees and trading partners, supporting customers,
quickly developing solutions for medical market customers,
maintaining business continuity and preserving resources.
Widespread changes were made to operating procedures
across the Group’s 29 international manufacturing locations
with high levels of operational continuity and only a small
number of short term site closures, as required by local
government regulations, which has continued into the new
year.
Employees and Culture
On behalf of the Board, I would like to thank everybody at
discoverIE for their commitment and hard work, particularly
during this unprecedented period, when their flexibility,
resilience, initiative and support have demonstrated, beyond
all expectations, their quality and capability.
The Group comprises approximately 4,400 employees in 24
countries around the world. By adopting an entrepreneurial
and decentralised operating environment, together with
rigorous planning, review, support, investment and controls,
and with a commitment to increasing diversity, the Group
has created an ambitious and successful culture.
We aim to achieve a culture across the Group that:
■ is entrepreneurial
■ is honest, reliable, trusting and non-political
■ enables decision making close to the customer through a
decentralised structure
■ enables open, constructive communication with a
willingness to listen
■ is performance, target and results driven
Group sales for the year reduced by 3% to £454.3m, with
underlying operating profit, which excludes acquisition-
related costs, reducing by 5% to £35.2m and underlying
profit before tax reducing by 4% to £31.5m.
Underlying earnings per share for the year reduced by 14%
to 26.0p (FY 2019/20: 30.2p) as a result of the combined effect
of share capital increasing by 6% following equity fund-
raising last year, the underlying tax rate increasing by 4ppts
to 24% and profitability reducing by 5%.
After accounting for acquisition-related costs of £14.5m (FY
2019/20: £13.3m), profit before tax for the year on a reported
basis was £17.0m, 13% lower than last year (FY 2019/20:
£19.5m) with fully diluted earnings per share of 13.0p (FY
2019/20: 16.5p).
Free cash flow increased by 38% to £37.6m (157% of
underlying profit after tax) driven by an inflow from lower
working capital as well as swift operational actions taken
in response to COVID-19. This resulted in net debt reducing
by £35.9m during the year (before including the cost of two
acquisitions) with net debt at the year end of £47.2m and a
gearing ratio of 1.1x, reducing by 0.15x over the year (gearing:
1.25x at 31 March 2020).
Acquisitions
The Group paused acquisitions during the first half
during the height of the pandemic to preserve resources,
recommencing in the second half. The Group made two
acquisitions of specialist sensor manufacturers: the German-
based Limitor GmbH (“Limitor”) and the trade and assets
of the US-based Phoenix America Inc (“Phoenix”), for a
combined initial cash consideration of £21.2m on a debt free,
cash free basis.
Both businesses are being integrated into the Group and
now operate within the Variohm sensors cluster in the D&M
division, retaining their distinct identity and high-quality
management teams. Their complementary product ranges
and wider access to customers should create cross-selling
opportunities in our target markets and drive further
growth. Both businesses have started well and in line with
expectations, delivering organic growth in orders and sales.
Since the year end, we have also acquired Control Products
Inc (“CPI”), a New Jersey, USA, based designer and
manufacturer of custom, rugged sensors and switches for
£8m on a debt free, cash free basis.
We are delighted to welcome the employees of all three
businesses into the Group.
12
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Dividend
Summary
Last year, with the onset of COVID-19, the Board took the
prudent decision not to declare a final dividend for FY
2019/20. With an improving outlook by the third quarter,
and strong cash flow, the Board reinstated dividends in
November 2020 with a 6% increase in this year’s interim
dividend to 3.15p per share (H1 2019/20: 2.97p per share).
With the Group’s performance continuing to improve, the
Board is recommending a final dividend of 7.0p per share,
giving a full year dividend of 10.15p per share, 6% higher than
the pre-pandemic dividend for FY 2018/19 of 9.55p per share.
This represents a cover against underlying earnings of 2.6
times (FY 2018/19: 2.8 times). The final dividend is payable
on 3 August 2021 to shareholders registered on 11 June 2021.
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
with a long term dividend cover of over three times
against underlying earnings. This will enable us to fund
both dividend growth and a higher level of investment in
acquisitions from internally generated resources.
With these results, the Group has demonstrated its strength
and adaptability through a year of unprecedented market
and operational conditions. The benefits of discoverIE’s
clear commercial and operational strategy, which delivered
strong organic growth during the ‘up’ cycle of the previous
few years, have enabled the Group to demonstrate real
resilience through the pandemic and leave it well positioned
to capitalise on the significant long term opportunities
ahead.
By focussing on custom products in attractive growth
markets, the Group has a high-quality business with
excellent prospects. The customised electronics market
remains highly fragmented, providing scope to further
build capability and extend geographic coverage through
disciplined acquisitions.
Despite the challenges still posed by the pandemic in
certain parts of the world, the Board and management are
excited by the opportunities ahead to continue building
a global business that attracts and retains high quality
employees, delivers exceptional value to our customers,
grows long term returns for our shareholders, contributes to
the creation of a sustainable environment and that adheres
to the highest standards.
Malcolm Diamond
Chairman
03 June 2021
13
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics BUSINESS
MODEL
discoverIE is an international leader in customised
electronics focusing on markets with sustained growth
prospects and increasing electronic content. Our purpose
is to create innovative electronics that help to improve the
world and people’s lives.
OUR INPUTS
BUSINESS MODEL
Our purpose, values and people
The Group’s purpose, mission and strategy provide a
clear framework for decision making, reflecting our
desire to make a positive difference to the world and
people’s lives.
Our values guide decision-making, ensuring we strive
for the highest performance and ethical standards. This
relies upon the dedication, drive, integrity and ability
of our people, many of whom have a high degree of
technical knowledge.
The Group seeks to foster an open, ambitious and
entrepreneurial culture, within which each of our
approximately 4,400 people are recognised for
their achievements and are made to feel valued as
individuals. They are crucial to the success of the Group
and the outcomes of its customers.
Design and Manufacturing facilities
Over 80% of the products made by the Design &
Manufacturing division are manufactured in-house.
The division’s principal manufacturing facilities are
in China, India, the Netherlands, Poland, Sri Lanka,
Thailand, Mexico and the UK.
Long-term customer relationships
discoverIE’s highly skilled engineers work closely with
customers, developing a deep understanding of their
industry, sharing unique expertise and insights, and
producing custom electronic solutions to address each
challenge; thereby enhancing product performance
and reinforcing long term relationships.
Financial
We use our financial capital to invest heavily in our
businesses and make acquisitions that add to our
expertise.
14
discoverIE Group plc
s
m
a
e
r
t
e s
u
n
R e p eat reve
Repeat revenue streams
Once approved, our products typically enjoy repeat revenue
for the lifetime of the customer’s production, typically 5–7
years, depending on the product end market.
Cross-selling opportunities
A key strategic focus for the Group is cross-selling between
its businesses. We aim to sell as many product groups to our
customers as possible.
Cross-selling initiatives are changing the nature of the
discoverIE business by broadening the range of products
sold to customers, in turn developing more valuable
customer relationships and achieving more efficient use of
sales resources. The divisional structure provides excellent
cross-selling opportunities.
Acquisitions
A core part of the Group’s strategy is the acquisition of
complementary businesses that bring enhanced value to
the Group and its customers. In order to achieve this, the
Group has established a dedicated M&A team focused on
developing and pursuing these opportunities.
Annual Report and Accountsfor the year ended 31 March 2021
Our competitive advantages
Global reach
Expertise
Differentiated products
Our global footprint means that we
can meet the location demands of our
customers.
We have been active in the electronics
market for over 20 years and our
expertise and knowledge has grown
over this time. This allows us to develop
new products in response to changing
technologies.
The products which we design and
manufacture are application specific.
We have specialist knowledge in
many niche markets, enabling us to
differentiate our products to match
our customers’ requirements.
BUSINESS MODEL
VALUE CREATION
Our customers
Customers
Large customer base, spread geographically and
across multiple industries. Our customers are Original
Equipment Manufacturers that require solutions for
their product-specific applications. With rising electronic
content, customers are increasingly dependent on
technology to develop their next-generation products.
Identification of opportunity
By working closely with our customers, we are able to
understand their needs and jointly develop appropriate
solutions. We understand our customers, how they
operate and how our components and solutions fit
into their products. The solutions we provide result in
an enhanced performance of our customers’ products,
which benefits both customers and their end users.
Design and quotation
We design solutions for our customers. While some
solutions are designed completely from scratch, we have
“platform product ranges” that can be modified to meet
our customers’ needs. Speed is important – the ability to
provide customers with a quote quickly enables them
to produce the final product faster. This approach saves
customers time and cost. Customers will work with a
dedicated team of engineers to create a design that
matches their requirements.
Sample and approvals
Once the quote and design are accepted, samples are
provided to the customer for approval. This is a critical
step in the process.
Production
With internal know-how and in-house manufacturing,
we can maintain control of the product manufacturing
process, ensuring both high standards and reliability.
Quality is assured through our advanced testing
procedures.
Supply
discoverIE is able to supply the customer consistently over
the lifetime of the project. We do this through ongoing
production and maintaining inventory, be it in-house or
on consignment at the customer.
■ Improved usability and effectiveness of the
products we design, manufacture and supply
results in enhanced performance of our
customers’ applications, which also benefits
their own customers.
■ We enable customers to differentiate their
own products from their competitors.
■ Cost-efficient.
■ Short lead times.
■ Quality, high standards and reliable
components. We are able to achieve this as
we have control over the end-to-end process
of the production of an electronic solution.
Employees
Employees benefit from the ability to
improve their skills and work in a challenging
and ambitious environment. They get the
opportunity to make a contribution to
world-leading products. We have created an
environment where each employee is able to be
their best.
Shareholders
We generate attractive returns for Shareholders
over the long term.
Communities and the environment
We aim to contribute positively to the
communities and environment in which we
operate.
Suppliers
Our geographical footprint allows us to engage
with suppliers at their locations. We enable
smaller suppliers to expand their global network
via our international supply chain.
Governing bodies and regulators
We aim to create trusted relationships with
governing bodies and regulators, meeting
all legal and regulatory commitments and
requirements.
15
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics MARKET
REVIEW
GROWTH AREAS WHERE
ELECTRONICS WILL DRIVE
EFFICIENCY, INTELLIGENCE
AND SUSTAINABILITY
Growth areas where electronics
will drive efficiency, intelligence
and sustainability
Long-term technology trends
Our framework for creating
sustainable value
Target markets
The Group focuses on four target markets, which account for over
two-thirds of Group turnover: renewable energy, transportation,
medical and industrial & connectivity. These are expected to drive the
Group’s organic revenue well ahead of GDP over the economic cycle
and create value enhancing opportunities, which are then further
bolstered through acquisitions.
Global macro-trends underpinning structural growth
Growth in these markets is driven by global macro trends such as
the need for renewable sources of energy, more energy efficient
transportation systems, a growing middle class population, an ageing
affluent population and expanding infrastructure.
Sales in target markets1 continue to increase
TARGET MARKETS
£317.0m
70%
OTHER MARKETSS
£137.3m
30%
Notes
1. Target markets are renewable energy, transportation,
medical and industrial & connectivity
16
discoverIE Group plc
RENEWABLE ENERGY
TRANSPORTATION
MEDICAL
INDUSTRIAL AND
CONNECTIVITY
Mega trends
Mega trends
Mega trends
Mega trends
Decarbonisation & Diversification
Electrification & Autonomous vehicles
Artificial intelligence, sensing &
Connectivity, automation & Industrial
analytics
Internet of Things
Market drivers
■ Geopolitical consensus
■ Growing public awareness
Market drivers
■ Decarbonisation
Market drivers
Market drivers
■ Proactive & preventative medicine
■ Remote monitoring & control
■ ‘Safety-centric’ agenda
■ Technological & biological fusion
■ Quality control
■ Legislative and regulatory regimes
■ Mass transit & route vehicles
■ Predictive analytics
■ Precision & automation
■ Cost of energy
Technology integration
■ Increasing scale of wind turbines
■ Diversification of solar systems
discoverIE’s solutions
■ Power inductors
■ Turbine blade pitch control
■ Airflow measurement
Technology integration
Technology integration
Technology integration
■ Electric vehicles
■ Monitoring & control
■ Automation & robotics
■ Mass transit & route vehicles
■ Automation & robotics
■ ‘Smart factories’
■ Autonomous vehicles
■ Advanced surgery
■ Artificial intelligence
■ High speed rail
■ Increasing electronic content
discoverIE’s solutions
discoverIE’s solutions
discoverIE’s solutions
■ Charging
■ Sensing systems
■ Power control
■ Cabin monitoring & control
■ Embedded diagnostics
■ Wireless telematics
■ Interface device & cabling
■ Fibre optic connectivity
■ Power systems
■ Communication technologies
■ Wireless robotics control
■ Power control
Our global impact
Our global impact
Our global impact
Our global impact
Annual Report and Accountsfor the year ended 31 March 2021
RENEWABLE ENERGY
TRANSPORTATION
MEDICAL
INDUSTRIAL AND
CONNECTIVITY
Mega trends
Mega trends
Mega trends
Mega trends
Decarbonisation & Diversification
Electrification & Autonomous vehicles
Artificial intelligence, sensing &
analytics
Connectivity, automation & Industrial
Internet of Things
■ Legislative and regulatory regimes
■ Mass transit & route vehicles
■ Predictive analytics
■ Precision & automation
Market drivers
■ Decarbonisation
Market drivers
Market drivers
■ Proactive & preventative medicine
■ Remote monitoring & control
■ ‘Safety-centric’ agenda
■ Technological & biological fusion
■ Quality control
Technology integration
Technology integration
Technology integration
■ Electric vehicles
■ Monitoring & control
■ Automation & robotics
■ Mass transit & route vehicles
■ Automation & robotics
■ ‘Smart factories’
■ Autonomous vehicles
■ Advanced surgery
■ Artificial intelligence
■ High speed rail
■ Increasing electronic content
discoverIE’s solutions
discoverIE’s solutions
discoverIE’s solutions
■ Charging
■ Sensing systems
■ Power control
■ Cabin monitoring & control
■ Embedded diagnostics
■ Wireless telematics
■ Interface device & cabling
■ Fibre optic connectivity
■ Power systems
■ Communication technologies
■ Wireless robotics control
■ Power control
Our global impact
Our global impact
Our global impact
Our global impact
Market drivers
■ Geopolitical consensus
■ Growing public awareness
■ Cost of energy
Technology integration
■ Increasing scale of wind turbines
■ Diversification of solar systems
discoverIE’s solutions
■ Power inductors
■ Turbine blade pitch control
■ Airflow measurement
17
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics OUR
STRATEGY
“ Our strategy is clear and
our continued strong
performance demonstrates
the success of our model.
The Group is well positioned
for growth in the coming
years.”
Nick Jefferies
Group Chief Executive
18
discoverIE Group plc
Our vision is to design and supply
innovative customised electronics that
help our customers create ever better
technical solutions around the world.
Our strategic aim
To grow our business in customised electronics by focusing
on markets with sustained growth prospects, driven by
increasing electronic content and where there is an essential
need for our products.
Our strategic priorities
Over recent years, the Group has pursued a clear strategy,
investing in initiatives that enhance design opportunities for
customised products in targeted growth markets, namely
renewable energy, transportation, medical and industrial &
connectivity. Our business model is resilient and flexible and
the benefits of our approach have been evident in results
over recent years.
Core to our value proposition is the understanding of
our customers’ design challenges and the design and
manufacture of engineered products to meet their needs.
These are then supplied over the life of the customer’s
production, typically five to seven years.
In a fragmented market, opportunities exist to consolidate
certain manufacturers of customised products for the
Group’s common customer base, which ranges from
mid-sized original equipment manufacturers to
multinational companies operating in multiple locations.
Our four target markets are long-term global growth
markets driven by excellent fundamentals where our
customers depend upon the Group’s product.
The key pillars of our strategy
Our strategy is currently broken down into four strategic
priorities:
Grow sales well
ahead of GDP
Continue building
revenues in the higher
margin D&M division
Acquire high quality
businesses
Further internationalise
the business
Read more about strategy in our
Corporate governance report on pages 74 to 84
Annual Report and Accountsfor the year ended 31 March 2021
Strategic
priorities
Progress
made
Link to key
strategic indicators
Link
to risks
C
D
The Group had resilient trading
during H1 FY 2020/21 despite
the pandemic, reflecting the
strength of our operating model.
Full year Group sales were 6%
lower organically, with target
markets well ahead of wider
markets. There was strong order
growth in H2 FY2020/21 and
sales returned to organic growth
for the last two months of the
year.
The higher margin D&M division
delivered 65% of Group sales in
FY2020/21, up 1ppt on last year
(FY 2019/20: 64%).
A
B
D&M generated 87% of the
Group’s underlying operating
profit contribution (FY 2019/20:
84%).
A
B
C
D
C
During the year, the Group
completed two acquisitions, the
business of Phoenix in October
2020 and then Limitor in
February 2021.
The acquisition of Phoenix
brought in a new US business
and the acquisition of Limitor
brought in a German business
with manufacturing capacity
also in Hungary.
Sales beyond Europe accounted
for 28% of total sales.
Growing sales well
ahead of GDP
Grow sales well ahead of GDP over
the economic cycle by focusing on
structural growth markets.
Continue building
revenues in the higher
margin D&M division
Continue building revenues in the
Design & Manufacturing (“D&M”)
division where operating margins
for our businesses are higher than
in Custom Supply.
Acquire high
quality businesses
Acquire businesses within attractive
growth markets.
Internationalising
the business
Internationalise the business
by developing sales in North
America and Asia.
Key strategic indicators
1
4
5
7
8
2
4
5
6
7
1
2
1
2
7
A
Increase share of Group revenue
from Design & Manufacturing
B
Increase underlying
operating margin
C
Build sales beyond
Europe
D Target Market
Sales
Risks
1
6
Instability in the economic
environment
Technological changes
2
7
Business acquisitions
underperformance
Major business
disruption
Loss of major
customers
Cyber security
4
8
5
Loss of major
suppliers
19
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics INNOVATION
WITH PURPOSE
We create innovative electronics that make a difference to the planet and people’s
lives. We create products that deliver value for our consumers in a number of areas,
contributing to a better future:
Investing in
renewable energy
electronic solutions
Advancing the
electrification of
transportation
Our innovative electronics are used in
renewable energy solutions, contributing
to the generation of efficient fossil-free
sources of energy
We provide electrification solutions,
encouraging the conversion from fossil
fuel usage to renewable energy
Customer application examples
Customer application examples
■ Vertical ‘cone’ scanning LiDAR for wind turbines,
■ Electrical motors used for powering electrical
used to analyse wind speed and direction
vehicles and hybrid electric vehicles
■ Roller blind with solar panels built in to generate
■ Pressure transmitter used in zero-emission buses
solar energy
running on hydrogen based power
■ LiDAR for sensing wind to help wind energy projects
■ Charging solutions for electric vehicles
harvest as much power as possible
Sustainability benefits
■ Our products ensure maximum efficiency and yield,
allowing for the increase of energy produced from
wind.
Sustainability benefits
■ Our products are used in hybrid and electric
vehicles which reduce or avoid particle
concentrations in urban areas and limit the
emission of greenhouse gases
■ Roller sun blinds are an innovative solution for
■ Our hypercharger is three times faster than a
offices and homes which can be lowered to block
the sun and generate renewable electricity.
normal charger, contributing to further efficiencies,
reducing particle emission and greenhouse gases.
■ Our reactors are used to filter the converted power
■ Our product is used on zero-emission buses,
and to supply the grid with clean electricity.
contributing to the reduction of greenhouse gas
emissions and the UK Government’s target to be
net-zero by 2050.
Relevant target markets
Relevant target markets
20
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
Read our Impact Report 2021
This Report provides examples of how our products
benefit the planet and its people.
Please find it at www.discoverIEplc.com
Renewable
energy
Transportation
Medical
Industrial &
connectivity
Contributing to
improving efficiencies
in energy use
Enhancing the
quality of life and care
for people
Our products are designed to minimise
energy consumption and emissions,
ensuring great performance efficiently
and effectively
We are improving lives through
innovation, providing products that
are used across the medical industry
Customer application examples
Customer application examples
■ Wireless thermostat that customers can control
■ Nebulisers for effective aerosol drug delivery,
remotely, with flexibility
■ HVDC switches used in high-voltage, direct current
(HVDC) electric power transmission systems
a technique of administering medication directly
into the airway and lungs
■ World-class DXA systems for measuring bone density
■ UniQ Heat battery: an energy storage solution used
■ Transformers for intensive care ventilators
in household boilers
Sustainability benefits
■ Our products reduce greenhouse gas emissions
and energy consumption.
■ Our HVDC technology allows for efficiencies by
reducing power losses from 6.5% to 3.5% compared
to alternative methods.
■ When installed in a household, our product
generates proven energy savings of between 40%
and 80% and carbon dioxide emission reductions of
between 20% and 40% per unit.
Sustainability benefits
■ Our product increases the effectiveness of the inhaled
medication. The product results in faster symptom
control, reduced likelihood of hospital admittance and
shorter stays for spontaneously breathing patients.
■ On average, the bone density densitometer benefits
20 patients per day, typically equating to 34,300
patients each year.
■ Our product is used in intensive care ventilators,
providing life-sustaining ventilation and breathing
support for critical care patients in hospitals during
the COVID-19 pandemic.
Relevant target markets
Relevant target markets
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
21
Other InformationFinancial StatementsCorporate GovernanceStrategic Report KEY STRATEGIC
INDICATORS
A Increase share of Group revenue from D&M1
■ FY25 Target >75%
FY17
FY18
FY19
FY20
FY21
52%
57%
61%
64%
65%
Definition
The proportion of
total Group revenue
that is derived
from business
in the Design &
Manufacturing
(‘‘D&M’’) division.
Commentary
The higher margin D&M division delivered 65% of Group sales,
up 1ppt on last year (FY 2019/20: 64%), generating 87% of the
Group’s underlying operating profit contribution (FY 2019/20: 84%);
importantly, customer concentration remains low with no single
customer accounting for more than 7% of Group sales.
1. As a percentage of Group revenue
B Increase underlying operating margin
■ FY25 Target 12.5%
FY17
FY18
FY19
FY20
FY21
5.9%
6.3%
7.0%
8.0%
7.7%
Definition
Underlying
operating profits
as a percentage of
sales.
Commentary
Underlying operating margin was impacted by reduced sales
in the year resulting from the global slowdown caused by the
pandemic partly offset by savings from lower operating costs,
reducing by 0.3ppts to 7.7%. We aim to achieve organic margin
improvement through growth-based efficiencies and to acquire
businesses with margins that are higher than our D&M division,
with a target in the next four years to increase the margin to 12.5%.
C Build sales beyond Europe1
■ FY25 Target 40%
FY17
FY18
FY19
FY20
FY21
19%
19%
21%
27%
28%
D Target market sales1
■ FY25 Target 85%
FY17
FY18
FY19
FY20
FY21
56%
62%
66%
68%
70%
Definition
Sales in the
Americas, Asia and
Africa. Excludes the
UK and Europe.
Commentary
28% of Group sales were beyond Europe, in line with last year,
with sales arising from stronger organic growth in Asia and the
acquisition of the US-based Phoenix, being offset by weaker
organic sales in North America and the acquisition of the
German-based Limitor. We continue to seek acquisitions with
high quality international revenues with a target to reach 40%
of sales by FY 2024/25.
1. As a percentage of Group revenue
Definition
The proportion of
Group revenue that
is derived from
sales into our target
markets.
Commentary
In June 2020, we introduced a new mid-term target of achieving
85% of Group sales from our target markets, all of which have
long-term growth momentum. Since first publishing this data,
target market sales have increased from 56% of Group sales in
FY 2016/17 to 70% this year, with an increase of 2ppts over last year.
As in previous years, sales in target markets outperformed sales
in other markets with target market sales in D&M reducing by 3%
organically compared with other markets which were 10% lower.
1. As a percentage of Group revenue
22
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
KEY PERFORMANCE
INDICATORS
1 Sales growth
CER
FY17
FY18
FY19
FY20
FY21
D&M Organic
Group Organic
6%
11%
FY17
FY18
14%
FY19
8%
FY20
(4%)
FY21
(1%)
FY17
11%
FY18
10%
FY19
5%
FY20
(4%)
FY21
Commentary
Group organic sales reduced
by 6% driven by a stronger
performance in our D&M target
markets where organic sales
were 3% lower. Second half
organic sales reduced by 3%
and returned to growth for the
last two months of the year.
(1%)
6%
8%
2%
(6%)
■ Targets Well Ahead of GDP
2 Underlying EPS growth
■ Target >10%
FY17
FY18
FY19
FY20
FY21
4 ROCE(1)
■ Target >15%
FY17
FY18
FY19
FY20
FY21
1. Defined in Note 2 of the
financial statements
Commentary
Underlying EPS for the year
was 14% below last year
(FY 2019/20: +11%), a
combination of the equity
issuance in the second half
last year, and increased
underlying tax rates as well
as the impact of COVID-19.
13%
16%
22%
11%
(14%)
3 Dividend growth
■ Target Progressive
FY17
FY18
FY19
FY20
FY21
6%
6%
6%
6%
6%
Commentary
As part of cash conservation
actions taken earlier in the year,
a final dividend for last year was
not paid. Dividends resumed
this year at a level 6% higher
than in FY 2018/19 (the last full
dividend payment year).
For FY 2019/20, the 6% increase
was in the H1 interim dividend
over FY 2018/19.
5 Operating profit conversion
Commentary
ROCE reduced to 14.5% (FY
2019/20: 16.0%) reflecting the
lower underlying operating
profit resulting from COVID-19.
First half ROCE reduced to
12.7% before recovering to
15.6% in the second half, which
is ahead of our 15% target.
13.0%
13.7%
15.4%
16.0%
14.5%
■ Target >85% of
underlying operating
profit
FY17
FY18
FY19
FY20
FY21
136%
85%
93%
106%
141%
6 Free cash conversion(1)
■ Target >85% of
underlying PAT
FY17
FY18
FY19
FY20
FY21
1. Defined in Note 2 of the
financial statements
n/d
n/d
94%
104%
157%
Commentary
Strong operating cash flow
has translated into strong free
cash conversion (being cash
available for dividends and
acquisitions) at 157% of profit
after tax, again significantly
ahead of our 85% target. This
target was established last
year as we seek to become
a business which can
increasingly and repeatedly
self-fund acquisitions.
7 Carbon emissions
■ Target 50% reduction
vs CY2019
2019
2020
Target
22.91 tCO2e/ £m turnover
21.54 tCO2e/ £m turnover
11.45 tCO2e/ £m turnover
Innovative Electronics
Commentary
Operating cash conversion
for the year was very strong at
141% of underlying operating
profit, significantly above our
85% target, reflecting tight
management of working
capital, working capital
inflow from lower sales and
lower capital expenditure
throughout the year. Over the
last eight years since targets
were introduced, operating
cash conversion has been
consistently strong through
the cycle.
Commentary
A new target was introduced
during the year for the
reduction of carbon
emissions from our 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% on a like-for-
like basis and by 6% on an
underlying basis adjusted for
the effects of COVID-19.
23
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCV
STRATEGIC AND
OPERATIONAL REVIEW
Overview
The Group is pursuing its clear and established strategy
of focussing on growing opportunities for customised
electronic products in targeted growth markets,
namely renewable energy, medical, transportation and
industrial & connectivity. Group organic sales were 6%
lower than last year (4% lower in the D&M division and
8% lower in the Custom Supply division) due to the
effects of COVID-19. Performance in our target markets,
which accounted for 70% of Group sales, has been better
than other markets which were more severely affected
by the global pandemic. Including acquisitions, Group
sales reduced by 3% on a reported basis and by 4% CER
to £454.3m.
As a result of the uncertainty caused by the onset of
the pandemic, customers significantly reduced their
placement of new orders in April and May 2020 to cover
a much shorter period with the result that orders for the
first half were 18% lower than last year organically with a
book to bill ratio of 0.91:1. The situation stabilised over the
summer, and orders picked up strongly in the second
half being 40% higher than the first half at CER and up
12% organically, as longer term orders resumed. Orders
were significantly ahead of sales with the book to bill
ratio of 1.19:1 for the second half and 1.05:1 for the full year.
This strong second half order growth resulted in a record
order book at the year-end of £181m, 15% higher than
last year at CER, and 11% higher organically.
During the year, we introduced a carbon emissions
reduction target, with the intention to reduce Group
emissions by 50% over five years. Along with the
focus on selling into markets that are aligned with
a sustainable future, this target reflects the Group’s
commitment to reducing the impact of its operations
on the environment. A good start has been made with
underlying carbon emissions reducing by 6% in calendar
2020 since last year. Overall carbon emissions reduced
by 19%, the difference being savings arising from the
impact of the pandemic on our operations including
sites closures, freight and travel reductions.
“ While Group sales reduced
by 4% CER to £454.3m,
strong second half order
growth resulted in a record
order book at year-end of
£181m, 15% higher than last
year at CER, and 11% higher
organically.”
Nick Jefferies
Group Chief Executive
24
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
COVID-19
The Group responded decisively to the emergence of
the COVID-19 pandemic, prioritising the well-being of
employees, supporting customers and trading partners,
developing fast solutions for medical market customers,
and maintaining business continuity. Whilst sales in China,
which were impacted by the pandemic at the end of last
year have recovered quickly and returned to growth, its
effects have been felt across all other regions where the
Group operates.
The Group has operations in 24 countries, with 29
manufacturing facilities in 18 of those countries across
Europe, the UK, Asia and the Americas. Four facilities
(Sri Lanka, California and two in India) were required by
government mandate to close for short periods during the
first half. By the year end, all sites were open with capacity
mostly back to normal levels as organic sales growth
returned to the Group in the last two months of the year.
The recent escalation of the pandemic in India, where the
Group has two production facilities, and Sri Lanka, has
resulted in some disruption to those operations. We expect
this situation may continue for some time and are making
arrangements to mitigate the impact. The effects on the
Group overall are expected to be minimal.
With a decentralised structure, the Group was able to adapt
quickly to establish safe working practices and appropriate
distancing measures, with each business making changes
to suit its particular needs and welfare requirements. At
its peak, around 650 employees were working from home
although this has since reduced.
During the year we took prudent actions to preserve cash
and reduce operating expenses, including:
■ Deferral of non-essential capital expenditure and other
discretionary spend
■ Freezes in pay rises and hiring
■ 20% salary reduction for the Board and Group Executive
Committee for three months and reduced bonuses for
the Group Executive Committee
■ Increased focus on working capital efficiency
These actions led to organic operating costs being 2% lower
than last year, a reduction of 4% over last year’s second
half run rate, with working capital and capital expenditure
being 13% and 43% lower than last year respectively. These
reductions all helped to achieve strong operating cash
generation for the year of £49.7m, up 26% on last year (141%
of underlying operating profits).
Additionally, during the first half, acquisitions were deferred
and no final dividend was made for the year ended 31
March 2020. By the second half with an improving outlook,
continuing strong cash generation and low gearing, the
Group repaid all UK furlough payments received, resumed
acquisitions with two deals completed, and resumed its
dividend with a 6% uplift compared with FY 2018/19, the last
year pre-pandemic.
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
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STRATEGIC AND
OPERATIONAL REVIEW
Sustainability and Social Responsibility
Brexit
The Group provides innovative electronics that help
customers create new technologies for a sustainable world.
Applications which use our products help 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 emphasis in market
areas that are inconsistent with a long term sustainable
agenda.
As expected, discoverIE has not been materially impacted by
Brexit, and although there was some minor disruption in the
first few weeks as new border processes were established,
this has since settled.
As an international business, exposure to Brexit risks are
low, with only 12% of sales in the UK and minimal cross
border trade between the UK & the EU. The majority of sales
in the UK are of products manufactured outside the EU,
predominantly in Asia and the US, and are unaffected.
Prior to Brexit, changes had been made to some warehousing
and logistics to hold a buffer stock in the country of demand
to minimise the effects of any border disruption.
Our target sales markets are well aligned to a sustainable
agenda and last year we set ourselves the goal of achieving
85% of sales from those target markets by the end of FY
2024/25. By the end of this year, sales from target markets
were 70% of Group sales and 75% of sales in our D&M
division.
Please refer to the Group’s Impact Report which will be
published online with the Annual Report and Accounts
and which illustrates how the Group is helping meet the
sustainability challenges facing the world today.
Carbon emissions
During the year we introduced carbon reduction targets for the
Group. With 29 manufacturing locations, the primary source
(80%) of our emissions is from purchased electricity (Scope 2
emissions). The remainder are mainly from vehicles (Scope 1).
We plan to reduce emissions by sourcing electricity from
renewable and lower or zero carbon sources and to reduce
electricity demand through more efficient working practices.
This will include both sustainably generated grid sourced
power and the installation of renewable power sources at
some sites.
It is planned to achieve a 50% reduction in carbon emissions
from existing businesses over 5 years and additionally, it is
targeted that for newly acquired businesses, within the first 5
years of ownership, at least 50% of their energy demand will
be generated from renewable sources.
During the year the Group committed to invest c.£1m in
capital expenditure for renewable energy generation in Sri
Lanka and Poland which will be installed in the coming
year. Good progress towards our targets has been made
in calendar year 2020 with a 6% year-on-year reduction in
underlying carbon emissions. Overall carbon emissions were
19% lower.
Group Strategy
The Group designs, manufactures and supplies 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 Europe
(28% of Group sales and 36% of D&M sales are now outside
Europe) as we build a geographically diverse electronics group.
Acquisitions have made a significant contribution to the
development of the D&M division and over the 11 years to
31 March 2021, we have acquired 16 specialist, high margin
D&M businesses which have been integrated successfully,
helping to drive our growth alongside our key organic focus.
A further acquisition has been completed since the year
end. 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 D&M division with several
acquisition opportunities in development.
Our strategy comprises 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 by continuing to build revenues
in the higher margin D&M division;
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 model,
and delivering long-term sustainable returns.
26
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Target Markets
Medical
Our four focus target markets of renewable energy, medical,
transportation, and industrial & connectivity, account for 75%
of D&M turnover and 70% of Group turnover. These markets
are expected to drive the Group’s organic revenue growth
well ahead of GDP over the economic cycle and create
acquisition opportunities.
During the year, sales to target markets continued to
perform well ahead of sales into other markets, both in the
D&M division and in the Group overall. Target market sales
reduced by only 3% organically while other markets reduced
by 9%, resulting in D&M organic sales being 4% lower
organically and Group organic sales being 6% lower.
Growth in these markets is driven by increasing electronic
content and by global trends such as the accelerating need
for renewable sources of energy and an ageing affluent
population.
Renewable Energy
Mega trend – decarbonisation and diversification of
energy sources
The increasing global requirement for clean electricity is
leading to the rapid deployment of sustainable energy
generation. According to the International Energy Agency
(“IEA”), renewable energy production needs to increase by
7% p.a. globally, driving the proportion of global electricity
production coming from renewable energy to increase from
28% in 2019 to 49% in 2030. The Group’s focus is on wind and
solar energy which in 2020 accounted for around two thirds
of global growth. We anticipate that demand for renewable
energy will accelerate further.
Mega trend – sensing, analytics and artificial intelligence
Driven by the increasing use of technology in diagnosing,
monitoring and controlling medical conditions, as well as an
increasingly affluent and ageing global population which
now accounts for the majority of healthcare spending in
developed economies, the medical electronics market is
expected to continue growing steadily. The medical sensors
market is forecast to grow by 10% p.a. (2021 – 2026) according
to Mordor market intelligence.
Transportation
Mega trend – vehicle electrification
The Group is particularly focussed on rail and bus
transportation, electrification infrastructure and specialist
vehicle electrification, all of which are important for the
urban environment and consistent with the sustainability
agenda. Electronic content is increasingly driven by
electrification, safety, intelligence, automation and
convenience. External reports indicate that the rail
electrification and vehicle charging markets will grow at a
combined 11% p.a. from 2020 through to 2025.
Industrial & Connectivity
Mega trend – industrial automation and connectivity
Technology proliferation is creating opportunities for
widespread connectivity of equipment and devices, and is
being increasingly adopted in industry and automation for
remote monitoring and control. With a focus on sustainable
markets, we concentrate on improving efficiency in industrial
market applications that are aligned with a sustainable
growth agenda, including fibre optic and wireless
connectivity applications within these markets. According to
Grandview research, the global industrial automation market
is forecast to grow by 8.6% p.a. from 2019 to 2025.
27
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OPERATIONAL REVIEW
Engineering-led Sales Model
Our business model has three core capabilities:
■ Engineering - our primary and leading differentiator.
■ Engineering-led solutions
By understanding our customers’ design challenges we
design and create products that address their specific
needs.
■ Manufacturing - we manufacture individually designed
products to a repeatedly and consistently high standard
at one or more of our production facilities internationally.
■ Logistics - we supply our products internationally to
customers’ various production locations over the life of
their demand, typically for five to seven years.
We apply these capabilities to develop long term,
embedded relationships with our customers as follows:
■ Understanding customer needs
− By listening to and understanding customers’ needs,
we help solve their technical challenges to create
more effective, efficient, productive and sustainable
equipment and comply with increasingly stringent
environmental, health, safety and performance
requirements.
■ Enduring customer relationships
− Our sales model creates a unique understanding of
customers’ needs and builds long term relationships
that last for many years.
− 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, leading to multiple years of repeated monthly
demand and creating stable, recurring revenue
streams.
■ Regional manufacturing
− Manufacturing locations in Europe, Asia and the
Americas provide regional supply for customers,
reducing transit times, costs and environmental
impact as well as providing flexibility and reducing
risk of disruption.
Additionally, we acquire businesses with similar
characteristics, building our product capability and
international presence. With many customers operating
internationally, it is necessary for us to have a presence in
the major regions of the world and with the market being
highly fragmented, numerous opportunities exist for us to
acquire complementary businesses.
28
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Key Strategic and Performance Indicators
Since 2014, the Group’s progress with its strategic objectives and its financial performance have been measured through
key strategic indicators (“KSIs”) and key performance indicators (“KPIs”). Our KSI targets have been raised each time they are
achieved, and in June 2020, we set increased targets for 31 March 2025.
Key Strategic indicators
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
1. Increase share of Group revenue from D&M1
18%
2. Increase underlying operating margin
3. Build sales beyond Europe1
4. Target market sales1
1. As a percentage of Group revenue
n/d: not previously disclosed
3.4%
5%
n/d
37%
4.9%
12%
n/d
48%
5.7%
17%
n/d
52%
5.9%
19%
56%
57%
6.3%
19%
62%
61%
7.0%
21%
66%
64%
8.0%
27%
68%
65%
7.7%
28%
70%
FY25
Target
>75%
12.5%
40%
85%
During the year, the Group made further progress with its KSIs despite the impact of COVID-19.
■ The higher margin D&M division delivered 65% of Group
sales, up 1ppt on last year (FY 2019/20: 64%), generating
87% of the Group’s underlying operating profit
contribution (FY 2019/20: 84%); importantly, customer
concentration remains low with no single customer
accounting for more than 7% of Group sales;
■ Underlying operating margin was impacted by reduced
sales in the year resulting from the global slowdown
caused by the pandemic partly offset by savings from
lower operating costs, reducing by 0.3ppts to 7.7%. We
aim to achieve organic margin improvement through
growth-based efficiencies and to acquire businesses
with margins that are higher than our D&M division, with
a target in the next four years to increase the Group’s
margin to 12.5%;
■ 28% of Group sales were beyond Europe, in line with last
year, with sales arising from stronger organic growth in
Asia and the acquisition of the US based Phoenix, being
offset by weaker organic sales in North America and the
acquisition of the Germany based Limitor. We continue to
seek acquisitions with high quality international revenues
with a target to reach 40% of sales by FY 2024/25; and
■ In June 2020, we introduced a new mid-term target of
achieving 85% of Group sales from our target markets, all
of which have long-term growth momentum. Since first
publishing this data, target market sales have increased
from 56% of Group sales in FY 2016/17 to 70% this year, with
an increase of 2ppts over last year. As in previous years, sales
in target markets outperformed sales in other markets
with target market sales in D&M reducing by 3% organically
compared with other markets which were 10% lower.
Key Performance indicators
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Target
1. Sales growth
CER
D&M organic
Group organic
2. Underlying EPS growth
3. Dividend growth
4. ROCE3
17%
3%
2%
20%
10%
36%
14%
9%
3%
31%
11%
3%
3%
10%
6%
6%
(1%)
(1%)
13%
6%
11%
11%
6%
16%
6%
14%
10%
8%
22%
6%
8%
5%
2%
11%
6%1
(4%)
(4%)
(6%)
Well ahead
of GDP
(14%)
>10%
6%2
Progressive
15.2%
12.0% 11.6%
13.0% 13.7%
15.4% 16.0% 14.5% >15%
5. Operating profit conversion3
100%
104%
100%
136%
85%
93%
106%
141%
6. Free cash conversion3
7. Carbon emissions
94%
104%
157%
(6%)4
>85% of underlying
operating profit
>85% of
underlying PAT
50% reduction
to CY25
1. 6% increase in the H1 2019/20 interim dividend; a final dividend was not proposed for FY 2019/20 due to COVID-19
2. 6% increase over FY 2018/19, the last full dividend payment year
3. Defined in note 2 of the Group consolidated financial statements
4. Annual carbon emissions for CY 2020 reduced by 19% on a like-for-like basis and by 6% on an underlying basis (adjusted to normalise the
impact of COVID-19)
29
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OPERATIONAL REVIEW
The performance of each of our KPIs for this year was as
follows:
Order Book
During the second half, the Group order book grew strongly
and finished the year at a record level of £181m, an increase
of 15% CER compared with last year. Second half orders
increased 29% over the first half more than offsetting the 11%
year on year reduction in the first half. On an organic basis,
the Group order book increased by 11%.
The order book is driven by repeating revenues from
existing customer projects as well as by the conversion of
new project design wins into new orders. The pandemic had
the effect of customers temporarily shortening their order
windows amidst the uncertainty. During the second half,
customers resumed placing longer term orders. Over 80% of
the order book is for delivery within twelve months from the
time of order.
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, we identify opportunities for our
products to be specified into their designs, which then lead
to future revenue streams.
Design wins were 15% lower for the year, with the second
half being 12% lower and the first half 19% lower. Second half
design wins were 3% higher sequentially than the first half
and were supported by an increase in new project activity,
albeit that this was still lower than for the same prior year
period.
Over 90% of design wins in the D&M division and 60% in the
Custom Supply division were in the target markets.
The Group has a strong bank of design wins built up over
several years that creates the basis for the strong order
growth now being experienced.
■ Group organic sales reduced by 6% driven by a stronger
performance in our target markets in D&M where organic
sales were 3% lower. Second half organic sales reduced
by 3% and returned to growth for the last two months of
the year;
■ Underlying EPS for the year was 14% below last year (FY
2019/20: +11%), a combination of the equity issuance in the
second half last year, increased underlying tax rates and
the impact of COVID-19;
■ As part of the cash conservation actions taken earlier in
the year, a final dividend for last year was not paid. With
greater visibility and improving conditions, dividends
resumed this year at a level 6% higher than in FY 2018/19
(the last full year dividend payment year), aligned with
our progressive dividend policy;
■ ROCE reduced to 14.5% (FY 2019/20: 16.0%) reflecting
the lower underlying operating profit resulting from
COVID-19. First half ROCE reduced to 12.7% before
recovering to 15.6% in the second half, ahead of our 15%
target;
■ Operating cash conversion for the year was very strong
at 141% of underlying operating profit, reflecting tight
management of working capital, working capital
inflow from lower sales and lower capital expenditure
throughout the year. Over the last eight years since
targets were introduced, operating cash conversion has
been consistently strong through the cycle;
■ Strong operating cash flow has translated into strong
free cash conversion (being cash available for dividends
and acquisitions) at 157% of profit after tax. This target
was established last year as we seek to become a
business which can increasingly and repeatedly self-fund
acquisitions; and
■ A new target was introduced during the year for
the reduction of carbon emissions from our 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% on a like-for-like
basis and by 6% on an underlying basis adjusted for the
effects of COVID-19.
30
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Divisional Results
Divisional and Group performance for the year ended 31 March 2021 are set out and reviewed below.
Divisions
Revenue
£m
FY 2020/21
Underlying
operating
profit1
£m
Margin
Revenue
£m
FY 2019/20
Underlying
operating
profit1
£m
Margin
Revenue
growth
CER
revenue
growth
Organic
revenue
growth
Design &
Manufacturing
296.6
37.7
12.7%
297.9
38.1
12.8%
0%
(1%)
(4%)
Custom Supply
157.7
Head office costs
Total
454.3
5.6
(8.1)
35.2
3.6%
168.5
7.7%
466.4
7.3
(8.3)
37.1
4.3%
(6%)
(8%)
(8%)
8.0%
(3%)
(4%)
(6%)
1. Underlying operating profit excludes acquisition-related costs.
Design & Manufacturing Division
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.
Growth in the first half was impacted by short term site
closures, as required by local government regulations in
Sri Lanka, India and the US to combat COVID-19. These
sites were all open during the second half and operating
at normal capacity by the end of the year. Our two Chinese
facilities, which were closed temporarily in the fourth
quarter of the last financial year, recovered quickly with
Asian sales up 11% this year. All other sites remained open
throughout the year, several with essential supplier status
classification, and a number operated at reduced capacity
but are mostly now back to normal capacity. At the time of
writing, lockdown restrictions are affecting our sites in India
and Sri Lanka and while causing some disruption, these are
minor in nature at a Group level.
Demand in our German and Rest of Europe businesses was
resilient with organic sales 3% and 1% lower than last year
respectively. Organic sales in other territories were more
impacted, including the UK (15% lower), the Nordic region
(8% lower) and North America (17% lower). Asia and North
America now account for 36% of D&M revenues up from 22%
five years ago. Demand was much better in target markets
(75% of D&M sales) with sales only 3% lower than last year
compared with 9% in the other markets.
Organic orders recovered strongly in the second half
increasing by 10%, partially offsetting an 18% fall in the first
half for a net 4% organic reduction for the year to £307.0m
with a book to bill ratio of 1.04:1. Second half orders were 40%
higher than the first half at CER.
The second half also saw a noticeable improvement in
organic sales being only 2% lower than last year compared
with 7% lower in the first half for a net 4% reduction
in organic sales for the year. Together with a 3% sales
contribution from acquisitions, overall reported sales of
£296.6m were broadly level with last year (FY 2019/20:
£297.9m), with second half reported sales increasing by 1%.
D&M revenue was 65% of Group revenue, an increase of 1ppt
over last year (FY 2019/20: 64%) and further progress towards
our mid-term target for D&M to exceed 75% of Group
revenue.
Underlying operating profit of £37.7m was £0.4m (1%) lower
than last year (FY 2019/20: £38.1m), or 1% lower at CER, and
was 87% of the Group’s underlying profit contribution, up
3ppts on last year (FY 2019/20: 84%).
The underlying operating margin of 12.7% was 0.1ppts lower
than last year (FY 2019/20: 12.8%) reflecting the positive effect
of operating efficiencies and higher margin acquisitions
largely offsetting the impact of lower sales resulting from
the pandemic.
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Acquisitions
We acquire businesses that are successful and profitable
with good growth prospects, led by entrepreneurial
management teams where we can invest for growth and
operational performance development. We operate a
decentralised structure and an entrepreneurial culture with
the business unit leadership empowered to make decisions
and act quickly. The market is highly fragmented with many
opportunities to acquire and consolidate. According to
circumstances, the Group adds value in some of or all of the
following areas:
■ Internationalising sales channels and expanding the
customer base, including Group cross-selling initiatives;
■ Focussing sales development onto target market areas
and enabling growth with larger customers;
■ Developing and expanding the product range;
■ Investing in management capability (‘scaling up’) and
succession planning;
■ Capital investment in manufacturing and infrastructure,
improving efficiency in manufacturing, warehousing and
freight;
■ Finance & administrative support, such as treasury,
banking, legal, pension, tax & insurance;
■ Installing Group risk, control, ESG and diversity policies;
■ Longer term strategic planning for the business; and
■ Expanding the acquired business through further
acquisitions.
During the year, the Group completed two acquisitions:-
1.
In October 2020, the trade and assets of Phoenix America
Inc (“Phoenix”), a US designer and manufacturer of
magnetically actuated sensors, encoders and related
products, for an initial cash consideration of $11.0m
(£8.5m) on a debt free, cash free basis and a contingent
payment of up to $1.5m (£1.2m), subject to the
achievement of certain growth targets over a three year
period. Phoenix is based in Fort Wayne, Indiana.
2. In February 2021, Limitor GmbH, a German designer
and manufacturer of custom thermal safety sensors and
limiters, for an initial consideration of €14.5m (£12.8m) on
a debt free, cash free basis and a contingent payment of
up to €3.5m (£3.1m) subject to the achievement of certain
growth targets over a three year period. Limitor is based
near Urbach, Germany, with production in Pécs, Hungary.
Both will operate within the Variohm business cluster in
the D&M division, retaining their distinct brand identity
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.
Also, since the year end, in May 2021, we completed the
acquisition of Control Products Inc (“CPI”), a New Jersey,
USA, based designer and manufacturer of custom, rugged
sensors and switches, for $11.4m (£8.1m) on a debt free, cash
free basis.
In the 11 years to 31 March 2021, the Group has successfully
completed 16 D&M acquisitions contributing to an increase
in D&M revenues from £15m in FY 2012/13 to £297m in FY
2020/21 with Group operating margins increasing by 5ppts
to 8% over the same period, and increasing D&M operating
margins to c. 13%. The Group’s operating model is well
established, facilitating the smooth integration of acquired
businesses, with a combination of investment in growth
and efficiency while leveraging the Group’s commercial
infrastructure. The D&M businesses acquired and owned for
at least two years, delivered an average return on investment
of 16% over the life of those acquisitions, ahead of our target
of 15%. While this is a 1ppt lower average than last year
due to the pandemic’s impact on profits, it illustrates the
strength and resilience of our acquired businesses.
32
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Custom Supply Division
Summary and Outlook
This year challenged us in ways we couldn’t have foreseen.
Our dedicated employees responded quickly, creating a
new normal operating environment with COVID safety at its
core, whilst continuing operations with minimal disruption
to customers.
The second half saw a strong recovery following the
uncertainty of the first half, with orders increasing
organically by 12% year-on-year and the Group returning to
organic sales growth by the year end. A record order book,
up 15%, leads the way for sales growth in the year ahead.
Together with robust gross margins and tight management
of expenditure throughout the year, underlying earnings
ended the year ahead of expectations.
Cash generation was excellent with £38m of free cash
flow for the year reducing gearing to 1.1x. As well as
demonstrating the cash generating capability of our
businesses and the strength of the operating model,
this provides us with the capacity to pursue further value
enhancing acquisitions.
The new financial year has started well with organic
sales growth ahead of last year and the year before and
continuing strong orders running ahead of sales across
all territories.
With a clear strategy focussed on long-term high quality
growth markets, a diversified customer base, excellent order
book and a strong pipeline of acquisition opportunities,
we are well positioned to make further progress on our key
strategic priorities.
Nick Jefferies
Group Chief Executive
03 June 2021
The Custom Supply division provides customised electronic,
photonic and medical products for technically demanding
applications in industrial, medical and healthcare markets.
The business operates similarly to the D&M division, but with
products that are mostly sourced from third party suppliers
rather than manufactured in-house. As such, operating
margins are lower than in the D&M division. Additionally, the
division acts as a sales channel through which to cross-sell
D&M products.
The division comprises two businesses, Acal BFi and Vertec.
Acal BFi supplies industrial markets and accounts for
most of the divisional revenue. It supplies products from
third party manufacturers to customers in five technology
areas: Communications & Sensors, Power & Magnetics,
Electromechanical & Cabling, Microsystems, and Imaging
& Photonics. The business operates across Europe, with
centralised warehousing, purchasing and finance, supplier
contact management and IT systems. Vertec supplies
exclusively sourced medical imaging and radiotherapy
products into medical and healthcare markets in the UK
and South Africa.
The division’s trading for the year was more impacted by
the pandemic than D&M, due to sales being predominately
in Europe and with a lower percentage of sales in the more
resilient target markets (60% of sales in target markets in
Custom Supply compared with 75% in D&M). Reported
divisional revenue was 6% lower than last year at £157.7m (FY
2019/20: £168.5m) with organic sales 8% lower, the difference
being the translation benefit from a net weakening of
Sterling compared with last year. The second half saw
a noticeable improvement with organic sales 6% lower
compared with 10% lower in the first half. Orders of £173.0m
were in line with last year organically with a book to bill ratio
of 1.09:1. Similar to D&M, second half orders increased by 16%
organically, offsetting a similar level fall in the first half to be
c.40% ahead of first half levels.
Underlying operating profit for the year reduced by £1.7m on
last year to £5.6m (or £1.8m lower at CER) with an underlying
operating margin of 3.6% (FY 2019/20: £7.3m at 4.3%). Gross
margins remained strong and operating expenditure
reducing 4% compared with last year’s second half run rate,
partly offsetting the impact of lower sales.
33
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REVIEW
“ The Group continues to be
highly cash generative, with
free cash flow for the year
of £37.6m, an increase of
38% over last year.”
Simon Gibbins
Group Finance Director
2021 HIGHLIGHTS
GROUP GROSS MARGIN
34.2%
OPERATING CASH FLOW
£49.7m
Revenue and Orders
Reflecting the impact of the pandemic across the
Group, sales of £454.3m were 6% lower organically
than last year, second half sales being 3% lower and
first half sales being 8% lower. The acquired businesses
of Sens-Tech in October last year, and Phoenix and
Limitor this year, added 2% to sales, such that overall
Group sales reduced by 3% on both a CER and
reported basis (FY 2019/20: £466.4m).
£m
Reported revenue
FX translation
impact
Underlying revenue
(CER)
Acquisitions
Organic revenue
FY
2020/21
454.3
FY
2019/20
%
466.4
(3%)
4.6
454.3
471.0
(4%)
(9.5)
444.8
–
471.0
(6%)
With 90% of Group sales in non-Sterling currencies, the
translation of Group results into Sterling was positively
impacted by Sterling being on average 2% weaker
against the Euro and Nordic currencies during the year,
partially offset by 3% strength against the US dollar.
Group orders reduced by 2% organically for the year to
£480.0m with a book to bill ratio of 1.06:1. Second half
orders rebounded strongly growing 12% organically
with a book to bill ratio of 1.19:1 following the pandemic-
impacted first half with orders 18% lower and a book to
bill ratio of 0.91:1.
Gross Margin and Gross Profit
Group gross margin increased 0.6ppts in the year to
34.2% (FY 2019/20: 33.6%). This is the highest Group gross
margin since the current strategy was implemented
11 years ago. Organic gross margins were robust and
increased by 0.1ppt with high gross margin acquisitions
adding 0.5ppts.
With the benefit of the higher gross margin year-on-
year, gross profit for the year of £155.3m was only 1%
lower than last year (FY 2019/20: £156.7m).
The Group continues with its policy of hedging foreign
exchange transactions from the point of order through
to settlement.
34
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
Underlying Operating Costs
At the outset of the pandemic, the Group took prudent actions to preserve cash and reduce expenditure including deferral
of discretionary spend, freezes in pay rises and hiring, a three month 20% salary reduction for the Board and Group Executive
Committee and reduced bonus opportunity for the Group Executive Committee. The combined effect of these actions was
to reduce Group underlying operating costs for the year by 2% organically and by 4% compared with the second half run rate
from last year.
£m
Organic operating costs
Acquisition operating costs
Underlying operating costs (CER)
FX translation
Underlying adjustments
(see below)
Reported operating costs
£m
Selling and distribution costs
Administrative expenses
Reported operating costs
FY
2020/21
118.0
2.1
120.1
14.5
FY
2019/20
%
120.4
(2%)
120.4
0%
(0.8)
13.3
134.6
132.9
1%
FY
2020/21
FY
2019/20
57.8
76.8
134.6
58.1
74.8
132.9
Group Operating Profit and Margin
Group underlying operating profit for the year was £35.2m, a reduction of £1.9m on last year (FY 2019/20: £37.1m), delivering
a Group underlying operating margin of 7.7%, 0.3ppts lower than last year (FY 2019/20: 8.0%).
Reported Group operating profit for the year (after accounting for the underlying adjustments discussed below) was £20.7m,
£3.1m lower than last year.
£m
Underlying
Underlying adjustments
Acquisition & merger expenses
Amortisation of acquired intangibles
Legacy pension cost
Reported
FY 2020/21
FY 2019/20
Operating
profit
Finance
Cost
Profit before
tax
Operating
profit
Finance
Cost
Profit before
tax
35.2
(3.7)
31.5
37.1
(4.3)
32.8
(2.0)
(11.1)
(1.4)
20.7
–
–
–
(3.7)
(2.0)
(11.1)
(1.4)
17.0
(4.0)
(9.0)
(0.3)
23.8
–
–
–
(4.3)
(4.0)
(9.0)
(0.3)
19.5
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
35
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FINANCE
REVIEW
Underlying Adjustments
Underlying adjustments for the year comprise acquisition and merger expenses of £2.0m (FY 2019/20: £4.0m), the amortisation
of acquired intangibles of £11.1m (FY 2019/20: £9.0m) and the IAS19 legacy pension cost of £1.4m (FY 2019/20: £0.3m).
Acquisition expenses of £2.0m mainly comprise the transactions costs incurred in acquiring Phoenix and Limitor, ongoing
transaction costs and the integration costs of North American businesses within the Noratel cluster. The £2.1m increase
in the amortisation charge since last year to £11.1m relates to the annualisation of the amortisation charge for Sens-Tech
together with amortisation for Phoenix and Limitor. The increased pension charge of £1.1m compared with last year relates
mainly to a one off adjustment relating to historic commutation terms for legacy scheme members.
Financing Costs
Total finance costs for the year were £3.7m (FY 2019/20: £4.3m). This year’s charge comprises underlying finance costs
(being interest and facility fees arising from the Group’s banking facilities) of £3.1m (FY 2019/20: £3.7m) and an IFRS 16
interest charge of £0.6m, in line with last year.
Finance costs (excluding IFRS 16 interest charge) of £3.1m were £0.6m lower than last year due to lower average net debt this
year resulting from strong cash generation.
Underlying Tax Rate
The underlying effective tax rate for the year was 24%, an increase of 4ppts over last year due to a greater proportion of group
profits arising in higher taxed countries, such as China, and the recognition last year of certain tax losses not available this year.
The overall effective tax rate of 29% (FY 2019/20: 27%) was higher than the underlying effective tax rate due to there being
no tax relief on acquisition costs and a lower rate of tax relief on amortisation of acquired intangibles (within underlying
adjustments above).
Profit Before Tax and EPS
Underlying profit before tax (“PBT”) for the year of £31.5m was £1.3m lower than last year (FY 2019/20: £32.8m), with underlying
EPS for the year reducing to 26.0p (FY 2019/20: 30.2p). On the back of improving conditions, underlying PBT rebounded in the
second half rising £0.5m on last year (+3%) partly offsetting a £1.8m reduction in the first half at the height of the pandemic.
The reduction in underlying EPS of 14% was higher than that for underlying profit before tax (4%) due to higher underlying
tax rates and the issuance of new equity in October 2019, increasing weighted average fully diluted shares by 6% to 92.2m
shares (FY 2019/20: 86.9m shares).
£m
H1 Underlying
H2 Underlying
FY Underlying
Underlying adjustments
Acquisition & merger expenses
Amortisation of acquired intangibles
Legacy pension cost
Reported
FY 2020/21
FY 2019/20
PBT
13.8
17.7
31.5
(2.0)
(11.1)
(1.4)
17.0
EPS
11.3p
14.7p
26.0p
13.0p
PBT
15.6
17.2
32.8
(4.0)
(9.0)
(0.3)
19.5
EPS
14.4p
15.8p
30.2p
16.5p
After the underlying adjustments above, reported profit before tax was £17.0m, a reduction of £2.5m compared with last year
(FY 2019/20: £19.5m) with reported fully diluted earnings per share of 13.0p reducing by 3.5p compared with last year
(FY 2019/20: 16.5p).
36
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Working Capital
Working capital at 31 March 2021 was £61.6m, equivalent to 13.1% of annualised second half sales at CER and was £9.3m
(13%) lower than the prior year (31 March 2020: £70.9m at 14.4% of annualised sales). This reduction is partly due to the lower
demand in the year with organic sales reducing by 6%, and partly reflects tight management across the Group, with debtor
days reducing 4 days to 48 days partly offset by creditor days decreasing by 2 days to 61 days. Due to the lower sales, stock
turns reduced by 0.2 turns to 5.0 turns.
Working capital performance was strong across both divisions: in D&M, working capital was 17.0% of sales (FY 2019/20: 17.7%)
and in Custom Supply, it was 9.6% of sales (FY 2019/20: 11.1%).
Return on Capital Employed
ROCE for the year (return on capital employed, as defined in note 2 to the Group consolidated financial statements)
including an annualisation of acquisitions, was 14.5%, a reduction of 1.5ppts on last year reflecting lower underlying operating
profit resulting from COVID-19 taking it below our target of 15%. The impact was particularly noticeable in the first half
with ROCE reducing to 12.7% before recovering to 15.6% in the second half, ahead of our target. The full year Group ROCE is
expected to improve further next year.
Cash Flow
Net debt at 31 March 2021 was £47.2m compared with £61.3m at 31 March 2020. Excluding spend on acquisitions, net debt
reduced by £35.9m in the year (59% of last year’s net debt) demonstrating continuing strong cash generation by the Group.
£m
Opening net debt
Free cash flow (see table below)
Acquisition related cash flow
Equity issuance
Dividends
Foreign exchange impact
Net debt at 31 March
FY
2020/21
FY
2019/20
(61.3)
37.6
(21.8)
0.1
(2.8)
1.0
(47.2)
(63.3)
27.3
(75.9)
60.5
(8.1)
(1.8)
(61.3)
While dividends and acquisitions were put on hold in the first half as part of our cash preservation measures in response
to the pandemic, the second half saw a resumption of both as conditions improved. The acquisitions of Phoenix and
Limitor, associated acquisition expenses and earnout payments totalled £21.8m. The acquisition outflow last year of £75.9m
comprised the acquisition of Sens-Tech in October 2019 for £58.4m together with Hobart and Positek acquired in April 2019.
The payment of an interim dividend of £2.8m was £0.2m higher than last year’s interim following a 6% increase. Included last
year was £5.5m paid in respect of the FY 2018/19 final dividend payment with no final dividend paid for FY 2019/20.
37
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REVIEW
Operating cash flow and free cash flow (see definitions in note 2 to the Group consolidated financial statements) for the year
compared with last year, are shown below:
£m
Underlying profit before tax
Net finance costs
Non-cash items*
Underlying EBITDA
Working capital
Capital expenditure
IFRS 16
Operating cash flow
Net finance costs
Taxation
Legacy pensions
Executive share option exercises
Free cash flow
FY
2020/21
FY
2019/20
31.5
3.7
13.2
48.4
11.6
(3.6)
(6.7)
49.7
(3.1)
(7.2)
(1.8)
–
37.6
32.8
4.3
13.5
50.6
1.6
(6.3)
(6.6)
39.3
(3.7)
(6.4)
(1.8)
(0.1)
27.3
* Non-cash items are depreciation, amortisation and share based payments. Includes £6.6m IFRS 16 depreciation for FY 2020/21
(FY 2019/20: £6.6m)
Underlying EBITDA of £48.4m was 4% lower than last year (FY 2019/20: £50.6m). With a heightened focus on working capital
optimisation during the year and partly as a result of a 6% reduction in organic sales, an £11.6m inflow was generated from
working capital compared with an inflow of £1.6m last year. Around 50% of this year’s savings are expected to reverse as we
invest in working capital to support growth.
Capital expenditure was also restricted during the year to mainly maintenance costs giving a 43% reduction to £3.6m
(FY 2019/20: £6.3m). Capital expenditure levels are expected to increase next year to around £8.5m spend for the full year.
Combined with the other cash conservation measures taken by the Group this year, £49.7m of operating cash was generated
in the year, an increase of 26% over last year (FY 2019/20: £39.3m). This represents 141% of underlying operating profit during
the year, well above our 85% target. Over the last 7 years, the Group has consistently achieved high levels of cash conversion
averaging in excess of 100%.
Finance cash costs of £3.1m were £0.6m lower than last year due to reduced average net debt balances in the year.
Tax payments of £7.2m were £0.8m higher than last year, reflecting last year’s increased Group profitability.
Free cash flow (being cash flow before dividends and acquisitions) for the year was £37.6m, an increase of 38% over last year
(FY 2019/20: £27.3m). Our free cash conversion for the year was 157% of profit after tax, 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 31 March 2021 of £47.2m, the Group’s gearing ratio at the end of the year (being net debt divided by
underlying EBITDA as annualised for acquisitions) was 1.1x a reduction of 0.15x from last year despite completing two
acquisitions. Excluding the acquisitions, on a like-for-like basis, the gearing would have been 0.7x at the year end. Including
the post year end acquisition of CPI, pro-forma gearing at 31 March 2021 increased to 1.25x; with our target gearing range
being between 1.5x and 2.0x, plenty of debt capacity remains for further acquisitions.
38
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Balance Sheet
Net assets of £208.8m at 31 March 2021 were £8.3m higher than at the end of the last financial year (31 March 2020: £200.5m).
The increase primarily relates to the net profit after tax for the year of £12.0m offset by dividends paid in the year and
movements on the Group’s legacy defined benefit scheme. The movement in net assets is summarised below:
£m
Net assets at 31 March 2020
Net profit after tax
Dividend paid
Currency net assets – translation impact
Loss on defined benefit scheme
Shares issued
Share based payments (inc tax)
Net assets at 31 March 2021
FY
2020/21
200.5
12.0
(2.8)
(0.6)
(2.8)
0.1
2.4
208.8
Defined Benefit Pension Scheme
Risks and Uncertainties
The Group’s IAS19 pension liability, associated with its legacy
defined benefit pension scheme, increased during the
year by £2.8m from a surplus of £1.8m at 31 March 2020 to a
deficit of £1.0m at 31 March 2021.
At the end of last year, corporate bond yields temporarily
increased due to the COVID-19 situation, converting the
net liability at 31 March 2019 of £2.5m to a net surplus at 31
March 2020. Since last year end, corporate bond yields have
reverted back to previous levels and historic commutation
rates for legacy scheme members have been subject to a
one off adjustment, resulting in a £1.0m liability at the year
end. Over the last two years, there has been a net liability
reduction of £1.5m.
Annual payments of £1.8m are payable, growing by 3%
each year until September 2022 in accordance with the
plan agreed with the pension trustees as part of the most
recently completed triennial valuation at 31 March 2018.
The next triennial valuation will be at 31 March 2021.
The principal risks faced by the Group are covered in more
detail on pages 47 to 52. These risks are: the economic
environment, particularly linked to the impact of COVID-19;
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 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. The
Group’s performance over the last year has demonstrated
this well.
Simon Gibbins
Group Finance Director
03 June 2021
39
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics RISK
MANAGEMENT
Governance and culture
The Board of Directors has overall responsibility for the Group’s risk appetite and risk management strategy. Roles and
responsibilities for managing risks across the discoverIE Group have been clearly defined as shown in the diagram below.
Board
■ Overall responsibility for corporate strategy
Audit and Risk Committee
■ Reviews effectiveness of Group’s risk management framework
and risk management
and internal controls
■ Defines the Group’s appetite for risk
■ Oversees effectiveness of Group Internal Audit
Group Executive Committee
■ Management of the Group and delivery of the strategy
■ Monitoring of key risks and compliance with relevant laws
■ Regular reviews of the Group’s risk management framework
Divisional Management
■ Oversight and review of operational risks
Operating Companies
■ Identify internal and external risks
■ Responsible for the implementation of risk
mitigation actions and internal controls and
compliance with policies
■ Responsible for compliance with relevant laws
Group Functions
■ These include Finance,
Treasury, Risk and IT and
are responsible for the
integration of the risk
management framework
Group Internal Audit
■ Monitors compliance with
the Group’s internal controls
and policies
■ Conducts or commissions
internal audits
e
n
i
l
g
n
i
t
r
o
p
e
r
t
n
e
d
n
e
p
e
d
n
I
The Group operates a decentralised model which is target
and results driven with a strong culture of open, constructive
communication and a willingness to listen. The Group
Internal Audit function applies this culture in how it operates
and monitors matters across the Group.
In pursuing the Group strategy (detailed on pages 18 to
19, a number of key objectives are agreed annually for the
Group and for each business unit. Progress against these
is reported on a regular basis to Divisional and Head Office
functional management, the Group Executive Committee
and the Board. Having a clear understanding of our strategy
and objectives assists with the effective identification and
management of existing or emerging risks that have the
potential to prevent or hinder these objectives from being
achieved.
The Company’s risk management framework follows a
three lines of defence model. The first line of defence is
operational management in our businesses. Day-to-day
risk management controls, policies and procedures are
implemented and monitored by the local management
teams with oversight and review by Divisional Management.
This is conducted within a series of delegated authority
levels. Relevant internal control systems are in place to
identify, evaluate and manage the Group’s business risks.
The second line of defence comprises Group functions
such as risk, finance, IT, treasury and tax. This focuses on
monitoring and compliance with risk control systems and
processes implemented by the Group.
The Group Internal Audit function provides independent
assurance of the operation of risk management processes,
internal controls and governance, and serves as the third line
of defence. As well as carrying out full audits on individual
entities, the team conducts thematic audits, focusing
on specific areas across the Group as a whole. The team
reassessed scheduling of activities in light of COVID-19 travel
restrictions, identifying those matters that could be reviewed
remotely. Other activities carried out by the function include
reviewing and updating Group policies and improving
processes and procedures where opportunities for
improvement have been identified during previous audits.
40
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
Risk Profile
Risk appetite
The Group’s overall risk profile is mitigated by a number of
overriding factors, including:
■ Our business units operate largely independently of one
another and so if an issue arose in any one business, it
would be unlikely to affect other businesses in the Group.
■ We operate in 24 countries and no single country
represents more than 21% of group turnover or profit.
■ Most of the Group’s businesses operate on separate IT
systems, which assists in minimising the risks of a major
cyber security incident affecting the wider Group.
■ The Group operates from over 70 separate sites and so
if an incident were to occur at one site, that would not
directly affect the other businesses within the Group.
Further, there exists the ability to switch production
between certain sites if needed, which the Group did at
certain times during the last year, where facilities were
affected by COVID-19.
■ The Group has very limited reliance on any single
customer or supplier, with the largest customer
representing less than 7% of revenue and the largest
supplier representing less than 4%.
■ The Group manufactures and sells multiple product lines,
across multiple geographies and market sectors, removing
reliance on any single revenue stream. This is further
reinforced by the innovative, bespoke nature of the Group’s
products, which continue to evolve as circumstances
change.
■ The Group operates in structural growth markets,
which reflect long-term needs and are less cyclical in
nature.
The Group’s performance and adaptability throughout the
COVID-19 pandemic demonstrates the resilience of the
Group’s model.
One of the Group’s core principles is to deliver its strategic
priorities in a sustainable and responsible manner. This
requires that careful consideration is given by the Board as
to the nature and level of risks that the Group should accept.
discoverIE draws a clear distinction between those risks
that it is more willing to take (typically relating to advancing
business prospects) and those that it is less willing to accept
(e.g., safety, reputational, regulatory or compliance risks).
The following table provides a summary:
Risk Tolerant
Risk Neutral
Risk Averse
(Willing to take
greater risk)
(Taking a balanced
approach to risk)
(Taking as little
risk as possible)
Product
innovation
Operating in
new markets
Investment in
facilities
Business
development
initiatives
Product safety
Health & safety
Acquisitions
Cyber risks
New customers
and suppliers in
existing markets
Regulatory/
covenant
compliance
Foreign exchange
translational risk
Foreign exchange
transactional risk
Markets with
greater business
cyclicality
Regardless of the appetite in respect of a particular risk, all
risks are identified and managed in the appropriate manner.
41
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MANAGEMENT
Enterprise Risk Management
discoverIE applies the Enterprise Risk Management framework to identify potential events or circumstances that may
affect the Group and manage the associated existing and emerging risks. The risk management framework is made up of a
number of discrete steps to identify, assess and mitigate risks.
Step 1
Two processes are conducted in parallel:
■ A top-down review of the Group Risk Register to:
■ A bottom-up review by the management of each
− identify new or emerging risks
− assess changes to existing risks
− consider the potential impact and likelihood
of risks, linking each risk to the Group’s
corporate strategy
business to:
− identify new or emerging risks
− assess changes to existing risks
− consider the potential impact and likelihood
of risks
− evaluate potential mitigating actions and
− evaluate potential mitigating actions and
controls
− consider the residual risks remaining after
the applications of the Group’s internal
control processes (and if appropriate the
implementation of further mitigating actions)
controls
− consider residual risks
This initial exercise is conducted by Divisional Management and the Group Risk function
Step 2
■ Comparison of the results of the top-down and bottom-up identification processes above
The benefits of conducting both top-down and bottom-up reviews are:
Step 3
Step 4
− increased assurance that all risks have been identified, and doing so from multiple perspectives
− ensuring alignment between local management and Head Office
− ensuring that businesses ‘own’ the risks most relevant to their individual operating unit
■ An assessment of any differences identified and update the Group Risk Register as appropriate
Consolidation into common themes / topics
■ Review of the Group Risk Register by the Group Executive Committee. This review focuses on:
− the materiality of each of the risks identified
− prioritisation of the allocation of the Group’s resources to the most important areas
− clarity of ownership for each of the risks identified
This review takes into account the Group’s risk appetite in respect of the various types of risk identified.
The Group Risk Register (both detailed and consolidated) is then updated as appropriate following
the review.
This is then summarised in a table of principal risks and uncertainties, the final version of which (for
FY21) is set out on pages 47 to 52.
Step 5
Review by the Audit and Risk Committee – this includes:
− consideration of the Group’s risk management framework
− review of the Group Risk Register
− identification of any other areas of potential risk
− review of the table of principal risks and uncertainties
− challenging actual or potential control weaknesses
− review of the effectiveness of the Group’s internal controls and risk management systems
42
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 The above processes are conducted twice each financial year:
■ an interim review, typically completed shortly ahead of announcement of the Group’s interim results, focuses
predominantly on changes during the period
■ a more thorough and comprehensive review is then completed shortly prior to the Group’s full year preliminary results
announcement
Further information on the Group’s principal risks and uncertainties (“PRUs”) is detailed on pages 47 to 52.
As noted above, a key element in assessing the Group’s principal risks is considering likelihood and potential magnitude of impact,
over a range of time horizons, as well as whether the risks are new or emerging, or have changed in importance during the year.
The below diagram provides a summary of the PRUs on that basis.
Risk Heat Map
2
7
12
6
3
5
4
8
10
9
11
13
14
15
1
t
c
a
p
m
I
g
n
i
s
a
e
r
c
n
I
g
n
i
s
a
e
r
c
e
D
Decreasing
Likelihood
Increasing
1
2
Instability in the economic
environment
Business acquisitions
underperformance
3 Climate Related Risks
4 Loss of major customers
5
Loss of major suppliers
6 Technological changes
7 Major business disruption
8 Cyber security
9 Loss of key personnel
10 Product liability
11
Inventory obsolescence
12 Liquidity and debt covenants
13 Foreign currency
14
15
Retirement benefit
obligations
Non-compliance with legal
and regulatory requirements
KEY
Category of risk:
Strategic Risk
Operational Risk
Financial Risk
Regulatory/Compliance Risk
43
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics
RISK
MANAGEMENT
Ongoing monitoring, mitigation
and improvement
In addition to the processes outlined above, key risks, and
the internal control processes adopted to address these
risks, are monitored on an ongoing basis. Among other
controls, this includes a review by the Group Executive
Committee in all of its regularly scheduled meetings
(typically seven per year) and escalation to the Board of
any material developments as and when they arise.
discoverIE continually pursues improvements in its
Enterprise Risk Management Framework. During FY21 the
Risk Management Policy was reviewed and a revised version
approved.
A summary of this continual cycle of risk identification,
determination of the Group’s response, establishment of
systems and processes to mitigate, communication and
ongoing monitoring, is outlined in this diagram.
Climate related risks and opportunities
The UK Government has recently introduced a new Listing
Rule 9.6.8(8), and separately launched a consultation
(24 March 2021), in relation to climate-related financial
disclosures. These build upon the recommendations of
the Financial Stability Board’s (FSB) Task Force on Climate-
related Financial Disclosures (“TCFD”).
The aim of those measures is to assist with the achievement
by the UK of a transition through to becoming a ‘net zero’
economy. The Company has set its own internal emissions
reduction target (see page 62 and pages 64 to 65 for details)
and, once sufficient progress has been made, consideration
will be given to adopting a ‘net zero’ target.
Although reporting is not yet mandatory, we provide our
preliminary report below in respect of the following matters:
1. The “Four Pillars” of the TCFD recommendations.
2. Physical risks to Group facilities.
3. Transition risks.
4. Opportunities.
I d e n t i fy and assess
a nd external risks
i n t e r n a l
ctiveness
n efforts
r effe
tio
a
ig
t
i
m
f
o
o
t
i
n
o
M
C
a
o
n
m
d
m
m
Objective:
foster a culture of
risk management
to effectively
execute discoverIE’s
sustainable
strategy
u
i
ti
g
n
ic
tio
a
a
te risks
n plans
h s
E s t a b li s
a
a c c o u n t
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p o l
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r
i
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e
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o
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a
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o
p
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i
a
t
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m s, and
b ilit y, c o ntrols,
d p r o c e d ures
y s t e
n
44
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021
1. The “Four Pillars” of the TCFD recommendations
Governance
Strategy
Risk
Management
The Group’s governance arrangements
are described on pages 40 (governance
of risks), 60 (governance of “ESG” matters)
and 74 to 84 (governance generally).
Together these demonstrate the strong
governance arrangements we have in
place, including in relation to climate-
related risks.
The Group’s target markets, which in FY21
represented over 70% of revenue, are aligned
to the UN SDGs. The UN SDGs are based
on long-term trends, including the need to
address climate-related risks. The Group is
expected to benefit from the response of
governments and customers to those risks.
Climate-related risks are managed within
the Group’s standard risk management
processes, as outlined on pages 40 to 44.
Further details in relation to the specific
risks presented by climate change are set
out below.
Metrics and
Targets
The Group has set the following key
targets:
We report annually against sales into our
target markets. This provides audited
financial data demonstrating the impact
of our strategy. As noted above, the
Group expects to benefit from the global
response to climate change and this
will be reflected in our annual financial
reporting.
2. Physical risks to Group facilities
The physical risks presented by climate change fall into the
following broad categories:
■ Threats to the Group’s facilities
■ Supply chain risks
■ Availability of resources
We comment on the potential threats to the Group’s
facilities below and will assess supply chain risks and
availability of resources in the context of the required
TCFD disclosures during the course of FY2022 ready for full
disclosure next year.
Group facilities
■ We have conducted preliminary analysis in respect of
each of the Group’s 74 sites based on the Munich Re
database and modelling provided by RSM. The analysis
assessed:
− the likelihood of any of the following events occurring
at or near to each of those sites: earthquakes,
winterstorm, hailstorm, lightning, tornado, tropical
cyclone, wildfire, flash flood, river flood and coastal
flood
− the impact at each site
− modelling against a range of scenarios and timescales
(e.g., 1 in 100-year events).
■ Based on this preliminary analysis, the risks to the Group’s
facilities from climate-related risks is currently considered
to be low. The data used is based on current climatic
conditions.
Further work will be conducted in the coming year.
Please see pages 62 and 64 for our internal
environmental targets.
3. Transition risks
We have also published a separate “Impact
Report” (see www.discoverIEplc.com),
which provides a snapshot of some of the
benefits that our products bring to the
global fight against climate change
The TCFD recommendations require companies to assess
transition risks, which are those arising from the changes
in technology, markets, policy, regulation, and consumer
sentiment which will result from the transition to a
low-carbon economy. As noted above, this transition is
complementary to the Group’s strategy and expected to
drive long-term, sustainable growth for the Group.
4. Opportunities
For the reasons explained above, and elsewhere in this
Annual Report and Accounts, the Group expects to see
opportunities arising from the response of governments
and customers to the challenges of climate change.
45
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics VIABILITY
STATEMENT
In accordance with section 4.31 of the 2018 UK Corporate
Governance Code, the Directors have assessed the viability
of the Group over a 3-year period to 31 March 2024. In
making this assessment, the Directors have considered
the Group’s current financial position, recent and historic
financial performance and forecasts, its strategy and
business model and the principal risks and uncertainties.
The impact of COVID-19 pandemic has also been considered
in determining the effect of severe but plausible downside
scenarios.
Viability assessment period
The Directors have concluded that the most appropriate time
period over which to assess the Group’s prospects for this
purpose should be the three-year period ending 31 March
2024. The selection of this period is consistent with the
Group’s strategic planning process; its review of external credit
facilities; and its assessment of the Group’s principal risks.
Viability Base Case
The financial projections for this three-year period are based
upon the Group’s budget for the year ending 31 March
2022 and forecast progression thereon. The budget is a
consolidation of sales, profits, working capital and cash flow
forecasts made by each operating company and head office,
incorporating associated key risk factors including acquired
company forecasts and associated future earnout payments,
latest views on supplier and customer payments impacting
working capital and latest forecast foreign exchange rates.
The budget for the financial year ending 31 March 2022
assumes a steady recovery from the COVID-19 pandemic.
Future growth for the financial years 2022/23 and 2023/24
assume steady sales growth for those years (in total “The
Viability Base Case”).
Banking facilities and headroom
The Group has a syndicated banking facility of £180m
which is committed up to the end of June 2024, beyond
the viability assessment period. In addition, the Group has a
£60m accordion facility which it can use to extend the total
facility up to £240m. The syndicated facility is available both
for acquisitions and for working capital purposes.
The Group’s financial covenants for its banking facility are:
1. Gearing: net debt to Adjusted EBITDA (being Underlying
EBITDA, excluding IFRS16 plus the annualisation of
acquisitions) of less than 3.0x and
2. Interest cover: Adjusted EBITDA to interest greater than
4.0x.
At 31 March 2021, the Group had net debt of £47.2m (giving
undrawn facilities of nearly £120m) and was significantly
inside these covenants with gearing of 1.1x and interest cover
of 16.1x.
The Viability Base Case model shows increasing headroom
with annually reducing levels of net debt and gearing, and
increasing interest cover compared with the position at
31 March 2021.
46
discoverIE Group plc
Downside sensitivities
The Viability Base Case has been subjected to sensitivity analysis
involving flexing a number of the underlying main assumptions,
both individually and in conjunction. The sensitivities take into
account the principal risks and uncertainties set out on pages
47 to 52, notably instability in the economic environment, loss
of key customers and suppliers, underperformance of acquired
businesses, major business disruption, liquidity restriction,
breach of debt covenants and adverse foreign currency
movements arising from a stronger Sterling.
The Directors have modelled downside scenarios to the
Viability Base Case based on an underlying analysis of
the potential further impact of COVID-19 and adverse
macroeconomic factors additional to that already factored
into the Viability Base Case.
The most severe but plausible downside scenario assumes
a recurrence of Covid-19 in the second half of FY 2021/22 and
adverse macroeconomic factors resulting in a significant
decline in second half sales of FY 2021/22, negative sales
growth in FY 2022/23 and modest growth thereon in FY
2023/24. Additionally, gross margin was reduced, working
capital materially increased, significant one-off expenditures
(product liability, major customer insolvency or litigation)
included, and an increase in the Group effective tax rate.
Even after factoring in these significant additional downsides
to the Viability Base Case, there remains good headroom
both in terms of liquidity and our banking covenants. This is
supported by the fact that the Group sells a wide portfolio
of different products across a diverse set of industries and
geographies, low customer/supplier concentration, has a
global supply chain network, diverse manufacturing capacity,
and has well-established and in many cases long term
relationships with its customers. These factors are considered
important in mitigating many of the risks that could affect
the long-term viability of the Group.
Further mitigation actions not included in the Viability Base
Case or sensitivity downsides include further operational
and capital expenditure reductions, including pay rise,
bonus and hiring freezes, pay reductions, redundancies,
dividend reductions and equity raises.
The Strategic Report on pages 02 to 69 sets out the key details
of the Group’s financial performance, capital management,
business environment and principal risks and uncertainties.
Based on the Director’s assessment, the Board has a
reasonable expectation that, taking into account the Group’s
current position, having regard to the committed borrowing
facilities available to the Company, and subject to the principal
risks and uncertainties faced by the business as documented
on pages 47 to 52 of the Strategic Report, the Group will be
able to continue in operation and to meet its liabilities as they
fall due for the three-year period of their assessment.
Going Concern
Based on the assessment outlined above, the Directors also
believe that it is appropriate to continue to adopt the going
concern basis in preparing the Group financial statements.
Annual Report and Accountsfor the year ended 31 March 2021 PRINCIPAL RISKS
AND UNCERTAINTIES
Focus on principal risks
This section of the Strategic Report provides an overview of the Group’s approach to managing risk, focusing on the
major risk factors to implementing the Group’s strategy and business model. It is not an exhaustive list of all possible
risks. Additional uncertainties exist, some of which may not be known to the Group and could have a negative effect on
the Group’s financial position and performance. The principal risks and uncertainties detailed below were considered in
assessing the long-term viability of the Group. The viability statement can be found on page 46.
Risk description
Potential impact
Mitigating actions
Change in the year
Strategic risk
1 Instability in the economic environment
■ Reduction in sales
■ Market position as a specialist
■ Risk of decline
in financial
performance
due to recession
or geopolitical
changes, including
the ongoing
impact of
COVID-19
■ Lower margins
■ Closure of factories
and suppliers stopping
production
■ Difficulty raising equity
and debt, impacting
growth ability
supplier focused on core target
markets with diversified locations
and product offerings
■ Executive team actively
managing impact of COVID-19
■ A long-term credit facility is in
place with significant headroom
■ Careful monitoring of stock
levels and customers in relevant
geographies to identify any
issues early
■ Flexible production and
warehouse facilities to enable
movement of production and
supply to other countries if
required
■ COVID-19 impact on
global markets has
reduced during the
year, as economies
start to rebound
■ The UK has now left
the EU. However,
the direct impact of
Brexit is expected to
be limited and to date
this has proven to be
the case
Link to KSIs:
B C D
Link to KPIs:
■ Vigilance entering markets that are
politically or financially unstable
1 2 3 4 5 6 7
■ Phoenix, acquired in
October 2020, and
Limitor, acquired in
February 2021, have
performed well since
acquisition
Link to KSIs:
A B C D
Link to KPIs:
1 2 3 4 5 6
■ The acquisition programme was
put on hold early in FY21 while
impact of COVID-19 assessed;
restarted in October 2020
■ Operational, financial and legal
due diligence on target businesses
■ Appropriate warranties and
indemnities from vendors
■ Use of earn-out structures to
incentivise key management
■ Monitoring of the acquired
business performance against
budget and forecast
■ Hiring of experienced finance
personnel
■ Specific risk management
programme for first 12 months
post-acquisition before becoming
part of the Group ongoing risk
and internal audit programme
47
2 Business acquisitions underperformance
■ A degree of
uncertainty exists in
valuing acquisitions
and evaluating
potential synergies
■ Post-acquisition
risks arise due to
change of control
and integration
challenges
■ Financial impact due to
underperformance of
acquisitions
■ Loss of key employees
and their expertise
■ Expected synergies are
not realised
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics PRINCIPAL RISKS
AND UNCERTAINTIES
Risk description
Potential impact
Mitigating actions
Change in the year
3 Climate-related risks
■ Global warming
leads to greater
extremes of
weather events
and other local
issues
■ Our products or
other activities
or decisions
in relation to
climate related
risks may be
judged negatively
by external
stakeholders
■ The operations of Group
facilities are affected by
the impact of climate
change (e.g., through
weather related events)
■ Supply chains are
affected due to the
impact of climate
change on their
operations
■ Customer revenues are
impacted by climate
related effects on their
businesses
■ Reputational impact
and deterioration of
relationships with
external stakeholders
and staff
Operational risk
4 Loss of major customers
■ A key customer
moves to a
competitor,
significantly reduces
operations or goes
into insolvency
■ Loss of market share
■ Increased risk of bad
debt
■ Reduced profitability
and cash flow
■ An initial assessment of the
physical risks of climate change
to the Group’s facilities has been
conducted using the Munich Re
database, further details of which
are on page 45; the preliminary
analysis indicates that such risks
are considered to be low
■ The Group has diverse supply
chains and the ability to switch
from individual suppliers that
encounter issues
■ Given the Group’s Target Markets,
customer revenues are expected
to increase as a result of climate-
related matters which could offset
the risk impact in other areas
■ ESG matters are discussed at
all meetings of the Board and
Group Executive Committee, to
ensure that the right activities
are being prioritised and
implemented
■ Low dependence on any single
customer (the largest customer
represents less than 7% of Group
revenues)
■ Culture of high-quality service
and long-term customer
relationships
■ Robust customer quality
management systems
(including ISO9001)
■ No change in the
underlying risks
during the year;
however, further
and more detailed
analysis will be
conducted in order to
assess those risks in
greater detail
Link to KSIs:
B D
Link to KPIs:
1 2 3 4 5 6 7
■ While risk from
COVID-19 impacting
customers remains,
particularly in some
geographies, strong
improvement in order
rates were seen in the
second half of the year
Link to KSIs:
A B D
Link to KPIs:
1 2 5 6
48
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Key strategic indicators
Key performance indicators
A Increase share of Group revenue from Design & Manufacturing
1 Sales growth
5 Operating cash flow
B Increase underlying operating margin
2 Underlying EPS growth
6 Free cash flow
C Build sales beyond Europe
D Target Market Sales
3 Dividend growth
7 Carbon Emission reductions
4 Return on capital employed
Risk description
Potential impact
Mitigating actions
Change in the year
5 Loss of major suppliers
■ A key supplier
undergoes
change of
ownership, suffers
major business
disruption or
quality issues
■ Negative impact on
production
■ Damaged relationships
with key customers
■ Reduced sales
■ Low dependency on any single
supplier (the largest supplier
represents less than 4% of Group
revenues)
■ Dual source suppliers in place
where possible
■ Long-term supplier relationships,
enhanced by strong customer
relationships
■ Monitoring of market and
technological developments,
including input from customers
6 Technological changes
■ Reduced sales
■ Loss of market share
■ Inventory write offs
■ The development of
new technologies
that gives rise to
significant new
competition
or renders our
products obsolete
7 Major business disruption
■ The Group is diversified into
a number of differentiated
technology units
■ Focus on established
technologies with low capital
requirements
■ Sustained disruption
■ Insufficient production
■ Disaster recovery and business
to production
arising from a major
incident at one or
more sites
to deliver goods on order
continuity plans in place
■ Damaged relationships
with key customers
■ Reduced sales
■ Interruption in initiatives
being taken to reduce
carbon emissions
■ Multiple manufacturing sites
and warehousing enabling some
movement between facilities
■ Insurance cover
■ While risk from
COVID-19 impacting
suppliers remains (e.g.,
enforced closures,
reduced staffing),
the Group reviewed
its risk management
processes in this area
by way of a thematic
audit and confirmed
there were no
material deficiencies
in the Group’s risk
management
processes
Link to KSIs:
A B
Link to KPIs:
1 2
Link to KSIs:
A B
Link to KPIs:
1 2
■ COVID-19 caused
disruption to certain
manufacturing
facilities in Q4 19 and
H1 20 but these were
of short duration
■ Acquisition of Phoenix,
with facilities in the US
■ Acquisition of Limitor
with facilities in
Germany and Hungary
Link to KSIs:
A B C
Link to KPIs:
1 2 3 4 5 6 7
49
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics PRINCIPAL RISKS
AND UNCERTAINTIES
Risk description
Potential impact
Mitigating actions
Change in the year
8 Cyber security
■ System downtime
or loss of data due
to internal failure or
external attack
■ Business disruption
■ Central IT security policy
■ Reduced service to
customers
■ Financial loss
■ Theft of and/or access to
confidential data
■ Robust anti-virus and anti-spam
software and specialised target
threat protection services
■ Robust backup procedures in
place
■ Secure private networking
■ Third-party cyber security
assessments completed and
recommendations being
implemented
■ Different operating units
operating on separate IT systems
minimises risk of a major incident
impacting the wider Group
9 Loss of key personnel
■ Key employees
■ Loss of expertise
■ Staff development, training
leave, and effective
replacements
cannot be
recruited on a
timely basis
■ Potential business
disruption
■ Reduced growth
■ Insufficient resources
programmes and succession
planning
■ Remuneration based on
personal and business success
■ Regular remuneration
benchmarking
■ Use of earn-out structures,
to incentivise key management
of acquired companies
■ The number of separate
business units, each with their
own management teams,
minimises the risk that the
underperformance of any one
business impacts the Group
as a whole
■ External Cyber
assessments completed
December 2019
■ Group wide investment
in enhanced end-point
security solutions, with
central monitoring
capability, being
rolled out.
Link to KSIs:
B
Link to KPIs:
1 2 5 6
Link to KSIs:
B
Link to KPIs:
1 2
10 Product liability
■ A failure in one of
■ Non-compliance with
■ Quality inspection controls
our products results
in serious injury,
death, damage to
property or non-
compliance with
product regulations
quality standards
■ Financial loss
■ Reputational damage
Link to KPIs:
1 2 3 5 6
before products are shipped to
customers
■ Standard terms and conditions
limit companies’ liabilities
■ As a number of the Group’s
products are customised for
individual customers, this
reduces the risk relating to any
one product and/or customer
50
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Key strategic indicators
Key performance indicators
A Increase share of Group revenue from Design & Manufacturing
1 Sales growth
5 Operating cash flow
B Increase underlying operating margin
2 Underlying EPS growth
6 Free cash flow
C Build sales beyond Europe
D Target Market Sales
3 Dividend growth
7 Carbon Emission reductions
4 Return on capital employed
Risk description
Potential impact
Mitigating actions
Change in the year
11 Inventory obsolescence
■ Stock is held that
has reduced or nil
realisable value
■ Financial loss
■ Orders built to specific customer
requirements; many are non-
cancellable, and non-returnable
■ Certain supplier stock return
rights (Custom Supply Division)
■ Purchasing to reliable sales
forecasts
■ Provisioning and write-off policies
to cover potential obsolescence
Link to KSIs:
B
Link to KPIs:
2 4
Financial risk
12 Liquidity and debt covenants
■ There is a breach
of funding terms/
covenants
■ Insufficient cash
■ The Group has an existing
resources to support the
Group’s activities
revolving credit facility of £180m
which runs to June 2024 with
c.£130m undrawn at the year end
■ Central treasury function
oversees the Group’s cash
resources and financing
requirements
■ Regular review of headroom
against committed facilities and
financial covenants
■ Working capital controls and
monitoring of key working capital
metrics
■ Issuance of equity from time
to time to support acquisitions
programme
■ Acquiring high margin, high cash
generative businesses.
■ Very strong cash
flow in the year with
gearing at 31 March
2021 reducing
to 1.1x from 1.25x
last year and with
two acquisitions
completed.
Link to KPIs:
3 4 5 6
13 Foreign currency
■ With only 12% of
sales in Sterling,
the Group deals in
many currencies for
both its purchases
and sales, which
differ to its reporting
currency, and
so the Group
has translational
and operational
exposures to
foreign currency
fluctuations
■ Reduction of the Group’s
■ Use of forward currency contracts
reported results
■ Lower gross and
operating margins
to hedge committed and
forecast sales and purchases in
foreign currency
■ Currency borrowings as a natural
hedge against same currency
assets
■ Central review of foreign currency
exposures
Despite COVID-19,
movements in our
currencies have been
relatively low this year,
with only £0.2m adverse
impact on underlying
profits from translation.
Link to KPIs:
2 5 6
51
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics PRINCIPAL RISKS
AND UNCERTAINTIES
Risk description
Potential impact
Mitigating actions
Change in the year
14 Retirement benefit obligations
■ The reported
■ Increased charge to the
income statement
■ Increased level of cash
contributions required
pension deficit
is sensitive to
movements
in actuarial
assumptions
and returns on
investments
■ The scheme is closed to new
members and future service
benefits do not accrue for
existing members
■ A deficit recovery plan has been
agreed, based on actuarial advice
■ Monitoring of the fund assets
and liabilities
■ Investment strategy reviews at
least every three years
■ Agreed levels of hedging against
inflation and interest rate risks
Regulatory / compliance risk
15 Non-compliance with legal and regulatory requirements
■ Unintentional
■ Fines or penalties
■ Reputational damage
failure to comply
with international
and local legal
and regulatory
requirements
■ The Group hires employees with
relevant skills and uses external
advisers to keep up to date with
changes in regulations and
legal requirements to remain in
compliance
■ Internal control framework
including Group policies,
procedures and training in risk
areas such as export controls and
supplier and customer credit risk
■ Ongoing internal audit reviews
assess compliance with Group
policies
■ A whistleblowing hotline is in
place and available for use by all
employees
■ Insurance covers all standard
categories of insurable risk
■ Impact of COVID-19
on asset valuations
caused by changes
in the economic
environment. In the
early part of FY21 those
valuations reduced
but have since
rebounded strongly.
The allocation of
assets in the portfolio
across different
asset classes and the
existence of hedging
arrangements has also
meant that the risks
are not significant
Link to KPIs:
5 6
■ No significant
changes to new or
existing legislation
Link to KPIs:
5 6
Key strategic indicators
Key performance indicators
A Increase share of Group revenue from Design & Manufacturing
1 Sales growth
5 Operating cash flow
B Increase underlying operating margin
2 Underlying EPS growth
6 Free cash flow
C Build sales beyond Europe
D Target Market Sales
52
discoverIE Group plc
3 Dividend growth
7 Carbon Emission reductions
4 Return on capital employed
Annual Report and Accountsfor the year ended 31 March 2021 STAKEHOLDER
ENGAGEMENT
Stakeholder engagement
The Group considers it important to engage with our various stakeholder
groups in a proactive and constructive manner and the below provides a
summary of the ways in which we do so.
Why it is important to engage
Stakeholder key interests
Ways we engage
Our people
Employee engagement is critical
to our success. We work to create
a diverse and inclusive workplace
where employees can reach their
full potential. Engaging with our
employees ensures we can retain
and develop the best talent.
■ Health and safety
■ Workforce advisory panel
■ Reward
■ Career opportunities
■ Listening groups
■ Employee surveys
■ Employee engagement
■ Employee meetings
■ Training and development
■ Newsletters
■ Wellbeing
■ Reputation
■ Employee events
■ Apprenticeship programme
■ Recognition and reward
Customers
■ Our availability and responsiveness
■ Participation in industry forums
■ Safety, quality and reliability
■ Customer visits, telephone calls,
■ Competitiveness
engineering visits
Understanding the needs of our
customers allows us to provide
application-specific products which
both add value and differentiate our
customers from their competitors.
We engage with our customers to
build trusting relationships from
which we can mutually benefit.
■ Relationship
■ Compliance
■ Convenience
■ Range of products
and events
■ Social media and commercial
websites
■ Contract negotiation,
implementation and management
of ongoing relationships
■ Customer audits of our
manufacturing facilities
■ Customer-specific events
■ Geographical footprint allows us to
meet the customer in their locations
■ Satisfaction surveys
Suppliers
■ Long-term relationships
■ Quarterly business reviews
■ Quality management
■ Joint customer visits
■ Cost-efficiency
■ Employee training
Our external supply chain and
our suppliers are critical to our
performance. We engage with
our suppliers to build trusting
relationships from which we can
mutually benefit and to ensure
that they are performing to our
standards and conducting business
to our expectations.
■ Responsible procurement, trust and
■ Geographical footprint allows
ethics
smaller suppliers to operate globally
■ Technological advances, including
■ Logistics efficiencies
digital solutions
■ Supplier conferences
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ENGAGEMENT
Why it is important to engage
Stakeholder key interests
Opportunities
■ Growth
■ Regular market updates
■ Financial performance and
■ Investor presentations
economic impact
■ Governance and transparency
■ Individual meetings
■ Investor roadshows
■ Operating and financial information
■ Confidence in the Group’s leadership
■ Corporate website, including
dedicated investor section
■ Dividend growth
■ Shareholder consultations
■ Annual reports
■ Annual General Meetings
■ Capital Market Days
■ Local operational impact
■ Charitable donations and
■ Health and safety and
volunteering
environmental performance
■ Corporate and operating company
websites
■ Local environmental initiatives
Shareholders
To understand their requirements
and generate returns and value.
We ensure that we provide fair,
balanced and understandable
information to Shareholders and
investment analysts and work to
ensure that they have a strong
understanding of our strategy,
performance, culture and ambition.
Global communities
We support communities and
groups local and relevant to our
operations and consider the
environmental and social impacts of
our operations.
54
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 The Group promotes policies and procedures across
the Group which consider the interests of the Group’s
employees, the need to foster reasonable business
relationships with suppliers, customers and others, the
impact of the Group’s operations on its workforce, the
community and the environment, and the maintenance
of high standards of business conduct. Our policies and
procedures include the following:
Section 172 Statement
The Board of discoverIE Group plc takes seriously its duties to
act in accordance with legal requirements and appropriate
business and ethical standards. This includes fulfilling the
duties described in Section 172 of the Companies Act 2006
(the “Act”).
Section 172
Duty to promote the success of the company
A director of a company must act in the way
they consider, in good faith, would be most
likely to promote the success of the company
for the benefit of its members as a whole,
and in doing so have regard (amongst other
matters) to:
■ The likely consequences of any decision in
the long term;
■ The interests of the company’s employees;
■ The need to foster the company’s business
relationships with suppliers, customers and
others;
■ The impact of the company’s operations on
the community and environment;
■ The desirability of the company maintaining
a reputation for high standards of business
conduct; and
■ The need to act fairly as between members
of the company.
The information below describes how the Directors have had
regard to the matters referred to in Section 172 of the Act in
performing their duties and constitutes the Board’s Section
172 Statement for the year ended 31 March 2021. This section
is incorporated by reference into the Strategic Report.
■ Anti-bribery and corruption
■ Business ethics
■ Health and safety
■ Whistleblowing
■ Board Diversity Policy
Day-to-day responsibility for implementation of these
policies (other than the Board Diversity Policy) is delegated
to the management of discoverIE’s operating companies,
under the supervision of the Group Executive Committee.
Where appropriate, the Group policies and procedures are
supported by the local operating companies’ policies, all
within a framework established by the Board and Group
Executive Committee, intended to ensure that we operate as
a Group to the highest standards.
The Group also has due diligence processes in place to
support the ongoing assessment and management of risks
associated with both existing and newly acquired companies
and the development of relationships with new suppliers.
These include site visits by both executive and non-executive
management, meetings with customers and suppliers and,
where relevant, asking our suppliers to confirm compliance
with Group policies.
Management are committed to environmental, social and
governance affairs in its actions, and endeavours to show
due respect for human rights and works to high standards of
integrity and ethical propriety.
As an international organisation, discoverIE takes account of
cultural differences between the various territories in which it
operates. discoverIE’s values are essential to how it operates
and to the long-term success and growth of the Group.
discoverIE believes that who we are and how we behave
matters not only to our employees but the many other
stakeholders who have an interest in our business.
Stakeholder engagement remains vital to building a
sustainable business and we interact with many
stakeholders at different levels of the Group. Engagement
is carried out by those most relevant to the stakeholder
group or issue. The table on pages 53 and 54 identifies some
of our stakeholders and how discoverIE engages with them.
The following page also sets out the Company’s ‘section 172
statement’, which provides additional detail.
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ENGAGEMENT
Section 172 of the Companies Act 2006
(the “Act”)
Long-term decision-making
(s.172(a))
The Board delegates day-to-day
management and decision-making to its
senior management team, but it maintains
oversight of the Company’s performance,
and reserves to itself specific matters for
approval, including the strategic direction
of the Group, acquisitions and disposals
and entering into material contracts above
set thresholds.
The Board monitors performance against
strategy and that decision-making is
appropriate by receiving regular updates,
both in Board and Committee meetings
and at other intervals as appropriate.
Processes are in place to ensure that the
Board receives all relevant information to
enable it to make well-judged decisions for
the long-term success of the Company and
its various stakeholders.
Employee Interests
(s. 172(b))
The success of the Group depends upon
a highly-skilled and motivated workforce,
an entrepreneurial and innovative culture,
set within structures that provide fairness
for all.
Relations with external parties
(s. 172(c))
The Group works with a huge number and
variety of customers, suppliers and other
third parties. It is of great importance that
relations with those parties are appropriate.
discoverIE’s response
In FY21, the Board:
Considered a number of acquisition proposals. The Board only approves
such a transaction if it is satisfied, after full consideration, that it meets the
Section 172(1) requirement that it is most likely to promote the success of
the Company for the benefit of its members as a whole, and it considers
the value forecasted to be added to the Group by an acquisition, over a
defined future period. This judgement is recorded.
Received presentations on specific business areas and, through ongoing
discussion with the business leaders, determined strategic priorities for a
three-year period, and the development of robust supporting operating
plans.
Agreed the Group’s principal risks, considered emerging risks and received
regular risk management and internal control reviews throughout the
year, including specific consideration of risks arising from the COVID-19
outbreak.
Set annual budgets and capital allocation and oversaw business
performance against targets, enabling the Board to confirm the Company’s
outlook for the year ahead, the going concern statement and its longer-
term viability.
In FY21, the Board:
Received updates on how COVID-19 was affecting staff and the measures
being implemented within businesses to minimise the risk of the pandemic
spreading across the workforce, including working from home where possible.
Continued to operate a Workforce Advisory Panel, to ensure that the
communications between the Board, Group Executive Committee, individual
operating companies and Group staff were optimised.
Reviewed Board and Senior Management diversity and succession,
remuneration and employment relations and arrangements across the
Group.
In FY21:
Noting the pressure that businesses have been under during the COVID-19
pandemic, the Board ensured that suppliers continued to be paid on time
and that the Group continued to serve our customers effectively.
The Board regularly considered the marketplaces within which the Group’s
customers operate and the challenges they face, and opportunities
available. This helped shape the way in which resources were allocated
in order to ensure that the Group was well positioned to meet customer
needs.
Community & Environment
(s. 172(d))
Wherever the Group operates, it forms
a part of its local community and more
broadly, seeks to ensure that it provides a
positive contribution to the environment.
During the year:
The Board continued its focus on environmental, social and governance
matters and agreed a series of specific targets for the Group, further details
of which can be found on pages 62 to 65.
The Board also continued its support for the Community Foundation for Surrey.
56
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Section 172 of the Companies Act 2006
(the “Act”)
discoverIE’s response
Reputation for high standards
of business conduct (s.172(e))
The Board is responsible for developing a
corporate culture across the Group that
promotes integrity and transparency. It
has established comprehensive systems
of corporate governance which promote
corporate responsibility and ethical
behaviour.
Acting fairly as between members
of the Company (s.172(f))
The Board aims to understand the views of
Shareholders and always to act in their best
interests.
In FY21:
The Board received regular reports from the Group Risk Manager designed
to strengthen governance and compliance, integration of new and recent
acquisitions into the Group, and the identification and management of
existing and emerging risks.
The Board had updates and training on key areas of law and regulation.
The Board approved the Company’s Modern Slavery Act Statement.
In order to do this the Board:
Maintains close relations with its main shareholders through regular
dialogue, both after the publication of full-year and half-year results.
Approved value-enhancing acquisitions, the first being Phoenix, in October
2020 and the second being Limitor, in Germany and Hungary.
Receives Investor Relations updates at every Board meeting and direct
feedback from investors during specific consultation exercises (including
in particular on the Remuneration Policy to be put to Shareholders at
the forthcoming annual general meeting) and on publication of trading
results and updates.
Other key activities
■ The Board met regularly throughout the year and, in the year ended 31 March 2021, held 14 meetings. This included
a significant number of additional meetings early in FY21, as the impact of COVID-19 was considered and addressed.
The Board’s agenda considers all relevant matters at scheduled meetings.
■ As part of its regular programme of Board activities, the Board also receives reports from the Group Chief Executive,
the Group Finance Director and the Group General Counsel & Company Secretary, keeping them informed as to financial
and commercial performance and regulatory and legal affairs.
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
57
Other InformationFinancial StatementsCorporate GovernanceStrategic Report SUSTAINABILITY
“ We have taken active steps
in recent months to intensify
our approach to ESG, to
deliver tangible benefits to
our various stakeholders in
years to come.”
Simon Gibbins
Group Finance Director
58
58
discoverIE Group plc
Part 1 – Overview
18 months ago we began intensifying our
approach to environmental, social and
governance (“ESG”) matters.
Whilst already well positioned, with a focus on target
markets aligned with a sustainable future and products that
enable significant benefits for customers in these areas,
the Group undertook a comprehensive review to see where
further improvements could be made. With the help of
external consultants, the following steps were undertaken:
Governance
Our first task was to decide how we would govern ESG
matters internally
Read more in Part 2 on page 60
Materiality Assessment
Then we assessed the most important issues for our
various stakeholders
Read more in Part 3 on page 60
Priorities
Once we knew what was important, we then set our
priorities
Read more in Part 3 on page 61
UN SDG Alignment
Set Targets
We aligned our business
to the United Nations
Sustainable Development
Goals (UN SDGs)
At the same time, we
started to consider our
targets – those targets
have now been set
Read more on pages
16 and 17
Read more in Part 4
on pages 62 and 63
Our ESG Strategy
With our alignment to the UN SDGs clear, and our
priorities and targets set, this comprises our initial ESG
strategy. That strategy will be kept under constant review
and we will continue to improve it as we move forward.
Resource & Deliver
We have committed to spending £3m over the next 5
years to resource and deliver our ESG strategy and to
achieve the ambitious targets we have set.
Annual Report and Accountsfor the year ended 31 March 2021
The diagram below summarises the core pillars of our ESG strategy (Our Planet, Our Products and Our People), how they
come together to meet Our Purpose and how they are underpinned by our internal governance arrangements. More detail is
provided on the following pages.
Our Purpose
To create innovative electronics that help to improve the world and people’s lives.
Our Planet
Our Products
Our People
Improving our impact
on the environment
Complementing the benefits
that our products bring to our
customers, our own internal
initiatives will reduce our
carbon footprint and improve
other environmental impacts.
Fulfilling our purpose and
ensuring product safety &
reliability
Our products provide considerable
benefits customers.
Our processes ensure the
consistency of how we make our
products, increasing safety and
reliability.
Keeping our people safe
& happy
Our people are critical to our
success and keeping them safe
and happy is a key priority.
Our products require a high
degree of technical expertise.
Read more about our
products on pages 20 to 21
Read more about our
targets on pages 62 to 63
Read more about our
people on pages 66 to 67
Priorities
Underpinned by our Governance and Risk Management
A number of the highest priorities are already subject to separate targets, for example through our key performance
indicators and key strategic indicators, and so there was no need to create new priorities for those. It was agreed that our
ESG priorities should be as follows:
Our strategy will be achieved through ongoing processes to ensure its delivery is managed effectively.
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Part 2 – Governance
From the outset of our review, ESG was a specific agenda item in all scheduled meetings of the Board and Group Executive
Committee (‘GEC’). It became clear early on that ESG had to be considered in the context of the business and our general
strategy, and not be seen as separate.
It was therefore decided that each member of the GEC would have specific ESG responsibilities with oversight and challenge
brought by the Board.
The Board
Nick Jefferies
Simon Gibbins
Greg Davidson
In line with the Group’s general governance arrangements, the Board is responsible for oversight
and challenge of the Group’s ESG strategy and its delivery
Responsible for setting the overall direction of the Group’s approach to ESG, deciding on priorities
and ensuring alignment with wider business strategy
Responsible for ensuring the right resources are in place and liaising with investors in relation to ESG
matters
Day-to-day lead on ESG matters; recommending initiatives, monitoring delivery and internal and
external reporting
Martin Pangels
Ensuring that ESG is built into the long-term strategy for individual businesses across the Group
Paul Neville
Leading the implementation of our ESG strategy within the D&M division
Paul Webster
Leading the implementation of our ESG strategy within the Custom Supply division
Jeremy Morcom
Ensuring that ESG is actively considered in identifying and completing acquisitions
Each member of the GEC now has specific targets within their personal objectives relating to ESG, with a proportion of
annual bonus dependent upon achievement of those targets
Part 3 – Materiality and Priorities
Materiality
External consultants were engaged to help conduct a materiality assessment for the Group, ensuring that as many potential
topics as possible were considered in the process. Each topic was prioritised, both for the Group itself and its various
stakeholders (customers, suppliers, investors and employees) concluding in a set of ESG priorities for the Group. The result is
outlined in the matrix below:
2
3
4
5
6
7
8
9
10
12
11
13
14
15
16
17
18
l
s
r
e
d
o
h
e
k
a
t
s
’
s
E
I
r
e
v
o
c
s
i
d
o
t
e
c
n
a
t
r
o
p
m
I
Importance to discoverIE
Category of risk:
Economic
Social
60
discoverIE Group plc
Environmental
Governance
1 Growth in target markets
1
2 Product safety and quality
3 Bespoke, innovation-led product designs
4 Client service and relationships
5 Business acquisition performance
6 Occupational health and safety
7 Energy efficiency and climate change
8 Employee relations
9 Electronics for sustainability growth
10 Availability of skilled labour
11 Business ethics and anti-corruption
12 Governance and transparency
13 Human rights
14 International growth impacts
15 Regulation and public policy
16 Brand value and reputation
17 Cyber security
18 Effective use of raw material
Annual Report and Accountsfor the year ended 31 March 2021
Priorities
With a number of the highest priorities already subject to separate targets, for example through our key strategic and
performance indicators, it was agreed that our ESG priorities should be as follows:
Material issue
Reason
Risks
Opportunities
Energy efficiency
and climate
change
This affects everyone and
is a global concern.
Increased costs of working; increased
risks of damage from environmental
causes.
Market opportunities in our
key target markets.
Occupational
health & safety
and employee
relations
See also page 45 in the Risk
management section and page 48 in the
table of Principal risks and uncertainties.
Our people are our
most important asset
and key to our success.
Poor practices risk injury to our staff
which, as well as the risk, would affect
morale and lead to retention issues.
Unhappy staff would lead to high
turnover, resulting in a loss of key
knowledge and a less productive
organisation.
Product safety
The sale of our products
is key to our success as
an organisation.
Unsafe products will damage sales and
could lead to reputational harm and
liability issues.
A safe and happy working
environment leads to a
higher employee retention
and a more productive
workforce.
Customer confidence in
our product safety leads to
repeat business, providing
sustainable long-term
revenues.
These priorities led to the adoption of the targets set out below.
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
61
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Part 4 – Targets
A summary of our ESG-specific targets is below.
Category/
Primary Aim
How we
measure this
Targets
Progress
Our Planet
Minimise
our negative
impact on the
environment
Carbon intensity
50% reduction
against 2019
emissions
2019
2020
Target
ISO14001
accreditations
Energy audits
conducted at
Group sites
>80% of the
Group’s operations
to be covered
by an ISO14001
accreditation
by 2025
>80% of all Group
sites to have been
subject to an
energy audit within
the last 5 years
Read more on pages 64 to 65
2021
Target
Operations generating 31% of
Group revenue had ISO14001
accreditation at 31 March 2021
2021
Target
As at 31 March 2021, energy audits
had been conducted at 8 of
the Group’s 74 sites within the
previous five years.
Company cars
50% of company
cars to be electric
or hybrid by 2025
2020
Target
As at 31 December 2020, 23 of the
Group’s 253 company cars were
electric/hybrid.
22.91 tCO2e/
£m turnover
21.54 tCO2e/
£m turnover
11.45 tCO2e/
£m turnover
31%
80% of Group
covered by
ISO14001
11%
80%
91% fossil fuel
9% electric/
hybrid
50%
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discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
Category/
Primary Aim
How we
measure this
Targets
Progress
Our People
Keeping our
people safe
and happy
Proportion of
global workforce
covered by
ISO45001
compliant
occupational
health & safety
system
No. of H&S
Representatives
and trained H&S
staff across the
Group
>80% of employees
to be covered by
2025
2021
Target
Maintain a ratio of
at least 1:50 trained
H&S staff to total
employees
2020
Target
Staff turnover
Unplanned labour
turnover of no more
than 15% pa
2020
Target
Read more on page 66
Our Products
Ensuring the
quality and
reliability of our
products
Share of Group
products covered
by an ISO9001
system
Ensure that at
least 80% of all
products are built
in accordance with
ISO9001 accredited
processes
2020
Target
6%
80% of staff
covered by
ISO45001
Ratio of 1:47
Ratio of 1:50
<10%
15% max
88%
80%
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
63
Other InformationFinancial StatementsCorporate GovernanceStrategic Report Reducing our carbon emissions
Targeting a 50% reduction in the Group’s
carbon emissions over 5 years through a
combination of:
■ Buying electricity from renewable sources
where possible
■ Implementing energy reduction measures
■ Installing renewable energy electricity
sources on site
For newly acquired businesses targeting that
at least 50% of energy used is from renewable
sources within the first 5 years of ownership
Investment expected
C.£3m
over five years
SUSTAINABILITY
Our Planet
Greenhouse gas emissions
As noted in the table in Part 4, our target is to reduce our
carbon emissions by 50% from 2019 levels within 5 years.
Target & ’Net Zero’
We have prioritised reducing our carbon emissions by 50%
rather than adopting a ‘net zero’ target which can only be
achieved through the purchase of carbon offsets. Once
sufficient progress has been made, consideration will be
given to adopting a ‘net zero’ target.
Our target is calculated on an energy intensity metric
capturing Scope 1 & 2 emissions, using ‘market-based’
emissions data1. The target is a 50% reduction in the number
of tonnes of CO2e per £m revenue.
In 2019, our emissions were 22.91 tCO2e / £m revenue,
making our 2025 target 11.45 tCO2e / £m revenue. In 2020,
the figure was 18.52 tCO2e / £m revenue, a 19% reduction
on 2019 levels, or 6% on an underlying basis (with emissions
adjusted to normalise the impact of COVID-19).
Methodology
Emissions data is reported in accordance with the UK
Government’s ‘Environmental Reporting Guidelines:
Including Streamlined Energy and Carbon Reporting
Guidance’, and the GHG Protocol Corporate Reporting
Standard, using the 2020 emission conversion factors
published by the Department for Environment, Food and
Rural Affairs (Defra) and the Department for Business,
Energy & Industrial Strategy (BEIS). The assessment follows
the dual reporting approach for assessing Scope 2 emissions
from electricity usage. The operational control approach has
been used.
The data for the years ended 31 December 2019 and
31 December 2020, respectively, have been independently
assessed by Carbon Footprint Ltd, a leading carbon and
energy management company.
CO2e
Assessed
Organisation
As well as enabling us to report our emissions data, Carbon
Footprint have helped us identify new initiatives to further
reduce our emissions going forward.
1. Scope 1 & 2 emissions are most directly within the Group’s control; the ‘market-based’ measure of emissions is considered the most accurate.
64
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Greenhouse gas emissions
Other environmental impacts
The table below summarises our GHG emissions during
the reporting year 1 January 2020 to 31 December 2020.
This differs from our financial year to be consistent with
previous emissions assessments.
Scope
Element
Company owned
vehicles, gas, gas oil,
LPG, site diesel and
refrigerant chemicals
Purchased electricity
and District Heating
Direct
emissions
(Scope 1)
Indirect
emissions
(Scope 2
Location
Based)
2019
(tCO2e)
2020
(tCO2e)
2,640.99
1,644.70
7,298.55
6,600.54
Total tCO2e (Scope 1 & 2)
9,939.53
8,245.24
A number of Group companies have ISO14001 accreditation
and, as noted above, targets have been set to increase this.
In addition to compliance with environmental laws, Group
companies are encouraged to manage natural resources
carefully, minimise waste and recycle. Although the
majority of our products are non-hazardous, where such
items are involved, it minimises the environmental risks
by use of appropriate labelling and technical information,
in conjunction with training and procedures for handling,
storage and disposal. The Group has implemented
procedures to comply with the Restriction of the Use
of Hazardous Substances in Electrical and Electronic
Equipment Regulations 2004 (RoHS), the Waste Electrical
and Electronic Equipment Regulations 2006 (WEEE), the
Producer Responsibility Obligations (Packaging Waste)
Regulations 2005 and the Waste Batteries and Accumulators
Regulations 2009.
590.38
604.08
The Group also has a number of other initiatives underway,
as summarised below.
(Location-Based)
Other
indirect
emissions
(Scope 3)
Transmission and
distribution of
electricity
and district heating
Total tCO2e (Scope 3)
590.38
604.08
(Location-Based)
Gross Total (Location Based)
10,529.92
8,849.32
Gross Total (Market Based)
10,534.44
8,377.33
(Scope 1 & 2 only)
Intensity metric (Location-based):
Tonnes of CO2e per £M turnover
22.69
19.57
Total energy consumption (kWh)
26,236,422
22,824,386
UK based emissions (%)
UK based energy consumption (%)
Intensity metric:
Tonnes of CO2e (Scope 1 & 2)
per £M turnover
(market-based emissions)
9.45
–
22.68
4.46
12.70
18.521
1. A reduction of 6% in emissions is referred to elsewhere in this
Annual Report and Accounts. That figure has been adjusted to
reflect reduced operational capacity at certain sites as a result
of COVID-19.
Environmental initiatives
■ Plans in progress for installation of solar panels
at our facility in Sri Lanka and investigations
underway at one of our China facilities
■ Installation of natural source heat pump at
one of our facilities in Poland
■ Use of wind and hydroelectric renewable
energy at our facilities in Norway and Denmark
■ Introduction of light sensors and LED
lighting, reducing electricity consumption
■ Member of return and recycling system for
all waste products
■ Use of more efficient packing materials to
minimise waste production
■ Campaigns to recycle plastic
■ Encouragement of remote working where
appropriate
■ Installation of filters to reduce air emissions
■ Planting of trees near our facilities
■ Use of more efficient packing materials to
minimise waste production and recycling
of such materials – cardboard boxes are
shredded and used as packing materials
■ Use of electric forklifts instead of diesel
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Our People
Keeping our people safe and happy
Health and safety
The Group aims to provide clean, healthy and safe working conditions. In addition to compliance with local regulations,
discoverIE promotes working practices which protect the health and safety of its employees and other persons who enter
its premises. In line with that aim, the Group introduced a new Group Health & Safety Policy during the year, to reinforce
responsibilities and minimum standards, a summary of which is as follows:
Responsibility
& Ownership
Minimum
Requirements
The Group operates a decentralised management structure. The management of each of our
businesses is best placed to identify and manage the health and safety risks relevant to their business.
They must ensure that those risks are properly identified and managed.
The Policy sets out certain minimum expectations which are for individual management teams
to determine how best to achieve within their businesses. The minimum expectations include the
following:
■ Each business to have its own local H&S Policy and communicate to all concerned
■ Appropriate resources must be in place
■ Responsible individuals to be identified within each business and those individuals to have suitable
training
■ Appropriate documentation to be maintained
■ A ‘speak up’ culture is to be encouraged, with employees positively asked to identify potential risks
or hazards and bring them to the attention of those responsible for health and safety
■ Appropriate risk assessments to be performed and recommendations actioned
■ Training to be provided
Reporting
Operating companies report each month in respect of health and safety issues, including the
number of on-site accidents, near misses and mitigation. The following chart summarises the Group’s
accidents and near misses over the last three financial years.
0.025
0.020
0.015
0.010
0.005
0
Accidents per employee leading to absence
>5 days (per annum)
Accidents per employee (per annum)
Near misses per employee (per annum)
9
1
Y
F
0
2
Y
F
1
2
Y
F
As at 31 December 2020, the Group had over 90 health & safety representatives across our workforce of 4,200 employees, a
ratio of 1:47, which is well ahead of guidance. The Group conducted over 6,500 hours of health & safety training in the year to
31 December 2020.
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discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Equality and Diversity
Development and training
Employees are encouraged to develop their knowledge and
skills and to progress their careers to the mutual benefit of
themselves and the Group companies they work for. It is the
responsibility of management to ensure that they comply
with all local laws and regulations. Employees benefit from
the ability to improve their skills and work in a challenging
and ambitious work environment.
Some of the Group’s operating companies have structured
apprenticeship schemes for technical staff. Employees are
actively encouraged to undertake further learning, such as
National Vocational Qualifications or similar level courses, as
well as continual professional development to maintain any
relevant professional accreditations.
Recruitment and retention
Clear and fair terms of employment and a competitive
remuneration policy are in place. It is Group policy to
communicate with employees on major matters to
encourage them to take an interest in the affairs of their
employing company and the Group. In addition to the
Workforce Advisory Panel that has been established in
accordance with Provision 5 of the UK Corporate Governance
Code, each operating company is encouraged to maintain
effective employee engagement arrangements, including
keeping employees aware of the financial and economic
factors affecting their employing company’s performance.
The Group remains supportive of the employment and
advancement of disabled persons. Full consideration is given
to applications for employment from disabled persons,
where the candidate’s particular aptitudes and abilities are
consistent with meeting adequately the requirements of
the job. Opportunities are available to disabled employees
for training, career development and promotion. Where
existing employees become disabled, it is the Group’s policy
to provide continuing employment, wherever practicable,
in the same or an alternative position and to provide
appropriate training and support to achieve this aim.
The Group is committed to ensuring our people are treated
with respect, and are empowered and appropriately
rewarded. Our employment policies are based on equal
opportunities for all, and on there being no discrimination on
grounds of colour, ethnic origin, gender, age, religion, political
or other opinion, disability or sexual orientation. The policies
are fair, equitable and consistent with the skills and abilities
of employees and the needs of the Group’s businesses and
aim to ensure that everyone is accorded equal opportunity
for recruitment, training and promotion. The Group does not
tolerate any sexual, physical or mental harassment.
Our Board Diversity Policy can be found on the Company
website: www.discoverIEplc.com. Set out below is an analysis
of the number of employees by gender during the year.
Gender split
Employees
49%
(2020 45%)
51%
(2020 55%)
Senior Managers and executives
18%
(2020 24%)
82%
(2020 76%)
Group Executive Committee and direct reports
15%
85%
Directors
17%
(2020 17%)
83%
(2020 83%)
Female
Male
67
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics SUSTAINABILITY
Our Products
Fulfilling our purpose and ensuring product safety & reliability
Product Benefits
Our products bring considerable benefits to customers,
helping enable a sustainable future.
For details of the alignment of our target markets with the
United Nations Sustainable Development Goals please see
pages 16 and 17.
The vast majority of the Group’s products are manufactured
under ISO9001 systems, thereby increasing safety and
reliability
Read our impact Report 2021
This Report provides just a
few examples of the ways
in which our products are
helping in the global fight
against climate change,
and how they are helping
people personally.
It can be found on the
Company’s website:
www.discoverIEplc.com
General Business Ethics and Compliance
Business ethics
All discoverIE Group companies seek
to be honest, fair and competitive in
their relationships with customers
and suppliers. Every attempt is made
to ensure that products and services
are provided to the agreed standards
and all reasonable steps are taken to
ensure the safety and quality of the
goods and services provided.
So far as it is able to, and taking into
account local cultural and regulatory
differences, discoverIE encourages the
organisations and people with whom
it does business to abide by principles
of good practice in relation to their
corporate social responsibility.
discoverIE has a zero tolerance
approach to modern slavery, servitude,
forced or compulsory labour and
human trafficking in its business
operations or its supply chains. The
Group does not tolerate modern
slavery or human trafficking in any
part of the Group’s business and
expects the same high standards
from our third-party suppliers and
contractors.
The Group’s modern slavery statement
and its statement of intent on business
relationships matters can be found on
its website: www.discoverIEplc.com.
The Group maintains an external
whistleblowing helpline in addition
to the existing internal reporting
procedure so that anyone with
a concern is able to raise this
in confidence. The Group’s
whistleblowing policy can be
found on the discoverIE website:
www.discoverIEplc.com.
Anti-bribery and corruption
discoverIE is committed to applying
the highest standards of integrity,
honesty and fairness in its business
activities. A zero-tolerance approach is
taken towards bribery and corruption
in all its forms by, or of, its employees or
any persons or companies acting on its
behalf. It is discoverIE’s policy that no-
one in the Group should offer or accept
any bribes or other corrupt payments,
engage in any anti-competitive
practices or knowingly be involved in
any fraud or money laundering.
The Board and senior management
have implemented a worldwide anti-
bribery and corruption programme to
enforce and monitor effective anti-
bribery procedures in accordance with
the UK Bribery Act 2010.
68
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
Our compliance
The following table contains a summary of how discoverIE has addressed certain ESG matters.
Topic
General
The benefits of our products
Reference / Comment
Please see pages 16 to 17 and our separate Impact Report, which can be
found at www.discoverIEplc.com.
Governance
Please see:
The Corporate Governance Report on pages 74 to 84
For ESG governance, page 60
For Risk management, page 40
For governance of climate-related risks, page 45
Targets
Key performance indicators and key strategic indicators can be found on
pages 22 and 23
ESG-specific targets can be found on pages 62 and 63
AGM voting
Conducted by poll.
Risk Management
Climate-related risks
Read more on pages 40 to 45
Read more on pages 45 and 48
Materiality assessment
Read more on page 60
Remuneration
Please see the Remuneration Report on pages 94 to 118
■ A portion of remuneration is dependent upon ESG objectives for the
Executive Directors and the GEC
Policies
Board diversity policy
Please see the Company’s website: www.discoverIEplc.com
Anti-bribery and corruption policy
Whistleblowing policy
Other
Tax strategy
Please see the Company’s website: www.discoverIEplc.com
Regulatory compliance / fines
There were no prosecutions or fines of the Group during FY 2020/21.
The Strategic Report, as set out on pages 02 to 69, has been approved by the Board.
On behalf of the Board
Nick Jefferies
Group Chief Executive
Simon Gibbins
Group Finance Director
3 June 2021
3 June 2021
69
Other InformationFinancial StatementsCorporate GovernanceStrategic Reportwww.discoverIEplc.comStock Code: DSCVInnovative Electronics THE
BOARD
Malcolm Diamond
MBE
Nick Jefferies
Simon Gibbins
Tracey Graham
Bruce Thompson
Clive Watson
Greg Davidson
Non-Executive Chairman
Group Chief Executive
Group Finance Director
Non-Executive Director
Senior Independent
Non-Executive Director
Group General Counsel
& Company Secretary
N R
G N
G
A N R
A N R
G
Appointment to
the Board
Appointment to
the Board
Appointment to
the Board
Chairman since April 2017,
Non-Executive Director since
November 2015
January 2009
July 2010
Appointment to
the Board
November 2015
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Yes
No
No
Yes
Yes
Yes
No
Previous experience
Previous experience
Previous experience
Previous experience
Previous experience
Previous experience
Previous experience
Malcolm brings considerable
commercial and international
business experience to the
Board, as well as City investor
knowledge and expertise. Prior
to joining the Board, Malcolm
was Executive Chairman and
Chief Executive of Trifast plc
and, among other previous
appointments, was the Senior
Non-Executive Director of
Dechra Pharmaceuticals Plc
and a Non-Executive Director
of Unicorn AIM VCT plc.
Nick joined discoverIE as
Group Chief Executive in
2009. He started his career
as an electronics engineer
for Racal Defence (now
part of Thales plc), before
joining Toshiba and then
Hitachi’s European electronic
component businesses.
Prior to discoverIE, he
was General Manager
for electronics globally at
Electrocomponents plc.
Simon brings significant
financial expertise and
experience gained at an
international level. Prior to
joining the Group, he was
at Shire plc for nine years,
latterly as Global Head of
Finance and Deputy CFO,
and at ICI plc for six years in
various senior finance roles,
both in the UK and overseas.
His earlier career was spent
with Coopers & Lybrand
where he qualified as a
chartered accountant.
Tracey brings significant
operational expertise to the
Board. During her executive
career, Tracey was Chief
Executive of Talaris Limited and
Managing Director of De La Rue
Cash Systems. Prior to that she
was President of Sequoia Voting
Systems, Customer Services
Director at AXA Insurance and
held senior positions at HSBC.
External appointments
External appointments
External appointments
External appointments
External appointments
External appointments
External appointments
None
None
None
Non-Executive Director of
Link Scheme Limited, Senior
Independent Director of
Ibstock plc, and Non-Executive
Director of Royal London Mutual
Insurance Society. Tracey is also
a Member of the City of London
Court of Common Council
70
discoverIE Group plc
Director
A N R
since March 2019, Non-
Executive Director since
February 2018
Appointment to
Appointment to
Appointment to
the Board
the Board
Senior Independent Director
September 2019
the Board
November 2019
Bruce brings a wide range
Clive is a Chartered
of strategic and leadership
Accountant and brings wide-
expertise to the Board with
ranging experience in senior
proven experience of growing
financial roles to the Board.
international industrial
Prior to his retirement from
businesses.
During his executive career,
Bruce was Chief Executive
Officer of Diploma plc.
Prior to joining Diploma,
Bruce was a director
with the technology and
management consulting
firm Arthur D. Little Inc., both
in the UK and the USA.
executive roles, Clive spent
almost 13 years as Group
Finance Director of Spectris
plc, having previously held
a number of other senior
finance positions both in
the UK and overseas. He also
served as Senior Independent
Director and Audit Committee
Chairman of Spirax-Sarco
Engineering plc.
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 five years
at Wiggin & Co LLP, with
clients focused predominantly
in the technology sector and,
prior to joining discoverIE, 16
years at RM plc, with seven
years as General Counsel &
Company Secretary.
Non-Executive Director and
Non-Executive Director of
Chair of Avon Rubber plc
Breedon Group plc, Non-
None
Executive Director of Kier
Group plc and Non-Executive
Director of Trifast plc
Annual Report and Accountsfor the year ended 31 March 2021 Malcolm Diamond
Nick Jefferies
Simon Gibbins
Tracey Graham
Bruce Thompson
Clive Watson
Greg Davidson
Committee membership
MBE
Non-Executive Chairman
Group Chief Executive
Group Finance Director
Non-Executive Director
Senior Independent
Director
Non-Executive Director
Group General Counsel
& Company Secretary
N R
G N
G
A N R
A N R
A N R
G
Appointment to
Appointment to
Appointment to
Appointment to
the Board
the Board
Chairman since April 2017,
January 2009
the Board
July 2010
the Board
November 2015
Non-Executive Director since
November 2015
Appointment to
the Board
Senior Independent Director
since March 2019, Non-
Executive Director since
February 2018
Appointment to
the Board
September 2019
Appointment to
the Board
November 2019
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Yes
No
No
Yes
Yes
Yes
No
Previous experience
Previous experience
Previous experience
Previous experience
Previous experience
Previous experience
Previous experience
A Audit and Risk
Committee
G Group Executive
Committee
N Nomination
Committee
R Remuneration
Committee
Chairman of the
Committee
Bruce brings a wide range
of strategic and leadership
expertise to the Board with
proven experience of growing
international industrial
businesses.
During his executive career,
Bruce was Chief Executive
Officer of Diploma plc.
Prior to joining Diploma,
Bruce was a director
with the technology and
management consulting
firm Arthur D. Little Inc., both
in the UK and the USA.
Clive is a Chartered
Accountant and brings wide-
ranging experience in senior
financial roles to the Board.
Prior to his retirement from
executive roles, Clive spent
almost 13 years as Group
Finance Director of Spectris
plc, having previously held
a number of other senior
finance positions both in
the UK and overseas. He also
served as Senior Independent
Director and Audit Committee
Chairman of Spirax-Sarco
Engineering plc.
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 five years
at Wiggin & Co LLP, with
clients focused predominantly
in the technology sector and,
prior to joining discoverIE, 16
years at RM plc, with seven
years as General Counsel &
Company Secretary.
External appointments
External appointments
External appointments
External appointments
External appointments
External appointments
External appointments
Non-Executive Director of
Link Scheme Limited, Senior
Independent Director of
Ibstock plc, and Non-Executive
Director of Royal London Mutual
Insurance Society. Tracey is also
a Member of the City of London
Court of Common Council
Non-Executive Director and
Chair of Avon Rubber plc
Non-Executive Director of
Breedon Group plc, Non-
Executive Director of Kier
Group plc and Non-Executive
Director of Trifast plc
None
71
Malcolm brings considerable
Nick joined discoverIE as
Simon brings significant
Tracey brings significant
commercial and international
Group Chief Executive in
financial expertise and
operational expertise to the
business experience to the
2009. He started his career
experience gained at an
Board. During her executive
Board, as well as City investor
as an electronics engineer
international level. Prior to
career, Tracey was Chief
knowledge and expertise. Prior
for Racal Defence (now
joining the Group, he was
Executive of Talaris Limited and
to joining the Board, Malcolm
part of Thales plc), before
at Shire plc for nine years,
Managing Director of De La Rue
was Executive Chairman and
joining Toshiba and then
latterly as Global Head of
Cash Systems. Prior to that she
Chief Executive of Trifast plc
Hitachi’s European electronic
Finance and Deputy CFO,
was President of Sequoia Voting
and, among other previous
component businesses.
and at ICI plc for six years in
Systems, Customer Services
appointments, was the Senior
Prior to discoverIE, he
various senior finance roles,
Director at AXA Insurance and
Non-Executive Director of
was General Manager
both in the UK and overseas.
held senior positions at HSBC.
Dechra Pharmaceuticals Plc
for electronics globally at
His earlier career was spent
and a Non-Executive Director
Electrocomponents plc.
of Unicorn AIM VCT plc.
with Coopers & Lybrand
where he qualified as a
chartered accountant.
None
None
None
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report THE GROUP
EXECUTIVE COMMITTEE
Nick Jefferies
Simon Gibbins
Greg Davidson
Group Chief Executive
Group Finance Director
Group General Counsel
& Company Secretary
For biography
see page 70
For biography
see page 70
For biography
see page 71
Paul Neville
Martin Pangels
Paul Webster
Jeremy Morcom
Group Commercial
Director
Group Development
Director
Group Director – Acal
BFi and Cross-Selling
Group Head of
Corporate Development
Paul joined discoverIE
in March 2009 and is
responsible for running the
Design & Manufacturing
division. Formerly
responsible for discoverIE’s
M&A programme, Paul
led the acquisition of 13
businesses, ten of which
are now within the D&M
division. He has many years’
experience in both financial
and operational senior
management positions for
listed public companies.
Martin joined discoverIE in
July 2010 after working as
an advisor to the business.
Prior to joining discoverIE,
he spent nine years at
Electrocomponents plc,
where he was Regional
General Manager for Europe,
and six years with Bain &
Company as a strategy
consultant.
Paul joined discoverIE in
June 2010 as Managing
Director, Acal BFi UK,
moving to his current
role in April 2012. He has
many years’ experience
in senior management
roles, including Head of
Product Management
for electronics globally at
Electrocomponents plc. He
began his career as a design
engineer for Plessey Avionics
(now part of BAE Systems).
Jeremy was appointed
Group Head of Corporate
Development in March
2017. A physicist by
background, he has over
25 years’ experience in
industrial mergers and
acquisitions, initially in
investment banking and
then in industry, leading
the corporate development
programmes at Spectris plc
and Invensys plc.
72
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
73
Other InformationFinancial StatementsCorporate GovernanceStrategic Report CORPORATE
GOVERNANCE
REPORT
“ The events of the last year
have demonstrated both the
importance and resilience
of the Group’s governance
arrangements”
Malcolm Diamond MBE
Chairman
Chairman’s Governance
Overview
discoverIE is a strong business, with a
clear purpose and set of values. This is
underpinned by a governance structure
that enables the Group’s long-term
objectives to be met.
The events of the last year have
demonstrated the importance of our
governance arrangements. The resilience
that the Group has shown, responding
quickly to changing circumstances, and
establishing safe working practices and
maintaining continuity, is testament to
their effectiveness.
These structures help ensure we are well
positioned for continued growth and
to meet the social and environmental
challenges facing the world today.
Malcolm Diamond MBE
3 June 2021
74
discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
Compliance with the UK Corporate Governance Code 2018
During the year ended 31 March 2021, the Company complied with the UK Corporate Governance Code 2018 (the “Code”),
with the exception of provision 38 (alignment of pensions) which, in accordance with guidance, the Company will comply
with from 1 January 2023.
Section
Progress made
Board Leadership and
Company Purpose
The Board leads from the front in setting the tone for the
business and has established a clear purpose, set of values
and strategy, taking into account the interests of our various
stakeholders. The right resources, structures and processes are
in place to ensure that these are then implemented properly
throughout the Group.
Further
Information
Read more on
pages 76 to 79
Division and
Responsibilities
The respective roles and responsibilities of the Executive and
Non-Executive Directors are clear and consistently applied,
providing for constructive and effective dialogue and clear
accountability.
Read more on
pages 80 to 81
Composition, Succession
and Evaluation
The Board has a healthy balance of skills, knowledge and
experience and the appointment process is rigorous and
carefully applied. Annual evaluations keep the effectiveness of
the Board and its Committees under regular review to ensure
this remains the case.
Read more on
pages 82 to 83
Audit, Risk and
Internal control
Remuneration
The Board has established clear processes and procedures
to ensure that risks are carefully identified, monitored and
mitigated against and then reported externally in an open and
transparent manner. This helps ensure that the Company’s
financial statements are fair, balanced and understandable.
Effective risk management is critical to achieving our strategy.
Read more on
page 84
Remuneration supports the Company’s strategy and is
appropriate to the nature and size of the business. The
Board has clear processes in place and aims to report in a
straightforward and easy to understand way, with a view to
providing external stakeholders with reassurance that pay,
performance and wider interests are aligned.
Read more on
page 84
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
75
Other InformationFinancial StatementsCorporate GovernanceStrategic Report
CORPORATE
GOVERNANCE
REPORT
Board Leadership
and Company Purpose
Current composition and changes
to the Board in the year
Details of the current members of the Board and Group
Executive Committee are set out on pages 70 to 72.
There were no changes during the year ended 31 March
2021. Bruce Thompson is Senior Independent Director,
Tracey Graham is Chair of the Remuneration Committee
and Clive Watson is Chair of the Audit and Risk Committee.
All of the Non-Executive Directors have considerable
expertise in their respective roles.
Section 172 Statement
The Board takes seriously all of its duties, including those set
out in section 172 of the Companies Act 2006. The statement
required by section 172(1) explaining how it has taken those
duties into account can be found on pages 55 to 57.
Stakeholder engagement
We engage proactively with our stakeholder groups.
Read more on pages 53 to 57
Sustainability
Provision 1 of the Code deals with the Company generating
value over the long term in the context of future risks and
opportunities. This is addressed in the Sustainability Report
and in the Risk Management section.
Read more on pages 58 to 69
Read more on pages 40 to 45
76
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Good governance
Following the introduction of the new Code in 2018, the Board reviewed the Group’s governance frameworks and its
purpose, culture and values.
Our Purpose:
To create innovative electronics that help to improve the world and people’s lives.
Values and Culture
Values
Culture
■ To operate with the highest ethical standards and
■ Honest, reliable and trusting
integrity
■ To strive for the highest performance standards, not
accepting of mediocrity
■ To support the protection of the environment through
our products and solutions while minimising our direct
environmental impact
■ To be a responsible employer, with a safe working
environment
■ To respect, empower, engage and develop our
employees in an entrepreneurial environment
■ To add value and be a trusted partner to customers,
suppliers and shareholders
■ Decentralised decision-making close to the customer
■ Open, constructive communication and willingness
to listen
■ Non-political, non-bureaucratic
■ Performance, target and results driven
Vision:
Strategic Priorities:
To be a leading innovator in electronics internationally.
This strategy comprises the following priorities:
Mission:
To design and supply innovative customised electronics
that help our customers create ever better technical
solutions around the world. We aim to achieve this
through a motivated, entrepreneurial and empowered
workforce that adheres to the highest ethical and quality
standards.
In doing so we expect to create value for shareholders,
while being seen as an attractive and responsible
employer and a trusted partner for customers and
suppliers.
Strategy:
To grow our business in customised electronics by
focusing on markets with sustained growth prospects,
driven by an increasing electronic content and where
there is an essential need for our products.
■ Grow sales well ahead of GDP over the economic
cycle by focusing on structural growth markets
■ Move up the value chain into higher margin products
■ Acquire businesses with attractive growth markets
and strong operating margins
■ Further internationalise the business by developing
sales in North America and Asia
■ Generate strong cash flows and sustainable returns
while reducing impact on the environment
Progress against our objectives is measured through
our key strategic indicators (KSIs) and key performance
indicators (KPIs), which have recently been refreshed for
the forthcoming five-year period. Details are set out on
pages 22 and 23.
77
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report CORPORATE
GOVERNANCE
REPORT
Board Leadership
and Company Purpose
Employee Engagement
A high-quality workforce is vital to the success of the Group.
There are a range of employee engagement initiatives in
place across the Group and these include the following:
■ Works Councils and staff representative meetings
■ Employee meetings
■ Quarterly performance updates
■ Staff surveys
■ Social and team-building events
■ Health & wellbeing reviews
■ Workforce Advisory Panel
Since 2009, as part of its annual calendar the Board visits
the Group’s operating sites, meeting management and
employees directly.
In 2017, the Board visited Flux (Copenhagen), in 2018 the
Board visited Myrra and Noratel (both in China) and, in 2019,
the Board visited Cursor Controls (Newark, UK). Prior to the
emergence of COVID-19, plans had been made for the Board
to visit Santon in The Netherlands, in September 2020.
The Board aims to visit as much of the Group as possible,
visiting facilities in a variety of locations internationally. The
Board gains a deeper understanding of the business, local
complexities, working conditions, the level of skills and
expertise in each facility, the concerns and aspirations of
staff, and any issues that the leadership or staff may wish to
discuss with the Board. The Board intends to resume these
visits once conditions allow.
The purpose of the Workforce Advisory Panel is to ensure
that the “employee voice” is heard, that the Board is aware
of any issues or concerns that staff may have and to ensure
that their views are taken into account and influence the
Board’s decision-making, where appropriate. This helps the
Board to monitor and assess the culture of the organisation.
A number of operational changes have already been implemented as a result of the interaction. In the coming year, it is
intended that this will include increased collaboration between different businesses within the Group.
Time Allocation, Board and Committee Meetings and Attendance
During the year, attendance by Directors at Board and Committee meetings was as follows:
Director
Malcolm Diamond
Simon Gibbins
Tracey Graham
Nick Jefferies
Bruce Thompson
Clive Watson
Board
14 / 14
14 / 14
14 / 14
14 / 14
14 / 14
14 / 14
Audit and Risk
Remuneration
Nomination
Overall Attendance %
Committees
3 / 3
3 / 3
3 / 3
3 / 3
3 / 3
3 / 3
6 / 6
6 / 6
6 / 6
6 / 6
6 / 6
6 / 6
1 / 1
1 / 1
1 / 1
1 / 1
1 / 1
1 / 1
100%
100%
100%
100%
100%
100%
Time is provided at the start and the end of each meeting for the Chairman to meet privately with the Senior Independent Director and Non-
Executive Directors. During FY 2020/21, the Board was mindful of the additional time commitment required of the Non-Executive Directors as
a result of COVID-19, both for the Company and also for their other appointments. These commitments were taken into accountaccount in the
preparation and planning of meetings to ensure that all Directors were able to allocate sufficient time to discharge their responsibilities.
Board approval is required prior to any Director accepting any external appointments.
78
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Board activities
Topic
Strategy
Risk and risk
management
Governance
Key activities and discussions in 2020/21
Key priorities in 2021/22
■ Oversaw the Group’s response to COVID-19
■ Reviewed and approved the acquisitions of
Phoenix and Limitor
■ Reviewed key strategic indicators (“KSIs”) and key
performance indicators (“KPIs”)
■ Continued consideration of the
Group’s response to COVID-19
■ Consider acquisitions as identified
and determine the appropriate
course of action
■ Keep KSIs and KPIs under review
■ Keep the Group’s dividend policy
under review
■ Continue to focus on international
growth in key markets, including
expansion into North America
■ Carried out robust assessment of principal and
■ Review key risks and ensure that
the Group’s internal control process
remains appropriate
■ Build further understanding and
plan actions in relation to new
regulations over the period
emerging risks (see pages 47 to 52)
■ Considered the Group’s exposure to climate
related and other ESG risks
■ Monitored compliance with the anti-bribery and
corruption policy
■ Reviewed internal audit reports and actions taken
to address findings identified
■ Reviewed and engaged with major shareholders
and proxy bodies on the remuneration policy
due to be put to Shareholders at the 2021 annual
general meeting
■ Continued focus on the composition, balance and
effectiveness of the Board
■ Signed off and published the Group’s modern
slavery statement
■ Engaged with institutional Shareholders, investors
and other stakeholders throughout the year
■ Reviewed and approved the FY 2019/20 Annual
Report
Organisational
capacity
■ Monitored health and safety performance across
the Group. Regular Board updates received on
actions improving health and safety
■ Continue to monitor health and
safety performance across the
Group
■ Received presentations by senior management
■ Consideration of the Group’s
including on M&A strategy
capacity as it continues to grow
■ Review of Group’s resources and ability to respond
in light of COVID-19
Board development
■ Continued focus on the composition, balance and
■ Focus on increasing diversity both
effectiveness of the Board
■ Reviewed Board and Committee composition and
discussed and acted on the recommendations of
the Nomination Committee
■ Undertook an internal evaluation of the Board, its
Committees and individual Directors
for the Board and across the Group
more generally
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Division and Responsibilities
discoverIE is led by a strong and experienced Board with a broad range of skills, experience and knowledge.
Throughout the year under review, the Board consisted of Malcolm Diamond as Non-Executive Chairman, Tracey Graham,
Bruce Thompson and Clive Watson as Non-Executive Directors, with Nick Jefferies as Group Chief Executive and Simon
Gibbins as Group Finance Director. The composition of the Board is kept under review by the Nomination Committee on an
annual basis. The Nomination Committee considers the size and composition of the Board to be appropriate to the Group’s
business and strategy but would benefit from increased diversity. The Non-Executive Directors constructively challenge
management proposals where appropriate and carefully monitor management performance and reporting on an ongoing
basis. The Company has both a Chairman and a Group Chief Executive.
There is a clear division of responsibilities, which has been agreed by the Board, and a summary of their respective roles is
described opposite.
Role of the Chairman
Role of the Group Chief Executive
Role of the Board
■ Responsible for leading the Board,
which includes the operation of the
Board’s overall procedures.
■ Leading the development and
implementation of the Group’s
strategy.
■ Setting the long-term objectives
and commercial strategy.
■ Oversight of the management of
■ Providing a forum for constructive
discussion and ensuring receipt of
clear and timely information.
■ Overseeing Corporate Governance
matters.
■ Leading the performance
evaluations of the Group Chief
Executive, the Non-Executive
Directors and the Board.
The Chairman, in conjunction with the
Group Company Secretary, ensures
that Directors receive a full, formal and
tailored induction to the Group and
ongoing training as relevant.
■ Communicating with Shareholders
discoverIE.
and other stakeholders.
■ Responsible for the day-to-day
management of the Group’s
businesses and reporting on their
progress to the Board.
■ Leading the Group Executive
Committee.
The Group Chief Executive is assisted
in meeting his responsibilities by the
Group Executive Committee.
■ Review of the KSIs and KPIs.
■ Review of acquisitions and
corporate transactions.
■ Recommending or declaring
dividends.
■ Approval of financial statements,
business plans, financing and
treasury matters.
■ Approval of major capital
expenditure and commitments.
■ Maintaining sound internal controls
and risk management systems.
■ Review of the Group’s overall
corporate governance.
■ Any litigation of a material nature.
As set out on the opposite page,
certain matters are delegated to the
Group Executive Committee and to
the Audit and Risk, Remuneration and
Nomination Committees.
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discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Governance framework
The Board
Chaired by Malcolm Diamond
Meets a minimum of six times a year.
Accountable to Shareholders for the long-term success of the Group. This is achieved via a clear division of
responsibilities between the Chairman and Group Chief Executive, the setting of strategic aims and ensuring that the
necessary resources are in place.
Nomination Committee
Chaired by Malcolm
Diamond
The Nomination Committee
regularly reviews the structure,
size and composition of the
Board and its Committees.
It identifies and nominates
suitable candidates to be
appointed to the Board
(subject to Board approval)
and considers diversity, culture,
talent and succession generally.
Further information on the
Nomination Committee is
on pages 90 to 91
Audit and Risk Committee
Chaired by Clive Watson
The Audit and Risk Committee
has responsibility for overseeing
and monitoring the Group’s
financial statements,
accounting processes, audit
processes (internal and external),
and controls.
Further information on the
Audit and Risk Committee is
on pages 85 to 89
Remuneration Committee
Chaired by Tracey Graham
The Remuneration Committee
reviews and recommends to
the Board the framework and
policy for the remuneration of
the Chairman, the Executive
Directors and the Group
Executive Committee.
The Committee ensures that
the remuneration policy of
the Group reflects the Group’s
strategy.
Further information on the
Remuneration Committee
is on pages 94 to 118
Group Executive Committee
The Group Executive Committee comprises: Nick Jefferies, who is the Chairman of the Committee, together with
Simon Gibbins, Greg Davidson, who is also the Secretary, Jeremy Morcom, Paul Neville, Martin Pangels and Paul
Webster. For their biographies see page 72.
In previous years, the Committee typically met 6 – 7 times a year. However, in response to COVID-19, during the
year ended 31 March 2021, the Committee held weekly meetings to consider latest developments and the Group’s
response, in addition to its ordinarily scheduled bi-monthly meetings. The Committee met over 30 times during the
year ended 31 March 2021.
The Committee is responsible for the Group’s day-to-day operations, for delivering results, and for driving growth and
ensuring this is done in a sustainable and ethical manner.
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Composition, succession
and evaluation
Current Composition
The biographies of the current members of the Board and
Group Executive Committee are set out on pages 70 to 71
and 72 respectively.
Work of the Nomination Committee
The Nomination Committee Report, which can be found
on pages 90 to 91, describes the work of the Nomination
Committee in ensuring that the Board continues to have
the right mix of skills, knowledge and experience, and the
process for ensuring that there is an effective process in
place for succession planning. As noted in the Nomination
Committee Report, the Board considers that steps should be
taken to improve the diversity of the Board and wider Group.
Independence
The independence of the Non-Executive Directors is
reviewed annually. The Board considers that the Non-
Executive Directors bring strong independent oversight
and continue to demonstrate independence. The Board
recognises the recommended term for Non-Executive
Directors as set out in the Code and is mindful of the
need for suitable succession.
Bruce Thompson is the Senior Independent Director
and is available to Shareholders should they have
concerns that cannot be resolved through other channels.
Induction
All new Directors receive induction training on joining
the Board and are expected regularly to update and
refresh their skills and knowledge, with the Company
providing the necessary resources, as required.
The induction programme includes meeting with the
Group’s senior management and visits to key locations,
as well as a comprehensive briefing pack.
Board composition
Gender diversity
Female (1)
17%
Male (5)
83%
Independence
Executive (2)
33%
Non-executive (4)
67%
Board tenure
<1 year (0)
0%
>1 year (6)
100%
Ethnic diversity
Mixed/multiple ethnic group (0)
0%
White (6)
100%
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discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021
Evaluation
In accordance with the Code, the Board and each of its
Committees undertakes an evaluation each financial year.
Such evaluations were completed during the year ended
31 March 2021 and the process and findings are summarised
below.
Step 1
Summary of the 2021
Board evaluation
Board composition
The composition of the Board was positively
rated but diversity should be improved.
Each Director considers his or her individual performance,
the performance of the Chairman and the overall
performance of the Board and each of its Committees by
using questionnaires.
Board’s expertise
The Board’s understanding of the views and
requirements of major investors and other
stakeholders was rated positively.
The completed questionnaires are submitted to the
Company Secretary who collates the results and provides
an overall summary to the Board.
Step 2
The results of the evaluation are discussed by the Board
and actions for improvement are decided upon.
A summary of the 2021 Board evaluation is detailed in the
box opposite.
Step 3
Individual questionnaires are provided to the Chairman
and Senior Independent Director, as appropriate.
One-on-one discussions are then held between the
Chairman and the Senior Independent Director on the
evaluation of the Chairman, and between the Chairman
and the Non-Executive Directors on their respective
evaluations.
Re-election
In accordance with the Code, all Directors stand for
re-election annually at each AGM.
Board dynamics
The interaction among and between Board
members was rated highly, with there being a
positive atmosphere and strong relationships,
set in the context of proper and constructive
challenge.
Management of meetings
The management of meetings and the
structure of the Committees, together with
Board support, was considered appropriate.
Risk management
The effectiveness with which the Board takes
risk into account when making decisions
was positively rated. Further details on the
Group’s approach to risk are set out in the Risk
Management section of this Annual Report and
Accounts on pages 40 to 45.
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GOVERNANCE
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Audit, Risk and
Internal Control
Remuneration
The Strategic Report notes that delivering the Group’s
strategic priorities in a sustainable and responsible manner
requires careful consideration to be given by the Board to
the nature and level of risks that the Group should accept.
The Board’s approach to risk generally, including the
identification, management and mitigation of risks
(including internal controls), is described in further detail in
the following sections of this Annual Report and Accounts:
■ Our approach to Risk Management is described on pages
40 to 45.
The Board’s approach to remuneration is set out in the
Remuneration Report (see pages 94 to 118). In its approach
to remuneration, during the year ended 31 March 2021, the
Company complied fully with the Code, with the exception
of provision 38 of the Code (alignment of pensions). The
Remuneration Committee has decided that employer
pension contributions for any newly appointed Executive
Directors shall be the same as those for the general UK
workforce and that the contributions for the current
Executive Directors will be aligned with the general
workforce with effect from 1 January 2023.
■ The Group’s Principal Risks and Uncertainties are set out
on pages 47 to 52.
Approval
■ Finally, the Audit & Risk Committee Report on pages 85
to 89 provides further details as to how the Committee
provides oversight, and supports the Board, in relation
to matters relating to audit, risk and internal controls
generally.
This Corporate Governance Report has been approved by
the Board and signed on its behalf by
Greg Davidson
Group General Counsel and Company Secretary
3 June 2021
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Annual Report and Accountsfor the year ended 31 March 2021 AUDIT AND
RISK COMMITTEE
REPORT
“ The Committee’s role
is central in bringing
together the Group’s risk
management activities
and control environment.”
Clive Watson
Chairman of the Audit Committee
Dear Shareholder,
I am pleased to report on the activities of the Audit and Risk
Committee (“the Committee”) during the year under review.
Meetings
During the year, the Committee met three times and also
met privately with the external auditor. The Committee
comprised the people shown in the table on the left, all of
whom were Non-Executive Directors.
In addition to the Committee members, the Group Chief
Executive, the Group Finance Director, representatives
from the external auditor, the Group Risk and Internal
Audit Manager, the Group Projects Manager and the Group
Financial Controller attended parts of these meetings by
invitation. As Chair of the Committee, I maintain direct
communication with the external auditor and the Group
Risk and Internal Audit Manager, independently of the
management of the Company.
Meetings of the Committee are scheduled so as to ensure
the Committee is informed fully, and on a timely basis, on
areas of significant risks and judgement. The Committee
also received sufficient, reliable and timely information from
management on significant changes to financial accounting
standards and reporting requirements, regulatory and
governance changes and developments concerning risk
management, fraud prevention and detection, and cyber
security. As Chair of the Committee, I report to the Board
on any significant matters arising from the activities of the
Committee.
The Board is satisfied that the members of the Committee
have both recent and relevant experience (as set out on
pages 70 and 71) and that, therefore, the Committee as a
whole has competence in the sector in which the Group
operates. The Committee is satisfied that the Group’s
executive compensation arrangements do not prejudice
robust controls and good stewardship.
Member
Clive Watson
Tracey Graham
Bruce Thompson
Member
Since
2019
2017
2019
The Group Company Secretary acts as Secretary to the
Committee.
Details of individual Directors’ attendance
can be found on page 78
How the Committee spent its time
20%
25%
35%
External Audit
Annual Report
Finance Reviews
Internal Audit
10%
10%
Risk Management
& Internal Controls
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AUDIT AND
RISK COMMITTEE
REPORT
Committee activities during FY21
Standing items
June 2020
■ Reviewed results of the external audit of the FY20 Annual
Report and Accounts
■ Reviewed the going concern and viability statements
■ Reviewed the FY20 Annual Report and Accounts
■ Agreed a revised risk management and internal audit
programme for FY21
■ Update on internal audits conducted and progress
with management’s implementation of actions
■ Update on alignment of newly acquired businesses
to group policies and procedures
■ Update on risk management projects
After each meeting of the Committee, the Chair of the
Committee reports to the Board, to enable the Board to
discharge its responsibilities.
■ Discussed the overall adequacy and effectiveness of the
Group’s internal controls
Role of the Committee
■ Reviewed the self-assessment of the Group Internal Audit
function and the adequacy of its resources
■ Considered the impact of COVID-19 on the Group’s key
controls environment
■ Reviewed and approved the revised Risk Management
Policy
■ Reviewed and approved the internal audit charter
■ Half yearly review of the Group Risk Register
November 2020
■ Reviewed half year results and judgemental accounting
areas, in particular the impact of COVID-19 on going
concern and goodwill
■ Reviewed regulatory update
■ Half yearly review of the Group Risk Register including,
in particular, subsidiary risk reporting
January 2021
■ Reviewed external audit planning report for FY21 Annual
Report and Accounts (including review and approval of
audit scope and fees)
■ Agreed a risk management and internal audit programme
for FY22
The Committee’s role is central in bringing together
the Group’s risk management activities and control
environment to ensure adherence to policies, the integrity
of financial reporting and the maintenance of a strong risk-
focused culture. Following recent and upcoming regulatory
changes, this includes consideration and review of the
Group’s exposure to climate-related risks and opportunities.
As Chair of the Audit and Risk Committee, I attend the
annual general meeting and make myself available for any
Shareholder questions within the Committee’s remit.
The Committee oversees and reviews the management of
risk, financial results, and the Group Internal Audit function.
Key responsibilities of the Committee:
■ Consideration of the appropriateness of the accounting
principles, policies and practices adopted in the Group’s
accounts
■ Review of external financial reporting and associated
announcements to ensure they are fair, balanced and
understandable
■ Managing the appointment and remuneration of the
Group’s external auditor, together with an assessment
of the effectiveness and independence of the audit,
including the policy on the award of non-audit services
■ Initiating and supervising a competitive tender process
for the external audit, as and when required
■ Oversight of Group Internal Audit
■ Ensuring the effectiveness of the Group’s risk
management processes and internal controls
■ Oversight and update of the Group Risk Register
■ Oversight of the Group’s whistleblowing procedures in
conjunction with the Board. If any issues are reported that
require further investigation, this is typically conducted
by the Group Internal Audit function, which reports back
to the Committee as to their findings and whether any
further action is necessary or desirable. During the year
a small number of reports were made, with the majority
proving to be routine HR matters. None of the matters
reported were found to be a cause for concern.
■ Monitoring compliance with the UK Corporate
Governance Code
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discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Fair, balanced and understandable
The Committee has, at the request of the Board, reviewed this year’s Annual Report and Accounts to assess whether it
presents a fair, balanced and understandable view of the Company’s position and prospects. The Committee’s review
took account of the process by which the Annual Report and Accounts is prepared, which includes analysis of changes to
applicable reporting requirements and standards, and a robust schedule of review and verification by senior management
and external advisers to ensure disclosures are accurate. The Committee is satisfied that, taken as a whole, the Annual
Report and Accounts is fair, balanced and understandable and provides the information necessary for Shareholders to
assess the Group’s position and performance, business model and strategy and has advised the Board accordingly.
Significant matters considered and decisions taken
As part of the monitoring of the integrity of the financial statements, the Committee assesses whether suitable accounting
policies have been adopted and whether management has made appropriate estimates and judgements. Support from the
external auditor is sought when undertaking these assessments.
During the year, the Committee’s review of other significant accounting and financial reporting issues included a focus on
the key areas outlined as follows:
Impairment of goodwill
A consideration of the carrying value of goodwill and the assumptions underlying the
impairment review. The judgements in relation to goodwill impairment largely relate to
the assumptions underlying the calculations of the recoverable amount of the business
unit being tested for impairment, primarily the achievability of long-term business plans
and macroeconomic assumptions underlying the valuation process. The assumptions are
sensitised to ensure that there is adequate headroom between the recoverable amount and
the carrying value of the business being tested for impairment.
Specifically, this included a review of any businesses not performing in line with expectations,
to assess any potential impact on the carrying value of goodwill.
COVID-19
A review of the potential impact of COVID-19 on the Group and re-scheduling of Group
Internal Audit activities to enable continued effectiveness during lockdowns.
Accounting for acquisitions
A review of the initial accounting for the acquisitions of Phoenix and Limitor during the year,
including the appropriateness of the assumptions used in assessing the fair value of assets
and liabilities acquired.
Valuation of the legacy
defined benefit pension
scheme
The recognition and
valuation of judgemental
provisions
A review of the appropriateness of the assumptions used in the valuation of the legacy
defined benefit pension scheme under IAS 19 – Employee Benefits.
A determination of the appropriateness of the assumptions used in the recognition and
valuation of judgemental provisions which relate mainly to onerous contracts, inventory,
severance indemnities, acquisition earn-out arrangements, long-term incentive plans,
restructuring and integration.
Presentation of underlying
profit adjustments
A review of the appropriateness of items disclosed as exceptional items and acquisition-
related costs (including asset amortisation of acquired intangibles and acquisition expenses)
in the Supplementary income statement information and notes to the Group financial
statements, in line with the Group’s stated policy.
Going Concern and Viability
A review of the assumptions underpinning the going concern and viability statements.
The Committee was satisfied that each of the matters set out above had been fully and adequately addressed by the
Executive Directors, appropriately tested first by the Committee and then reviewed by the external auditor, and that the
disclosures made in this Annual Report and Accounts were appropriate.
In respect of each significant matter reviewed by the Committee, the Committee considered the assumptions made, the
reasonableness of judgements in their context, and how such matters have been presented. The Committee evaluated and
challenged each of these to ensure that the Annual Report and Accounts is complete and accurate in all material respects.
Tax strategy
In March 2021, the Committee approved the Group Tax Strategy, which can be found on the Company’s website at
www.discoverIEplc.com.
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RISK COMMITTEE
REPORT
Risk management and internal controls
The Board has overall responsibility for the Group’s risk
appetite and risk management. This includes determining
the nature and extent of the risks it is willing to take in
achieving the Group’s strategy and objectives. The Board
is ultimately responsible for the effectiveness of the risk
management strategy and framework, and internal
controls systems.
Oversight of risk management is undertaken by the
Committee, in accordance with its terms of reference.
In order to ensure the effectiveness of the risk management
and internal control systems, the Committee undertook a
number of key activities during the year, including:
■ Consideration of the risk management activities during
the year (including particular focus on specific areas of
cyber security and financial controls)
■ Review of risk management and reporting to ensure
effectiveness and that the balance between risk and
opportunity was in keeping with the Group’s risk appetite
■ Regular meetings with members of senior management
and internal audit
■ Review of reports on control matters and challenge of
management’s response to any matters raised
■ Evaluation and challenge of the results and
recommendations of audits undertaken by the Group
Internal Audit function and the external auditor
■ Review of the resource requirements of the Group
Internal Audit function
■ Review of the annual Audit and Risk Committee agenda.
Review of Internal Controls
The Group’s finance department includes a separate
Group Internal Audit function. This is led by the Group
Risk and Internal Audit Manager who is part of the Group
management team and reports to the Group Financial
Director and, independently, to me, as Chair of the
Committee.
Internal Audit
The Group Internal Audit function’s primary purpose
is to provide risk-based and independent assurance,
advice and insight to help improve all aspects of the
organisation’s governance and system of internal control,
including management of risk. The remit of the internal
audit function covers discoverIE Group plc and all of its
subsidiaries. The function consists of two staff, supported
by the Group Projects Manager and outsourced providers
as deemed necessary. Further details on the operation of
the Group Internal Audit function can be found in the Risk
Management section on page 40.
The Audit and Risk Committee has overall responsibility for
reviewing the effectiveness of the Group’s internal control
framework and the Group Internal Audit function. As part of
this, we ensure that the Group Internal Audit function has
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discoverIE Group plc
unrestricted scope, the necessary resources, and appropriate
access to information, to enable it to perform its function
effectively. The suitability of resources available to the Group
Internal Audit function was considered in the year. The
Committee also reviews regular updates on internal audit
work carried out and the actions taken by management to
implement the recommendations of internal audit reviews.
A programme of internal audit activities has been
completed during the year. The scope of work carried
out by the Group Internal Audit function generally focuses
on the internal financial and operational controls within
each business, particularly in recently acquired businesses.
Further internal audit work is outsourced to external
providers, where appropriate.
While no system of controls can provide absolute assurance
against material misstatement or loss, the Group’s systems
are designed to manage, rather than eliminate, the risk of
failure to achieve business objectives and provide reasonable,
and not absolute, assurance against material misstatement
or loss. As part of the annual review of the effectiveness of
the Group’s internal controls, the Committee, on behalf of
the Board, has regard to the significance of the risks involved,
the likelihood and severity of an event occurring and the
costs associated with any relevant controls. The formal
Annual Opinion for FY21 issued by the Group Internal Audit
function was reviewed by the Committee, concluding that
there were no material failings or weaknesses identified in
the Group’s internal control systems.
The principal components of the Group’s systems of
control are:
■ a clearly defined organisational structure with short
and clear reporting lines
■ recruitment of high-quality staff
■ an ongoing process for the identification, regular review
and management of the principal risks and issues
affecting the business, both at Group and operating levels
■ in-house and outsourced internal audit activities
■ an ongoing review of regulatory compliance
■ a regular review of the principal suppliers and customers of
the Group, and how each impacts upon the Group’s business
■ a comprehensive planning process, which starts with
a strategic plan and culminates in an annual budget
and a long-term plan
■ regular rolling forecasting throughout the year of orders,
sales, profitability, cash flow, working capital and balance
sheets
■ a regular review of actual performance against budget
and forecasts
■ clearly defined procedures for the authorisation of major
new investments and commitments
■ a requirement for each operating company to maintain
a system of internal controls appropriate to its own local
business environment.
Annual Report and Accountsfor the year ended 31 March 2021 The Finance team is responsible for producing financial
information that is timely, accurate and in accordance with
applicable laws and regulations. In addition, it is responsible
for the distribution of financial information, both internally
and externally. Key financial and operational performance
is reported on a timely basis and measured against both the
Board-approved budget, management’s rolling forecasts
and comparable information from prior periods. A review
of the financial statements is completed by management
to ensure that the financial position and results of the
Group are appropriately reflected. All financial information
published externally by the Group is approved by the Board.
The above procedures apply to discoverIE Group plc and all
of its subsidiary companies.
External audit
The Committee is responsible for managing the relationship
with the Group’s external auditor on behalf of the Board
including their appointment, remuneration, independence
and performance.
During the year the Committee’s activities in respect of
external audit were as follows:
■ considering the re-appointment of the external auditor
■ considering and approving the audit approach and scope
of the audit undertaken by PwC and the related fees
■ agreeing reporting materiality thresholds
■ reviewing reports on audit findings
■ considering and approving letters of representation
issued to the auditor
The Committee concluded that the audit team had the
necessary professionalism, experience and understanding of
the business to carry out a thorough and robust audit. As a
result, the performance of PwC was considered satisfactory.
Auditor independence
The Committee believes that the provision of non-audit
services to the Company is closely related to external auditor
independence and objectivity. The Committee recognises
that the independence of the external auditor may risk
becoming compromised if it also acts as the Company’s
consultant and adviser to any material extent. The Committee
accepts that certain work of a non-audit nature is best
undertaken by the external auditor. The Committee reviewed
its policy on the provision of non-audit services during the
year to ensure that there is no likelihood of any impairment of
auditor independence or objectivity. The non-audit services
that were provided by the external auditor during the
financial year were in line with the policy, were permissible
under Ethical Standards and were not material (£5,000).
The Company last undertook a tender for external audit
services in 2017 which led to the appointment of PwC. There
are no contractual obligations restricting the Committee’s
choice of external auditors. The external auditors are
required to rotate the audit partner at least every five
years and the current lead audit partner, Chris Hibbs, was
assigned to the discoverIE audit in 2021. The Committee
recommended to the Board that it proposes to shareholders
that PwC be re-appointed at the annual general meeting.
■ considering the independence of the auditor
Additional key areas of focus in 2021/22
■ Audit Partner rotation.
Audit performance and effectiveness
The performance and effectiveness of the external auditor
and related audit is reviewed annually by the Committee.
This covers the robustness of the audit at both a Head Office
and entity level.
The review covers the following:
■ Robustness of the audit plan and, in particular, the
identification of significant risks
■ Execution of the above plan, including the auditor’s
ability to challenge management on key accounting
judgements and assumptions adopted
■ Ensuring the auditor demonstrates a deep and thorough
knowledge of the business to enable them to reach
appropriate conclusions on key accounting judgements
■ Quality of reports provided to the Committee
■ Communication between auditor and the Committee
■ Feedback from management on the quality of the audit
team
■ Professional scepticism of the auditor.
■ Continue to assess the potential impact of, and the
Group’s response to, COVID-19 and Brexit
■ Continue to assess progress against additional
measures being rolled out following cyber risk review
■ Further assessment of exposure to ESG-related risks
including to climate-related risks and opportunities
■ Review the accounting for new acquisitions
■ Monitor the development and assess the impact of the
UK’s audit and governance reform proposals as set out
in the BEIS consultation published on 18 March 2021
Terms of reference
The Committee’s terms of reference are available upon
request and are on the Company’s website:
www.discoverIEplc.com.
Clive Watson
Chairman of the Audit and Risk Committee
3 June 2021
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COMMITTEE
REPORT
“ The Nomination Committee
helps to ensure that the
Board maintains the
knowledge and skills
needed to deliver the
Group’s growth ambitions.”
Malcolm Diamond MBE
Chairman of the Nomination Committee
Member
Malcolm Diamond
Tracey Graham
Nick Jefferies
Bruce Thompson
Clive Watson
Since
2017
2018
2009
2019
2021
The Group Company Secretary acts as Secretary to the
Committee.
2020/21 key achievements
■ Recommended to the Board the re-appointment
of Bruce Thompson, which was duly approved
■ Identification of priorities for the coming year
Key areas of focus in 2021/22
■ Increasing diversity for the Board and wider Group
■ Continued evaluation of knowledge and skills
Dear Shareholder,
During the year, the Committee met once, with all
Committee members attending and participated in
a separate evaluation process which identified areas
for improvement, especially in relation to diversity. The
Committee’s recommendations were made after careful
consideration of the independence, performance and
ability to continue to contribute to the Board of the
relevant people, in the light of the knowledge, skills,
commitment and experience required.
Composition
The majority of the Committee members are
independent Non-Executive Directors. During the year
under review, the Committee was chaired by me, with
Tracey Graham, Bruce Thompson and Nick Jefferies as
Committee members.
Key responsibilities
The Committee’s key duties are:
■ To review the structure, size and composition
(including the skills, knowledge and experience)
of the Board and to recommend changes where
appropriate.
■ To consider succession planning for the Directors and
the right balance of skills, knowledge, experience and
diversity on the Board.
■ To identify and nominate candidates to fill Board
vacancies, having previously prepared a description
of the role and capabilities required for a particular
appointment.
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discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
■ To review the leadership needs of the organisation, both
Diversity and Succession planning
executive and non-executive.
■ To make recommendations to the Board on the
reappointment of any Non-Executive Director at the
conclusion of their specified term of office and on
appointments to the Audit and Risk and Remuneration
Committees.
■ To review, as part of the annual assessment exercise, the
time commitment of the Non-Executive Directors to the
role and to their external appointments.
Appointment of Directors
The Committee’s principal role is to make recommendations
to the Board on suitable candidates to fill Board vacancies,
as and when they arise, or when other changes or
appointments may be desirable. In managing this process,
the Committee takes into account the Board’s existing
balance of skills, knowledge and experience and has
due regard for diversity. Unless the appointment is as an
Executive Director, for which a suitable candidate is available
from within the Group, the Committee will create a short-list
of suitable candidates for final selection by the Committee.
References from appropriate third parties will then be taken
on the prospective director. Candidates meet all members
of the Committee, which then makes recommendations to
the Board. Adopted practice is for all members of the Board
to meet with the relevant candidate before an appointment
is made.
The Board is committed to a culture which attracts and
retains talented people and to ensure that a proper process
exists for succession planning for the Board and senior
management.
The Company’s Board Diversity Policy, which commits the
Company to aiming to comply with both the Hampton-
Alexander Review on gender diversity and the Parker
Review on ethnic diversity, can be found on the Company’s
website www.discoverIEplc.com. Please see page 67 of the
Sustainability report for a summary of the Group’s current
gender diversity and page 82 of the Corporate governance
report for the current Board composition.
Terms of reference
The Committee’s terms of reference are available
upon request and are on the Company’s website:
www.discoverIEplc.com
Malcolm Diamond MBE
Chairman of the Nomination Committee
3 June 2021
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
91
Other InformationFinancial StatementsCorporate GovernanceStrategic Report
DIRECTORS’
REPORT
The Directors’ report for the financial year ended 31 March 2021 is set out below. Certain matters required to be included in the
Directors’ report are included in the Strategic report, as the Board considers them to be of strategic importance, as follows:
Disclosure
Location
Future business developments
Risk management
Employee involvement
Greenhouse gas emissions
Stakeholder engagement
Throughout the Strategic report (page 02 to 69)
Risk management and principal risks and uncertainties (pages 40 to 52)
Sustainability report (pages 66 to 67)
Sustainability report (pages 64 to 65)
Please see pages 53 to 57
The Group’s policies and processes for managing its capital,
its financial risk management objectives, its financial
instruments and hedging activities and exposure to credit
and liquidity risk are disclosed in note 26 to the Group
financial statements on pages 167 to 168.
Both the Directors’ report and the Strategic report have been
drawn up in accordance with English company law. The
liabilities of the Directors in connection with that report shall be
subject to the limitations and restrictions provided by such law.
Financial results and dividends
The audited consolidated financial statements set out the
results of the Group for the financial year to 31 March 2021
and are shown on pages 130 to 181. The key strategic and
performance indicators of the business are set out in the
Strategic report on pages 02 to 69.
The Directors recommend a final dividend of 7.0p per share
(2019/20: nil) which, together with the interim dividend of 3.15p
per share (2019/20: 2.97p), makes a total dividend for the year
of 10.15p per ordinary share (2019/20: 2.97p). Subject to approval
by Shareholders of the recommended final dividend, the
dividend award to Shareholders for 2020/21 will total £9.0m
(2019/20: £2.9m). If approved, the Company will pay the final
dividend on 3 August 2021 to Shareholders on the register of
members at 11 June 2021.
The Board believes that, as an acquisitive growth company,
maintaining a progressive dividend policy, with the long term
dividend covered over three times by underlying earnings, is
appropriate to enable both dividend growth and a higher level
of investment from internally generated resources.
Directors
Board membership and biographical details of the Directors
are on pages 70 and 71 and are incorporated by reference.
Copies of Executive Directors’ service contracts are available
to Shareholders for inspection at the London office of the
Company’s corporate solicitors, White & Case LLP and
at the annual general meeting. Details of the Directors’
remuneration and service contracts and their interests in
the shares of the Company are included in the Directors’
remuneration report which is set out on pages 94 to 118.
Powers of the Directors
The Board of Directors is responsible for the management
of the business of the Company and may exercise all the
powers of the Company, subject to the Company’s Articles of
Association (the “Articles”), the Companies Act 2006 and any
directions given by the Shareholders by special resolution.
The Articles may be amended by a special resolution of the
Company’s Shareholders.
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discoverIE Group plc
Appointment and replacement of Directors
The Board can appoint a Director but anyone so appointed
must be elected by an ordinary resolution at the next
general meeting. All Directors offer themselves for re-
election at each next annual general meeting.
Directors’ conflicts of interest
The Company has procedures in place for managing
conflicts of interest. Should a Director become aware that
they, or any of their connected parties, have interest in an
existing or proposed transaction with discoverIE, they should
notify the Board in writing or at the next Board meeting.
Internal controls are in place to ensure that any related party
transactions involving Directors, or their connected parties,
are conducted on an arm’s length basis. Directors have a
continuing duty to update any changes to these conflicts.
Directors’ indemnity
The Articles of the Company contain an indemnity in favour
of the Directors, which is a Qualifying Third Party Indemnity
within the meaning of s.234 of the Companies Act 2006 and
is in force at the time of the approval of this Annual Report
and Accounts. Directors of subsidiary undertakings are also
subject to this Qualifying Third Party Indemnity.
In addition, each Director of the Company has entered into a
Deed of Indemnity with the Company, which operates only
in excess of any right to indemnity that a Director may enjoy
under any such other indemnity or contract of insurance. The
Company has also arranged appropriate insurance cover in
respect of legal action against its Directors and officers.
Share capital
As at 31 March 2021, the Company’s issued share capital
consisted of 89,455,915 ordinary shares of 5p each (no shares
are held in treasury).
Details of movements in the Company’s issued share capital
can be found on page 170 in note 29 to the Group financial
statements.
Restrictions on transfer of securities in the
Company
There are no restrictions on the transfer of securities in the
Company, except that certain restrictions may from time
to time be imposed by laws and regulations (for example,
insider trading laws such as the Market Abuse Regulation)
and pursuant to the Listing Rules of the Financial Conduct
Authority, whereby certain employees of the Company
require the approval of the Company to deal in the
Company’s ordinary shares. The Company is not aware of
Annual Report and Accountsfor the year ended 31 March 2021 any agreements between holders of securities that may
result in restrictions on the transfer of securities.
Rights and obligations attaching to shares
Subject to the Articles, the Companies Act 2006 and other
Shareholders’ rights, shares in the Company may be issued
with such rights and restrictions as the Shareholders may by
ordinary resolution decide, or, if there is no such resolution,
as the Board may decide, provided it does not conflict with
any resolution passed by Shareholders.
The rights attached to any class of shares can be amended
if approved, either by 75% of Shareholders holding the
issued shares in the class by amount, or by special resolution
passed at a separate meeting of the holders of the relevant
class of shares.
Every member and every duly appointed proxy present at
a general meeting or class meeting has, upon a show of
hands, one vote and every member present in person or by
proxy has, upon a poll, one vote for every share held.
annually, and a special resolution will be proposed at the
2021 annual general meeting to renew it. The Directors will
only purchase the Company’s shares in the market if they
believe it is in the best interest of Shareholders generally.
Change of control
Details of the Group’s borrowing facilities are provided in
the Finance review section of the Strategic report on page
38. These agreements contain a change of control provision,
which may result in the facility being withdrawn or
amended upon a change of control of the Group. The Group
is party to a number of commercial agreements which, in
line with industry practice, may be affected by a change of
control following a takeover bid. There are no agreements
between the Company and its Directors or employees
providing for compensation for loss of office or employment
which occurs because of a takeover bid.
Political donations
There were no political donations during the year (2019/20: nil).
No person holds securities in the Company carrying special
rights with regard to control of the Company.
Auditor and disclosure of information to
auditor
Substantial shareholdings
As at 31 March 2021, the Company had been notified of, or
was aware of, the following major shareholdings equal to, or
greater than, 3% of the issued share capital of the Company:
10,973,504 12.27%
Aberdeen Standard Investments
7.34%
6,569,057
Blackrock
5.25%
4,700,000
Kempen Capital Management NV
4,319,549 4.83%
Franklin Templeton Investments
4,260,000
4.76%
Montanaro Investment Managers
4,000,000 4.47%
Canaccord Genuity Wealth Mgt
4.25%
Charles Stanley
4.21%
Legal & General Investment Mgt
Swedbank Robur
3.02%
As at 1 June 2021, the Company had been notified of, or was
aware of, the following shareholders holding 3% or more of
the issued share capital of the Company:
3,803,431
3,763,933
2,700,000
Holdings
of ordinary
shares (5p)
% of
issued
share
Shareholder
capital
10,811,513 12.09%
Aberdeen Standard Investments
6.93%
6,201,884
Blackrock
5.37%
4,800,000
Kempen Capital Management NV
4,319,549 4.83%
Franklin Templeton Investments
4,257,985 4.76%
Montanaro Investment Managers
4,000,000 4.47%
Canaccord Genuity Wealth Mgt
3,755,986 4.20%
Legal & General Investment Mgt
4.16%
Charles Stanley
3,717,772
3.91%
Franklin Templeton Fund Management 3,500,000
3.11%
2,777,630
Swedbank Robur
PricewaterhouseCoopers LLP have indicated their
willingness to continue in office and a resolution to appoint
them will be proposed at the annual general meeting. In the
case of each Director in office as at the date of this report:
■ so far as the Director is aware, there is no relevant audit
information of which the Group and Company’s auditors
are unaware; and
■ they have taken all the steps that they ought to have
taken as a Director in order to make themselves aware
of any relevant audit information and to establish that
the Group and Company’s auditors are aware of that
information.
Annual General Meeting
The Notice of the annual general meeting to be held at
11.00am on Thursday 29 July 2021 will be sent to Shareholders
separately from this report. The venue for the meeting is
The Technology Centre, Surrey Research Park, 40 Occam
Rd, Guildford GU2 7YG. Details of the arrangements for that
meeting will be as set out in the Notice for that meeting.
Going concern
For the reasons explained in the Viability Statement on page
46, the Directors continue to adopt the going concern basis
in preparing this Annual Report and Accounts.
By order of the Board
Authority to purchase own shares
At the annual general meeting held on 19 August 2020,
Shareholders authorised the Company to purchase in
the market up to 10% of its issued share capital (8,945,591
ordinary shares) and, as at 31 March 2021, all of this authority
remained in force and unused. This authority is renewable
Greg Davidson
Group General Counsel & Company Secretary
3 June 2021
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey GU2 7AH
Registered number: 02008246
93
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report DIRECTORS’
REMUNERATION
REPORT
2020/21 key achievements
■ Consultation with the Company’s largest 22
Shareholders in relation to the remuneration
policy to be put to Shareholders for approval
at the 2021 annual general meeting
■ Consideration of the impact of COVID-19 on
remuneration outcomes for 2020/21 and our
approach to setting pay in 2021/22
■ Setting of appropriate incentive measures
and targets for Executive Directors and senior
management
■ A review of other remuneration-related items
within the UK Corporate Governance Code and
the latest views from investors and proxy voting
agencies
■ Oversight of wider workforce remuneration
■ Consideration of gender pay gap data
Key areas of focus in 2021/22
■ Review the competitiveness of remuneration
for Executive Directors and senior management
and its alignment with strategy
■ Set incentive targets and determine incentive
outcomes for Executive Directors and senior
management
■ Keeping abreast of corporate governance and
regulatory developments
■ Monitoring of performance against all personal
objectives, including in particular the sustainability
/ ESG measures included in the objectives for
the Executive Directors and Group Executive
Committee
“ I have been hugely impressed
by the extraordinary
commitment of everyone at
discoverIE and, in particular,
the flexible approach to the
challenging and changing
conditions presented by the
pandemic in order to serve
customers and protect safety.”
Tracy Graham
Chair of the Remuneration Committee
ANNUAL STATEMENT
Information not subject to audit
Member
Tracey Graham (Chair)
Malcolm Diamond
Bruce Thompson
Clive Watson
Member
Since
2016
2017
2018
2020
The Committee consults with the Group Chief
Executive who may attend meetings by invitation of
the Committee Chair, although he is not involved in
deciding his own remuneration. The Group Company
Secretary acts as Secretary to the Committee.
Details of individual Directors’ attendance
can be found on page 78
Dear Shareholder,
On behalf of the Board, it is my pleasure to present
our Directors’ Remuneration Report for the year ended
31 March 2021. This report comprises:
■ This Annual Statement which summarises the work
of the Remuneration Committee (the ‘Committee’)
in 2020/21.
■ The revised Directors’ Remuneration Policy (the
‘Policy’) which sets the parameters for how our
Directors will be remunerated going forward and
which will take effect from the date of our 2021 annual
general meeting, subject to Shareholder approval.
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discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
■ The Annual Report on Remuneration which provides (i)
details of the remuneration earned by Directors and the
link between Company performance and pay in the year
ended 31 March 2021 and (ii) how we intend to implement
the new Policy in 2021/22.
This has been a busy year for the Committee as we set and
evaluated pay in the context of the disruption caused by
the global pandemic. Alongside this, we embarked on a
review of Directors’ remuneration as the policy approved
by Shareholders in 2018 approached the end of its three-
year life. This review involved a comprehensive shareholder
consultation exercise with Shareholders holding 74% of our
issued share capital and I am grateful for the helpful and
constructive feedback received.
In addition as part of the Board’s commitment to wider
societal matters this year we introduced a sustainability
component into all Executive Directors’ and senior leaders’
personal objectives.
Business performance and resulting
remuneration outcomes for the year ending
31 March 2021
Throughout 2020 I was hugely impressed by the
extraordinary commitment of all colleagues at discoverIE.
The immediate and flexible approach to the challenging
and changing conditions presented by the pandemic,
to serve customers and protect colleague safety, was a
testament to the global business working successfully
together.
During the year, the Committee implemented the
Company’s remuneration policy, which had been approved
at the 2018 annual general meeting. All decisions made
were within the policy framework.
The Group experienced disruption to the business
particularly during the first half of FY 2020/21 as a result
of the outbreak of COVID-19 and took active measures to
protect the well-being of our employees, with changes to
create socially distanced operating procedures and shift
patterns for those in manufacturing and operations. Many
office based staff switched to home working for a period.
At the same time employees were focussed on minimising
supply disruption to customers.
As part of our cash preservation measures, the Board and
Group Executive Committee took a 20% reduction in fees
and base salaries for a period of three months, the Group
was granted a certain level of state support and the Board
decided that no final dividend would be declared for FY
2019/20. A small number of staff were placed on furlough for
a limited period of time.
As the year progressed, the Group’s cash position remained
strong and during the second half trading performance
improved significantly with the Group returning to order
growth, and by the end of the year sales growth. As a
result, the Company resumed dividends, paying an interim
dividend in January 2021, and the Company has since repaid
all UK government support monies received.
Performance for the year as a whole was very resilient, with
the Company delivering £35.2m in underlying operating
profit, 5% lower than the prior year and an operating cash
flow of £49.7m, up 26% on the prior year. Key to these results
was the organic trading which at -6% was considerably better
than the wider market, along with operating efficiencies.
There were a number of achievements which we expect to
build value over the longer term. You can read more detail in
the Strategic report on pages 02 to 69.
Annual bonus
The annual bonus for the Executive Directors for FY 2020/21
was based on operating profit targets (56%), simplified
working capital (24%) and non-financial objectives (20%).
Given the impact of the pandemic on the business in the
early part of the 2020/21 financial year, the profit targets
were set later than usual to provide greater visibility on the
short-term outlook. As a result of the delay, the Committee
decided to halve the potential profit element of the bonus,
resulting in a reduced bonus opportunity for the year of 90%
of salary (from 125%) for the Group Chief Executive and 72%
of salary (from 100%) for the Group Finance Director.
Based on the strong performance during the year in the
circumstances, the profit performance was just above the
maximum target, the Simplified Working Capital target was
met in full and non-financial objectives were determined
to have been substantially met (resulting in an 80% payout
for this element). This performance would have resulted
in bonuses of 94% of the reduced maximum (or £396,741
for the Group Chief Executive and £213,900 for the Group
Finance Director).
While the Committee believes these outcomes are a fair
reflection of the financial and operational performance of
the Company during 2020/21, the Executive Directors felt
that bonuses should be adjusted to reflect the reduced
salaries received during the year (i.e., net of the voluntary
20% reduction applied for three months of the financial
year) and no higher than those earned for FY 2019/20 and
therefore proposed that bonuses were reduced so that they
would be c.8% lower than the prior year.
Innovative Electronics
www.discoverIEplc.com
Stock Code: DSCV
95
Other InformationFinancial StatementsCorporate GovernanceStrategic Report
DIRECTORS’
REMUNERATION
REPORT
The Committee commended and accepted management’s proposal and, therefore, reduced the bonus outcomes above by
a further 16% and 17% for the Group Chief Executive and Group Finance Director respectively, resulting in awards of c.75% and
c.60% of the salary paid during the year to the Group Chief Executive and Group Finance Director respectively for FY 2020/21.
The table below sets out a summary of the adjustments applied to the FY 2020/21 annual bonus.
Group Chief
Executive
Group Finance
Director
Maximum bonus
opportunity
£583,443
125% of salary
£310,000
100% of salary
Bonus opportunity
following reduction
to the operating
profit element
Actual formulaic
outcome following
reduced profit
element
Reduction to reflect
lower salary (20%
for three months)
Reduction to
produce outcome
8% lower than 2020
Executive Director voluntary reductions
£420,079
£396,741
£376,904
£332,796
£223,200
£213,900
£203,205
£177,680
In line with the remuneration policy, 20% of the bonus for the Group Chief Executive will be delivered in deferred share
awards. Further details of the bonus for 2020/21 are set out in the Annual Report on Remuneration.
Long term incentives vesting
The Group Chief Executive and Group Finance Director
received awards under the LTIP in March 2018 that were based
on absolute TSR, relative TSR and EPS performance criteria.
■ Relative TSR – discoverIE ranked in the top 10% of the TSR
peer group, thereby achieving this element in full
■ Absolute TSR – discoverIE’s TSR of 79.3% over the period
was above CPI + 30%, thereby achieving this element in full
■ EPS – a CAGR of 5.3% over the period from FY18 to FY21
led to 27.7% of this element vesting
This performance has resulted in 75.9% of the LTIP awards
granted in March 2018 vesting. The Committee believes this
vesting outcome is warranted and reflective of the strong
performance of the Company and, therefore, no discretion
has been applied to adjust the formulaic outcomes. These
shares will be subject to a two-year holding period before
they become exercisable.
2021 Directors’ Remuneration Policy
Background, business and remuneration context
Since 2009, discoverIE has transformed into a designer,
manufacturer and supplier of customised electronic
components and sub-assembly units, focusing on four high
quality, growth target markets which now account for 68%
of Group sales and this is expected to continue to rise.
With a focus on delivering sustainable long-term growth
with lower cyclicality, the Group has increased electronics
revenues from £120m in 2010 to approaching £500m today,
from loss making to underlying EBITDA of £51m in FY20.
Over this period, the Group made 19 acquisitions for a total
consideration of £274m and disposed of 4 non-core legacy
businesses for £12m. Of the acquisitions, £135m (49%) was
funded with new equity, c.£75m (27%) self-funded through
internal cash flow and disposal proceeds and the remainder
(c.£50m) through bank debt. The business has become
considerably more international and complex.
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discoverIE Group plc
Nick Jefferies joined the Group in January 2009 when
the Group’s enterprise value was £6m and Simon Gibbins
was appointed Finance Director the following year. As
at the end of the financial year ending 31 March 2021,
the enterprise value was c.£650m, and over this period
c.£430m of incremental equity value has been generated
for Shareholders with the Company transitioning from the
FTSE Fledgling index through to the upper quartile of the
FTSE SmallCap. The Group now employs c. 4,400 people
and operates internationally with principal operating units
located in Continental Europe, the UK, China, Sri Lanka, India
and North America. The current management team has
overseen this extraordinary transformation of the Company.
discoverIE has been one of the best performing companies
in the FTSE All-Share over the period of their tenure.
The Committee is mindful of the need to motivate and
retain this successful team and is proposing a revised policy
that it believes is competitive and fair and recognises the
achievements set out above. While we are not looking to
reward for past achievements, we believe it is important
that the Executive Directors are rewarded appropriately for
future delivery.
The primary aims of the proposed changes to the new
policy are therefore to ensure that Executive Directors’
remuneration is:
■ aligned with discoverIE ’s strategy at this stage of its
development and support the business’s medium and
long-term plans;
■ aligned with practice internally and externally;
■ competitive and fair against companies of our size and
geographical complexity;
■ focused on delivering long-term sustainable returns; and
■ compliant with Shareholders’ latest views on executive
pay and the requirements of the 2018 UK Corporate
Governance Code.
Annual Report and Accountsfor the year ended 31 March 2021 Proposed changes to remuneration
Following a comprehensive consultation exercise with
our largest shareholders, the Committee is proposing the
following changes:
■ The annual bonus opportunities to be 150% of salary
for the Group Chief Executive and 125% for the Group
Finance Director (previously 125% and 100%). The Policy
for target bonus will be reduced from 60% of maximum
to 50% of maximum. Bonus deferral will apply to all
Executive Directors and not just the Group Chief
Executive as was previously the case.
■ The 2021 LTIP grant levels to be set at 150% of salary for
the Group Chief Executive and 135% of salary for the
Group Finance Director (previously 135% and 100%). The
Policy limit to be increased to 175% of salary although
there is no current intention to make grants at this level.
The Committee understands that the resulting proposed
levels are in line with award levels in similar sized companies
and not higher than the median for companies of our size.
For the avoidance of doubt, we regard market practice
as one input only of several, but when we look at the
competitiveness of pay, we look at total target, maximum
and realised remuneration.
■ The Group Chief Executive’s pension contribution of
15% of salary will be reduced to the workforce level from
1 January 2023 (currently, 6.5% of salary).
■ A 250% of salary shareholding guideline will continue
to apply for the current Executive Directors and a two-
year post cessation shareholding guideline has been
introduced. A 200% of salary shareholding guideline will
apply for new appointments, in line with typical market
practice in this area.
■ The LTIP rules are being updated to include enhanced
malus and clawback provisions and dividend equivalent
provisions covering dividends paid in the vesting and
holding periods.
■ The recruitment policy has been amended so that the
ability to grant 300% of salary LTIP awards to new recruits
has been removed with limits now in accordance with the
normal policy limit (i.e., up to 175% of salary going forward).
These steps bring the Company into line with good practice
in these areas and enhances alignment with employees and
Shareholders.
Application of policy in 2021
The Committee had been planning to increase Executive
Directors’ salaries in line with the workforce at the start of the
2020/21 financial year. However, with COVID-19 challenges
facing the Company, the Committee determined that
Executive Directors should not receive a salary increase in
2020/21 and the Board and Group Executive Committee
took a voluntary 20% salary reduction for three months from
1 June 2020. Employees in non-management production
positions received base salary increases in-line with inflation.
Following consultation with Shareholders, the Committee
has decided to increase the salaries of the Executive Directors
by 5% from 1 April 2021 in line with wider increases for high
performing members of the workforce. These increases will
be below the overall workforce increase for the two-year
period. The Committee considers the proposed increases
are appropriate and proportionate recognising the strong
performance of the Executive Directors and the Group.
The bonus measures will remain unchanged for FY 2021/22
although we have taken the opportunity to slightly amend
the weightings, resulting in the bonus being based on
operating profit targets (60%), Simplified Working Capital
(24%) and non-financial objectives (16%). This reweighting
results in the proposed increase in opportunity under the
new policy being subject to the financial measures. The
Committee has decided to remove absolute TSR from the
LTIP measures and so for the 2021 award, 50% will be based
on relative TSR and 50% on EPS growth. The EPS growth
targets have been increased from those applied last year
(4%p.a. to 10%p.a.) so that the threshold and maximum
targets are 5%p.a. and 12%p.a. respectively. Vesting of the EPS
element shall also be subject to an underpin requiring the
Committee to be satisfied with the Group’s annual rate of
return on capital employed (ROCE) over the measurement
period. Further details of the approach for 2021 can be found
on page 118 in the Annual Report on Remuneration.
Other key activities in the year ending
31 March 2021
During the year under review, the Committee held six formal
meetings. As well as the review of the remuneration policy,
the Committee also carried out the following activities:
■ Reviewed and approved the Executive Directors’
performance against financial and non-financial
objectives for the year ended 31 March 2020 to determine
the bonuses payable and reviewed performance against
the 2017 LTIP targets to determine vesting
■ Reviewed the Executive Directors’ expected performance
against the financial and non-financial objectives in the
annual bonus scheme for the year ended 31 March 2021
and the 2018 LTIP Awards
■ Determined salary increases for Executive Directors as
well as other GEC members for the forthcoming year
■ Reviewed and approved the annual bonus structure for
Executive Directors and senior management for the year
ending 31 March 2022
■ Implemented a deferred bonus scheme, in line with the
Company’s remuneration policy
There will be three remuneration related votes at the
forthcoming annual general meeting. The first is to approve
the directors’ remuneration report, the second to approve
the Directors’ Remuneration Policy and a third to approve
the new Long Term Incentive Plan rules. We hope that you
will support these resolutions.
Tracey Graham
Chair of the Remuneration Committee
3 June 2020
97
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report DIRECTORS’
REMUNERATION
REPORT
Remuneration at a glance
When determining the Remuneration Policy, the Committee has
ensured that the Directors’ Remuneration Policy and practices are
consistent with the six factors set out in Provision 40 of the Corporate
Governance Code:
CLARITY
Our Directors’ Remuneration
Policy is well understood by
our senior executive team
and the Company invited its
principal Shareholders and
shareholder representative
groups to consult on the
updated Remuneration Policy
and received good feedback.
This report sets out the
remuneration arrangements
for the Executive Directors in a
clear and transparent way.
PREDICTABILITY
Our incentive plans are
subject to individual caps,
with our share plans also
subject to standard dilution
limits. The potential value and
composition of the Executive
Directors’ remuneration
packages at below threshold,
target and maximum
scenarios are provided in the
relevant policy.
SIMPLICITY
The Committee is mindful
of the need to avoid overly
complex remuneration
structures which can be
misunderstood and deliver
unintended outcomes.
Therefore, a key objective
of the Committee is to
ensure that our Directors’
Remuneration Policy and
practices are straightforward
to communicate and operate.
The Committee’s approach
to performance measures
has always been that they
must be understandable for
participants in the schemes
in order to ensure they are
effective.
PROPORTIONALITY
There is a clear link between
individual awards, delivery of
strategy and our long-term
performance. The Committee
has discretion to override
formulaic results to ensure
that they are appropriate
and reflective of overall
performance.
RISK
Our Directors’ Remuneration
Policy has been designed to
ensure that inappropriate
risk-taking is discouraged,
including the use of a blend
of financial, non-financial and
shareholder return targets.
Shares play a significant role
in our incentive arrangements;
this includes the deferral
under the annual bonus;
malus/clawback provisions
operate within our incentive
plans.
ALIGNMENT
TO CULTURE
The variable incentive schemes
and performance measures are
designed to be consistent with
the Group’s purpose, values and
strategy.
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discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2021
Executive Directors
In this section, we show the link between corporate performance for the year
under review and the remuneration outcomes for the Executive Directors.
The key features of the Executive Directors’ remuneration for the year ended
31 March 2021 are also shown.
Nick Jefferies
FY21
FY20
£1,717k
£2,093k
Fixed
remuneration
Bonus
£516k
£333k
Fixed
remuneration
Bonus
£540k
£362k
LTIPs
£868k
LTIPs
£1,192k
Simon Gibbins
FY21
FY20
£944k
£1,057k
Fixed
remuneration
Bonus
£324k
£178k
LTIPs
£442k
Fixed
remuneration
Bonus
LTIPs
£339k
£193k
£525k
Corporate performance
for the year
Revenue
£454.3m
FY21
FY20
£454.3m
£466.4m
Underlying
Operating Profit
£35.2m
FY21
FY20
Underlying EPS
26.0p
FY21
FY20
£35.2m
£37.1m
26.0p
30.2p
www.discoverIEplc.com
Stock Code: DSCV
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DIRECTORS’
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REPORT
Remuneration outcomes for the Executive Directors for the year ended 31 March 2021
Salary FY21
Bonus (£k and as % of salary)
Taxable benefits
Pension benefits/allowance
Value of LTIP vesting
Single figure of total remuneration
Nick Jefferies
£000
Simon Gibbins
£000
75%
443
333
11
62
868
1,717
60%
295
178
12
18
442
945
The annual bonus for the year ending 31 March 2021 was based on the achievement against financial and non-financial
measures. The bonus outcomes for the year were 75% of salary for the Group Chief Executive and 60% for the Group Finance
Director. The above values reflect the value of the bonus earned. In accordance with the Remuneration Policy, 20% of Nick
Jefferies’ bonus will be in the form of deferred shares.
LTIP awards were granted to both executive directors on 31 March 2018. These awards were based on absolute and relative
TSR conditions, and EPS performance, measured for the three-year period ending 31 March 2021. The Company’s TSR
performance, being in the top 10% of the TSR peer group, and with an Absolute TSR growth of 79.4%, each over that three-
year period, has resulted in full vesting of those elements of award. EPS growth for the period FY18 to FY21 was 5.3% CAGR,
which resulted in 27.7% of that element of the award vesting. As a result, 75.9% of the total 2018 LTIP award vested.
The values of these awards at the time of vesting are shown in the above table. Awards are subject to a two-year holding period.
Application of the remuneration policy for the year ending 31 March 2022
The table below sets out a summary of how the remuneration policy will apply during 2021/22 subject to approval of the new
Directors’ Remuneration Policy at the 2021 annual general meeting.
Possible remuneration outcomes for the Executive Directors for the year ended 31 March 2022 are shown on page 108.
Remuneration element
Remuneration for year ending 31 March 2022
Base salary
■ Salaries for FY 2021/22 are:
− £490,091 for the Group Chief Executive.
− £325,500 for the Group Finance Director.
Pension
■ Cash equivalent of 15% of salary for Group Chief Executive and 6.5% of salary for Group
Finance Director.
■ Any new or promoted Executive Directors will have a pension contribution of 6.5% of
salary, which is in line with the majority of the UK workforce.
Annual bonus
■ The maximum bonus opportunity will be 150% of salary for Group Chief Executive and
125% of salary for Group Finance Director.
■ Target bonus opportunity is 50% of maximum.
■ Performance metrics are based 84% on financial measures and the remaining 16% will
be based on strategic objectives. These include non-financial objectives relating to
environmental, social and governance (“ESG”) matters.
■ Mandatory deferral of 20% of any bonus earned into discoverIE shares for a period of
three years.
LTIP
■ LTIP awards for FY 2021/22 will be made in line with policy, with grant sizes of 150% of
salary for the Group Chief Executive and 135% of salary for the Group Finance Director1.
■ Performance metrics and targets will be based 50% on underlying EPS growth and
50% on Relative TSR. Vesting of the EPS element shall also be subject to an underpin
requiring the Committee to be satisfied with the Group’s annual rate of return on capital
employed (ROCE) over the measurement period.
Shareholding guidelines
■ A shareholding guideline of 200% of salary applies for the Group Chief Executive and
Group Finance Director, to be achieved within five years and 250% after seven years
1. Additional awards may be granted to the Group Chief Executive and Group Finance Director in return for their bearing the Company’s
liability to Employer’s National Insurance arising on the exercise of such grants made to them above. The additional award ensures that the
Group Chief Executive and Group Finance Director are in a neutral position on an after-tax basis, assuming no change in the tax rate.
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Annual Report and Accountsfor the year ended 31 March 2021 DIRECTORS’ REMUNERATION POLICY
Information not subject to audit
This part of the Directors’ Remuneration Report sets out the remuneration policy which will be put forward for shareholder
approval at the Annual General Meeting on 29 July 2021 and, if approved, will take formal effect from that date. It has been
prepared in accordance with the Companies Act 2006 (the “Act”) and the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2008.
The Committee has reviewed the Executive Directors’ remuneration packages to ensure that they reflect the Company’s own
particular circumstances and are aligned with the Company’s key strategic objectives, as set out in the Strategic Report, and
with the long-term interests of its Shareholders.
Key objectives of our reward policy
As described in the Annual Statement, the Remuneration Committee undertook a comprehensive review of the Executive
Directors’ remuneration arrangements and engaged with the Company’s largest shareholders on the proposed changes.
The primary aims of the proposed changes to the new policy are to deliver a remuneration package that is:
■ Aligned with discoverIE ’s strategy at this stage of its development and supports the business’s medium and long-term plans
■ Consistent with practice internally and externally
■ Competitive and fair compared against companies of our size and geographical complexity
■ Focused on delivering long-term sustainable returns
■ Compliant with shareholders’ latest views on executive pay and the requirements of the 2018 UK Corporate Governance Code
■ Able to attract and retain high calibre Executive Directors and senior managers in a challenging and competitive business
environment
■ Reduces complexity, delivering an appropriate balance between fixed and variable pay.
When implementing the policy, the Committee:
■ Takes account of pay and employment conditions elsewhere in the Group
■ Ensures that incentive arrangements encourage responsible behaviour in all aspects of the Company’s business,
including financial, social, environmental and governance aspects; do not encourage excessive risk-taking; and are
compatible with the Company’s risk policies and procedures. The Committee has the discretion to take these factors into
account when adjudicating bonus and LTIP outcomes
■ Enters into open dialogue and consults with key Shareholders, when looking to make material changes to the
remuneration policy
■ Considers market practice in terms of the structure and levels of executive remuneration.
Key changes to the 2021 Directors’ Remuneration Policy
Details of the key changes proposed in the 2021 policy can be summarised as follows:
■ Increase in incentive opportunity – following a comprehensive Shareholder consultation exercise the annual bonus and
LTIP individual limits have been increased. The maximum bonus opportunity is 150% of salary per annum for the Group
Chief Executive and 125% of salary for other Executive Directors and the maximum LTIP award grant value is 175% of salary
per annum
■ Pension contributions for all directors will be aligned with the rate applying for the majority of the UK workforce from 1
January 2023
■ Bonus deferral has been introduced for all Executive Directors. 20% of any bonus earned will be deferred in shares for
three years
■ Annual bonus and LTIP performance metrics – greater flexibility has been introduced on the choice of performance
metrics and their weightings
■ A post-cessation shareholding guideline has been introduced, requiring Executive Directors to retain shares for two years
after ceasing to be a director
■ Malus and clawback provisions have been strengthened by including additional triggers
■ Recruitment Policy – the ability to grant a new Executive Director up to 300% of salary in performance shares has been
removed so that any awards granted (excluding those for the purpose of a buyout) are subject to the limits set out in the
remuneration policy table.
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Remuneration policy table
Element, purpose
and link to strategy
Operation
Maximum
Opportunity
Performance
targets
Salaries are normally reviewed
annually with increases
typically effective from 1 April.
There is no prescribed
maximum or maximum
increase.
Although there are no formal
performance conditions,
any increase in base salary
is only implemented after
careful consideration of
individual contribution and
performance and having due
regard to the factors set out
in the ‘Operation’ column of
this table.
However, any percentage
increases will ordinarily be in
line with those across the wider
workforce.
Salary increases may be higher
in exceptional circumstances,
such as the need to retain a
critical executive, or an increase
in the scope of the executive’s
role (including promotion to a
more senior role) and/or in the
size of the Group.
Not applicable
There is no prescribed
maximum as insurance cover
can vary based on market rates.
The maximum level of
participation in all-employee
share plans is subject to the
limits imposed by the relevant
tax authority from time to time.
Base salary
To attract and retain
quality staff.
Benefits
To help retain
employees and
remain competitive in
the marketplace.
In determining Executive
Directors’ salaries, the
Remuneration Committee
takes into account:
■ Each Director’s role,
competence, experience
and performance;
■ Average change in broader
workforce pay; and
■ Total organisational salary
budgets.
Salaries are also benchmarked
against companies of
a comparable size and
complexity and against
companies which operate
internationally, in similar
sectors.
Directors, along with other
senior UK executives, may
receive certain benefits
such as a car allowance, life
assurance and critical illness
cover, and family medical
insurance.
Any reasonable business-
related expense (and any tax
thereon) can be reimbursed
if determined to be a taxable
benefit.
Executive Directors will be
eligible to participate in any
all-employee share plan
operated by the Company,
on the same terms as other
eligible employees.
For external and internal
appointments or relocations,
the Company may pay certain
relocation and/or incidental
expenses as appropriate.
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discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Element, purpose
and link to strategy
Operation
Maximum
Opportunity
The Group Chief Executive
currently receives a Company
contribution of 15% of base
salary which will reduce to the
contribution rate applying to
the majority of the UK workforce
rate in place at the time
(currently 6.5% of salary) from 1
January 2023.
For the Group Finance Director
and any new Executive Directors
appointed to the Board, the
pension contribution will be in
line with the majority of the UK
workforce.
The maximum bonus
opportunity is 150% of salary for
the Group Chief Executive and
125% of salary for other Executive
Directors. Maximum bonus is
payable for significant over-
achievement of financial and
non-financial bonus objectives.
Typically, no more than 50%
of the maximum bonus
opportunity will be payable for
achieving target performance.
Pension
To facilitate long-term
savings provisions.
The Company operates a
defined contribution pension
scheme.
Executive Directors may take
a cash allowance in lieu of
pension contributions
Annual bonus
To reward the
achievement of
annual financial and
strategic business
targets.
Bonus is based on
performance targets
determined and reviewed
by the Committee and are
selected to be relevant for the
year in question.
Any payment is discretionary
and the bonus payable is
determined by the Committee
after the financial year-end,
based on performance against
these targets.
Financial objectives are
updated to reflect acquisitions,
disposals and currency
movements during the year.
20% of any bonus earned is
deferred into discoverIE shares
for a period of three years.
Where applicable, dividends
may accrue on deferred bonus
shares.
Malus and clawback provisions
apply to cash and deferred
elements of the bonus,
applying in the event of
material misstatement of the
Company’s financial results,
an error of calculation or in the
event of serious misconduct,
material reputational damage
or corporate failure.
Performance
targets
Not applicable
The Committee sets
performance measures and
targets that are appropriately
stretching each year, taking
into account key strategic
and financial priorities
and ensuring there is
an appropriate balance
between incentivising
Executive Directors to meet
targets, while ensuring they
do not drive unacceptable
levels of risk or inappropriate
behaviours.
Financial measures may
include (but are not limited
to) EBIT and Simplified
Working Capital. Non-
financial measures may
include strategic measures
directly linked to the
Company’s priorities.
A graduated scale of
targets is normally set for
each measure, with no
payout for performance
below a threshold level of
performance.
The Committee has
discretion to amend the
pay-out should any formulaic
outcome not reflect the
Committee’s assessment of
overall business or individual
performance.
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Element, purpose
and link to strategy
Operation
Maximum
Opportunity
Performance
targets
Long Term
Incentive Plan
To motivate
Executives to deliver
Shareholder value
over the longer term.
The maximum award in respect
of any one financial year is an
award over shares of market
value at grant of 175% of salary.
The 2021 LTIP grant level for the
Group Chief Executive is 150% of
salary and 135% of salary for the
Group Finance Director.
The Committee may increase
the grant size of an LTIP
award on grant (subject to
the maximum award limit) if
the award terms include that
participants bear the cost of the
Company’s liability to employer’s
National Insurance arising on
the settlement of their awards.
The increased award size
ensures that the participants are
in a neutral position on an after-
tax basis, assuming no change
in tax rates.
The Company is committed
to remaining within the
Investment Association’s 10%
dilution limit.
Performance metrics reflect
the Group’s strategic goals
and milestones.
The performance conditions
may include, and are
not limited to, relative or
absolute TSR, earnings
per share growth, return
based measures, strategic
measures and ESG-related
objectives.
The Committee retains
discretion to set alternative
weightings or performance
measures for awards granted
over the life of the policy.
Threshold performance
will normally result in no
more than 25% of the award
vesting.
The Committee retains
discretion to adjust vesting
levels taking into account
such factors as it considers
relevant, including, but
not limited to, the overall
performance of the
Company or the relevant
Participant who holds the
Award.
Awards of conditional shares
or nil-cost options are typically
granted annually, which vest
after three years dependent
on the achievement of
performance conditions and
continued service.
Vested awards are subject to a
two-year post vesting holding
period (net of tax, if applicable)
in respect of their vested
awards.
Dividend equivalents may be
paid in respect of awards to the
extent they vest by reference
to dividends declared during
the award’s vesting period and
holding period.
Malus and clawback may
apply to vested and unvested
LTIP awards in the event of
material misstatement of the
Company’s financial results,
an error of calculation or in the
event of serious misconduct,
material reputational damage
or corporate failure.
The Company’s share
schemes are funded through
a combination of shares
purchased in the market
and newly issued shares, as
appropriate. The Company
monitors the number of shares
issued under the schemes and
their impact on dilution limits.
Shareholding
guidelines
To further align the
interests of Executives
with those of
Shareholders.
Executive Directors are
expected to accumulate
the required shareholding
requirement.
The current Executive Directors
are required to build up and
hold shareholdings to the value
of 250% of salary.
Not applicable.
Shares held which are no
longer subject to performance
conditions count towards the
requirement (on a net of tax
basis, if applicable).
Executive Directors are
required to retain at least
50% of their net of tax vested
share awards until the in-
employment shareholding
guideline is met.
Any new Executive Directors
appointed will be required to
build up and hold shareholdings
to the value of 200% of salary.
Post cessation: Executive
Directors are normally required
to hold shares at a level equal to
the lower of their shareholding
at cessation and 200% of salary,
for two years post-employment,
from share awards granted
after the date of approval by
Shareholders of this policy. This
excludes any shares vesting
from share plan awards made
before such approval and shares
purchased with own funds.
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discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Notes to the remuneration policy table
Performance conditions and target setting
Each year, the Committee will determine the weightings, measures and targets as well as timing of grants and payments
for the annual bonus and LTIP plans within the approved remuneration policy and relevant plan rules (or documents). The
Committee considers a number of factors which assist in forming a view. These include, but are not limited to, the strategic
priorities for the Company over the short to long term, Shareholder feedback, the risk profile of the business and the
macroeconomic climate.
The current Annual Bonus Scheme is measured against a balance of profitability, cash management and the delivery of key
strategic areas of importance for the business. The profitability metric used for FY 2021/22 is EBIT and the cash management
metric is Simplified Working Capital.
The LTIP measures for the first grant under this policy will be assessed against EPS growth targets and relative TSR. These
measures were identified as those most relevant to driving sustainable bottom-line business performance, as well as
providing value for Shareholders.
Targets are set against the annual and long-term plans, taking into account analysts’ forecasts, the Company’s strategic
plans, prior year performance, estimated vesting levels and the affordability of pay arrangements. Targets are set to provide
an appropriate balance of risk and reward to ensure that, while being motivational for participants, maximum payments are
only made for exceptional performance.
Discretions and judgements
The Committee will operate the annual bonus plan and long-term incentive plan according to their respective rules and
ancillary documents. Consistent with market practice, the Committee has discretion in a number of respects in relation to
the operation of each plan. Discretions include:
■ who participates in the plan;
■ determining the timing of grants of awards and/or payments;
■ determining the quantum of an award and/or payment;
■ determining the extent of vesting;
■ how to deal with a change of control or restructuring of the Group;
■ whether an Executive Director or a senior manager is a good/bad leaver for incentive plan purposes and whether the
proportion of awards that vest do so at the time of leaving or at the normal vesting date(s);
■ how and whether an award may be adjusted in certain circumstances (e.g., for a rights issue, a corporate restructuring or
for special dividends);
■ what the weighting, measures and targets should be for the annual bonus plan and LTIP plans from year to year; and
■ the Committee also retains the ability within the policy to vary and/or adjust targets and/or set different measures or
weightings for the annual bonus plan and LTIP plans, if events occur that cause it to consider it appropriate to do so,
and, in the case of the LTIP, any amended performance conditions are not materially less challenging than the original
conditions would have been but for the events in question.
Any discretion exercised by the Committee in the adjustment of performance conditions will be fully explained to
Shareholders in the relevant report. If the discretion is material and upwards, the Committee will consult with major
Shareholders in advance.
All historical awards that have been granted before the date this policy came into effect and still remain outstanding
(including those detailed on page 114 of the Annual Report on Remuneration) and remain eligible to vest based on their
original award terms.
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Recruitment (and appointment) policy
The remuneration package for a new Executive Director would be set in accordance with the terms of the Company’s
approved remuneration policy in force at the time of appointment. Similar considerations may also apply where a Director is
promoted to the Board from within the Group.
Element
Base salary
Recruitment policy
New Executive Director appointments will be offered a salary in line with the existing
remuneration policy. The Committee will take into account a number of factors, including
the current pay for other Executive Directors, external market forces, the expertise, skills and
experience of the individual and current level of pay.
Where the Committee has set the salary of a new appointment at a discount to the market
level initially until proven, they may receive an uplift or a series of planned increases to bring
the salary to the appropriate market position over time.
Benefits
Benefits provision would be in line with normal policy.
Pension
Annual bonus
The Committee may agree that the Company will meet appropriate relocation costs and/or
incidental expenses as appropriate.
Pension contribution (or a cash allowance in lieu of contribution) provision will be no more
than the general workforce contribution rate in place at the time (currently 6.5% of salary).
Eligible to take part in the annual bonus, with a maximum bonus opportunity not in excess
of the limits set out in the policy.
Depending on the timing of the appointment, the Committee may deem it appropriate
to set different annual bonus performance conditions for the first performance year of
appointment.
Long Term Incentive
Plan
An LTIP award may be granted upon appointment but not in excess of the limits set out in
the policy.
An LTIP award may be made shortly following an appointment (assuming the Company is
legally permitted to do so).
Compensation for
forfeited remuneration
The approach in respect of compensation for forfeited remuneration in respect of a previous
employer will be considered on a case-by-case basis taking into account all relevant factors,
such as performance achieved or likely to be achieved, the proportion of the performance
period remaining and the form of the award.
The Committee retains the ability to make use of the relevant Listing Rule to facilitate the
“buy-out”. Any “buy-out” awards would have a fair value no higher than the remuneration
forfeited.
In the case of an internal appointment, any variable pay element awarded in respect of the
prior role would be allowed to pay out according to its terms, adjusted as relevant to take into
account the appointment.
Chairman and non-
executive directors
For the appointment of a new Chairman or Non-Executive Director, the fee arrangement
would be set in accordance with the approved Remuneration Policy.
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discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Notice period and payment for loss of office
It is the Company’s policy that Executive Directors should have service contracts incorporating a maximum notice period of
one year. However, it may be necessary occasionally to offer longer initial notice periods to new Directors. Under the terms
of their service contracts, any termination payments are not predetermined but are determined in accordance with the
Director’s contractual rights, taking account of the circumstances and the Director’s duty to mitigate loss. The Company’s
objective is to manage its exposure to the risk of a potential termination payment.
Non-Executive Directors have letters of appointment for a term of three years, subject to re-appointment by Shareholders at
each annual general meeting. In line with the UK Corporate Governance Code, they are generally renewed for no more than
nine years in aggregate. Non-Executive Directors are not eligible for payment on termination, other than payment to the end
of their contracts.
Name
Role
Date of original appointment
Expiry of current term
Malcolm Diamond
Chairman
1 November 2015
31 October 2021
Nick Jefferies
Group Chief Executive
26 November 2008
Simon Gibbins
Group Finance Director
10 June 2010
Tracey Graham
Non-Executive Director
1 November 2015
Bruce Thompson
Non-Executive Director
26 February 2018
Clive Watson
Non-Executive Director
2 September 2019
12 months by either
Director or Company
12 months by either
Director or Company
31 October 2021
25 February 2024
1 September 2022
Other than their service contracts, no contract of significance, to which any member of the discoverIE Group is a party and in
which a Director is or was materially interested, subsisted at the end of, or during, the year.
Termination payments for Executive Directors
On termination, the Company will normally make a payment in lieu of notice (‘PILON’) which is equal to the aggregate of the
base salary and cash equivalent of other benefits for the applicable notice period.
The Company may pay the PILON either as a lump sum or in equal monthly instalments, from the date on which the
employment terminates until the end of the relevant period. If alternative employment is commenced, for each month that
instalments of the PILON remain payable, the monthly amount paid may be reduced by the amount received from such
alternative employment.
If identified as a ‘good leaver’ for the purposes of the bonus plan, the bonus payout will be pro-rated based on the Committee’s
reasonable assessment of the achievement of the performance measures in respect of the relevant financial year.
The treatment of LTIP awards on termination will be in accordance with the plan rules and, where appropriate, at the
discretion of the Committee.
If identified as a ‘good leaver’ under the LTIPs and share option schemes’ rules, (including those good leavers identified as
being at the discretion of the Committee), outstanding awards may be exercised, normally pro rata for service up until the
date of leaving and subject to the outcome of the performance conditions, either on the normal release or on such earlier
date as the Committee may determine.
The Committee may also agree to make payments in respect of statutory employment claims, reasonable legal fees,
outplacement and accrued holiday or sick leave.
Change of control or restructuring
On a change of control, all LTIP awards will be released, subject to performance requirements and will ordinarily be prorated
according to completion of the vesting period. In line with market practice and the Plan rules, the final treatment of any
awards is subject to the discretion of the Committee.
There are no enhanced bonus provisions on a change of control.
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Comparison with remuneration policy for other employees
The Company’s approach to salary reviews is consistent throughout the Company with consideration given to responsibility,
experience, performance, salary levels in comparable organisations and the Company’s ability to pay.
Differing bonus arrangements (which are normally discretionary) operate elsewhere in the organisation and, subject to role,
employees are entitled to benefits such as healthcare, car allowance (or Company-funded vehicle), life assurance and critical
illness cover.
Fees for Non-Executive Directors
Fees for the Non-Executive Directors are determined on behalf of the Board by the Non-Executive Directors’ Remuneration
Committee. When determining fees, due regard is given to fees paid to Non-Executive Directors in other similarly-sized UK
quoted companies, the time commitment and the responsibilities of the roles. Non-Executive Directors cannot participate
in any of the Company’s share incentive schemes. As disclosed on page 110 of this Annual Report and Accounts, additional
fees, over and above the base fee payable to the Non-Executive Directors, are payable for chairing the Audit and Risk and
Remuneration Committees and for acting as Senior Independent Director.
Fees are normally reviewed annually to ensure that they reflect an individual’s time commitment and responsibilities.
External appointments
The Executive Directors are entitled to accept one appointment outside the Group, provided that the Chairman’s permission
is obtained in advance of accepting an appointment and specific approval is given by the Board. Neither of the Executive
Directors who served during the year held any non-executive appointments outside the Group.
Illustrations of the application of the Executive Directors’ remuneration policy
The bar charts below illustrate some possible outcomes of the application of the policy for the year ending 31 March 2022.
Group Chief Executive (£’000)
Group Finance Director (£’000)
£2,750
£575
£1,126
£2,045
£2,413
£2,750
£358
£672
£1,205
£1,424
0
0
0
£
’
£2,500
£2,250
£2,000
£1,750
£1,500
£1,250
£1,000
£750
£500
£250
£0
15%
36%
30%
16%
33%
36%
30%
100%
51%
28%
24%
0
0
0
£
’
£2,500
£2,250
£2,000
£1,750
£1,500
£1,250
£1,000
£750
£500
£250
£0
15%
31%
36%
16%
30%
53%
34%
29%
30%
25%
100%
Minimum On-target
Maximum
Max with
growth
Minimum On-target
Maximum
Max with
growth
Fixed
Annual Bonus
Long-term incentive
Share price growth
1. Minimum in the bar charts above is fixed remuneration only (i.e., salary, pension and benefits as disclosed in the single figure table).
2. Target assumes that 25% of the LTIP award vests (based on an award with a face value of 150% and 135% of salary for the Group Chief
Executive and Group Finance Director respectively) and bonuses have been earned at the target levels (75% of salary for the Group Chief
Executive and 62.5% of salary for the Group Finance Director).
3. Maximum assumes that the Long Term Incentive Plan (“LTIP”) award vests in full (based on an award with a face value of 150% and 135% of
salary for the Group Chief Executive and Group Finance Director) and the maximum bonus (150% and 125% of salary for the Group Chief
Executive and Group Finance Director) have been earned.
4. Maximum plus share price growth – this is based on the maximum scenario set out above but with a 50% share price increase applied to
the value of LTIP awards.
108
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Projected values do not take into account dividend accrual or additional awards granted as a result of any agreement by an
Executive Director to incur the Company’s liability to employers’ National Insurance.
Consideration of employment conditions elsewhere in the Group
The remuneration policy, which has been implemented for the current Executive Directors, is more weighted towards
performance-related pay than for other employees. The reason for this is to establish a clear link between remuneration
received by the Executive Directors and the creation of Shareholder value.
As mentioned on page 108 of this Annual Report and Accounts, when setting the policy the Committee takes account of pay
and employment conditions elsewhere in the Group, but has not used any remuneration comparison measures between
the Executive Directors and other employees.
Employee Engagement
As outlined on page 53 there are a range of employee engagement initiatives in place across the Group and, as part of this
employee engagement, there is the opportunity for employees to ask questions and provide feedback on the strategy of the
Company, including how this links to remuneration.
Consideration of Shareholder views
The Committee’s policy is to receive updates on the views of Shareholders and their representative bodies on best practice,
and take these into account. It seeks the views of key Shareholders on matters of remuneration in which it believes they
may be interested. This includes a comprehensive Shareholder consultation exercise undertaken with the Group’s largest
Shareholders in determining the changes applied to this Directors’ Remuneration Policy.
ANNUAL REPORT ON REMUNERATION
Information subject to audit
The Committee is responsible for considering and making recommendations to the Board on the remuneration of the
Executive Directors. In doing so, it reports to the Board on how it has discharged its responsibilities and operates within
agreed terms of reference.
The Committee also considers the recommendations of the Group Chief Executive with regard to the members of the Group
Executive Committee who are not Executive Directors, in determining their remuneration packages, including bonuses, incentive
payments, share options and other share-based awards. The Group Company Secretary provides administrative support.
The table below shows the total remuneration earned by executive directors for the year ended 31 March 2021 and the prior year.
Single total figure of remuneration for each Executive Director (audited)
Pension3
£000
Total Fixed
Remuneration
Benefits2
£000
Bonus4
£000
Salary1
£000
LTIP5
£000
Total Variable
Remuneration
Nick
Jefferies
Simon
Gibbins
FY21
FY20
FY21
FY20
443
467
295
310
11
11
12
11
62
62
18
18
516
540
324
339
333
362
178
193
868
1,192
442
525
1,201
1,554
620
718
Total
£000
1,717
2,093
944
1,057
1. Each of the Executive Directors voluntarily waived 20% of their base salary for the three-month period from June 2020 to August 2020.
2. Taxable benefits comprise car allowance (£9,000 each) and family medical insurance. The total value of benefits for 2021 were £11,148 and
£11,571 for Nick Jefferies and Simon Gibbins respectively.
3. Pension in the year under review for Nick Jefferies and Simon Gibbins was paid as cash in lieu of pension and was equal to 15% and 6.5% of
salary (minus NI contributions) respectively.
4. For performance in the year under review, a bonus of 75.1% and 60.3% of salary paid during the year is payable to Nick Jefferies and Simon
Gibbins, respectively. Further details can be found on pages 110 to 112. In accordance with the Remuneration Policy, 20% of Nick Jefferies’
bonus will be in the form of deferred shares.
5. 75.9% of the 2018 LTIP award granted to Nick Jefferies and Simon Gibbins on 31 March 2018 vested on 31 March 2021. Further details can be
found on page 112. Of the FY21 LTIP values shown in the table above, £369,514 of Nick Jefferies and £188,306 of Simon Gibbins, is attributed
to share price growth over the vesting period.
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Single total figure of remuneration for Non-Executive Directors (audited)
Basic fee2
Committee Chair fees
SID fee
Total
Malcolm Diamond
133,000
140,000
FY21
£
FY20
£
Richard Brooman1
Tracey Graham
Henrietta Marsh1
Bruce Thompson
Clive Watson
–
15,333
43,700
46,000
7,600
–
43,700
43,700
15,333
46,000
26,833
FY21
£
_
–
–
_
FY20
£
–
2,667
8,000
–
–
FY21
£
FY20
£
FY21
£
FY20
£
–
–
–
–
–
–
–
–
7,600
8,000
133,000
140,000
–
51,300
–
51,300
51,300
18,000
54,000
15,333
54,000
31,500
7,600
4,667
–
–
1. Stepped off the Board on 25 July 2019
2. Each of the Non-Executive Directors agreed to a 20% reduction in their base fees for the three-month period from June 2020 to August 2020.
Incentive outcomes for Executive Directors for the year ended 31 March 2021
Annual bonus in respect of performance for the year
The maximum bonus opportunity for the year under review was 125% and 100% of salary for the Group Chief Executive and
the Group Finance Director respectively. Annual bonuses for the year under review were based on operating profit targets
(56%), simplified working capital (24%) and non-financial objectives (20%). However, given the impact of the pandemic on the
business in the early part of the 2020/21 financial year, the profit targets were set later than usual to provide greater visibility
on the short-term outlook. As a result of the delay, the Committee decided to halve the potential profit element of the bonus,
resulting in a reduced bonus opportunity for the year of 90% of salary (from 125%) for the Group Chief Executive and 72% of
salary (from 100%) for the Group Finance Director.
Based on the strong performance during the year, the profit performance was just above the maximum target, the
Simplified Working Capital target was met in full and non-financial objectives were determined to have been substantially
met (resulting in an 80% payout for this element). This performance would have resulted in bonuses of 94% of the reduced
maximum (or £396,741 for the Group Chief Executive and £213,900 for the Group Finance Director).
While the Committee believes these outcomes are a fair reflection of the financial and operational performance of the Company
during 2020/21, the Executive Directors felt that bonuses should be adjusted to reflect the reduced salaries received during the
year (i.e., net of the voluntary 20% reduction applied for three months of the financial year) and no higher than those earned
for FY 2019/20 and therefore proposed the bonuses are reduced so that they are c.8% lower than the prior year. The Committee
commended and accepted management’s proposal and, therefore, reduced the bonus outcomes above by a further 16% and 17%
for the Group Chief Executive and Group Finance Director respectively, resulting in awards of c. 75% and c. 60% of salary during the
year to the Group Chief Executive and Group Finance Director respectively for FY 2020/21.
Further details, including the targets set and performance against each of the metrics, are provided in the tables below:
110
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Nick Jefferies (audited)
Group underlying EBIT (£m)
Payout1 (% of salary)
SWC
Payout1 (% of salary)
Individual objectives
Payout (% of salary)
Formulaic outcome (% of salary)
Formulaic outcome (% of max)
Adjusted actual payout (% of salary)
Adjusted actual payout (% of max)
Weighting
Threshold
56%
24%
20%
£29.8m
10%
27.0%
0%
Target
£32.2m
17.5%
24.0%
15%
Maximum
£34.6m
Actual
£35.2m
35%
21.0%
30%
35.0%
20.0%
30.0%
16.0%
20.0%
85.0%
68.0%
75.1%
60.0%
1. Vesting between the points is on a straight-line basis
2. As referred to above, actual performance against the original objectives would have resulted in the payments referred to in the “Formulaic
outcome” rows but actual payouts were adjusted as shown
Simon Gibbins (audited)
Group underlying EBIT (£m)
Payout1 (% of salary)
SWC
Payout1 (% of salary)
Individual objectives
Payout (% of salary)
Formulaic outcome (% of salary)
Formulaic outcome (% of max)
Adjusted actual payout (% of salary)
Adjusted actual payout (% of max)
Weighting
Threshold
56%
24%
20%
£29.8m
10%
27.0%
0%
Target
£32.2m
14%
24.0%
12%
Maximum
£34.6m
Actual
£35.2m
28%
21.0%
24%
28.0%
20.0%
24.0%
16.0%
16.0%
68.0%
68.0%
60.3%
60.3%
1. Vesting between the points is on a straight-line basis; profit element reduced by 50%
2. As referred to above, actual performance against the original objectives would have resulted in the payments referred to in the “Formulaic
outcome” rows but actual payouts were adjusted as shown
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Each Executive Director was given a number of individual non-financial objectives, tailored to their role and to business
requirements in the year under review. Nick Jefferies and Simon Gibbins each earned 80% for their performance against
their non-financial objectives achieved during the year.
Nick Jefferies
Simon Gibbins
■ Steer the Group through COVID-19, preserving financial
■ Steer the Group through COVID-19, preserving financial
resources whilst maintaining momentum and resources
for recovery
resources whilst maintaining momentum and resources
for recovery
■ Layout path to achieving the 5-year plan
■ Layout path to achieving the 5-year plan
■ Introduce new business review structure
■ Introduce new ESG strategy
■ Introduce new ESG strategy
■ Further develop internal audit function
■ Increase sales in target markets in line with KSI objectives
■ Proactively develop analyst and investor base
■ Develop acquisition opportunities
■ Development of HO function
■ Develop investor base
The Committee assessed these achievements against the pre-set personal objectives and in the context of overall business
performance and decided to award Nick Jefferies 20% out of the available 25% and Simon Gibbins 16% out of the available
20% for this element of their bonus. This means that, in total for the year under review, and after taking into account the
downward adjustments applied above, Nick Jefferies earned a bonus of 75.1% of his salary and Simon Gibbins earned a bonus
of 60.3% of his salary.
2018 LTIP vesting (audited)
LTIP Awards were granted on 31 March 2018 to Nick Jefferies and Simon Gibbins with vesting dependent on relative TSR
performance against a comparator group made up of constituents of the FTSE Small Cap Index (1/3), absolute TSR in excess
of CPI (1/3) from 31 March 2018 to 31 March 2021 and the growth in EPS between the year ended 31 March 2018 and the year
ended 31 March 2021 (1/3). The specific targets were as follows:
Relative TSR ranking against the FTSE Small Cap (1/3 weighting)
Relative TSR ranking against peers
% of award vesting
Upper quartile (or above)
100%
Between median and upper quartile
Straight-line vesting between 25% and 100%
Below median performance
0%
Absolute TSR performance (1/3 weighting)
Absolute TSR performance
Equal to or above CPI +30ppts
% of award vesting
100%
Between CPI +10ppts and CPI +30ppts
Straight-line vesting between 25% and 100%
Below CPI +10ppts
0%
EPS Performance (1/3 weighting)
EPS growth from FY18 to FY21
Equal to or above 12ppts pa
Between 5ppts pa and 12ppts pa
Below 5ppts pa
% of award vesting
100%
Straight-line vesting between 25% and 100%
0%
discoverIE’s TSR performance was 79.3% over the three-year period to 31 March 2021. This ranked the Company in the top 10%
of the FTSE Small Cap and 75.3% above CPI growth of 4.0% over the period. This strong performance resulted in both of the TSR
elements of the award vesting in full. EPS growth from FY18 to FY21 was 5.3% CAGR and so 27.7% of this element of the award
vested. This meant that a total of 75.9% of the 2018 LTIP award vested. The vested awards are subject to a two-year holding period.
112
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Share awards made during the year (audited)
The following LTIP awards were granted on 30 June 2020:
Director
Nick Jefferies
Simon Gibbins
Face value
as % of
salary
135%
100%
Face value1
£630,118
£310,000
Number
of shares
127,039
62,500
Threshold
vesting
(% of
face value)
Maximum
vesting
(% of
face value)
25%
100%
End of performance
period
31 March 2023
31 March 2023
1. The face value of the awards is based on a share price of £4.96, being the three-day average share price directly prior to the grant of the award.
In addition to the grants set out above, 10,446 awards with a face value of £51,812 were granted to Simon Gibbins in return
for him bearing the Company’s liability to employer’s National Insurance arising on the exercise of such grants made to him
above and 13,985 awards with a face value of £69,366 were granted to Nick Jefferies in return for him bearing a proportion of
such liability. The additional awards ensure they are in a neutral position on an after-tax basis, assuming unchanged tax rates.
Vesting of these awards is subject to the following performance conditions:
Relative TSR ranking against the FTSE Small Cap (1/3 weighting)
Relative TSR ranking against peers
% of award vesting
Upper quartile (or above)
100%
Between median and upper quartile
Straight-line vesting between 25% and 100%
Below median performance
0%
Absolute TSR performance (1/3 weighting)
Absolute TSR performance
Equal to or above CPI +30ppts
% of award vesting
100%
Between CPI +10ppts and CPI +30ppts
Straight-line vesting between 25% and 100%
Below CPI +10ppts
0%
EPS Growth (1/3 weighting)
EPS Growth
% of award vesting
Equal to or above 10ppts per annum
100%
Between 4ppts and 10ppts per annum
Straight-line vesting between 25% and 100%
Below 4ppts per annum
0%
Performance will be measured over three years from 1 April 2020 to 31 March 2023 using, for the two TSR measures, share
prices averaged over the previous month, for both the start and end of the performance period. In the case of EPS Growth,
performance will be measured from FY 2019/20 to FY 2022/23. Vested shares will be subject to an additional two-year holding
period.
As noted above, 20% of Nick Jefferies annual bonus is deferred into shares. On 26 October 2020, 5,956 shares were acquired at
a price of £6.38 per share (representing 20% of the FY 2019/20 bonus net of tax).
Pension arrangements (audited)
The Company does not operate a defined benefit pension scheme for Executive Directors. Pension contributions/ cash
allowances for the Executive Directors are set out in the policy table on page 103 of this Report.
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Directors’ interests under the Long-Term Incentive Plans
Movements in the Executive Directors’ holdings of nil-cost options under the LTIPs during the year are shown below.
The performance criteria for the LTIPs are set out on page 113.
Nick
Jefferies
Simon
Gibbins
Movements during the year
Granted
Vested Exercised
Lapsed
Number
held at
31.03.20
Vested
but not
exercised
Share
value at
31.03.21
£
When exercisable
Number held
at 31.03.21
245,192(v)1
223,567(v)2
242,788(v)3
123,998(v)4
166,236(nv)
127,039(nv)11
127,039
120,192(v)5
98,437(v)6
106,900(v)7
63,190(v)8 9
92,006(nv)9,10
–
–
–
–
–
62,500(nv)12
62,500
–
–
–
–
–
–
–
–
123,998
–
–
–
–
–
63,190
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
245,192
245,192 1,624,786 Mar 2020 to Mar 2025
223,567
223,567 1,497,899 Mar 2021 to Mar 2026
242,788
242,788 1,626,680 Mar 2022 to Mar 2027
39,373
163,371
123,998
830,787 Mar 2023 to Mar 2028
–
–
–
–
–
166,236
–
–
–
1,113,781
Apr 2024 to Apr 2029
851,161
Jul 2025 to Jun 2030
120,192
120,192
805,286 Mar 2020 to Mar 2025
98,437
98,437
659,528 Mar 2021 to Mar 2026
106,900
106,900
716,230 Mar 2022 to Mar 2027
20,065
83,255
63,190
423,373 Mar 2023 to Mar 2028
–
–
92,006
–
–
–
616,440
Apr 2024 to Apr 2029
418,750
Jul 2025 to Jun 2030
(v)= vested; (nv) = non-vested
1. The award, in the form of a nil-cost option over 245,192 shares in the Company was made to Nick Jefferies on 31 March 2015.
The performance conditions attached to the award resulted in 100% vesting on 31 March 2018.
2. The award, in the form of a nil-cost option over 223,567 shares in the Company was made to Nick Jefferies on 31 March 2016.
The performance conditions attached to the award resulted in 100% vesting on 31 March 2019.
3. The award, in the form of a nil-cost option over 242,788 shares in the Company was made to Nick Jefferies on 31 March 2017.
The performance conditions attached to the award resulted in 100% vesting on 31 March 2020.
4. The award, in the form of a nil-cost option over 163,371 shares in the Company was made to Nick Jefferies on 29 March 2018.
The performance conditions attached to the award resulted in 75.9% vesting on 29 March 2021.
5. The award, in the form of a nil-cost option over 120,192 shares in the Company was made to Simon Gibbins on 31 March 2015.
The performance conditions attached to the award resulted in 100% vesting on 31 March 2018.
6. The award, in the form of a nil-cost option over 98,437 shares in the Company was made to Simon Gibbins on 31 March 2016.
The performance conditions attached to the award resulted in 100% vesting on 31 March 2019.
7. The award, in the form of a nil-cost option over 106,900 shares in the Company was made to Simon Gibbins on 31 March 2017.
The performance conditions attached to the award resulted in 100% vesting on 31 March 2020.
8. The award, in the form of a nil-cost option over 83,255 shares in the Company was made to Simon Gibbins on 29 March 2018.
The performance conditions attached to the award resulted in 75.9% vesting on 29 March 2021.
9. An additional award of 13,916 nil-cost options was made on 29 March 2018 such that Simon Gibbins is in a net neutral position after tax,
assuming unchanged tax rates, as a result of his agreement to take on the Company’s liability to employer’s National Insurance on the
March 2018 award. 75.9% of the 2018 award vested; meaning 63,190 options from the ‘base award’ vested and 20,065 options from the ‘base
award’ lapsed; and 10,562 options from the NI element vested and 3,353 options from the NI element lapsed.
10. An additional award of 15,379 nil-cost options was made on 30 April 2019 such that Simon Gibbins is in a net neutral position after tax,
assuming unchanged tax rates, as a result of his agreement to take on the Company’s liability to employer’s National Insurance on the
April 2019 award. This is in addition to the 92,006 shares set out above and is subject to the same vesting and exercise conditions.
11. An additional award of 13,985 nil-cost options was made on 30 June 2020 such that Nick Jefferies is in a net neutral position after tax,
assuming unchanged tax rates, as a result of his agreement to take on a proportion of the Company’s liability to employer’s National
Insurance on the June 2020 award. This is in addition to the 127,039 shares set out above and is subject to the same vesting and exercise
conditions.
12. An additional award of 10,446 nil-cost options was made on 30 June 2020 such that Simon Gibbins is in a net neutral position after tax,
assuming unchanged tax rates, as a result of his agreement to take on the Company’s liability to employer’s National Insurance on the June
2020 award. This is in addition to the 62,500 shares set out above and is subject to the same vesting and exercise conditions.
114
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Directors’ interests (audited)
The interests of the Directors, who held office as at 31 March 2021 (including family interests) in ordinary shares (fully paid, 5p)
of the Company, were as follows:
Nick Jefferies
Simon Gibbins
Tracey Graham
Malcolm Diamond
Bruce Thompson
Clive Watson
Unencumbered
shares
981,4001
267,489
9,358
27,316
25,000
12,500
Shares held at 31 March 2021
Nil cost
options
vested but
not exercised
and outside of
holding period
Shares/nil cost
options vested
but subject
to additional
holding period
Shares/nil cost
options subject
to performance
conditions
468,759
218,629
366,786
170,090
293,275
154,506
–
–
–
–
–
–
–
–
–
–
–
–
Unencumbered
shares held at
31 March 2021
Value of current
shareholding
(% of salary)
2,484%
1,351%
965,750
267,489
9,358
27,316
25,000
12,500
1. Nick Jefferies holds 965,750 shares outright. In line with the Remuneration Policy, 20% of the FY19 and FY20 bonuses were deferred into
shares. The figure of 981,400 above includes the shares bought with those deferred bonuses, which were 9,694 and 5,956 shares respectively.
The interests of all Directors at 1 June 2021 are unchanged from those at 31 March 2021. The values of current shareholdings
for Nick Jefferies and Simon Gibbins have been valued using the share price as at 31 March 2021 of 670p and include all
options that have vested and are based on salaries as at 1 June 2021.
Executive Directors are required to build up/maintain a shareholding of at least 200% of salary, including LTIP shares
where performance conditions no longer apply, within five years. Both of the Executive Directors have met the current
shareholding requirements. In accordance with the remuneration policy, Executive Directors are required to build up/
maintain a shareholding of at least 250% of salary within seven years. Both of the Executive Directors meet the shareholding
requirements. The figures for shares/nil cost options subject to performance conditions exclude any additional awards to
Executive Directors in respect of employer’s National Insurance.
Dilution
The Company’s share schemes are funded through a combination of shares purchased in the market and newly issued shares,
as appropriate. The Company monitors the number of shares issued under the schemes and their impact on dilution limits.
As at 31 March 2021, approximately 5.44m shares (6.1% in the last ten years) have been, or may be, issued to settle awards
made in the last ten years in connection with all share schemes and executive share schemes, respectively. The Company is
committed to remaining within The Investment Association’s 10% in 10 years dilution limit.
Payments for loss of office (audited)
There were no payments for loss of office during the year.
Payments to past Executive Directors (audited)
There were no payments to past Executive Directors during the year.
This represents the end of the audited section of the Report.
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Pay for performance
The graph below shows Total Shareholder Return (TSR) in terms of change in value (with dividends deemed to be reinvested
gross on the ex-dividend date) of an initial investment of £100 on 1 April 2011 between that date and 31 March 2021 in a
holding of the Company’s shares, compared with the corresponding TSR in a hypothetical holding of £100 invested in
the FTSE Small Cap Index. This index has been chosen because it is considered to be a reasonable comparator in terms
of the Company’s size and its share liquidity. The accompanying table details the Group Chief Executive’s single figure of
remuneration and actual variable pay outcomes over the same period.
Total Shareholder Return
400
350
300
250
200
150
100
50
0
31 Mar 2011
31 Mar 2012 31 Mar 2013
31 Mar 2014
31 Mar 2015 31 Mar 2016 31 Mar 2017
31 Mar 2018
31 Mar 2019
31 Mar 2020
31 Mar 2021
DiscoverIE Return Index
FTSE Small Cap Return Index
Source: Refinitiv Datastream
Group Chief Executive single figure of total remuneration history
Note: The Company’s share price was adjusted following the rights issue in June 2014.
2012
1,613
297
10
94
207
7
2013
999
320
20
88
177
5
2014
572
320
55
2015
1,246
330
59
2016
1,321
425
60
2017
665
429
43.5
2018
1,803
438
63.7
2019
1,796
453
69.2
2020
2,093
467
62.0
2021
1,717
443
60.1
9
100
100
–
100
100
100
75.9
212
7
271
13
288
16
338
20
387.9
438.9
466.4
454.3
24.5
30.6
37.1
35.2
Single figure of total
remuneration (£’000)
Salary (£’000)
Bonus outcome
(% of maximum)
LTIP outcome
(% of maximum)
Turnover (£m)
EBIT (£m)1
1. Continuing operations
116
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Group Chief Executive remuneration
Annual Percentage Change in Remuneration of Directors and employees
As required by the 2019 regulations, the table below shows a comparison of the annual change of each individual Director’s
pay to the annual change in average UK employee pay. Average employee pay is based on a Full Time Equivalent (FTE)
calculation.
Nick Jefferies1
Simon Gibbins
Malcolm Diamond
Tracey Graham
Bruce Thompson
Clive Watson2
All UK employees
Percentage change in remuneration from 31/3/20 to 31/3/21
Percentage change in
base salary / fee
%
Percentage change in
benefits
%
Percentage change in
profit share award
%
–5%
–5%
–5%
–5%
–5%
–5%
+2%
3%
3%
–
–
–
–
+5%
–8%
–8%
–
–
–
–
+49%
1.
In accordance with the Remuneration Policy, 20% of the Group Chief Executive’s bonus is in the form of deferred shares.
2. Clive Watson joined the Board in September 2019. Fees in FY 2019/20 were £31,500 for the 7 months remaining that year, a full year
equivalent of £54,000. Fees in FY 2020/21 were £51,300. On a pro-rated basis this represented a reduction of 5% per annum in FY 2020/21.
CEO pay ratio
The table below sets out the pay ratios for the Group Chief Executive in relation to the equivalent pay for the lower quartile,
median and upper quartile employees (calculated on a full-time basis).
Year
2021
2020
Method
Option B
Option B
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
63:1
83:1
47:1
57:1
25:1
40:1
1. The Company determined the remuneration figures for the employee at each quartile with reference to a date of 31/3/21.
2. The Group used calculation method B as the Gender Pay Gap data is already collated for UK employees and was therefore readily available.
3. Following a review, the Committee was satisfied that the three individuals reported on are representative of the lower quartile, median and
upper quartile employees. No adjustments or estimates were used.
Set out in the table below is the total pay and benefits as well as the salary component of remuneration for the employees
identified as being at the relevant percentiles.
£
Salary
Total pay and benefits
25th percentile
25,500
27,170
Median
34,000
36,210
75th percentile
52,417
68,975
Importance of the spend on pay
The table below shows the importance of the spend on pay for all employees across the globe compared with the returns
distributed to Shareholders, during the year under review and the prior financial year. The information is based on like-for-
like constant currency and includes annualised prior year acquisitions.
Remuneration paid to or receivable by all employees
Distributions to Shareholders by way of dividends (net of share issues)
2021
£m
93.8
2.8
2020
£m
92.7
8.1
change
%
1.2%
-65.4%
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www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report DIRECTORS’
REMUNERATION
REPORT
Statement of implementation of the remuneration policy in the financial year ending
31 March 2022
The Company intends to implement the policy in the financial year ended 31 March 2022 in the way described in the
“Remuneration at a glance” section and policy table for the Executive Directors on pages 98 to 99 and 102 to 104 respectively.
The Committee has approved performance measures for the annual bonus for the Executive Directors for the year ending
31 March 2022, with 84% based on financial performance and 16% on personal or strategic objectives.
On target performance will result in a 50% target payout. Due to the close link between targets and the long-term strategy, the
bonus targets for the year ending 31 March 2022 have not been disclosed in this report due to commercial sensitivity. However,
further information on these bonus targets will be disclosed in next year’s Annual Report and Accounts.
The Committee will grant LTIP awards in line with the policy after approval by Shareholders of the new LTIP scheme at the
annual general meeting scheduled for 29 July 2021. The award for the Group Chief Executive will be over shares with a face
value of 150% of salary and 135% for the Group Finance Director. The performance measures will be based 50% on relative TSR
and 50% on underlying earnings growth measures. The Committee considered carefully the EPS range and has agreed to set
a growth target of 5% to 12% p.a. This growth range is appropriately challenging and is higher than the 4%p.a. to 10%p.a. targets
applied for last year’s awards.
The fees for the Non-Executive Directors increased by 5% with effect from 1 April 2021, as follows:
As at 1 April 2021
Malcolm Diamond
Tracey Graham
Bruce Thompson
Clive Watson
Advisers
Basic fee
£
147,000
48,300
48,300
48,300
Committee
Chair fee
£
–
8,400
SID fee
£
–
–
–
8,400
8,400
Total
£
147,000
56,700
56,700
56,700
During the year, the Committee received independent advice on executive remuneration from FIT Remuneration
Consultants LLP (“FIT”). FIT were appointed by the Committee in 2019 following a competitive tender process. FIT is a
signatory to the Remuneration Consultants’ Code of Conduct. FIT does not provide any services other than advice to the
Remuneration Committee and the Committee considers FIT to be independent and objective. The fees paid to FIT for
advising the Committee for the financial year ended 31 March 2021 were £57,344 based partly on a fixed fee basis and partly
based on time spent.
Shareholder voting
AGM resolutions
2018 binding vote on the
Directors’ Remuneration Policy
2020 Approval of the
Remuneration Report (excl. Policy)
1.
Includes votes at the Chairman’s discretion
For1
Against
Withheld2
47,004,246
95.56%
2,186,425
4.44%
9,067
68,046,592
97.16%
1,991,774
2.84%
815,048
2. A vote “withheld” is not a vote in law, and is not counted in the calculation of the proportion of votes for and against the resolution1
118
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 STATEMENT OF DIRECTORS’
RESPONSIBILITIES IN RESPECT
OF THE FINANCIAL STATEMENTS
The Directors are responsible for the maintenance and
integrity of the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Directors’ confirmations
The Directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the Group’s and Company’s position and
performance, business model and strategy.
Each of the Directors, whose names and functions are listed
in on pages 70 and 71 confirm that, to the best of their
knowledge:
■ the Group financial statements, which have been
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006 and international financial reporting
standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group;
■ the Company financial statements, which have
been prepared in accordance with United Kingdom
Accounting Standards, comprising FRS 101, give a true
and fair view of the assets, liabilities, financial position and
loss of the Company; and
■ the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and Company, together with a
description of the principal risks and uncertainties that it
faces.
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements
in accordance with international accounting standards
in conformity with the requirements of the Companies
Act 2006. Additionally, the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules require the
Directors to prepare the Group financial statements in
accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and the Company financial
statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law).
Under company law, Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the Directors
are required to:
■ select suitable accounting policies and then apply them
consistently;
■ state whether applicable international accounting
standards in conformity with the requirements of
the Companies Act 2006 and international financial
reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union
have been followed for the Group financial statements
and United Kingdom Accounting Standards, comprising
FRS 101 have been followed for the Company financial
statements, subject to any material departures disclosed
and explained in the financial statements;
■ make judgements and accounting estimates that are
reasonable and prudent; and
■ prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and Company will continue in business.
The Directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that
the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
119
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC
Report on the audit of the financial
statements
Opinion
In our opinion:
■ discoverIE Group plc’s Group financial statements
and Company financial statements (the “financial
statements”) give a true and fair view of the state of the
Group’s and of the Company’s affairs as at 31 March 2021
and of the Group’s profit and the Group’s cash flows for
the year then ended;
■ the Group financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006;
Separate opinion in relation to international
financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the
European Union
As explained in note 2 to the financial statements, the
Group, in addition to applying international accounting
standards in conformity with the requirements of the
Companies Act 2006, has also applied international financial
reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
In our opinion, the Group financial statements have been
properly prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
■ the Company financial statements have been properly
Basis for opinion
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 “Reduced
Disclosure Framework”, and applicable law); and
■ the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006.
We have audited the financial statements, included within
the Annual Report and Accounts (the “Annual Report”),
which comprise: the Consolidated statement of financial
position and the Company balance sheet as at 31 March
2021; the Consolidated income statement, Consolidated
statement of comprehensive income, the Consolidated
and Company statement of changes in equity, and the
Consolidated statement of cash flows for the year then
ended; and the notes to the financial statements, which
include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit
and Risk Committee.
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes
the FRC’s Ethical Standard, as applicable to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in note 7 to the consolidated
financial statements, we have provided no non-audit
services to the Company or its controlled undertakings in
the period under audit.
120
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Our audit approach
Overview
Audit scope
and assessed the risks of material misstatement in the
financial statements.
Key audit matters
■ We conducted full scope audits on 27 components
including all consolidation adjustments considered as
one component (overseas and UK) and specified audit
procedures on a further 11 components (overseas and
UK).
■ The components where full audit work was performed
accounted for 75% of the Group’s revenue and 81% of the
Group’s underlying profit before tax. We have considered
all the consolidation adjustments as a single full scope
component and these are included in the coverage
obtained above. In addition, we have performed specified
procedures over certain entities that are not included as
full scope.
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the
audit of the financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by
the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key audit matters
This is not a complete list of all risks identified by our audit.
■ Goodwill impairment assessment (Group)
■ COVID-19 and Going concern considerations (Group and
Company)
■ Reporting of underlying adjustments (Group)
■ Carrying value of investments (Company)
Materiality
■ Overall Group materiality: £1,574,400 (2020: £1,679,000)
based on 5% of underlying profit before tax.
■ Overall Company materiality: £1,417,000 (2020: £1,511,000)
based on 1% of total assets, limited to 90% of Group
materiality.
■ Performance materiality: £1,180,800 (Group) and
£1,062,700 (Company).
The scope of our audit
As part of designing our audit, we determined materiality
Accounting for acquisitions and Valuation of inventory,
which were key audit matters last year, are no longer
included because of the lower level of assessed risk in
these areas based on the quantum of acquisitions being
lower than prior year, the results of audit procedures over
similar transactions and balances in the prior year and
management’s judgements and estimates applied in these
areas not being sufficiently complex to result in a material
misstatement in the consolidated financial statements.
Otherwise, the key audit matters below are consistent with
last year.
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THE MEMBERS OF discoverIE GROUP PLC
Key audit matter
How our audit addressed the
key audit matter
Goodwill impairment assessment (Group)
Refer to page 87 (Audit and Risk Committee Report), note 2
(Significant accounting judgements and estimates) and note 17
for the related disclosures on goodwill.
The Group carried £127.9 million of goodwill at 31 March 2021
(2020: £117.3 million).
We evaluated and challenged the Directors’ future
cash flow forecasts in the goodwill impairment model
and the process by which they were prepared. We
tested the cash flow forecast by comparing it with the
FY22 budget approved by the Board in March 2021
and found them to be reasonable.
We challenged:
The recoverability of the carrying value of goodwill is contingent
on future cash flows of the underlying cash generating units
(‘CGUs’) and there is a risk that if these cash flows do not meet the
Directors’ expectations, the goodwill may be impaired.
■ the key assumptions for short and long term
growth rates in the forecasts by comparing them
with historical results, as well as the actual results
for the period after the year end;
We focused our assessment on the estimates and judgements
used by management in their impairment model including
appropriate downside sensitivities. In light of the current
uncertainties as a result of the COVID-19 outbreak we have
focused on CGUs which performed significantly below budgeted
level for the year ended 31 March 2021 or were more reliant on
the long term cash flows to recover the carrying value of the
CGU. No impairment charge was recognised in the years ended
31 March 2021 and 31 March 2020.
■ the discount rate used in the calculations by
assessing the discount rate for each CGU based on
the country of its operations; and
■ assessed the appropriateness of the model
prepared to calculate the value in use.
We performed sensitivity analysis on the key
assumptions within the cash flow forecasts. This
included further sensitising the future cash flows
using lower short and longer term sales growth rates
while keeping the operating expenses in line with
Director’s forecast resulting in lower forecast profit
margins. .
We ascertained the extent to which a change in these
assumptions, both individually or in aggregate, would
result in a goodwill impairment, and considered
the likelihood of such events occurring. We also
considered the sufficient and appropriateness of
disclosures included in the Group’s consolidated
financial statements regarding such events.
We engaged PwC’s valuation experts to assess
the reasonableness of the discount rates used.
We consider these to be more conservative when
compared to ranges calculated by our valuation
experts. This results in an embedded additional
headroom within the model prepared by
management.
We compared the total value in use calculated in
management’s goodwill models to the Group’s
market capitalisation of £597 million at 31 March 2021
to further assess the assumptions within the models.
Based on the procedures described above, we were
satisfied that the recoverability of the carrying value of
goodwill in respect of all the CGUs identified has been
appropriately assessed.
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discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 How our audit addressed the
key audit matter
In assessing management’s consideration of the
potential impact of COVID-19, we have undertaken
the following audit procedures:
■ We discussed with management and the Board
the critical estimates and judgements applied in
their latest assessments in order to understand
and challenge the rationale underlying the factors
incorporated and the sensitivities applied as a
result of COVID-19, including the assessment of
goodwill impairment and related cash flows as
described in the key audit matter on ‘goodwill
impairment assessment’; and
■ We reviewed the judgements included by
management in their ‘expected credit loss’ model
with respect to the impact of COVID-19. We
considered the position of the trade receivables
subsequent to the year end to assess the
appropriateness of management’s judgements
applied in the model.
■ We have assessed the operating effectiveness
of the control environment throughout the year
through our UK and overseas audits, feeding back
any observations to Management. We consider
the overall control environment to have operated
effectively through the period.
■ We have reviewed management’s assessments
over the net realisable value of inventory and any
write downs that are required as a consequence.
We consider the position taken at 31 March 2020
to be reflective of the condition, demand and
future selling price of the goods.
We audited the disclosures included in the Annual
Report in respect of this risk, including going
concern, and impairment sensitivities and consider
them reasonable.
The procedures we performed to address the risks
of going concern and our findings are set out in
the ‘Conclusions relating to going concern’ section
below.
Key audit matter
COVID-19 and Going concern considerations (Group and
Company)
The COVID-19 pandemic in early 2020 affected individuals and
businesses across the world and this continues to have varying
impacts on the countries where the Group operates.
Given the nature of the pandemic, it is difficult to predict the impact
on the Group and there remains an uncertainty in the short term
and longer term. The Directors have considered the potential impact
of the disruptions caused by the COVID-19 pandemic on the way
business is carried out across the Group and have taken steps during
the year to minimise the impact of this on the Group operations.
During the year ended 31 March 2021, the Group made a net profit
after tax of £12.0 million and had net current assets of £75.8 million at
the year-end. The Group holds a cash and cash equivalent balance
(net of bank overdraft) of £28.2 million. Despite this position at the year
end, due to the impact of COVID-19 outbreak there is an uncertainty
over the expected future cash flows and continuity of business at the
forecast levels.
The Directors performed a going concern assessment based on
the Group’s FY22 budget approved by the Board in March 2021
and forecast growth for FY23 and FY24, and other associated key
risk factors including acquired Company forecast and associated
future earn-out payments, latest views on supplier and customer
payments impacting working capital and latest foreign exchange
rates. The assessment carried out by the Directors is for a period of
at least twelve months from the date of approval of these financial
statements.
The Directors’ assessment included preparing a severe but plausible
downside scenario including revenue and EBITDA downside trading
sensitivities and identified mitigating actions that could be taken to
reduce cash expenditure if necessary. They also considered the levels
of funding accessible by the Group.
The Directors concluded based on these forecasts and sensitivities,
that there was sufficient headroom in respect of covenants and
liquidity beyond the severe but plausible downside scenario, to
prepare the financial statements on a going concern basis.
The Directors have also considered the risk of impairment of non-
current assets, increased credit risk on trade receivables, obsolescence
of inventory and working practices across the Group including the
impact on control environment.
We have focussed on this risk due to the evolving nature of the
pandemic, the uncertainties involved and the magnitude of any
potential impact on the financial statements.
The Directors have included their assessment of the impact of
COVID-19 in the Annual Report. Further details are set out in note 2
to the consolidated financial statements.
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THE MEMBERS OF discoverIE GROUP PLC
Key audit matter
How our audit addressed the
key audit matter
Reporting of underlying adjustments (Group)
Refer to Audit and Risk Committee Report (page 87); Accounting
policies (note 2); and note 6 (Underlying profit before tax).
We considered the appropriateness of the
adjustments made to the statutory profit before
tax to derive underlying performance.
£14.5 million (2020: £13.3 million) of net costs incurred in the year
are presented as adjustments to the Group’s underlying profit
before tax. These include:
In order to do this, we considered:
■ The Group’s accounting policies on exceptional
and non-underlying items;
■ £2 million of acquisition and integration costs;
■ The application of IFRS, in particular IAS 1; and
■ £11.1 million of amortisation of acquired intangibles; and
■ European Securities and Markets Authority
■ £1.4 million in respect of the Group’s IAS 19 pension charge for
the year.
The Group presents underlying performance measures on the
face of the consolidated income statement as supplementary
information.
Management believes that the presentation of underlying
performance measures provides investors with a means of
evaluating performance of the Group on a consistent basis, similar
to the way in which management evaluates performance.
The determination of which items are classified as adjustments to
underlying profit is subject to judgement and therefore need to
be classified appropriately and presented consistently.
(“ESMA”) guidelines on alternative performance
measures (APMs) issued on 3 July 2016.
We challenged management on the
appropriateness of the classification of each
item, being mindful that classification should be
balanced between gains and losses, the basis for
the classification clearly disclosed and applied
consistently from one year to the next.
We also considered the risk that the Group’s
accounting policy could be manipulated to help
achieve profit targets.
We also considered the risk of one-off gains during
the year not being properly identified and therefore
presented inappropriately within underlying profit.
Having considered the nature and quantum
of these items, overall, we were satisfied that
the presentation of adjustments to the Group’s
underlying profit in the consolidated financial
statements for the year ended 31 March 2021 is
consistently applied and appropriately disclosed.
124
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Key audit matter
Carrying value of investments (Company)
Refer to note 2 and note 5 of the Company financial statements.
The Company holds investments in its subsidiaries of £201.3 million
(2020: £200.2m).
We focused on this area due to the size of the investment balances
with focus on the risk of impairment arising in the Company’s
investment of £23.7 million in discoverIE Management Services
Limited (“DMS”), the Group’s service Company that derives revenue
from intercompany recharges.
Management has performed an assessment of the recoverable
amount of the investment and compared this to the carrying value
using the same cash flow methodology applied in the impairment
test for goodwill described above.
The results showed that no impairment was required against this
investment.
How our audit addressed the
key audit matter
We obtained management’s assessment of
the carrying value of the investments and we
challenged:
■ the key assumptions for short and long term
growth rates in the forecast cash flows for DMS
by comparing them with historical results, as
well as challenging the expected growth in
DMS’s income arising from its recharge of costs
around the Group;
■ We assessed the recoverability of the loans
extended by DMS to other Group companies;
■ the discount rate used in the calculations by
assessing the cost of capital for the Group and
comparable organisations; and
■ assessed the recoverability of investment in
subsidiaries other than DMS by comparing the
net asset values of these subsidiaries against the
carrying value of the investment. There were no
indications of impairment identified
We performed sensitivity analysis on the key
assumptions within the cash flow forecasts. This
included sensitising the discount rate applied to
the future cash flows, and the short and longer
term growth rates and operating income forecast.
Following the conclusion of our procedures above,
we are satisfied that no impairment is required
and the carrying value of the investment in DMS is
appropriate.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the
structure of the Group and the Company, the accounting
processes and controls, and the industry in which they
operate.
For 11 (2020: 9) further components (“specified procedures
components”), we performed tailored audit procedures to
address any significant risk or balances and transactions
involving judgement and estimates. We have also tested
balances and transactions within these components
which are both material and form a significant part of the
respective total balance across the Group.
The business is structured across two reported segments,
Design & Manufacturing (‘D&M’) and Custom Supply (‘CS’),
operating in 24 countries.
Across the 24 countries, the Group has 63 component
business operations. We performed an audit of the
complete financial information of 26 (2020: 28) of these
components and one component which includes all
consolidation entries (“full scope components”), which
were selected based on their size or risk characteristics. This
covered 75% (2020: 78%) of the Group’s revenue and 81%
(2020: 77%) of the Group’s underlying profit before tax.
The remaining 25 components in aggregate represent 12%
(2020: 11%) of the Group’s underlying profit before tax. For
these components, the Group audit team performed central
risk assessment analytical procedures.
In establishing our overall approach to the Group audit,
we determined the nature of work that needed to be
undertaken at each of the components by us, as the Group
audit engagement team, or by component auditors from
PwC network firms operating under our instruction.
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Of the 27 full scope components, audit procedures were
performed on 16 components directly by the Group
audit team, with component auditors performing audit
procedures over the remaining 11 components. Of the 11
specified procedures components, 8 components where
the work was performed by component auditors, we
determined the appropriate level of involvement to enable
us to determine that sufficient audit evidence had been
obtained as a basis for our opinion on the consolidated
financial statements as a whole.
The Group audit team also joined the audit clearance
meetings for each of the full scope components where the
work was undertaken by other component auditors.
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the consolidated financial statements as a whole, taking
into account the structure of the Group and the Company,
the accounting processes and controls, and the industry in
which they operate.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - Group
Financial statements - Company
Overall materiality
£1,574,400 (2020: £1,679,000).
£1,417,000 (2020: £1,511,000).
How we determined it
5% of underlying profit before tax
1% of total assets, limited by Group materiality
Rationale for
benchmark applied
We believe that underlying profit before
tax provides a consistent year on year basis
for determining materiality and is the most
relevant performance measure to the key
stakeholders of the Group.
We believe that total assets is the most
appropriate measure to assess a holding
Company, and is a generally accepted
auditing benchmark.
For each component in the scope of our Group audit,
we allocated a materiality that is less than our overall
Group materiality. The range of materiality allocated
across components was between £42,000 and £1,417,000.
Certain components were audited to a local statutory
audit materiality that was also less than our overall Group
materiality.
We use performance materiality to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall
materiality. Specifically, we use performance materiality
in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% of overall
materiality, amounting to £1,180,800 for the Group financial
statements and £1,062,700 for the Company financial
statements.
In determining the performance materiality, we considered
a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls - and concluded that an amount at the upper end
of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we
would report to them misstatements identified during
our audit above £78,720 (Group audit) (2020: £84,000)
and £78,720 (Company audit) (2020: £84,000) as well as
misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
126
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Conclusions relating to going concern
Reporting on other information
The other information comprises all of the information in
the Annual Report other than the financial statements and
our auditors’ report thereon. The directors are responsible
for the other information. Our opinion on the financial
statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to
the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to
perform procedures to conclude whether there is a material
misstatement of the financial statements or a material
misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic report and Directors’ report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic report
and Directors’ report for the year ended 31 March 2021 is
consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group
and Company and their environment obtained in the course
of the audit, we did not identify any material misstatements
in the Strategic report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Directors’ remuneration report
to be audited has been properly prepared in accordance
with the Companies Act 2006.
Our evaluation of the directors’ assessment of the Group’s
and the Company’s ability to continue to adopt the going
concern basis of accounting included:
■ Obtaining the Directors’ cash flow forecasts for the going
concern period and validating the underlying cash flow
projections by challenging the basis of the judgements
applied and verifying that it is consistent with our existing
knowledge and understanding of the business;
■ Reviewing the sensitivity analysis carried out by the
Directors to assess the impact of the key assumptions
underlying the forecast such as reduction in sales,
increase in working capital and expected level of
operating expenses;
■ Assessing the impact of the Directors’ severe but
plausible downside scenarios on the headroom available
on liquidity and covenants under the Group’s revolving
credit facility of £180m, including agreeing the terms of
the facility to the agreements;
■ Reviewing the Directors’ identified available mitigating
factors where required and included within the cash flow
forecast;
■ Testing the mathematical accuracy of the Directors’ cash
flow forecast and validating the opening cash position;
and
■ assessing the adequacy of the disclosure provided in note
2 of the consolidated and Company financial statements.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s and the Company’s ability
to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised
for issue.
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate.
However, because not all future events or conditions can
be predicted, this conclusion is not a guarantee as to the
Group’s and the Company’s ability to continue as a going
concern.
In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
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www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC
Corporate governance statement
■ The directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for the members to assess the Group’s and Company’s
position, performance, business model and strategy;
■ The section of the Annual Report that describes the
review of effectiveness of risk management and internal
control systems; and
■ The section of the Annual Report describing the work of
the Audit and Risk Committee .
We have nothing to report in respect of our responsibility
to report when the directors’ statement relating to the
Company’s compliance with the Code does not properly
disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements
and the audit
Responsibilities of the directors for the
financial statements
As explained more fully in the Statement of Directors’
Responsibilities in Respect of the Financial Statements, the
directors are responsible for the preparation of the financial
statements in accordance with the applicable framework
and for being satisfied that they give a true and fair view.
The directors are also responsible for such internal control
as they determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using
the going concern basis of accounting unless the directors
either intend to liquidate the Group or the Company or to
cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
The Listing Rules require us to review the directors’
statements in relation to going concern, longer-term
viability and that part of the corporate governance
statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to
the corporate governance statement as other information
are described in the Reporting on other information section
of this report.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
corporate governance statement is materially consistent
with the financial statements and our knowledge obtained
during the audit, and we have nothing material to add or
draw attention to in relation to:
■ The directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
■ The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are
being managed or mitigated;
■ The directors’ statement in the financial statements
about whether they considered it appropriate to adopt
the going concern basis of accounting in preparing them,
and their identification of any material uncertainties to
the Group’s and Company’s ability to continue to do so
over a period of at least twelve months from the date of
approval of the financial statements;
■ The directors’ explanation as to their assessment of
the Group’s and Company’s prospects, the period this
assessment covers and why the period is appropriate; and
■ The directors’ statement as to whether they have a
reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the
longer-term viability of the Group was substantially less in
scope than an audit and only consisted of making inquiries
and considering the directors’ process supporting their
statement; checking that the statement is in alignment
with the relevant provisions of the UK Corporate Governance
Code; and considering whether the statement is consistent
with the financial statements and our knowledge and
understanding of the Group and Company and their
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of
our audit, we have concluded that each of the following
elements of the corporate governance statement is
materially consistent with the financial statements and our
knowledge obtained during the audit:
128
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we
identified that the principal risks of non-compliance with
laws and regulations related to the listing rules, pensions
legislation, tax legislation and local laws and regulations
applicable in the territories that the Group operates in, and
we considered the extent to which non-compliance might
have a material effect on the financial statements. We also
considered those laws and regulations that have a direct
impact on the financial statements such as the Companies
Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and
determined that the principal risks were related to posting
of unusual journals to increase revenue and management
bias in determining accounting estimates. The Group
engagement team shared this risk assessment with the
component auditors so that they could include appropriate
audit procedures in response to such risks in their work.
Audit procedures performed by the Group engagement
team and/or component auditors included:
■ Discussed and interviewed the senior management,
internal audit, and the Audit and Risk Committee,
including consideration of known or suspected instances
of non-compliance with laws and regulation and fraud;
■ Reviewed incentives and bonus schemes to understand
and review drivers that could lead to higher fraud risks;
■ Performed unpredictable procedures; and
■ Identified and tested journal entries, in particular, journal
entries; which had unexpected account combinations,
posted by unexpected users, with unusual descriptions
or descriptions referring to directors or key management
personnel.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting
a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
Our audit testing might include testing complete
populations of certain transactions and balances, possibly
using data auditing techniques. However, it typically involves
selecting a limited number of items for testing, rather
than testing complete populations. We will often seek to
target particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to
enable us to draw a conclusion about the population from
which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared
for and only for the Company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
■ we have not obtained all the information and
explanations we require for our audit; or
■ adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not
been received from branches not visited by us; or
■ certain disclosures of directors’ remuneration specified by
law are not made; or
■ the Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit and Risk
Committee, we were appointed by the directors on 13
September 2017 to audit the financial statements for the
year ended 31 March 2018 and subsequent financial periods.
The period of total uninterrupted engagement is 4 years,
covering the years ended 31 March 2018 to 31 March 2021.
Christopher Hibbs (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
3 June 2021
129
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CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2021
notes
4
7
9
9
10
13
notes
7
6
18
31
6
18
31
13
2021
£m
454.3
(299.0)
155.3
(57.8)
(76.8)
20.7
0.3
(4.0)
17.0
(5.0)
12.0
2020
£m
466.4
(309.7)
156.7
(58.1)
(74.8)
23.8
0.6
(4.9)
19.5
(5.2)
14.3
13.5p
13.0p
17.0p
16.5p
2021
£m
20.7
2.0
11.1
1.4
35.2
17.0
2.0
11.1
1.4
31.5
2020
£m
23.8
4.0
9.0
0.3
37.1
19.5
4.0
9.0
0.3
32.8
26.0p
30.2p
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administrative expenses
Operating profit
Finance income
Finance costs
Profit before tax
Tax expense
Profit for the year
Earnings per share
Basic
Diluted
SUPPLEMENTARY INCOME
STATEMENT INFORMATION
Underlying Performance Measures
Operating profit
Add back: Acquisition and merger expenses
Amortisation of acquired intangible assets
IAS 19 pension charge
Underlying operating profit
Profit before tax
Add back: Acquisition and merger expenses
Amortisation of acquired intangible assets
IAS 19 pension charge
Underlying profit before tax
Underlying earnings per share
130
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 March 2021
Profit for the year
Other comprehensive (loss)/income:
Items that will not be subsequently reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit pension scheme
Deferred tax credit/(charge) relating to defined benefit pension scheme
notes
31
10
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign subsidiaries
Other comprehensive loss for the year, net of tax
Total comprehensive income for the year, net of tax
2021
£m
12.0
(3.4)
0.6
(2.8)
(0.5)
(0.5)
(3.3)
8.7
2020
£m
14.3
2.4
(0.5)
1.9
(4.6)
(4.6)
(2.7)
11.6
131
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FINANCIAL POSITION
as at 31 March 2021
Non-current assets
Property, plant and equipment
Intangible assets – goodwill
Intangible assets – other
Right of use assets
Defined benefit pension surplus
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Lease liabilities
Current tax liabilities
Provisions
Non-current liabilities
Trade and other payables
Other financial liabilities
Lease liabilities
Pension liability
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Currency translation reserve
Retained earnings
Total equity
notes
14
16
18
15
31
10
19
20
21
28
22
15
25
28
22
15
31
25
10
29
2021
£m
23.5
127.9
63.3
22.4
–
7.9
245.0
67.7
84.9
1.8
29.2
183.6
428.6
(94.8)
(0.8)
(4.8)
(5.6)
(1.8)
2020
£m
25.2
117.3
64.9
21.1
1.8
6.1
236.4
68.4
90.1
2.1
36.8
197.4
433.8
(87.6)
(4.3)
(5.3)
(5.5)
(0.9)
(107.8)
(103.6)
(0.8)
(75.6)
(16.7)
(1.0)
(5.4)
(12.5)
(112.0)
(219.8)
208.8
4.4
138.8
19.9
(2.7)
48.4
208.8
(3.1)
(93.8)
(14.7)
–
(4.7)
(13.4)
(129.7)
(233.3)
200.5
4.4
138.8
22.7
(2.2)
36.8
200.5
The financial statements on pages 130 to 181 were approved by the Board of Directors on 3 June 2021 and signed on its behalf
by:
Nick Jefferies
Group Chief Executive
Simon Gibbins
Group Finance Director
132
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 March 2021
Attributable to equity holders of the Company
Share
capital
£m
3.7
–
–
–
0.7
–
–
–
Share
premium
£m
106.9
–
–
–
31.9
–
–
–
4.4
138.8
–
–
–
–
–
–
–
–
–
–
–
–
4.4
138.8
Merger
reserve
£m
Currency
translation
reserve
£m
Retained
earnings
£m
2.9
–
–
–
27.9
–
(8.1)
–
22.7
–
–
–
–
(2.8)
–
19.9
2.4
–
(4.6)
(4.6)
–
–
–
–
(2.2)
–
(0.5)
(0.5)
–
–
–
(2.7)
18.8
14.3
1.9
16.2
–
1.8
8.1
(8.1)
36.8
12.0
(2.8)
9.2
2.4
2.8
(2.8)
48.4
At 1 April 2019
Profit for the year
Other comprehensive loss
Total comprehensive income
Shares issued (note 29)
Share-based payments
including tax
Transfer to retained earnings
Dividends (note 12)
At 31 March 2020
Profit for the year
Other comprehensive loss
Total comprehensive income
Share-based payments
including tax
Transfer to retained earnings
Dividends (note 12)
At 31 March 2021
Total
equity
£m
134.7
14.3
(2.7)
11.6
60.5
1.8
–
(8.1)
200.5
12.0
(3.3)
8.7
2.4
–
(2.8)
208.8
133
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CASH FLOWS
for the year ended 31 March 2021
Net cash flow from operating activities
Investing activities
Acquisition of businesses (net of cash/(debt) acquired)
Acquisition related contingent consideration
Purchase of property, plant and equipment
Purchase of intangible assets – software
Proceeds from disposal of property, plant and equipment
Interest received
Net cash used in investing activities
Financing activities
Net proceeds from the issue of shares
Proceeds from borrowings
Repayment of borrowings
Payment of lease liabilities
Interest paid on lease liabilities
Dividends paid
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents1
Net cash and cash equivalents at 1 April
Effect of exchange rate fluctuations
Net cash and cash equivalents at 31 March
Reconciliation to cash and cash equivalents in the consolidated
statement of financial position
Net cash and cash equivalents shown above
Add back: bank overdrafts
Cash and cash equivalents presented in current assets in the consolidated
statement of financial position
notes
24
23
23
12
22
21
2021
£m
46.6
(20.8)
–
(3.2)
(0.7)
0.3
0.3
(24.1)
0.1
9.3
(27.8)
(6.1)
(0.6)
(2.8)
(27.9)
(5.4)
34.8
(1.2)
28.2
28.2
1.0
29.2
2020
£m
37.4
(72.6)
(1.0)
(5.3)
(1.0)
–
0.5
(79.4)
60.5
41.9
(31.3)
(6.0)
(0.6)
(8.1)
56.4
14.4
20.8
(0.4)
34.8
34.8
2.0
36.8
1 Further information on the consolidated statement of cash flows is provided in notes 23 and 24.
134
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 March 2021
1. Authorisation of financial statements and statement of compliance with IFRS
The consolidated financial statements, which comprise the results of discoverIE Group plc (‘the Company’) and its
subsidiaries (collectively referred to as ‘the Group”), for the year ended 31 March 2021 were authorised for issue by the Board
of Directors on 3 June 2021. discoverIE Group plc is a public limited company incorporated and domiciled in England, UK and
the registered office is disclosed on page 191. The Company’s ordinary shares are traded on the London Stock Exchange.
The significant accounting policies adopted by the Group are set out in note 2 and have been applied consistently to all years
presented in these Consolidated financial statements.
2. Accounting policies
Basis of preparation
The Group’s consolidated financial statements have been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and the applicable legal requirements of the Companies
Act 2006. In addition to complying with international accounting standards in conformity with the requirements of the
Companies Act 2006, the consolidated financial statements also comply with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (IFRS). These consolidated financial
statements are prepared under the historical cost convention, unless otherwise stated.
The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest hundred
thousand except as otherwise indicated.
Changes in Accounting Policies
In the prior year, the Group adopted IFRS 16 ‘Leases’; and recognised lease liabilities and right of use assets in respect of the
leasing agreements in place as at 1 April 2019 and those which were entered into during the prior year. During the prior year,
the Group did not make use of the exemption of applying IFRS 16 for short-term leases (leases shorter than 12 months). In the
current year, for the purposes of practical expediency, the Group has decided to make use of the above exemption available
under IFRS 16. This change in accounting policy does not have a material impact on the current year and prior year balances
and therefore the numbers for prior year have not been restated.
Basis of consolidation
The Group’s consolidated financial statements consolidate the results of discoverIE Group plc, entities controlled by the
Company (its subsidiaries) and include the Group’s share of the results of its associates.
Subsidiaries
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries for the year ended
31 March 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its control over the investee. Specifically, the Group controls an
investee if, and only if, the Group has:
■ Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
■ Exposure, or rights, to variable returns from its involvement with the investee; and
■ The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts
and circumstances in assessing whether it has power over an investee, including:
■ The contractual arrangement with the other vote holders of the investee;
■ Rights arising from other contractual arrangements; and
■ The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee, if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated income statement from the date the Group gains
control until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line
with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.
135
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Going concern
In line with IAS1 ‘Presentation of financial statements’ and revised guidance on ‘risk management, internal control and
related financial and business reporting’, management has taken into account all available information about the future for
a period of at least, but not limited to, 12 months from the date of approval of the financial statements when assessing the
Group’s and Company’s ability to continue as a going concern.
The Group’s business activities, together with factors which may adversely impact its future development, performance
and position, are set out in the Strategic Report on pages 2 to 69. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the Finance Review section of the Strategic report on pages 34 to 39.
The Group’s forecasts and projections, taking account of the sensitivity analysis of changes in trading performance, show that
the Group is well placed to operate within the level of its current committed facilities for the foreseeable future.
The Viability Base Case, as stated on page 46 has been subjected to sensitivity analysis involving flexing a number of the
underlying main assumptions, both individually and in conjunction. The sensitivities take into account the principal risks and
uncertainties set out on pages 47 to 52, notably instability in the economic environment, loss of key customers and suppliers,
underperformance of acquired businesses, major business disruption, liquidity restriction, breach of debt covenants and
adverse foreign currency movements arising from a stronger Sterling.
The most severe but plausible downside scenario assumes a recurrence of COVID-19 in the second half of FY 2021/22 and
adverse macroeconomic factors resulting in a significant decline in second half sales of FY 2021/22, negative sales growth in
FY 2022/23 and modest growth thereon in FY 2023/24. Additionally, gross margin was reduced, working capital materially
increased, significant one-off expenditures (product liability, major customer insolvency or litigation) included, and an
increase in the Group effective tax rate.
Even after factoring in these significant additional downsides to the Viability Base Case, there remains good headroom
both in terms of liquidity and our banking covenants. This is supported by the fact that the Group sells a wide portfolio of
different products across a diverse set of industries and geographies, low customer/supplier concentration, has a global
supply chain network, diverse manufacturing capacity, and has well-established and in many cases long term relationships
with its customers. These factors are considered important in mitigating many of the risks that could affect the long-term
viability of the Group. As a consequence, the Directors believe that the Group is well placed to manage its principal risks and
uncertainties as disclosed on pages 47 to 52 of the Strategic Report.
The Directors are confident that the Company and the Group have sufficient resources to continue in operational existence
for at least 12 months from the date of approval of the financial statements. Accordingly, they continue to adopt the going
concern basis in preparing the Annual Report and Accounts.
Underlying profits and earnings
These financial statements include alternative performance measures that are not prepared in accordance with IFRS.
These alternative performance measures have been selected by management to assist them in making operating
decisions because they represent the underlying operating performance of the Group and facilitate internal comparisons of
performance over time. See note 6.
Alternative performance measures are presented in these financial statements as management believe they provide
investors with a means of evaluating performance of the Group on a consistent basis, similar to the way in which
management evaluates performance, that is not otherwise apparent on an IFRS basis, given that certain strategic non-
recurring, infrequent or non-cash items that management does not believe are indicative of the underlying operating
performance of the Group are included when preparing financial measures under IFRS. The Directors consider there to be
the following alternative performance measures:
Underlying operating profit
“Underlying operating profit” is defined as operating profit excluding acquisition related expenditure (namely amortisation
of acquired intangible assets, acquisition and merger expenses, and the IAS19 pension charge relating to the Group’s legacy
defined benefit pension scheme) and exceptional items.
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Acquisition and merger expenses comprise all attributable costs in connection with business acquisitions and disposals and
any related integration into the Group. Acquisition costs include contingent consideration where it is treated as an expense
and movement in contingent consideration where it is treated as purchase price outside of the 12 month measurement
period.
Underlying EBITDA
“Underlying EBITDA” is defined as underlying operating profit with depreciation, amortisation and equity settled share-
based payment expense added back.
Underlying profit before tax
“Underlying profit before tax” is defined as profit before tax excluding acquisition related expenditure (namely amortisation
of acquired intangible assets, acquisition and merger expenses and the IAS19 pension charge relating to the Group’s legacy
defined benefit pension scheme) and exceptional items.
Underlying effective tax rate
“Underlying effective tax rate” is defined as the effective tax rate on underlying profit before tax.
Underlying earnings per share
“Underlying earnings per share” is calculated as underlying profit before tax reduced by the underlying effective tax rate,
divided by the weighted average number of ordinary shares (for diluted earnings per share purposes) in issue during
the year.
Operating cash flow
“Operating cash flow” is defined as underlying EBITDA adjusted for the investment in, or release of, working capital and less
the cash cost of capital expenditure.
Free cash flow
“Free cash flow” is defined as net cash flow before dividend payments, net proceeds from equity fund raising, the cost of
acquisitions and proceeds from business disposals.
Return On Capital Employed (“ROCE”)
“ROCE” is defined as underlying operating profit as a percentage of net assets plus net debt, including an annualisation for
acquisitions.
Organic basis
Reference to ‘organic’ basis included in the Chairman’s statement, Strategic & Operational Review and Finance Review of the
Strategic Report means at constant exchange rates (“CER”) and excluding the first 12 months of acquisitions (Sens-Tech was
acquired on 16 October 2019, Phoenix on 13 October 2020 and Limitor on 11 February 2021).
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling
interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate
share of the acquiree’s identifiable net assets is determined on a transaction by transaction basis. Acquisition costs incurred
are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions
at the acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be
recognised in accordance with IFRS9 ‘Financial Instruments: Classification and measurement’ either in profit or loss or in
other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is
finally settled within equity.
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Goodwill is initially measured at cost, being the excess of the aggregate of the acquisition-date fair value of the consideration
transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved
in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) over the net
identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination. Assets
acquired and liabilities assumed in transactions separate to the business combinations, such as the settlement of pre-
existing relationships or post-acquisition remuneration arrangements, are accounted for separately from the business
combination in accordance with their nature and applicable IFRS. Identifiable intangible assets, meeting either the
contractual-legal or separability criterion are recognised separately from goodwill. Contingent liabilities representing a
present obligation are recognised if the acquisition-date fair value can be measured reliably.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s cash-generating units (or groups of cash-generating units) that are expected to benefit from the business
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group
of units to which goodwill is allocated shall represent the lowest level within the entity at which the goodwill is monitored for
internal management purposes and shall not be larger than an operating segment before aggregation.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the disposed of operation is included in the carrying amount of the operation when determining the gain or
loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the
operation disposed of and the portion of the cash-generating unit retained.
Intangible assets – other
All intangible assets, excluding goodwill arising on a business combination, are stated at their amortised cost or fair value less
any provision for impairment.
(a) Software
Implementation costs of IT systems, and computer software, are amortised on a straight-line basis over their estimated
useful lives which vary from three to ten years depending on the type of software and associated licensing and maintenance
arrangements.
(b) Acquired intangible assets – business combinations
Intangible assets that are acquired as a result of a business combination include customer and supplier relationships and
patents that can be separately identified and measured at fair value on a reliable basis, together with the associated deferred
tax liability. Amortisation is charged to the consolidated income statement in administrative expenses, on a straight-line
basis over the expected useful economic lives as follows.
Customer relationships
Patents
5–10 years
Patent term
(c) Intangible assets – research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated
intangible asset arising from the Group’s development activities is capitalised only if all of the following conditions are
met: (a) an asset is created that can be identified (such as software, new processes and product development costs); (b) it
is probable that the asset created will generate future economic benefits; and (c) the development cost of the asset can
be measured reliably. Internally generated intangible assets are amortised on a straight-line basis over their useful lives
between 5 and 10 years and charged to the consolidated income statement in administrative expenses. Where no internally
generated intangible asset can be capitalised, development expenditure is recognised as an expense in the period in which
it is incurred.
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Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is provided on a straight-line basis to write off the cost, less residual value, over the estimated useful life at the
following rates:
Land and buildings:
Freehold property
2–4% per annum
Leasehold buildings
Shorter of lease term or useful life
Land is not depreciated
Leasehold improvements
Plant and equipment
10–20% per annum or over the life of the lease
5–33% per annum
Property, plant and equipment is reviewed for impairment in accordance with IAS 36 ‘Impairment’, when there are events or
changes in circumstances that indicate that the carrying value may not be recoverable.
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying value of its assets to determine whether there is any indication that
the assets are impaired. If any such indication exists, or when annual impairment testing for an asset is required, such as in
the case of goodwill, the recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss, if any.
Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating
unit) is reduced to its recoverable amount and an impairment loss is immediately recognised as an expense.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such an indication exists, an impairment loss is reversed to the extent
that the asset’s carrying value does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised. Such reversals are recognised in the consolidated income
statement. Any impairment charge on goodwill is not reversed.
Financial assets
The Group classifies its financial assets in the following measurement categories:
1. those to be measured at amortised cost; and
2. those to be measured subsequently at fair value through profit or loss.
The classification depends on the Group’s business model for managing the financial assets as well as the contractual terms
of the cash flows of the financial assets.
For assets measured at fair values, gains or losses will either be recorded in profit or loss or other comprehensive income.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
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At subsequent measurement
Financial assets mainly comprise of “trade receivables”, “other current assets (excluding prepayments and VAT receivables)”,
and “cash and cash equivalents” in the statement of financial position.
Financial assets are subsequently measured based on the classification as follows:
Amortised cost: Financial assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortised cost. A gain or loss on a financial asset that is subsequently
measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is
derecognised or impaired. Interest income from these financial assets is included in finance income using the effective
interest rate method.
Fair value through profit or loss (“FVTPL”): Derivative financial instruments that are held for trading as well as those that do
not meet the criteria for classification as amortised cost or fair value through other comprehensive income (“ FVOCI”) are
classified as FVTPL. Movement in fair values and interest income that is not part of a hedging relationship is recognised in
profit or loss in the period in which it arises.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there
is a legally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and the liability
simultaneously.
Inventories
Inventories comprise goods held for resale and work in progress and are stated at the lower of cost and net realisable value
after making allowance for any obsolete or slow-moving items. Cost comprises direct materials, inward carriage and, where
applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present
location and condition.
Trade and other receivables
Trade receivables are amounts due from customers for goods and services sold in the ordinary course of business. They are
held with the object of collecting the contractual cashflows and are measured at amortised cost less expected credit losses.
Trade receivables are assessed for impairment in accordance with IFRS 9 ‘Financial instruments’. This requires consideration
of both historical and forward-looking information when considering potential impairment of trade receivables. The Group
has opted to use the simplified approach allowed under IFRS 9, which requires the calculation of a lifetime expected credit
loss. A provision matrix has been created to calculate an expected credit loss. This matrix is based upon historical observed
default rates adjusted for forward looking information to create an adjusted default rate. This adjusted default rate is used to
calculate an expected credit loss and is compared with the bad debts written off during the previous 36 months. Expected
credit loss is assessed separately for each of the Group’s trading divisions and is based on each trading division’s three-year
historical credit loss experience.
The following criteria are used to calculate the default rate:
Historical
■ The level of sales written off during the prior 36-month period compared to the credit sales over the same 36-month
period and the aging of receivables.
Forward-Looking
■ Macro-economic factors such as growth rates or interest rates
■ Other material factors such as customer concentration; changes in technologies; Brexit; COVID-19
In addition provision is made where there is objective evidence that a receivable balance may be impaired. Such evidence
may include a significant change in the credit risk profile of a customer, debt that has become significantly overdue or
contract default.
Trade receivables are written off where there is no reasonable expectation of recovery, such as bankruptcy proceedings.
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Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand and short-
term deposits with an original maturity of three months or less. For the purpose of the consolidated statement of cash flows,
cash and cash equivalents comprise cash and cash equivalents as defined above, net of outstanding bank overdrafts.
Borrowings
Borrowings are initially recognised at fair value net of any associated issue costs. Borrowings are subsequently recorded
at amortised cost, with any difference between the amount initially recorded and the redemption value recognised in the
consolidated income statement using the effective interest rate method.
Provisions
Provisions for warranties, onerous contracts, retirement benefits and restructuring costs are recognised when the Group has
a present legal or constructive obligation as a result of a past event; it is probable that an outflow of resources will be required
to settle the obligation; and a reliable estimate can be made of the amount of the obligation. In relation to the provision for
onerous contracts, an assessment is made for impairment of any related assets.
Provisions are discounted to present value when the effect is material using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as
a finance cost.
Exceptional items
The Group discloses exceptional items by virtue of their nature, size or incidence so as to allow a better understanding of the
underlying trading performance of the Group. The Group includes, where material, the profit or loss on disposal of property,
investments or businesses and other financial assets, asset impairments and significant restructuring costs in exceptional
items.
Foreign currency translation
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange
ruling at the reporting date and gains or losses on translation are included in the consolidated income statement.
Currency gains and losses arising from the retranslation of the opening net assets of foreign operations are recorded as a
movement on reserves, net of tax. The differences that arise from translating the results of overseas businesses at average
rates of exchange, and their assets and liabilities at closing rates, are dealt with in a separate currency translation reserve. All
other currency gains and losses are dealt with in the consolidated income statement.
Revenue recognition
Revenue represents the fair value of the consideration received or receivable for goods, commission and other services
provided to third parties, after deducting discounts, VAT and similar taxes levied overseas. Revenue is recognised when a
customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the
good or service. In particular:
a. Revenue from the sale of products is recognised upon transfer of control to the customer upon completion of specified
performance obligations. This is generally when goods are dispatched to customers;
b. Revenue from rendering of services, which primarily comprise maintenance and outsourcing contracts, is recognised over
the life of the contract reflecting performance of the contractual obligations to the customer;
c. Interest income is recognised as the interest accrues using the effective interest method;
d. Dividend income is recognised when the shareholders’ right to receive the payment is established.
Segment reporting
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Board.
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Dividends
Dividends are recognised when they meet the criteria for recognition as a liability. In relation to final dividends, this is when
the dividend is approved by the shareholders in the general meeting, and in relation to interim dividends, when paid.
Leases
Recognition
At inception the Group assesses whether a contract is or contains a lease. This assessment involves the exercise of
judgement about whether it depends on a specific asset, whether the Group obtains substantially all the economic benefits
from the use of that asset and whether the Group has the right to the direct use of the asset. The Group recognises a right of
use (ROU) asset and a lease liability at the commencement of the lease.
Non-lease components
Fees for components such as property taxes, maintenance, repairs and other services which are either variable or transfer
benefits separate to the Group’s right to use the asset are separated from lease components based upon their stand-alone
selling price. These components are expensed in the income statement as incurred.
Measurement
Lease liabilities
Lease liabilities are initially measured at the present value of future lease payments at the commencement date. Lease
payments are discounted using the interest rate implicit in the lease, if this rate is readily available. If not, then lessee’s
incremental borrowing rate is used. The incremental borrowing rate is a combination of government bond yields, used as
a proxy for a risk-free rate, calculated over various periods linked to existing lease terms. This rate is adjusted for borrowing
costs and risks specific to each entity. Lease payments include the following payments due within the non-cancellable term
of the lease, as well as the term of any extension options where these are considered reasonably certain to be exercised:
■ Fixed payments
■ Variable payments that depend on an index or rate
■ The exercise price of purchase or termination options if it is considered reasonably certain these will be exercised.
Subsequent to the commencement date, the lease liability is measured at the initial value, plus an interest charge
determined using the incremental borrowing rate, less lease payments made. The interest expense is recorded in finance
costs in the income statement. The liability is remeasured when future lease payments change, when the exercise of
extension or termination options becomes reasonably certain, or when the lease is modified.
Right of use assets
The ROU asset is initially measured at cost, being the value of the lease liability plus initial direct costs and the cost of any
restoration obligations, less any incentives received.
The ROU asset is subsequently measured at cost less accumulated depreciation and impairment losses. The ROU asset is
adjusted for any re-measurement of the lease liability. The ROU asset is subject to testing for impairment where there are
any impairment indicators. ROU assets are depreciated on a straight-line basis over the shorter of the lease term and the
asset’s useful life.
The Group has elected to not recognise right-of-use assets and lease liabilities for short-term leases that have lease terms
of 12 months or less. The Group decides application of IFRS 16 for low values on a ‘lease by lease basis’, where the criteria for
exemption for low value leases as per IFRS 16 is met. Lease payments relating to these leases are expensed to profit or loss on
a straight-line basis over the lease term.
Borrowing costs
Borrowing costs are recognised as an expense in the period in which they are incurred, in accordance with the effective
interest rate method.
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Pensions
Payments to defined contribution pension schemes are charged as an expense as they fall due.
In respect of defined benefit pension schemes, any obligation recognised in the consolidated statement of financial
position represents the present value of the defined benefit obligation, reduced by the fair value of the scheme assets. A
pension scheme asset is recognised if the employer has an unconditional right to receive a surplus arising on the wind-up
of the scheme. The cost of providing benefits is determined using the projected unit credit actuarial valuation method.
Actuarial gains and losses are recognised in full in the period in which they occur in the consolidated statement of
comprehensive income. Net interest costs are included in finance costs and pension administration costs are included in
administration expenses.
Share based payments
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they
are granted, calculated using an option pricing model, and is recognised as an expense over the vesting period, which ends
on the date on which the relevant employees become fully entitled to the award. In valuing equity-settled transactions, no
account is taken of non-market vesting conditions.
At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting
period has expired and management’s best estimate of the achievement or otherwise of non-market conditions and
hence the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous
reporting date is recognised in the consolidated income statement, with a corresponding entry in equity.
Taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or substantively enacted by the reporting date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements, with the following exceptions:
■ where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that
is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
■ in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing
of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future; and
■ deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply
when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the
reporting date.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise
income tax is recognised in the consolidated income statement.
Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from operational
activities. It principally employs forward foreign exchange contracts to hedge the risks associated with foreign currency
fluctuations relating to certain firm commitments and highly probable forecast transactions. Certain derivative financial
instruments are designated as hedging instruments in line with the Group’s risk management policies. Hedges of foreign
currency exposure on firm commitments and highly probable forecast transactions are accounted for as a cash flow hedge.
The Group does not enter into speculative derivative contracts.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged
items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also
documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. All derivative
financial instruments are initially recognised in the statement of financial position at fair value and are subsequently re-
measured to their fair value at each reporting date. The fair value of forward exchange contracts is calculated by reference to
current forward exchange contracts with similar maturity profiles.
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Significant accounting judgements and estimates
In determining and applying accounting policies, judgement is often required where the choice of specific policy,
assumption or accounting estimate to be followed could materially affect the reported amount of assets, liabilities, income
and expenses, should it be determined that a different choice may be more appropriate. Estimates and judgements are
reviewed on an ongoing basis and are based on historical experience and various other factors that are believed to be
reasonable under the circumstances.
The most significant areas in which assumptions are made and estimates used are in determining:
Goodwill impairment
The Group tests annually whether goodwill is impaired in accordance with its accounting policy. The recoverable amounts
of cash-generating units have been determined based on value-in-use calculations. These calculations require the use
of estimates of future cash flows and the selection of suitable discount rates and judgement is required to identify cash
generating units (note 17).
Contingent consideration
The amounts recognised for contingent consideration in relation to business combinations are the Directors’ best estimates
of the actual amounts which will be payable based on the forecast performance of the acquired businesses. Note 11 provides
details of contingent considerations arising from business combinations.
Fair value of assets acquired in a business combination
Judgements and estimates are made in assessment of fair value of the consideration and net assets acquired, including
the identification and valuation of intangible assets and their useful lives. Note 11 provides details on business combinations.
Judgement is required in evaluating whether any contingent consideration is part of purchase price or compensation for
post combination services.
Retirement benefits
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using
a number of assumptions. The assumptions used in determining the net expense for pensions include the discount rate. Any
changes in these assumptions will impact the carrying amount of retirement benefit obligations. The actuarial assumptions
used in determining the carrying amount at 31 March 2021 are set out in note 31.
Inventories
The carrying amounts of inventories are stated with due allowance for excess, obsolete or slow-moving items. The Directors
exercise judgement in assessing net realisable value. Provisions for slow-moving and obsolete inventory are based on
management’s assessment of the nature and condition of the inventory, including assumptions around future demand and
market conditions.
Trade Receivables
The trade receivables impairment provision requires the use of estimation techniques by the Directors. The estimate is made
based on the assessments of the credit risk profile of a customer, the ageing profile of receivables, historical experience, and
expectations about future market conditions.
Leases
Extension and termination options are included in a number of property and equipment leases across the Group. These
terms are used to maximise operational flexibility in terms of managing contracts. The extension and termination options
held are exercisable only by the Group and not by the lessor. In determining the lease term, the Directors exercise judgement
by considering all the facts and circumstances that create an economic incentive to exercise an extension option, or not
exercise a termination option. Extension options (or periods after termination options) are only included in the lease term
if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a
significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 3. New accounting standards and financial reporting requirements
New standards applied
The Group has applied the following standards and amendments for the first time for its annual reporting period
commencing 1 April 2020:
■ Definition of Material – Amendments to IAS 1 and IAS 8; and
■ Definition of a Business (Amendments to IFRS 3)
■ Revised Conceptual Framework for Financial Reporting.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
New standards not yet applied
Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2021
reporting period and have not been early adopted by the Group. None of these are expected to have a material impact on
the Group in the current or future reporting periods.
4. Revenue
Group revenue is analysed below:
Sale of goods
Rendering of services
Total revenue
2021
£m
443.0
11.3
454.3
2020
£m
454.5
11.9
466.4
5. Operating segment information
The Group organises its businesses into two divisions, Design & Manufacturing and Custom Supply.
■ The Design & Manufacturing division manufactures custom electronic products that are uniquely designed or modified
from a standard product for a specific customer requirement. The products are manufactured at one of our in-house
manufacturing facilities or, in some cases, by third party contractors.
■ The Custom Supply division provides technically demanding, customised electronic, photonic and medical products to
the industrial, medical and healthcare markets, both from a range of high-quality, international suppliers (often on an
exclusive basis) and from discoverIE’s Design & Manufacturing division.
These two divisions have been assessed as the reportable operating segments of the Group. Within each reportable
operating segment are aggregated business units with similar characteristics such as the method of acquiring products for
sale (manufacturing versus distribution), the nature of customers and products, risk profile and economic characteristics.
Management monitors the operating results of its business units separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance is reported and evaluated based on operating
profit or loss earned by each segment without allocation of central administration costs including directors’ salaries,
investment revenue and finance costs, and income tax expense.
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Segment revenue and results
2021
Revenue
Result
Underlying operating profit/(loss)
Acquisition and merger expenses
Amortisation of acquired intangible assets
IAS 19 pension charge
Operating profit/(loss)
2020
Revenue
Result
Underlying operating profit/(loss)
Acquisition and merger expenses
Amortisation of acquired intangible assets
IAS 19 pension charge
Operating profit/(loss)
Segment assets and liabilities
Design &
Manufacturing
£m
296.6
Custom
Supply
£m
157.7
37.7
(2.0)
(11.1)
–
24.6
5.6
–
–
(1.0)
4.6
Design &
Manufacturing
£m
297.9
Custom
Supply
£m
168.5
38.1
(3.8)
(9.0)
–
25.3
7.3
(0.2)
–
–
7.1
Unallocated
£m
–
(8.1)
–
–
(0.4)
(8.5)
Unallocated
£m
–
(8.3)
–
–
(0.3)
(8.6)
Design &
Manufacturing
£m
142.7
180.1
322.8
Custom
Supply
£m
53.5
10.2
63.7
(76.4)
(39.1)
2021
Assets and liabilities
Segment assets (excluding goodwill and other intangible assets)
Goodwill and other intangible assets
Central assets
Cash and cash equivalents
Current and deferred tax assets
Total assets
Segment liabilities
Central liabilities
Other financial liabilities
Pension liability
Current and deferred tax liabilities
Total liabilities
Net assets
146
discoverIE Group plc
Total
£m
454.3
35.2
(2.0)
(11.1)
(1.4)
20.7
Total
£m
466.4
37.1
(4.0)
(9.0)
(0.3)
23.8
Total
£m
196.2
190.3
386.5
3.2
29.2
9.7
428.6
(115.5)
(8.8)
(76.4)
(1.0)
(18.1)
(219.8)
208.8
NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 5. Operating segment information continued
2020
Assets and liabilities
Segment assets (excluding goodwill and other intangible assets)
Goodwill and other intangible assets
Central assets
Cash and cash equivalents
Pension asset
Current and deferred tax assets
Total assets
Segment liabilities
Central liabilities
Other financial liabilities
Current and deferred tax liabilities
Total liabilities
Net assets
Design &
Manufacturing
£m
Custom Supply
£m
144.4
170.9
315.3
59.2
10.5
69.7
(72.4)
(38.4)
Total
£m
203.6
181.4
385.0
2.0
36.8
1.8
8.2
433.8
(110.8)
(5.5)
(98.1)
(18.9)
(233.3)
200.5
For the purposes of monitoring segment performance and allocating resources between segments, the Directors monitor
the net assets attributable to each segment. Assets and liabilities are allocated to reportable segments, with the exception of
the pension liability, tax assets and liabilities, cash and all borrowings, central assets (ERP and other Head Office assets) and
central liabilities (Head Office liabilities).
Other segment information
Design & Manufacturing
Custom Supply
Central
Depreciation and
amortisation1
Additions to
non current assets1
2021
£m
20.0
2.8
0.4
23.2
2020
£m
18.0
2.6
0.4
21.0
2021
£m
28.3
2.4
1.7
32.4
2020
£m
83.7
3.9
0.4
88.0
1
Includes right of use assets, goodwill, acquired intangibles and related amortisation.
Design & Manufacturing additions comprised intangible assets £10.1m, goodwill £9.3m, right of use assets £4.6m and
tangible assets £4.3m. Custom Supply additions comprised intangible assets £0.1m, right of use assets £2.2m and tangible
assets £0.1m. Central additions comprised intangible assets £0.3m, right of use assets £1.3m and tangible assets £0.1m.
Geographical information
The Group’s revenue from external customers based on customer locations and information about its segment assets
(excluding pension asset) by geographical location are detailed below:
UK
Europe
Rest of the World
Revenue from external
customers
Non current
assets
2021
£m
56.7
268.5
129.1
454.3
2020
£m
60.2
281.5
124.7
466.4
2021
£m
57.3
166.7
21.0
245.0
2020
£m
59.0
152.6
23.0
234.6
147
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Profit before tax
Add back Acquisition and merger expenses
Amortisation of acquired intangible assets
Total IAS 19 pension charge
Underlying profit before tax
2021
£m
17.0
2.0
11.1
1.4
31.5
2020
£m
19.5
4.0
9.0
0.3
32.8
(a)
(b)
(c)
The tax impact of the underlying profit adjustments above is a credit of £2.5m (2020: £1.4m).
a. In the year there were £2.0m of acquisition and merger related expenses. £1.8m of transaction costs were incurred in
relation to the acquisition of Phoenix, Limitor and ongoing transactions. There was a net contingent consideration
credit of £0.2m in relation to current and past acquisitions and £0.4m charge in relation to the integration of acquired
businesses in North America.
In the prior year there were £4.0m of acquisition and merger related expenses. Costs of £1.5m were incurred in relation to
the acquisition of Hobart, Positek and Sens-Tech and £0.3m in relation to ongoing transactions. Contingent consideration
of £2.0m was charged in relation to current and past acquisitions. Costs of £0.2m were incurred in relation to the
integration of RSG into the Custom Supply division.
b. Amortisation charge for intangible assets recognised on acquisition of £11.1m being amortisation of acquired customer
relationships and patents. The equivalent charge last year was £9.0m. The increase relates to the three acquisitions during
the last two years (Sens-Tech in October 2019, Phoenix in October 2020 and Limitor in February 2021).
c. Pension costs of £1.4m this year in respect of the Group’s legacy defined benefit pension scheme, mainly relate to a one-
off adjustment relating to historic commutation terms for legacy scheme members (see note 31).
7. Operating profit
Amounts charged/(credited) to the consolidated income statement are as follows:
Employee costs (note 8)
Depreciation of property, plant and equipment (note 14)
Depreciation of right of use assets (note 15)
Amortisation of other intangible assets (note 18)
Net foreign exchange differences
Inventories (amounts included in cost of sales):
Cost of inventories
Write-down of inventories to net realisable value
Write-back of amounts previously written off
Auditors’ remuneration:
Audit of the Group financial statements (including parent company)
Audit of local subsidiary financial statements
2021
£m
96.8
4.9
6.6
11.7
(0.4)
298.1
2.6
(0.1)
0.4
0.9
2020
£m
94.0
4.8
6.6
9.6
(0.3)
309.7
1.8
–
0.2
0.9
After completion of the 2020 audit of the consolidated financial statements and subsidiary statutory accounts, additional
fees amounting to £0.1m were incurred which have been included in the 31 March 2020 analysis above.
The fee for non-audit services is not material. These mainly relate to reporting required by regulators in overseas countries.
148
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021
8. Employee costs and Directors’ emoluments
Wages and salaries
Social security costs
Other pension costs
Share-based payments (note 30)
2021
£m
79.6
12.5
3.6
1.1
96.8
The average monthly number of employees (including Executive Directors) during the year was as follows:
Sales and marketing
Manufacturing and service
Administration
At 31 March 2021 the Group had 4,414 employees (2020: 4,339).
Directors’ emoluments
Aggregate emoluments in respect of qualifying services
Aggregate contribution to defined contribution scheme
Highest paid director
Emoluments in respect of qualifying services
Pension contributions to the defined contribution scheme
2020
£m
76.4
12.8
3.5
1.3
94.0
2020
544
3,321
529
4,394
2020
£
1,353,637
79,230
2021
524
3,253
492
4,269
2021
£
1,271,111
79,230
1,350,341
1,432,867
787,360
61,523
848,883
839,316
61,523
900,839
Retirement benefits are accruing to two directors under a defined contribution pension scheme (2020: two).
Further details of directors’ emoluments are provided in the remuneration report on pages 94 to 118.
9. Finance income/(costs)
Interest receivable and similar income
Finance income
Finance costs on bank loans and overdrafts
Finance costs on lease liabilities
Amortisation of borrowing costs
Finance costs
2021
£m
0.3
0.3
(2.9)
(0.6)
(0.5)
(4.0)
2020
£m
0.6
0.6
(3.8)
(0.6)
(0.5)
(4.9)
149
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10. Tax expense
The major components of the corporation tax expense are summarised below:
Current taxation:
UK adjustments in respect of prior years
Overseas tax
Overseas adjustments in respect of prior years
Total current taxation expense
Deferred taxation
Origination and reversal of temporary differences within the UK
Origination and reversal of temporary differences overseas
Increased recognition of historic losses
Impact of tax rate changes
Total deferred taxation credit
Tax expense reported in the consolidated income statement
Tax recognised in other comprehensive expense
Increase/(decrease) in deferred tax asset on pension deficit
Tax reported in other comprehensive expense
Tax recognised in equity
Increase in deferred tax asset on share based payments
Tax reported in equity
2021
£m
–
–
7.6
–
7.6
7.6
(1.0)
(1.2)
(0.4)
–
(2.6)
5.0
2021
£m
0.6
0.6
2021
£m
1.3
1.3
2020
£m
(0.1)
(0.1)
6.5
0.3
6.8
6.7
(0.8)
–
(0.8)
0.1
(1.5)
5.2
2020
£m
(0.5)
(0.5)
2020
£m
0.5
0.5
The effective rate of taxation for the year is higher (2020: higher) than the standard rate of taxation in the UK of 19% (2020:
19%). A reconciliation of the tax expense applicable to the profit before tax, at the statutory tax rate, to the actual tax expense
at the Group’s effective tax rate for the years ended 31 March 2021 and 31 March 2020 respectively is presented below:
Profit before tax
Profit before taxation multiplied by standard rate of corporation tax in the UK of 19% (2020:
19%)
Effect of:
Different tax rates in overseas companies
Tax losses not recognised
Non-deductible expenses
Increased recognition of historic losses
Impact of tax rate changes on deferred tax
Adjustments to current taxation expense in respect of prior years
Total tax reported in the consolidated income statement
2021
£m
17.0
3.2
1.2
–
1.0
(0.4)
–
–
5.0
2020
£m
19.5
3.7
1.4
(0.7)
1.3
(0.8)
0.1
0.2
5.2
150
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021
10. Tax expense continued
Deferred tax
Deferred tax liabilities
Accelerated capital allowances
Intangibles
Pensions
Other temporary differences
Gross deferred tax liabilities
Deferred tax assets
Decelerated capital allowances
Pensions
Tax losses
Share-based payment plans
Other temporary differences
Gross deferred tax assets
Deferred tax expense/(credit) in the consolidated income statement
Consolidated income statement
Decelerated capital allowances
Other temporary differences
2021
£m
(0.3)
(11.1)
–
(1.1)
(12.5)
0.2
0.7
2.2
3.5
1.3
7.9
2021
£m
0.1
(2.7)
(2.6)
2020
£m
(0.4)
(11.5)
(0.3)
(1.2)
(13.4)
0.4
0.3
2.2
2.2
1.0
6.1
2020
£m
–
(1.5)
(1.5)
At 31 March 2021, the Group had not recognised any deferred tax asset in respect of tax losses of approximately £19.8m (2020:
£23.1m). Deferred tax assets are not recognised where there is insufficient evidence that losses will be utilised.
At 31 March 2021, a £0.5m deferred tax liability (2020: £0.7m) has been recognised for withholding taxes payable on the
remittance of certain of the Group’s overseas subsidiaries’ unremitted earnings. The aggregate amount of unremitted
earnings on which deferred tax has not been recognised is £12.9m (2020 £12.2m). No deferred tax has been recognised on
this amount as the Group is able to control the timing of these distributions and is not expecting to distribute these profits in
the foreseeable future.
The 2021 Budget on 3 March 2021 announced that the UK corporate tax rate will increase from 19% to 25% effective from 1
April 2023. As the rate increase was not substantively enacted at the statement of financial position date, the 19% rate has
been applied in the measurement of the Group’s UK based deferred tax assets and liabilities at 31 March 2021. If the rate
change had been substantively enacted as at 31 March 2021, it would not have had a material impact on the statement of
financial position.
151
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Acquisitions in the year ended 31 March 2021
Acquisition of Phoenix
On 13 October 2020, the Group completed the acquisition of the trade and assets of Phoenix America Inc (“Phoenix”). The
trade and assets were transferred to a newly incorporated company, Phoenix America LLC.
Phoenix was acquired for an initial cash consideration of £8.5m ($10.9m) and funded from the Group’s existing debt facilities.
In addition, a contingent payment of up to £1.2m ($1.5m) will be payable to the management shareholder subject to Phoenix
achieving certain profit targets during the three-year period ended 31 December 2023. The fair value of the contingent
consideration will be recognised in the consolidated income statement over the performance period.
Phoenix, based in the USA, is a designer and manufacturer of magnetically actuated sensors, encoders and related products
for industrial customers.
The provisional fair value of the identifiable assets and liabilities of Phoenix at the date of acquisition were:
Property, plant and equipment
Intangible assets – other
Inventories
Trade and other receivables
Trade and other payables
Total identifiable net assets
Provisional goodwill arising on acquisition
Total investment
Discharged by
Cash
Provisional
fair value
recognised
at acquisition
£m
0.5
3.3
0.7
0.5
(0.2)
4.8
3.7
8.5
8.5
8.5
Included in the £3.7m of goodwill recognised above are certain intangible assets that cannot be individually separated and
reliably measured from the acquiree, due to their nature. These include the value of expected operational benefits.
Net cash outflows in respect of the acquisition comprise:
Cash consideration
Transaction costs of the acquisition (included in operating cash flows) 1
Total
£m
8.5
0.4
8.9
1 Acquisition costs of £0.1m and £0.3m were expensed as incurred in the years ended 31 March 2021 and 31 March 2020
respectively. These were included within administrative expenses (note 6).
Included in cash flow from investing activities is the cash consideration of £8.5m.
From the date of acquisition to 31 March 2021, Phoenix contributed £2.5m to revenue and £0.2m to profit after tax of the
Group. If the business combination had taken place at the beginning of the year, the consolidated profit after tax for the
Group would have been £12.3m and the consolidated revenue for the Group would have been £456.5m.
152
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 11. Business combinations continued
Acquisition of Limitor
On 11 February 2021, the Group completed the acquisition of the Limitor Group (“Limitor”) via the purchase of 100% of the
share capital and voting equity interests of Limitor GmbH and its subsidiary company Limitor Solutions GmbH and 100% of
the share capital and voting equity interests of Limitor Hungaria Kft.
Limitor was acquired for an initial cash consideration of £12.8m (€14.6m), before expenses, funded from the Group’s existing
debt facilities. In addition, a contingent payment of up to £3.1m (€3.5m) will be payable subject to Limitor achieving certain
operational and profit growth targets during the three-year period ended 31 March 2024. £0.4m of contingent consideration
has been accounted for in the purchase price with the remaining fair value of the contingent consideration to be recognised
in the consolidated income statement over the performance period.
Limitor, based in Germany and Hungary, designs and manufactures custom thermal safety components for industrial markets.
The provisional fair value of the identifiable assets and liabilities of Limitor at the date of acquisition were:
Property, plant and equipment
Intangible assets – other
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax asset
Deferred tax liabilities
Total identifiable net assets
Provisional goodwill arising on acquisition
Total investment
Discharged by
Cash
Contingent consideration
Provisional
fair value
recognised
at acquisition
£m
0.8
6.5
0.7
0.9
1.0
(0.8)
0.1
(1.6)
7.6
5.6
13.2
12.8
0.4
13.2
Included in the £5.6m of goodwill recognised above are certain intangible assets that cannot be individually separated and
reliably measured from the acquiree, due to their nature. These include the value of expected operational benefits.
Net cash outflows in respect of the acquisition comprise:
Cash consideration
Transaction costs of the acquisition (included in operating cash flows)1
Net cash acquired
Total
£m
12.8
0.5
(1.0)
12.3
1 Acquisition costs of £0.5m were expensed as incurred in the year ended 31 March 2021 and were included within
administrative expenses (note 6).
Included in cash flow from investing activities is the cash consideration of £12.8m and the net cash acquired of £1.0m.
From the date of acquisition to 31 March 2021, Limitor contributed £1.3m to revenue and £0.2m to profit after tax of the
Group. If the business combination had taken place at the beginning of the year, the consolidated profit after tax for the
Group would have been £12.7m and the consolidated revenue for the Group would have been £461.2m.
153
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Acquisitions in the year ended 31 March 2020
There have been no changes to the provisional fair values of the assets and liabilities acquired in the prior year.
Acquisition of Hobart
On 15 April 2019, the Group completed the acquisition of 100% of the share capital and voting equity interests of Coil-Tran
Corporation and 85% of the share capital and voting equity interests of Coil-Tran de Mexico SA de CV (trading as Hobart
Electronics). The fair value of the non-controlling interest in Coil-Tran de Mexico SA de CV is assessed as immaterial.
Hobart Electronics (“Hobart”) was acquired for an initial cash consideration of £11.5m ($15.2m) on a debt free, cash free basis,
before expenses, funded from the Group’s existing debt facilities. In addition, further contingent cash consideration of up
to £3.1m ($4.0m) is payable subject to achieving certain operational and profit growth targets during the three-year period
ending 31 March 2022.
Hobart is a US based designer and manufacturer of custom transformers, inductors and magnetic components.
The fair value of the identifiable assets and liabilities of Hobart at the date of acquisition were:
Property, plant and equipment
Intangible assets – other
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Provisions (current)
Total identifiable net assets
Goodwill arising on acquisition
Total investment
Discharged by
Cash
Contingent consideration
Fair value
recognised
at acquisition
£m
0.1
5.4
1.9
0.8
0.3
(0.9)
(0.2)
(0.2)
7.2
5.3
12.5
11.5
1.0
12.5
Included in the £5.3m of goodwill recognised above are certain intangible assets that cannot be individually separated and
reliably measured from the acquiree, due to their nature. These include the value of expected operational benefits.
Net cash outflows in respect of the acquisition comprise:
Cash consideration
Transaction costs of the acquisition (included in operating cash flows)1
Net cash acquired
Total
£m
11.5
0.4
(0.3)
11.6
1 Acquisition costs of £0.2m and £0.3m were expensed as incurred in the years ended 31 March 2020 and 31 March 2019
respectively. These were included within administrative expenses (note 6).
Included in cash flow from investing activities for last year is the cash consideration of £11.5m and the net cash acquired
of £0.3m.
154
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 11. Business combinations continued
Acquisition of Positek
On 15 April 2019, the Group completed the acquisition of 100% of the share capital and voting equity interests of Positek
Limited (“Positek”).
Positek was acquired for an initial cash consideration of £4.2m on a debt free, cash free basis, before expenses, funded from
the Group’s existing debt facilities. In addition, further contingent cash consideration of up to £0.4m is payable subject to
achievement of certain integration objectives and profit target for the 12 month period ending 30 September 2020.
Positek is a UK based designer and manufacturer of rugged, high accuracy linear rotary tilt and submersible sensors
supplying the international markets.
The fair value of the identifiable assets and liabilities of Positek at the date of acquisition were:
Intangible assets – other
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Deferred tax liabilities (non-current)
Total identifiable net assets
Goodwill arising on acquisition
Total investment
Discharged by
Cash
Contingent consideration
Fair value
recognised
at acquisition
£m
1.8
0.3
0.2
1.1
(0.1)
(0.2)
(0.3)
2.8
2.7
5.5
5.3
0.2
5.5
Included in the £2.7m of goodwill recognised above are certain intangible assets that cannot be individually separated and
reliably measured from the acquiree, due to their nature. These include the value of expected operational benefits. None of
the goodwill recognised is expected to be deductible for corporate tax purposes.
Net cash outflows in respect of the acquisition comprise:
Cash consideration
Transaction costs of the acquisition (included in operating cash flows)1
Net cash acquired
Total
£m
5.3
0.2
(1.1)
4.4
1 Acquisition costs of £0.1m and £0.1m were expensed as incurred in the years ended 31 March 2020 and 31 March 2019
respectively. These were included within administrative expenses (note 6).
Included in cash flow from investing activities for last year is the cash consideration of £5.3m and the net cash acquired
of £1.1m.
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Acquisition of Sens-Tech
On 16 October 2019, the Group completed the acquisition of 100% of the share capital of Xi-Tech Limited and its subsidiary,
Sens-Tech Limited (“Sens-Tech”).
Sens-Tech was acquired for an initial cash consideration of £58.0m on a debt free, cash free basis, before expenses, funded
from the Group’s existing debt facilities and a placing of shares. In addition, further contingent cash consideration of up
to £12m is payable subject to the achievement of certain profit growth targets over a three year period ending 31 March
2022. The fair value of the contingent consideration will be recognised in the consolidated income statement over the
performance period from the acquisition date.
Sens-Tech, is a UK based business specialising in X-ray detection and data acquisition modules supplying international
markets.
The fair value of the identifiable assets and liabilities of Sens-Tech at the date of acquisition were:
Intangible assets – other
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Deferred tax liabilities (non-current)
Total identifiable net assets
Goodwill arising on acquisition
Total investment
Discharged by
Cash
Fair value
recognised
at acquisition
£m
32.4
2.0
2.6
12.8
(1.2)
0.2
(6.2)
42.6
27.4
70.0
70.0
70.0
Included in the £27.4m of goodwill recognised above are certain intangible assets that cannot be individually separated and
reliably measured from the acquiree, due to their nature. These include the value of expected operational benefits. None of
the goodwill recognised is expected to be deductible for corporate tax purposes.
Net cash outflows in respect of the acquisition comprise:
Cash consideration
Transaction costs of the acquisition (included in operating cash flows)1
Net cash acquired
Total
£m
70.0
1.2
(12.8)
58.4
1 Acquisition costs of £1.2m were expensed as incurred in the year ended 31 March 2020 and were included within
administrative expenses (note 6).
Included in cash flow from investing activities is the cash consideration of £70.0m and the net cash acquired of £12.8m.
From the date of acquisition to 31 March 2020, Sens-Tech contributed £8.7m to revenue and £1.5m to profit after tax of the
Group. If the business combination had taken place at the beginning of the year, the consolidated profit after tax for the
Group would have been £16.7m and the consolidated revenue for the Group would have been £476.4m.
156
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 12. Dividends
Dividends recognised in equity as distributions to equity holders in the year:
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2020 of 0.0p (2019: 6.75p)
Interim dividend for the year ended 31 March 2021 of 3.15p (2020: 2.97p)
Total amounts recognised as equity distributions during the year
Proposed for approval at AGM:
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2021 of 7.0p (2020: 0.0p)
Summary
Dividends per share declared in respect of the year
Dividends per share paid in the year
Dividends paid in the year
13. Earnings per share
2021
£m
–
2.8
2.8
2021
£m
6.2
10.15p
3.15p
£2.8m
2020
£m
5.4
2.7
8.1
2020
£m
–
2.97p
9.72p
£8.1m
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is the basic earnings per share after allowing for the dilutive effect of the conversion into ordinary
shares of the weighted average number of options outstanding during the year.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Profit for the year attributable to equity holders of the parent:
Weighted average number of shares for basic earnings per share
Effect of dilution – share options
2021
£m
12.0
2020
£m
14.3
Number
Number
88,753,576
83,997,130
3,469,048
2,878,352
Adjusted weighted average number of shares for diluted earnings per share
92,222,624
86,875,482
Basic earnings per share
Diluted earnings per share
Underlying earnings per share is calculated as follows:
Net profit for the year
Acquisition and merger expenses
Amortisation of acquired intangible assets
IAS 19 pension charge
Tax effect of the above
Underlying profit
13.5p
13.0p
2021
£m
12.0
2.0
11.1
1.4
(2.5)
24.0
17.0p
16.5p
2020
£m
14.3
4.0
9.0
0.3
(1.4)
26.2
157
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Weighted average number of shares for basic earnings per share
Effect of dilution – share options
Adjusted weighted average number of shares for diluted earnings per share
Underlying earnings per share
Number
Number
88,753,576
83,997,130
3,469,048
2,878,352
92,222,624
86,875,482
26.0p
30.2p
At the year end, there were 3,928,273 ordinary share options in issue that could potentially dilute underlying earnings per
share in the future, of which 3,469,048 are currently dilutive (2020: 3,306,166 in issue and 2,878,352 dilutive).
14. Property, plant and equipment
Cost
At 1 April 2019
Reclassification
Additions
Disposals
Arising from business combinations
Exchange adjustments
At 31 March 2020
Reclassification
Additions
Disposals
Arising from business combinations
Exchange adjustments
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Reclassification
Charge for the year
Disposals
Exchange adjustments
At 31 March 2020
Reclassification
Charge for the year
Disposals
Exchange adjustments
At 31 March 2021
Net book value at 31 March 2021
Net book value at 31 March 2020
Land and
buildings
£m
Leasehold
improvements
£m
Plant and
equipment
£m
11.6
(0.7)
0.3
–
–
0.2
11.4
0.3
–
(0.3)
–
(0.7)
10.7
3.1
(0.3)
0.5
–
0.1
3.4
0.3
0.4
(0.1)
(0.2)
3.8
6.9
8.0
2.8
0.9
0.5
(0.2)
–
–
4.0
(0.1)
0.3
(0.1)
0.3
–
4.4
1.4
0.5
0.4
(0.1)
–
2.2
(0.1)
0.4
(0.1)
(0.2)
2.2
2.2
1.8
28.2
(0.2)
4.5
(0.1)
0.1
0.3
32.8
(0.2)
2.9
(0.5)
1.0
(1.4)
34.6
13.7
(0.2)
3.9
(0.1)
0.1
17.4
(0.2)
4.1
(0.4)
(0.7)
20.2
14.4
15.4
Total
£m
42.6
–
5.3
(0.3)
0.1
0.5
48.2
–
3.2
(0.9)
1.3
(2.1)
49.7
18.2
–
4.8
(0.2)
0.2
23.0
–
4.9
(0.6)
(1.1)
26.2
23.5
25.2
Land and buildings includes land with a cost of £0.8m (2020: £0.8m) that is not subject to depreciation.
At 31 March 2021 the Group had non-contractual capital expenditure commitments for plant and equipment and leasehold
improvements of £1.1m (2020: £0.3m) for which no provision has been made. The commitments are expected to be satisfied
within one year of 31 March 2021.
158
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 15. Leases
15.1 Leasing arrangements
The Group leases manufacturing and warehousing facilities, offices and various items of plant, machinery, equipment and
vehicles.
Manufacturing and warehouse facilities generally have lease terms between 3 and 10 years. Lease contracts generally
include extension and termination options and variable lease payments, which are discussed further above in ‘Significant
accounting judgements and estimates’ on page 144.
15.2 Carrying value of right of use assets
Set out below are the carrying amounts of right-of-use (“ROU”) assets recognised and movements during the year:
At 1 April 2019
Additions/modifications
Depreciation charge
Exchange adjustments
At 31 March 2020
Additions/modifications
Depreciation charge
Exchange adjustments
At 31 March 2021
Land and
Buildings
£m
Plant and
machinery
£m
17.8
5.8
(5.0)
0.1
18.7
6.7
(5.0)
(0.5)
19.9
2.9
1.0
(1.6)
0.1
2.4
1.7
(1.6)
–
2.5
15.3 Carrying value of lease liabilities
Set out below are the carrying amounts of lease liabilities and the movements during the year:
At 1 April 2019
Additions
Lease modifications
Interest for the year
Lease payments
Exchange adjustments
At 31 March 2020
Additions
Lease modifications
Interest for the year
Lease payments
Exchange adjustments
At 31 March 2021
Current liabilities
Non-current liabilities
2021
£m
4.8
16.7
21.5
Total
£m
20.7
6.8
(6.6)
0.2
21.1
8.4
(6.6)
(0.5)
22.4
Total
£m
(19.8)
(5.5)
(0.6)
(0.6)
6.6
(0.1)
(20.0)
(6.8)
(1.3)
(0.6)
6.7
0.5
(21.5)
2020
£m
5.3
14.7
20.0
159
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15.4 Amounts recognised in the consolidated income statement
Depreciation of ROU assets
Interest expense (included in finance cost – see note 9)
15.5 Extension and termination options
2021
£m
6.6
0.6
7.2
2020
£m
6.6
0.6
7.2
Extension and termination options are included in a number of property and equipment leases across the Group. These
terms are used to maximise operational flexibility in terms of managing contracts. For a description of judgements and
estimates associated with extension and termination options, see note 2.
Variable lease payments based upon an index or rate are accounted for once rental amounts are changed.
£m
122.1
35.4
(3.4)
154.1
9.3
1.3
164.7
£m
(36.8)
127.9
117.3
16. Intangible assets – goodwill
Cost
At 1 April 2019
Arising from business combinations
Exchange adjustments
At 31 March 2020
Arising from business combinations
Exchange adjustments
At 31 March 2021
Impairment
At 31 March 2020 and 31 March 2021
Net book value at 31 March 2021
Net book value at 31 March 2020
160
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 17. Impairment testing of goodwill
The carrying value of goodwill is analysed as follows:
Custom Supply
Acal BFi
Medical
Design & Manufacturing
Stortech
Hectronic
MTC
Myrra
Noratel
Foss
Flux
Contour
Variohm
Santon
Cursor Controls
Hobart
Positek
Sens-Tech
Phoenix
Limitor
2021
£m
9.6
0.6
3.6
0.6
2.0
5.1
2020
£m
9.9
0.6
3.6
0.6
1.9
5.3
28.6
25.9
5.4
0.6
7.7
6.0
5.1
9.0
5.0
2.7
27.4
3.5
5.4
127.9
5.1
0.6
7.7
6.0
5.3
9.0
5.7
2.7
27.4
–
–
117.3
Goodwill acquired through business combinations is allocated to cash-generating units (“CGUs”).
The movement in goodwill compared to prior year relates to the movement in foreign exchange with the exception of
Phoenix and Limitor which were acquired in the year (refer to note 11 for details).
The recoverable amount of each remaining CGU is based on value in use calculations and management’s view of the
recoverable amount. The key assumptions in these calculations relate to future revenue and margins. Cash flow forecasts
for the five-year period from the reporting date are based on 2021/22 budget and management projections thereon. 5
year Compound Annual Growth Rate (CAGR) for revenue between 1% and 8% (2020: between 2% and 7%) have been used
depending on size and sector in which the CGU operates. Annual cash flow growth rates beyond the five-year period are
assumed at 2% (2020: 2%) for all CGUs in line with the average long-term growth rates.
Discount rates reflect the current market assessment of the risks specific to each CGU. The discount rate was estimated
based on the average percentage of a weighted average cost of capital for the industry and then further adjusted to reflect
management’s assessment of any risk specific to the Group. The pre-tax discount rate applied to the cash flow projections of
CGUs varies from 13% to 15% (2020: 13% to 16%).
Sensitivity to changes in assumptions
The Group has conducted sensitivity analysis on the impairment test of each CGUs carrying value taking into account
the latest estimate of the impact of the COVID-19 pandemic, size of the CGU and the sector in which the CGU operates
in. The Directors are comfortable that none of the CGUs would experience a carrying value issue with these downside
sensitivities. It is possible that with respect to certain CGUs with combined carrying value of goodwill of £32.5m as at 31 March
2021, that further adverse changes in sales assumptions in addition to the current downside assumptions could lead to their
carrying values exceeding their recoverable amounts. The Directors have considered plausible scenarios in their assessment
as at 31 March 2021 and therefore do not believe that the change in assumptions beyond what is already included in the
downside scenarios is probable and therefore no impairment has been recorded.
161
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Cost
At 1 April 2019
Arising from business combinations
Additions
Exchange adjustment
At 31 March 2020
Arising from business combinations
Additions
Exchange adjustment
At 31 March 2021
Accumulated amortisation
At 1 April 2019
Charge for the year
Exchange adjustment
At 31 March 2020
Charge for the year
Exchange adjustment
At 31 March 2021
Net book value at 31 March 2021
Net book value at 31 March 2020
19. Inventories
Finished goods and goods for resale
Raw materials and work in progress
Total inventories
Acquired intangibles
Software &
Development
£m
Customer/
Supplier
Relationships
£m
Patents &
Brands
£m
12.6
–
1.0
(0.1)
13.5
–
0.6
–
14.1
9.6
0.6
–
10.2
0.6
–
10.8
3.3
3.3
48.1
39.5
–
(1.5)
86.1
9.9
–
0.2
96.2
21.1
8.5
(1.1)
28.5
10.6
0.5
39.6
56.6
57.6
5.5
–
–
0.1
5.6
–
–
(0.1)
5.5
1.1
0.5
–
1.6
0.5
–
2.1
3.4
4.0
2021
£m
34.2
33.5
67.7
Total
£m
66.2
39.5
1.0
(1.5)
105.2
9.9
0.6
0.1
115.8
31.8
9.6
(1.1)
40.3
11.7
0.5
52.5
63.3
64.9
2020
£m
36.0
32.4
68.4
As at 31 March 2021, the provision for realisable value against total inventories was £9.7m (2020: £8.9m).
162
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 20. Trade and other receivables
Trade receivables
Other receivables
Prepayments and contract assets
2021
£m
75.5
6.8
2.6
84.9
2020
£m
80.3
6.9
2.9
90.1
Trade receivables are non-interest bearing; are generally on 30 to 60 days’ terms and are shown net of expected credit losses.
As at 31 March 2021, the amount of expected credit losses recorded against trade receivables is £1.2m (2020: £1.1m). The
movements in the expected credit losses during the year were as follows:
At 1 April
Charge for the year
Amounts written off
Exchange adjustment
At 31 March
As at 31 March, the aging analysis of trade receivables net of expected credit losses is as follows:
Total
£m
75.5
80.3
Not due
£m
64.8
67.4
<30
days
£m
7.8
9.7
30–60
days
£m
1.1
2.1
Overdue
60–90
days
£m
0.4
0.5
2021
2020
21. Cash and cash equivalents
Cash at bank and in hand
2021
£m
1.1
0.2
(0.1)
–
1.2
90–120
days
£m
0.4
0.2
2021
£m
29.2
2020
£m
0.8
0.3
(0.1)
0.1
1.1
>120
days
£m
1.0
0.4
2020
£m
36.8
Cash at bank earns interest at floating rates, based on daily bank deposit rates. The Group only deposits cash surpluses with
major banks of high credit standing (£18.7m with HSBC; credit rating of AA-, £0.3m with Danske Bank; credit rating of A+ and
the remaining balance of £10.2m with various financial institutions; credit rating of BBB- or higher) in line with its treasury
policy. The fair value of cash and cash equivalents is £29.2m (2020: £36.8m).
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22. Other financial liabilities
Bank overdrafts
Unsecured bank loans
Revolving Credit Facility (RCF)
Capitalised debt costs
Total other financial liabilities
Lease liabilities
Trade and other payables
Total
Effective
interest rate
%
Maturity
Variable On demand
Variable
Variable
Current
Non-current
2021
£m
1.0
0.3
–
(0.5)
0.8
4.8
79.3
84.9
2020
£m
2.0
2.8
–
(0.5)
4.3
5.3
75.0
84.6
2021
£m
–
2.3
74.0
(0.7)
75.6
16.7
0.8
93.1
Interest on overdrafts is based on floating rates linked to LIBOR.
Included in unsecured bank loans are Euro-denominated loans of £0.1m carrying fixed interest rates of 8% and
USD-denominated loans of £0.3m carrying fixed interest rates of 1%.
At 31 March 2021, the RCF drawdowns of £74.0m were denominated in Sterling and Euros which bear interest based
on LIBOR and EURIBOR, plus a facility margin.
Trade and other payables above include only contractual obligations.
The maturity of the carrying value of the gross contractual financial liabilities is as follows:
At 31 March 2021
Fixed and floating rate
Lease liabilities
Trade and other payables
At 31 March 2020
Fixed and floating rate
Lease liabilities
Trade and other payables
Within
1 year
£m
0.8
5.5
79.3
85.6
Within
1 year
£m
4.3
5.9
75.0
85.2
2–5
years
£m
75.6
11.1
0.8
87.5
2–5
years
£m
93.8
11.2
3.1
108.1
>5
years
£m
–
7.6
–
7.6
>5
years
£m
–
4.6
–
4.6
The carrying amount of the Group’s other financial liabilities excluding lease liabilities is denominated in the following
currencies:
Sterling
Euro
US dollar
Other currencies
164
discoverIE Group plc
2021
£m
40.5
68.2
25.3
22.5
156.5
2020
£m
–
0.2
94.8
(1.2)
93.8
14.7
3.1
111.6
Total
£m
76.4
24.2
80.1
180.7
Total
£m
98.1
21.7
78.1
197.9
2020
£m
66.4
65.1
24.5
20.2
176.2
NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 23. Movements in cash and net debt
Year to 31 March 2021
Cash and cash equivalents
Bank overdrafts
Net cash
Bank loans under one year
Bank loans over one year
Capitalised debt costs
Total loan capital
Net debt
1 April
2020
£m
36.8
(2.0)
34.8
(2.8)
(95.0)
1.7
(96.1)
(61.3)
Cash flow
£m
Non cash
changes
£m
31 March
2021
£m
(6.0)
0.6
(5.4)
2.4
16.1
–
18.5
13.1
(1.6)
0.4
(1.2)
0.1
2.6
(0.5)
2.2
1.0
29.2
(1.0)
28.2
(0.3)
(76.3)
1.2
(75.4)
(47.2)
Bank loans over one year above include £74.0m (2020: £94.8m) drawn down against the Group’s revolving credit facility.
Year to 31 March 2020
Cash and cash equivalents
Bank overdrafts
Net cash
Bank loans under one year
Bank loans over one year
Capitalised debt costs
Total loan capital
Net debt
Supplementary information to the statement of cash flows
1 April
2019
£m
22.9
(2.1)
20.8
–
(85.9)
1.8
(84.1)
(63.3)
Underlying Performance Measure
Increase in net cash
Add: Business combinations
Dividends paid
Less: Net proceeds from share issue
Free cash flow
Net finance costs
Taxation
Executive options issuance
Legacy pension scheme funding
Operating cash flow
Cash flow
£m
Non cash
changes
£m
31 March
2020
£m
13.5
0.9
14.4
(2.7)
(7.9)
–
(10.6)
3.8
0.4
(0.8)
(0.4)
(0.1)
(1.2)
(0.1)
(1.4)
(1.8)
2021
£m
13.1
21.8
2.8
(0.1)
37.6
3.1
7.2
–
1.8
49.7
36.8
(2.0)
34.8
(2.8)
(95.0)
1.7
(96.1)
(61.3)
2020
£m
3.8
75.9
8.1
(60.5)
27.3
3.7
6.4
0.1
1.8
39.3
165
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2021
£m
12.0
5.0
3.7
4.9
6.6
11.7
–
1.0
(1.8)
1.4
1.1
45.6
(0.1)
5.5
6.2
11.6
57.2
(3.4)
(7.2)
46.6
2020
£m
14.3
5.2
4.3
4.8
6.6
9.6
0.1
(0.3)
(1.8)
0.3
1.3
44.4
2.7
1.9
(1.0)
3.6
48.0
(4.2)
(6.4)
37.4
Severance and
retirement
indemnity
£m
Other
£m
Total
£m
2.9
0.6
–
(0.2)
(0.1)
0.1
3.3
1.0
(0.2)
(0.2)
(0.2)
3.7
0.9
1.6
0.2
(0.1)
(0.2)
(0.1)
2.3
1.4
–
(0.2)
–
3.5
3.8
2.2
0.2
(0.3)
(0.3)
–
5.6
2.4
(0.2)
(0.4)
(0.2)
7.2
24. Reconciliation of cash flows from operating activities
Profit for the year
Tax expense
Net finance costs
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets – other
Loss on disposal of property, plant and equipment
Change in provisions
Pension scheme funding
IAS 19 pension charge
Impact of equity-settled share-based payment expense and associated taxes
Operating cash flows before changes in working capital
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease in working capital
Cash generated from operations
Interest paid
Income taxes paid
Net cash flow from operating activities
25. Provisions
At 1 April 2019
Arising during the year
Arising from business combinations
Utilised
Released
Exchange difference
At 31 March 2020
Arising during the year
Utilised
Released
Exchange difference
At 31 March 2021
166
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 25. Provisions continued
Analysis of total provisions:
Current
Non-Current
2021
£m
1.8
5.4
7.2
2020
£m
0.9
4.7
5.6
Severance and retirement indemnity
The severance provision relates to severance costs payable to employees.
Retirement indemnity provision of £3.2m (2020: £2.8m), relates to retirement and leaving indemnity schemes in Italy
£1.3m, Sri Lanka £0.9m, India £0.5m, and France £0.5m. The schemes are unfunded. The service cost, representing deferred
salaries accruing to employees, is included as an operating expense and determined by reference to local laws and actuarial
assumptions where applicable.
Other
Other provisions relates primarily to dilapidations provisions £2.0m, warranty provisions £0.6m and restructuring provisions of
£0.3m. The provisions greater than one year are expected to be utilised within one to three years.
26. Financial risk controls
Management of financial risk
The main financial risks faced by the Group are credit risk, liquidity risk and market risk, which include interest rate risk
and currency risk. The Board regularly reviews these risks and has approved written policies covering the use of financial
instruments to manage these risks.
The Group Finance Director retains the overall responsibility and management of financial risk for the Group. Most of the
Group’s financing and interest rate and foreign currency risk management is carried out centrally at Group head office. The
Board approves policies and procedures setting out permissible funding and hedging instruments, exposure limits and a
system of authorities for the approval of transactions.
Management of interest rate risk
The Group has exposure to interest rate risk arising principally from changes in Euro, Sterling and US Dollar interest rates.
The Group does not hedge against exposure to interest rate risk.
Based on the Group’s debt position at the year end, excluding lease liabilities, a 1% increase in interest rates would decrease
the Group’s profit before tax by approximately £0.5m (2020: £0.6m).
167
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Management of foreign exchange risk
The Group’s shareholders’ equity, earnings and cash flows are exposed to foreign exchange risks, due to the mismatch
between the currencies in which it purchases stock and the final currency of sale to its customers.
It is Group policy to hedge identified significant foreign exchange exposure on its committed operating cash flows. This is
carried out centrally based on forecast orders and sales.
The following table demonstrates the sensitivity to a 10% change in the rates of Sterling against all other currencies, US Dollar
against all other currencies and Euro against all other currencies, with all other variables remaining constant, of the Group’s
profit before tax, due to changes in the fair value of monetary assets and liabilities.
£
currency impact
US$
currency impact
Euro
currency impact
2021
£m
0.2
(0.3)
2020
£m
(1.0)
1.2
2021
£m
1.1
(1.1)
2020
£m
1.8
(1.8)
2021
£m
(0.6)
(0.8)
2020
£m
(0.5)
0.7
Profit before tax – gain/(loss)
10% appreciation
10% depreciation
Management of credit risk
Credit risk exists in relation to customers, banks and insurers. Exposure to credit risk is mitigated by maintaining credit
control procedures across a wide customer base.
The Group is exposed to credit risk that is primarily attributable to its trade and other receivables. This is minimised by
dealing with recognised creditworthy third parties who have been through a credit verification process. The maximum
exposure to credit risk is limited to the carrying value of trade and other receivables.
As well as credit risk exposures inherent within the Group’s outstanding receivables, the Group is exposed to counterparty
credit risk arising from the placing of deposits and entering into derivative financial instrument contracts with banks and
financial institutions. The Group manages exposure to this credit risk by entering into financial instrument contracts only
with highly credit-rated authorised counterparties which are reviewed and approved annually by the Board.
Counterparties’ positions are monitored on a regular basis to ensure that they are within the approved limits and that there
are no significant concentrations of credit risks. The Group’s largest customer is approximately 7% of Group sales.
Management of liquidity risk
The Group manages its exposure to liquidity risk and maximises its flexibility in meeting changing business needs by
managing the cash generation of its operations, combined with bank borrowings and access to long-term debt. In its
funding strategy, the Group’s objective is to maintain a balance between the continuity of funding and flexibility through the
use of overdrafts, bank loans and facilities.
At 31 March 2021, the Group had net cash of £28.2m (2020: £34.8m), excluding borrowings of £75.4m (2020: £96.1m). The
Group had total working capital facilities available of £190.4m (2020: £190.6m) with a number of major UK and overseas
banks, of which £180.0m (2020: £180.0m) were committed facilities. The Group had drawn £79.5m against total facilities at
31 March 2021. In addition, the Group has a £60m accordion facility which it can use to extend the total facility up to £240m.
The syndicated facility is available both for acquisitions and for working capital purposes. The facilities are subject to certain
financial covenants, which, following review, had significant headroom at 31 March 2021.
Management of capital
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain
robust capital ratios to support the development of the business with a view to providing strong returns to shareholders. In
order to maintain or adjust the capital structure, the Group may change the amount of dividends paid to shareholders, issue
new shares or increase bank borrowings.
In respect to this objective, the Group has a target gearing range of between 1.5 and 2.0 times. Gearing at 31 March 2021 was
below the range at 1.1 times. In order to maintain such a gearing range and provide the funding for acquisitions, the Group
issued new shares in the prior year (April 2019 and October 2019).
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 27. Financial assets and liabilities
Fair values
Set out below is a comparison by category of carrying amounts and fair values of the Group’s financial instruments that are
carried in the financial statements.
Financial assets
Cash at bank and in hand
Financial liabilities at amortised cost
Carrying
amount
2021
£m
Fair
value
2021
£m
Carrying
amount
2020
£m
Fair
value
2020
£m
29.2
29.2
36.8
36.8
Bank overdrafts and short-term borrowings
(1.3)
(1.3)
(4.9)
(4.9)
Non-current interest-bearing loans and borrowings:
Fixed and floating rate borrowings
Lease liabilities
Contingent consideration
(75.6)
(21.5)
(3.4)
(75.6)
(21.5)
(3.4)
(93.8)
(20.0)
(3.3)
(93.8)
(20.0)
(3.3)
The fair value of loans and borrowings has been calculated by discounting future cash flows, where material, at prevailing
market interest rates.
Short-term trade and other receivables and payables have been excluded from the above table as their book values
approximate fair values.
28. Trade and other payables
Current
Trade payables
Other payables
Accrued expenses and contract liabilities
2021
£m
56.8
25.8
12.2
94.8
2020
£m
57.1
19.6
10.9
87.6
Trade payables are non-interest bearing and are settled in accordance with credit terms. Other payables are non-interest
bearing and are settled throughout the year. Accrued expenses are non-interest bearing and are settled throughout the
year. Contract liabilities are recognised over the term of the underlying contract. Included in current year other payables
is contingent consideration of £2.6m which relates to the acquisition of Cursor Controls. Prior year includes contingent
consideration of £0.2m relating to the acquisition of Positek.
Certain businesses in the Group participate in supply chain finance arrangements whereby suppliers may elect to receive
early payment of their invoices from a bank by factoring their receivable from discoverIE entities. Included within trade
payables is £0.5m (2020: £0.5m) subject to such an arrangement.
Non-Current
Other payables
2021
£m
0.8
2020
£m
3.1
Included in non-current trade and other payable is a £0.8m contingent payment relating to the acquisitions of Sens-Tech,
Limitor and Phoenix. For 2020, £3.1m related to the acquisition of Cursor Controls, Hobart and Sens-Tech.
169
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report 29. Share capital
Allotted, called up and fully paid
Ordinary shares of 5p each
2021
Number
89,455,915
2021
£m
4.4
2020
Number
88,705,915
2020
£m
4.4
In April 2020 750,000 shares were issued to the Group’s Employee Benefit Trust. At 31 March 2021 the Trust held 689,307
shares (2020: nil). During the year to 31 March 2021, employees exercised 60,693 share options under the terms of the various
share option schemes (2020: 2,361).
On 18 April 2019, 7,309,867 shares were issued for a gross consideration of £29.2m before costs and £28.2m after costs.
The shares were issued at 400 pence per share, a discount of 3.85 per cent to the closing share price of 416 pence per share
on 15 April 2019. The shares were issued under a cash box structure and accordingly, £0.3m was share capital with the
balance of £27.9m being allocated to a merger reserve. This amount is fully available for distribution.
On 17 October 2019, 8,034,840 shares were issued for a gross consideration of £33.3m before costs and £32.3m after costs.
The shares were issued at 415 pence per share, a discount of 3.9 per cent to the closing share price of 432 pence per share
on 16 October 2019. £0.4m was share capital with the balance of £31.9m being allocated to share premium account.
30. Share-based payment plans
The Group operates various share-based payment plans. The various schemes are explained below and have been separated
into two separate disclosures. The charge to the income statement in respect of each of these schemes is:
a) Approved and Unapproved Executive Share Option Schemes
b) discoverIE Group plc long-term incentive plan (“the LTIP”)
2021
£m
–
1.1
1.1
2020
£m
–
1.3
1.3
a) Approved and Unapproved Executive Share Option Schemes
The Group operates an approved and an unapproved executive share option scheme, the rules of which are similar
in all material respects. The grant of options to Executive Directors and senior management is recommended by the
Remuneration Committee on the basis of their contribution to the Group’s success. The options vest after three years.
The exercise price of the options is equal to the closing mid-market price of the shares on the trading day prior to the date of
the grant. Exercise of all options is subject to continued employment. The life of each option granted is ten years. There are
no cash settlement alternatives.
Options are valued using the binomial option-pricing model. No non-market performance conditions were included in the
fair value calculations.
The fair value per option granted during the year and the assumptions used in the calculation are as follows:
Grant date
Share price at grant date
Exercise price
Number of employees
Shares under option
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate of return
Expected dividends expressed as a dividend yield
Fair value
170
discoverIE Group plc
September
2020
£6.22
£6.04
6
14,247
3
32.4%
10
6.5
0.01%
1.71%
£1.63
NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 30. Share-based payment plans continued
The expected volatility is based on historical volatility over the previous five years. The expected life is the average expected
period to exercise. The risk-free rate of return is the yield on zero-coupon UK government bonds of a term consistent with
the assumed option life.
The total charge for the year relating to the approved and unapproved share option schemes was £nil (2020: £nil).
Outstanding share options
A summary of the options over ordinary shares that have been granted under various Group share option schemes and
remain outstanding is given below:
At 31 March 2021
Outstanding at
1 April 2020
Forfeited
during the year
Exercised
during the year
Granted
during the year
Outstanding at
31 March 2021
Exercise price
(pence)
26,853
9,580
12,789
–
49,222
At 31 March 2020
–
–
–
–
–
(25,162)
–
–
–
(25,162)
–
–
–
14,247
14,247
1,691
9,580
12,789
14,247
38,307
219.50
402.00
421.17
603.60
Outstanding at
1 April 2019
Forfeited
during the year
Exercised
during the year
Granted
during the year
Outstanding at
31 March 2020
Exercise price
(pence)
2,948
23,791
35,098
14,278
–
76,115
–
–
(1,374)
(2,348)
(3,999)
(7,721)
(2,948)
(23,791)
(6,871)
(2,350)
(645)
(36,605)
–
–
–
–
17,433
17,433
–
–
26,853
9,580
12,789
49,222
302.00
226.25
219.50
402.00
421.17
Changes in share options
A reconciliation of option movements over the year to 31 March 2021 is shown below:
Outstanding at 1 April
Granted
Exercised
Forfeited
Outstanding at 31 March
Exercisable at 31 March
2021
2020
Weighted
average
exercise
price
£3.07
£6.04
£2.20
–
£4.75
£3.75
Number
49,222
14,247
(25,162)
–
38,307
11,271
Number
76,115
17,433
(36,605)
(7,721)
49,222
26,853
Exercise
dates
2020–2027
2021–2028
2022–2029
2023–2030
Exercise
dates
2018–2025
2019–2026
2020–2027
2021–2028
2022–2029
Weighted
average
exercise
price
£2.59
£4.21
£2.46
£3.79
£3.07
£2.20
The weighted average remaining contractual life for the share options outstanding at 31 March 2021 is 8.2 years (2020: 7.7 years).
The range of exercise prices for options outstanding at the end of the year was £2.20 to £6.04 (2020: £2.20 to £4.21).
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www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report 30. Share-based payment plans continued
b) The LTIP
Since 2008, the Group has operated the LTIP as a replacement for the approved and unapproved executive share option
scheme detailed above. The LTIP involves a conditional award of shares on a grant of a nil-cost option. The award of shares to
Executive Directors and senior management is recommended by the Remuneration Committee on the basis of such factors
as their contribution to the Group’s success. The LTIPs are equity settled and there are no cash settled alternatives. The
vesting of an award is dependent on the individual’s continued employment for a three-year period from the date of grant
and the satisfaction by the Company of certain performance conditions. The exercise of the awards is also subject to a 2 year
holding period from the date of vesting.
For awards made in 2021, the performance conditions are as follows:
■ 33.3% of the award is based on the Company’s comparative total shareholder return (“TSR”) against a comparator group
made up of the constituents of the FTSE Small Cap Index;
■ 33.3% of the award is based on the Company’s absolute total shareholder return as measured against the Consumer Price
Index (“CPI”); and
■ 33.3% of the award is based on the Company’s absolute earnings per share (“EPS”) performance.
■ For certain operational management, 25% of the award is based on the Company’s absolute earnings per share (“EPS”)
performance and 75% of the award is based on local earnings targets.
Awards are valued using the Monte Carlo Simulation and Discounted Share Price models. No non-market performance
conditions were included in the fair value calculations. The fair value per award granted and the assumptions used in the
calculation are as follows:
Awards granted in the year ended 30 March 2021:
Grant date
Share price at grant date
Exercise price
Number of employees
Shares under option
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate of return
Expected dividend yield
Fair value
15 July
2020
EPS
£5.90
nil
20
30 June
2020
EPS
£5.12
nil
11
30 June
2020
TSR
£5.12
nil
11
30 June
2020
CPI
£5.12
nil
11
150,165
160,766
160,766
160,766
3
n/a
10
5
n/a
1.95%
£5.04
3
n/a
10
5
n/a
1.95%
£4.38
3
32.6%
10
5
3
32.6%
10
5
–0.08%
–0.08%
1.95%
£2.70
1.95%
£2.37
The expected volatility is based on historical volatility over a term commensurate with the expected life of each award.
The expected life is the average expected period to exercise. The risk-free rate of return is the yield on zero-coupon UK
government bonds of a term consistent with the assumed option life.
The total charge for the year relating to the LTIP schemes was £1.1m (2020: £1.3m).
172
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NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 30. Share-based payment plans continued
Outstanding LTIP
A summary of the awards that have been granted under the LTIP and remain outstanding is given below:
At 31 March 2021
Outstanding at
1 April 2020
615,574
590,796
761,616
611,118
727,062
–
3,306,166
At 31 March 2020
Outstanding at
1 April 2019
617,935
590,796
788,765
632,440
–
2,629,936
Granted
during the year
Forfeited
during the year
Exercised
during the year
Outstanding at
31 March 2021
626,873
2025–2030
(34,230)
3,889,966
Exercise
dates
2020–2025
2021–2026
2022–2027
2023–2028
2024–2029
Exercise
dates
2020–2025
2021–2026
2022–2027
2023–2028
581,344
590,796
761,616
611,118
718,219
615,574
590,796
761,616
611,118
–
–
–
–
–
632,463
632,463
–
–
–
–
(8,843)
(5,590)
(14,433)
–
–
–
–
727,062
727,062
–
–
(27,149)
(21,322)
–
(48,471)
(34,230)
–
–
–
–
–
(2,361)
–
–
–
–
727,062
2024–2029
(2,361)
3,306,166
Granted
during the year
Forfeited
during the year
Exercised
during the year
Outstanding at
31 March 2020
The weighted average remaining contractual life for the share options outstanding at 31 March 2021 is 6.6 years (2020: 7.1 years).
The range of exercise prices for options outstanding at the end of the year was nil (2020: nil).
31. Pension
Defined contribution schemes
The Group makes payments to various defined contribution pension schemes, the assets of which are held in separately
administered funds. In the United Kingdom, the relevant scheme is the discoverIE Group plc Employee Pension Scheme
(‘the discoverIE scheme’). Contributions by both employees and Group companies are held in externally invested trustee-
administered funds.
The Group contributes a specified percentage of earnings for members of the discoverIE scheme, and thereafter has
no further obligations in relation to the discoverIE scheme. At the year end, 190 employees were active members of
the discoverIE scheme (2020: 192). The total cost charged to the consolidated income statement in relation to the UK-
based discoverIE scheme was £627,000 (2020: £617,000). Employer contributions in respect of other UK-based schemes
and overseas pension schemes were £440,000 (2020: £427,000) and £2,598,000 (2020: £2,484,000) respectively. Total
contributions payable in the next financial year are expected to be at rates broadly similar to those in 2020/21 but based on
actual salary levels in 2021/22.
173
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Defined benefit schemes
The acquisition of the Sedgemoor Group in June 1999 brought with it certain defined benefit pension schemes, together
‘the Sedgemoor Scheme’. The Sedgemoor Scheme is funded by the Company, provides retirement benefits based on final
pensionable salary and its assets are held in a separate trustee-administered fund.
Following the acquisition of the Sedgemoor Group, the Sedgemoor Scheme was closed to new members. Shortly thereafter,
employees were given the opportunity to join the discoverIE scheme and future service benefits ceased to accrue to
members under the Sedgemoor Scheme.
Contributions to the Sedgemoor Scheme are determined in accordance with the advice of independent, professionally
qualified actuaries and are set based upon funding valuations carried out every three years.
Based upon the results of the triennial funding valuation at 31 March 2018, the Sedgemoor Scheme’s Trustees agreed with
Sedgemoor Limited on behalf of the participating employers to continue the participating employers’ contributions under
the deficit recovery plan agreed at the previous valuation at 31 March 2015. This required contributions of £1.8m p.a. over the
year to 31 March 2021 with future contributions increasing by 3% each April payable over the period to 30 September 2022.
There is a risk that adverse experience could lead to a requirement for additional contributions to recover any deficit that
arises. The next triennial funding valuation is due for the year ended 31 March 2021.
The estimated amount of employer contributions expected to be paid to the Sedgemoor Scheme during 2021/22 is £1.9m
(2020/21: £1.8m).
The results of the triennial funding valuation as at 31 March 2018 were updated to the accounting date by an independent
qualified actuary in accordance with IAS 19.
The main actuarial assumptions used are set out as follows:
Rate of increase of salaries
Rate of increase of pensions in payment
Discount rate
Inflation assumption – RPI
Inflation assumption – CPI*
* 3.3% from 2031
2021
n/a
2.5%
1.9%
3.4%
2.3%
2020
n/a
2.1%
2.5%
2.6%
1.8%
The discount rate is based on the yields on AA grade Sterling corporate bonds at the reporting date.
Pensioner mortality assumptions are based on 110% of the ‘S2NA’ table, projected from 2007 and with long-term
improvement rates in line with CMI 2019 core projections based on each member’s actual date of birth with a long-term
annual rate of improvement of 1.25% for males and for females.
The weighted average duration of the defined benefit obligation at 31 March 2021 was 13 years (2020: 12 years).
The investment strategy is set by the Trustee of the Sedgemoor Scheme in consultation with the Company. The current
strategy is to invest 45% of the assets in equities, property, infrastructure and other return seeking investments and 55% in
liability driven investments, corporate bonds and cash. As at 31 March 2021 the investment strategy hedged 75% of interest
rate risk and 75% of inflation risk relative to the Sedgemoor Scheme’s liability value for cash funding purposes.
The Sedgemoor Scheme assets are held exclusively within instruments with quoted prices in an active market, other than
the property fund. Re-measurements are recognised immediately through other comprehensive income.
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discoverIE Group plc
NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 31. Pension continued
The charges recognised in the consolidated income statement in respect of defined benefit schemes are as follows:
Pension charge (recognised in administrative expenses)
Total
The charges recognised in the consolidated statement of comprehensive income are as follows:
Re-measurement gains:
Return on plan assets (excluding amounts included in net interest expense)
Actuarial changes arising from changes in actuarial assumptions
Actuarial (losses)/gains recorded in the consolidated statement of comprehensive income
2021
£m
1.4
1.4
2021
£m
0.6
(3.8)
(3.2)
The fair value of assets and expected rates of return used to determine the amounts recognised in the consolidated
statement of financial position are as follows:
Equities
Bonds
Property
Diversified Growth Fund
Cash
Liability driven investments
Infrastructure
Fair value of scheme assets
Present value of funded defined benefit obligations
(Liability)/asset recognised in the consolidated statement of financial position
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligations
Net interest cost
Actuarial losses due to:
Changes in actuarial assumptions
Pension costs
Benefits paid
Closing defined benefit obligations
2021
£m
3.5
9.9
4.1
6.6
4.4
5.6
4.5
38.6
(39.6)
(1.0)
2021
£m
35.8
0.9
3.8
1.0
(1.9)
39.6
2020
£m
0.3
0.3
2020
£m
0.5
2.3
2.8
2020
£m
2.3
9.4
3.8
4.8
6.0
6.4
4.9
37.6
(35.8)
1.8
2020
£m
39.2
0.9
(2.3)
–
(2.0)
35.8
175
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report 31. Pension continued
Changes in the fair value of the scheme assets are as follows:
Opening fair value of scheme assets
Interest on scheme assets
Actual return on plan assets less interest on plan assets
Pension administration costs
Contributions
Benefits paid
Closing fair value of scheme assets
2021
£m
37.6
0.9
0.6
(0.4)
1.8
(1.9)
38.6
2020
£m
36.7
0.9
0.5
(0.3)
1.8
(2.0)
37.6
The pension costs include £0.4m administration costs (2020: £0.3m) and a £1.0m charge (2020: nil) relating to a one-off
adjustment relating to historic commutation terms for legacy scheme members.
Sensitivities
The sensitivity of the 2021 pension liabilities to changes in assumptions are as follows:
Assumption
Discount rate
Inflation
Life expectancy
Change in assumption
Decrease by 0.5%
Increase by 0.5%
Increase by 1 year
Increase in
scheme deficit
£m
2.6
0.9
2.3
32. Related party disclosures
As at 31 March 2021 the Group’s subsidiaries are set out below. Unless otherwise stated, the Group holds (directly or indirectly)
100% of the total voting rights of all subsidiaries.
Except where noted, all material subsidiaries have a 31 March year end and the shares carry the same voting rights as their
effective interest.
UK registered subsidiaries exempt from audit: discoverIE Nordic Holdings Limited (company no. 03118969); Contour Holdings
Limited (company no. 06846542); Variohm Holdings Limited (company no. 05783452); Xi-Tech Limited (company no.
07068708) and Cursor Controls Holdings Limited (company no. 09472278) qualify to take the statutory audit exemption as
set out within section 479A of the Companies Act 2006 for the year ended 31 March 2021. discoverIE Group plc will guarantee
the debts and liabilities of those companies at the statement of financial position date in accordance with section 479C of
the Companies Act 2006. discoverIE Electronics Limited also qualifies to take the statutory audit exemption within section
479A of the Companies Act 2006 for the year ended 31 March 2021.
Name and nature of business
Registered address
Country of
incorporation
and registration
Custom Supply
Acal BFi UK Limited
Acal BFi Central Procurement UK
Limited
Vertec Scientific Limited
Vertec Scientific SA (pty) Limited
Acal BFi France SAS
Acal BFi Belgium NV/SA
Acal BFi Germany GmbH
Acal BFi Nordic AB
Acal BFi Netherlands BV
Acal BFi Italy Srl
176
discoverIE Group plc
3 The Business Centre, Molly Millars Lane, Wokingham, RG41 2EY
3 The Business Centre, Molly Millars Lane, Wokingham, RG41 2EY
England
England
England
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
8 Charmaine Avenue, President Ridge, Randburg 2194 Johannesburg South Africa
4 allée du Cantal – ZI Petite Montagne Sud – 91090 Lisses, Evry
Lozenberg 4, 1932 Zaventem, Brussels
Assar-Gabrielsson-Strabe 1, 63128, Dietzenbach, Germany
P.O. Box 3002, 750 03 Uppsala, Stockholm
Luchthavenweg 53, 5657EA, Eindhoven
Via Cascina Venina n.20/A, 20090 Assago, Milan
France
Belgium
Germany
Sweden
Netherlands
Italy
NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 32. Related party disclosures continued
Name and nature of business
Registered address
Design & Manufacturing
Myrra SAS
2 Boulevard de La Haye, 77600 Bussy-Saint-Georges
Myrra Power sp z.o.o
Ul Warszawska 1, 05-310 Kaluszyn
Zhongshan Myrra Electronic Co
Limited1
39-2 Industrial Road, Xiaolan Industrial Park, Xiaolan Town, 528400,
Zhongshan, Guandong Province
Myrra Deutschland GmbH
Lebacher Strabe 4, 66113 Saarbrucken
Myrra Hong Kong Limited
42/F Central Plaza,18 Harbour Road, Wanchai, Hong Kong
Noratel AS
Noratel UK Limited
Noratel Denmark A/S
Noratel Finland OY
Elektroveien 7, 3300 Hokksund
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Naverland 15, 2600 Glostrup, Copenhagen
Kiertokatu 5, PB 11, 24280, Salo Helsinki
Foshan Noratel Electric Co Limited1
NO 22-2 Xingye Road, Zone C Shishan Science & Technology
Industrial Park, Nanhai Distric, Foshan City, Guangdong Province
528225
Noratel Germany AG
Elsenthal 53, DE-94481 Grafenau, Bremen
Noratel India Power Components
Private Limited
Nila Technopark, Trivandrum, Kerala, 695581
Noratel sp z.o.o
ul. Szczecinska 1K, Dobra Szczecinska PL-72-003
Danselbud Noratel Transformator
sp z.o.o
ul. Szczecinska 1K, Dobra Szczecinska PL-72-003
Noratel International Private Limited P.O Box 15, Phase 2 KEPZ, Katunayake
Noratel Sweden AB
Lars Lindahlsväg 2, Bo Lars Lindahlsväg 2, Box 108, Laxå 69522 x 108,
Laxå 69522
Noratel North America LLC
13663 Providence Road, Suite 345, Weddington, NC 28104
Noratel Power Engineering LLC
# 1117 East Janis Street, Carson, CA 90746
Foss Fiberoptisk Systemsalg AS
Dansrudveien 45, N-3036 Drammen
Foss Fibre Optics s.r.o.
Odborarska 52, 831 02 Bratislava
Flux A/S
Industrivangen 5, 4550 Asnaes
Flux International Limited
41/27, 23 Village No. 6, Phuncaroen Lane, Bangna-Trad Km 16.5, Bang
Chalong (Bangkok), Bang Phli District, Samut Prakan Province, 10540
Hectronic AB
P.O. Box 3002, 750 03 Uppsala, Sweden
MTC Micro Tech Components GmbH Hausener Straße 9, 89407 Dillingen a.d., Donau
EMC Innovation Limited
Stortech Electronics Limited
Contour Electronics Limited
Woolim Lions Valley C-409, 283 Bupyeong-daero, Bupyeong-gu,
Cheongcheon-Dong, Incheon
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Country of
incorporation
and registration
France
Poland
China
Germany
Hong Kong
Norway
England
Denmark
Finland
China
Germany
India
Poland
Poland
Sri Lanka
Sweden
USA
USA
Norway
Slovakia
Denmark
Thailand
Sweden
Germany
South Korea
England
England
Contour Electronics Asia Limited
Room 601, 6/F Shing Yip Industrial Building, 19-21 Shing Yip Street,
Kwun Teng, Kowloon
Hong Kong
Plitron Manufacturing Incorporated
8-601 Magnetic Drive, Toronto, Ontario, M3J 3J2
Heason Technology Limited
Herga Technology Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Canada
England
England
177
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Name and nature of business
Registered address
Variohm-Eurosensor Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Santon Holland B.V.
Santon Group B.V.
Santon Switchgear Limited
Hekendorpstraat 69, 3079 DX Rotterdam
Hekendorpstraat 69, 3079 DX Rotterdam
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Santon Circuit Breaker Services B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Santon Hekendorpstraat B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Santon International B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Santon GmbH
Cursor Controls Limited
NSI bvba
Sens-Tech Limited
Coil-Tran LLC (trading as Hobart
Electronics)
Coil-Mag LLC (trading as IMAG
Electronics)
Coil-Tran de Mexico SA de CV2
Oberstrasse 1, Altes Rathaus Hinsbeck,
Postfach 5217, 41334 Nettetal
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Haakstraat 1A, 3740 Bilzen, Belgium
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
160 South Illinois Street, Hobart, Indiana, 46342-4512
160 South Illinois Street, Hobart, Indiana, 46342-4512
Country of
incorporation
and registration
England
Netherlands
Netherlands
England
Netherlands
Netherlands
Netherlands
Germany
England
Belgium
England
USA
USA
Calle Matamoros 124, Colonia Centro, Municipio Agualeguas, Nuevo
Leon, Mexico, CP 65800
Mexico
Positek Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Phoenix America LLC
850 New Burton Road, Suite 201, Dover, DE 19904
Limitor GmbH
Dieselstraße 22, 73660 Urbach, Germany
Limitor Solutions Gmbh
Dieselstraße 22, 73660 Urbach, Germany
Limitor Hungaria Kft
Pécs, Makay István út 13/b, 7634 Hungary
Management services
discoverIE Management Services
Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Holding companies
Acal Electronic Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Trafo Holding AS
Elektroveien 7, Hokksund, 3300
discoverIE Nordic Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
discoverIE BV
Luchthavenweg 53, 5657 EA Eindhoven
discoverIE Europe Holding BV
Luchthavenweg 53, 5657 EA Eindhoven
discoverIE France Holdings SAS
4 Allée du Cantal – ZI Petite Montagne Sud – 91090 Lisses, Evry
DiscoverIE US Holdings Inc.
850 New Burton Road, Suite 201, Dover, DE 19904
Sedgemoor Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Contour Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
England
USA
Germany
Germany
Hungary
England
England
Norway
England
Netherlands
Netherlands
France
USA
England
England
178
discoverIE Group plc
NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 32. Related party disclosures continued
Name and nature of business
Registered address
discoverIE Electronics Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Aramys SAS
2 Boulevard de La Haye, 77600 Bussy-Saint-Georges
Variohm Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
EWAC Holding B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Cursor Controls Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Country of
incorporation
and registration
England
France
England
Netherlands
England
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
England
Xi-Tech Limited
Dormant companies
Cabcon (UK) Limited
Eurosensor Limited
Acal Supply Chain Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Acal BFi Iberia SL
C/Anabel Segura, 7, Planta Acceso, 28108 Alcobendas, Madrid
Acal Electronics Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
BFi Optilas Denmark A/S
Jernabanegade 238, 4000 Roskilde Copenhagen
BFi Optilas Limited
Sedgemoor Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Sedgemoor Group Supplementary
Pension Trustees Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Sedgemoor Group Pension Trustees
Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
Townsend-Coates Limited
Actech Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
England
England
England
Spain
England
Denmark
England
England
England
England
England
England
Advanced Crystal Technology Limited 2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
England
Bosunmark Limited
Gothic Crellon Limited
Radiatron Holdings Limited
Radiatron Components Limited
Amega Group Limited
Amega Electronics Limited
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
England
England
England
England
England
England
179
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Name and nature of business
Registered address
Myrra Hispania Srl
Ixthus Instrumentation Limited
c/Mataro 43 Pol. Ind. les Grases, 08980 Saint Feliu De Llobregat,
Barcelona
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford
GU2 7AH
DiscoverIE North America LLC
850 New Burton Road, Suite 201, Dover, DE 19904
Country of
incorporation
and registration
Spain
England
USA
1 Zhongshan Myrra Electronic Co Limited and Foshan Noratel Electric Co Limited have 31 December year ends
2 15% of Coil-Tran de Mexico SA de CV is owned by local management
Related parties
Remuneration of key management personnel
The Group considers key management personnel as defined in IAS 24 ‘Related Party Disclosures’ to be the members of the
Group Executive Committee as set out on page 72. Remuneration is set out below in aggregate. The charge for share-based
payments of £0.7m (2020: £1.0m) relates to the Group’s LTIP as detailed in note 30.
Short-term employee benefits
Share-based payme nts
2021
£m
3.1
0.7
3.8
2020
£m
3.2
1.0
4.2
Terms and conditions of transactions with related parties
All transactions with related parties were on an arm’s length basis. Outstanding balances at year end are unsecured and
settlement occurs in cash.
Transactions with other related parties
Details of transactions with Directors are detailed in the Remuneration report on pages 94 to 118.
180
discoverIE Group plc
NOTES TO THE GROUPFINANCIAL STATEMENTSfor the year ended 31 March 2021Annual Report and Accountsfor the year ended 31 March 2021 33. Exchange rates
The profit and loss accounts of overseas subsidiaries are translated into sterling at average rates of exchange for the year and
consolidated statements of financial position are translated at year end rates. The main currencies are the US Dollar, the Euro
and the Norwegian Krone. Details of the exchange rates used are as follows:
US Dollar
Euro
Norwegian Krone
Year to 31 March 2021
Year to 31 March 2020
Closing
rate
1.3760
1.1736
11.7306
Average
rate
1.3075
1.1207
11.9697
Closing
rate
1.2360
1.1281
12.9847
Average
rate
1.2722
1.1448
11.4639
34. Events after the reporting date
There were no matters arising, between the statement of financial position date and the date on which these financial
statements were approved by the Board of Directors, requiring adjustment in accordance with IAS10, Events after the
reporting period. The following important non-adjusting events should be noted:
Dividends
A final dividend of 7.0p per share (2020: nil), amounting to a dividend of £6.2m (2020: nil) and bringing the total dividend for
the year to 10.15p (2020: 2.97p), was declared by the Board on 27 May 2021. The discoverIE group financial statements do not
reflect this dividend.
Business Combinations
On 13 May 2021, subsequent to the year end, the Group completed the acquisition of Control Products Inc (“CPI”). CPI was
acquired for an initial cash consideration of £8.1m ($11.4m) on a debt free, cash free basis, before expenses, funded from
the Group’s existing debt facilities. In addition, a contingent payment of up to £3.8m ($5.4m) will be payable subject to CPI
achieving certain profit growth targets over a four year period.
181
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as at 31 March 2021
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Total current assets
Creditors: amounts falling due within one year
Net current assets
Non-current liabilities
Other financial liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account
Total shareholders’ funds
notes
2021
£m
2020
£m
5
6
7
8
9
201.3
200.2
29.9
3.1
33.0
(15.0)
18.0
23.1
5.6
28.7
(12.8)
15.9
(9.3)
(11.8)
210.0
204.3
4.4
138.8
19.9
46.9
210.0
4.4
138.8
22.7
38.4
204.3
The profit of the Company for the financial year was £7.4m (2020: £2.4m loss).
These financial statements on pages 182 to 187 were approved by the Board of Directors on 3 June 2021 and signed on its
behalf by:
Nick Jefferies
Group Chief Executive
Simon Gibbins
Group Finance Director
182
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021
COMPANY STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 March 2021
At 1 April 2019
Total comprehensive loss for the year
Share-based payments
Shares issued (note 9)
Transfer to retained earnings
Dividends
At 31 March 2020
Total comprehensive profit for the year
Share-based payments
Transfer to retained earnings
Dividends
At 31 March 2021
Share
capital
£m
3.7
–
–
0.7
–
–
4.4
–
–
–
–
Share
premium
£m
106.9
–
–
31.9
–
–
138.8
–
–
–
–
4.4
138.8
Merger
reserve
£m
Profit and
loss account
£m
2.9
–
–
27.9
(8.1)
–
22.7
–
–
(2.8)
–
19.9
39.5
(2.4)
1.3
–
8.1
(8.1)
38.4
7.4
1.1
2.8
(2.8)
46.9
Total
£m
153.0
(2.4)
1.3
60.5
–
(8.1)
204.3
7.4
1.1
–
(2.8)
210.0
At 31 March 2021, an amount of £30.2m out of the total £46.9m in the profit and loss account and £17.0m out of total £19.9m
in the merger reserve is available for distribution, subject to filing these Financial Statements with Companies House. When
making a distribution to shareholders, the Directors determine profits available for distribution by reference to guidance on
realised and distributable profits under the Companies Act 2006 issued by the Institute of Chartered Accountants in England
and Wales and the Institute of Chartered Accountants of Scotland in April 2017. The profits of the Company have been
received in the form of dividends from subsidiary companies which have been paid to the Company in cash. The availability
of distributable reserves is dependent on the available cash resources of the Group and other accessible sources of funds and
is subject to any future restrictions or limitations at the time such distribution is made.
183
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FINANCIAL STATEMENTS
for the year ended 31 March 2021
1. Basis of preparation
The separate financial statements of the Company have been prepared for all periods presented, in accordance with
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101), on the going concern basis and under
the historical convention modified for fair values, and in accordance with the Companies Act 2006 and with applicable
accounting standards. None of the new standards which became effective in the year had an impact on the Company.
A separate profit and loss account dealing with the results of the company has not been presented as permitted by section
408(3) of the Companies Act 2006.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements,
in accordance with FRS 101:
■ The following paragraphs of IAS 1 ‘Presentation of financial statements’
■ 10(d) (statement of cash flows)
■ 16 (statement of compliance with all IFRS)
■ 111 (cash flow statement information)
■ 134-136 (capital management disclosures)
■ IFRS 7 ‘Financial instruments: Disclosures’
■ IAS 7 ‘Statement of cash flows’
■ IAS 24 (paragraph 17) ‘Related party disclosures’ (key management compensation)
■ IAS 24 ‘Related party disclosures’ (the requirement to disclose related party transactions between two or more members
of a group)
For the following disclosures, as the Group’s consolidated financial statements include the equivalent disclosures, the
company has taken the exemptions available under FRS 101:
■ IFRS 2 Share-based payments in respect of group settled equity share-based payments
■ Certain disclosures required by IFRS 13 Fair Value Measurement
2. Summary of significant accounting policies
Going concern
The Company acts as a holding company for investments in the subsidiaries and does not engage in any trading activities
directly and thus is dependent on the trading activities of its subsidiaries. The Company holds sufficient net current assets as
at 31 March 2021 to continue as a going concern.
The factors considered in the going concern assessment of the Group are considered in note 2 to the Group’s consolidated
financial statements. The Group’s forecasts and projections, taking account of the sensitivity analysis of changes in trading
performance, show that the Group is well placed to operate within the level of its current committed facilities for the
foreseeable future.
After making due enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the Annual Report and Accounts.
Income recognition
Dividend income is recognised when the Company’s right to receive payment is established.
184
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 2. Summary of significant accounting policies continued
Investments
Investments in subsidiary and associate undertakings are stated initially at cost, being the fair value of the consideration
given and including directly attributable transaction costs. The carrying values are reviewed for impairment if events or
changes in circumstances indicate the carrying values may not be recoverable.
Dividends
Dividends are recognised when they meet the criteria for recognition as a liability. In relation to final dividends, this is when
approved by the shareholders in general meeting, and in relation to interim dividends, when paid.
Borrowing costs
Borrowing costs are recognised as an expense in the period in which they are incurred, in accordance with the effective
interest rate method.
Share-based payments
In preparing the financial statements, the Company has applied IFRS 2 ‘Share-based payments’. Although the Company
does not incur a charge under this standard, the issuance by the Company to its subsidiaries of a grant of options over the
Company’s shares represents additional capital contributions by the Company in its subsidiaries. The additional capital
contribution is based on the fair value of the grant issued, allocated over the underlying grant’s vesting period.
Further information on share based payments is provided in note 30 of the Group Financial Statements.
Taxation
Corporation tax payable is provided on taxable profits at the current rate.
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance
sheet date, where transactions or events that result in an obligation to pay more tax in the future, or a right to pay less tax
in the future, have occurred at the balance sheet date. Deferred tax assets are regarded as recoverable and recognised in
the financial statements when, on the basis of available evidence, it is more likely than not that there will be suitable taxable
profits from which the future reversal of the timing differences can be deducted. Deferred tax assets and liabilities are not
discounted.
Judgment and key sources of estimation uncertainty
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect
the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and
expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.
Value of investments
Investments in subsidiaries are reviewed annually for impairment when indicators for impairment are identified.
Determining whether the Company’s investments in subsidiaries have been impaired requires estimations of the
investments’ values in use or consideration of the net asset value of the entity. The value in use calculations require the
Directors to estimate the future cash flows, expected to arise from the investments and suitable discount rates in order to
calculate present values.
Recoverability of amounts owed by subsidiary undertakings
Annually, the Company considers whether the amounts owed by subsidiaries are recoverable. The recoverable amount
is compared to the balance sheet position of the corresponding subsidiary. Where the corresponding subsidiary has net
current liabilities or net liabilities the Company considers the estimation of the future cash flows of the subsidiary, alongside
the selection of appropriate assumptions including growth rates and discount rates in order to calculate the present value of
those cash flows to assess the recoverability of these balances.
185
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FINANCIAL STATEMENTS
for the year ended 31 March 2021
3. Profit of the company
The profit of the company for the financial year was £7.4m (2020: £2.4m loss). By virtue of section 408(3) of the Companies
Act 2006, the Company is exempt from presenting a separate profit and loss account.
4. Employees
No remuneration was paid or is payable to the directors in their capacity as directors of the Company (2020: £nil). The
directors also provide services to other group undertakings and received remuneration from a fellow group undertaking,
discoverlE Management Services Limited in respect of services to the Group.
5. Investments
At 1 April 2019
Investment in subsidiaries
Impairment of investment
Share-based payments
At 31 March 2020
Share-based payments
At 31 March 2021
Subsidiary
undertakings
£m
168.9
40.0
(10.0)
1.3
200.2
1.1
201.3
2020
£m
21.3
1.6
–
0.2
23.1
Details of all direct and indirect holdings in subsidiaries are provided in note 32 of the Group Financial Statements.
6. Debtors
Amounts falling due within one year:
Amounts owed by subsidiary undertakings
Corporation tax
Other debtors
Prepayments
2021
£m
28.0
1.7
0.1
0.1
29.9
Amounts owed by subsidiary undertakings bore interest at a sterling base rate plus a margin of 1.75% and at USD one month
LIBOR plus a margin of 2% . All amounts are repayable on demand.
7. Creditors
Amounts falling due within one year:
Bank loans and overdrafts (see note 8)
Amounts owed to subsidiary undertakings
Other payables
Accruals
Amounts owed to subsidiary undertakings bore interest at a nil rate and are repayable on demand.
2021
£m
1.9
12.0
0.1
1.0
15.0
2020
£m
1.3
10.5
0.3
0.7
12.8
186
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021
8. Other financial liabilities
Other financial liabilities of £9.3m at 31 March 2021 (2020: £11.8m) comprise drawdowns on the Group’s revolving credit facility
(see note 22 to the Group consolidated financial statements). The amount is denominated in Sterling and bears interest
based on LIBOR. The facility is secured against the shares of certain Group subsidiaries.
9. Called up share capital
Allotted, called up and fully paid
Ordinary shares of 5p each
2021
Number
89,455,915
2021
£m
4.4
2020
Number
88,705,915
2020
£m
4.4
In April 2020 750,000 shares were issued to the Group’s Employee Benefit Trust. At 31 March 2021 the Trust held 689,307
shares (2020: nil). During the year to 31 March 2021, employees exercised 60,693 share options under the terms of the various
share option schemes (2020: 2,361).
On 18 April 2019, 7,309,867 shares were issued for a gross consideration of £29.2m before costs and £28.2m after costs.
The shares were issued at 400 pence per share, a discount of 3.85 per cent to the closing share price of 416 pence per share
on 15 April 2019. The shares were issued under a cash box structure and accordingly, £0.3m was share capital with the
balance of £27.9m being allocated to a merger reserve. This amount is fully available for distribution.
On 17 October 2019, 8,034,840 shares were issued for a gross consideration of £33.3m before costs and £32.3m after costs.
The shares were issued at 415 pence per share, a discount of 3.9 per cent to the closing share price of 432 pence per share
on 16 October 2019. £0.4m was share capital with the balance of £31.9m being allocated to share premium account.
At 31 March 2021, there were outstanding options for employees of subsidiaries to purchase up to 3,928,273 (2020: 3,306,166)
ordinary shares of 5p each between 2020 and 2030 at prices ranging from £nil per share to £6.04 per share. These are subject
to certain performance conditions as disclosed in note 30 of the Group consolidated financial statements. During the year to
31 March 2021, employees exercised 60,693 share options under the terms of the various share option schemes (2020: 2,361).
The shares exercised during the year ended 31 March 2021 were settled by the Trust.
10. Related parties
The Company is exempt under the terms of IAS 24 from disclosing related party transactions with wholly-owned entities
that are part of the Group as these transactions are fully eliminated on consolidation.
The Company has given guarantees and offset arrangements to support bank facilities made available to subsidiary
undertakings.
11. Share-based payments
For detailed disclosures of share-based payments granted to the employees of subsidiaries refer to note 30 of the Group
Financial Statements.
12. Post balance sheet events
There were no matters arising, between the statement of financial position date and the date on which these financial
statements were approved by the Board of Directors, requiring adjustment in accordance with IAS10, Events after the
reporting period. The following important non-adjusting events should be noted:
Dividends
A final dividend of 7.0p per share (2020: nil), amounting to a dividend of £6.2m (2020: nil) and bringing the total dividend
for the year to 10.15p (2020: 2.97p), was declared by the Board on 27 May 2021. The discoverIE plc financial statements do not
reflect this dividend.
Business Combinations
On 13 May 2021, subsequent to the year end, an indirectly held subsidiary of the Company completed the acquisition of
Control Products Inc (“CPI”). CPI was acquired for an initial cash consideration of £8.1m ($11.4m) on a debt free, cash free basis,
before expenses, funded from the Group’s existing debt facilities. In addition, a contingent payment of up to £3.8m ($5.4m)
will be payable subject to CPI achieving certain profit growth targets over a four year period.
187
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report FIVE YEAR RECORD
Group income statement
Revenue
Gross profit
Underlying operating profit
Underlying profit before tax
Profit before tax
Profit for the year
Earnings per share
Underlying diluted earnings per share
Fully diluted earnings per share
Dividend per share
Group statement of financial position
Net debt
Non-current assets
Net assets
2021
£m
2020
£m
454.3
155.3
35.2
31.5
17.0
12.0
26.0p
13.0p
10.15p
(47.2)
245.0
208.8
466.4
156.7
37.1
32.8
19.5
14.3
30.2p
16.5p
2.97p
(61.3)
236.4
200.5
2019
£m
438.9
145.0
30.6
27.2
19.3
14.6
27.2p
19.4p
9.55p
(63.3)
149.2
134.7
2018
£m
387.9
126.7
24.5
21.9
14.6
10.6
22.3p
14.2p
9.0p
(52.4)
136.4
126.8
2017
£m
338.2
111.0
20.0
17.2
4.1
3.5
19.2p
4.1p
8.5p
(30.0)
122.2
122.5
The figures for 2020 onwards included the impact of the adoption of IFRS16.
188
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 PRINCIPAL
LOCATIONS
Group head office
Country
United Kingdom
Custom Supply division
Country
United Kingdom
Belgium
Denmark
Finland
France
Germany
Italy
Netherlands
Norway
South Africa
Sweden
Company
discoverIE Group plc / discoverIE
Management Services Limited
Location
Guildford
Company
Location
Acal BFi UK Limited
Wokingham, Bracknell
Acal BFi Central Procurement UK Limited
Wokingham
Vertec Scientific Limited
Acal BFi Belgium NV/SA
Acal BFi Nordic AB
Acal BFi Nordic AB
Acal BFi France SAS
Silchester
Brussels
Copenhagen
Helsinki
Evry
Acal BFi Germany GmbH
Dietzenbach, Munich
Acal BFi Italy Srl
Acal BFi Netherlands BV
Acal BFi Nordic AB
Milan, Rome
Eindhoven
Honefoss
Vertec Scientific SA (pty) Ltd
Johannesburg
Acal BFi Nordic AB
Stockholm, Uppsala
Design & Manufacturing division
Country
United Kingdom
Belgium
Canada
Company
Contour Electronics Limited
Cursor Controls Ltd
Heason Technology Limited
Location
Hook
Newark
Horsham
Herga Technology Limited
Bury St. Edmunds
Noratel UK Limited
Positek Limited
Santon Switchgear Limited
Sens-Tech Limited
Stortech Electronics Limited
Variohm-Eurosensor Limited
NSI BVBA
Noratel Canada Inc
Nantwich
Cheltenham
Newport
Egham
Harlow
Towcester
Bilzen
Toronto
189
www.discoverIEplc.comStock Code: DSCVInnovative ElectronicsOther InformationFinancial StatementsCorporate GovernanceStrategic Report PRINCIPAL
LOCATIONS
Design & Manufacturing division continued
Company
Location
Foshan Noratel Electric Co Limited
Foshan City
Zhongshan Myrra Electronic Co Limited Zhongshan
Noratel Denmark A/S
Flux A/S
Noratel Finland OY
Myrra SAS
Limitor GmbH
Limitor Solutions GmbH
Glostrup
Asnaes
Salo
Bussy-Saint-Georges
Urbach
Urbach
MTC Micro Tech Components GmbH
Dillingen
Noratel Germany AG
Grafenau, Bremen
Santon GmbH
Variohm-Eurosensor
Contour Asia Limited
Myrra Hong Kong Limited
Limitor Hungaria Elektromechanikai
Gyarto Kft.
Noratel India Power Components
Pvt Limited
Hobart Electronics
Santon Holland BV
Foss AS
Noratel AS
Myrra Poland sp. z o.o.
Noratel sp. z o.o.
Foss Fibre Optics s.r.o.
Nettetal
Heidelberg
Kowloon
Wanchai
Pecs
Kerala, Bangalore
Agualeguas, Nogales
Rotterdam
Drammen
Hokksund, Hamar
Kaluszyn
Szczecinska
Bratislava
EMC Innovation Limited
Cheongcheon-Dong
Noratel International Pvt Limited
Katunayake
Hectronic AB
Noratel Sweden AB
Flux International Limited
Hobart Electronics
IMAG Electronics
Uppsala
Laxa, Vaxjo
Bangkok
Hobart, IN
Tempe, AZ
Noratel North America LLC
Charlotte, NC
Noratel Power Engineering LLC
Carson, CA
Phoenix America LLC
Wayne County, IN
Country
China
Denmark
Finland
France
Germany
Hong Kong
Hungary
India
Mexico
Netherlands
Norway
Poland
Slovakia
South Korea
Sri Lanka
Sweden
Thailand
USA
190
discoverIE Group plc
Annual Report and Accountsfor the year ended 31 March 2021 FINANCIAL CALENDAR
2021/22
Annual General Meeting
29 July 2021
Results
Interim results for the six months to 30 September 2021
Late November 2021
Preliminary announcement for the year to 31 March 2022
Early June 2022
Annual Report 2022
Late June 2022
CORPORATE
INFORMATION
Registered office
Corporate solicitors
Registrars
discoverIE Group plc
2 Chancellor Court
Occam Road
Surrey Research Park
Guildford
Surrey GU2 7AH
Telephone: 01483 544500
Incorporated in England and Wales
with registered number: 2008246
Auditors
PriceWaterhouseCoopers LLP
White & Case LLP
Principal bankers
Bank of Ireland
Clydesdale Bank plc
Citibank NA Inc
Danske Bank A/S
HSBC Bank UK plc
KBC Bank NV
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone: 0371 384 2001
Stockbrokers
Peel Hunt LLP
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191
www.discoverIEplc.comStock Code: DSCVInnovative Electronics
discoverIE Group plc
2 Chancellor Court, Occam Road,
Surrey Research Park Guildford,
Surrey GU2 7AH
Telephone +44 (0)1483 544500
Fax +44 (0)1483 544550
www.discoverIEplc.com