discoverIE Group plc
Annual Report and Accounts
for the year ended 31 March 2024
Enabling
technology for a
sustainable world
discoverIE Group plc Innovative Electronics
Strategic Report
Highlights
01
The discoverIE Difference
02
Group at a Glance
04
Chairman’s Statement
12
Investment Case
15
Our Strategy
16
Key Performance Indicators
19
Strategy in Action
20
Market Overview
24
Our Business Model
28
Strategic and Operational Review
30
Financial Review
38
Our Engagement with
Stakeholders
44
Section 172 Statement
46
Sustainability Report
48
Summary Disclosure Against
TCFD Recommendations
65
Risk Management
71
Principal Risks and Uncertainties
75
Viability Statement
82
Non-Financial Information and
Sustainability Statement
84
Corporate Governance
The Board
86
Chairman’s Introduction
88
Corporate Governance Report
89
Audit and Risk Committee Report
100
Nomination Committee Report
108
Directors’ Report
110
Directors’ Remuneration Report
113
Statement of Directors’
Responsibilities in Respect of the
Financial Statements
139
Financial Statements
Independent Auditors’ Report
to the members of discoverIE
Group plc
140
Consolidated Statement of
Profit or Loss
148
Supplementary Statement of
Profit or Loss Information
148
Consolidated Statement
of Comprehensive Income
149
Consolidated Statement
of Financial Position
150
Consolidated Statement
of Changes in Equity
151
Consolidated Statement of
Cash Flows
152
Notes to the Group Consolidated
Financial Statements
153
Company Statement of
Financial Position
203
Company Statement
of Changes in Equity
204
Notes to the Company
Financial Statements
205
Additional Information
Five Year Record
207
Principal Locations
208
Financial Calendar 2024/25
209
Corporate Information
209
CONTENTS
Welcome to the 2024
Annual Report
discoverIE is a leading
international designer and
manufacturer of customised
electronics for industrial
applications. We create innovative
electronics that deliver value
to our customers, whilst
making positive impacts on
the environment, society and
people’s lives
Our vision is to
be a leading
innovator in
electronics,
internationally
Annual Report and Accounts for the year ended 31 March 2024
FINANCIAL
GROUP
REVENUE
£437.0m
UNDERLYING
OPERATING PROFIT1
£57.2m
UNDERLYING
EPS1
36.8p
-3%
+10%
+5%
£379.2m
£448.9m
£437.0m
FY24
FY23
FY22
£41.4m
£51.8m
£57.2m
FY24
FY23
FY22
29.4p
35.2p
36.8p
FY24
FY23
FY22
REPORTED
OPERATING PROFIT2
£31.2m
UNDERLYING OPERATING
CASH FLOW3
£59.2m
FULL YEAR DIVIDEND
PER SHARE
12.0p
-10%
+22%
+5%
£20.9m
£34.6m
£31.2m
FY24
FY23
FY22
£33.1m
£48.6m
£59.2m
FY24
FY23
FY22
10.8p
11.45p
12.0p
FY24
FY23
FY22
STRATEGIC
UNDERLYING
OPERATING MARGIN1
13.1%
SALES BEYOND
EUROPE
41%
10.9%
11.5%
13.1%
FY24
FY23
FY22
40%
40%
41%
FY24
FY23
FY22
TARGET
MARKET SALES4
75%
CARBON
EMISSIONS REDUCTION5
47%
76%
77%
75%
FY24
FY23
FY22
35%
CY22
CY23
47%
HIGHLIGHTS
Notes:
1
“Underlying operating profit”, “underlying operating margin”, and “underlying EPS”, are non-IFRS financial measures used by the Directors to assess the
underlying performance of the Group. These measures exclude amortisation of acquired intangible assets of £16.2m and acquisition and disposal expenses of
£9.8m, totalling £26.0m. Equivalent underlying adjustments within the FY2023 underlying results totalled £17.2m. For further information, see note 6 on pages 164
to 168.
2 Reported operating profit growth below underlying operating growth because of the disposal of the Santon solar business unit and more acquisitions in the year.
3 “Underlying operating cash flow” is a non-IFRS financial measure. It is underlying EBITDA adjusted for the investment in, or release of, working capital and less the
cash cost of capital expenditure and lease payments.
4 Target markets are renewable energy, transportation, medical, and industrial & connectivity.
5 Scope 1 & 2 emissions reduction against CY21 baseline.
Strategic Report
01
discoverIE Group plc Innovative Electronics
THE discoverIE DIFFERENCE
At discoverIE, we are
more than just electronics
manufacturers. We are a
global leader in designing
and building customised,
niche solutions that
empower industries.
Our innovations not
only deliver exceptional
value to our customers
but also contribute to a
more sustainable and
equitable world.
Our Culture
We embrace a decentralised operating
model, and our success hinges on a
culture built on respect, fairness, and
equality. In turn, our decentralised
structure strengthens a culture that
empowers our teams, fosters open
communication, and unites us towards
our shared vision and ambitions.
These core values and the collaborative
spirit of our global workforce fuel
our passion for innovation, guide
our decision-making, and propel us
towards achieving our mission of
providing the highest quality products
and services to our customers, whilst
creating a positive impact on the
environment, society and people’s lives.
■
Dedication and determination
– driven by empowerment and a
sense of ownership
■
Customer centricity – allow
employees closest to the customers
to make decisions that directly
affect customer satisfaction
■
Respect, fairness and equality
– create an open and inclusive
environment in which everyone
has an equal opportunity to flourish
and grow
■
Open communication – create
a trusting environment where
information flows freely and
collaboration thrives
■
Target driven – strive for results
and high performance
The importance of cultural fit in the
acquisitions we make
For a decentralised Group like
discoverIE, cultural fit with the
businesses we acquire is crucial to
our and their long-term success. We
thrive on empowered employees and
independent decision-making, close
to our customers. Acquired businesses
benefit from being part of a larger
group of like-minded businesses that
are able to meet the local needs of their
stakeholders whilst retaining their own
identity.
By factoring in cultural fit, we can
ensure acquired businesses seamlessly
integrate into our existing structure,
preserving the agility and innovation
that make discoverIE successful.
Our Purpose
Our Vision
To create innovative electronics
that help improve the world and
people’s lives
To be a leading global innovator in
electronics
Our Mission
To design and manufacture innovative 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.
Our Values
These are our fundamental beliefs and principles that guide our
decision-making:
■
Integrity – we act with honesty and openness, treating our partners and
stakeholders fairly
■
Quality – we strive for excellence and make constant improvements that
deliver superior value to our customers
■
Empowerment – we inspire growth and innovation by providing an
entrepreneurial environment
■
Collaboration – we work together, trust and respect each other
■
Positive impact – we care about the environment and societies we live in
and commit to making a positive impact
02
Annual Report and Accounts for the year ended 31 March 2024
How we operate differently
A decentralised model
Strength in our clusters
Sustainable approach
The discoverIE Group consists of 26
operating businesses, specialising
in different technologies. Based on
technology areas, these businesses
are grouped into two divisions –
Magnetics & Controls and Sensing
& Connectivity, each with its own
divisional head. Each business
operates autonomously under its
own brand within a well-defined
framework and is supported by
the Group’s central resources. This
emphasis on decentralised decision-
making fosters a strong sense of
ownership and accountability within
individual businesses.
Businesses within each division with
similar or adjacent technologies are
grouped into clusters. The clustering
approach makes it easy to identify
synergies and foster collaboration
among the operating businesses.
Instead of adding another
management layer, a leadership
team from within the cluster takes
the lead. This keeps the structure
flat, allowing for faster decision-
making and greater agility.
At discoverIE, sustainability is
embedded throughout our
business. We design long-lasting,
energy-efficient products that
minimise service or replacement
needs. We focus on markets that
are aligned with the UN Sustainable
Development Goals (“SDGs”).
We recognise that sustainability
is a shared responsibility. By
collaborating with our customers
and suppliers on their sustainability
journeys, we strive to help them
achieve their environmental goals,
whilst working to achieve our own.
Our sustainability focus areas
Our sustainability
programme has
three pillars:
Our Planet
Creating a positive
impact on our
environment
Our People
Keeping
our people safe
and happy
Our Products
Ensuring product
reliability and
sustainability
Strategic Report
03
discoverIE Group plc Innovative Electronics
North America
North America
Our global footprint
Revenue
M&C £265m
S&C £172m
Underlying
operating profit
M&C £40.6m
S&C £28.9m
discoverIE is a global leader
in innovative electronic
components for industrial
applications.
Our international network of businesses design and
manufacture differentiated products, catering to key
growth markets worldwide. Our in-house engineering
teams and a global manufacturing footprint allow us to
deliver ever better technical solutions to our customers.
GROUP AT A GLANCE
Revenue breakdown
UK – 6%
Nordics – 23%
Rest of Europe – 26%
N. America – 26%
Asia & ROW – 19%
Revenue breakdown
UK – 22%
Nordics – 10%
Rest of Europe – 34%
N. America – 23%
Asia & ROW – 11%
Our UN SDG-aligned
target markets
Renewable Energy
More electricity will come from solar
and wind in the coming decades as the
world is racing to meet net zero goals
Transportation
Green cities and a clean future drive
demand for electric transport
Medical
Chronic diseases, ageing populations
and better healthcare access fuel a rise
in demand for electronic devices
Industrial & Connectivity
The rise of the Industrial Internet of
Things, 5G and artificial intelligence is
creating an ever-increasing need for
electronics
READ MORE ABOUT OUR TARGET
MARKETS ON PAGES 24 TO 27
Our divisions
Magnetics & Controls
Comprises the magnetic components,
embedded computing and human-machine
interface businesses. It consists of two clusters -
magnetics and human-machine interface - and
six standalone businesses, across 17 countries
with 21 manufacturing sites. Produces electronics
for signal conditioning, power conversion and
switching, monitoring and remote control,
communication and interface control.
Sensing & Connectivity
Comprises four clusters - sensing, RF/wireless
communication, fibre optic and connectors -
and three standalone connectivity businesses,
across nine countries with 15 manufacturing
sites. Produces electronics for X-ray detection,
wireless transmission, fibre optic and cable
connection, electromagnetic shielding and
sensing components for measuring movement,
temperature, pressure, position, force and load.
04
Annual Report and Accounts for the year ended 31 March 2024
Asia
Europe
UK
UK
UK
ASIA
Europe
M&C manufacturing site
M&C sales representative
S&C manufacturing site
S&C sales representative
Revenue
£235m
£281m
£265m
FY24
FY23
FY22
Magnetics
Controls
Indicates
our Clusters
READ
MORE ABOUT
OUR CLUSTERS
ON PAGE 28
Revenue
£145m
£168m
£172m
FY24
FY23
FY22
Sensing
Connectivity
Strategic Report
05
discoverIE Group plc Innovative Electronics
Incorporating proven
technology
Our products are based on proven
technologies, which is the key to
creating successful and reliable
products. The challenging task is
applying such technology to meet
the requirements of a specific
application. This requires a deep
understanding of the application itself
as well as the technology. Our team of
electronics, mechanical, and software
engineers have in-depth knowledge
of the technologies and a wealth of
experience in applying them. They work
hand-in-hand with customers to find
the best solution for the application.
Our aim is
to have
a positive
impact…
Our ambition:
To create innovative
electronics that make
a positive difference,
contributing to
a better future
06
Annual Report and Accounts for the year ended 31 March 2024
Working with customers to maximise our impact
Application 1: The maritime sector is undergoing a green
revolution, with shipping companies and system integrators
seeking innovative solutions to meet emissions targets.
We are at the forefront of this change, collaborating with
industry leaders to retrofit existing vessels to enable them to
run on hybrid or renewable energy sources.
Our project-based, custom-designed products, such as
optimised single or 3-phase transformers and reactors, are
tailor-made for these new hybrid-electric or fully electric
propulsion systems.
We support our customers in their green transformations,
while contributing to a cleaner, lower carbon future for the
global economy.
Application 2: Since its inauguration in 2019, the Vande
Bharat Express has revolutionised travel across India. This
semi-high speed train significantly reduces travel times
on key routes – some by as much as 15%. We partner
with Siemens on this project, custom-designing and
manufacturing the crucial power systems which keep trains
operational. These systems ensure a constant and regulated
flow of electricity to power essential onboard functions such
as lighting, displays, and air conditioning.
Strategic Report
07
discoverIE Group plc Innovative Electronics
...by
delivering
highly
customised
products...
Our products are essential components
for many industrial applications. We
focus on those markets that have
long-term growth prospects and that
are aligned with the UN Sustainable
Development Goals.
READ MORE ABOUT HOW WE CONTRIBUTE TO THE UN SUSTAINABLE
DEVELOPMENT GOALS ON PAGES 52 TO 53
08
Annual Report and Accounts for the year ended 31 March 2024
Key
Renewable energy
Transportation
Medical
Industrial & Connectivity
Our product range is expanding as we continue to acquire
businesses that are leading in their respective fields. We are
also looking for new technology platforms that will complement
our existing businesses while bringing product, technical and
geographic strengths to the Group.
■
We have acquired 26 businesses
since 2011. They are based on
different technology platforms but
all share the discoverIE DNA.
■
They are grouped into four
technology areas: magnetics,
embedded computer & interface
controls, sensing, cable & wireless
connectivity.
■
Based on these technologies,
we customise and develop new
applications to meet our customers’
specific requirements.
Our specialist electronic components are customised to
ensure optimal efficiency for the end user
Magnetic components for
wind turbine systems
X-ray detection for waste
management
Embedded solution for
medical devices
Application
Inductors to reduce harmonics in wind
energy conversion
Application
Dual energy X-ray detectors for sorting
waste materials
Application
Embedded microcomputer for wearable
cardiac monitoring device
Benefits
A variable speed wind turbine uses power
electronics converters to convert the AC
power generated by the turbine into DC,
then back to AC to feed into the grid.
The converter system creates harmonics
in the wind-generated power’s voltage
and current, reducing power quality. Our
custom-designed inductors reduce the
harmonics in the wind energy conversion
system, minimising power loss and
making the wind turbine system more
efficient.
Benefits
Traditional metal sorting using magnets
can only sort between ferrous and
non-ferrous metals. However, using dual
energy X-ray measurements can sort
materials at a much more granular level,
such as sorting aluminium by different
grades. This method helps to increase the
recovery of valuable materials, such as
minerals and metals.
Benefits
The compact, wearable device records
patients’ heartbeats for signs of potentially
dangerous arrhythmias and then wirelessly
transmits data to patient monitoring
services, allowing remote care and early
intervention. We design and build the
small embedded system comprising a
powerful application processor with
PC-like speeds and a wireless chipset with
Bluetooth and GPS support. The system is
designed for optimal efficiency, ensuring
extended operation on a single charge.
Target market
Target market
Target market
Strategic Report
09
discoverIE Group plc Innovative Electronics
...serving
vital markets
contributing
to a more
sustainable
world.
10
Annual Report and Accounts for the year ended 31 March 2024
We focus on four target markets, providing tangible benefits
to the world
Growth in our target markets is driven by megatrends, such as decarbonisation, electrification, and digitalisation.
READ MORE ON THE MEGATRENDS ON PAGES 24 TO 27
Renewable energy
Why is it important
The key to unlocking a clean energy future lies in
sustainable power sources. By building new electricity
capacity, such as wind and solar, we can significantly
reduce carbon emissions and create a more sustainable
world.
The role we play
We are at the forefront of the renewable energy
revolution. Our innovative components play a critical role
in enabling the efficient transmission of wind and solar
power, minimising energy loss during transit. We also
develop solutions that go directly into customer products,
empowering them to generate clean electricity from
these renewable sources. By minimising energy loss and
enabling wider adoption of renewable technologies,
we are actively contributing to a cleaner, more
sustainable future.
Medical
Why is it important
The healthcare industry is experiencing a surge in
electronic devices due to three key factors: the growing
prevalence of chronic diseases, an ageing population,
and increased access to healthcare. These devices play
a crucial role in enhancing patient care, improving
diagnostics, and enabling minimally invasive surgeries.
The role we play
Our mission-critical electronics are embedded in a wide
range of medical equipment, from X-ray detection
systems in scanners to fully sealed control panels
for ultrasound machines. These innovative solutions
empower healthcare providers to deliver exceptional care
and improve patients’ quality of life.
Transportation
Why is it important
Transportation is a major contributor to global
CO2 emissions. Driven by the combined forces of
decarbonisation and urbanisation, the demand for
electrified transportation is surging. This electrification
extends beyond personal vehicles to encompass mass
transit systems like trains and buses, as well as specialised
vehicles used for deliveries and agriculture. Furthermore,
even traditional vehicles are incorporating more
electric components to enhance safety, efficiency,
and communication capabilities.
The role we play
We help our customers create products that assist with
the electrification of transportation. From DC switches
isolating train batteries to HVAC control solutions ensuring
passenger comfort, and from magnetic components
in high-powered EV chargers to pressure sensors for
hydrogen buses, our diverse range of long-lasting,
energy-efficient products touches nearly every aspect
of electric mobility. We further contribute by retrofitting
existing trains and ships with the latest, more efficient
power systems.
Industrial & Connectivity
Why is it important
Industrial automation and robotics have increased
exponentially in certain sectors, such as manufacturing,
and are now expanding into medical, aviation and
agriculture. With the growing adoption of the Internet
of Things (“IoT”), 5G and artificial intelligence (“AI”), the
demand for electronics such as antennas, sensors, and
fibre optic connections will continue to grow.
The role we play
We are at the heart of industrial automation. Our products
perform the essential functions of automation, such as
signal conditioning and transmission, monitoring and
remote control. We provide fast and reliable cable and
wireless connections, enabling industrial IoT to take place
and, in turn, helping to improve productivity and efficiency.
Strategic Report
11
discoverIE Group plc Innovative Electronics
GROUP REVENUE
£437.0m
(FY2023: £448.9m)
UNDERLYING
OPERATING PROFIT
£57.2m
(FY2023: £51.8m)
The Group continues
to deliver strong
results through
the business cycle,
demonstrating
its quality and
resilience.”
Bruce Thompson
Chairman
CHAIRMAN’S STATEMENT
This year’s results reflect another
strong performance, with operational
efficiencies driving good growth in
underlying operating profits and
margin, as well as underlying earnings
per share. Once again, the high quality
of the Group’s earnings, along with
its capital-light nature, has delivered
excellent growth in cash flow.
Industrial markets slowed this year
following two strong years where Group
revenue increased by almost 50%. The
industry wide supply chain shortages of
a year ago led to inventory imbalances
that have had to be realigned.
Encouragingly, the inventory correction
in our markets appears to have been
achieved smoothly; testament to the
improved supply chain skills developed
in the industry in previous downturns.
Despite the changing market
conditions, the Group’s revenue
has proven resilient. By focussing
on structural growth markets, and
avoiding the more cyclical and
consumer-facing markets, the Group
has successfully offset the impact of
inventory correction in the industrial
markets. The Group continued to
make excellent progress operationally,
generating efficiencies that partly
come from organising our businesses
into clusters, thereby sharing resources
and know-how, reducing working
capital and making further progress on
the acquisition front.
Strategy
The Group’s strategy has remained
consistent for a number of years and
has delivered sustained returns for
shareholders. The Group designs
and manufactures high quality
components which are created to
fit the unique requirements of each
customer allowing for secure, long-
term revenue streams. Operating
with an international, decentralised
business model allows us to retain
an entrepreneurial mindset and
be close to our customers, reacting
quickly to their needs and operating
an efficient supply chain. To deliver
consistent, long-term growth we focus
on structurally growing, sustainable
markets driven by increasing electronic
content and where there is an essential
need for our products.
The Group’s target markets are
renewable energy, transportation,
medical and industrial & connectivity
and are all aligned with the UN
Sustainable Development Goals (“UN
SDGs”). With these being worldwide
markets and with major customers
operating internationally, the business
is expanding both within and, to an
increasing extent, beyond Europe. By
focusing on these target markets, the
Group is also helping to facilitate the
transition to a cleaner, healthier, and
more sustainable world.
12
Annual Report and Accounts for the year ended 31 March 2024
Alongside organic growth, acquisitions
are a key factor in the Group’s
compounding growth strategy.
Since 2011, the Group has acquired
26 specialist, value and margin-
enhancing design and manufacturing
businesses, which have been integrated
successfully and driven further growth.
discoverIE has a disciplined approach
to acquisitions and continues to see
opportunities for further acquisitions
in a highly fragmented market with a
strong pipeline in development.
The Group’s capital-light model
generates strong cash flows,
which management reinvests into
accelerating the strategy and delivering
further value creation for shareholders.
Sustainability and
Positive Impact
The Group continues to work hard to
build a more sustainable business.
Excellent progress has been made
towards its target of reducing its carbon
emissions and the Group has a net zero
plan to reduce Scope 1 & 2 emissions
to zero by 2030 and Scope 3 emissions
to zero by 2040. Since 2021, Scope 1 & 2
emissions have already been reduced
by 47%. In addition, managements’
remuneration continues to be aligned
with delivering on ESG-related
objectives.
Last year, the Group undertook an
assessment of the resilience of its
business model and strategy, and
potential impact of climate change
over the short and medium term. It
concluded that, while the Group may
be exposed to certain risks during the
transition to a low carbon economy,
such risks are considered to be low
and more than outweighed by the
commercial opportunities presented
to the Group in our target markets
from the energy transition. In early
2024, the Group carried out an interim
reassessment of the climate risks to
take into account the newly acquired
businesses. The results showed that
there has been no material change in
the Group’s climate-related risk profile.
The Group also aims to be a socially
responsible employer, adhering to
the highest ethical standards both
internally and throughout its supply
chain, with a commitment to excellent
employee relations and to increasing
diversity at all levels of the business.
Recognising the Group’s achievements
and focus on sustainable development,
MSCI has upgraded its classification of
the Group with an “AA” rating in its 2023
ESG Rating assessment (previously
“A” rating). The Group is also ‘Regional
Top rated’ by Sustainalytics. Both
acknowledged the Group’s strong
performance against industry peers in
various areas, including opportunities
in clean technology and corporate
governance.
Acquisitions
The Group made five acquisitions
during the year, for a total consideration
of £83m.
Three of those acquisitions were in
the M&C division, namely Silvertel, a
UK-based designer and manufacturer
of differentiated, high performance
Power-over-Ethernet (“PoE”) modules
acquired in August 2023; Shape, a
US-based designer & manufacturer
of speciality transformers acquired
in January 2024 as a bolt-on to the
Noratel cluster, and DTI, a US-based
designer and manufacturer of custom
embedded modules acquired in March
2024 as a bolt-on to the Beacon cluster.
Two acquisitions were made in the S&C
division, namely 2J Antennas Group (“2J
Antennas”), a Slovakia-based designer
and manufacturer of high performance
antennas acquired in September
2023, which is to be integrated with
our existing Antenova business, and
IKN, a Norwegian cable designer and
manufacturer acquired in March 2024
as a bolt-on to the Foss cluster.
The management teams at each
business have remained in position
post-acquisition, and with the support
structure and cross-selling opportunities
that come from being part of an
enlarged group, we fully expect to see
accelerated growth in the years ahead.
We welcome the employees of these
businesses into the Group and look
forward to working with them in the
years ahead.
Strategic Report
13
discoverIE Group plc Innovative Electronics
CHAIRMAN’S STATEMENT continued
Continued financial progress
Group sales for the year increased by
1% at CER to £437.0m, notwithstanding
strong comparators (+48% growth
in the prior two years). As a result of
significant operating efficiencies,
underlying operating profit
increased by 16% at CER to £57.2m
with underlying operating margin
increasing by 1.6ppts to 13.1%. Conversely
interest rate rises contributed to a
£3.5m increase in finance costs to
£9.0m and, together with a stronger
Sterling, reduced growth in underlying
profit before tax to 4% (increasing from
£46.3m to £48.2m) with underlying
earnings per share up 5% to 36.8p
(FY2023: 35.2p).
This year saw a greater number and
value of acquisitions (five deals for a
total of £83m compared with two last
year for a total of £23m), resulting in
proportionately higher acquisition
expenses. In addition, there were £5.9m
of costs associated with the disposal
of the Santon solar business unit (see
note 12); net cash proceeds of c.£7m
from this transaction are due to be
received in the new financial year.
After underlying adjustments for the
inclusion of higher acquisition and
disposal-related costs, profit before tax
on a reported basis reduced by £6.9m
to £22.2m (FY2023: £29.1m) with fully
diluted earnings per share reducing by
5.9p to 15.8p (FY2023: 21.7p).
Free cash flow of £37.0m was generated
this year, being 12% higher than
last year and representing 102% of
underlying earnings, well ahead of
the Group’s conversion target of 85%.
With £83m invested in five acquisitions
this year, net debt at 31 March 2024
increased to £104.0m (31 March 2023:
£42.7m) with a gearing ratio of 1.5x, at
the lower end of our target range of 1.5x
to 2.0x.
Increased Dividend
The Board is recommending a 4% (0.35
pence) increase in the final dividend
to 8.25 pence per share, giving a 5%
increase in the full year dividend per
share to 12.0 pence (FY2023: 11.45 pence)
and an underlying earnings cover
of 3.1 times (FY2023: 3.1 times). The
final dividend is payable on 2 August
2024 to shareholders registered on 28
June 2024.
The Board believes in maintaining a
progressive dividend policy along with
a long-term dividend cover of over
three times earnings on an underlying
basis. This approach, along with the
continued development of the Group,
will enable funding of both dividend
growth and a higher level of investment
in acquisitions from internally
generated resources.
At the time of the interim dividend in
January 2024, the Company started a
Dividend Re-Investment Programme
(“DRIP”), details of which are available
from the Company’s Registrars,
Equiniti. The final date for DRIP
elections for the final dividend will be 12
July 2024.
Board of Directors
On 1 June 2023 we were pleased to
welcome Celia Baxter to the Board.
She has many years of experience in
listed companies, including at Bunzl
plc, DS Smith plc and Dowlais plc. She
will succeed Tracey Graham as both
Chair of the Remuneration Committee
and as Senior Independent Director
when Tracey retires from the Board
in November this year. We extend our
sincere thanks to Tracey for her service
to the Board and to the Company since
her initial appointment in November
2015 and we wish her every success for
the future.
Employees and Culture
On behalf of the Board, I would like
to thank everybody at discoverIE for
their sustained dedication, hard work,
initiative and support.
The Group comprises approximately
4,500 employees in 20 countries
around the world. By adopting an
entrepreneurial and decentralised
operating environment, together
with rigorous planning, controls and
investment, the Group has created an
ambitious and successful culture.
We aim to achieve a culture across the
Group that:
■
is entrepreneurial
■
treats everybody equally and
recognises the importance of
diversity
■
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 driven
Summary
The Group is building a leading
business that continues to deliver
strong results through the economic
cycle and the Group has again
demonstrated the quality and resilience
of its business.
The market remains highly
fragmented, providing scope to
build further capability and extend
geographic reach through disciplined,
accretive acquisitions. The Board is
excited by the opportunities available
to continue building a business that
attracts and retains a high quality
workforce, delivers essential products
for our customers, grows long-term
returns for our shareholders, and
contributes to the creation of a
sustainable environment.
With a strong pipeline of opportunities,
the Group is well positioned for
continued growth.
Bruce Thompson
Chairman
14
Annual Report and Accounts for the year ended 31 March 2024
INVESTMENT CASE
1
See estimated growth in our target markets on
pages 24 to 27.
2 Continuing operations only, i.e. excluding
the disposals of Acal BFi and Vertec SA in
March 2022.
3 Free cash flow conversion is defined as net cash
flow before dividend payments, net proceeds
from equity fund raising, acquisition costs
and business disposal proceeds divided by
underlying profit after tax.
4 Compound Annual Growth Rate.
Sustainable growth markets
Increasing electronic content and
electrification of products and
processes drive demand for electrical
and electronic components. We
prioritise four markets that are driven
by megatrends and are aligned with
UN Sustainable Development Goals.
Read more on the megatrends on
pages 24 to 27.
FORECASTED GROWTH IN OUR
TARGET MARKETS1
7-12% p.a.
Target markets: Renewable energy,
Transportation, Medical, and
Industrial & Connectivity
Proven strategy for growth
Grow organically well ahead of
GDP through the economic cycle
by focusing on structural growth
markets and an expanding product
offering, bolstered by earnings and
margin-enhancing acquisitions.
Proven track record of delivering
strategic and financial targets.
REVENUE GROWTH2 OF
10%
CAGR4 from FY2019-FY2024
Differentiated product offering
We specialise in providing
customised and niche electronic
solutions, utilising established
technologies to create small,
mission-critical components
tailored to meet the unique needs
of our customers. We manufacture
and supply these engineered
components for the lifespan of the
end products.
LONGEST CUSTOMER
RELATIONSHIP
30+ years
Long-lasting customer relationships
and stable, repeat revenue
Strong financials
Sustainable, profitable growth and
excellent cash generation. Our
strong balance sheet with gearing
in the range of our 1.5x – 2x target
allows headroom for further
acquisitions.
UNDERLYING OPERATING
PROFIT GROWTH2 OF
21%
CAGR4 from FY2019-FY2024
FREE CASH FLOW
CONVERSION3 OF
109%
on average from FY2019-FY2024
Consistent Shareholder
returns
Disciplined capital allocation with a
track record of value-enhancing
acquisitions drive capital appreciation
and progressive dividends.
DIVIDEND GROWTH OF
6%
CAGR4 from FY2014-FY2024
TOTAL SHAREHOLDER
RETURN OF
403%
FY2014-FY2024
Strategic Report
15
discoverIE Group plc Innovative Electronics
OUR STRATEGY
Impact of climate change
Climate change presents a different
set of challenges and opportunities
to our business. To understand the
financial impact of climate-related
risks and opportunities on the
Group, we conducted a detailed
analysis and financial modelling in
FY2023. The results showed that the
net financial impact of the
climate-related risks and
opportunities to the Group is
immaterial as the costs incurred in
mitigating such risks are more or
less offset by the benefits arising
from the opportunities, and that
our business model and strategy
remained resilient in the face of
climate change. More details on the
scenario analysis can be found in
the TCFD Report on page 66 and 86
of the 2023 Annual Report.
In FY2024, we assessed the
five newly acquired businesses
using the same methodology
and concluded that they face no
significant climate-related risks.
Hence, the new acquisitions do not
change the Group’s climate-related
risk profile.
That being said, we recognise
that climate change remains a
threat to the Group’s assets in
the long term and that there
has been a growing expectation
among our stakeholders that we,
as a responsible corporate citizen,
address climate risks in our business
operations. Therefore, we have
prioritised climate-related risks as a
principal risk and manage it as such,
with carbon reduction being one of
our Key Strategic Indicators since
November 2022. Climate change is
now considered in many aspects
of how we manage our business,
from strategic and financial
planning to capital investment and
acquisitions to remuneration. It is
fully embedded in our operations.
Our net zero plan and SBTi-aligned
targets announced in November
2022 are a demonstration of our
long-term commitment to tackle
this issue. More information about
the progress we have made against
these targets can be found in the
Sustainability Report on pages
55 and 61 to 64, and in the TCFD
summary report on pages 65 to 70.
Over the past decade
our clear strategy
has delivered stellar
results and we remain
committed to this path,
with a clear focus on
our strategic priorities.”
Nick Jefferies
Group Chief Executive
Our strategic aim
Our mission is 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.
We aim to achieve this through a motivated, entrepreneurial and empowered
workforce that adheres to the highest ethical and quality standards.
16
Annual Report and Accounts for the year ended 31 March 2024
Strategic priorities
Progress to date
Link to key
strategic
indicators
Link
to risks
Grow sales well
ahead of GDP
through the economic cycle by focusing
on structural growth markets, namely
renewable energy, transportation, medical,
and industrial & connectivity. Each of
these markets is predicted to grow faster
than global GDP. Read more about these
markets on pages 24 to 27.
The Group has delivered on average 6%
annual organic growth since FY2014.
Target markets have grown well ahead
of wider markets, even during the
pandemic. Sales into the target markets
as a proportion of the Group sales had
increased from 56% in FY2017 when it
was first measured, to 75% in FY2024. We
aim to achieve 85% sales from the target
markets in the medium-term.
B C
1 4
5 7
8
Move up the value chain
where margins are higher. We aim to
achieve this by improving efficiency and
leveraging synergies among our operating
businesses, as well as through strategic
acquisitions of higher margin businesses
with niche and more differentiated
products.
Since F2014, the Group’s underlying
operating margin has risen significantly,
from 3.4% to 13.1% in FY2024. This
improvement is attributable to a
combination of factors, including
efficiency gains, operating leverage and
higher margin acquisitions. The sale
of the lower margin Custom Supply
distribution business in March 2022 also
played a contributing role.
A
2 4
5 6
7
Acquire high quality businesses
with attractive growth prospects
and strong, sustainable margins. In a
fragmented market, opportunities exist
to consolidate certain manufacturers of
niche, customised products for the Group’s
common customer base. We have a clear
approach to acquisitions, and the target
businesses must have discoverIE DNA.
The Group has acquired 26 design and
manufacturing businesses over the past
13 years, investing a total of over £470m,
of which c.£110m was in the last two
years alone. The businesses that have
been part of the Group for more than
two years have delivered a return on
investment of 18.5% in FY2024.
A B
C D
1 2
Further internationalise
by expanding in North America and Asia.
From its British roots, the Group has
established a strong European presence
over the years. We are committed to
continued growth in our home region,
while strategically expanding in North
America and Asia, where demand for
our products is surging. This geographic
diversification enhances the Group’s
resilience against market fluctuations.
Beyond Europe, our sales have grown
significantly, increasing from just 5%
of the Group’s total in FY2014 to 41% in
FY2024. This expansion is fuelled by both
organic growth initiatives and strategic
acquisitions. Notably, North America,
a previously untapped market, now
contributes a quarter of Group sales.
B
1 2
7
Key strategic indicators
A Increase underlying
operating margin
B Build sales beyond
Europe
C Increase target
market sales
D Reduce carbon
emissions
Risks
1 Instability in the
economic environment
2 Business acquisitions
underperformance
3 Climate-related risks
4 Cyber security
5 Loss of key customers
6 Loss of key
suppliers/supply
7 Technological changes
8 Major business
disruption
9 Loss of key personnel
10 Product liability
11 Inventory obsolescence
12 Liquidity and debt
covenants
13 Foreign currency
14 Non-compliance with legal
and regulatory requirements
SEE OUR PRINCIPAL RISKS AND UNCERTAINTIES ON PAGES 75 TO 81
Our strategic priorities
Over the past decade, our clear strategy of investing in initiatives that enhance design opportunities for niche, customised
products and targeting structural growth markets has delivered stellar results. Despite divesting a substantial portion
of our business through the sale of the distribution business in 2022, the Group’s revenue has more than doubled and
underlying operating profit has grown sixfold in the past ten years. Along the way, we have built a global specialist electronics
engineering business, with strong design capabilities and a growing international presence. We remain committed to this
path, with unwavering focus on our strategic priorities:
Strategic Report
17
discoverIE Group plc Innovative Electronics
Increase underlying operating margin
FY25 Target:
13.5%
FY24
FY23
FY22
FY21
FY20
11.5%
10.9%
7.7%
8.0%
13.1%
Medium Term Target:
15.0%
Definition
Underlying operating profit as a
percentage of sales
Commentary
Underlying operating margin increased
by 1.6ppts on last year, with the second
half margin of 13.4% and the first half
margin of 12.9%. The Group benefited
in the year from operational efficiencies
resulting in robust gross margin and
lower operating costs, augmented by
higher margin acquisitions.
Build sales beyond Europe
Target:
45%
FY24
FY23
FY22
FY21
FY20
40%
40%
28%
27%
41%
Definition
Sales in the Americas, Asia and
Africa. Excludes the UK and
continental Europe
Commentary
Sales beyond Europe increased by 1ppt
to 41% of Group revenue, with strong
organic sales and two acquisitions in
the US being partly offset by reduced
demand in Asia.
Increase target market sales
Target:
85%
FY24
FY23
FY22
FY21
FY20
77%
76%
70%
68%
75%
Definition
The proportion of Group revenue that is
derived from sales into our four target
markets
Commentary
Target market sales reduced by 2ppts
as a result of lower sales in industrial
automation, acquisitions which had
lower target market sales at the outset
and a recovery in some non-target
market areas, such as aerospace and
defence.
Reduce carbon emissions
CY25 Target:
CY30 Target:
65%
>90%
OR NET ZERO
CY23
CY22
47%
35%
Definition
Absolute reduction in Scope 1 & 2
emissions against the calendar year
2021 (CY2021) baseline
Commentary
Scope 1 & 2 reduced further during
the year and are now 47% lower on
an absolute basis than in CY2021,
demonstrating excellent progress
towards our reduction targets of 65% by
CY2025 and net zero by CY2030.
A
B
C
D
KEY STRATEGIC INDICATORS
18
Annual Report and Accounts for the year ended 31 March 2024
Sales growth
Target: well ahead of GDP
CER
Organic growth
FY24
FY23
FY221
FY20
FY19
15%
27%
8%
14%
1%
FY24
FY23
FY221
FY20
FY19
10%
14%
5%
10%
(1%)
Commentary
CER sales increased by 1% with organic
sales reducing by 1%. Growth rates have
reduced due to normalising markets
and de-stocking in the industrial
automation sector. Growth in the
transportation, renewable energy and
medical markets remained strong as
well as in some non-target markets.
Free cash conversion3
Target: >85% of underlying net profit
FY24
FY23
FY22
FY20
FY19
95%
102%
104%
94%
102%
Commentary
Free cash flow was 12% higher than last year with free cash conversion of 102%, reflecting
the cash generative nature of the business through the economic cycle.
Underlying EPS growth
Target: >10%
FY24
FY23
FY221
FY20
FY19
20%
20%
11%
22%
5%
Commentary
Underlying EPS increased by 5% and by 10% at CER.
Excluding increased finance costs and at CER, underlying
operating profit increased by 16% due to operational
efficiency, tight cost control, and contributions from
acquisitions.
ROCE3
Target:
>15%
FY24
FY23
FY22
FY20
FY19
15.9%
14.7%
16.0%
15.4%
15.7%
Commentary
As expected, ROCE was 0.2ppts lower than last year
following five acquisitions for a total investment of £83m
this year. Excluding acquisitions, organic ROCE increased
by 1.9ppts to 17.8%.
Dividend growth
Target: Progressive
FY24
FY23
FY221
FY202
FY19
6%
6%
6%
6%
5%
Commentary
This progressive dividend policy has seen a more than
doubling of dividend per share since 2010 (up 135%), whilst
dividend cover on an underlying basis remained at 3.1x for
the year.
Underlying operating cash conversion3
Target:
>85% of underlying operating profit
FY24
FY23
FY22
FY20
FY19
94%
101%
106%
93%
103%
Commentary
Underlying operating cash flow was 22% higher than last
year, with underlying operating cash conversion of 103%,
well ahead of our 85% target.
6
2
1
4
3
5
KEY PERFORMANCE INDICATORS
1
FY2022 shown as growth over the pre-Covid period of FY2020 to reflect the actual ongoing growth of the business. FY2019-FY2020 are for total operations before
disposal, as reported at the time
2 In FY2020, 6% increase in interim dividend, a final dividend was not proposed due to Covid
3 Defined in note 6 of the consolidated Financial Statements
Strategic Report
19
discoverIE Group plc Innovative Electronics
STRATEGY IN ACTION
Growth with
resilience
The Group has been built through
a focus on organic growth
alongside 26 carefully selected
and well-integrated acquisitions
over the past 13 years to create a
growth-oriented, higher margin
design and manufacturing
business. Along the way, we
have built business resilience by
broadening our customer base
and product and technology
portfolio, and increased agility
through a scalable decentralised
structure and distributed
decision-making model.
We build this high-quality growth
business through a two-prong
approach: organic growth and
acquisition.
20
Annual Report and Accounts for the year ended 31 March 2024
Growing organically is fundamental to our
strategy. We aim to deliver above-GDP
organic growth by focusing on securing a
strong pipeline of design projects, or design
wins, and investing in engineering and
manufacturing capabilities and capacities,
as well as creating more synergies across
our businesses.
We target strategically high-growth, less cyclical end
markets. These markets, characterised by custom-designed
products and long-term customer partnerships, offer stable
and predictable revenue streams with robust margins. Our
engineer-led sales model ensures products are designed-in
and lead to repeat revenue. The project pipeline is monitored
and managed to ensure opportunity continuity. In FY2024,
we secured design projects with an estimated lifetime value
(“ELV”) of £ 337m, a 23% increase on the prior year, 90% of
which is in target markets.
Design wins (ELV £m)
FY24
FY23
FY22
FY21
FY20
FY19
FY18
FY17
£245m
£273m
£161m
£218m
£203m
£189m
£89m
£337m
Case Study
Delivering growth through
collaboration
To encourage collaboration and better use of Group
resources, we organise businesses with similar or
adjacent technologies within the same division into
clusters. This clustering approach makes it easier to
identify commercial and technological synergies.
Collaboration among the operating businesses that are
not in the clusters is encouraged and facilitated by the
Group Development team. The latest example of this is
the joint development of an advanced marine camera
control system for one of Cursor Controls’ customers.
Being focused on external system “touch points”, or HMI
(“Human Machine Interface”), the full control system
solution that requires an integrated embedded computer
would have proven challenging for Cursor Controls to
develop alone. Keen to pursue this new opportunity,
Cursor Controls approached the Group Development
team, and an introduction was swiftly made to Hectronic
– the Group’s Sweden-based specialist developer of
customised embedded computers, with significant
experience in IEC60945 certified marine applications.
Sharing the same DNA and ethos, the two businesses
agreed to undertake a collaborative joint development
for the system control unit – each leveraging the
complementary expertise and IP in their respective fields
to run parallel development paths. The ability to maintain
and control development of the diverse system aspects
within the same group, and within the tight timeline and
cost targets, was a strong differentiator. This ultimately
led to the award of a high-value, multi-year contract.
In April 2024, seven of the Group’s operating businesses
joined forces for the first time at the Embedded World
Exhibition in Nuremberg, Germany, showcasing the
Group’s broad technology and engineering capabilities.
Organic
growth
1
Strategic Report
21
discoverIE Group plc Innovative Electronics
STRATEGY IN ACTION continued
Growth
through
acquisition
2
Acquisitions are an essential part of
our growth strategy. Since acquiring
our first design and manufacturing
business in 2011, we have invested
a total of £470m in 26 acquisitions,
of which over £100m was in the
last 18 months alone. The Group’s
revenues from continuing operations
increased to £437m in FY2024 from
£10m in FY2010.
The niche, customised electronic
components market is highly
fragmented with many opportunities
to consolidate. Our acquisition
pipeline consists of 250 identified
possible targets, of which a number
are in the active outreach phase at
any time. The table below shows the
level of penetration and the ‘white
spaces’ in the technology areas we
focus on.
Our technology focus and penetration
Division
Technology
United
Kingdom
Rest of
Europe
North
America
Asia
Magnetics
Power Magnetics
Hi-Reliability Magnetics
High Frequency Magnetics
Measurement & Speciality Magnetics
Controls
Embedded Computing
Industrial Computing & Interface
KML Displays & Indication
Power Conversion, Control Protection
Sensing
Industrial Sensors
Process Measurement
Advanced Sensing
Inspection, Vision & Data Acquisition
Connectivity
EML/EMC & Thermal Management
Optical Fiber & Photonics
Connectors & Cabling
RF and Wireless
Specialised Passives & Other
Key – discoverIE penetration
Significant
Medium
Light
22
Annual Report and Accounts for the year ended 31 March 2024
Case Study
Building an RF/wireless
cluster
We expanded our wireless/radio frequency (“RF”)
presence with the €52.5m acquisition of 2J Antennas,
a global leader in external antennas, in September
2023. Based in Bardejov, Slovakia, with subsidiaries in
the US and the UK, 2J Antennas sells into more than
50 countries and has a long track record of profitable
growth at operating margins significantly higher than the
Group average. The acquisition broadens our technology
capability and product offering and further strengthens
our position in the antenna market.
2J Antennas and Antenova, a leading designer of
embedded antennas acquired by the Group in
2021, complement each other geographically and
technologically. They have been combined to form
a new RF/wireless cluster under common expanded
leadership, and will be integrated onto a common
infrastructure over time.
This strategic move positions us to capitalise on the
rapidly growing market for wireless connectivity
in industrial applications, driven by the Industrial
Internet of Things (“IIoT”), robotics, and AI-powered
industrial systems that require dependable wireless
communication to function.
GLOBAL SALES OF
SMART 5G ANTENNA
BY 2031
US$ 16.7
BILLION*
GLOBAL SALES OF
SMART 5G ANTENNA
GROWTH 2023-31
10.8%
CAGR*
Relevant Target Markets:
Value creation –
long term approach
We acquire businesses that
demonstrate specific characteristics
which we regard as the discoverIE DNA.
Our strong track record of acquisitions
rests not only on identifying the right
businesses but also on our ability to add
value to them.
We have a well-established approach
to acquisitions, as well as management
of our portfolio of existing businesses.
We continue to see significant scope
for further expansion with a strong
pipeline of acquisition opportunities in
development. By taking a long-term
approach to creating compounding
organic growth in acquired and
integrated businesses, as well as careful
portfolio management of our existing
businesses, the Group generates
substantial value. Those acquired
businesses that have been part of the
Group for seven or more years delivered
a return on capital employed of 28% in
FY2024.
*Source: Transparency Market Research
Strategic Report
23
discoverIE Group plc Innovative Electronics
MARKET OVERVIEW
Our products are essential components for many industrial
applications. We focus on four end markets: renewable energy,
transportation, medical, and industrial & connectivity.
Growth in these markets is driven by global megatrends,
such as decarbonisation, electrification, and digitalisation.
Our target markets
We tilted our focus towards markets with sustainable growth
prospects over a decade ago, namely, renewable energy,
transportation, medical and industrial & connectivity. In
FY2017, we started measuring the sales into these markets. In
the past seven years, organic target market sales have grown
twice as fast as that of non-target markets. To date, 75% of the
Group’s revenue is from these target markets. We expect it to
continue to grow, with an aim to reach 85%.
Revenue from target markets
(% of total revenue)
Target Markets Accumulative Growth
75%
% of total revenue
Industrial & connectivity
Medical
Renewables
Transport
Others
Target Markets
Other
Megatrends drive
substantial growth
Megatrends like decarbonisation, electrification,
and digitalisation have been fuelling the growth
of electronic components, and they will continue
to do so in the decades to come. The global shift
towards a low carbon economy drives energy
transition and electrification. Businesses will
need to adapt their operations and invest in new
technologies to reduce their carbon footprint.
Additionally, the increasing integration of digital
technologies across all aspects of society and
industry involves using tools like sensors, artificial
intelligence, and big data to connect machines,
processes, and people.
These megatrends represent a massive opportunity
for us to develop innovative solutions and cater
to the growing demand for a more sustainable,
electrified, and digitally connected future.
Decarbonisation
Decarbonisation pushes for cleaner energy
solutions, leading to a surge in demand for
components used in renewable energy systems
and energy storage.
Electrification
Electrification creates entirely new markets for
electric vehicles, charging infrastructure, and
smart grids. It also means existing systems need
to be retrofitted to allow them to run on electricity.
All of these rely heavily on specialised electronic
components.
Digitalisation
Digitalisation hinges on the ever-increasing
interconnectedness of devices and systems,
requiring a vast array of electronic components for
data transmission, processing, and control.
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
+100%
+80%
+60%
+40%
+20%
+0%
-20%
24
Annual Report and Accounts for the year ended 31 March 2024
Key statistics:
61%
OF THE WORLD’S ELECTRICITY IS EXPECTED
TO BE FROM RENEWABLE SOURCES BY 20302
VS 30% IN 2023
9% CAGR
GROWTH IN RENEWABLE POWER GENERATION
BETWEEN 2023 AND 20263
Decarbonisation
What are the trends
Governments around the world are setting ambitious targets
and implementing comprehensive strategies to achieve net zero
emissions by 2050. To meet these goals, a staggering $275 trillion
in global investment in physical assets is needed over the next
30 years, with most of it required in the next decade and a half1.
This translates into a significant annual investment of $9.2 trillion.
This surge in investment, driven by global decarbonisation efforts,
will create a massive demand for sustainable solutions across
various industries.
■
Renewable energy – the renewable energy market, including
solar, wind and hydropower, stands to gain significantly from
decarbonisation
■
Energy efficiency – energy-efficient technologies and
solutions such as lighting systems, building materials, and
smart grid technologies
■
Electric vehicles (“EVs”) – the production of EVs, charging
infrastructure, and related technologies
■
Energy storage – the need for energy storage solutions
increases as renewable energy sources, such as solar and
wind, become more prevalent
■
Carbon Capture, Utilisation and Storage (“CCUS”) – includes
carbon capture technologies, carbon utilisation solutions and
storage infrastructure
■
Sustainable agriculture – includes organic farming, precision
agriculture technologies, and sustainable food production
systems
■
Sustainable construction – includes energy-efficient
buildings, green materials and renewable energy integration
How we are responding
Global decarbonisation offers us significant opportunities. We
are leveraging our expertise and product portfolio to meet the
growing demand for renewable energy generation, energy
efficiency, electric mobility and smart infrastructure, while
continuing to expand our product offerings. This involves
investing in both new product development and acquisitions to
broaden our range of sustainable solutions, as well as increasing
our manufacturing capacity. In addition, we also proactively work
with our suppliers to ensure they meet sustainability criteria, such
as responsible sourcing and ethical practices. This will sharpen
our competitive edge and further differentiate us from our
competitors.
Applicable markets
■
Renewable Energy
■
Transportation
■
Industrial & Connectivity
Market trends
Technological
applications
Our solutions
Renewable energy
■
9.0% CAGR growth
in renewable power
generation between
2023-20263
Transportation
■
10.2% CAGR growth in
smart transportation
market between 2021-20304
Industrial & Connectivity
■
8.6% CAGR growth in
industrial automation
between 2022-20305
■
Increasing scale
of wind turbines
■
Smart grid and
energy-efficient
technology
■
Sensing
technology
■
Solar technology
Power & Magnetics
■
Liquid-cooled power reactors and transformers for wind power systems
■
Control systems and displays
■
Systems to monitor and control power transmission
■
Smart control panels for indoor climate control
Sensing & Detection
■
Encoders in solar trackers to obtain reliable positioning of tilt and
azimuth angles
■
Encoders for harsh environments in wind energy
Connectors & Communications
■
DC isolators and DC/AC power inverters for solar power
■
Safety switches for railways
1
McKinsey & Co report: The net zero transition: What it would cost, what it could bring, January 2022
2 International Energy Agency: Net Zero by 2050 – A roadmap for the global energy sector, May 2021 (https://iea.blob.core.windows.net/assets/deebef5d-0c34-4539-
9d0c-10b13d840027/NetZeroby2050-ARoadmapfortheGlobalEnergySector_CORR.pdf)
3 International Energy Agency: Electricity Market Report 2024, January 2024 (https://iea.blob.core.windows.net/assets/6b2fd954-2017-408e-bf08-952fdd62118a/
Electricity2024-Analysisandforecastto2026.pdf)
4 Allied Market Research: Smart transportation market (https://www.alliedmarketresearch.com/smart-transportation-market)
5 Precedence Research: Industrial automation market (https://www.precedenceresearch.com/industrial-automation-market#:~:text=The%20global%20
industrial%20)
Other = agriculture, fuel production, transformation and related
process emissions, and direct air capture.
Power
Buildings
Transport
Industry
Other
IEA. All rights reserved.
Emission reduction by sector in net zero by 2050
scenario2
Figure 3.1 – CO2 emissions by sector in the NZE
2010
2020
Emissions fall fastest in the power sector, with transport, buildings
and industry seeing steady declines to 2050. Reductions
are aided by the increased availability of low-emission fuels
2030
2040
2050
15
10
Gt CO2
5
0
-5
Strategic Report
25
discoverIE Group plc Innovative Electronics
MARKET OVERVIEW continued
Electrification
What are the trends
Electrification is not just crucial for achieving net zero
emissions; it is also one of the key drivers for efficiency
and productivity. In the EU, nearly two-thirds of emissions
reduction by 2030 could be achieved through energy
efficiency and electrification1. This megatrend is poised to
transform many industries:
■
Smart grid and energy management – technologies
optimise energy distribution, improve grid reliability and
facilitate the efficient utilisation of electricity
■
Industrial – includes electrifying equipment and processes,
which enable automation, heating and cooling systems
■
Transportation – from personal cars to mass transit, all
transportation sectors - rail, aviation, maritime, trucks and
off-road vehicles - need new technologies like battery
storage and hydrogen fuel cells, or system retrofits to
enable electric operation
■
Building and home automation – includes smart
appliances, connected devices and automation solutions
that enhance energy efficiency, comfort and sustainability
■
Agriculture – includes electrified irrigation systems, farm
equipment and other agriculture processes.
Electric-powered machinery and electrified systems
in agriculture contribute to efficiency gains and
sustainability improvements
How we are responding
We see three end markets that are particularly relevant to our
current capabilities – industrial electrification, transportation,
and energy management. Our electronic components, such
as power control, sensors, actuators, switches and circuit
protection devices, play a crucial role in electrification by
enabling the control, monitoring, and communication of
electrical systems. They are used in various applications,
ranging from power electronics and motor control to
energy management and automation. Additionally, as
electrification expands, there is a growing need for advanced
electromagnetic-based power electronics, such as inverters,
converters, and DC-DC converters, which facilitate the
conversion and management of electrical power between
different systems and devices. Our magnetics products
are vital in niche applications, such as renewable energy
systems, EV charging infrastructure, grid integration and
energy storage.
Key statistics:
45%
INDUSTRIAL PROCESS ELECTRIFICATION BY 2035
TARGET SET BY US MANUFACTURERS1
8.9% CAGR
GROWTH IN GLOBAL ELECTRIFICATION
BETWEEN 2023 AND 20322
Applicable markets
■
Renewable Energy
■
Transportation
■
Industrial & Connectivity
Market trends
Technological applications
Our solutions
Renewable energy
■
14.7% CAGR growth in
smart grid market between
2022-20303
Transportation
■
8.3% CAGR growth in
transportation electrification
between 2022-20294
Industrial & Connectivity
■
10.6% CAGR growth in global
industrial electrification
2022-20305
■
Sensing technology
■
Smart charging
■
High speed rail
■
Electrification of mass
transportation
■
Retrofitting engine
systems for ships
Power & Magnetics
■
Retrofitting electric systems for ships and
manufacturing equipment
■
Traction transformers for railway rolling stock
applications
Control Systems & Displays
■
Ruggedised CPU modules and carrier boards for
automatic guided vehicles
■
Master controllers for trains
Sensing & Detection
■
Pressure sensors for hydrogen-fuelled e-Bus
■
Temperature sensors for monitoring industrial heat
processes
Connectors & Communications
■
Circuit breakers and services for ships
■
Battery isolation switches for trains
1
Deloitte: Electrification in industrials, 2020
2 Precedence Research: Electrification Market 2022
3 Market Research Future: Smart grid market report (https://www.globenewswire.com/en/news-release/2022/09/28/2524402/0/en/Smart-Grid-Market-Worth-USD-10)
4 Maximize Market Research: Transportation electrification market (https://www.maximizemarketresearch.com/market-report/global-transportation-electrification-
market/96)
5 Custom Market Insight: Global industrial electrification market (https://www.custommarketinsights.com/report/industrial-electrification-market/)
26
Annual Report and Accounts for the year ended 31 March 2024
Digitalisation
What are the trends
The proliferation of high-speed internet and widespread
access to mobile devices has created a connected world. The
availability of affordable and reliable connectivity enables
the seamless exchange of information, communication and
collaboration, driving digital transformation. Digitalisation
can bring benefits to various markets and industries:
■
Telecommunications and connectivity – digitalisation
relies on robust telecommunications infrastructure and
connectivity. This involves high-speed internet services,
mobile networks, fibre optic infrastructure and wireless
technologies, which stand to benefit from the increasing
demand for connectivity and data transmission.
■
Industrial 4.0 – Rapid adoption of artificial intelligence
(“AI”) and the Internet of Things (“IoT”) allows optimisation
of manufacturing processes. Machines require built-in
components that are connected to a wired network or a
wireless network to facilitate data transmission.
■
Healthcare technology – This includes wearable devices,
remote patient monitoring solutions, smart implants,
smart inhalers and portable diagnostic devices. The
adoption of these devices is driven by the demand for
personalised healthcare, patient empowerment, and the
integration of healthcare with digital platforms
and systems.
How we are responding
The connected world relies on a foundation of vital
electronic components. We are a key player in this space,
providing solutions for establishing and maintaining
connectivity in digital ecosystems. Our components, like
power controls, sensors, transceivers, and wireless modules,
facilitate functions like signal processing, data acquisition,
and network infrastructure. This ensures seamless
communication and integration across various digital devices
and systems. But reliable power is equally crucial. That is
where our power electronics come in, including voltage
regulators and power distribution units, which guarantee
optimal performance for digital equipment.
We further strengthened our position in the connectivity
space with several acquisitions, including leaders in industrial
IoT antennas - Antenova and 2J Antennas - and
Power-over-Ethernet specialist, Silvertel.
Key statistics:
6.7% CAGR
GROWTH OF THE INDUSTRIAL IOT MARKET
BETWEEN 2023 AND 20261
Applicable markets
■
Renewable Energy
■
Transportation
■
Industrial & Connectivity
Market trends
Technological applications
Our solutions
Medical
■
15.4% CAGR growth in smart
medical devices market
2022-20312
Transportation
■
10.2% CAGR growth in smart
transportation market
between 2021-20303
Industrial & Connectivity
■
6.7% CAGR growth in
Industry IoT market
2023-20261
■
Artificial intelligence
and machine learning
■
5G technology
■
Big data and analytics
■
Sensing technology
■
Automation and
robotics
Power & Magnetics
■
Built-in transformers and inductors for MRI scanners
Control Systems & Displays
■
Single board computers for electrocardiographs
■
Wireless portable emergency defibrillator
Sensing & Detection
■
X-ray detectors for bone density measuring
X-ray scans
■
Light detectors for harmful gas emissions
Connectors & Communications
■
Wireless antennas for robotic control
■
Signal transmitters for crop monitors
1
Markets and Markets: Industrial IoT market (https://www.marketsandmarkets.com/Market-Reports/industrial-internet-of-things-market-129733727.html)
2 Allied Market Research: Smart Medical Devices Market Research 2031 (https://www.alliedmarketresearch.com/smart-medical-devices-market-A17644)
3 Allied Market Research: Smart transportation market (https://www.alliedmarketresearch.com/smart-transportation-market)
Strategic Report
27
discoverIE Group plc Innovative Electronics
OUR BUSINESS MODEL
Our decentralised approach
We operate a decentralised operating model. Our network
of 26 operating businesses, each specialising in different
technological areas, are grouped under two divisions -
Magnetics & Controls and Sensing & Connectivity - led by
two divisional heads. Supported by the Group’s central
resources, each business operates independently under its
own brand, but within a well-defined control framework
and under discoverIE’s shared vision and strategic goals. This
decentralised approach empowers individual businesses
to make their own decisions, fostering a strong sense of
ownership and accountability.
Collaboration through clustering:
To encourage collaboration and synergy, businesses within
each division with similar or related technologies are grouped
into clusters. These clusters are led by the leadership teams
of the largest operating businesses within their own cluster,
removing the need for an additional management layer. This
flat structure allows for faster decision-making and greater
agility, enabling businesses to adapt quickly to changing
market demands.
This decentralised model empowers our businesses, while
fostering collaboration through the cluster system. It allows
them to leverage the benefits of autonomy and agility, while
still maintaining a supportive and collaborative environment
across the Group.
Our business model is simple. We design and manufacture niche, customised electronic
components for industrial original equipment manufacturers (“OEMs”) operating in
growth markets.
We add value by providing our customers with a turnkey solution for critical components. By acting as an extension of our
customers’ engineering teams, we help them create ever-better solutions and guarantee a reliable, long-term supply of these critical
components. This business model is resilient, proven by the Group’s robust and consistent track record.
Our resources and key enablers
Our people
We have c.4,500 colleagues worldwide; many of them are
long-serving and have a high level of technical knowledge and
experience in their fields. We encourage local employment
and talent development so that our colleagues have an
in-depth understanding of the market where they operate.
Our expertise
For over three decades, we have cultivated a vast amount
of expertise and technical know-how in the specialist
electronics market. Our team of electronics, mechanical and
software engineers have a wealth of knowledge of our core
technologies and diverse application experience. This allows
us to rapidly develop new products that meet our customers’
evolving needs.
Our intellectual property
We retain the intellectual property rights of the products
designed and developed for customers. We also have
unique technology patents, which are used in many of our
customised products.
Our manufacturing capability
We have 36 manufacturing facilities in 20 countries, including
Sri Lanka, China, India, Poland, Hungary, Slovakia, the UK,
Mexico, and the USA, producing high-quality products
consistently and reliably in locations close to our customers.
Our financial strength
We have a strong balance sheet supported by high cash
generation, which allows us to continue to invest in our people
and capabilities and expand geographically.
What we do
Our main activity is designing and manufacturing specialist
electronic components for industrial applications. Our core
strength lies in the deep understanding of our customers’
design challenges, which allows us to engineer and
manufacture customised solutions that perfectly meet their
needs, and the guarantee of reliable supply throughout the
life cycle of the end system.
Our core activities
Design and customise products
We work closely with our customers, who are
primarily OEMs, to develop better solutions to
solve complex technical challenges. This often
requires adaptations of standard products or the
development of new ones.
Manufacture customised products
Manufacturing bespoke and niche products requires
a flexible production model and is often technically
demanding. With technical know-how and in-house
manufacturing capabilities, we have control of the
production process, ensuring both quality and
reliability. Quality is assured through rigorous and
repeat testing, often above what is required.
Deliver globally
With manufacturing facilities in the Americas,
Europe and Asia, we are able to reduce the risks of
logistic disruptions and shorten delivery lead times.
We provide customers with a consistent and reliable
supply of products throughout the lifetime of the
end system design.
1
2
28
Annual Report and Accounts for the year ended 31 March 2024
Shared
knowledge
and expertise
Risk
management
Financial
support
M&A
support
Common
purpose and
strategic goals
ESG
guidance
and support
Strategic
guidance
Economies
of scale
How we do it differently
Bespoke product design
Our products are a small but essential part
of larger systems, which typically have a
revenue life cycle of five to seven years.
We work with our customers to design
components that fit their system design and
technical requirements. Once designed in,
the product is used throughout the life cycle
of the customers’ product, resulting in
long-term repeat revenues for the Group. It
also ensures our customers’ peace of mind
and enables them to focus on their core
business.
Strong customer relationships
We have been supplying many of our
customers for decades. Our highly skilled
engineers work closely with customers,
developing a deep understanding of
their industry and sharing knowledge
and insights. Our long-lasting customer
relationships are built upon our product
knowledge and expertise, manufacturing
know-how, product quality and reliable
delivery.
3
Sustainable mindset
Sustainability is embedded throughout discoverIE. We design enduring, energy-efficient
products that minimise service or replacement needs. We focus on markets aligned with
the UN Sustainable Development Goals. By collaborating with our customers on their
sustainability journey, we help them achieve their sustainability goals, while working to
achieve our own.
Our
sustainability
focus areas
Our Planet
Our People
Our Products
4
The value we create
Customers
Quality, reliability and
efficiency. 100% on time,
in full delivery target.
Employees
Empowering and
collaborative culture
and healthy and safe
environment.
9%
VOLUNTARY EMPLOYEE
TURNOVER
Shareholders
Attractive returns and
growth opportunities.
403%
TEN-YEAR TOTAL
SHAREHOLDER RETURN
Communities
Contribution to local
employment, tax revenue,
community engagement
and decarbonisation.
£23.7m
TAX AND SOCIAL
SECURITY
CONTRIBUTION IN
FY2024
47%
CARBON REDUCTION
SINCE CY2021
Suppliers
Reliable partnership and
shared knowledge
READ MORE ON PAGES 48 TO 70
The Groups’ head office functions,
including legal, finance, M&A, IT,
communications and sustainability
provide support to our businesses,
enabling them to grow. The Group risk
and internal audit function ensures
compliance and effective controls, and
that risks are managed appropriately.
Strategic Report
29
discoverIE Group plc Innovative Electronics
STRATEGIC AND
OPERATIONAL REVIEW
This year’s results
reflect another
strong operational
performance, with good
growth in underlying
operating profits and
margin, as well as
earnings per share.”
Nick Jefferies
Group Chief Executive
Good progress towards
our targets
The Group designs and manufactures
niche, customised, innovative
electronics. Good progress was
made this year towards our near and
medium-term goals of increasing
operating margins, supplying UN SDG-
aligned target markets internationally,
generating consistently strong cash
flow and enhancing our value-creation
through a disciplined approach to
capital allocation.
The Group continues to deliver
sustained compounding growth
over time, both organically and from
acquisitions. Since FY 2017/18, sales have
grown by 14% CAGR, of which organic
growth was 7% CAGR. In the same
period, returns have grown at a faster
rate with underlying operating profit
growth of 22% CAGR and underlying
EPS growth of 17% CAGR.
During the year, underlying operating
profit grew by 16% at CER and
underlying EPS by 5% (10% at CER),
despite the economic headwinds.
Organic ROCE, which excludes this
year’s acquisitions, rose by 1.9ppts to
17.8% with an overall ROCE (including
this year’s acquisitions) of 15.7%,
ahead of our benchmark target,
reflecting the effectiveness of our
investment approach.
Sales in the year increased by 1% CER on
strong comparators of 48% in the last
two years, with an organic reduction of
1% for the year and growth of 2% in the
final quarter.
The target markets of medical,
renewable energy and transportation
(46% of Group sales), grew by 12%
organically, driven by strong demand
in both existing and new projects.
This was offset by the industrial
automation market (29% of Group
sales) which reduced by 19% as major
industrial customers reduced their
global inventories. Additionally, other
markets (25% of Group sales) grew by
3% organically, driven by the space,
aeronautics and security sectors,
offsetting declines in distribution and
general industry.
By region, organic sales growth was
strongest in North America (25%
of Group sales), and grew by 20%,
driven by growth in key target market
customers, easing of semiconductor
supply chains and customer re-
shoring of production. The UK and
Nordics (30% of Group sales) grew
by 1%, whilst the rest of Europe (29%
of Group sales) declined by 8%, due
primarily to softness in Germany.
Growth in Asia (16% of Group sales)
reduced by 15% driven principally by
one large customer destocking in India.
Excluding this customer, Asia reduced
by 1%, with India continuing to grow
and with China in line with last year.
By organising into clusters, our
businesses are able to generate
efficiencies which result in higher gross
margins and lower operating expenses.
30
Annual Report and Accounts for the year ended 31 March 2024
These efficiencies combined with
higher margin acquisitions led to an
underlying operating margin of 13.1%,
an increase of 1.6ppts year-on-year
and another significant step towards
achieving our Group targets of 13.5%
in the year ahead, and 15% in the
medium-term.
During the year, our enlarged M&A
team delivered five higher margin
acquisitions (two platforms and
three cluster bolt-ons) for a total
investment of £83m. We also reached
an agreement to sell Santon’s solar
business unit enabling it to focus on its
higher margin industrial business. This
exit, which results in £5.9m of cost in
the year reported, is expected to realise
c.£7m in net cash proceeds next year.
Expansion of the Group’s production
capacity in Germany and Thailand was
also completed this year, as was the
transfer of production from Tempe,
Arizona to Mexico.
Following supply chain constraints
last year, the Group order book, which
peaked at £257m in September 2022
(c.7 months of sales), has normalised
as expected with the order book at
31 March 2024 reducing to £175m,
representing c.4.5 months of sales,
in line with historic coverage levels and
appropriate to meet current
sales expectations.
With strong growth in design wins (up
23% this year), an end to the customer
destocking cycle and reductions in
interest rates stimulating both demand
and earnings, the Group is very well
positioned to accelerate growth once
market conditions improve.
Positioned well for
market recovery
The Group is well positioned in an
environment of rapidly changing
conditions, with a business model that
is both resilient and flexible.
■
Essential products: the Group’s
products are designed-in and
essential for customers’ applications
whilst amounting to a small
proportion of their overall system
cost, thereby driving resilient
gross margins.
■
Broad footprint: a decentralised
model with 36 manufacturing sites
and with operations around the
world, able to support customers
locally and contribute to the
decarbonisation of their supply
chains.
■
Efficient supply chains: our
manufacturing uses a low
proportion of bought-in
components, the majority being
manufactured in-house from raw
materials and base components,
reducing our exposure to external
supply chain disruptions.
■
Low energy intensity operations: the
large majority of the Group’s energy
exposure is electricity and with
operations mainly being manual
or semi-automated, energy costs
represent less than 1% of Group
revenues, limiting the Group’s
exposure to energy price rises and
operational disruptions.
With a capital-light business model,
a differentiated product portfolio, a
strong balance sheet and low customer
concentration (the Group’s largest
customer is c.7% of Group sales),
the Group has grown strongly and
consistently over the last decade whilst
proving resilient through economic
downturns, including the pandemic.
We expect this to continue to be
the case.
Continued financial progress
Group sales for the year increased
by 1% at CER after adjusting for
pass-through costs to £437.0m,
notwithstanding strong comparators
(+48% growth in the prior two years).
As a result of significant operating
efficiencies, underlying operating profit
increased by 16% at CER to £57.2m
with underlying operating margin
increasing by 1.6ppts to 13.1%. Conversely
interest rate rises contributed to a
£3.5m increase in finance costs to
£9.0m, and together with a stronger
Sterling, reduced growth in underlying
profit before tax to 4% (increasing from
£46.3m to £48.2m) with underlying
earnings per share up 5% to 36.8p (FY
2022/23: 35.2p).
This year saw a greater number and
value of acquisitions (five deals for a
total of £83m compared with two last
year for a total of £23m) resulting in
proportionately higher acquisition
expenses. In addition, there were £5.9m
of costs associated with the disposal
of the Santon solar business unit (see
note 12); net cash proceeds of c.£7m
from this transaction are due to be
received in the new financial year.
After underlying adjustments for the
inclusion of acquisition and disposal
related costs, profit before tax on a
reported basis reduced by £6.9m to
£22.2m (FY 2022/23: £29.1m) with fully
diluted earnings per share reducing by
5.9p to 15.8p (FY 2022/23: 21.7p).
Free cash flow of £37.0m was generated
this year, being 12% higher than
last year and representing 102% of
underlying earnings, well ahead of
the Group’s conversion target of 85%.
With £83m invested in five acquisitions
this year, net debt at 31 March 2024
increased to £104.0m (31 March 2023:
£42.7m) with a gearing ratio of 1.5x, at
the lower end of our target range of 1.5x
to 2.0x.
Increased dividend
The Board is recommending a 4% (0.35
pence) increase in the final dividend
to 8.25 pence per share, giving a 5%
increase in the full year dividend per
share to 12.0 pence (FY 2022/23: 11.45
pence) and an underlying earnings
cover of 3.1 times (FY 2022/23: 3.1 times).
The final dividend is payable on 2
August 2024 to shareholders registered
on 28 June 2024.
The Board believes in maintaining a
progressive dividend policy along with
a long-term dividend cover of over
three times earnings on an underlying
basis. This approach, along with the
continued development of the Group,
will enable funding of both dividend
growth and a higher level of investment
in acquisitions from internally
generated resources.
At the time of the interim dividend in
January 2024, the Company started a
Dividend Re-Investment Programme
(“DRIP”), details of which are available
from the Company’s Registrars,
Equiniti. The final date for DRIP
elections for the final dividend will be
12 July 2024.
Sustainability and social
responsibility
The Group creates innovative
electronics that help customers
produce new technologies. Our focus
on sustainability forms the core of
our target markets where, through
focused initiatives, we aim to grow our
revenues organically ahead of the wider
industrial market. These trends are
reported in our key strategic indicators
as target market sales.
Strategic Report
31
discoverIE Group plc Innovative Electronics
STRATEGIC AND
OPERATIONAL REVIEW continued
Our target markets are aligned to the
UN Sustainable Development Goals
with our target of generating around
85% of new design wins from these
markets. 90% of our new design wins
during the year were into these target
markets, while sales from target
markets were 75% of Group sales.
Please refer to the Group’s website
which illustrates how we are working
with customers and suppliers to meet
the global sustainability agenda.
The Group was awarded the MSCI ESG
“A” Rating in April 2022, which was
subsequently upgraded to “AA” rating
in July 2023, being in the top 16% of all
companies surveyed; the Group is also
rated by Morningstar Sustainalytics as
one of the Regional (Europe) Top Rated
companies in 2023, a recognition given
to companies that have achieved the
highest scores in ESG risk management.
Last year, the Group conducted
detailed scenario analysis and financial
modelling for climate-related risks
and opportunities, and published
the process and findings in our TCFD
report. This can be found in the Group’s
2023 Annual Report and Accounts and
on our corporate website. In early 2024,
we carried out an interim reassessment
of our climate risk analysis, taking into
account the newly-acquired businesses.
The results showed that there has been
no material change in the climate-
related risk profile of the Group.
During the year, we also made good
progress against our Net Zero plan and
other sustainability targets, including:
Environmental
■
Carbon emissions:
–
Scope 1 & 2 emissions reduced
by 47% in CY 2023 (CY 2022:
35%) compared with the CY
2021 baseline despite multiple
acquisitions, and we remain on
track to meet our target of a
65% reduction by CY 2025;
–
Completed a full assessment
of Scope 3 emissions; we are
working on our reduction plan
and are on target to complete
our SBTi submission by the end
of this year;
■
Energy intensity (kWh/£m revenue)
reduced by 11% year-on-year,
with 72% of our electricity from
renewable / clean sources;
■
13 more sites achieved ISO 14001
Environmental Management
Systems accreditation, bringing
the total number of sites to 43 sites;
revenue generated from these sites
represents 69% of Group sales (CY
2022: 59%);
■
12 sites completed energy audits in
the year, which means 81% of Group
sites have now completed an audit
since 2018, meeting our 80% CY
2025 target two years early;
■
Electric or hybrid vehicles now
represent 40% of our car fleet (CY
2022: 33%), also on track to meet our
target of 50% by CY 2025;
Social
■
13 more sites achieved ISO 45001
Occupational Health & Safety
Management Systems accreditation,
bringing the total number of
employees covered to 60% of our
global workforce (CY 2022: 48%);
■
16,500 hours of health and
safety training was carried out,
representing a 3% increase year-
on-year. The health and safety
representative to employee ratio
increased to 1:20 (CY 2022: 1:21),
well ahead of our original target of
maintaining a ratio of at least 1:50;
■
Made further progress on learning
and development, including the
initiation of a cloud-based learning
platform and an internal knowledge
sharing webinar series, and the
launch of an industrial placement
scheme;
■
98% of Group revenue was from
operations accredited with ISO 9001
(CY 2022: 92%).
Governance
■
Enhanced ESG accountability
by establishing three-year ESG
objectives and KPIs for each
operating business;
■
Rolled out a new carbon reporting
system across the Group to
help streamline data collection,
consolidation and reporting on
greenhouse gases;
■
Launched a Business Ethics Policy
and a Sustainability Policy;
■
Completed Carbon Disclosure
Project (“CDP”) full disclosure for the
first time;
■
Increased transparency by reporting
on the Sustainable Finance
Disclosure Regulation Principal
Adverse Impact (PAI) indicators;
■
Preparation for IFRS Sustainability
Reporting underway with dedicated
resources in place;
■
Improved Board gender diversity
with female members representing
43% of the Board.
A proven growth strategy
The Group has been built through
a focus on organic growth and
enhanced operational efficiency,
alongside 26 carefully selected and
well-integrated acquisitions over
the past 13 years to create a focused,
growth-oriented, higher margin design
and manufacturing business. We have
a well-developed approach to capital
allocation and see significant scope for
further expansion with a strong pipeline
of opportunities in development.
The Group’s strategy comprises
four elements:
1.
Grow sales well ahead of GDP over
the economic cycle by focusing
on the structural growth markets
that form our sustainable target
markets;
2. Improve operating margins by
moving up the value chain into
higher margin products;
3. Acquire businesses with attractive
growth prospects and strong
operating margins;
4. Further internationalise the
business by expanding operations
in North America.
These elements are underpinned by
core objectives of generating strong
cash flows from a capital-light
business model and delivering
long-term sustainable returns while
progressing towards net zero carbon
emissions and reducing our impact on
the environment.
Focused on UN SDG-Aligned
target markets
Our four target markets of industrial
automation & connectivity,
medical, renewable energy, and
the electrification of transportation
accounted for 75% of sales. Long-term
growth in these target markets is being
driven by increasing electronic content
and by global megatrends such as
the accelerating need for industrial
automation and connectivity, an ageing
affluent population, renewable sources
of energy and the electrification of
transport.
32
Annual Report and Accounts for the year ended 31 March 2024
Our focus on these markets is driving the Group’s organic revenue growth well ahead of GDP over the economic cycle, giving
resilience in softer market conditions and creating acquisition opportunities.
During the year, target market sales overall were 2% lower organically. There was a return to organic sales growth in renewable
energy which grew by 15%, with strong growth also in transportation (+22%) while medical grew by 5%. Growth in these
markets was offset by a 19% reduction in industrial automation as major industrial customers reduced their global inventories
as pull-through demand slowed. Since 2017, sales into the Group’s target markets have grown organically by 80% compared
with 19% in other markets. This reflects the sustained structural growth drivers and less cyclical nature of these markets.
Continued progress on Key Strategic and Performance Indicators
Since 2014, the Group’s strategic progress and its financial performance have been measured through key strategic indicators
(“KSIs”) and key performance indicators (“KPIs”). The KSI targets are reviewed periodically, and were raised most recently in
June 2023 when the new mid-term operating margin was set.
For tracking purposes, the KSIs and KPIs in the tables below remain as reported at the time rather than adjusted for disposals.
Targets are for the medium-term unless stated, with medium-term defined as being around five years from FY 2022/23. This
year’s performance relative to last year is discussed below.
Key Strategic Indicators
FY14
FY18
FY19
FY20
FY22
FY23
FY24
Targets
1. Increase underlying operating margin
3.4%
6.3%
7.0%
8.0%
10.9%
11.5%
13.1%
15%1
2. Build sales beyond Europe2
5%
19%
21%
27%
40%
40%
41%
45%
3. Increase target market sales2
62%
66%
68%
76%
77%
75%
85%
4. Carbon emissions Scope 1 & 2 reduction3
35%
47%
65%
1
Also a target for FY 2024/25 of 13.5%.
2 As a percentage of Group revenue.
3 Carbon emissions are measured on a calendar year basis. Target is for absolute carbon emissions reduction by CY 2025 from CY 2021 with net zero by CY 2030.
The Group made further good progress on its KSIs during the year:
■
Underlying operating margin this year was 13.1%, an increase of 1.6ppts on last year (FY 2022/23: 11.5%) with the second
half margin of 13.4% being 0.5ppts higher than for the first half (H1 2022/23: 12.9%). The Group benefited in the year
from operational efficiencies resulting in robust gross margin and lower operating costs, augmented by higher margin
acquisitions. The Group remains on track to achieve its targets of 13.5% in FY 2024/25 and 15% in the medium-term.
■
Sales beyond Europe increased by 1ppt to 41% of Group revenue compared with FY 2022/23, with strong organic growth in
the US plus two US acquisitions being partly offset by reduced demand in Asia. The target is 45%.
■
Target market sales reduced by 2ppts to 75% of Group revenue compared with FY 2022/23 as a result of lower sales in
industrial automation, acquisitions which had lower target market sales at the outset, as is often the case, and a recovery
in non-target market areas (space, aeronautics and security sectors and some non-UN SDG aligned industrial markets).
Design wins, which are the bedrock of future sales, were up by 23% year-on-year with 90% in target markets, ahead of our
85% target.
■
Carbon emissions (Scope 1 & 2) reduced further during the year and are now 47% lower on an absolute basis than in
CY 2021, demonstrating excellent progress towards our reduction targets of 65% by CY 2025 and net zero by 2030.
Key Performance Indicators
FY14
FY18
FY19
FY20
FY22
FY23
FY24
Targets
1. Sales growth
CER
Organic4
17%
3%
11%
11%
14%
10%
8%
5%
27%
14%
15%
10%
1%
(1%)
Well ahead
of GDP
2. Underlying EPS growth
20%
16%
22%
11%
20%
20%
5%
>10%
3. Dividend growth
10%
6%
6%
6%2
6%
6%
5%
Progressive
4. ROCE3
15.2%
13.7%
15.4%
16.0%
14.7%
15.9%
15.7%
>15%
5. Operating profit conversion3
100%
85%
93%
106%
101%
94%
103%
>85% of
underlying
operating
profit
6. Free cash conversion3
94%
104%
102%
95%
102%
>85% of
underlying
earnings
1
FY 2021/22 shown as growth over the pre-Covid year FY 2019/20 as this reflects the ongoing growth of the business. FY 2013/14 to FY 2019/20 are for total operations
before disposals as reported at the time.
2 6% increase in the H1 2019/20 interim dividend; a final dividend was not proposed for FY 2019/20 due to Covid.
3 Defined in note 6 of the consolidated Financial Statements.
4 Group organic sales growth for FY2021/22 to FY2023/24, and Design & Manufacturing divisional organic growth for years prior to disposal of Custom Supply
division during FY2021/22.
Strategic Report
33
discoverIE Group plc Innovative Electronics
STRATEGIC AND
OPERATIONAL REVIEW continued
The Group also made good progress on
its KPIs during the year, especially given
the prevailing economic headwinds.
■
CER sales after adjusting for pass-
through costs increased by 1% this
year with organic sales reducing
by 1%. Growth rates have reduced
due to normalising markets and
de-stocking in the industrial
automation sector. Growth in the
transportation, renewable energy
and medical markets remained
strong as well as in some of our
other smaller market areas such
as space, aeronautics and security.
Over the last 10 years, organic sales
have grown by 6% per annum on
average, illustrating the strong
through-cycle organic growth of the
business, with 7% average growth
per annum in the last seven years.
■
Underlying EPS increased by 5%
and by 10% at CER. Excluding
increased finance costs and at
CER (so eliminating the impact
of stronger Sterling), underlying
operating profit increased by 16%
due to our operational efficiencies
with robust gross margins, tight
control of operating costs, and
contributions from acquisitions.
■
It is proposed to increase the full
year dividend by 5%, continuing
our progressive policy whilst
providing for a higher proportion
of investment in acquisitions from
internally generated resources. This
progressive policy has seen a more
than doubling of the dividend per
share since 2010 (up 135%), whilst
dividend cover on an underlying
basis remained at 3.1x for the year.
■
ROCE for the year was 15.7% and
remains ahead of our 15% target. As
expected, it was marginally lower
than last year (FY 2022/23: 15.9%),
following five acquisitions this year
for a total investment of £83m, as
acquisitions will typically be dilutive
to ROCE initially. Organic ROCE,
which excludes acquisitions this
year, increased by 1.9ppts to 17.8%.
■
Underlying operating cash flow and
free cash flow for the year were 22%
and 12% higher respectively than
last year with underlying operating
cash conversion of 103%, and free
cash conversion of 102%, both well
ahead of our 85% targets. Over
the last ten years, both underlying
operating cash conversion and
free cash conversion have been
consistently strong, averaging
well over 90%, reflecting the cash
generative nature of the business
through the economic cycle.
Divisional Results
The divisional results for the Group for the year ended 31 March 2024 are set out and reviewed below.
FY 2023/24
FY 2022/23
Revenue
£m
Underlying
operating
profit1
£m
Margin
Revenue
£m
Underlying
operating
profit1
£m
Margin
CER
revenue
growth
Organic
revenue
growth
M&C
265.1
40.6
15.3%
265.9
36.4
13.6%
0%
(2%)
S&C
171.9
28.9
16.8%
165.3
25.1
15.2%
+4%
+2%
Unallocated
(12.3)
(12.2)
Total (CER)
437.0
57.2
13.1%
431.2
49.3
11.4%
+1%
(1%)
Pass-through2
5.0
-
(1%)
FX
12.7
2.5
(3%)
Total
437.0
57.2
13.1%
448.9
51.8
11.5%
(3%)
1
Underlying operating profit excludes acquisition & disposal-related costs
2 Revenue for FY 2022/23 included a £5.0m of one-off increase in semiconductor costs passed through to customers at nil margin
Magnetics & Controls Division
(“M&C”)
The M&C division designs, manufactures
and supplies highly differentiated
magnetic and power components,
embedded computing and interface
controls, for industrial applications. The
division comprises two clusters and
three further businesses operating
across 17 countries. Products are
manufactured in-house at one of the
division’s 21 manufacturing facilities,
with its principal sites being in China,
India, Mexico, USA, Poland, Sri Lanka,
Thailand and the UK. Geographically,
6% of sales by destination are in the UK,
49% in the rest of Europe, 26% in North
America and 19% in Asia.
This year has seen three new
acquisitions into the division: Silvertel,
a UK-based high performance power-
over-Ethernet modules business;
Shape, a US speciality transformer
business to be part of the Noratel
magnetics cluster; and DTI, a US
custom embedded modules business
to be part of the Beacon embedded
modules cluster. Capacity of our facility
in Thailand has also been expanded
and the move to a new facility in China
is underway. Construction of a larger
production facility in Kerala, India has
been put on hold following the reduced
demand by a major customer there.
Our US facility in Tempe, Arizona has
been closed with production being
integrated into one of our existing sites
in Mexico.
With supply chain conditions back to
normal during the year, the divisional
order book normalised as expected
with orders reducing by 7% CER to
£237.1m (FY 2022/23: £254.9m CER)
for a book-to-bill ratio of 0.90:1 against
exceptional prior year comparators.
The book-to-bill ratio improved during
the year, from 0.89:1 in the first half to
0.91:1 in the second half. Normalisation
of inventories at customers led to sales
reducing in the year by 2% organically.
34
Annual Report and Accounts for the year ended 31 March 2024
Strong growth in North America of
19% was offset by sales in Asia reducing
by 15%, primarily due to one major
customer’s slowdown in India, and
the rest of Europe reducing by 5%,
mainly in Germany. Excluding one large
customer destocking in India, sales in
Asia were down only 1%.
Combined with a 2% sales increase
from acquisitions, overall sales were in
line with last year at CER. Including the
impact of translation from a stronger
Sterling on average, reported divisional
revenue reduced by 6% to £265.1m
(FY 2022/23: £280.8m reported and
£265.9m CER). Underlying operating
profit of £40.6m was £4.2m (+12%)
higher than last year at CER and £2.2m
(+6%) higher on a reported basis (FY
2022/23: £38.4m). The underlying
operating margin of 15.3% was 1.7pts
higher than last year at CER and 1.6%
higher on a reported basis (FY 2022/23:
13.7%), reflecting the positive effect of
operating efficiencies, robust margins
and higher margin acquisitions.
Sensing & Connectivity Division
(“S&C”)
The S&C division designs, manufactures
and supplies highly differentiated
sensing and connectivity components
for industrial applications and
comprises four clusters and three
further businesses operating
across nine countries. Products
are manufactured in-house at one
of the division’s 15 manufacturing
facilities, with its principal ones
being in Hungary, the Netherlands,
Norway, Slovakia, the UK and the
US. Geographically, 22% of sales by
destination are in the UK, 44% in the
rest of Europe, 23% in North America
and 11% in Asia.
This year has seen two new acquisitions
into the division; 2J Antennas, a high
performance antennas business
forming an RF (radio frequency) &
wireless cluster with our existing
Antenova business and IKN, which is
now part of the Foss Nordic cabling
business cluster. Additionally, the Group
has sold its lower margin, solar business
unit within Santon, enabling it to focus
on its higher margin industrial business.
This year has also seen the opening of
a new, purpose built, larger facility in
Germany for MTC, a business acquired
in 2011.
As with the M&C division, supply
conditions returned to normal during
the year, with the divisional order book
normalising as expected leading to
orders reducing by 11% CER to £152.6m
(FY 2022/23: £170.9m CER) for a book-
to-bill ratio of 0.89:1, also against
exceptional prior year comparators. The
book-to-bill ratio improved in the year,
from 0.84:1 in the first half to 0.93:1 in the
second half. Normalisation of inventories
at customers impacted sales which
grew by 2% organically, with 22% organic
growth in North America and 7% in the
UK, offset by a 14% reduction in the rest
of Europe and an 11% reduction in Asia,
principally in China.
Combined with a 2% sales increase
from acquisitions less disposals, overall
sales increased by 4% CER. Including
the impact of translation from a
stronger Sterling on average, reported
divisional revenue increased by 2% to
£171.9m (FY 2022/23: £168.1m reported
and £165.3m CER).
Underlying operating profit of £28.9m
was £3.8m (+15%) higher than last year
at CER and £3.3m (+13%) higher on a
reported basis (FY 2022/23: £25.6m). The
underlying operating margin of 16.8%
was 1.6ppts higher than last year (FY
2022/23: 15.2%), which, as with the M&C
division, reflects the positive effect of
operating efficiencies, robust margins
and higher margin acquisitions.
Design wins driving future
recurring revenues
As a business with an engineering
led sales function, organic growth is
achieved by identifying and winning
new design opportunities and as such,
project design wins are an indicator
of new business creation. These are
achieved by working with customers
at an early stage in their project design
cycle to identify opportunities. Once the
products are specified into their designs,
a design win is registered which leads to
future recurring revenue streams.
The Group has a strong bank of design
wins built up over many years, creating
the basis for the Group’s strong organic
growth through the cycle. During the
year, new design wins were registered
with an estimated lifetime value of
£337m, an increase of 23% over last
year and with 90% being in our target
markets.
This increase in design wins reflects
both the expected increase in customer
project design activity at this stage in
the cycle, catch-up from designs that
were paused during last year’s supply
chain bottlenecks, and increased
focus and implementation by Group
engineers.
Additionally, new project design activity
remains at a high level, being broad-
based across all target markets along
with a smaller proportion in other
market areas with similar high quality
recurring revenue characteristics such
as space, aeronautics and security.
The total pipeline of ongoing projects
continues to be very strong.
Acquisitions
The market is highly fragmented
with many opportunities to acquire.
Currently, the Group’s pipeline consists
of around 250 possible targets of which
a number are in the active outreach
phase and live deal negotiation at
any time.
The businesses we acquire are typically
led by entrepreneurs who wish to
remain with the business for a period
following acquisition. We encourage
this as it enables integration and helps
retain a dynamic, decentralised and
entrepreneurial culture.
We acquire high quality businesses that
are successful with good long-term
growth prospects, paying a price that
reflects this quality whilst generating
good returns for shareholders.
We invest in these businesses for
growth and operational performance
development. According to the
circumstances, we add value in some or
all of the following areas:
Strategy and operations:
■
Creating a long-term strategy for
growth with operational leverage;
■
Grouping businesses into clusters;
■
Generating operational efficiencies;
■
Internationalising sales channels;
■
Accelerating organic growth by
focusing sales development onto
target market areas, expanding the
customer base including through
cross-selling, and;
■
Developing the product range.
Strategic Report
35
discoverIE Group plc Innovative Electronics
STRATEGIC AND
OPERATIONAL REVIEW continued
People:
■
Investing in management
capability;
■
Enabling peer networking and
collaboration;
■
Increasing diversity;
■
Succession planning and
management transition.
Sustainability:
■
Aligning sustainability strategies
with those of the Group;
■
Creating carbon emission
reduction plans;
■
Inclusion in the Group’s SBTi net
zero carbon emission reduction
program;
■
Providing training and
development.
Investment:
■
Capital investment in
manufacturing and infrastructure;
■
Internationalising operations;
■
Expansion through further
acquisitions;
■
Upgrading systems such as IT.
Controls and support:
■
Implementing robust financial
measurement, KPIs and controls;
■
Finance and related support, such
as treasury, banking, legal, tax and
insurance;
■
Risk management and
internal audit.
The Group has acquired 26 design and
manufacturing businesses over the last
13 years, with the Group’s continuing
revenues increasing to £437m in FY
2023/24 from £10m in FY 2009/10. By
taking a long-term approach to create
compounding organic growth in
acquired and integrated businesses,
the Group has generated substantial
value organically. As reported in the
finance section, our ROCE increases
over time, broadly according to the
period of ownership.
During the year, the Group completed
five high margin acquisitions:
i.
Silvertel, a UK-based designer and
manufacturer of differentiated,
high performance Power-over-
Ethernet (“PoE”) modules and
complementary products for global
industrial electronic connectivity
markets, which sells into more than
70 countries. Silvertel was acquired
for an initial cash consideration of
£21.7m on a debt free, cash free
basis, together with an earn-out
of up to £23m payable subject to
Silvertel’s performance over the
next four years.
ii.
2J Antennas, a Slovakian-based
designer and manufacturer of high
performance antennas for industrial
electronic connectivity applications
for a cash consideration of €50.8m
(£44.1m) on a debt free, cash free
basis. 2J Antennas, which has
subsidiaries in the US and UK and
sells into more than 50 countries,
will form a new technology cluster
with the Group’s existing antenna
business, Antenova, creating a
leading platform in the growing,
high performance, industrial
wireless connectivity market.
iii. Three smaller bolt-on deals
for a total debt free, cash free
consideration of £17.0m for an
average mid-single digit EBIT
multiple, namely: Shape, a US-
based designer and manufacturer
of speciality transformers; DTI, a US-
based designer and manufacturer
of custom embedded modules; and
IKN, a Norwegian cable designer
and manufacturer. All three will be
part of existing clusters, with Shape
part of the Noratel cluster, DTI part
of the Beacon cluster and IKN being
part of the Foss cluster.
The Group’s operating model is
well established and has facilitated
the smooth integration of acquired
businesses. Through a combination of
investment in efficiency and leveraging
of the broader Group’s commercial
infrastructure, the businesses acquired
since 2011 and owned for at least two
years delivered a return on investment
(“EBIT ROI”) of 18.5% this year, well above
our target of 15%.
Summary and Outlook
Over the past three years, the
underlying profitability of the business
has nearly doubled on revenues that
have increased by almost 50% as
the combination of organic growth
with efficiencies and higher margin
acquisitions came through. This
year’s results reflect another strong
performance against a tougher
trading backdrop, with good growth
in underlying operating profits
and margin, as well as underlying
earnings per share. Revenues in our
transportation, renewable and medical
markets delivered strong organic
growth whilst industrial & connectivity
declined as a result of customer
destocking.
Cash generation has again been strong
reflecting both the high quality of
earnings and the capital-light nature of
the business. Naturally, higher interest
rates have taken effect although we will
see the corresponding benefit if and
when rates reduce.
Underlying operating profit grew
by 16% at constant exchange rates
with underlying operating margin
increasing by 1.6ppts to over 13% driven
organically by efficiencies and value
creation. Underlying operating cash
flow increased by 22% to £59m.
We made five acquisitions during the
year for a consideration of £83m. Our
approach to long-term compounding
organic growth is delivering increasing
ROCE over time, with our longer
standing acquisitions now generating
28% ROCE and we expect our newer
businesses to generate similar returns
over time. Our commitment to
disciplined capital allocation includes
review of the business portfolio and
during the year we sold our solar
switches production lines, enabling
us to focus on the remaining higher
margin products in the Santon
business.
Whilst the softer market conditions in
some sectors are expected to continue
for the first half of the year, we have a
strong pipeline of design wins, order
backlog and acquisition opportunities.
With the benefit of a robust balance
sheet, we expect to make further
progress in the year ahead, in line with
the Board’s expectations, building on
the essential role that our specialist
products provide for our customers.
Nick Jefferies
Group Chief Executive
36
Annual Report and Accounts for the year ended 31 March 2024
Strategic Report
37
discoverIE Group plc Innovative Electronics
FINANCIAL REVIEW
The Group continues
to deliver strong cash
flow with operating
cash up 22% and
conversion rates at
over 100%.”
Simon Gibbins
Group Finance Director
Revenue and Orders
Group sales of £437.0m were 1% higher than last year at CER after adjusting for
pass-through sales (FY 2022/23: £431.2m CER). Acquisitions and disposals in the last
12 months added a net 2% to organic sales which were 1% lower than last year as
customers continued to normalise their inventory levels. Acquisitions comprised
five deals this year plus two deals last year and in the final quarter, the Group
agreed the sale of its lower margin, Santon solar business unit.
Last year’s revenue included £5.0m of one-off increases in semiconductor
purchase costs due to the unprecedented supply constraints. These costs were
passed through to customers at nil margin and impacted sales growth by 1%.
A stronger Sterling on average during the year, particularly compared with Nordic
currencies and the US Dollar, reduced sales by 3% on translation, resulting in sales
being 3% lower than last year.
Revenue (£m)
FY
2023/24
FY
2022/23
%
Organic sales
404.4
408.1
(1%)
Acquisitions
18.6
Disposals
14.0
23.1
Sales at CER
437.0
431.2
+1%
Nil margin pass-through costs
5.0
(1%)
FX translation
12.7
(3%)
Reported sales
437.0
448.9
(3%)
As mentioned above, the Group order book normalised as supply chains eased,
ending the year at £175m (c.4.5 months of sales) compared with £257m at 30
September 2022 (c.7 months of sales) at the height of global supply constraints.
Orders for the year were £389.7m, 8% lower at CER than last year (FY 2022/23:
£425.7m CER), in line with the order book normalisation. The extent of
normalisation reduced during the year with a book to bill ratio of 0.87:1 in the first
half improving to 0.91:1 in the second half, for a full year ratio of 0.89:1.
38
Annual Report and Accounts for the year ended 31 March 2024
Group Operating Profit and Margin
Group underlying operating profit for the year was £57.2m, a 10% increase on last year (FY 2022/23: £51.8m), and 16% higher at
CER, delivering an underlying operating margin of 13.1%, 1.6ppts higher than last year (FY 2022/23: 11.5%) and 1.7ppts higher at
CER. Underlying operating margin in the second half of the year increased to 13.4%, being well on track to reach our targets of
13.5% in FY 2024/25 and 15% over the medium term.
Group reported operating profit for the year (including acquisition and disposal-related costs discussed below) of £31.2m was
£3.4m lower than last year (FY 2022/23: £34.6m). This was due to the costs arising from the disposal of Santon’s lower margin
solar business unit (£5.9m) and higher acquisition expenses (£3.9m) due to an increased number and value of acquisitions this
year (five deals for £83m) compared with last year (two deals for £23m). Proceeds from the disposal will be recognised in next
year’s accounts.
FY 2023/24
FY 2022/23
£m
Operating
profit
Finance
cost
Profit
before tax
Operating
profit
Finance
cost
Profit
before tax
Underlying
57.2
(9.0)
48.2
51.8
(5.5)
46.3
Underlying adjustments
Amortisation of acquired intangibles
(16.2)
–
(16.2)
(15.8)
–
(15.8)
Acquisition and disposal expenses
(9.8)
–
(9.8)
(1.4)
–
(1.4)
Reported
31.2
(9.0)
22.2
34.6
(5.5)
29.1
Underlying operating profit growth has been achieved through a combination of strong operating efficiencies and acquisitions
as shown below:
£m
Underlying
Operating
Profit
FY 2022/23
51.8
Gross profit on lower organic sales
(1.5)
Organic gross margin improvement
4.9
Organic opex savings
0.5
Organic profit growth
3.9
Profit from acquired companies
4.0
CER growth in operating profits
59.7
Foreign exchange impact
(2.5)
FY 2023/24
57.2
£3.9m or half of the incremental CER profits in the year were generated from organic operating performance of the businesses
driven by robust gross margins from operational efficiencies and tight management of operating costs amidst a high inflation
environment. The remaining incremental profits were delivered by the seven acquisitions made in the last two years.
Sterling has been stronger this year versus 12 months ago, compared with the US Dollar (+4%) and Nordic currencies (+7%), while
the Euro was at the same level as last year on average. This gave rise to a reduction in underlying operating profits on translation
of £2.5m for the year.
Strategic Report
39
discoverIE Group plc Innovative Electronics
FINANCIAL REVIEW continued
Underlying Adjustments
Underlying adjustments for the year
comprise the amortisation of acquired
intangible assets of £16.2m (FY 2022/23:
£15.8m) together with acquisition and
disposal expenses of £9.8m (FY 2022/23:
£1.4m).
The amortisation charge for the year
has increased over last year following
the five acquisitions completed during
the year. With the annualisation effect
of those acquisitions, the expected
charge for next year is c.£17m.
£3.9m of the acquisition and disposal
expenses are the costs associated with
the five acquisitions during the year
together with movements in accrued
contingent consideration costs relating
to the acquisitions of Limitor, Phoenix,
CPI and Silvertel.
£5.9m of costs (of which c.£2.4m are
cash costs) arise from the agreed sale
of Santon’s lower margin solar business
unit including £3.0m of costs being
the assets of the business unit, and
£2.9m of exit and restructuring costs.
c.£2.0m of profit is expected to accrue in
FY 2024/25 on completion of the
disposal for an overall net transaction
book loss of c.£4.0m with a net cash
inflow on the whole transaction arising
next year of c.£7m.
Financing Costs
Net finance costs for the year were
£9.0m (FY 2022/23: £5.5m) and include
a £0.7m charge for leased assets under
IFRS 16 (FY 2022/23: £0.6m) and £0.6m
charge for amortised upfront facility
costs (FY 2022/23: £0.6m). Finance
costs related to our banking facilities
were £7.7m (FY 2022/23: £4.3m) and
have increased by 79%. This increase is
mainly linked to the rise in interest rates
during last year and the first half of this
year. From April 2022 to September
2023, the Sterling base rate increased
from 0.75% to 5.25%, the US Dollar
Federal rate from 0.5% to 5.5% and
the ECB lending rate from 0% to 4.5%,
these being the Group’s three principal
borrowing currencies.
Together with five debt funded
acquisitions in the last seven months
of the year, net finance costs for next
year are expected to annualise to
c.£11m. Looking forward, with interest
rates expected to have peaked, and
the Group’s banking facility being
at variable rates, a 1ppt reduction in
interest rates would reduce annualised
finance costs by approximately £1.3m,
and increase EPS by c.1.0p or c.2.5%.
Underlying Tax Rate
The underlying effective tax rate (“ETR”)
for the year was 24.9%, marginally lower
than last year’s rate (FY 2022/23: 25.3%)
due to a positive impact on this year’s
tax charge from adjustments to prior
year tax liabilities.
The overall ETR was 30% (FY 2022/23:
27%). This was higher than the
underlying ETR due to there being
a lower rate of tax relief expected on
acquisition and disposal expenses
(within underlying adjustments above).
FY 2023/24
FY 2022/23
£m
PBT
ETR
PBT
ETR
Group underlying
48.2
25%
46.3
25%
Amortisation of acquired intangibles
(16.2)
22%
(15.8)
20%
Acquisition & disposal expenses
(9.8)
16%
(1.4)
57%
Total reported
22.2
30%
29.1
27%
Profit Before Tax and EPS
Underlying profit before tax for the year of £48.2m was £1.9m higher (+4%) than last year (FY 2022/23: £46.3m), with underlying
EPS for the year also increasing by 5% to 36.8p (FY 2022/23: 35.2p).
FY 2023/24
FY 2022/23
£m
PBT
EPS
PBT
EPS
Underlying
48.2
36.8p
46.3
35.2p
Underlying adjustments
Amortisation of acquired intangibles
(16.2)
(15.8)
Acquisition & disposal expenses
(9.8)
(1.4)
Reported
22.2
15.8p
29.1
21.7p
After the underlying adjustments above, reported profit before tax was £22.2m, a reduction of £6.9m compared with last year
(FY 2022/23: £29.1m) while reported fully diluted earnings per share was 15.8p, 5.9p lower than last year (FY 2022/23: 21.7p). The
reductions reflect the costs associated with the agreed sale of Santon’s solar business unit (with costs recognised this year
and income recognised only on receipt of the sale proceeds next year) and expenses associated with the increased level of
acquisitions.
40
Annual Report and Accounts for the year ended 31 March 2024
Working Capital
Working capital at 31 March 2024 was
£77.5m equivalent to 16.6% of fourth
quarter annualised sales at CER with
an additional £9.3m of working capital
from acquisitions during the last 12
months offset by £2.2m from foreign
exchange translation. This is 2.2ppts
lower than at the half year as Group
inventory levels reduced following the
global supply chain constraints. The
working capital ratio is higher than last
year when working capital was £69.4m
or 15.1% of fourth quarter annualised
sales.
Working capital KPIs have remained
robust with debtor days of 50 (5 days
above last year), creditor days of 80 (in
line with last year) and stock turns of 3.3
(0.1 turn better than last year).
Asset return ratios
ROCE for the year of 15.7% was ahead
of our 15% target and 0.6ppts ahead of
ROCE reported at 30 September 2023
(H1 2023/24: 15.1%). While 0.2ppts below
last year (FY 2022/23: 15.9%), this reflects
the dilutive effect of five acquisitions for
an £83m investment over the last seven
months.
Organic ROCE, excluding acquisitions
this year, was 17.8% (an increase of
1.9ppts on last year) and we expect
this to continue to grow well going
forward. The effect of compounding
growth on acquisitions over time can be
seen in the ROCE for those businesses
acquired more than 7 years ago which
have a ROCE of 28% including an
apportionment of Group central costs.
Return on Tangible Capital Employed
(“ROTCE”) for the year, which excludes
intangible and non-operational assets,
was 54.1% and illustrates both the
strong returns being generated by the
Group’s operational assets, and the
capital-light requirements of those
businesses with capital expenditure
of only 1.1% of sales this year
(FY 2022/23: 1.2%).
ROTCE was 5.8ppts ahead of last year
(FY 2022/23: 48.3%) with improvements
from organic operating efficiency
and also from acquiring high
margin businesses with low capital
requirements.
Cash Flow
Net debt at 31 March 2024, excluding leases, was £104.0m, compared with £42.7m at 31 March 2023 with the increase
in the year of £61.3m mainly related to five acquisitions during the year partly offset by continued strong free cash flow.
The movements in net debt during the year are summarised as follows:
£m
FY
2023/24
FY
2022/23
Opening net debt at 1 April
(42.7)
(30.2)
Free cash flow (see table below)
37.0
33.0
Acquisitions & disposals
(85.4)
(30.6)
Equity issuance (net of taxes)
(0.3)
(0.6)
Dividends
(11.2)
(10.5)
Foreign exchange impact
(1.4)
(3.8)
Net debt at 31 March
(104.0)
(42.7)
Total acquisition costs of £85.4m during the year comprised £82.8m on five acquisitions, on debt free, cash free bases and
£2.6m of acquisition and disposal expenses.
Dividends of £11.2m paid during the year were 7% higher than paid in the previous year (FY 2022/23: £10.5m) mainly following a
6% increase in the total dividends declared last year.
The cash impact from FX translation was lower this year, compared to last year which saw Sterling significantly weaken in
particular compared to the US Dollar. The Group’s policy is to hold net debt in currencies aligned to the currency of its cash
flows in order to protect the gearing of the Group.
Strategic Report
41
discoverIE Group plc Innovative Electronics
FINANCIAL REVIEW continued
Underlying operating cash flow and free cash flow for the year (see definitions in note 6 to the consolidated Financial
Statements) compared with last year are shown below:
£m
FY
2023/24
FY
2022/23
Underlying profit before tax
48.2
46.3
Net finance costs
9.0
5.5
Non-cash items(1)
15.9
14.6
Underlying EBITDA
73.1
66.4
IFRS 16 - lease payments
(6.8)
(5.8)
EBITDA (incl. lease payments)
66.3
60.6
Changes in working capital
(2.2)
(6.4)
Capital expenditure
(4.9)
(5.6)
Underlying operating cash flow
59.2
48.6
Finance costs
(7.7)
(5.0)
Taxation
(12.5)
(9.0)
Legacy pensions
(2.0)
(1.6)
Free cash flow
37.0
33.0
1
Non-cash items are depreciation, amortisation, share-based payments and IAS19 pension charge
Underlying EBITDA (pre IFRS 16 lease
payments) of £73.1m was 10% higher
than last year (FY 2022/23: £66.4m)
reflecting operating efficiency
combined with contributions from the
seven acquisitions made since the start
of last year.
During the year, the Group invested
£2.2m in working capital, a reduction
of £4.2m on last year as supply chain
conditions continued to normalise with
Group inventory turns increasing to the
highest level in the last two years.
Capital expenditure of £4.9m was
invested during the year including
various new production line extensions,
ERP upgrades and ESG initiatives. This
represents 1.1% of sales, down from 1.2%
of sales last year illustrating the capital-
light nature of the Group’s businesses.
£59.2m of underlying operating
cash flow was generated in the year,
an increase of 22% on last year (FY
2022/23: £48.6m) representing 103% of
underlying operating profit, well ahead
of our 85% conversion target.
Finance cash costs of £7.7m were
£2.7m higher than last year, partly due
to increased interest rates and partly
on additional levels of debt used to
fund five acquisitions during the year.
Corporate income tax payments of
£12.5m were £3.5m ahead of last year
reflecting higher profitability this year
and loss utilisation last year, notably in
the US.
Free cash flow (being cash flow before
dividends, acquisitions and equity fund
raises) of £37.0m was generated in the
year, £4.0m or 12% higher than last year
(FY 2022/23: £33.0m), a lower growth
rate than underlying operating cash
flow due to the higher finance and
tax costs. This represents a free cash
conversion rate of 102% of underlying
earnings, again well ahead of our 85%
target. Over the last 10 years, the Group
has consistently achieved high levels
of underlying operating cash and free
cash conversion, averaging well in
excess of 90%.
Banking facilities
The Group has a £240m syndicated
banking facility which extends to
August 2027. In addition, the Group
has an £80m accordion facility which
it can use to extend the total facility
up to £320m. The syndicated facility
is available both for acquisitions and
for working capital purposes, and
comprises seven lending banks.
With net debt at 31 March 2024 of
£104.0m, the Group’s gearing ratio
at the end of the year (being net
debt divided by underlying EBITDA,
excluding IFRS 16 and as annualised for
acquisitions) was 1.5x compared with
a target gearing range of between 1.5x
and 2.0x. Excluding acquisitions in the
year, organic gearing reduced from
0.7x at 31 March 2023 to 0.3x following
continued strong cash generation
during the year.
42
Annual Report and Accounts for the year ended 31 March 2024
Balance Sheet
Net assets of £301.6m at 31 March 2024 were £2.0m lower than at the end of the last financial year (31 March 2023: £303.6m).
The decrease primarily relates to the net profit after tax for the year of £15.5m partially offset by currency translation impact of
£7.7m and dividend payments this year of £11.2m. The movement in net assets is summarised below:
£m
FY
2023/24
Net assets at 31 March 2023
303.6
Net profit after tax
15.5
Dividend paid
(11.2)
Currency net assets – translation impact
(7.7)
Loss on defined benefit scheme
(0.9)
Share based payments (inc tax)
2.3
Net assets at 31 March 2024
301.6
Defined Benefit Pension
Scheme
The Group’s IAS 19 pension asset,
associated with its legacy defined
benefit pension scheme, decreased
this year by £2.0m from £2.3m at 31
March 2023, to £0.3m at 31 March 2024
(30 September 2023: £0.7m). The key
drivers were the reduction in the value
of fund assets and the cost of scheme
administration.
Risks and Uncertainties
The principal risks faced by the Group
are covered in more detail in Principal
Risk and Uncertainties on pages 75 to
81. These risks comprise: the economic
environment, particularly linked to the
geopolitical issues arising from the
ongoing conflicts in Ukraine and the
Middle East; inflationary headwinds and
rising interest rates; the performance
of acquired companies; climate-
related risks; loss of major customers
or suppliers; technological changes;
major business disruption; cyber
security; loss of key personnel; inventory
obsolescence; product liability; liquidity
and debt covenants; exposure to
adverse foreign currency movements;
and non-compliance with legal and
regulatory requirements.
The Board reviewed the Group’s
principal risks and the mitigating
actions and processes in place during
the financial year. The Board’s view
is that risks associated with the
macroeconomic environment have
increased during the financial year,
while the supply chain issues flagged
last year have reduced, with no material
change to the relative importance or
quantum of the Group’s other principal
risks.
Risk management is an ongoing
process, and the Board will continue
to monitor risks and the mitigating
actions in place. The Group’s risk
management processes cover
identification, impact assessment, likely
occurrence and mitigating actions.
Some level of residual 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 £240m and the
adaptability we have as an organisation.
Simon Gibbins
Group Finance Director
Strategic Report
43
discoverIE Group plc Innovative Electronics
OUR ENGAGEMENT WITH
STAKEHOLDERS
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 below identifies some of
our stakeholders and how we engage with them.
Why it is important to engage
Stakeholder key interests
Ways we engage
Our people engagement
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.
Please see pages 90 to 93 for
more on employee engagement.
■
Health and safety
■
Remuneration and benefits
■
Career opportunities
■
Employee engagement
■
Training and development
■
Well-being
■
Reputation
■
Employee surveys
■
Regular town hall meetings
■
Board and Group management visits to
operating companies
■
Annual performance evaluations
■
Newsletters
■
Employee events
■
Social media
■
Apprenticeship and placement
programmes
■
Online learning and development portal
■
Fair pay
■
Recognition and reward
Our operating businesses
We operate a decentralised
model where our operating
businesses are empowered to
innovate and grow, and decision-
making takes place in the
frontline and close to customers.
Our companies are key
stakeholders of the Group and
are vital for our growth strategy.
■
Operational and financial
performance
■
International expansion
■
Capital investment
■
Collaboration
■
Strategic guidance
■
Resources and support
■
Quarterly business reviews
■
Regular site visits and management
meetings
■
Operating business management forums
■
Support in specialist areas, such as tax,
legal and commercial, M&A, and ESG
■
Sustainability workshops
■
Knowledge sharing webinars
■
Internal audit and compliance
Customers
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.
■
Safety, quality and reliability
■
Engineering capabilities
■
Technical know-how
■
Competitiveness
■
Our availability and
responsiveness
■
Relationship
■
Compliance
■
Convenience
■
Range of products
■
Customer visits, telephone calls,
engineering visits
■
Participation in industry forums
and events
■
Social media and commercial websites
■
Contract negotiation, implementation and
management of ongoing relationships
■
Customer audits of our manufacturing
facilities
■
Trade shows and exhibitions
■
Distributor conferences
■
Geographical footprint allows us to meet
customers in their locations
■
Satisfaction surveys
Suppliers
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.
■
Quality management
■
Cost-efficiency
■
Long-term relationships
■
Responsible procurement, trust
and ethics
■
Technological advances,
including digital solutions
■
Knowledge sharing
■
Joint customer visits
■
Supplier audits
■
Employee training
■
Regular business reviews
■
Geographical footprint allows smaller
suppliers to operate globally
■
Logistics efficiencies
■
Supplier conferences
44
Annual Report and Accounts for the year ended 31 March 2024
Why it is important to engage
Stakeholder key interests
Ways we engage
Shareholders
To understand their requirements
and generate returns and value.
We ensure that we provide timely
disclosures and 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.
■
Growth
■
Financial performance and
economic impact
■
Governance and transparency
■
Operating and financial
information
■
Confidence in the Group’s
leadership
■
Dividend growth
■
Regular market updates
■
Investor presentations
■
1x1 and group meetings
■
Site visits
■
Corporate website, including dedicated
investor section
■
Shareholder consultations
■
Annual reports
■
Annual General Meetings
■
Capital Markets Days
■
Investor conferences and roadshows
Global communities
We support communities and
groups local and relevant to
our operations and consider
the environmental and social
impacts of our operations.
■
Local operational impact
■
Health and safety and
environmental performance
■
Employment
■
Charitable donations and volunteering
■
Corporate and operating company
websites
■
Local environmental initiatives
■
Prioritising local employment
The Group promotes policies and
procedures across the Group that
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 can
be found at our Group website
www.discoverIEplc.com/sustainability/
company-policies and are referred
to on pages 84 and 93 of this Annual
Report and Accounts.
Day-to-day responsibility for
implementation of policies (other than
the Board Diversity Policy) is delegated
to the management of discoverIE’s
operating companies, under the
supervision of the Group Management
Committee.
Where appropriate, the Group policies
and procedures are supported by the
local operating businesses’ policies,
all within a framework established by
the Board and Group Management
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 is committed to
environmental, social and governance
affairs in its actions, 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 also the many other
stakeholders who have an interest in
our business. In the last three years,
none of our staff have been involved
in any matters involving bribery or
corruption, and no disciplinary action
has been taken against any person who
reported any whistleblowing issue.
Strategic Report
45
discoverIE Group plc Innovative Electronics
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 (among 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
2024. This section is incorporated by
reference into the Strategic Report.
Section 172 of the Companies Act
2006 (the “Act”)
The discoverIE Board’s response
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.
In FY2024, the Board:
Considered long-term sustainability-related issues and their potential impact on
the Group’s strategy and ongoing performance, including ongoing monitoring
of climate-related risks and opportunities and the Group’s net zero targets and
related plans.
Considered a number of acquisition proposals and the proposed disposal of the
Santon Solar business. The Board only approves an acquisition or disposal 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, over a defined future period. This judgement is recorded. During the
year, the Board approved the acquisitions of Silvertel (August 2023), 2J Antennas
(September 2023), Shape (January 2024), DTI (March 2024) and IKN (March 2024)
and the disposal of the Santon Solar business.
Received presentations on specific business areas and, through ongoing
discussion with 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.
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.
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.
In FY2024, the Board:
Received updates on the impact on staff of global inflation and specific local issues
affecting their livelihoods.
Continued to ensure that the communications between the Board, Group
Management Committee, individual operating companies and Group staff were
optimised. Board members and representatives from the Group Management
Committee also visited a number of sites to meet with staff, including a whole
Board visit to MTC in Germany.
Reviewed Board and Senior Management remuneration and employment
relations and arrangements across the Group.
46
Annual Report and Accounts for the year ended 31 March 2024
Section 172 of the Companies Act
2006 (the “Act”)
The discoverIE Board’s response
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.
In FY2024, 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 and 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.
In FY2024, the Board:
Continued its focus on environmental, social and governance matters and, in
particular, further embedded the Sustainability Committee that was recently
established, further details of which can be found in the Sustainability Report on
pages 48 to 64.
Continued its support for the Community Foundation for Surrey.
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.
In FY2024, 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.
Approved the Company’s Modern Slavery Act Statement.
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 FY2024, the Board:
Maintained close relations with its main Shareholders through regular dialogue,
both after the publication of full-year and half-year results, and on an ad hoc basis.
Approved value-enhancing acquisitions, Silvertel (August 2023), 2J Antennas
(September 2023), Shape (January 2024), DTI (March 2024) and IKN (March 2024),
as well as the disposal of the Santon Solar business.
Consulted with Shareholders representing 70% of the Company’s issued share
capital in relation to the Remuneration Policy to be put to Shareholders at the
2024 Annual General Meeting.
Received investor relations updates at every Board meeting and direct feedback
from investors during specific consultation exercises 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 2024, held nine meetings. 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.
Strategic Report
47
discoverIE Group plc Innovative Electronics
SUSTAINABILITY REPORT
We have made
substantial progress
in addressing key
challenges, whilst
fostering sustainable
growth.”
Rosalind Kainyah
Chair of the Sustainability
Committee
Dear Shareholder,
Throughout the year, our sustainability
initiatives have continued to evolve,
guided by our purpose to create
innovative electronics that help to
improve the world and people’s lives,
and mindful of the broader economic
circumstances. We have made
substantial strides in addressing key
environmental and social challenges,
while fostering sustainable growth
in line with our Stakeholders’
expectations. As we reflect on the past
year’s achievements and challenges, I
am delighted to share with you some
key highlights of the progress we have
made in the past year:
•
We continued to make good
progress in reducing our carbon
emissions, with Scope 1 & 2
emissions 47% lower than the
CY2021 baseline.¹
•
Energy intensity for continuing
operations reduced 11% year-on-
year, despite three acquisitions in
CY2023. Now 72% of our electricity
is from renewable or clean sources,
compared to 67% in 2022.²
•
Significant progress was made
on ISO 45001 certification, with 13
more sites gaining accreditation.
60% of our workforce now work in
operations covered by this health
and safety standard, up from 48%
last year.
•
We introduced a new carbon
reporting system across the Group,
streamlining the data collection
process and providing enhanced
local and Group-wide reporting
capabilities.
•
We completed a more detailed
calculation of our Scope 3 emissions
and from that have been able to
confirm those areas that are most
material to the Group.
•
We have appointed our first
full-time dedicated ESG Manager.
While we are proud of these
accomplishments, we recognise that
there is always more work to be done
and our key priorities for the coming
year include the following:
•
We will continue to seek ways to
reduce our Scope 1 & 2 emissions
further, while refining our processes
for the collection of Scope 3
emissions data.
•
We will continue to develop plans
to reduce our Scope 3 emissions to
achieve both our near-term goals
(2030) and our longer-term target
of being fully net zero by 2040.
•
We will continue to work
towards ISO 45001 and ISO 14001
accreditations at a number of
our sites.
•
We will monitor the gender diversity
of our senior and operational
leadership teams closely, and
review opportunities to support
more women in senior roles.
One challenge we have is that
the electronic sector is typically
male-dominated at the senior
leadership level. This is also reflected
in the companies we acquire,
meaning that maintaining and
improving gender diversity is a
constant challenge as we buy more
businesses. Nonetheless, we will
continue to improve diversity of
all types where possible, fostering
a broad range of skills across our
international workforce.
•
Given the significant progress
made in achieving our initial range
of ESG targets, we will review our
ESG performance metrics and set
targets beyond 2025.
•
We will also continue to monitor
new and upcoming regulatory
developments, to ensure that
we are prepared for future
requirements.
SUSTAINABILITY REPORT
1
The CY2021 baseline and CY2022 reported
figures have been rebased to factor in emissions
from businesses acquired since CY2021. In
accordance with the Greenhouse Gas Protocol
(“GHG Protocol”) reporting standards, prior year
emissions from these acquisitions have been
assumed to be the same as emissions in the first
year of Group ownership.
2 The reported CY2022 figure in last year’s Annual
Report was 58%. In calculating that figure, where
a site had a mix of energy sources with some
from zero emission sources and the rest from
fossil fuel sources, the whole site was treated as
using fossil fuel. This year the figures have been
calculated to more accurately reflect the energy
mix, factoring in the renewable or clean sources.
48
Annual Report and Accounts for the year ended 31 March 2024
In FY2023, we conducted a detailed
scenario analysis of climate change and
its impact on our business model and
strategy, and reported in accordance
with the recommended disclosures
of the Task Force for Climate-related
Financial Disclosures (“TCFD”). Details
of that analysis can be found on pages
66 to 86 of the 2023 Annual Report.
We concluded that climate-related
risks are immaterial to the Group
and the Group’s business model
remains resilient. We carried out an
interim reassessment of our climate
risk analysis in early 2024, including
for newly-acquired companies. This
assessment reassured us that there
has been no material change in the
climate-related risk profile of the Group.
However, we also recognise that climate
change remains a threat to the Group’s
assets in the long term and that there
are growing expectations among our
stakeholders that we, as a responsible
corporate citizen, address all identified
climate risks in our business operations.
As such, we have incorporated
climate-related risks into our principal
risks and uncertainties and manage
them as such. Further details of how
we assess and manage climate-related
risks and opportunities can be found
in our TCFD Report on pages 67 to 83
of the 2023 Annual Report. A summary
of the TCFD Report can be found on
pages 65 to 70 of this Annual Report
and Accounts.
Although the Group has made very
good progress in its various sustainability
initiatives, we are aware that there are
areas where our impact and processes
could be improved. For example:
•
As noted above, we will continue
to work on our plans for tackling
Scope 3 emissions.
•
While a number of our businesses
are trying to increase the level
of recycled materials used in
operations, especially for items such
as packaging, our products still
typically require virgin raw materials
in their manufacture. This usually
derives from customer concerns
related to product safety and
performance requirements. This
is a classic example of potentially
conflicting ESG drivers – with
resource use on the one hand,
and safety and performance on
the other. We cannot solve this
dilemma alone and will continue
working with customers and
suppliers to improve our collective
performance in this area.
Sustainability is an exciting and
fast-moving area. We continue
to prepare ourselves to meet the
challenges it brings and to address the
opportunities it presents. I am confident
that our strong foundation, dedicated
team, and strategic focus will enable us
to navigate the evolving sustainability
landscape and drive both sustainable
growth and value creation for all our
stakeholders.
The Board
Ultimate responsibility for all Group operations, including sustainability
Sustainability Governance Framework
While the Board has responsibility for overseeing our approach to sustainability, the Sustainability Committee is specifically
dedicated to more detailed consideration of sustainability strategies and policies, and oversees and monitors practices and
performance throughout the organisation. This is complemented by our wider governance structure as outlined in the
diagram below. For further details, please also see page 68 of the TCFD Report in the 2023 Annual Report.
Group
Management
Committee
Sustainability
Committee
Remuneration
Committee
Audit & Risk
Committee
Divisional
Management
Group
Sustainability
Team
Operating
Company
Management
Risk & Internal
Audit functions
Key
Reporting line
Collaboration
Strategic Report
49
discoverIE Group plc Innovative Electronics
SUSTAINABILITY REPORT continued
As well as the general governance structures in place, discoverIE has a range of policies that it expects all of its businesses to
adhere to. These include the following (all available at www.discoverIEplc.com):
Policy
Comment
Anti-Bribery &
Corruption Policy
■
The Group has a zero tolerance approach to bribery, fraud and corruption
matters and this is reflected in our Policy (which has been translated into all
of the Group’s predominant languages) and is supported through our global
training programme.
Board Diversity Policy
■
The Board adopted its first Diversity Policy in May 2021 and updated it in June
2022, with revised targets in line with latest guidance.
Business Ethics Policy
■
discoverIE is committed to strong ethical values and good corporate practice
and aims to conduct its operations on sound business principles with trust,
honesty and integrity. This Policy provides a summary of those principles.
Conflict Minerals Policy
■
This Policy seeks to ensure that none of the Group’s operations are exposed to
sourcing conflict minerals anywhere in its operations.
Environmental Policy
■
This Policy summarises the Group’s overall environmental objectives and focus.
Human Rights Policy
■
Respect for the well-being of all people, staff, customers, suppliers and other
stakeholders alike is at the core of who we are and how we work. Treating
people fairly, with dignity and respect is essential to our long-term success.
Modern Slavery Statement
■
discoverIE is committed to ensuring that no forms of modern slavery exist in its
business operations or supply chains.
Supplier Code of Conduct
■
This Code defines the Group’s basic requirements of suppliers, and in
particular their responsibilities to their stakeholders and the environment.
Sustainability Policy
■
This Policy outlines the Group’s commitment and priorities on matters
considered important for the Group’s long-term sustainability.
Group Tax Strategy
■
We seek to minimise exposure to material tax risk, ensure that tax affairs
are managed efficiently, comply with tax laws in all jurisdictions and avoid
aggressive tax planning.
Whistleblowing Policy
■
The Group encourages a “speak up” culture at all levels, if any kind of risk exists
or wrongdoing (such as fraud, bribery or improper conduct of any kind) has
occurred. A secure and confidential hotline to an independent third party is
provided and has been made available and advertised to staff at all Group
locations.
50
Annual Report and Accounts for the year ended 31 March 2024
Strategic Report
51
discoverIE Group plc Innovative Electronics
Key
Medical
Industrial &
Connectivity
Renewable energy
Transportation
Sustainability is an integral part of our business. We create a positive impact on the
world around us and people’s lives through both our products and our operations.
By creating innovative electronics and focusing on four target markets – renewable
energy, transportation, medical, and industrial & connectivity - we contribute to the
UN Sustainable Development Goals (“SDGs”). In FY2024, 75% of the Group’s revenue
was from the four UN SDG-aligned target markets.
Ensure healthy lives and
promote well-being for all
ages
Ensure access to affordable,
reliable, sustainable and
modern energy for all
How our products create
positive impacts
We design and make products that
go into medical devices and systems,
such as ultrasound machines and
defibrillators, contributing directly to
the health and well-being of people.
The Group’s sensing products
are used in environmental
management systems, such as
indoor temperature monitoring
and water treatment plants.
How our products create
positive impacts
Renewable energy is a target market
for both our magnetics and sensing
products. We provide transformers,
switches and sensors for wind
and solar systems, supporting the
generation and distribution of
renewable and clean energy.
Our products are versatile and can
be adapted for other types of
renewable energy.
Applicable markets
Applicable markets
How our operations create
positive impacts
It is our responsibility to ensure that
our employees operate in safe and
healthy working environment. Each
of our operating businesses conducts
health and safety refresher training
every year. See page 58 and 64 for
health and safety performance.
We have flexible and hybrid working,
which helps our employees achieve a
better work-life balance. Our trained
mental health first aiders provide
support to colleagues on sites.
How our operations create
positive impacts
We support the growth of renewable
energy generation by switching
to renewable energy tariffs where
possible. Higher demand leads to
more investment.
Where economically appropriate,
we invest in renewable energy
self-generation, such as installing
rooftop solar panels. The solar
systems installed in our plants in
Sri Lanka and Thailand in the last
two years have contributed to our
overall renewable energy generation
capacity and provided over 1.5 million
kWh of electricity in 2023.
HOW WE CREATE
POSITIVE IMPACTS
52
Annual Report and Accounts for the year ended 31 March 2024
Build resilient infrastructure,
promote inclusive and
sustainable industrialisation
and foster innovation
Make cities and human
settlements inclusive, safe,
resilient and sustainable
Take urgent action to combat
climate change and its
impacts
How our products create
positive impacts
We supply connectivity solutions
to infrastructure that underpins
the ‘Internet of Things’ (“IoT”),
enables industrial automation and
digitalisation, and brings people and
communities together.
Our sensing and connectivity
products are used to improve the
resilience of infrastructure, such as
road bridges and railways.
How our products create
positive impacts
Our products play a crucial role in
the electrification of transportation
and energy efficiency. We provide
charging solutions for electric
vehicles and power solutions for mass
transport, such as trains and e-buses,
helping to reduce the use of fossil
fuels. Our magnetics products are
used in the distribution of renewable
energy.
Our connectivity solutions enable
people to connect with one another,
building communities and making
them more inclusive.
How our products create
positive impacts
We design products that are more
energy efficient and less harmful to
the environment than the ones they
replace.
Our focus on products that
reduce carbon emissions, aiding
electrification, automation and
improving efficiency, assists in
combating climate change.
Applicable markets
Applicable markets
Applicable markets
How our operations create
positive impacts
We are an electronic engineering
company and we design and create
innovative electronics that help to
improve the world and people’s lives.
Our engineers work with our
suppliers and customers to create
innovative solutions that solve
technical challenges. Our product
knowledge and technical know-how
enable us to create products for
industrial applications that contribute
to resilient infrastructure.
How our operations create
positive impacts
We are a global company but a local
operator. Our operating businesses
and employees have a strong
connection to the communities in
which they operate. Through our
operating businesses, we create
jobs and contribute to the social
and economic well-being of the
communities through tax revenues,
donations and volunteering.
How our operations create
positive impacts
We play our part in tackling climate
change by reducing carbon
emissions. Our net zero plans set
out our commitment to reduce
emissions to net zero within our
operations (Scope 1 & 2) by 2030,
and within our value chain (Scope 3)
by 2040. See our carbon reduction
performance on pages 55 and 61.
We are also reducing resource
consumption, such as energy and
water, and recycling where possible
in our operations.
Strategic Report
53
discoverIE Group plc Innovative Electronics
Our sustainability strategy has three pillars: Our Planet,
Our People and Our Products, connected to the three aspects
of sustainability: environmental, social, and economic.
Our purpose is to create innovative electronics that help to improve the world and people’s lives, now and in the future.
Achieving our purpose and the long-term sustainability of our business requires a comprehensive approach.
Our products
We produce high-quality, reliable
products that bring considerable
benefits to customers and the
environment alike.
Our focus areas
Our products play a critical role in
the functioning of larger systems,
which have zero tolerance to failure.
We focus on product quality and
reliability, which are paramount to
our customers.
Our people
Our employees are our most
valuable asset. They are responsible
for developing innovative solutions,
creating high-quality products
and services, and building lasting
relationships with customers. Their
contribution is critical to achieving
our long-term success.
Our focus areas
We aim to maintain a positive and
diverse work environment that
fosters creativity, collaboration and
teamwork. In addition to ensuring
healthy and safe working conditions,
we also focus on investing in our
people through learning and
development to ensure employees
can grow and thrive.
Our planet
We understand the urgent need
to preserve our planet for future
generations and to mitigate the
impact of climate change. At
discoverIE, we contribute to the
transition to a low carbon economy
– through our products that help
others reduce their emissions,
and through our operations by
committing to become a net zero
emissions business.
Our focus areas
We focus on reducing greenhouse
gas emissions and energy intensity.
We aim to achieve SBTi-aligned net
zero emissions for Scope 1 & 2 by
2030 and for Scope 3 by 2040.
OUR SUSTAINABILITY STRATEGY
1
Like-for-like emissions restated for acquisitions
47%1
REDUCTION IN
SCOPE 1 & 2
EMISSIONS SINCE
CY2021
72%
OF ELECTRICITY
FROM RENEWABLE
OR CLEAN
SOURCES
60%
OF GLOBAL WORKFORCE
WORKING AT SITES
WITH ISO 45001
ACCREDITATION
98%
OF GROUP
PRODUCTS
MANUFACTURED
UNDER ISO 9001
54
Annual Report and Accounts for the year ended 31 March 2024
Greenhouse gas emissions
In November 2022, we announced
our commitment to achieve net zero
emissions and set science-based
targets for the medium and long
term. We report progress on our net
zero short-term targets against the
2021 baseline, restated to exclude
divestments and include acquisitions,
in accordance with the GHG Protocol.
We aim to achieve net zero emissions
for Scope 1 & 2 by 2030 and for Scope
3 by 2040 and have published a
transition plan for net zero Scope 1 & 2
emissions by 2030. Further details of
our net zero plan can be found at:
https://discoverieplc.com/sustainability/
our-net-zero-commitment/default.aspx
Our net zero plan for Scope 1 & 2
focuses primarily on addressing four of
the Group’s largest emission sources:
electricity, natural gas, company cars
and refrigerants, and aims to achieve
an absolute reduction of 65% by 2025
against the 2021 baseline.
Further details of how we performed
last year can be found in the Key
metrics section on page 61.
We continue to make good progress
in reducing our Scope 1 & 2 emissions
across the Group, as outlined above. Key
elements in achieving reductions to
date include investment in heat pumps
at our Myrra facility in Poland and at
Foss in Norway, and in solar panels at
our manufacturing plants in Thailand
and Sri Lanka. We are considering
future investments in solar panels at
other sites, such as India, China and
Mexico. Where available, we have also
switched our sites’ electricity supplies
to renewable energy sources. CY2023
emissions were 47% lower than CY2021
(further details on page 61).
Our like-for-like natural gas emissions
were 26% lower than CY2021. We have
achieved this by taking the opportunity
to move away from gas heating where
we have relocated premises, such as
MTC in Germany and Positek in the UK.
Through energy audits and increased
awareness, we have also achieved more
modest reductions at other sites. We
have started investigating alternative
technologies at sites where natural
gas is still the main source of heating
and will consider these based on a cost
benefit analysis, prioritising those sites
with the greatest impact and strongest
business case.
This year, we enhanced our efforts
to identify and calculate Scope
3 emissions. To support this, we
engaged a carbon reporting specialist
provider to collect operational data
and calculate the resulting emissions.
The exercise covered the entire Group
(100% of all Group companies) and
included as many of the sub-categories
within Scope 3 of the GHG Protocol
methodology as possible. We will
continue to refine our processes and
methodology and develop our future
reduction plans. More information on
our Scope 3 emissions can be found on
pages 62 to 63.
Our progress
■
In CY2023, we reduced Scope 1 & 2 emissions by 47%
compared to the CY2021 baseline
■
72% of the Group’s electricity is now sourced from
renewable or clean sources
■
40% of the vehicles in our car fleet are now electric
or hybrid
■
In CY2023, natural gas emissions were 26% lower than
the CY2021 baseline
■
In CY2023, energy intensity was 30% lower than CY2021
■
81% of operations have now completed an energy audit,
achieving our target two years ahead of plan
■
69% of revenue is generated by operations with ISO 14001
certification
Our planet
At discoverIE, we contribute to the transition to a
low-carbon economy through our products that help
others reduce their emissions, and through our operations
by committing to become a net zero emissions business.
We understand the urgent need to preserve our planet for future generations and
to mitigate the impact of climate change.
SUSTAINABILITY IN ACTION
Our targets
■
Reduce Scope 1 & 2 emissions by 65% by 2025 against
CY2021 baseline and to net zero by 2030
■
Source 80% of energy from zero emission sources by
2025, and 100% by 2030
■
50% electric vehicles in the company car fleet by 2025 and
100% by 2030
■
Replace at least 90% of gas heating with lower emission
alternatives by 2029
■
Reduce energy intensity by 10% by 2030
■
80% of operations to have completed an energy audit
by 2025
■
80% of revenue covered by ISO 14001 certification
Strategic Report
55
discoverIE Group plc Innovative Electronics
SUSTAINABILITY IN ACTION continued
Use of resources
Energy usage
Energy consumption during CY2023
was 6% lower, despite acquisitions and
strong manufacturing output. Energy
intensity for continuing operations
decreased by 11% in CY2023 compared
to CY2022 and by 30% compared to
CY2021. This is well ahead of our target
to reduce consumption by 10% by 2030.
Most sites have implemented energy
saving measures, such as replacing
lighting with energy efficient LED
or fluorescent alternatives and by
installing motion sensors.
81%¹ of our sites have now completed
an energy audit, thereby achieving
our 2025 target two years ahead
of plan. The audits provide energy
saving recommendations, which
are considered and prioritised as
appropriate.
Water usage
Our production processes typically
require no or very little water. The water
used is mainly for cooling purposes,
in which the water is recycled, and
for sanitary and drinking purposes.
Therefore, the risk of water scarcity is
not a material concern for the Group.
However, we also recognise that water
is a finite resource and reducing water
consumption is an essential step in
preserving the environment. Several
sites use water-efficient equipment,
such as low-flow toilets and sensor
taps. We will continue work to increase
awareness and promote water saving
practices throughout the Group.
Waste management
We take measures to minimise waste
in the manufacture of products, use
recycling options where available and
reduce packaging.
The majority of our products are
non-hazardous. Where hazardous
items are involved, environmental risks
are minimised by use of appropriate
labelling and technical information,
in conjunction with training and
procedures for handling, storage
and disposal.
As an electronic and electrical
manufacturer, we follow all relevant
laws and regulations, including the
following laws governing electronic
waste handling, storage and disposal:
■
Restriction of the Use of Hazardous
Substances in Electrical and
Electronic Equipment Regulations
2004 (“RoHS”)
■
Waste Electrical and Electronic
Equipment Regulations 2006
(“WEEE”)
■
Producer Responsibility
Obligations (Packaging Waste)
Regulations 2005
■
Waste Batteries and Accumulators
Regulations 2009
Whilst plastic packaging is often
necessary for protecting sensitive
electronic components, discoverIE
is committed to managing its use of
plastics in a responsible and sustainable
manner. One way that many of
our businesses do this is by using
recycled and recyclable plastics, where
appropriate. Additionally, we are actively
working to replace foam packaging
with more environmentally friendly
and recyclable options. By taking steps
to reduce our use of non-recyclable
materials, we are helping to reduce our
environmental footprint and promote
more sustainable business practices.
ISO 14001 accreditation
The ISO 14001 (Environmental
Management System) accreditation is
an internationally recognised standard
that sets out certain requirements for
environmental management. It helps
organisations improve environmental
performance through more efficient
use of resources and reduction of waste
and provides an objective, independent
view of an organisation’s environmental
credentials.
Thirteen further sites achieved ISO
14001 accreditation in CY2023. Sites
generating 69% of Group revenue
are now ISO 14001 certified (CY2022:
59%). This certification is becoming
more important as customers place
increasing focus on the environmental
credentials of their value chain. Our
aim is for two more sites to achieve this
accreditation by 2025.
There were no fines relating to
environmental non-compliance during
the year or the previous three years.
1
Excludes businesses acquired during FY2024.
Case Study
New sustainable building for MTC
In September 2023, Germany-based MTC
Micro Tech Components GmbH moved
into a newly-built office and logistics
facility. The move marked a significant
milestone for MTC, reflecting its strong
growth over the last few years.
The new building not only doubles the
space available for current and future
employees but also aligns with our
focus on sustainability and resource
conservation.
■
Energy is supplied exclusively from
renewable sources
■
Solar panels ensure the building is
self-sufficient in electricity
■
Heating is provided by a carbon
neutral biomass pellet heating system
■
Charging points for electric vehicles
and e-bikes are available in front of
the building
The office area requires only 67% of
the energy typically required for a new
building of its type, while the warehouse
requires less than 30%.
The new building also caters for the
enhanced well-being of colleagues, with
flexible working spaces encouraging
collaboration and fostering a pleasant
and open working environment.
Employees who live locally are
encouraged to cycle to work or use
e-bikes.
56
Annual Report and Accounts for the year ended 31 March 2024
Our People
Our employees are highly valued, and we are committed
to creating a supportive and inclusive workplace culture
that promotes employee engagement, development
and retention.
Our culture
At discoverIE, we believe that a strong
culture is key to achieving our mission
and supporting our values. Our culture is
built on a foundation of respect, fairness,
and equality. We are committed to
creating an inclusive workplace where
everyone feels valued and empowered
to contribute their best work.
Our culture is characterised by:
Diligence and determination:
We are dedicated to our work and
take pride in delivering high-quality
products and services to our customers.
Customer-centricity:
We prioritise our customers’ needs
and work closely with them to develop
innovative solutions that meet their
requirements.
Respect, fairness, and courtesy:
We treat our colleagues with respect,
fairness, and courtesy, recognising that
everyone’s contributions are important
to our success.
Open and constructive
communication:
We believe in open and honest
communication, with a willingness
to listen and consider different
perspectives.
Diversity and inclusion:
We value diversity and strive to create
an open and inclusive environment
where everyone has an equal
opportunity to succeed.
High performance and target-driven:
We are go-getters, driven by a desire to
achieve excellence in everything we do.
Diversity and inclusion
We are committed to creating an
inclusive and welcoming environment
for all our employees. We believe that
diversity is a strength and that everyone
should be treated with respect, dignity
and fairness. We are dedicated to
providing equal opportunities for all
individuals, regardless of their gender,
race/ethnicity, social background,
religion, sexual orientation, family
responsibilities, disabilities, political
opinion, age, sensitive medical
condition or trade union membership.
We aim to foster a culture that values
diversity and inclusion, where everyone
feels respected, empowered and
appropriately rewarded.
Our employment policies are fair,
equitable and consistent with the skills
and abilities of our employees and the
needs of our businesses. Our policies
aim to ensure that everyone is accorded
equal opportunity for recruitment,
training and promotion. We do not
tolerate any form of discrimination,
harassment or bias in the workplace,
whether it be sexual, physical or mental.
We recognise that diverse perspectives
and backgrounds are essential to
driving innovation, creativity and
growth in our business. Therefore,
we are committed to improving
the diversity of our workforce and
management team by promoting
within and proactively managing our
recruitment process.
Our Board Diversity Policy sets out our
aim to achieve a Board that is diverse,
not only in gender and race, but also in
cultural background, experience and
expertise. Our Board Diversity Policy
can be found on our website:
www.discoverIEplc.com. See pages
64 and 98 for further details of our
diversity.
Our progress
■
In the year, the ratio of health and safety
representatives to employees improved from 1:21
to 1:20
■
Thirteen more sites achieved ISO 45001 certification,
bringing the total number of employees covered to
60% of the workforce
■
43% of the Board are female
Our targets
■
Maintain a health and safety representative to
employee ratio of at least 1:50
■
80% of workforce in operations certified with ISO
45001 by 2025
■
40% of the Board are female
Strategic Report
57
discoverIE Group plc Innovative Electronics
SUSTAINABILITY IN ACTION continued
With three female Non-Executive
Directors and one Non-Executive
Director from a non-white ethnic
minority background, we continue
to meet our target of 40% female
representation at Board level and to
meet our target of having at least
one person from a non-white ethnic
minority background on the Board.
The gender diversity of the Group
Management Committee shifted away
from female representation slightly
during the year. This was due to one
member taking maternity leave and
choosing to return in a more flexible
projects-based role, to better fit with
her family life. Her replacement was
a male colleague who has developed
his career at discoverIE over the last
four years, having joined the Group on
secondment in 2020.
Health and safety
We aim to provide healthy and safe
working conditions. In addition to
compliance with local regulations,
discoverIE promotes working practices
that protect the health, safety and
well-being of its employees and other
persons who enter its premises.
During CY2023, the number of health
and safety representatives we have as a
Group increased by 3% to 236 (CY2022:
229), across our c.4,500 employees. This
gave a health and safety representative
to employee ratio of 1:20, a small
improvement on CY2022 and well
ahead of our target of maintaining a
ratio of at least 1:50. We also continued
to emphasise the importance of health
and safety training, conducting over
16,500 hours of training across the
Group, equivalent to more than three
hours per employee. These actions
had a positive impact on our Lost Time
Incident Frequency Rate (“LTIFR”), and
we are pleased to report that both
this and the number of work-related
incidents resulting in the loss of five or
more work days decreased, despite new
acquisitions.
Thirteen sites achieved ISO 45001
(Occupational Health and Safety
Management System) accreditation
in the year. This means that 60% of
the Group’s workforce now work in
operations with the accreditation,
up from 48% previously.
There have been no work-related
fatalities in the last five years.
Learning and development
Our businesses are proactive in
anticipating both short and long-
term employment needs and skills
requirements. All employees are
encouraged to actively engage in
their career development and training
opportunities are available across the
Group. We provide technical training to
our employees, as relevant for their role.
This is scheduled and tracked.
Some of our operating businesses
have structured apprenticeship and
graduate schemes. In late 2023, we
partnered with the University of Surrey
on a student placements scheme, with
a focus on engineering and science.
Subsequently, we launched a pilot
programme in the UK, with the first
electronics engineering placements
starting in July 2024.
Our 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.
During the past 12 months, we
launched two Group-wide initiatives to
support the learning and development
of our employees. First, we started a
series of webinars in October 2023,
covering a variety of topics, such as a
technology deep dive, greenhouse gas
emissions management, marketing
and finance. The aim is to encourage
knowledge and best practice sharing
across the Group. Secondly, we
launched an online learning and
development platform, which enables
our operating businesses to manage
their talent development and skill gaps,
and our employees to take control
of their learning experience. Three
operating businesses are currently
undertaking a 12-month trial. The vast
majority of employees receive annual
performance appraisals, which include
identifying their development needs.
Recruitment and retention
Clear, fair and competitive terms of
employment 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. Each operating business is
encouraged to maintain effective
employee engagement arrangements,
including keeping employees aware
of the financial and economic factors
affecting their employing company’s
performance. Please see pages 90 to 93
for further details of our engagement.
We remain 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 in the same
or an alternative position wherever
practicable, and to provide appropriate
training and support to achieve
this aim.
We are committed to retaining our
talented and skilled workforce. We
achieve this by offering clear and fair
terms of employment, a competitive
remuneration policy and regular
communication with our employees on
major matters. Our voluntary employee
turnover in FY2024 reduced to 9%.
Community engagement
We value community engagement
and strive to be an active participant
in the local communities where we
operate. We support local good causes
by offering opportunities for employees
to volunteer and through charitable
donations (no donations are made to
political causes). Our commitment
to community engagement is
highlighted by the Group’s support of
the Community Foundation for Surrey
and other employee volunteering
opportunities.
As well as supporting the causes
themselves, initiatives such as these
motivate employees and increase
their sense of purpose in working for
an organisation that is keen to play a
positive role in society.
58
Annual Report and Accounts for the year ended 31 March 2024
Noratel Knowledge and Communication
Recognising the benefits of effective
employee engagement and knowledge
sharing among its global workforce,
Noratel has taken further steps to
improve employee communication,
learning and development over the
last 18 months. The team has built
upon employees’ desire for knowledge-
sharing to create the foundations of a
community of experts able to support
their colleagues.
Building on its “One Noratel” culture
and their core values of Passion,
Accountability, Care, Teamwork and
Excellence, the Noratel team has
created a range of communication and
training tools available to its employees.
Starting with “TechTalk”, an informal
engineering forum which allows
employees from across the group to
discuss specific business challenges
and gain insights from their peers in
an open and supportive environment,
the initiative has expanded rapidly. The
platform was used to host a session
of the Female Engineering Forum on
International Women’s Day, discussing
the challenges and rewards of a career
in engineering for women, attended by
both male and female colleagues.
The “Quick Learns” programme,
where employees are invited to
share knowledge and skills over
interactive webinars on a range of
topics, ranging from mental health to
management systems, has proven to
be a great success. Volunteers are given
guidance and training to help them
communicate more effectively.
Mindful of Noratel’s core competency
as a specialised design and engineering
business, the team has also launched
“Noratel University”, where employees
can sign up to a structured course to
deep dive into key technologies with
the aim to improve knowledge across
the business. Tutors are selected from
global engineering teams through
an analysis of their respective skills,
and given training to empower
them to share their skills, knowledge
and experience with colleagues.
To date, over 70 employees from
across Noratel’s global footprint have
benefited from gaining a deeper
understanding of the company’s core
technologies.
Case Study
Strategic Report
59
discoverIE Group plc Innovative Electronics
SUSTAINABILITY IN ACTION continued
Product responsibility
Our products are essential components
of electrical systems and electronic
devices, and play a critical role in the
functioning of larger systems, which
tend to have long lifespans. Quality
and reliability are paramount to our
customers. In addition to designing
for durability, the high quality and
standards of our products are ensured
and monitored through rigorous
testing, which is often above the
requirements of our customers, and
the adoption of ISO 9001 Quality
Management Systems. As a result, the
overall rejection rates for our products
due to quality issues are negligible.
Product sustainability
The sustainability of our products is a
priority. We ensure raw materials used
are from responsible sources, which
are procured in accordance with the
principles in our Supplier Code of
Conduct, Modern Slavery Statement
and Conflict Minerals Policy (all are
available at www.discoverIEplc.com).
These are verified and monitored
through regular local checks and
supplier audits. In the event of
non-compliance, we would engage
with the supplier to seek measures
to rectify the non-compliance or seek
alternatives if appropriate. During the
year, we completed the third phase
of our Group-wide supplier audit
programme. Following the first and
second phases completed in FY2022
and FY2023 respectively, this takes the
overall proportion of Group suppliers
audited (measured by spend) up to 55%
over the last three years.
Our magnetic components use
raw materials, such as copper and
aluminium, which are essential to
electrical equipment. We design,
manufacture and deliver products
with sustainability in mind. Where it is
possible, and with customer permission,
recycled raw materials are used in
production processes. We also proactively
reduce and recycle packaging and
replace plastics with recyclable materials
such as paper and cardboard.
Our products are components that
are often embedded in larger systems,
which means that the likelihood of
replacements being required must be
minimised. As such, our products are
designed for long lifespans and are
intended to be energy efficient in order
to reduce downtime.
Our Products
The Group produces high-quality, reliable products
that bring considerable benefits to customers and the
environment alike.
Our progress
■
In CY2023, 98% of the Group’s products, measured by
revenue, were manufactured under ISO 9001 Quality
Management Systems (CY2022: 92%)
Our targets
■
80% of Group products manufactured under ISO 9001
60
Annual Report and Accounts for the year ended 31 March 2024
Case Study
Noratel selected as Sustainability Supplier of
the Year
In September 2023, Noratel was awarded
Sustainability Supplier of the Year by
Siemens, a global pioneer in sustainability
and innovation. Siemens is a major
customer of Noratel.
Grégory Malherbe, CEO of Noratel,
said, “This award is a testament to
our unwavering commitment to
environmental responsibility and our
relentless pursuit of excellence in all
aspects of our operations. It is truly
an honour to be acknowledged by
Siemens for our sustainability efforts. We
recognise that we all share responsibility
for the well-being of current and future
generations. It is one of our core values
at Noratel that with a customer-first
mindset, we strive for excellence in
everything we do.”
Based in Norway, with operations across
three continents, Noratel designs and
manufactures magnetic components
for industrial applications, such as
MRI scanners and wind turbines. This
award affirms Noratel’s position as a
leading advocate for sustainability and
recognises its contribution to a greener,
more sustainable future.
Key metrics
Carbon emissions
During 2023, we invested in a new carbon emissions data capture and calculation tool. To ensure consistency with prior year
data, we used the tool to verify and recalculate CY2021 and CY2022 emissions. Some small differences to previously reported
figures were identified as a result, amounting to a 145 tCO₂e increase in the Scope 1 & 2 total for CY2021 and a 285 tCO₂e increase
for CY2022. During this exercise, we also became aware of an error in the Scope 2 emissions of our subsidiary Beacon, which had
been understated by 350 tCO₂e in CY2021 and 390 tCO₂e in CY2022. This error has been rectified in the prior years’ figures below.
Total Emissions¹ (tonnes)
Like-for-like Emissions² (tonnes)
Location-based
CY2021
CY2022
CY2023
CY2021
CY2022
CY2023
Scope 1
1,488
1,338
1,606
1,704
1,514
1,606
Scope 2
9,365
8,710
6,736
9,477
8,792
6,736
Total Scope 1 & 2
10,853
10,048
8,342
11,181
10,306
8,342
Scope 3
–
–
196,879
–
–
196,879
Total emissions
–
–
205,221
–
–
205,221
Intensity – tCO2e / £m revenue (Scope 1 & 2)
30.73
23.49
18.61
29.22
22.69
18.61
Total Emissions¹ (tonnes)
Like-for-like Emissions² (tonnes)
Market-based
CY2021
CY2022
CY2023
CY2021
CY2022
CY2023
Scope 1
1,488
1,338
1,606
1,704
1,514
1,606
Scope 2
6,460
4,392
2,820
6,594
4,486
2,820
Total Scope 1 & 2
7,948
5,730
4,426
8,297
6,000
4,426
Reduction on CY2021
–
28%
44%
–
28%
47%
Scope 3
–
–
196,879
–
–
196,879
Total emissions
–
–
201,305
–
–
201,305
Intensity – tCO2e / £m revenue (Scope 1 & 2)
22.50
13.39
9.88
21.68
13.21
9.88
Total Emissions¹ (tonnes)
Like-for-like Emissions² (tonnes)
Market-based
CY2021
CY2022
CY2023
CY2021
CY2022
CY2023
Energy consumption (kWh)
25,575,035
24,117,547
22,577,592
26,971,017
25,291,981
22,577,592
Energy intensity (kWh/£m revenue)
72,406
56,379
50,367
70,486
55,689
50,367
UK based energy consumption3
7.2%
8.9%
10.1%
N/A
N/A
N/A
1
The “Total Emissions” columns include all continuing operations owned by the Group as at the end of each calendar year. The discontinued operations Vertec SA
(disposed January 2022) and Acal BFi (disposed March 2022) are excluded from all figures.
2 “Like-for-like Emissions” include the assumed impact of emissions from companies acquired since 2021. In accordance with GHG Protocol guidance, historic
emissions for these companies are deemed to be the same in prior years as in the year of acquisition.
3 The energy consumption of our UK-based businesses as a percentage of our total Group power consumption.
Grégory Malherbe (CEO) and Remi-Brice
Magne (SVP North America) of Noratel at
the Siemens Supplier Sustainability Day
Strategic Report
61
discoverIE Group plc Innovative Electronics
SUSTAINABILITY IN ACTION continued
Scope 3
This year we completed our second
Group-wide exercise to capture
data on all Scope 3 emissions. The
exercise sought to cover the entire
Group (including new acquisitions),
and included as many of the Scope 3
sub-categories defined by the GHG
Protocol as possible. With the new
carbon data collection and calculation
tool, we were able to complete a more
detailed and comprehensive analysis
of Scope 3 emissions, a significant
improvement on last year’s exercise.
As well as a more comprehensive
data set, in certain sub-categories
we were able to include elements of
activity-based data, whereas last year
emissions were calculated almost
exclusively using spend-based data.
Despite the significant improvements
in processes already made, we are
aware that data collection in respect of
Scope 3 emissions is more challenging
for most businesses than for Scope 1 &
2. The Group will continue to take this
into account as our processes evolve in
future years.
Like Scope 1 & 2, Scope 3 emissions
were reported on a calendar year
basis, from 1 January to 31 December.
This differs from our financial year to
be consistent with previous emission
assessments.
There were two key elements to the
exercise in our second year:
■
To confirm the categories and
sub-categories that are most
relevant and material to the Group
■
To identify the challenges faced in
the accurate and comprehensive
collection of Scope 3 data and help
prepare the Group to complete this
more efficiently and systematically
in future.
A summary of the key findings is as
follows:
■
Our CY2023 Scope 3 emissions
were significantly higher than
those identified last year, at
c.196,879 tCO2e, comprising almost
98% of the Group’s total emissions
across all of Scope 1, 2 and 3
■
The largest category of Scope 3
emissions was from purchased
goods and services (Category
1), with that category alone
representing c.75% of total Scope 3
emissions
■
The second largest source of Scope
3 emissions was freight (Categories
4 and 9). This year we were able
to separate upstream (Category
4) and downstream (Category
9) emissions, an improvement
in process on the prior year.
Data collection for downstream
transportation poses a particular
challenge because the data is often
held by customers rather than the
Group. We will in future enhance
the data collection and accuracy
of intra-Group shipments and
customer distribution. Together
they comprise c.22% of total Scope
3 emissions
■
The third and fourth largest
sources were fuel- and energy-
related activities, and employee
commuting, each respectively at
c.1% of total Scope 3 emissions.
In terms of the methodology used to
calculate our Scope 3 emissions:
■
For Purchased Goods and Services
(Category 1), we enhanced our
analysis from last year, using a
variety of activity-based data where
available, particularly in using
the weights and quantities of
raw materials consumed. Where
quantity data was not available,
all other goods and services
purchased used spend-based
data relating to the type of goods
and materials purchased at a
generic level (for example, copper,
aluminium, plastics, paper, etc.).
That data was then processed by
our carbon emissions data capture
and calculation tool. This is in line
with the GHG Protocol reporting
methodology but is less accurate
than supplier-specific data (where
such data is available). It also relies
on the correct material codes
having been applied. We expect
our calculations to become more
established and accurate as we
continue to refine our methods
and processes in the coming years.
■
Transportation data was based on
weights carried, distances travelled
and mode of transportation used
where possible. Where such
data was not available, spend
on transportation was used to
calculate an assumed emissions
factor.
■
In the employee commuting
category, rather than figures
being calculated at an individual
employee level, each of our
operating businesses provided
estimates for both the “average”
employee journey to work via
each mode of transport and the
number of people using that mode
of transport. Whilst this data was
collected at an individual operating
business level, it nevertheless relies
on the estimation being reasonably
accurate.
The exercise has provided valuable
insight into the emissions in our value
chain. In particular, it has highlighted
where we should focus our efforts in
future, both in ensuring the accuracy
and completeness of the data collected
and also in terms of where to target
future emissions reductions.
We recognise that this is an iterative
process, and our methodology and
systems will be refined over time.
However, within the next 12 months,
we aim to:
■
Start upgrading our systems and
processes to enable this data to
be captured more accurately and
efficiently going forward
■
Complete the equivalent exercise
for our CY2024 Scope 3 emissions
■
Develop an SBTi-aligned reduction
plan for our Scope 3 emissions
Building on our existing plan to
achieve net zero emissions by 2030 for
our Scope 1 & 2 emissions, this work
will help us achieve our ultimate goal
of becoming a net zero emissions
business across all Scopes 1, 2 and 3
by 2040.
62
Annual Report and Accounts for the year ended 31 March 2024
A summary of each of the categories within Scope 3, and their relevance and materiality to us as a Group, is provided below:
Category
Description
Screening criteria
Percentage
of Scope 3
1
Purchased
goods and
services
Extraction, production, and
transportation of goods and services
purchased
Total Group spend or, where available, the
weight of goods purchased (which provides
a more accurate conversion)
74.8%
2
Capital goods
Extraction, production, and
transportation of capital goods
purchased
Partially captured this year and we intend to
assess more fully in future years
0.3%
3
Fuel- and
energy-related
activities
Extraction, production, and
transportation of purchased fuels and
energy that are not already accounted
for in Scope 1 & 2
a.
Scope 1 & 2 Well to Tank (“WTT”)
b. Transmission and distribution
c.
District heating distribution
1.1%
4
Upstream
transportation
and distribution
Transportation and distribution of
products and services purchased
Transport emissions of lorry, sea, air, and rail
freight purchased by the Group (excluding
those paid by customers or suppliers)
15.9%
5
Waste generated
in operations
Disposal and treatment of waste
generated in operations
0.0%
6
Business travel
Transportation of employees for
business-related activities in vehicles
not owned by the Group
Business travel in employee-owned cars,
hire cars, flights, taxis, rail journeys and
ferries
0.3%
7
Employee
commuting
Transportation of employees between
their homes and workplaces
Estimated by each operating business
1.1%
8
Upstream leased
assets
Operation of assets leased by the Group
that are not included in Scope 1 & 2
Not applicable
N/A
9
Downstream
transportation
and distribution
Transportation and distribution of
products sold by the Group
Transport emissions of lorry, sea, air, and rail
freight purchased by customers
6.5%
10
Processing of
sold products
Processing of intermediate products
sold by downstream companies
Our products can be used in a wide
variety of applications and typically form
a small part of the end product, which
together make this category difficult to
calculate. Once data collection for the other
categories is more established, the intention
is to reassess this category
–
11
Use of sold
products
End use of goods and services sold
See category 10 above
–
12
End-of-life
treatment of
sold products
Waste disposal and treatment of
products sold
See category 10 above
–
13
Downstream
leased assets
Operation of assets owned by the
Group and leased to other entities
The Group does not have leased assets
N/A
14
Franchises
Operation of franchises
The Group does not have franchises
N/A
15
Investments
Operation of investments
The Group is not involved in financial
investments
N/A
100%
Strategic Report
63
discoverIE Group plc Innovative Electronics
SUSTAINABILITY IN ACTION continued
Health and safety
Lost time incident frequency rate (“LTIFR”) information
FY21
FY22
FY23
FY24
Lost time incidents (“LTIs”)1
15
19
19
17
Average headcount2
4,269
4,522
4,863
4,441
LTIFR3
0.19
0.23
0.21
0.18
1
LTI or lost time incident is defined as a work-related incident resulting in the loss of five or more work days in the reported period.
2 Reported headcount includes all full-time and part-time employees and contractors.
3 LTIFR is the number of LTIs divided by the total work hours in the reported period, multiplying by 100,000 hours (representing the estimated number of working
hours in an employee’s work lifetime).
There were no fatalities among the Group’s employees or contractors during any of the four years stated above.
Gender Diversity3
Group Management
Committee
Senior Management1
Operational Management2
All Employees
FY24
(No.)
FY24
(%)
FY23
(%)
FY24
(No.)
FY24
(%)
FY23
(%)
FY24
(No.)
FY24
(%)
FY23
(%)
FY24
(No.)
FY24
(%)
FY23
(%)
Total
13
–
–
47
–
–
75
–
–
4,543
–
–
Male
10
77%
69%
34
72%
72%
50
66%
70%
2,357
52%
53%
Female
3
23%
31%
13
28%
28%
26
34%
30%
2,186
48%
47%
1
Senior Management is the Group Management Committee and Direct Reports.
2 Operational Management is the most senior managers in the Group’s operating businesses.
3 As at 31 March 2024.
As noted on page 58, the gender diversity of the Group Management Committee reduced during FY2024 due to one
member taking maternity leave and choosing to return in a more flexible projects-based role, to better fit with her family life,
and her replacement being a male colleague who has developed his career at discoverIE over the last three years, having
joined the Group on secondment in 2020.
Other ESG KPIs
2023
2024
2025
Target
Our Planet
ISO 14001 accreditation1
59%
69%
80%
Energy audits2
63%
81%
80%
Company cars (EV/hybrid)3
33%
40%
50%
Our People
ISO 45001 accreditation4
48%
60%
80%
Health and safety representatives5
1:21
1:20
1:50
Voluntary staff turnover6
10%
9%
<15%
Our Products
ISO 9001 accreditation7
92%
98%
80%
1
Measured as a percentage of Group revenue generated by operations with a ISO 14001 accreditation.
2 Measured as a percentage of the number of Group sites that have had an energy audit since 2018, excluding businesses acquired in CY2023.
3 Measured as the percentage of Group company cars that are electric or hybrid.
4 Measured as the percentage of the Group employees that work in operations covered by ISO 45001 accreditation.
5 Measured as the proportion of health and safety representatives to the overall number of employees.
6 Staff turnover is measured on a financial year basis (i.e., from 1 April to 31 March).
7 Measured as a percentage of Group revenue generated by operations with ISO 9001 accreditation.
Rosalind Kainyah
Chair of the Sustainability Committee
64
Annual Report and Accounts for the year ended 31 March 2024
SUMMARY DISCLOSURE AGAINST
TCFD RECOMMENDATIONS
We have continued to disclose in line with the FCA Listing Rules 9.8.6, the UK
Climate-Related Financial Disclosure Requirements (“CFD”) and the recommended
disclosures of the Taskforce for Climate-Related Financial Disclosures (“TCFD”). Being in
the electrical and electronic components sector, the Group follows the TCFD’s All Sector
Guidance in preparation of our report.
Climate-related risks and opportunities are routinely considered in our strategic and financial planning, operational
management, M&A and capital allocation decisions. The table below gives a high-level summary and further details are
available in the TCFD Report on pages 66 to 86 of our 2023 Annual Report. This is the same process as we follow for detailed
disclosure on other strategic considerations for our business, including risk, tax and social issues.
For more detailed information, please refer to the TCFD Report on our website at: www.discoverieplc.com/sustainability/
tcfd-report/
Governance
The Board’s role in oversight
Whilst the Board has responsibility for overseeing our approach to sustainability, the
Sustainability Committee, on behalf of the Board, reviews the Group’s sustainability
strategies and policies, and oversees and monitors practices and performance against
commitments and targets.
During FY2024, the Sustainability Committee met twice and climate change-related
matters were discussed by the Committee at both of these meetings, and it was also
an agenda item at six Board meetings. The Sustainability Committee reviewed each
key action of the Group’s three sustainability pillars and progress against our targets.
Management’s role in assessing
risks and opportunities
Together with the Group Risk and Internal Audit and Group Finance teams, the
Group Sustainability Team (“GST”) identifies and assesses climate-related risks and
opportunities, which are then reviewed and discussed by the General Management
Committee (“GMC”). Action plans to mitigate such risks are drawn up and agreed
upon by the GMC.
Identify persons or committees
responsible
The GST comprises members with sustainability, finance, legal and operations
experience, and is responsible for monitoring, reviewing, consolidating and reporting
the Group’s operating businesses’ progress on sustainability implementation. It
reports to the Sustainability Committee and the GMC. The GST drives sustainability
initiatives throughout the Group and works closely with divisional management and
individual operating businesses on implementing the Group’s sustainability strategy.
Strategy
Climate-related risks and
opportunities
We have identified and assessed 12 climate change-related risks, of which eight were
transition risks and four physical. Of these, we consider four transition risks and two
physical risks to be the most material, based on a combination of impact magnitude
and likelihood. We have also identified three climate-related opportunities.
Impact on our businesses,
strategy and financial planning
We have modelled the financial impact of these six most material risks and three
opportunities. Our assessment that climate-related risks pose a net neutral risk to
discoverIE’s financial position remains unchanged.
Resilience based on scenarios,
including a 2⁰C or lower
scenario
We assessed the emerging trends affecting the exposure of our physical assets to
climate-related risks in the medium (up to 2050) and long term (up to 2100) under
two scenarios: RCP 4.5 and RCP 8.5. RCP 4.5 is the current climate development
trajectory, and RCP 8.5 is the worst-case scenario trajectory. It is estimated that 35% of
the Group’s 64 facilities would be exposed to some sorts of physical risks, such as heat
stress, precipitation and river flood. A handful of sites were more vulnerable, the costs
of which were also factored into the financial impact model.
Details of mitigation actions,
planned or in place
We monitor the developing physical risks to our assets and have plans in place to
switch production to alternative sites, or move to new facilities where necessary.
Our focus on sustainable markets, such as renewable energy, and our alignment
to the UN Sustainable Development goals puts us in a good position to take
advantage of new opportunities. Our specialised durable products, and the long-term
relationships we foster with our customers, lends resilience to our business.
Strategic Report
65
discoverIE Group plc Innovative Electronics
SUMMARY DISCLOSURE AGAINST
TCFD RECOMMENDATIONS continued
Risk Management
Processes for identifying and
assessing climate-related risks
In identifying and assessing climate-related risks to the Group’s operations, assets and
reputation, we use primarily a top-down approach. Given the Group’s decentralised
structure, we consider this approach more appropriate for assessing climate-related
risks, particularly physical ones.
How we consider risks at
subsidiary level
We also take a bottom-up approach by factoring in the feedback from our operating
businesses where appropriate.
Processes for managing
climate-related risks
Action plans to mitigate any risks are managed and reported at Group level, whereas
the responsibility for implementing the plans is delegated to the management of the
operating businesses. The operating businesses report on ESG progress, including
carbon reduction actions, in quarterly business reviews chaired by the divisional heads.
How we integrate those
risks into our overall risk
management
Climate-related risks are managed as part of the Group risk management process,
alongside other strategic and operational risks and, as with all matters in the Group
Risk Register, these risks are reviewed annually. Climate-related risks and mitigation
progress are monitored by the Risk and Internal Audit team on an ongoing basis, which
updates the Audit and Risk Committee at each meeting.
Metrics and Targets
Greenhouse gas emissions
targets
In November 2022, we announced our commitment to achieve net zero emissions and
set science-based targets for the medium and long term. The net zero commitment
was a significant step up from our previous target.
We aim to achieve net zero emissions for Scope 1 & 2 by 2030 and for Scope 3 by 2040,
and have published a transition plan for net zero Scope 1 & 2 emissions by 2030.
Internal metrics
Our net zero strategy has three priorities: Reduce, Replace and Remove.
■
Reduce energy intensity across the Group
■
Replace higher carbon energy sources with lower or zero carbon options
■
Invest in removing emissions that cannot be replaced or reduced
Supplementary information can be found in the Road to Net Zero Emissions Report
on our website: www.discoverieplc.com/sustainability/our-net-zero-commitment/
default.aspx
Targets used to manage
climate-related risks and
opportunities and performance
against them
■
80% of Group sites to complete energy audits by the end of 2025
■
Reduce energy intensity by 10% by 2030
■
Install solar panels in Sri Lanka and Thailand
■
80% zero emission energy by 2025 and 100% by 2030
■
Replace 90% of gas heating with electric options
■
Replace 100% company-owned cars with fully electric vehicles by 2030
■
Remove all refrigerants by 2025 where feasible
■
Invest in carbon removal projects to remove residual emissions beyond 2030
Our performance against these targets can be found in the Key metrics section on
pages 61 and 64, and on page 55 (Our Planet), of the Sustainability Report.
66
Annual Report and Accounts for the year ended 31 March 2024
Climate-related risks and opportunities
We assess and report climate change-related transition risks and opportunities on the short- (up to three years), medium-
(three to seven years) and long- (more than seven years) term basis. For physical risks, we define short-term as the period up
to 2030, medium-term up to 2050 and long-term up to 2100. However, given the fast-changing and unpredictable nature
of economic and environmental conditions, we model the financial impact of the physical risks up to 2030 only. Having
identified 12 climate change-related risks, we prioritised them based on a combination of impact magnitude and likelihood,
then modelled the potential financial impact of the six risks – four transition risks and two physical risks – that had the highest
scores. We also identified and modelled the financial impact of three climate related opportunities. The results of the analysis
of all 12 risks are shown in the matrix below. A detailed description of the top six risks and three identified opportunities, and
our responses to them, follows on pages 68 to 70.
1
Capital markets shift investment to low-carbon activities
2
Changing customers’ preference to low emissions alternatives
3
New and emerging technologies substitute our customers’ existing products and services
4
Increased stakeholder concern or negative stakeholder feedback from lack of climate action plan
5
Increased energy costs due to increasing carbon taxes and alternative low emission energy sources
6
Increasing costs of commodity and raw materials
7
Increased borrowing costs
8
Mandatory environmental standards or requirements for existing products and services
9
Extreme weather events such as cyclones or floods
10
Changes in precipitation patterns and extreme variability in weather patterns
11
Gradual changes in key climate variables such as temperature, humidity and precipitation
12
Rising sea levels
Potential financial impact on the Group
Low
High
Medium
1
4
5
9
11
2
7
12
3
8
10
6
Probability
Low
High
Medium
Priority C
(low/medium)
Priority B
(medium/high)
Priority A
(high/very high)
Transition
risk
Physical
risk
Strategic Report
67
discoverIE Group plc Innovative Electronics
SUMMARY DISCLOSURE AGAINST
TCFD RECOMMENDATIONS continued
Climate-related risks and opportunities continued
Risk
Risk description
Our response
Our progress
Transition risks
1
Capital markets
shifting
investment
to low carbon
activities
Timeframe
Medium-long
term
Our growth strategy relies on
both organic sales generation
and acquisitions. Both require
capital investment. We may
need to raise additional funding
in the capital markets. The
shifting of investment to low
carbon or green activities may
impact our ability to raise capital
or increase our cost of capital,
in turn reducing our ability to
invest in the existing business or
acquire new businesses.
Our strategy focuses on
markets with structural,
sustainable growth,
such as renewable
energy, electrification of
transportation, industrial
automation and connectivity,
all of which support the
transition to a low-carbon
economy. Operationally,
we constantly work to
improve market perceptions
by providing timely and
transparent disclosures.
Our target market revenue
decreased slightly from 77%
in FY2023, but remains high
at 75%.
We have a strong pipeline of
design projects, with over 90%
of projects won in FY2024 being
in target markets.
Our MSCI ESG Research rating
was increased from A to AA in
July 2023.
2
Changing
customers’
preference to
low emissions
alternatives
Timeframe
Medium-long
term
The majority of our customers
are industrial OEMs. They may
adopt an aggressive approach to
reduce emissions in their value
chain. They may switch to low
emission versions of products
or suppliers, or be required to
change due to more stringent
legislation.
Our business model of
designing and manufacturing
customised electronics
means that we work closely
and collaboratively with our
customers. Our engineers
design products with
customers’ requirements
in mind, ensuring technical
compatibility as well as
environmental compliance.
We have set emission
reduction targets and made
good progress against these.
Reduced Group Scope 1 & 2
emissions by 47% against the
CY2021 baseline on a
like-for-like basis.
Thirteen more sites achieved
ISO 14001 environmental
management system
certification in the year, with
69% of CY2023 revenues being
from sites with ISO 14001.
3
New and
emerging
technologies
substitute our
customers’
existing products
and services
Timeframe
Short-long term
We supply to industrial OEMs. If
our customers’ existing products
and services become obsolete,
our ability to achieve growth well
above GDP may be impacted.
Our products are designed
and built on well-established
technologies that are
adaptable. They are applicable
to many industrial applications.
Our product and technologies
portfolio and customer base
are broad. We continue to
diversify our product and
customer base organically and
through acquisitions, reducing
our risk exposure.
Completed five more
acquisitions during the
year, Silvertel, 2J Antennas,
Shape, DTI and IKN. The
acquisitions expand the Group’s
technical reach through new
technologies such as
power-over-ethernet, and
consolidate our position in
existing specialisms, such as RF
and Wireless.
68
Annual Report and Accounts for the year ended 31 March 2024
Risk
Risk description
Our response
Our progress
6
Increasing costs
of commodity
and raw
materials
Timeframe
Short-long term
Prices of some raw materials,
such as copper and aluminium,
are expected to rise as supply
cannot meet rapid increases in
demand. Significant price rises
may cause customers to switch
to low cost suppliers. The raw
material shortage may impact
our ability to continue to supply
certain products.
Our products are designed
and customised for specific
applications and are
priced according to project
specifications and material
costs at that point in time,
which to some extent
protects the Group from price
fluctuation. Furthermore, our
products are designed into
applications and are often
protected by our design IP.
Our technical know-how and
reliable delivery engender
long-lasting customer
relationships.
Our supply chain is resilient, as
tested and proven during the
pandemic. We source materials
and components from multiple
suppliers where possible,
except for those specified by
customers.
We continue to engage with
our key suppliers locally, and
through the Group-wide
Supplier Audit Programme.
In CY2023, we purchased 72% of
our electricity from renewable
or clean sources.
Acute physical risks
9
Extreme weather
events such
as cyclones or
floods
Timeframe
Short-long term
Increased severity of extreme
weather events, such as
cyclones and floods, may disrupt
production activities and incur
higher operating costs.
The Group has 64 sites globally,
including 36 manufacturing
facilities across Asia, Europe
and North America. Some
production activities can
be transferred to other
locations to ensure business
continuity, if necessary. We
have experience in moving
manufacturing between sites
where circumstances require
us to do so.
We repeated the risk
assessment carried out in
FY2023 to include all newly-
acquired sites.
Chronic physical risks
11
Gradual changes
in key climate
variables such
as temperature,
humidity and
precipitation
Timeframe
Medium-long
term
Rising average temperature
causes heat stress, drought,
wildfires and changes in rainfall
patterns. Some of the Group’s
manufacturing sites are in
areas exposed to heat stress
and precipitation, and some are
at risk of rising sea levels. Our
workforce may be affected if the
average temperature continues
to rise. Our supply chain may
also be disrupted, causing delays
and cancellations.
Using the WTW Climate
Diagnostic Analytical
Tool, we have identified a
number of sites that may
be affected by changing
climate patterns in the next
30 to 80 years. The analysis
showed rising temperatures
and precipitation were likely
to impact a number of our
businesses.
External assessments were
carried out at four of the ten
sites deemed to be at medium
to high risk. This is in addition to
the two sites assessed in FY2023.
As the risks to property involved
are inherently long term, we
will continue to monitor the
situation year-by-year and take
further action if required in
future.
Strategic Report
69
discoverIE Group plc Innovative Electronics
Climate-related risks and opportunities continued
Opportunity
Opportunity description
Our response
Linked to strategy
1
Acceleration
of renewable
energy
Timeframe
Short – long term
Driven by decarbonisation and
increasing regulations, the
renewable energy market will
continue to grow in the business
as usual scenario (under which
no further efforts to reduce
emissions will be made), and
accelerate in the 2DS scenario
(in which emissions reductions
are consistent with limiting
global temperature increase to
2°C). The International Energy
Agency has estimated over half
of energy generated will be from
renewable sources by 2050.
Renewable energy is one of
our target markets, and we
are leading in the fields we
serve, such as transformers
for wind turbines and
sensors for solar systems. Our
products can also be applied
to other types of renewable
energy, such as hydro, which
will be an addition to our
existing renewable energy
exposure. Our broad range of
technologies is applicable to
many parts of the renewable
energy value chain. From
generation to transportation
and distribution, we will be
able to take advantage of
these opportunities.
SEE OUR STRATEGY
ON PAGES 16 and 17
2
Acceleration of
transportation
electrification
Timeframe
Short – long term
Decarbonisation and the
recent energy crisis have
driven the acceleration of the
electrification of transportation.
This is reflected both in
personal vehicles and mass
transportation infrastructure.
It is estimated that around
USD 1 trillion will be invested in
transportation by 2050 to meet
global net zero goals.
Transportation is one of the
major sources of carbon
emissions globally. Switching
to cleaner methods of
transportation is crucial for
meeting the net zero goals
of many governments. Being
one of the Group’s target
markets, we focus on mass
transportation, such as rail,
buses and ships, and specialist
vehicles such as delivery
trucks. We are targeting
retrofitting ageing systems
as well as developing new
applications. In addition, our
knowledge and know-how of
magnetic components will
enable us to take advantage of
growth in the electric vehicle
infrastructure market, such as
charging stations.
SEE OUR STRATEGY
ON PAGES 16 and 17
3
Acceleration
of plant and
machinery
automation
Timeframe
Medium – long
term
Climate change could reduce
productivity as the workforce
is impacted and production
disrupted. An increasing
number of companies will
look to automate processes
to improve efficiency and
productivity.
Industrial and connectivity
are our largest target markets.
Our fibre optic and wireless
connections and a broad
range of sensing capabilities,
essential for automation, will
enable us to continue growing
in this market.
SEE OUR STRATEGY
ON PAGE 16 AND 17
SUMMARY DISCLOSURE AGAINST
TCFD RECOMMENDATIONS continued
70
Annual Report and Accounts for the year ended 31 March 2024
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.
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,
GTS, Treasury, and Tax. This focuses on
monitoring and compliance with risk
and 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. All
audits conducted by the Group Internal
Audit function are completed on-
site. During FY2023/24, the team also
continued preparations for complying
with the revisions to the UK Corporate
Governance Code, specifically the need
for the Board to prepare a statement
on the effectiveness of internal controls.
Preparations during the year included
control pilots at Group businesses and
the roll-out of a revised Internal Controls
Manual to enhance the overall control
environment. 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.
The Group operates a decentralised
management model that 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 reviews
control environments across the Group.
In pursuing the Group strategy, 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 Management
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.
Board
■
Overall responsibility for corporate
strategy and risk management
■
Defines the Group’s appetite for risk
Divisional Management
■
Oversight and review of
operational risks
Group Functions
■
These include Finance,
Treasury, Risk, and Group
Technology Services (“GTS”),
and are responsible for
the integration of the risk
management framework
Group Internal Audit
■
Monitors compliance with
the Group’s internal controls
framework
■
Conducts or commissions
internal audits
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
Audit and Risk Committee
■
Reviews effectiveness of Group’s risk management framework
and internal controls
■
Oversees effectiveness of Group Internal Audit
Group Management 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
Sustainability Committee
■
Oversees the Group’s overall sustainability progress
■
Reviews climate-related risks and the Group’s response
Independent reporting line
Strategic Report
71
discoverIE Group plc Innovative Electronics
RISK MANAGEMENT continued
Risk profile
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 20 countries and no
single site represents more than 6%
of Group turnover or 14% of Group
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. In
FY2022, a Group-wide project was
completed to further enhance cyber
security controls across the Group’s
businesses by implementing
consistent web and end-point
security as well as introducing an
outsourced Security Operations
Centre (“SOC”) to monitor and
respond to IT security threats
24/7. This was further enhanced
in FY2023 with the establishment
of an external incident response
team to assist with any incidents
identified by the SOC. We
further enhanced these controls
during FY2024 by completing a
vulnerability scanning exercise
across a number of businesses. In
addition to the Group-wide security
controls, a revised Cyber Security
Framework, was rolled out to all
Group businesses during FY2024.
The framework has been designed
to further enhance the information
security controls at a business level.
■
The Group operates from over
50 separate sites so that, if an
incident were to occur at one
site, it would not directly affect
the other businesses within the
Group. Further, we have business
continuity arrangements in place
to identify where there is scope to
switch production between certain
sites if needed.
■
The Group has very limited
reliance on any single customer or
supplier, with the largest customer
representing approximately 7% of
revenue.
■
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.
Risk appetite
One of the Group’s core principles is
to deliver its strategic priorities in a
sustainable and responsible manner.
This requires that the Board gives careful
consideration to the nature and level of
risks that the Group should accept.
The Group 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
(Willing to take greater risk)
Risk Neutral
(Taking a balanced approach to risk)
Risk Averse
(Taking as little risk as possible)
■
Product innovation
■
Operating in new markets
■
Investment in facilities
■
Business development initiatives
■
Acquisitions and disposals
■
New customers and suppliers in
existing markets
■
Foreign exchange translational risk
■
Product safety
■
Health and safety
■
Cyber risks
■
Regulatory/covenant compliance
■
Foreign exchange transactional risk
■
Markets with greater business cyclicality
■
Environmental risks
Regardless of the appetite in respect of a particular risk, all risks are identified and managed in the appropriate manner.
72
Annual Report and Accounts for the year ended 31 March 2024
Enterprise risk management
discoverIE applies an Enterprise Risk Management framework to identify potential events or circumstances that may affect
the Group and to manage the associated existing and emerging risks. The risk management framework is made up of a
number of discrete steps to identify, assess, mitigate and monitor risks.
Step 1
Two processes are conducted in parallel:
■
A top-down review of the Group Risk Register to:
–
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
–
evaluate existing 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)
■
A bottom-up review by the management
of each business to:
–
identify new or emerging risks
–
assess changes to existing risks
–
consider the potential impact of risks
–
evaluate existing mitigating actions
and controls
–
consider residual risks (and if
appropriate the implementation of
further mitigating actions)
The top-down review of the Group Risk Register is conducted by the Group Risk team, Divisional
Management, Group Technology Services, and the internal Group Sustainability Team. The bottom-up review
is conducted by the management team within each business with support from the Risk team.
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:
–
increased assurance that all risks have been identified, with input from multiple perspectives
–
ensuring alignment between local management and Head Office
–
ensuring that businesses take ownership of the risks most relevant to their individual operating unit
–
ensuring that controls in place to mitigate risks at the operating unit level are appropriate
■
An assessment of any differences identified and update of the Group Risk Register as appropriate
Step 3
■
Review of the Group Risk Register by the Group Management 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 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
FY2024) is set out on pages 75 to 81.
Step 4
■
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
These 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 first half of the year
■
a comprehensive review of all risks within the Group Risk Register is completed shortly prior to the Group’s full-year
preliminary results announcement.
Strategic Report
73
discoverIE Group plc Innovative Electronics
RISK MANAGEMENT continued
The processes ultimately lead to the compilation of the Group’s principal risks and uncertainties (“PRUs”), of which further
detail can be found on pages 75 to 81.
The Group Risk function is continually looking to improve the Group’s Enterprise Risk Management framework. During
FY2024 the Group Risk function was subject to a maturity assessment, which assessed the effectiveness of the function
against recognised risk management standards, such as ISO 31000 and the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”) Internal Control - Integrated Framework. The aim of this exercise was to ensure the function
is best placed to manage the risks the Group currently faces and is effectively horizon scanning for new risks.
Objective:
foster a culture of
risk management
to effectively
execute discoverIE’s
sustainable strategy
Id
en
tif
y
a
nd
a
ss
es
s
in
te
rn
al
a
n
d
ex
te
rn
al
r
is
ks
D
et
er
mi
ne
a
pp
ro
pr
ia
te
ri
sk
r
es
po
ns
e
M
on
it
or
e
ff
ec
ti
ve
ne
ss
of
m
it
ig
ati
on
e
ff
or
ts
ac
co
u
nt
ab
ili
ty
, c
on
tr
ol
s,
Es
ta
bl
is
h
sy
st
e
m
s
a
n
d
po
li
ci
es
a
n
d
pr
oc
ed
ur
es
an
d
mi
ti
ga
ti
on
p
la
ns
C
o
m
m
un
ic
at
e
ri
sk
s
Impact
Increasing
Decreasing
Decreasing
Increasing
Likelihood
4
8
7
5
1
2
10
13
14
11
3
9
12
6
1
Instability in the economic environment
2
Business acquisition underperformance
3
Climate-related risks
4
Cyber security
5
Loss of key customers
6
Loss of key suppliers/supply
7
Technological changes
8
Major business disruption
9
Loss of key personnel
10
Product liability
11
Inventory obsolescence
12
Liquidity and debt covenants
13
Foreign currency
14
Non-compliance with legal and
regulatory requirements
KEY
Category of risk:
Strategic risk
Operational risk
Financial risk
Regulatory /
Compliance risk
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
above diagram provides a summary of the PRUs on
that basis.
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 Management 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.
A summary of this continual cycle of risk
identification, establishment of systems and
processes to mitigate, communication and ongoing
monitoring, is outlined in the diagram opposite.
74
Annual Report and Accounts for the year ended 31 March 2024
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 pages 82 and 83.
The numbering of the below risks does not represent the ranking of these risks by the Group.
Risk
description
Potential impact
Mitigating actions
Change in
the year
Strategic risk
1
Instability
in the
economic
environment
■
Risk of
decline in
financial
performance
due to
recession, or
geopolitical
changes
■
Reduction in sales
■
Lower margins
■
Closure of
factories and
suppliers stopping
production
■
Difficulty raising
equity and debt,
impacting ability to
acquire businesses
■
Market position as a
specialist supplier focused
on core target markets with
diversified locations and
product offerings
■
A long-term credit facility
is in place with significant
headroom
■
Careful monitoring of
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
■
Vigilance entering markets
that are politically or
financially unstable
■
Increased cost of
borrowing
■
Conflict in the
Middle East
■
Continued conflict in
Ukraine
Link to KSIs:
A B C
Link to KPIs:
1 2 3
4 5 6
2
Business
acquisition
under-
performance
■
A degree of
uncertainty
exists in
valuing
acquisitions
and
evaluating
potential
synergies
■
Post-
acquisition
risks arise
due to
change of
control and
integration
challenges
■
Failure
to deliver
targets from
business
plan
during first
three years
■
Financial
impact due to
underperformance
of acquisitions
■
Loss of key
employees and
their expertise
■
Expected synergies
are not realised
■
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 and management
personnel
■
Where possible, new
acquisitions become part
of a cluster reporting
operationally to an existing
established senior business
■
Dedicated staff managing
tailored onboarding process
for all new acquisitions
■
Acquisition assurance
programme put in place
by Group Internal Audit
Function to provide detailed
insight into progress made
in aligning businesses to
Group standards
■
A more uncertain
economic
environment
increases the risk of
underperformance
of acquired
businesses
■
Increased number
of acquisitions
and investment
in the year (five
acquisitions
for £83m)
Link to KSIs:
A B C
Link to KPIs:
1 2 3
4 5 6
Strategic Report
75
discoverIE Group plc Innovative Electronics
PRINCIPAL RISKS
AND UNCERTAINTIES continued
Risk description
Potential impact
Mitigating actions
Change in
the year
Strategic risk
3
Climate-
related
risks
■
Global warming
leads to greater
extremes of
weather events
and other local
issues, which
may cause
production
disruptions
and increase
operational costs
■
Rising
temperatures
and sea levels
may adversely
affect several of
the Group’s sites
■
Supply chains
are affected
by climate
change on their
operations
■
Our products or
other activities
or decisions
in relation
to climate-
related risks
may be judged
negatively
by external
stakeholders
■
Failure to
meet new
ESG reporting
requirements
due to unreliable
emission data
and/or resource
constraints
■
The operations
of Group
facilities are
affected by
the impact of
climate change
(e.g., through
weather
related events)
■
Reduced
revenue due to
components
and material
shortages
■
Increased
commodity
and raw
material costs
due to rapid
increase in
demand
and supply
shortages. This
may also lead
to reduced
sales as some
products
become less or
non-profitable
■
Reduced
sales due to
customer
revenues being
impacted by
climate-related
effects on their
businesses
■
Unable to raise
capital to fund
acquisitions
and/or
increased
finance
costs due to
reputational
impact and
deterioration
of relationships
with external
stakeholders
and staff
■
An assessment of the
physical risks of climate
change to the Group’s
facilities conducted
using the WTW Climate
Diagnostic analysis
concluded that such risks
are considered to be low
impact overall for the Group.
Those sites considered to
be at high physical risk are
insured for loss of revenue
for 18 months resulting from
climate-related disruptions.
See our 2023 Climate Report
for further details. The sites
acquired in FY2024 have
been assessed using similar
methodology and are
considered low risk
■
The Group has diverse
supply chains and the ability
to switch from individual
suppliers that encounter
issues. The agility of the
Group’s de-centralised
operating model enables us
to deal with supply issues
promptly and effectively
■
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
■
The Group has a
comprehensive plan to
reduce emissions within
its operations and has
committed to net zero
emissions for Scope 1 & 2 by
2030 and Scope 3 by 2040
■
ESG matters are discussed
at all meetings of the Board,
Sustainability Committee
and Group Management
Committee, to ensure
that the right activities
are being prioritised and
implemented. ESG targets
are established at a Group
and operating company
level to ensure effective
management of ESG
matters
■
Good progress made
against Scope 1 & 2 net
zero emissions plan, with
an absolute reduction
of 47% on the CY2021
baseline, building on the
35% reduction in CY2022.
See further details on
page 61.
■
Completed detailed
Scope 3 assessment.
Reduction plan in
progress
■
Rolled out ESG objectives
to individual operating
businesses
■
Majority of Group
businesses have achieved
their ESG objectives in
the year. Thirteen more
sites were certified for ISO
14001 and thirteen more
sites for ISO 45001
■
Appointed dedicated ESG
resources at the Group
level to ensure data
quality and reporting
standards are met
■
Rolled out a new carbon
reporting system
across the Group to
help streamline data
collection, consolidation
and reporting on
greenhouse gas
■
Launched Sustainability
Policy across the Group
Link to KSIs:
A D
Link to KPIs:
1 2 3
4 5 6
76
Annual Report and Accounts for the year ended 31 March 2024
Risk description
Potential impact
Mitigating actions
Change in
the year
Operational risk
4
Cyber
security
■
System
downtime, loss
of data and/
or financial
impact due to
external attack
■
Business
disruption
■
Reduced service
to customers
■
Financial loss
■
Theft of and/
or access to
confidential data
■
Reputational
damage
■
Different operating units
operating on separate IT
systems and networks
minimises risk of a major
incident impacting the
wider Group
■
Next generation end point
security, DNS monitoring and
web security solution
■
Outsourced SOC (Security
Operations Centre) provides
24/7 continuous security
monitoring
■
Digital Forensics and
Incident Response (“DFIR”)
Service
■
Cyber security training
platform rolled out across
the Group
■
Backup procedures in place
■
Revised cyber
security framework
rolled out to all
businesses
■
Detailed review
completed on
outsourced IT
support at a
number of Group
businesses, and
remedial actions
put in place
■
Cyber threat
exposure
assessment
completed at
Group businesses
■
Internal audit
coverage of IT risk
has been increased
Link to KSIs:
A
Link to KPIs:
1 2 5 6
5
Loss of key
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
■
Low dependence on any
single customer (the largest
customer represents c.7% of
Group revenues)
■
Culture of high-quality
service and long-term
customer relationships
■
Robust quality management
systems (including ISO 9001)
■
Customer satisfaction surveys
completed by all operating
companies on a regular basis
■
Regular dialogue with local
management in relation to
sales and design pipeline
Link to KSIs:
A
Link to KPIs:
1 2 5 6
6
Loss of key
suppliers/
supply
■
A key supplier
suffers major
business
disruption or
quality issues
or goes into
solvency
■
Negative impact
on production
■
Damaged
relationships
with key
customers
■
Reduced sales
■
Low dependency on any
single supplier
■
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
■
Supply chain
constraints have
eased during
the year
Link to KSIs:
A
Link to KPIs:
1 2
Strategic Report
77
discoverIE Group plc Innovative Electronics
PRINCIPAL RISKS
AND UNCERTAINTIES continued
Risk description
Potential impact
Mitigating actions
Change in
the year
Operational risk
7
Technological
changes
■
The
development
of new
technologies
that gives rise to
significant new
competition
or renders
our products
obsolete
■
Reduced sales
■
Loss of
market share
■
Inventory
write offs
■
The Group is diversified into
a number of differentiated
technology units
■
Focus on established
technologies with low capital
requirements
■
Group project underway to
ensure use cases and best
practice relating to AI is
shared between businesses
■
Businesses work closely
with core customers on new
engineering projects to ensure
products meet their needs
■
All businesses contribute
to a design pipeline aimed
at widening the product
portfolio
■
Emergence of AI
presents both a risk
and opportunity for
the Group
■
Acquisitions in
the year increase
the number of
technologies within
the Group
Link to KSIs:
A C
Link to KPIs:
1 2
8
Major
business
disruption
■
Sustained
disruption to
production
arising from a
major incident
at one or
more sites
■
Global
pandemic
■
Insufficient
production to
deliver goods
on order
■
Damaged
relationships
with key
customers
■
Reduced sales
■
Reputational
damage
■
Ability to transfer
between sites
■
Not overly reliant on one site
for sales. Maximum revenue
derived from a single site
is equal to 6% of Group
turnover
■
Insurance coverage
■
Acquisition of
Shape increases
manufacturing
capabilities
in the US
■
Assessment
of alternative
manufacturing
locations
undertaken as part
of TCFD analysis
Link to KSIs:
A B
Link to KPIs:
1 2 3
4 5 6
9
Loss of key
personnel
■
Key employees
leave, and
effective
replacements
cannot be
recruited on a
timely basis
■
Loss of expertise
■
Potential
business
disruption
■
Reduced growth
■
Insufficient
resources
■
Reputational
damage
■
Staff development, training
programmes and succession
planning
■
Remuneration based on
personal objectives 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
■
Five new
acquisitions in
the year
■
Increasingly
challenging
recruitment market
Link to KSIs:
A
Link to KPIs:
1 2
78
Annual Report and Accounts for the year ended 31 March 2024
Risk description
Potential impact
Mitigating actions
Change in
the year
Operational risk
10
Product
liability
■
A failure in one
of our products
results in serious
injury, death,
damage to
property or
non-compliance
with product
regulations
■
Non-compliance
with quality
standards
■
Financial loss
■
Reputational
damage
■
Quality inspection controls
before products are shipped
to customers
■
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
■
Product liability insurance
in place covering all Group
companies
Link to KSIs:
A
Link to KPIs:
1 2 3
4
5 6
11
Inventory
obsolescence
■
Inventory value
falls below its
realisable value
■
Financial loss
■
Orders built to specific
customer requirements;
many are non-cancellable,
and non-returnable
■
Purchasing to reliable sales
forecasts
■
Continuous monitoring of
inventory turns
■
Supply chain
constraints have
eased supporting
reduced
inventory levels
■
Inventory and
working capital
improvement plan
implemented
■
Inventory
Management
review undertaken
by Group Internal
Audit function
Link to KSIs:
A
Link to KPIs:
2 4
Strategic Report
79
discoverIE Group plc Innovative Electronics
PRINCIPAL RISKS
AND UNCERTAINTIES continued
Risk description
Potential impact
Mitigating actions
Change in
the year
Financial risk
12
Liquidity
and debt
covenants
■
There is a breach
of funding
terms/covenants
■
Insufficient
cash resources
to support the
Group’s activities
■
The Group has a revolving
credit facility of £240m,
which runs to August 2027
with £103m available to be
drawn down 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
■
Gearing increased
in the year
from 0.7x to 1.5x
following five
acquisitions in the
year for £83m
■
Interest rates
increased during
the first half of the
year with finance
costs increasing
from £5.5m last
year to £9.0m
this year
Link to KPIs:
2 5 6
13
Foreign
currency
■
The Group
transacts in
many currencies
for both its
purchases
and sales,
which differ to
its reporting
currency, and so
the Group has
translational and
transactional
exposures to
foreign currency
fluctuations
■
Reduction of the
Group’s reported
results
■
Volatility in
operating margins
■
Use of forward currency
contracts to hedge
committed and forecast sales
and purchases in foreign
currency (the Group policy
is not to hedge translation
exposures)
■
Currency borrowings as a
natural hedge against same
currency assets
■
Central review of foreign
currency exposures
Link to KPIs:
2 5 6
80
Annual Report and Accounts for the year ended 31 March 2024
Risk description
Potential impact
Mitigating actions
Change in
the year
Regulatory/compliance risk
14
Non-
compliance
with
legal and
regulatory
requirements
■
Unintentional
failure to
comply with
international
and local legal
and regulatory
requirements
■
Fines or penalties
■
Reputational
damage
■
The Group hires employees
with relevant skills and uses
external advisers to keep
up to date with changes
in regulations and legal
requirements in order 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. Annual
internal controls self-
assessments used to identify
and address gaps in control
within Group businesses
■
Annual supplier audits
undertaken across the Group
to ensure compliance with
Supplier Code of Conduct
■
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
■
Revisions
announced to
UK Corporate
Governance
Code in January
2024, with some
requirements
effective from
January 2025
■
Increased
exposure to
and complexity
of US Federal
labor laws and
US taxation
following two US
acquisitions this
year (adding to
five existing US
businesses)
Link to KPIs:
5 6
Risk indicators
Increased risk
Decreased risk
Risk stays the same
Key strategic indicators
A
Increase underlying
operating margin
B
Build sales
beyond Europe
C
Increase target
market sales
D
Reduce carbon
emissions
Key performance indicators
1
Sales growth
2
Underlying EPS growth
3
Dividend growth
4
Return on capital
employed
5
Operating profit
conversion
6
Free cash conversion
Strategic Report
81
discoverIE Group plc Innovative 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 three-year period to 31 March 2027.
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.
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
2027. 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 and
uncertainties.
Viability base case
The financial projections for this
three-year period are based upon the
Group’s budget for the year ending
31 March 2025 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 contingent
consideration payments, climate-
related capex expenditures, latest views
on supplier and customer payments
impacting working capital, interest
rates and applicable foreign exchange
and tax rates.
The budget for the financial year
ending 31 March 2025 and the financial
years FY2026 and FY2027 assume
steady sales growth (in total “The
Viability Base Case”).
Banking facilities and headroom
The Group has a syndicated banking
facility of £240m, which is committed
up to the end of August 2027. In
addition, the Group has an £80m
accordion facility, which it can use to
extend the total facility up to £320m.
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 plus the annualisation of
acquisitions), excluding IFRS 16, of
less than 3.0x; and
2. Interest cover: Adjusted EBITDA
to interest (excluding IFRS 16 and
amortised upfront costs) greater
than 4.0x.
At 31 March 2024, the Group had net
debt of £104m and was significantly
inside these covenants with gearing of
1.47x and interest cover of 8.6x.
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 2024.
Downside sensitivities
The Viability Base Case has been
subjected to downside 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 75 to 81, notably instability
in the economic environment,
underperformance of acquired
businesses, climate-related risks,
loss of key customers and suppliers,
major business disruption, liquidity
restriction, debt covenants, interest
rate increases and adverse foreign
currency movements.
The most severe but plausible
downside scenario assumes
a worsening of the economic
environment caused by a number
of factors including geo-political
events and significant reduction in
consumer demand due to continuing
inflationary pressures and elevated
interest rates. This downside scenario
results in a significant decline in second
half sales of FY2025, negative sales
growth in FY2026 and modest growth
thereon in FY2027. Additionally, gross
margin was reduced, working capital
materially increased, significant one-off
expenditures included (product liability,
major customer insolvency or litigation,
climate change, cyber-security
incident), interest rates increased and
the Group effective tax rate increased.
After factoring in these significant
additional downsides to the Viability
Base Case, there remains good
headroom both in terms of liquidity and
our debt 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, has low customer/
supplier concentration, a global supply
chain network, diverse manufacturing
capacity, and has well-established
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.
82
Annual Report and Accounts for the year ended 31 March 2024
Reverse testing has also been applied
to the most plausible downside
scenario to determine the level of
additional downside that would be
required before the Group would
breach its debt covenants or current
liquidity headroom during the
assessment period. The reverse stress
test was conducted on the basis that
certain mitigating actions would be
undertaken to reduce overheads and
capital expenditure during the period
as sales declined and, on that basis, a
fall in underlying operating margin to
below 6% in FY2025 would be required
before such a breach occurred.
The Board considers the possibility
of such a scenario to be remote and
further mitigation, such as hiring
freezes, pay and bonus reductions,
headcount reductions, reduction
in planned capital expenditure,
suspension of dividend payments
and equity raises, would be available if
future trading conditions indicated that
such an outcome were possible.
The Strategic Report on pages 01
to 84 sets out the key details of the
Group’s financial performance, capital
management, business environment
and principal risks and uncertainties.
Based on the Directors’ 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 75 to 81 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 for a period
of at least, but not limited to, 12 months
from the date of approval of the Group
Financial Statements.
Strategic Report
83
discoverIE Group plc Innovative Electronics
NON-FINANCIAL INFORMATION AND
SUSTAINABILITY STATEMENT
In accordance with sections 414CA and 414CB of the Companies Act 2006, we set out
below where the relevant non-financial information we need to report against can be
found in this Annual Report:
Environmental matters
■
Please see our Sustainability Report on pages 48 to 64.
■
A summary disclosure against TCFD recommendations is on pages 65 to 70,
including a detailed discussion of climate-related risks and opportunities on
pages 67 to 70.
■
Please see pages 71 to 74 for our general approach to risk management and
pages 49 to 50 and 65 to 66 for a summary of our governance framework
relating to sustainability matters and climate-related risks in particular. These
governance arrangements fit within our broader governance framework,
which can be seen in our Corporate Governance Report on pages 88 to 99.
Employee matters
■
Please see pages 57 and 58 (Our People), page 44 (Our people
engagement), page 46 (Section 172 statement) and pages 90 to 93
(Employee engagement).
Social matters
■
Please see pages 44 to 45 and 58.
Human rights
■
Please see pages 50, 57 to 58, 90 to 93, and 127.
Anti-bribery and
corruption matters
■
Please see page 50 (Anti-Bribery & Corruption Policy and
Whistleblowing Policy).
■
Please also see pages 45, 94 and 103.
Business model
■
Please see pages 28 to 29 for our Business Model.
■
Please see pages 11 and 24 to 27 for our target markets, pages 16 to 17 for a
summary of our strategy and pages 02 to 05 for a summary of the Group.
Policies
■
The following codes, policies and
standards can be found at our
Group website
(www.discoverieplc.com):
–
Sustainability Policy
–
Whistleblowing Policy
–
Business Ethics Policy
–
Anti-Bribery &
Corruption Policy
–
Modern Slavery Statement
–
Group Tax Strategy
–
Board Diversity Policy
–
Supplier Code of Conduct
–
Conflict Minerals Policy
–
Environmental Policy
–
Human Rights Policy
Outcome
of policies
■
The above policies contribute to the overall governance framework of
the Group, providing common standards that operating companies and
suppliers must observe.
■
The Group has a proven, flexible and resilient business model, as
demonstrated by its strong financial performance over several years. These
are underpinned by the Group’s governance arrangements in general,
including the Policies summarised above.
■
The Group has good relations with its various stakeholders, including staff,
customers and suppliers. The above Policies help support those relations.
Principal risks
■
Where principal risks have been identified in relation to any of the matters
listed above, these can be found on pages 75 to 81.
Non-financial KPIs
■
Our non-financial key performance indicators are set out on pages 61 and 64.
The Strategic Report, as set out on pages 01 to 84, has been approved by the Board.
On behalf of the Board
Nick Jefferies
Simon Gibbins
Group Chief Executive
Group Finance Director
4 June 2024
4 June 2024
84
Annual Report and Accounts for the year ended 31 March 2024
discoverIE Board visited MTC
in Dillingen, Germany in January 2024
Strategic Report
85
discoverIE Group plc Innovative Electronics
THE BOARD
Bruce Thompson
Non-Executive Chairman
Nick Jefferies
Group Chief Executive
Simon Gibbins
Group Finance Director
Tracey Graham
Senior Independent Director
R
S
N
N
S
G
G
S
A
N
S
R
Appointment to the Board
Non-Executive Director
since February 2018, Senior
Independent Director since
March 2019 and Non-
Executive Chairman since
November 2022.
Appointment to the Board
January 2009
Appointment to the Board
July 2010
Appointment to the Board
November 2015 and Senior
Independent Director since
November 2022.
Tenure
6 years
Tenure
15 years
Tenure
13 years
Tenure
8 years
Independent
Yes
Independent
No
Independent
No
Independent
Yes
Previous experience
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.
Previous experience
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.
Previous experience
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.
Previous experience
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
Avon Protection plc, Non-
Executive Director and Chair.
External appointments
None.
External appointments
None.
External appointments
Link Scheme Ltd,
Non-Executive Director
Close Brothers Group plc,
Non-Executive Director
Nationwide Building Society,
Non-Executive Director
Committee membership
A
Audit and Risk Committee
N
Nomination Committee
S
Sustainability Committee
G
Group Management Committee
R
Remuneration Committee
Chair of the Committee
86
Annual Report and Accounts for the year ended 31 March 2024
Clive Watson
Non-Executive Director
Rosalind Kainyah
Non-Executive Director
Celia Baxter
Non-Executive Director
Greg Davidson
Group General Counsel &
Company Secretary
N
S
R
A
A
N
R
S
A
N
R
S
G
Appointment to the Board
September 2019
Appointment to the Board
January 2022
Appointment to the Board
June 2023
Appointment to the Board
November 2019
Tenure
4 years
Tenure
2 years
Tenure
1 years
Tenure
N/A
Independent
Yes
Independent
Yes
Independent
Yes
Independent
No
Previous experience
Clive is a Chartered
Accountant and brings
wide-ranging experience in
senior financial roles to the
Board. Prior to retirement
from executive roles, he 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.
Previous experience
Rosalind has extensive
experience in sustainability
matters and currently
runs Kina Advisory, an ESG
consultancy. Previously,
she was VP, External
Affairs & Corporate Social
Responsibility at Tullow Oil
and held various roles at De
Beers SA, latterly as President
of De Beers Inc. in the USA.
Previous experience
Celia brings many years
of senior management,
executive and board
experience in several FTSE 250
and FTSE 100 companies, and
has a good understanding
of industrial businesses that
have grown by acquisition. She
spent her executive career in
Human Resources, starting
with Ford Motor Company and
then KPMG, before moving on
to Tate & Lyle plc, Enterprise Oil
and Hays plc. More recently, at
Bunzl plc, she was a member
of the Executive Committee
responsible for HR and
sustainability.
Previous experience
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
Breedon Group plc,
Non-Executive Director
Kier Group plc,
Non-Executive Director
Trifast plc,
Non-Executive Director
External appointments
GEM Diamonds Ltd,
Non-Executive Director
Kew Soda Ltd,
Non-Executive Director
EnQuest plc,
Non-Executive Director.
External appointments
DS Smith plc,
Non-Executive Director &
Chair of the Remuneration
Committee
Dowlais Group plc, Senior
Independent Director
and Remuneration
Committee Chair.
External appointments
None.
87
Corporate Governance
discoverIE Group plc Innovative Electronics
CHAIRMAN’S
INTRODUCTION
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 Group’s performance over the last year was underpinned by our governance
arrangements. These structures help ensure we are well positioned for continued
growth and to meet the social and environmental challenges facing the
Group today.
Bruce Thompson
Compliance with the UK Corporate Governance Code 2018
During the year ended 31 March 2024, the Company fully complied with the
UK Corporate Governance Code 2018 (the “Code”).
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.
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.
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. During the year ended 31 March 2024, an
evaluation of the Board and its Committees
was completed.
Audit, Risk
and Internal
Controls
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.
Remuneration
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.
The Group’s
performance is
underpinned by our
strong governance
arrangements”
Bruce Thompson
Chairman
88
Annual Report and Accounts for the year ended 31 March 2024
Values and Culture
Values
■
Integrity – we act with honesty and openness, treating our
partners and stakeholders fairly
■
Quality – we strive for excellence and make constant
improvements that deliver superior value to our customers
■
Empowerment – we inspire growth and innovation by
providing an entrepreneurial environment
■
Collaboration – we work together, trust and respect
each other
■
Positive impact – we care about the environment
and societies we live in and commit to making a
positive impact
Culture
■
Dedication and determination – driven by
empowerment and a sense of ownership
■
Customer centricity – allow employees closest to
the customers to make decisions that directly affect
customer satisfaction
■
Respect, fairness and equality – create an open
and inclusive environment in which everyone has an
equal opportunity to flourish and grow
■
Open communication – create a trusting
environment where information flows freely and
collaboration thrives
■
Target driven – strive for results and high performance
CORPORATE
GOVERNANCE REPORT
Current composition and
changes to the Board in the year
Details of the current members of the
Board are set out on pages 86 and 87.
Tracey Graham is Senior Independent
Director and Chair of the Remuneration
Committee, Clive Watson is Chair
of the Audit and Risk Committee
and Rosalind Kainyah is Chair of the
Sustainability Committee.
All of the Non-Executive Directors
have considerable expertise in their
respective roles.
Section 172 Statement
The Board takes all of its duties
seriously, 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 46 and 47.
Stakeholder engagement
We engage proactively with our
stakeholder groups. Further details
can be found on pages 44 and 45 and
pages 90 to 93.
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 of
this Annual Report and Accounts.
Further details of how climate-related
risks and opportunities are assessed
and managed can be found in the
Sustainability Report.
Good governance
Following the introduction of the 2018 UK Corporate Governance Code, the Board reviewed the Group’s governance
frameworks and its purpose, culture and values. This was reviewed during the year ended 31 March 2023 and was updated as
set out below. Our purpose, culture and values are communicated to our workforce through internal newsletters, meeting
colleagues in-person, town hall meetings, digital channels and corporate brochures.
Our Purpose:
To create innovative electronics that help to improve the world and people’s lives.
Vision:
To be a leading global innovator in electronics.
Mission:
To design and manufacture 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 custom and differentiated
electronics for niche industrial applications by focusing
on markets with structural, sustained growth prospects,
complemented by value-enhancing acquisitions.
This is underpinned by strong cash generation and our
commitment to the UN Sustainable Development Goals.
Strategic Priorities:
This strategy comprises the following priorities:
■
Grow sales well ahead of GDP through the economic
cycle by focusing on structural growth markets
■
Move up the value chain where operating margins are
higher through sustained innovation and acquisitions
■
Acquire high-quality businesses with attractive growth
prospects and strong, sustainable margins
■
Further internationalise the business by expanding in
North America and Asia.
Progress against our objectives is measured through
our key strategic indicators (KSIs) and key performance
indicators (KPIs). Details are set out on pages 18 and 19.
Board Leadership and Company Purpose
89
Corporate Governance
discoverIE Group plc Innovative Electronics
CORPORATE
GOVERNANCE REPORT continued
Employee engagement
Our employees are highly valued and
skilled and we depend upon their
dedication and hard work for the
Group’s success. Our decentralised
business model relies on the expertise
of our teams in different businesses and
across different locations. Our strategy
recognises the benefits of maintaining
our businesses’ individual identities,
whilst contributing to the success of
the Group overall. The Board therefore
considers it most appropriate that
engagement activities are carried out
directly at a local level, with all feedback
received by any member of the Board
shared with the rest of the Board.
The below summarises why and how
the Board and senior management
both from Head Office and within our
businesses engage, how it influences
our strategic thinking, the feedback
we receive as to any key concerns, and
other factors that affect the day-to-day
working environment.
Why we engage
■
The well-being, dedication and
performance of our people are
critical to our continued success
as a Group, the products that are
delivered to and relationships
maintained with customers and, as
a result, the value delivered to all of
our stakeholders.
■
An engaged workforce can
help us achieve our long-term
strategic goals.
■
Knowledgeable and well-trained
employees help in the continued
development of new and innovative
products, both for us and our
customers.
■
Strong working relations help
attract and retain talent.
We aim for a well-motivated workforce
and recognise that, without their
commitment, the Group would not
have achieved its various successes
over the last several years. This is both
in terms of financial performance and
our wider contribution to tackling the
issues facing the world today, such
as climate change and the need to
reduce carbon emissions. As such,
it is important to the Board that our
colleagues know how highly they are
valued and that it recognises that our
success depends on their continued
invaluable contribution to the Group.
How we engage
A range of employee engagement
mechanisms are in place, including
employee surveys, performance
evaluations, ESG workshops,
newsletters, apprenticeship and
graduate programmes, employee
assistance programmes, employee
conferences and town hall meetings.
The Board receives updates at every
meeting from the Group Chief
Executive, the Group General Counsel
& Company Secretary and other senior
managers on a range of employee-
related matters, including any local
issues encountered, health and safety
matters and the general health and
well-being of our workforce. This was
particularly important during the
pandemic and more recently during
the cost-of-living crisis. The Audit &
Risk Committee also receives details of
any whistleblowing reports, the steps
taken to investigate, and any follow-up
actions identified as a result.
Board Leadership and Company Purpose continued
Reviewing, embedding and managing our culture
Site Visits
The Board, both individually
and as a whole, conduct
regular site visits during
which Directors engage
directly with colleagues at
all levels (see page 91 for a
summary of recent visits).
ESG workshops
Ad hoc ESG workshops are
carried out by the Group
Sustainability Team which
reports to the GMC and the
Sustainability Committee.
Newsletters
The Board receives periodic
newsletters summarising
recent events and activities
in operating businesses and
amongst our colleagues.
Health &
safety reports
The Board reviews health &
safety reports at every Board
meeting and discusses any
key events or themes
that may arise.
Culture reviews
The Board periodically
reviews the desired culture
of the Group and revises the
Group’s vision, mission and
values as relevant. The last
such review was conducted
in January 2023.
Internal Audit
reports
The Audit & Risk Committee
reviews the results of all
internal audits. Those
audits cover a wide range
of matters, including those
related to HR, culture, staff
morale and health & safety.
Whistleblowing
reports
The Audit & Risk Committee
receives a summary of all
whistleblowing reports
and discusses any material
topics that arise as a result.
People reviews
The Nomination Committee
routinely conducts reviews
of the Group’s senior
leadership teams (see page
109). These reviews include
consideration of matters,
including talent and
succession planning.
HOW OUR BOARD MONITORS CULTURE
We embrace a
decentralised operating
model, and our success
hinges on a culture built
on respect, fairness, and
equality, that empowers our
teams locally, fosters open
communication, and unites
us towards our shared
ambitions.
Engagement is conducted
using a variety of methods,
starting within businesses at
a local level, complemented
by oversight from Head
Office, and by the Board
engaging directly. The
diagram opposite provides
a summary.
90
Annual Report and Accounts for the year ended 31 March 2024
However, it is the personal
interactions that the Board and senior
management have that provide the
most direct and valuable feedback.
Since 2009, the Board has visited
the Group’s operating sites, meeting
management and employees directly.
In recent years, this has included visits
in 2017 to Flux (Asnaes, Denmark), in
2018 to Myrra and Noratel (Guangdong,
China) and in 2019 to Cursor Controls
(Newark, UK). During the pandemic
these visits ceased but the Board
continued with various forms of
engagement, including in particular
a virtual meeting with a team from
Noratel involving nine colleagues
covering a range of areas within
the business.
In FY2023, following the easing of
lockdown restrictions, the Board
resumed its schedule of face-to-face
meetings and this has continued
during FY2024. Further details are given
below. These visits enable all members
of the Board to meet with people
directly and because the interaction
is between all members of the Board,
as opposed to just one or two holding
this responsibility, this means that the
Board is able to meet with a wider
cross-section of our global workforce.
It also enables the different experience
and perspectives that each of our
Board members brings to contribute to
engagement, thereby fostering a much
broader range of interactions than
would otherwise be the case.
The below provides a summary of the Board’s visits over the last couple of years:
Date
Board Member(s)
Site
April 2022
Rosalind Kainyah
Cursor Controls
April 2022
Rosalind Kainyah
Sens-Tech
October 2022
Bruce Thompson
Nick Jefferies
Hectronic
October 2022
Bruce Thompson
Clive Watson
Sens-Tech
November 2022
Nick Jefferies
Simon Gibbins
CPI, Beacon
January 2023
Bruce Thompson
Simon Gibbins
Tracey Graham
Nick Jefferies
Rosalind Kainyah
Clive Watson
Variohm
February 2023
Bruce Thompson
Nick Jefferies
Limitor
May 2023
Nick Jefferies
Simon Gibbins
Magnasphere, Phoenix America
September 2023
Celia Baxter
Cursor Controls
October 2023
Celia Baxter
Variohm Eurosensor
November 2023
Celia Baxter
Sens-Tech
January 2024
Bruce Thompson
Celia Baxter
Simon Gibbins
Tracey Graham
Nick Jefferies
Rosalind Kainyah
Clive Watson
MTC
April 2024
Bruce Thompson
Nick Jefferies
CPI, Phoenix America, Shape, Magnasphere, Beacon
May 2024
Nick Jefferies
DTI
91
Corporate Governance
discoverIE Group plc Innovative Electronics
CORPORATE
GOVERNANCE REPORT continued
During these visits the Board seeks to
better understand:
■
The nature of each business,
the products it makes and the
customers and markets it serves
■
Any operational challenges or
constraints that the business
may face
■
Opportunities that have been
identified for future product
innovation and business growth
■
Employee morale and motivation,
working conditions, local skills
and expertise, and the strength
of relations among the workforce
generally and with the local senior
management team
■
Relations between the business and
the wider Group
■
Where a business sits within a
cluster of Group companies, how
that cluster is working together and
the opportunities and challenges
that this brings
■
Possible future acquisition targets
that may complement the existing
business
■
Any health and safety concerns
In addition to regularly scheduled
business reviews, several members of
the Group Management Committee
(“GMC”) conduct routine functional
meetings and other site visits with our
businesses.
Updates from these visits are reported
to the Board, either directly or via the
Group Chief Executive. These reports
typically include the matters referred
to above, thereby enabling the Board
to have oversight of workforce relations
and benefit from their collective input.
The Audit & Risk Committee also
receives updates at every meeting
from the Risk & Internal Audit team,
following internal audits that have been
conducted at each site.
One key item that is checked on all
internal audits is that the Group’s
whistleblowing posters are clearly
displayed at all sites, so that if there
are any matters that staff wish to raise
in confidence, and anonymously if
preferred, they know the channels
through which they can do so.
For further details on our Global
Whistleblowing Policy and the
independent helpline available to all
staff globally, please see page 50.
In the year ahead, as well as continued
visits by members of the Board and
GMC, an internal conference, bringing
together over 100 of the Group’s senior
leaders, together with the Board and
GMC, is scheduled for September 2024.
That conference will foster further
collaboration and knowledge sharing
between the Board, GMC and all of our
global businesses on a wide range
of matters.
One area of key focus for the Board is to
ensure that the right leadership teams
are in place at all of our businesses.
As well as guiding those businesses
generally, these leaders shape the
day-to-day experience of the people
within each of those businesses, and
regular direct employee engagement
is delegated to them. On behalf of the
Board, the Nomination Committee
regularly reviews the most senior
leaders throughout the Group and, in
FY2023, that review covered 92 of our
most senior business leaders. A further
review is planned for FY2025. Please see
page 108 and 109 of the Nomination
Committee Report for further details.
Outcomes of engagement
The purpose of the various forms of
engagement is as follows:
■
To deepen the Board’s knowledge,
by using the expertise and insights
of our workforce.
■
To assess the culture of the Group.
■
To identify any issues or concerns
that staff may have.
■
To ensure that the employee’s voice
is heard.
The Group’s core strategy is well
established and has been settled
for several years. As such, employee
engagement helps influence the
Board’s decision-making as to how that
strategy is implemented in practice.
For example:
■
During the pandemic, it was crucial
that our businesses adapted to
flexible working arrangements.
■
Over the last two years, the need
to support staff during the cost-of-
living crisis has been highlighted
and addressed. The Group’s
Human Rights Policy includes
a commitment to pay wages at
rates that are meaningfully ahead
of minimum statutory rates. As
part of its annual review of pay
and working conditions, the
Remuneration Committee received
updates on pay rises being given to
our colleagues globally, how they
compared to local rates of inflation
and how they compared to local
minimum wage requirements.
■
The Group closely monitored the
political, economic and social
situation in Sri Lanka. Additional
allowances, food and transportation
were consequently provided.
■
In light of a general desire to
increase knowledge-sharing
and collaboration between
Group companies, an internal
communication platform has
been set up, to enable people in
similar functions at all levels to work
together to solve common issues.
■
Regular webinars have been
held for colleagues in operating
businesses across the Group to
share best practice and knowledge,
covering a variety of topics such
as greenhouse gas emissions,
technology deep dives and finance.
■
In October 2022, the UK workforce
employer pension rate was
increased.
■
Following interest from staff, a
salary sacrifice electric vehicle car
scheme was rolled out to our UK
businesses in FY2023.
■
Given the rise in living costs, the
Group rolled out an employee
rewards programme across our
UK businesses to help support
our employees through these
challenging times.
■
Our employee assistance
programme provides our
employees with various types
of support, including advice on
financial difficulties, and mental
health and well-being.
Board Leadership and Company Purpose continued
92
Annual Report and Accounts for the year ended 31 March 2024
The metrics and other measures that
are used by the Board to help assess
employee relations include:
■
Staff turnover rates (see page 64 for
more details)
■
Pay rates globally (both in absolute
terms and in relation to local
inflation and minimum wages)
■
Accident frequency rates (see page
64 for more details)
■
Whistleblowing reports
■
Employee rewards programme
registration and activities
■
The level of collaboration activities
between businesses
■
Diversity (see pages 64 and 98 for
more details)
■
Gender pay gap data (UK only)
Policies and procedures
The Board puts in place a range of
policies and procedures that support
employees in their various business
activities. These policies consider 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:
■
Sustainability Policy
■
Human Rights Policy
■
Group Health and Safety Policy
■
Anti-Bribery and Corruption Policy
■
Business Ethics Policy
■
Whistleblowing Policy
■
Board Diversity Policy
■
Supplier Code of Conduct
■
Modern Slavery Statement
■
Conflict Minerals Policy
■
Environmental Policy
■
Group Tax Strategy
In addition to the above, clear and
fair terms of employment are in place
throughout the Group. The Group
remains supportive of the employment
and advancement of disabled persons
and full consideration is given to
applications for employment from
disabled persons, where the candidate’s
particular aptitudes and abilities
are consistent with meeting 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.
Time allocation, Board and Committee meetings and attendance
During the year, attendance by Directors at Board and Committee meetings was as follows:
Committees
Director
Board
Audit
and Risk
Remuneration
Nomination
Sustainability
Overall
Attendance %
Bruce Thompson
9 / 9
–
5 / 5
2 / 2
2 / 2
100%
Celia Baxter1
7 / 8
3 / 3
4 / 4
1 / 1
1 / 1
94%
Simon Gibbins
9 / 9
–
–
–
2 / 2
100%
Tracey Graham
9 / 9
4 / 4
5 / 5
2 / 2
2 / 2
100%
Nick Jefferies
9 / 9
–
–
2 / 2
2 / 2
100%
Rosalind Kainyah
9 / 9
4 / 4
5 / 5
2 / 2
2 / 2
100%
Clive Watson
9 / 9
4 / 4
5 / 5
2 / 2
2 / 2
100%
1
Appointed 1 June 2023
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. The Board’s commitments are taken into account in the preparation and planning of
meetings to ensure that all Directors are able to allocate sufficient time to discharge their responsibilities.
Board approval is required prior to any Director accepting any external appointments.
93
Corporate Governance
discoverIE Group plc Innovative Electronics
Board activities
Topic
Key activities and discussions in FY2023/24
Key priorities in FY2024/25
Strategy
■
Reviewed and approved the acquisitions of Silvertel, 2J
Antennas, Shape, DTI and IKN and the disposal of the
Santon Solar business
■
Reviewed key strategic indicators (“KSIs”) and key
performance indicators (“KPIs”)
■
Reviewed the Group’s long-term sustainability priorities
and progress against targets
■
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
■
Review of the Group’s long-term
sustainability related targets
Risk and risk
management
■
Carried out a robust assessment of principal and
emerging risks (see pages 75 to 81 and 67 to 70)
■
Considered the Group’s exposure to climate-related and
other ESG risks
■
Conducted a further roll-out of the Group’s Anti-Bribery
Policy and related training
■
Reviewed internal audit reports and actions taken to
address findings identified
■
Review key risks and ensure
that the Group’s internal control
process remains appropriate
Governance
■
Embedded the operation of the Sustainability
Committee that had been newly created in the
previous year
■
Continued focus on the composition, balance and
effectiveness of the Board
■
Signed off and published the Group’s modern slavery
statement
■
Evaluated supply chain risks, especially in the context
of global supply chain challenges and the conflicts in
Ukraine and Gaza
■
Engaged with institutional Shareholders, investors and
other stakeholders throughout the year
■
Reviewed and approved the 2023 Annual Report
■
Build further understanding and
plan actions in relation to new
regulations over the period
Organisational
capacity
■
Monitored health and safety performance across the
Group. Regular Board updates received on actions
improving health and safety
■
Received presentations by senior management
including on M&A strategy
■
Continue to monitor health
and safety performance across
the Group
■
Consideration of the Group’s
capacity as it continues to grow
Board
development
■
Continued focus on the composition, balance and
effectiveness of the Board
■
Reviewed Board and Committee composition and
discussed and acted on the recommendations of the
Nomination Committee
■
Undertook an evaluation of the Board, its Committees
and individual Directors
■
Focus on increasing diversity both
for the Board and across the Group
more generally
CORPORATE
GOVERNANCE REPORT continued
Board Leadership and Company Purpose continued
94
Annual Report and Accounts for the year ended 31 March 2024
95
Corporate Governance
discoverIE Group plc Innovative Electronics
CORPORATE
GOVERNANCE REPORT continued
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 Bruce Thompson as Non-Executive Chairman, Tracey Graham as
Senior Independent Director, Celia Baxter (from 1 June 2023), Rosalind Kainyah 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, both as at 31 March 2024 and as at the date of this Annual Report and Accounts, is set out
below. The Company confirms that it meets the requirements specified in Listing Rule 9.8.6(R)(9) as at both dates.
•
The Board is 43% female
•
The Senior Independent Director (Tracey Graham) is female
•
The Board has one Director from a minority ethnic background
discoverIE collects the data used for these purposes from members of the Board and Group Management Committee on a
voluntary basis, with each person confirming their gender and ethnicity. The senior positions are defined as Chairman, Group
Chief Executive (“CEO”), Group Finance Director (“CFO”) and Senior Independent Director (“SID”). The Group Management
Committee is considered to be the Company’s executive management as defined by the Listing Rules.
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 below.
Role of the Chairman
■
Responsible for leading the Board,
which includes the operation of the
Board’s overall procedures.
■
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.
Role of the Group Chief
Executive
■
Leading the development and
implementation of the Group’s
strategy.
■
Communicating with Shareholders
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 Management
Committee.
The Group Chief Executive is assisted
in meeting his responsibilities by the
Group Management Committee.
Role of the Board
■
Setting the strategy.
■
Oversight of the management of
discoverIE.
■
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 following page,
certain matters are delegated to the
Group Management Committee and
to the Audit and Risk, Remuneration,
Nomination and Sustainability
Committees.
Division of Responsibilities
96
Annual Report and Accounts for the year ended 31 March 2024
Governance framework
The Board
Chaired by Bruce Thompson
The Board meets a minimum of six times a year.
It is 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
Bruce Thompson
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 108 TO 109.
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 100 TO 106.
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 Management
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 113 TO 138.
Sustainability
Committee
Chaired by
Rosalind Kainyah
The Sustainability
Committee reviews
the Group’s ESG plans
and arrangements,
seeking to align
with best practice
and underpinning
the long-term
sustainability of
the Group.
FURTHER
INFORMATION ON
THE SUSTAINABILITY
COMMITTEE IS ON
PAGES 48 TO 50.
Group Management Committee
The Group Management Committee chaired by Nick Jefferies, Group Chief Executive, and comprises Simon Gibbins, the
Group Finance Director, the Divisional Managing Directors, Head of Corporate Development, Group General Counsel
& Company Secretary, Group Financial Controller, Divisional Finance Director, Head of Tax, Head of Acquisitions, Head
of Risk & Internal Audit, Head of Investor Relations and the Group Development Director. Further information about
Committee members can be found on the Group’s website www.discoverIEplc.com.
The Committee meets six to seven times a year and is responsible for the Group’s day-to-day operations, for delivering
results, and for driving growth and ensuring that this is done in a sustainable and ethical manner.
97
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discoverIE Group plc Innovative Electronics
CORPORATE
GOVERNANCE REPORT continued
Current composition
The biographies of the current
members of the Board are set out on
pages 86 and 87.
Work of the Nomination
Committee
The Nomination Committee Report,
which can be found on pages 108
and 109, 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. In June 2023, Celia Baxter was
appointed to the Board. Following her
appointment, the Board now meets the
targets set out in the Board Diversity
Policy, which include 40% female board
representation (see www.discoverIEplc.
com for more details).
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.
Tracey Graham is the Senior
Independent Director and is available to
Shareholders should they have concerns
that cannot be resolved through other
channels. Following Tracey Graham’s
retirement from the Board in November
2024, Celia Baxter will become Senior
Independent Director.
Induction
All new Directors receive induction
training on joining the Board and
are expected to regularly 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
The composition of the Board, both as
at 31 March 2024 and as at the date of
this Annual Report and Accounts, is set
out below. The Company confirms that
it meets the requirements specified in
Listing Rule 9.8.6(R)(9) as at both dates.
•
The Board is 43% female
•
The Senior Independent Director
(Tracey Graham) is female
•
The Board has one Director from a
minority ethnic background
discoverIE collects the data used for
these purposes from members of
the Board and Group Management
Committee on a voluntary basis,
with each person confirming their
gender and ethnicity. The senior
positions are defined as Chairman,
Group Chief Executive (“CEO”), Group
Finance Director (“CFO”) and Senior
Independent Director (“SID”). The
Group Management Committee
is considered to be the Company’s
executive management as defined by
the Listing Rules.
Composition, succession and evaluation
Gender diversity
Gender
Number
of Board
members
Percentage
of the Board
Number
of senior
positions on
the Board
(Chairman,
CEO, CFO
and SID)
Number in
Executive
Management
Percentage
of Executive
Management
Men
4
57%
3
10
77%
Women
3
43%
1
3
23%
Not specified / prefer not to say
0
0%
0
0
0%
Ethnic diversity
Ethnicity
Number
of Board
members
Percentage
of the Board
Number
of senior
positions on
the Board
(Chairman,
CEO, CFO
and SID)
Number in
Executive
Management
Percentage
of Executive
Management
White British or other White
(including minority-white groups)
6
86%
4
9
69%
Mixed / Multiple Ethnic Groups
0
0%
0
0
0%
Asian / Asian British
0
0%
0
4
31%
Black / African / Caribbean / Black British
1
14%
0
0
0%
Other ethnic group, including Arab
0
0%
0
0
0%
Not specified / prefer not to say
0
0%
0
0
0%
98
Annual Report and Accounts for the year ended 31 March 2024
Evaluation
In accordance with the Code, the Board
and each of its Committees undertake
an evaluation each financial year. Such
evaluations were completed during the
year ended 31 March 2024.
As noted in last year’s report, the
Company conducted an externally-
facilitated set of evaluations during
the year ended 31 March 2022 and
an externally facilitated review will be
conducted at least every three years.
A summary of the process and
findings for the 2024 evaluation are
provided below.
Step 1
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. Additionally, Tracey
Graham, as Senior Independent
Director, conducted interviews with
each of the other Directors to consider
the performance of the Chairman.
Step 2
The results of the evaluation are
discussed by the Board and actions for
improvement are decided upon.
A summary of the 2024 Board
evaluation is detailed in the box below.
Step 3
One-on-one discussions are held
between the Chairman and Senior
Independent Director on the evaluation
of the Chairman and between the
Chairman and the Non-Executive
Directors on their respective evaluations.
Summary of the 2024 Board evaluation
Risk management
The effectiveness with which the Board takes risk into account when making decisions was positively rated. The Group’s
approach to risk is set out in the Risk Management section of this Annual Report on pages 71 to 74.
Management of meetings
The management of meetings and the structure of the Committees, together with Board support, were appropriate.
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.
Board composition
The composition of the Board was positively rated.
Board’s expertise
The Board’s understanding of the views of major investors and other stakeholders was rated positively but, given recent
technological advances, Board members would benefit from more training in areas such as artificial intelligence (AI).
Re-election
In accordance with the Code, all
Directors stand for re-election annually
at each AGM.
Audit, risk and internal control
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 71 to 74.
■
The Group’s Principal Risks and
Uncertainties are set out on pages
75 to 81.
■
The Audit and Risk Committee
Report on pages 100 to 106
summarises how the Committee
provides oversight, and supports
the Board, in relation to audit, risk
and internal controls generally.
■
The Board’s approach to climate-
related risks and opportunities can
be found in the TCFD Report (see
pages 65 to 70.
Remuneration
The Board’s approach to remuneration
is set out in the Remuneration Report
(see pages 113 to 138).
Approval
This Corporate Governance Report
has been approved by the Board and
signed on its behalf by
Greg Davidson
Group General Counsel and Company
Secretary
99
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AUDIT AND RISK COMMITTEE REPORT
Responding to
upcoming regulatory
changes, the Committee
oversaw further
progress in enhancing
the Group’s risk and
control environment.”
Clive Watson
Chair of the Audit and
Risk Committee
Member
Member
since
Clive Watson (Chair)
2019
Tracey Graham
2017
Rosalind Kainyah
2022
Celia Baxter
2023
The Group Company Secretary acts as Secretary to the Committee.
Dear Shareholder,
I am pleased to report on the activities
of the Audit and Risk Committee
(the “Committee”) during the year
under review.
Role of the Committee
The Committee’s role is central in
bringing together the Group’s risk
management activities and control
framework to ensure adherence
to policies, the integrity of financial
reporting and the maintenance of
a strong risk-focused culture. The
Committee oversees and reviews the
management of risk, financial results,
and the Group Internal Audit function.
This includes reviews of recent and
upcoming regulatory changes and
the Group’s exposure to all risks and
opportunities, including those related
to climate change. 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.
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 the Group Internal
Audit function
■
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 its findings
and whether any further action is
necessary or desirable. During the
year a moderate 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
Meetings
During the year, the Committee met
four times and also met privately with
the external auditor. The Committee
comprised the people shown in the
table above, all of whom are Non-
Executive Directors.
In addition to the Committee
members, the Group Chairman, Group
Chief Executive Officer, Group Finance
Director, representatives from the
external auditor, the Head of Risk and
Internal Audit and the Group Financial
Controller attended some or all of
these meetings by invitation. As Chair
of the Committee, I maintain direct
communication with the external
auditor and the Head of Risk and
Internal Audit, 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 receives sufficient,
reliable and timely information
from management on significant
changes to financial accounting
standards and reporting requirements,
100
Annual Report and Accounts for the year ended 31 March 2024
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 86 and 87). The
Committee is satisfied that the Group’s
executive compensation arrangements
do not prejudice robust controls and
good stewardship.
Committee activities during FY
2023/24 and FY 2024/25 to date
May 2023
■
Reviewed and approved the
updated Non-Audit Services policy
■
Reviewed the results of the external
audit of the 2023 Annual Report
and Accounts
■
Reviewed the going concern and
viability statements
■
Reviewed the 2023 Annual Report
and Accounts, including assessing
and confirming the presentation
of the Consolidated Statement
of Profit and Loss and that the
Report was fair, balanced and
understandable
■
Assessed and agreed the
independent status of the external
auditor
■
Discussed the overall adequacy and
effectiveness of the Group’s internal
controls and reviewed the Group
Internal Audit function’s annual
opinion on the Group’s control
framework
■
Reviewed and approved the Group’s
Treasury policy
■
Reviewed and approved the internal
audit charter
■
Review of twice yearly update of
the Group Risk Register, including
agreeing key risks for inclusion
in the 2023 Annual Report and
Accounts
November 2023
■
Reviewed half-year results and
judgemental accounting areas
■
Reviewed the results of the interim
review conducted by the external
auditor
■
Reviewed and agreed the external
auditor’s FY 2023/24 Audit Planning
considerations
■
Review of twice yearly update of
the Group Risk Register, including
risk reporting by each operating
business
■
Reviewed a maturity assessment
of the Group’s risk management
function which assessed the
Group’s risk management function
and activity using an external
risk management maturity
tool mapped to recognised risk
management standards.
■
Reviewed a Fraud Risk Assessment
undertaken by the Risk & Internal
Audit team
January 2024
■
Reviewed the external audit
planning report for 2024 Annual
Report and Accounts (including
review and approval of audit scope
and fees)
■
Reviewed and approved the
2024 annual report and accounts
timetable along with the approach
for ensuring the annual report
would be fair, balanced and
understandable
■
Agreed a risk management and
internal audit programme and
resource requirements in detail for
FY 2024/25, and at a higher level for
the following three years to ensure
all businesses would be audited
over a four-year cycle
■
Reviewed the Committee’s Terms
of Reference
■
Annual review and update of the
Group’s tax strategy
February 2024
■
Reviewed and discussed the
announced updates to the UK
Corporate Governance code and
the topic of assurance.
May 2024
■
Reviewed the results of the external
audit of the 2024 Annual Report
and Accounts
■
Reviewed the going concern and
viability statements
■
Reviewed the 2024 Annual Report
and Accounts, including assessing
and confirming that the Report was
fair, balanced and understandable
■
Assessed and agreed the
independent status of the external
auditor
■
Discussed the overall adequacy and
effectiveness of the Group’s internal
controls, including reviewing the
Group Internal Audit function’s
annual opinion on the Group’s
control framework
■
Discussed and agreed the Group’s
Treasury policy
■
Reviewed progress against the
recommendations arising from the
external quality assessment
■
Half-yearly review of the Group
Risk Register, including agreeing
key risks for inclusion in the 2024
Annual Report and Accounts
Standing items
The following matters were
covered at the Audit and
Risk Committee meetings in
November, January and May:
■
Private session with the external
auditor without management
presence
■
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
■
Review of regulatory updates
■
Update on risk management
projects
■
Update on fraud and
whistleblowing reports
After each meeting of the Committee,
the Chair of the Committee reports
to the Board, to enable the Board to
discharge its responsibilities.
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.
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AUDIT AND RISK COMMITTEE REPORT continued
Significant accounting 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. The viewpoint of
the external auditor is sought when undertaking these assessments.
During the year, the Committee’s review of significant accounting and financial reporting issues included a focus on the
following key areas:
Impairment of
goodwill
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 each 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 business not performing in line with expectations, to
assess any potential impact on the carrying value of goodwill.
Accounting for
acquisitions and
disposals
A review of the accounting for acquisitions and disposals in FY 2023/24 including the
appropriateness of the assumptions used in assessing the fair value of the assets and
liabilities acquired.
Valuation of the
legacy defined
benefit pension
scheme
A review of the appropriateness of the assumptions used in the valuation of the legacy
defined benefit pension scheme under IAS 19 – Employee Benefits.
The recognition
and valuation
of judgemental
provisions
A review 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 acquisition and disposal-related costs
(including amortisation of acquired intangibles and acquisition and disposal expenses) in
the Supplementary Statement of Profit or Loss Information and notes to the Group financial
statements, in line with the Group’s stated policy.
Climate-related
financial disclosures
An evaluation of the impact of climate change on the Group in accordance with the TCFD
framework. The process involved a review of risks and opportunities from climate change
and evaluating the quantifiable financial impact on the Group under different climate
change scenarios.
Going concern and
Viability-related
financial disclosures
A review of the paper prepared by management on the Group’s going concern and viability
assessment, including underlying forecasts, cash flow assumptions and downside scenarios.
The Committee was satisfied that each of the matters set out above had been fully and adequately addressed by the
Executive Directors 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, the Committee considered the assumptions made, the reasonableness of
judgements made 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.
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Annual Report and Accounts for the year ended 31 March 2024
Tax and Treasury
The Committee typically meets
annually with the Head of Tax and the
Group Treasurer to review the key tax
and financing matters affecting the
Group and to understand the areas
of focus in the forthcoming year. In
FY 2023/24, these meetings were
conducted by the Board.
FRC Audity Quality Review
The Financial Reporting Council
(“FRC”) conducted a review of the
audit performed by PwC of the Group’s
financial statements for the year ended
31 March 2022, in accordance with
Part 2 of the FRC Corporate Reporting
Review Operating Procedures. The
review also covered the quality of
communication with the Committee,
plus certain matters relating to ethics,
independence, quality control and
completion. This review was not
finalised until after the publication of
the Group’s Annual Report for the year
ended 31 March 2023.
The outcome of the review was that the
audit work in respect of offsetting of
cash and overdraft balances required
improvement and accordingly as
communicated in the FY2023 Annual
report, the Group reassessed its
judgement to offset certain cash and
overdraft balances at 31 March 2023
and reported them as gross balances in
the financial statements. A consistent
treatment has been adopted for the
year ended 31 March 2024. We have
been informed that PWC agreed
a proposed action with the FRC in
relation to their audit procedures in
this area and they have confirmed
that the required improvements were
incorporated in the FY 2024 audit.
Risk management and
internal controls
The Board has overall responsibility
for the Group’s risk appetite and risk
management strategy, including
determining the nature and extent of
the risks it is willing to take in achieving
the Group’s strategy and objectives.
In order to discharge these duties
effectively, the Board is also required
to ensure 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
the specific areas of cyber security,
anti-bribery and conformance of
suppliers with the Group’s code of
conduct 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 the Group
Internal Audit function
■
Review of reports on control matters
and challenge of management’s
response to any matters raised
■
Review of the maturity assessment
conducted against the Group’s Risk
Management function to ensure
that it continues to align with
best practice
■
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
Preparation for changes in audit
and governance reform
Developments and enhancements
have continued to be made to the
Group’s internal control and risk
management processes during
FY 2023/24, further details of which
are set out below. The main driver of
these improvements was the revisions
to the UK Corporate Governance Code,
specifically the need for the Board to
make an explicit conclusion on the
effectiveness of internal controls. The
Committee has been pleased with
the enhancements being made to
the Group’s internal control and risk
management framework and the
preparations for enabling an explicit
conclusion on control effectiveness
within the FY26 Annual Report.
This work has included:
■
The embedding of critical controls
aligned to the Committee of
Sponsoring Organisations
(COSO) 2013 framework and
implementation of agreed
remediation actions
■
The issue of a revised Group
Accounting Manual and Internal
Controls Manual to all Group
companies
■
The issue of a Group Reporting
Manual to all Group companies
■
The roll-out of a revised Cyber
Security Framework aligned to CIS 8
■
The embedding of a Group
governance, risk and compliance
system to provide a more efficient
way to document, test and evidence
internal controls
■
Defined a target operating model
for risk, control and internal audit
■
A detailed update at each meeting
on the progress being made to
enhance the internal controls
framework
The Committee will continue to receive
regular updates and engage closely
with management on any changes
that might benefit the Group’s existing
approach to internal controls and to
ensure compliance with legislation and
best practice as they are updated.
Throughout the year, the Committee
has monitored the Group’s internal
control and risk management systems
and, at its meeting in May, specifically
reviewed the effectiveness of these.
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AUDIT AND RISK COMMITTEE REPORT continued
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. Resource in the function
remained fixed during FY 2023/24 with
three full time staff alongside assistance
from the Group Projects Manager,
as well as support from external
consultants and outsourced providers.
Further details on the operation of the
Group Internal Audit function can be
found in the Risk Management section
on pages 71 to 81.
The Committee has overall responsibility
for reviewing the effectiveness of the
Group’s risk management and internal
control systems framework as well as
the Group Internal Audit function. As
part of this, we ensure that the Group
Internal Audit function has 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.
The Head of Risk and Internal Audit and
I meet regularly between Committee
meetings to ensure the team can
effectively discharge its duties and
to discuss pertinent issues, such as
changes in legislation. Outside of the
scheduled meetings, I have conducted
the following activities on behalf of
the Committee related to Risk and
Internal Audit:
■
Reviewed the maturity assessment
of the Group’s risk management
effectiveness (November 2023)
■
Reviewed and approved the internal
audit charter (November 2023)
■
Input into the Group Risk and
Internal Audit team’s plans for FY25
(April 2024)
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.
The Group Internal Audit function
was subject to an External Quality
Assessment (EQA) in August 2022.
that assessment concluded that the
function had made great strides in
meeting most of the Standards, as
well as the Definition, Core Principles
and the Code of Ethics, which form the
mandatory elements of the Institute
of Internal Auditors’ International
Professional Practices Framework
(IPPF), the globally recognised standard
for quality in Internal Auditing. During
the year the Committee received
regular updates on the completion
of remedial actions from this review.
Additionally, at the May 2024 meeting
the Committee reviewed the function’s
plans to comply with the revised Global
Internal Audit Standards which will
come into effect in January 2025.
Control Environment
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 design of the risk
management framework, including
the three lines of defence model, 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 FY 2023/24 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 well 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 businesses
■
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
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.
104
Annual Report and Accounts for the year ended 31 March 2024
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 and approving the
reappointment of the external
auditor as a resolution at the 2023
Annual General Meeting
■
Considering and approving
the audit approach and scope
of the audit undertaken by
PricewaterhouseCoopers (“PwC”)
and the related fees
■
Agreeing reporting materiality
thresholds
■
Reviewing reports on audit findings
■
Considering and approving letters
of representation issued to the
external auditor
■
Considering the independence of
the external auditor.
■
Undertaking a tender for the Group
audit for FY2024/25 in line with best
practice (see below).
Audit performance
and effectiveness
The performance and effectiveness of
the external auditor, and the 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 external auditor’s
ability to challenge management
on key accounting judgements and
assumptions adopted
■
Ensuring the external 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 the
external auditor and the Committee
■
Feedback from management on
the quality of the audit team
■
Professional scepticism of the
external 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 in
FY2023/24.
The Group has complied with the
provisions of the Competition and
Market Authority (CMA) Order, issued
by the CMA in September 2014, for
“The Statutory Audit Services for Large
Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities)”.
External auditor independence
The Committee believes that the
provision of non-audit services to the
Group 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 external
auditor independence or objectivity.
Fees for non-audit services (excluding
interim review) provided by the external
auditor during the financial year totalled
£10,770 and represented 0.6% of the
total audit fee (FY 2022/23: £9,790: 0.5%),
were not considered to adversely impact
the independence of the external
auditor, were in line with the Group’s
policy on non-audit services and were
permissible under Ethical Standards.
Additionally, an interim review was
conducted by the external auditor at a
cost of £111,800 (FY 2022/23: £109,500).
External auditor tender
During FY2023/24, the Board decided
to tender the Group’s audit for the
year ending 31 March 2025. A thorough
tender process was conducted
comprising Big Four and non-Big Four
firms. Based on a detailed evaluation
of the participating firms against the
selection criteria, two audit firms were
shortlisted with a recommendation of
the preferred audit firm, Deloitte LLP.
The relative merits of each of the firms
were discussed and Deloitte LLP was
chosen by the Board. A resolution for
the appointment of Deloitte LLP as
the Group’s external auditor will be put
to Shareholders at the 2024 Annual
General Meeting. The Board confirms
that this recommendation is free from
influence and that no contractual terms
have been imposed on the Company
limiting the choice of auditor. A more
detailed description of the audit tender
process is as follows:
105
Corporate Governance
discoverIE Group plc Innovative Electronics
AUDIT AND RISK COMMITTEE REPORT continued
Audit tender process
The audit tender process was designed
taking into account the FRC’s guidance,
“Audit Committees and the External
Audit: Minimum Standard”. As agreed
with the Audit and Risk Committee, the
governance of the Group audit tender
process was delegated to a Selection
Committee, led by the Chair of the
Audit and Risk Committee and also
comprising the Senior Independent
Director, the Group Finance Director
and the Group Financial Controller.
The Selection Committee oversaw the
tender process, including agreeing
the timetable, selecting which firms
to invite to tender and the evaluation
process and selection criteria that
would be used in formulating the
recommendation made to the Board.
Key selection criteria included:
■
Technical Criteria: including
tailoring of audit approach to the
Group, the use of technology, the
ability to deliver a high quality
audit and capability to manage the
transition.
■
Team quality: including the
leadership and experience of
the team, understanding of the
Group’s business and the industry
it operates in, understanding of key
risk and judgemental areas and
ability to provide independent and
fair challenge to management.
■
Resources and organisation
including coverage of the Group’s
operating locations, quality
of communication, access to
specialists, and understanding of
local requirements.
■
Proactivity, ideas and added value:
encompassing varied factors such
as freshness of audit approach,
feedback on control environment,
technical updates and ability to
support the Committee’s role and
responsibilities.
The audit tender process was
conducted in two stages:
Stage 1
(November 2023 – January 2024)
■
Due diligence and introductory
meetings held with audit firms
being considered for the tender
process.
■
Each audit firm was asked to
confirm independence and if any
non-audit services which would
need to be terminated.
■
Four audit firms plus the
incumbent auditor, were invited
to tender on the basis of a detailed
tender process document. All
firms accepted the invitation and
confirmed their participation.
■
A data room was opened to provide
the four participant firms with
access to relevant information
about the Group.
■
Structured engagement
sessions were held with each of
the four participant firms and
relevant members of the Group
management team including
Group financial reporting,
divisional finance, internal audit
& risk, treasury, taxation, legal and
Group IT (“the Group team”). These
sessions provided the participant
firms an opportunity to better
understand the Group and discuss
certain subject matter areas in
greater depth. Feedback from each
member of the Group team was
collected to assist with evaluation of
the participant firms together with
selection criteria scores.
■
All participating firms submitted
written proposals covering the key
evaluation areas stipulated in the
tender process document.
■
Based on the evaluation of written
proposals, Group team feedback,
and the score against the selection
criteria, four audit firms including
the current incumbent were invited
to the next stage.
Stage 2
(January 2024 – March 2024)
■
The four audit firms made
presentations to the Selection
Committee and answered
questions from the Selection
Committee members.
■
The written proposals and
presentations were evaluated and
scored against the selection criteria
by each of the Selection Committee
members resulting in two firms
being brought forward to the Board
with a recommendation of the
preferred audit firm, Deloitte LLP.
■
The Board accepted the
recommendation from the
Selection Committee and a
resolution to appoint Deloitte LLP
will be put to Shareholders at the
2024 AGM.
Key areas of focus in 2024/25
■
Manage transition of the new
Group auditor
■
Continuing assessment of ESG-
related risks and reporting
requirements
■
Review the accounting for new
acquisitions
■
Monitor the Group’s activities to
comply with the revisions to the
UK Corporate Governance Code
effective from January 2025
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
Chair of the Audit and Risk Committee
4 June 2024
106
Annual Report and Accounts for the year ended 31 March 2024
Corporate Governance
107
discoverIE Group plc Innovative Electronics
NOMINATION COMMITTEE REPORT
The Committee
ensures that the
Group has the right
leadership in place to
drive continued growth
and success.”
Bruce Thompson
Chairman of the Nomination
Committee
Member
Member
since
Bruce Thompson (Chairman since 1 November 2022)
2018
Celia Baxter
2023
Tracey Graham
2018
Nick Jefferies
2009
Rosalind Kainyah
2022
Clive Watson
2021
The Group Company Secretary acts as Secretary to the Committee.
2023/24 key achievements
■
Appointed Celia Baxter as a Non-
Executive Director of the Company
■
Approved the re-appointment of
Bruce Thompson as Chairman
■
Identified priorities for the
coming year
Key areas of focus in 2024/25
■
Review of talent and succession
planning (following the last review
in 2023)
■
Increasing diversity across
the Group
■
Continued evaluation of knowledge
and skills
Dear Shareholder,
During the year, the Committee met
twice, with all Committee members
attending and participating in a
separate evaluation process, which
identified areas for improvement. 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 Celia Baxter
(following her appointment in June
2023), Tracey Graham, Clive Watson,
Rosalind Kainyah 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
■
To review the leadership needs of
the organisation, both 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, Remuneration and
Sustainability 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.
108
Annual Report and Accounts for the year ended 31 March 2024
Annual Report and Accounts for the year ended 31 March 2024
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 shortlist 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.
As noted in last year’s Annual Report
and Accounts, Russell Reynolds, a
leading advisory firm that specialises
in the appointment of Board members
for listed companies, assisted with
the recruitment of Celia Baxter to
the Board. Russell Reynolds has no
connection to the Company, or to any
individual Director, other than assisting
with recruitment. Tracey Graham
chaired the Nomination Committee
when it was dealing with the extension
of my appointment and I absented
myself from these discussions.
Diversity and succession
planning
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
can be found on the Company’s
website www.discoverIEplc.com
Please see page 64 of the Sustainability
Report for a summary of the Group’s
current gender diversity and page 98
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
Bruce Thompson
Chairman of the Nomination
Committee
4 June 2024
Focus on talent and
succession
■
The Committee oversees
and reviews the output
from regular reviews of the
Group’s key roles and talent
carried out by the Group
Management Committee.
■
A comprehensive review
was conducted in FY2023,
covering 92 people from
across the Group’s senior
management teams.
A further review will be
conducted in FY2025.
■
The Committee ensures that
long-term and emergency
succession plans are in place
for all senior / key roles. It
also considers the personal
aspirations and opportunities
for the people in those roles.
■
The review confirmed the
Committee’s belief in the
strength and talent of the
Group’s management
teams and wider employee
population.
Corporate Governance
109
discoverIE Group plc Innovative Electronics
DIRECTORS’ REPORT
The Board believes
that maintaining a
progressive dividend
policy is appropriate to
enable both dividend
growth and a higher
level of investment
from internally
generated resources.”
Greg Davidson
Group General Counsel &
Company Secretary
The Directors’ report for the financial year ended 31 March 2024 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:
Section
Progress made
Future business developments
Throughout the Strategic Report
(pages 01 to 84)
Risk management
Risk management and principal risks and
uncertainties (pages 71 to 81)
Employee engagement
Please see pages 90 to 93
Greenhouse gas emissions
Sustainability Report (pages 61, and 68 to 70)
Stakeholder engagement
Please see pages 44 and 45
Corporate Governance Statement Corporate Governance Report
(pages 89 to 99)
The Group’s policies and processes
for managing capital, financial risk
management objectives, financial
instruments and hedging activities,
and exposure to credit and liquidity risk,
are disclosed in note 27 to the Group
financial statements.
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
2024 and are shown on pages 148 to
202. The key strategic and performance
indicators of the business are set out in
the Strategic report on pages 18 and 19.
The Directors recommend a final
dividend of 8.25p per share (2022/23:
7.90p) which, together with the interim
dividend of 3.75p per share (2022/23:
3.55p), makes a total dividend for
the year of 12.00p per ordinary share
(2022/23: 11.45p). Subject to approval
by Shareholders of the recommended
final dividend, the dividend award to
Shareholders for 2023/24 will total
£11.5m (2022/23: £11.0m). If approved, the
Company will pay the final dividend on
2 August 2024 to Shareholders on the
register of members at 28 June 2024.
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
86 and 87 and are incorporated by
reference.
Copies of Executive Directors’ service
contracts are available to Shareholders
for inspection at the Company’s
registered office 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 113 to 138.
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.
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
Annual General Meeting.
110
Annual Report and Accounts for the year ended 31 March 2024
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 any 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.
This was in force throughout the year
ended 31 March 2024 and 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 2024, the Company’s
issued share capital consisted of
96,356,109 ordinary shares of 5p each
(no shares are held in treasury).
Details of movements in the Company’s
issued share capital can be found
in note 30 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 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.
No person holds securities in the
Company carrying special rights with
regard to control of the Company.
Substantial shareholdings
As at 31 March 2024, 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:
Shareholder
Holdings
of ordinary
shares (5p)
% of issued
share
capital
abrdn
7,337,498
7.61%
BlackRock, Inc.
6,077,659
6.31%
Kempen Capital Management NV
6,037,221
6.27%
Impax Asset Management
5,571,239
5.78%
Montanaro Asset Management
3,825,000
3.97%
Charles Stanley
2,921,776
3.03%
Swedbank Robur
2,891,000
3.00%
111
Corporate Governance
discoverIE Group plc Innovative Electronics
DIRECTORS’ REPORT continued
As at 1 June 2024, 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:
Shareholder
Holdings
of ordinary
shares (5p)
% of issued
share
capital
Kempen Capital Management NV
6,521,406
6.77%
Impax Asset Management
6,105,455
6.34%
BlackRock, Inc.
6,077,659
6.31%
abrdn
6,062,751
6.29%
Montanaro Asset Management
3,825,000
3.97%
Martin Currie Investment Management
3,500,000
3.63%
Swedbank Robur
3,121,000
3.24%
Authority to purchase
own shares
At the Annual General Meeting held on
28 July 2022, Shareholders authorised
the Company to purchase in the
market up to 10% of its issued share
capital (9,545,610 ordinary shares) and,
as at 31 March 2024, all of this authority
remained in force and unused. This
authority is renewable annually, and
a special resolution will be proposed
at the 2024 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 Financial
Review section of the Strategic Report
on page 38 to 43. 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 (FY 2022/23: nil).
Auditor and disclosure of
information to auditor
Each of the Directors in office as at the
date of this report confirms that:
■
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.
Following the conclusion of an external
audit tender process a resolution to
appoint Deloitte LLP as auditors will be
proposed at the forthcoming Annual
General Meeting. Additional detail is
provided on pages 105 and 106 of the
Audit & Risk Committee Report.
Annual General Meeting
The Notice of the Annual General
Meeting to be held at 11.30am on Friday
26 July 2024 will be sent to Shareholders
separately from this report. The venue
for the meeting is 2 Chancellor Court,
Occam Rd, Guildford, Surrey, GU2 7AH.
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 pages 82 and
83, the Directors continue to adopt the
going concern basis in preparing this
Annual Report and Accounts.
By order of the Board
Greg Davidson
Group General Counsel &
Company Secretary
4 June 2024
2 Chancellor Court
Occam Road
Surrey Research Park
Guildford
Surrey GU2 7AH
Registered number: 02008246
112
Annual Report and Accounts for the year ended 31 March 2024
DIRECTORS’ REMUNERATION REPORT
This year the Group
and its leadership
have demonstrated
continued progress and
I would like to thank all
of our staff globally for
their contribution to
another successful
year for the Group.”
Tracey Graham
Chair of the Remuneration
Committee
Member
Member
since
Tracey Graham (Chair)
2016
Bruce Thompson
2018
Clive Watson
2020
Rosalind Kainyah
2022
Celia Baxter (from 1 June 2023)
2023
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. The Directors’ Remuneration Report has been approved by
the Board.
2023/24 key achievements
■
Undertook a comprehensive review
of the Directors’ Remuneration
Policy and conducted a Shareholder
consultation exercise involving
Shareholders representing 70% of
the Company’s issued share capital
■
Received strong Shareholder
support for the 2023 Directors’
Remuneration Report
■
Approved bonus outcomes for
2022/23 performance and the
vesting of the 2020 LTIP award
■
Setting of appropriate short and
long-term incentive measures and
targets for Executive Directors and
senior management
■
Considered wider workforce
remuneration and approved the
implementation of out-of-cycle cost
of living adjustments for areas with
high rates of inflation
■
Undertook a review of senior
executive pay below the Board
■
Considered gender pay gap data
and initiatives to close the gap
■
Reviewed other remuneration-
related items within the 2024 UK
Corporate Governance Code and
the latest views from investors and
proxy voting agencies
Areas of focus in 2024/25
■
Review the competitiveness and
structure of remuneration for
Executive Directors and senior
management and its alignment
with strategy, taking into account
pay across the wider workforce
■
Set incentive targets for 2025 for
the annual bonus and LTIP which,
for the second consecutive year, will
include an ESG measure aligned
to our carbon emission net zero
reduction goals
■
Determine incentive outcomes
for Executive Directors and senior
management in respect of 2024
■
Keeping abreast of corporate
governance and regulatory
developments
■
Monitoring of performance against
all personal objectives for the
Executive Directors and Group
Management Committee
■
Sign off on the 2024 Directors’
Remuneration Report and respond
to Shareholder feedback at the
2024 AGM, as required
113
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DIRECTORS’ REMUNERATION REPORT continued
Annual statement
Information not subject to audit.
Dear Shareholder,
On behalf of the Board, it is my pleasure
to present our Directors’ Remuneration
Report for the year ended 31 March
2024. This report comprises:
■
This Annual Statement, which
summarises the work of the
Remuneration Committee (the
“Committee”) in FY 2023/24 and
remuneration outcomes for the year.
■
The new Directors’ Remuneration
Policy (the “Policy”) to be put forward
to a binding Shareholder vote at our
2024 Annual General Meeting.
■
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 2024 and
(ii) how we intend to implement the
Policy in FY 2024/25.
Business performance and
resulting remuneration
outcomes for the year ended
31 March 2024
The Group has delivered another
strong performance, with growth in
underlying operating profit and margin
and underlying EPS. This demonstrates
the strength of our model and the
continued dedication of our global
workforce.
Group sales increased by 1% CER,
underlying operating profit increased
by 16% to £57.2m, underlying profit
before tax increased by 4% to £48.2m,
underlying EPS increased by 5% to
36.8p and free cash flow of £37.0m was
up 12% on last year, which was itself 51%
up on the previous year.
We also made continued progress
on our ESG objectives with carbon
emissions down 47% against our
CY2021 baseline, energy audits now
completed at 81% of sites, thereby
achieving our 2025 target of auditing
80% of sites ahead of schedule, and
a further increase in the share of our
workforce covered by an ISO 45001
occupational health and safety system,
now at 60%, up from 48% last year and
5% two years ago.
The Group also completed five further
high-quality acquisitions, Silvertel in
August 2023, 2J Antennas in September
2023, Shape in January 2024, DTI in
March 2024 and IKN, also in March
2024. The Group also agreed terms to
dispose of its lower margin Santon solar
business unit, enabling it to focus on
its higher margin industrial business.
This shows careful and disciplined
management of the Group’s portfolio of
businesses.
During the year, I was delighted to
meet with colleagues at our new
purpose-built facility at MTC in
Germany, while other Board members
met several colleagues at various other
sites (see page 91 of the Corporate
Governance Report for more details).
This year the Group and its leadership
team have demonstrated continued
progress and I would like to thank all of
our staff globally for their contribution to
another successful year for the Group.
With a clear strategy focused on
long-term, high-quality, structural and
sustainability-aligned growth markets
across Europe, North America and Asia,
a diversified customer base, a strong
order book and pipeline of acquisition
opportunities, the Group is well
positioned to make further progress.
Annual bonus for FY 2023/24
The annual bonus for both Executive
Directors for FY 2023/24 was based on
Group operating profit (60%), simplified
working capital (24%), strategic
objectives (8%) and ESG objectives (8%).
Based on the performance as set out
above, actual underlying operating
profit of £57.2m was between target
and maximum, performance against
the Simplified Working Capital
measure was below threshold
and the strategic and ESG-related
objectives were determined to have
been substantially met. This results
in an overall bonus payout of 63% of
maximum for both Executive Directors.
The Remuneration Committee has
considered whether any adjustment
is required to the formulaic outcomes
to reflect the underlying financial
and non-financial performance of the
business and decided that no such
adjustment is appropriate given the
overall performance of the business
during the year.
In line with the Directors’
Remuneration Policy, 20% of the bonus
will be deferred in shares. Full details of
the bonus for FY 2023/24 are set out in
the Annual Report on Remuneration.
2021 LTIP vesting
The Group Chief Executive and Group
Finance Director received awards under
the LTIP on 29 July 2021 that were based
on relative TSR and EPS performance
criteria, each with an equal weighting.
■
Relative TSR – discoverIE delivered
a TSR of 8.5% over the three-year
period to 31 March 2024, which
ranked the Company between
median and upper quartile of the
TSR peer group, resulting in this
part of the award vesting at 70%.
■
EPS – EPS grew by 64% over the
three-year period, which was in
excess of the maximum target of
12% p.a. growth.
This share price and earnings
performance has resulted in 85% of
these LTIP awards vesting. While the
share price at grant was higher than the
likely vesting share price, the Committee
believes this vesting outcome is
warranted given the strong operational
and financial performance, including
underlying profit increasing by 63% over
the three-year period ending 31 March
2024. Furthermore, the Group delivered
a TSR of 8.5% which was well ahead of
the median (minus 11.5%). No discretion
has been applied to adjust the formulaic
outcomes. These vested awards will be
subject to a two-year holding period.
Review of Executive Directors’
Remuneration
During the year, the Committee
reviewed Executive Directors’ pay
arrangements ahead of the expiry of
the 2021 Directors’ Remuneration Policy.
The Committee concluded that the
current overriding pay structure remains
appropriate. The changes proposed in
the new Policy seek to ensure Executive
Directors are paid fairly for the roles
being undertaken and to take account
of good governance and developments
in market practice. In November 2023, I
wrote to the Shareholders representing
70% of our issued share capital and met
with or received feedback from almost
all we engaged with (covering 65% of
issued share capital). I am very grateful
for all comments and suggestions
received, which have helped shape
our Policy and its implementation in
2024/25.
114
Annual Report and Accounts for the year ended 31 March 2024
Sales (£m)
■ +12% CAGR1
■ +7% CAGR organic1
■ Discontinued ■ Continuing
+96%1
FY18
FY24
223
437
165
Operating EBIT (£m)
■ +27% CAGR1
■ Group total +133%2
■ Discontinued
■ Continuing
■ Central Cost
+236%1
FY18
FY24
24.2
7.5
(7.2)
(12.3)
69.5
EBIT Margin
■ Group margin +6.8ppts2
+5.5ppts1
FY18
FY24
7.6%
13.1%
Underlying EPS
■ +17% CAGR1
■ Group EPS +65%2
+152%1
FY18
FY24
14.6p
36.8p
Business context and
background
Nick Jefferies joined the Group in
January 2009 when the Group’s
market capitalisation was c.£25m and
Simon Gibbins was appointed Finance
Director the following year. Under their
tenure, the Company has transformed
from a FTSE Fledgling Index distributor,
into a FTSE 250 global electronic
engineering group with a market
capitalisation of over £700m.
The Group employs c.4,500 people
with principal operating units located
in Continental Europe, the UK, China,
Sri Lanka, India, and North America.
In FY2024, 41% of sales were derived
internationally from beyond Europe,
of which 25% were from the US and
16% from Asia.
The Group’s success has been
driven by a clear and differentiated
compounding growth strategy based
on steady organic growth accelerated
by carefully selected, value-enhancing
acquisitions. Since 2011, the Group has
completed 26 acquisitions which have
been successfully integrated into the
Group and have increased the scale,
profitability, margin and potential
of the Group, while also increasing
its complexity. The Group has a
disciplined approach to acquisitions
and continues to see significant scope
for further expansion with a number of
opportunities in development.
Over the same period, the Group has
also disposed of four legacy businesses,
completing the exit from the
distribution sector with the sale of Acal
BFi in March 2022.
The Group is committed to reducing
the impact of its business operations
on the environment and was an early
adopter of carbon reduction initiatives,
announcing its first carbon emissions
reduction plan in November 2020.
Additionally, the Group has focused
its selling efforts into markets that
are aligned with a sustainable future
(aligned to the UN Sustainable
Development Goals).
The Group has also strengthened its
wider ESG credentials considerably over
the last three years, which have been
recognised with the award of an ESG
“AA” rating by MSCI and being Regional
(Europe) Top Rated by Sustainalytics.
Within this, the Group has made
excellent progress towards its target of
reducing its carbon emissions, more
recently signing up to the Science
Based Targets Initiative (SBTi) with a
plan to reduce Scope 1 & 2 emissions to
net zero by 2030 and Scope 3 emissions
to net zero by 2040. Since 2021, absolute
emissions have been reduced by more
than 47%.
Nick Jefferies has made the creation
of a high performing and diverse
leadership team a core priority. Under
his tenure, the number of females in
leadership roles has increased from
zero in 2015, 15% in 2021 to 28% now.
Similarly, ethnic diversity has increased,
with four (31%) of the 13 members of our
Group Management Committee being
non-white (up from none in 2021).
Proposed changes to
remuneration
1. Base salaries
It is the Committee’s view that the
Group Chief Executive’s and Group
Finance Director’s base salaries require
an adjustment as they have not kept
pace with discoverIE’s increased size
and complexity or operational, financial
and ESG performance.
Given the above and noting that the
electronics sector is extremely talent
competitive, the Remuneration
Committee felt that it is essential that
both Executives are paid fairly for their
respective roles and that base salaries
reflect their outstanding performance,
leadership and stature. Maintaining
salaries at the current level increases
the risk of salary compression at lower
levels and this may impact our ability
to retain or recruit successfully into our
leadership team.
The Committee has to date taken a
prudent approach to executive pay
increases, taking into account the views
of our stakeholders and noting the
scrutiny and challenge resulting from
above workforce increases to Executive
Director remuneration.
Shareholders were consulted on the
following proposed changes and we
were grateful to the vast majority who
were supportive of the increases:
■
The Group Chief Executive’s base
salary is increased by 11.3% from
£530,082 to £590,000
■
The Group Finance Director’s base
salary is increased by 13.0% from
£346,984 to £392,000
To provide a sense check on salary
positioning, the Committee undertook
a benchmarking exercise and took
comfort that the proposed salary
positioning will place the Group
Chief Executive and Group Finance
Director at around the median of FTSE
companies of discoverIE’s size, noting
that the market study was based on
salaries disclosed in early 2023 which
1
Continuing operations only. Custom Supply was disposed of in FY22
2 Group total as reported at the time, i.e. FY18 figures including Custom Supply. FY18 EBIT of £24.5m, EBIT margin of 6.3% and underlying EPS of 22.3p
115
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DIRECTORS’ REMUNERATION REPORT continued
arguably understates the current
position, given 2023/24 Executive
Director salary inflation across the
market of around 4%. Further details
can be found on pages 137 to 138.
As we approached the end of FY
2023/24 and budgets were being
developed for 2024/25, the Executives
requested that any increases to their
salaries are not implemented in light of
current macroeconomic volatility and
current cost pressures. Salary increases
continue to be selectively implemented
across the rest of the workforce. The
Committee commends the Executive
Directors for the proposed freeze to
their salaries, notwithstanding the very
strong support from our Shareholders.
The Committee has agreed to not
increase salaries at the current time
and we will seek to apply the above
proposed increases at an appropriate
time, either later this year or next.
2. Annual bonus deferral
Upon reviewing bonus deferral, the
Committee noted that the method
of deferral and proportion deferred
are out of line with good and typical
practice. Currently, 20% of the net of
tax bonus is deferred in shares and
these shares become wholly owned by
the Executives and therefore are not
subject to forfeiture (for example, in bad
leaver circumstances).
Under the proposed Policy, the deferred
bonus element is granted as a share
award (in the form of nil cost options)
which vest after three years. The
deferred bonus award will be subject to
good and bad leaver provisions as well
as malus and clawback provisions.
The current Executives have significant
shareholdings with the Group Chief
Executive and Group Finance Director
holding shares with values of over
1,600% and 780% of their respective
base salaries. Their shareholding
guideline is set at 250% of base salary,
which is higher than typical market
levels. The Committee recognises that
deferring 20% of bonus is lighter than
typical practice but also appreciates
the significant equity stakes held by
the management team. As a result, the
new Policy will increase bonus deferral
to 33.3% of bonus but only in cases
where an Executive’s shareholding
is below his or her shareholding
guideline. For those holding shares
at or higher than the shareholding
guideline, deferral will continue to be
20% of bonus earned.
3. LTIP grant levels
The current LTIP grant levels for the
Group Chief Executive and Group
Finance Director are 175% and 160%
of salary with a Policy limit of 175% of
salary. Reflecting the performance of
the business and the executives, along
with the business’s increased scale
and complexity, we are proposing to
increase the overall LTIP Policy limit
to 200% of base salary to incorporate
additional headroom over the life of
the Policy. However, LTIP awards will be
made at the currently prevailing 175%
and 160% of salary levels in 2024/25.
In response to views heard, the
Committee will engage with
Shareholders in advance of the
additional headroom being used
and will continue to set challenging
performance targets.
Application of policy in 2024
■
Base salary: As set out above, at the
request of the Executive Directors,
the proposed salary increases for
the Group Chief Executive and
Group Finance Director will not
be implemented from 1 April
2024 and will remain unchanged.
The Committee will consider the
appropriate time to apply the
increases. For context, the Group
has employees in 20 countries,
operating across 25 businesses.
Base salary increases across the
Group for FY 2024/25 vary according
to local conditions, with over 20% in
some countries.
■
Pension: The pension contribution
for Executive Directors is an
entitlement of up to 8% of salary,
the same as the UK workforce rate.
■
Bonus: The bonus opportunity will
be 150% of salary for the Group Chief
Executive and 125% of salary for the
Group Finance Director, in line with
policy. In a change from previous
years, the simplified working capital
measure will be replaced with
operating cash flow. Operating
cash flow is an important KPI, is
arguably more transparent for
investors and is more aligned to the
organic sales growth objectives in
the budget. Therefore, the FY24/25
bonus measures will be underlying
operating profit (60%), operating
cash flow (24%) and non-financial
objectives (16%). The non-financial
objectives (16%) element will
continue to be split into two equal
parts with 8% based on strategic
objectives and the other 8% on ESG-
related objectives.
■
LTIP: The award to the Group
Chief Executive will be 175% of
salary and 160% of salary for the
Group Finance Director. The LTIP
measures will continue to be split
between relative TSR (45%), EPS
growth (45%) and an ESG target
(10%) related to achieving carbon
emission reductions in line with
our net zero goals. Further details
of the approach for 2024/25 and
the performance targets can be
found in the Annual Report on
Remuneration.
The Remuneration Committee will
consider the share price at the time of
grant when finalising LTIP award levels,
expected to be in June 2024. Based
on the prevailing share price being
around 20% lower than the 2023 grant
price and around 14% lower than the
average of the last three grants, it is not
anticipated that any adjustment to the
award level will be made.
There will be three votes at the
Annual General Meeting on 26 July
2024 to approve (i) this Directors’
Remuneration Report, (ii) the new
Directors’ Remuneration Policy, and (iii)
the Deferred Share Bonus Plan. I would
once again like to thank Shareholders
for their time and input into the design
of our new Policy and the approach to
paying executives in FY2025. I hope you
find the information in the report clear
and are able to support both resolutions.
If you have any questions on our Policy
or on this Report then please contact
me via the Company Secretary.
In October 2024, having served a
full nine year term, I will retire from
the Board of discoverIE. It has been
a privilege to serve, and witness the
Group successfully delivering its
growth strategy, entering the FTSE
250 and delivering consistent strong
Shareholder returns over the period.
The Group welcomed Celia Baxter as a
Non-Executive Director on 1 June 2023,
with Celia joining the Remuneration
Committee at the same time. Celia is
a highly experienced Remuneration
Committee Chair and will succeed
me as Chair of the Committee on 1
November 2024. I wish Celia, the Board
and all discoverIE colleagues continued
success in the future.
Tracey Graham
Chair of the Remuneration Committee
116
Annual Report and Accounts for the year ended 31 March 2024
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 2018 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.
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.
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.
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.
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.
Alignment to culture
The variable incentive schemes and performance
measures are designed to be consistent with the Group’s
purpose, values and strategy.
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 2023 are also shown.
Corporate performance for the year
REVENUE
£437.0m
UNDERLYING OPERATING PROFIT
£57.2m
UNDERLYING EPS
36.8p
Remuneration outcomes for the Executive
Directors for the year ended 31 March 2024
Nick
Jefferies
£000
Simon
Gibbins
£000
Salary FY 2023/24
530
347
Bonus (£k and
as % of salary)
500
94%
273
79%
Taxable benefits
12
13
Pension benefits/
allowance
42
28
Value of LTIP vesting
460
275
Single figure of total
remuneration
1,545
936
The annual bonus for the year ended 31 March 2024 was
based on the achievement against financial and non-
financial measures. The bonus outcomes for the year
were 94% of salary for the Group Chief Executive and 79%
for the Group Finance Director. In accordance with the
Remuneration Policy, 20% of the bonus will be deferred in
shares.
LTIP awards were granted to both Executive Directors on
29 July 2021. These awards were based on relative TSR and
EPS performance, measured for the three-year period ended
31 March 2024. The Company’s EPS grew by 64% leading to
full vesting of this element and TSR growth of 8.5% led to 70%
of this element vesting, resulting in 85% vesting overall. The
estimated value of the awards are shown in the above table.
Awards are subject to a two-year holding period.
117
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discoverIE Group plc Innovative Electronics
DIRECTORS’ REMUNERATION REPORT continued
Directors’
Remuneration
Policy
This part of the Directors’
Remuneration Report sets out the
Directors’ Remuneration Policy which
will be subject to Shareholder approval
at the Annual General Meeting on 26
July 2024 and it 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) Regulations
2008 (as amended). The Policy is
expected to remain in place until its
normal renewal which will be the 2027
Annual General Meeting at the latest.
The Committee 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
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 Committee
has developed a set of principles
and aims to ensure that directors’
remuneration is:
■
Aligned with discoverIE ’s strategy
at this stage of its development and
supports the business’s medium
and long-term plans
■
Better aligned 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 UK Corporate
Governance Code
■
Able to attract and retain high
calibre Executive Directors and
senior managers in a challenging
and competitive business
environment
■
Simple, 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 its approach to paying
Executive Directors
■
Considers market practice in
terms of the structure and levels of
Executive remuneration.
Changes to the Policy proposed
for 2024
The Committee is proposing to make
some revisions to the policy, within the
current overall framework. The main
changes can be summarised as follows:
■
Bonus deferral: the proportion of
bonus that is deferred in shares
has been increased to 33.3% of
bonus earned for those Executive
Directors that have not achieved
their shareholding guideline. For
those at or above the shareholding
guideline, the proportion of bonus
deferred will remain at 20%. In
respect of bonus earned from
2024/25 and thereafter, bonuses
will be deferred gross of tax under
the Deferred Share Bonus Plan.
■
The LTIP individual policy limit has
been increased to 200% of salary
from 175% of salary.
■
In the event of cessation of
employment, for good leavers,
deferred bonus awards will vest on
the earlier of their normal vesting
dates or the second anniversary of
ceasing to be a Director. Similarly,
for good leavers, LTIP awards will
normally vest on their normal
vesting dates with holding periods
expiring on the earlier of their
normal two-year expiry or the
second anniversary of ceasing to be
a Director. This aligns with the two-
year post-cessation shareholding
guideline that continues to apply in
the 2024 Policy.
118
Annual Report and Accounts for the year ended 31 March 2024
Remuneration Policy table
Element,
purpose and
link to strategy
Operation
Maximum opportunity
Performance targets
Base salary
To recognise
knowledge, skills
and experience,
as well as reflect
the scope and
size of the role
and to attract and
retain quality staff.
Salaries are normally reviewed
annually with increases typically
effective from 1 April.
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.
There is no prescribed
maximum or maximum
increase.
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.
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.
Benefits
To help retain
employees
and remain
competitive in the
marketplace.
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 and provide tax
equalisation, as appropriate.
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.
Not applicable
Pension
To facilitate long-
term savings
provisions.
The Company operates a defined
contribution pension scheme.
Executive Directors may receive
a contribution to the pension
scheme or take a cash allowance
in lieu of pension contributions.
The maximum contribution
rate for current and future
Executive Directors will be
the workforce contribution
rate in the home country
which is currently 8% of salary
in the UK.
Not applicable
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DIRECTORS’ REMUNERATION REPORT continued
Element,
purpose and
link to strategy
Operation
Maximum opportunity
Performance targets
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.
One third of any bonus earned
(from 2025) will be deferred into
share awards which vest after
three years. For Executive Directors
that have met their shareholding
guideline, deferral reduces to 20%
of any bonus earned. Dividends
may accrue on deferred bonus
shares.
Malus and clawback provisions
apply to cash and deferred
elements of the bonus. Further
details are provided in the notes to
the Policy table.
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.
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)
underlying operating profit,
working capital and cash flow.
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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Annual Report and Accounts for the year ended 31 March 2024
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.
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).
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 provisions
apply to vested and unvested
LTIP awards. Further details are
provided in the notes to the Policy
table.
Vested share awards are settled
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.
The maximum award in
respect of any one financial
year is an award over shares
of market value at grant of
200% of salary (and 175% of
salary for FY2024/25). The
Committee will engage
with Shareholders prior to
increasing award levels from
FY2024/25 levels.
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 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.
Shareholding
guidelines
To further align
the interests
of Executives
with those of
Shareholders.
Executive Directors are expected
to accumulate shares to the value
of the relevant shareholding
requirement.
Wholly owned shares or share
awards held which are no longer
subject to performance conditions
count towards the requirement
(on a net of tax basis, if applicable).
Shares held by a Director’s spouse
or dependents count towards the
guideline.
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.
The current Executive
Directors are required to build
up and hold shareholdings to
the value of 250% of salary.
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 29 July
2021. This excludes any share
awards vesting from share
plan awards made before
this date and excludes shares
purchased with own funds.
Not applicable.
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DIRECTORS’ REMUNERATION REPORT continued
Element,
purpose and
link to strategy
Operation
Maximum opportunity
Performance targets
Chairman and
Non-Executive
Director fees
Provision of a
competitive
fee to attract
Non-Executives
who have a
broad range of
experience and
skills
Fees are normally reviewed
annually to ensure that they reflect
an individual’s time commitment
and responsibilities.
Annual fees are paid in 12 equal
monthly instalments during the
year.
Fees for the Non-Executive
Directors are determined by the
Chairman and the Executive
Directors. 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 and no Director is
involved in any decision regarding
their own remuneration.
Additional fees, over and above
the base fee payable to the Non-
Executive Directors, are payable
for chairing the Audit and Risk,
Remuneration and Sustainability
Committees and for acting as
Senior Independent Director.
Additional fees may be provided
for chairing any other major
Committee established by the
Board or for material additional
work undertaken.
The Chairman’s fee is reviewed
annually and is set by the
Committee (excluding the
Chairman). The fee payable to
the Chairman is typically an all-
encompassing fee for all duties
performed.
There is no limit on the
individual fee level.
Not eligible to participate
in any performance related
elements of remuneration.
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Annual Report and Accounts for the year ended 31 March 2024
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
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 and the delivery of
key strategic areas of importance for
the business. Other measures may
apply in future years depending on the
priorities at the start of each year under
the three-year Policy period.
The LTIP measures currently used are
EPS growth targets, relative TSR and
ESG targets. These measures were
identified as those most relevant
to driving sustainable bottom-line
business performance, providing
value for Shareholders, and ensuring
the Group delivers on its ESG
commitments for the benefit of all
stakeholders.
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.
Malus and clawback
Malus and clawback provisions apply to
the cash and deferred elements of the
annual bonus and to LTIP awards. The
malus and clawback provisions may
be enforced in the event of material
misstatement, serious misconduct,
errors in calculation or calculations
based on inaccurate or misleading
information or assumptions, corporate
failure (entailing the appointment
of an administrator or liquidator)
and material reputational damage.
Malus or clawback as relevant may
be effected in a number of ways
including by a reduction in the amount
of any future bonus or subsisting
award, the vesting of any subsisting
award or future share award and/or a
requirement to make a cash payment.
In respect of bonus or deferred bonus
the relevant discovery period expires
three years from the payment of the
bonus or grant of the deferred award
as relevant. In respect of LTIP awards,
the relevant discovery period expires on
the second anniversary of the vesting
of the awards.
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 or not 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)
■
whether and how 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
■
the ability within the Policy to vary
and/or adjust targets and/or set
different measures or weightings
for inflight annual bonus 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
■
the ability to use its judgement to
make adjustments to published
outturns for significant events or
changes in the Company’s asset
base that were not envisaged when
the targets were originally set or for
changes to accounting standards,
to ensure that the performance
conditions achieve their original
purpose
■
reduce or apply other restrictions
to an award if, after taking into
account all circumstances known
to the Committee, it determines
that the amount which a
participant would otherwise receive
pursuant to an incentive award in
accordance with its terms would
result in the participant receiving
an amount which the Committee
considers cannot be justified or
which the Committee considers to
be an unfair or undeserved benefit
to the participant
■
override formulaic outcomes to
the bonus and the LTIP in order to
ensure that outcomes reflect true
underlying business performance
or to reduce awards if the business
has suffered an exceptional
negative event in order to ensure
that outcomes reflect overall
corporate performance
■
reduce or waive the post-
employment shareholding
requirement in the event of
ill health or death. The post-
employment shareholding
requirement would normally
fall away on a change of control,
although the Committee reserves
the right to continue its application
where there is a merger involving a
share-for-share exchange
■
amend the Policy with regard to
minor or administrative matters
where it would be, in the opinion of
the Committee, disproportionate to
seek or await Shareholder approval
Any discretion exercised by the
Committee in the adjustment of
performance conditions will be fully
explained to Shareholders in the
relevant report.
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DIRECTORS’ REMUNERATION REPORT continued
Legacy arrangements
The proposed and previous directors’ remuneration policies give authority to the Company to honour any commitments
entered into with current or former directors (that have been disclosed to Shareholders in previous remuneration reports)
or internally promoted future directors (in each case, such as the payment of a pension or the unwind of legacy share plans).
Details of any payments to former directors will be set out in the relevant remuneration report as they arise.
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
Recruitment policy
Base salary
The salary positioning for new Executive Director appointments will take into account
a number of factors, including the current pay for other Executive Directors (in situ and
departed), market levels of pay, the expertise, skills and experience of the individual, business
need, location and his or her 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 (above the
workforce increase) to bring the salary to the appropriate market position over time.
Benefits
Benefits provision would be in line with the Policy.
The Committee may agree that the Company will meet appropriate relocation costs and/or
incidental expenses or tax equalisation as appropriate.
Pension
Pension contribution (or a cash allowance in lieu of contribution) provision will be no more
than the general workforce contribution rate for that location in place at the time.
Annual bonus
Eligible to take part in the annual bonus, with a maximum bonus opportunity not in excess of
the limits set out in the policy. Participation will be on a pro rata basis to reflect the time in the
role in the year of appointment.
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). The Committee may deem it appropriate to set different LTIP
performance conditions than apply for other awards made during the year of appointment.
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 normally take account of the nature, time horizons and
performance requirements attached to the awards 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 Policy.
124
Annual Report and Accounts for the year ended 31 March 2024
Service contracts
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 Executive Directors.
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 three-month notice periods (six months for the Chairman).
Name
Role
Date of original
appointment
Expiry of current term
Bruce Thompson
Chairman
26 February 2018
25 February 2027
Nick Jefferies
Group Chief Executive
5 January 2009
12 months by either Director or Company
Simon Gibbins
Group Finance Director
10 June 2010
12 months by either Director or Company
Tracey Graham
Non-Executive Director
1 November 2015
31 October 2024
Rosalind Kainyah
Non-Executive Director
1 January 2022
31 December 2024
Clive Watson
Non-Executive Director
2 September 2019
1 September 2025
Celia Baxter
Non-Executive Director
1 June 2023
31 May 2026
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.
Policy on payment for loss of office
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.
The table below sets out key provisions for Executive Directors leaving the Company under their service contracts and the
incentive plan rules.
Element
Termination Policy
Fixed pay
On termination, the Company may 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 unexpired 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.
Annual
bonus
Upon cessation of employment, there will be no entitlement to bonus for the year of exit and any unvested
Deferred Share Bonus Plan (“DSBP”) awards shall ordinarily lapse.
If identified as a “good leaver”1 for the purposes of the bonus plan, the bonus payout will be pro-rated for
time based on the Committee’s reasonable assessment of the achievement of the performance measures
in respect of the relevant financial year. The bonus for the year of termination may be paid in cash or a mix of
cash and deferred share bonus awards.
If identified as a “good leaver”1 under the DSBP, awards shall vest on the earlier of the normal vesting date
and the second anniversary of cessation other than in the case of death where awards vest early.
LTIP
Upon cessation of employment, any unvested LTIP awards shall ordinarily lapse. Any vested awards which
remain subject to a holding period will not be subject to forfeiture.
If identified as a ‘good leaver’1 under the LTIP, outstanding awards will normally vest on their normal vesting
dates (or on such earlier date as the Committee may determine, for example in the case of death), normally
with a pro rata reduction for service in the normal vesting period up until the date of leaving and in each
case subject to the outcome of the performance conditions (assessed on normal timetable or early as
relevant). Holding periods will expire on the earlier of their normal two-year expiry or the second anniversary
of ceasing to be a Director.
1
Good leaver reasons include cessation of employment by reason of ill health, injury, disability, redundancy, retirement with the agreement of the Committee, the
participant’s office or employment being with a company which ceases to be a Group member or relating to a business which is transferred to a person who is
not a Group member, or for any other reason at the Committee’s discretion.
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DIRECTORS’ REMUNERATION REPORT continued
The Committee may also agree to make payments in reimbursement of a reasonable level of outplacement and legal fees
and tax thereon in connection with a settlement agreement. The Committee may agree payments it considers reasonable
in settlement of legal claims. This may include an entitlement to compensation in respect of leavers’ statutory rights under
employment protection legislation in the UK or in other jurisdictions.
Change of control or restructuring
On a change of control, all DSBP and LTIP awards will be released, subject to performance requirements and will ordinarily be
pro-rated 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.
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.
Illustration of the application of the Executive Directors’ Remuneration Policy
The bar charts below illustrate some possible outcomes of the application of the Policy to be proposed to Shareholders at the
Annual General Meeting on 26 July 2024 for the year ending 31 March 2025.
Group Chief Executive
Group Finance Director
Minimum
On-target
£0
£250
£500
£750
£1,000
£1,250
£1,500
£1,750
£2,000
£2,250
£2,750
£2,500
£585k
£1,214k
£2,307k
£2,771k
£388k
£743k
£1,376k
£1,654k
£0
£250
£500
£750
£1,000
£1,250
£1,500
£1,750
£2,000
£2,250
£2,750
£2,500
48%
100%
33%
19%
Maximum
25%
35%
40%
Max with
growth
21%
29%
33%
17%
£’000
Minimum
On-target
100%
52%
29%
19%
Maximum
28%
32%
40%
Max with
growth
23%
26%
34%
17%
£’000
£3,000
£3,000
Fixed
Annual Bonus
Long-term incentive
Share price growth
1
Minimum in the bar charts above is fixed remuneration only (i.e., 2025 salary, pension and the value of 2024 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 175% and 160% 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 LTIP award vests in full (based on an award with a face value of 175% and 160% 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
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.
126
Annual Report and Accounts for the year ended 31 March 2024
Comparison with remuneration
policy for other employees
The main difference in the
Remuneration Policy between the
Executive Directors and employees
in general is the split of fixed and
performance related pay, such as
bonus and long term incentives.
Overall the percentage of performance
related pay, in particular longer
term incentive pay, is greater for
the Executive Directors. This reflects
that Executive Directors have more
freedom to act and the consequences
of their decisions are likely to have a
broader and more far reaching time
span of effect than those decisions
made by employees with more limited
responsibility. As a consequence
only Executive Directors, and other
key senior employees in the Group,
participate in the LTIP. Differing bonus
arrangements (which are normally
discretionary) operate elsewhere in
the organisation and depend on the
specific role and the country in which
the employee operates.
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. Employees are entitled
to standard benefits according to their
country of employment.
Consideration of employment
conditions elsewhere in the
Group
The Committee is provided annually
with information on the salaries and
proposed increases for the senior
direct reports of the Chief Executive
Officer, as well as data on the average
salary increases for teams in each
region within the Group. In addition,
the Committee reviews and agrees all
grants of share awards.
The Committee considers the
general base salary increase within
the geographical regions for the
broader employee population when
determining the annual salary
increases for the Executive Directors
and is cognisant of the Group’s overall
employment arrangements when
reviewing and implementing the
Executive Directors’ Remuneration
Policy.
Employee Engagement
As outlined on pages 90 to 93, there
are a range of employee engagement
initiatives in place across the Group
and, as part of this employee
engagement, the Company explains
how its strategy links to remuneration
and provides the opportunity for
employees to ask questions and
provide feedback on that strategy.
The Group also consults on global
inflationary pressures and pay rises,
and will take local conditions into
account, with higher rises being
implemented in those countries where
staff face the greatest pressure. As
noted in the Group’s Human Rights
Policy (available at www.discoverieplc.
com), the Group states that it is
committed to paying wages at rates
that are meaningfully ahead of local
minimum statutory rates.
Consideration of Shareholder
views
The Committee receives updates on
the views of Shareholders and their
representative bodies on best practice
either directly or from its independent
adviser, and takes these into account
when making decisions on executive
pay. The Committee seeks the views
of key Shareholders on matters of
remuneration in which it believes
they may be interested. As part of the
design of this Directors’ Remuneration
Policy, the Committee wrote to its
largest Shareholders, representing
70% of our issued share capital, and
met with or received feedback from
almost all we engaged with (covering
65% of issued share capital). The
feedback received was very supportive
and this comprehensive Shareholder
consultation exercise helped shape
the Policy that is being put forward
for Shareholder support at the Annual
General Meeting on 26 July 2024.
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DIRECTORS’ REMUNERATION REPORT continued
Annual Report on Remuneration
The table below shows the total remuneration earned by Executive Directors for the year ended 31 March 2024 and the prior year.
Single total figure of remuneration for each Executive Director (audited)
Salary
£000
Benefits1
£000
Pension
£000
Bonus2
LTIP3
£000
Total
£000
Total
Fixed
Remuneration
Total
Variable
Remuneration
£000
Nick Jefferies
FY24
530
12
42
500
460
1,545
585
961
FY23
510
12
68
577
1,079
2,245
589
1,656
Simon Gibbins
FY24
347
13
28
273
275
936
388
548
FY23
334
12
27
315
531
1,218
373
846
1
Taxable benefits comprise car allowance (£9,000 each) and family medical insurance.
2 For performance in the year under review, a bonus of 94% and 79% of salary was earned by Nick Jefferies and Simon Gibbins, respectively. Further details of
performance against the targets can be found on pages 128 to 130. In accordance with the Remuneration Policy, 20% of these bonuses will be deferred in shares.
The values in the above table include the cash and deferred elements in line with the reporting requirements. No discretion was applied by the Remuneration
Committee.
3 The LTIP award granted to Nick Jefferies and Simon Gibbins on 29 July 2021 will vest on 29 July 2024, with 85% vesting. Further details of performance against
the targets can be found on page 131. The original awards comprised 74,482 awards for Nick Jefferies and 44,521 awards for Simon Gibbins. Based on the average
three-month share price to 31 March 2024 of £7.27, the estimated total values of the vested awards are £460,264 for Nick Jefferies and £275,119 for Simon Gibbins.
As the share price at the date of grant (£9.87) is higher than the three-month average share price to 31 March 2024 (£7.27), none of the FY24 LTIP values in the
above table are attributable to share price growth. No discretion was applied by the Remuneration Committee. Vested awards will attract dividend equivalents for
the period between the date of grant and the earlier of the end of the two-year holding period or the date of exercise.
The LTIP values for FY23 were estimated last year based on the 3-month average share price to 31 March 2023. The values have been updated to reflect the actual
share price on the vesting date (£8.49).
Single total figure of remuneration for Non-Executive Directors (audited)
Basic fee
Committee Chair fees
SID fee
Total
FY24
£
FY23
£
FY24
£
FY23
£
FY24
£
FY23
£
FY24
£
FY23
£
Bruce Thompson1
187,200
104,167
–
–
–
5,833
187,200
110,000
Celia Baxter2
43,750
–
–
–
–
–
43,750
–
Tracey Graham3
52,500
50,000
10,000
10,000
10,000
4,167
72,500
64,167
Rosalind Kainyah
52,500
50,000
10,000
10,000
–
–
62,500
60,000
Clive Watson
52,500
50,000
10,000
10,000
–
–
62,500
60,000
Malcolm Diamond4
–
104,000
–
–
–
–
–
104,000
1
Appointed Chairman on 1 November 2022.
2 Joined the Board on 1 June 2023.
3 Appointed as Senior Independent Director (“SID”) on 1 November 2022.
4 Retired on 1 November 2022.
128
Annual Report and Accounts for the year ended 31 March 2024
Incentive outcomes for Executive Directors for the year ended 31 March 2024
Annual bonus in respect of performance for the year (audited)
The maximum bonus opportunity for the year under review was 150% and 125% of salary for the Group Chief Executive and
the Group Finance Director, respectively. Annual bonuses for the year under review were based on a sliding scale of operating
profit targets (60%), simplified working capital (24%) and the achievement of non-financial objectives (16%).
Based on the performance during the year, profit of £57.2m was between target and maximum and Simplified Working
Capital of 24.7% was below threshold. Non-financial objectives were determined to have been substantially met. This
performance has resulted in bonuses of 63% of maximum.
Full details, including the targets set and performance against each of the metrics, are provided in the table below:
Weighting
Threshold1
Target
(50%
payable)
Maximum
(100%
payable)
Actual
Bonus
earned
(% of
maximum)
Group underlying operating profit (£m)
60%
£46.5m
£53.1m
£59.7m
£57.2m
81%
SWC2
24%
24.2%
23.0%
21.9%
24.7%
0%
Strategic objectives
8%
see below
90%
ESG objectives
8%
see below
90%
Outcome (% of max)
63%
1
Threshold payout under the underlying operating profit target is 10% of salary for both Directors and under the Simplified Working Capital measure is nil
2 Simplified Working Capital (“SWC”) is calculated based on the average of trade payables and receivables and inventories across the financial year, as a percentage
of total Group revenue
Each Executive Director was given a number of individual non-financial strategic and ESG objectives, tailored to their role and
to business requirements in the year. Nick Jefferies and Simon Gibbins each substantially achieved these objectives.
Nick Jefferies
Objective
Performance
Assessment
General Non-Financial Objectives
1.
Design wins
■
Design wins up 23%
Achieved
2.
Acquisitive growth
■
Completed the acquisitions of Silvertel, 2J
Antennas, Shape, DTI and IKN. Also sold the
Santon solar business unit
Achieved
3.
Improve margins
■
Underlying operating margin up 1.7% CER to
13.1% CER alongside 16% growth in operating
profit to £57.2m
Achieved
4.
Develop international investor base
■
Non-UK investors increased
■
ESG investors increased
Achieved
ESG Objectives
1.
Reduce carbon emissions on an absolute basis
towards CY2025 target of 65%
■
CY2023 carbon emissions reduced by 47% in
line with CY2025 goal
Achieved
2.
Embed new Group Management Committee
(“GMC”)
■
Achieved and maintained diversity at Senior
Management level
Achieved
3.
Define and monitor Group wide ESG
objectives.
■
Achieved further improvements in ISO 14001
and ISO 45001 coverage
Achieved
129
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DIRECTORS’ REMUNERATION REPORT continued
Simon Gibbins
Objective
Performance
Assessment
General Non-Financial Objectives
1.
Equity and debt funding to support
acquisition plans
■
Funded five acquisitions in the year
Achieved
2.
Opex and capex management
■
Managed successfully throughout the year
Achieved
3.
Develop US and European investor base
■
Non-UK investor base increased
Achieved
4.
Complete auditor tender process
■
Audit tender process for FY2025 successfully
completed (see Audit & Risk Committee Report)
Achieved
5.
Embed Group IT function as a support service
within a decentralised group
■
New IT function contributing to improvements
Achieved
ESG Objectives
1.
Continue to develop and support ESG
initiatives and reporting across the Group
■
ESG initiatives and targets set and monitored as
planned
Achieved
2.
Further develop Group Risk and Internal
Audit function and finalise preparation for
UK BEIS reforms
■
Achieved
Achieved
3.
Develop ESG investor base
■
ESG investors increased
Achieved
4.
Development of internal Finance teams
■
Internal moves completed to support the
business
Substantially
achieved
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 and Simon Gibbins a 90% payout for this element of their respective
bonuses. This means that, for the year under review, Nick Jefferies earned a bonus of 94% of salary and Simon Gibbins earned
a bonus of 79% of salary. In accordance with the Remuneration Policy, 20% of all bonuses are deferred into shares, as follows:
Bonus
outcome
(% of
maximum)
Bonus
opportunity
(% of salary)
Bonus
outcome
Cash
element
80%
Deferred
share
element
20%
Nick Jefferies
63%
150%
£500,397
£400,318
£100,079
Simon Gibbins
63%
125%
£273,076
£218,461
£54,615
Deferred shares must be held for three years after grant. Other than the malus and clawback terms referred to on page 123,
there are no conditions, whether performance or non-performance related, attached to these shares.
130
Annual Report and Accounts for the year ended 31 March 2024
2021 LTIP vesting (audited)
LTIP Awards were granted on 29 July 2021 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 excluding Investment
Trusts (50%) and the growth in underlying EPS over the three-year period ending 31 March 2024 (50%). The specific targets
were as follows:
Relative TSR ranking against the FTSE Small Cap excluding Investment Trusts (50% weighting)
Relative TSR ranking against peers
% of award vesting
Actual performance
Upper quartile (or above)
100%
discoverIE’s TSR over the
period was 8.5%, which
was between median and
upper quartile, resulting in
70% vesting
Between median and upper quartile
Straight-line vesting between 25% and 100%
Below median performance
0%
EPS Performance (50% weighting)
EPS growth from FY21 to FY24
% of award vesting
Actual performance
Equal to or above 12ppts p.a.
100%
64ppts growth over the
three-year period, which
was higher than the
maximum target of
12ppts p.a., resulting in
100% vesting
Between 5ppts p.a. and 12ppts p.a.
Straight-line vesting between 25% and 100%
Below 5ppts p.a.
0%
The EPS measure was met in full, leading to vesting of 100% of that element, and the TSR measure vested 70% and, therefore,
85% of the 2021 LTIP award will vest on 29 July 2024. The EPS element was subject to the Committee being satisfied as to the
Group’s return on capital employed (“ROCE”) over the performance period. The Committee has considered ROCE for that
period and was satisfied that the EPS element should vest in full. The vested awards are subject to a two-year holding period,
during which period dividends will accrue on the vested awards. No dividends accrued between the date of grant and vesting.
Director
Date of
grant
Number
of awards
granted
Vesting
outcome
Number
of vested
awards
Value of
vested
awards
Nick Jefferies
29 July 2021
74,482
85%
63,310
£460,264
Simon Gibbins
29 July 2021
44,521
37,843
£275,119
The estimated value of the vested awards is based on the three-month average share price to 31 March 2024 (£7.27).
Share awards made during the year (audited)
The following LTIP awards were granted on 14 June 2023:
Director
Face value
as % of
salary
Face value1
Number
of shares
Threshold
vesting
(% of
face value)
Maximum
vesting
(% of
face value)
End of
performance
period
Nick Jefferies
175%
£927,644
100,794
25%
100%
31 March 2026
Simon Gibbins
160%
£555,174
60,323
31 March 2026
1
The face value of the awards is based on a share price of £9.2034, being the three-day average share price directly prior to the grant of the award.
In addition to the grants set out above, 5,655 awards were granted to Simon Gibbins (with a face value of £52,043, based on a
share price of £9.20), in return for him bearing a proportion of the Company’s liability to employer’s National Insurance arising
on exercise. The additional award ensures he is in a neutral position on an after-tax basis, assuming unchanged tax rates. The
award was granted on the same date and under the same conditions as those set out in the table above.
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DIRECTORS’ REMUNERATION REPORT continued
Vesting of these awards is subject to the following performance conditions:
Relative TSR ranking against the FTSE 250 excluding Investment Trusts (45% 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%
EPS Growth (45% weighting)
EPS Growth
% of award vesting
Equal to or above 13ppts per annum
100%
Between 5ppts and 13ppts per annum
Straight-line vesting between 25% and 100%
Below 5ppts per annum
0%
Carbon Emission Reduction (10% weighting)
Reduction in carbon emissions between CY2021 and CY2025% of award vesting
Equal to or above 65%
100%
Between 45% and 65%
Straight-line vesting between 25% and 100%
Below 45%
0%
For the TSR and EPS elements, performance is measured over three years from 1 April 2023 to 31 March 2026. For the TSR
measure, one-month average prices are used prior to the start and end of the performance period. In the case of the EPS
measure, performance is measured based on growth from FY 2022/23 to FY 2025/26. For the carbon emissions element,
performance is measured based on the reduction in the Group’s carbon emissions between CY2021 and CY2025 measured on
an underlying basis (i.e. like-for-like disregarding acquisitions) and on the assumption that the methodology used to calculate
CY2025 outcome is no harder than that used to calculate CY2022 carbon emissions.
Vested shares will be subject to an additional two-year holding period.
Deferred bonus share awards were granted on 26 June 2023. As part of the terms of the bonus relating to FY2022/23, 20% of
the annual bonus for both Executive Directors was deferred into shares.
Director
Grant date
Face value1
(20% of
FY22
bonus, net
of tax)
Number
of shares
Vesting
date
Nick Jefferies
26 June 2023
£61,213
7,179
26 June 2026
Simon Gibbins
26 June 2023
£33,385
3,915
26 June 2026
1
Shares were acquired at a market price of £8.45 per share
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 single figure table on page 127 of this Report and were based on a
contribution rate of 8%, in line with the UK employee pension contribution rate.
132
Annual Report and Accounts for the year ended 31 March 2024
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. Values
are calculated using the closing share price on 28 March 2024 (£7.57). No awards were exercised or lapsed in the year. The
performance criteria for the 2023 LTIPs are set out on page 132.
Movements during the year
Number
held at
31.03.23
Vested
but not
exercised
Share
value at
31.03.2024
£
Grant
date
When
exercisable
Number
held at
31.03.2024
Granted
Vested
Exercised
Lapsed
Nick
Jefferies
242,788(v)
–
–
–
–
242,788
242,788
1,837,905
31/03/2017
Mar 2022
to Mar 2027
123,998(v)
–
–
–
–
123,998
123,998
938,665
29/03/2018
Mar 2023
to Mar 2028
166,236(v)
–
–
–
–
166,236
166,236
1,258,407
30/04/2019
Apr 2024
to Apr 2029
127,039(v)1 2
–
–
–
–
127,039
127,039
961,685
30/06/2020
Jun 2025
to Jun 2030
63,310(v)3 8
–
63,310
–
11,172
74,482
63,310
479,257
29/07/2021
Jul 2026
to Jul 2031
131,364(nv)
–
–
–
–
131,364
–
994,425
21/06/2022
Jun 2027
to Mar 2032
100,794(nv)
100,794
–
–
–
–
–
763,011
14/06/2023
Jun 2028
to Mar 2033
Simon
Gibbins
106,900(v)
–
–
–
–
106,900
106,900
809,233
31/03/2017
Mar 2022
to Mar 2027
63,190(v)4
–
–
–
–
63,190
63,190
478,348
29/03/2018
Mar 2023
to Mar 2028
92,006(v)5
–
–
–
–
92,006
92,006
696,485
30/04/2019
Apr 2024
to Apr 2029
62,500(v)6
–
–
–
62,500
62,500
473,125
30/06/2020
Jul 2025
to Jul 2030
37,843(v)7 8
–
37,843
–
6,678
44,521
37,843
286,472
29/07/2021
Jul 2026
to Jul 2031
78,619(nv)9
–
–
–
–
78,619
–
595,146
21/06/2022
Jun 2027
to Mar 2032
60,323(nv) 10
60,323
–
–
–
–
–
456,645
14/06/2023
Jun 2028
to Mar 2033
(v) = vested; (nv) = non-vested
1
The award, in the form of a nil-cost option over 127,039 shares in the Company was made to Nick Jefferies on 30 June 2020. The performance conditions attached
to the award resulted in 100% vesting on 3 July 2023.
2 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.
3 An additional award of 12,413 nil-cost options was made on 29 July 2021 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 July 2021 award. This is subject to the same
vesting and exercise conditions as the main award.
4 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 on
29 March 2021; 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.
5 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.
6 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 will vest in full on 3 July 2023.
7 An additional award of 7,441 nil-cost options was made on 29 July 2021 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 July 2021 award. This is subject to the same vesting
and exercise conditions.
8 The performance conditions attached to the award will result in 85% vesting on 29 July 2024.
9 An additional award of 7,370 nil-cost options was made on 21 June 2022 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 2022 award. This is subject to the same vesting
and exercise conditions.
10 An additional award of 5,655 nil-cost options was made on 8 June 2023 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 2023 award. This is subject to the same vesting
and exercise conditions.
133
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discoverIE Group plc Innovative Electronics
DIRECTORS’ REMUNERATION REPORT continued
Directors’ share interests (audited)
The interests of the Directors who held office as at 31 March 2024 (including family interests) in ordinary shares (fully paid, 5p)
of the Company, were as follows:
Shares held at 31 March 2024
Unencumbered
shares
Nil cost
options
vested but
not
exercised
and outside
of holding
period
Nil cost
options
vested but
subject to
additional
holding
period3
Nil cost
options
subject to
performance
conditions
Unencumbered
shares held at
31 March 2023
Value of
current
shareholding
(% of salary)
Nick Jefferies
1,264,3701
533,022
190,349
232,158
1,257,191
1,806%
Simon Gibbins
402,1532
262,096
100,343
138,942
398,238
877%
Tracey Graham
10,330
–
–
–
10,330
Bruce Thompson
49,000
–
–
–
45,000
Clive Watson
22,900
–
–
–
19,125
Rosalind Kainyah
656
–
–
–
656
Celia Baxter
2,791
–
–
–
–
1
Nick Jefferies holds 1,264,370 shares outright. In line with the Remuneration Policy, 20% of bonuses from FY2019/20 onwards were deferred into shares. The figure
of 1,264,370 includes the shares bought with those deferred bonuses.
2 Simon Gibbins holds 402,153 shares outright. In line with the Remuneration Policy, 20% of bonuses from FY2021/22 onwards were deferred into shares. The figure
of 402,153 includes the shares bought with those deferred bonuses.
3 Options subject to the additional holding period are not capable of exercise. No further performance conditions apply.
The interests of all Directors at 1 June 2024 are unchanged from those at 31 March 2024. The values of current shareholdings
for Nick Jefferies and Simon Gibbins have been valued using the share price as at 28 March 2024 of £7.57 and include all
options that have vested but remain unexercised and are based on salaries as at 1 June 2024.
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.
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.
New 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.
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 2024, approximately 5.4m shares (5.6% 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.
134
Annual Report and Accounts for the year ended 31 March 2024
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 31 March 2014 between that date and 31 March 2024 in a
holding of the Company’s shares, compared with the corresponding TSR in a hypothetical holding of £100 invested in the
FTSE 250 Index. The 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.
31 Mar 2014
31 Mar 2015
31 Mar 2016
31 Mar 2017
31 Mar 2024
31 Mar 2018
31 Mar 2019
31 Mar 2020
31 Mar 2022
31 Mar 2021
31 Mar 2023
300
250
200
150
100
50
0
400
350
450
discoverIE Return Index
FTSE 250 Return Index
Source: Datastream (a LSEG product)
Total Shareholder Return
Group Chief Executive single figure of total remuneration history
Nick Jefferies was Group Chief Executive throughout the period shown in the table below.
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Single figure of total
remuneration (£’000)
1,246
1,321
665
1,803
1,796
2,093
1,717
2,580
2,2452
1,545
Salary (£’000)
330
425
429
438
453
467
443
490
510
530
Bonus outcome
(% of maximum)
59
60
43.5
63.7
69.2
62.0
60.1
100
76
63
LTIP outcome
(% of maximum)
100
100
–
100
100
100
75.9
100
100
85
Turnover (£m)
271
288
338
387.9
438.9
466.4
454.3
379.2
448.9
437.0
Underlying operating profit (£m)
13
16
20
24.5
30.6
37.1
35.2
41.41
51.8
57.2
1
Continuing operations
2 The LTIP values for FY23 were estimated last year based on the 3-month average share price to 31 March 2023. The values have been updated to reflect the actual
share price on the vesting date (£8.49).
135
Corporate Governance
discoverIE Group plc Innovative Electronics
DIRECTORS’ REMUNERATION REPORT continued
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. discoverIE Group plc has no employees itself and therefore the
Committee has selected this comparator group on the basis that the Executive Directors are UK-based. Average employee
pay is based on a Full Time Equivalent (FTE) calculation.
% change from
2020 to 2021
% change from
2021 to 2022
% change from
2022 to 2023
% change from
2023 to 2024
Salary
or
fees
Benefits
Bonus
Salary
or
fees
Benefits
Bonus
Salary
or
fees
Benefits
Bonus
Salary
or
fees
Benefits
Bonus
Employees
5%
0%
44%
5%
0%
153%
5%
59%
13%
6%
6%
1%
Executive Directors
Nick Jefferies
-5%
-3%
-8%
11%1
2%
121%
4%
-8%
-21%
4%
-37%
-13%
Simon Gibbins
-5%
-3%
-8%
11%1
2%
129%
3%
26%
-23%
4%
4%
-13%
Non-Executive Directors
Malcolm Diamond
-5%
–
–
11%1
–
–
-29%3
–
–
–
–
–
Tracey Graham
-5%
–
–
11%1
–
–
13%4
–
–
13%4
–
–
Rosalind Kainyah
n/a2
–
–
n/a2
–
– 397%5
–
–
4%
–
–
Bruce Thompson
-5%
–
–
11%1
–
–
94%6
–
–
70%6
–
–
Clive Watson
-5%
–
–
11%1
–
–
6%
–
–
4%
–
–
1
Salaries and fees for the year ended 31 March 2021 were voluntarily reduced by all Directors by 20% for three months in light of the pandemic, as explained in the
2022 Annual Report. Without that reduction, the underlying increase in salary and fees from 2021 to 2022 was 5%
2 Joined the Board in January 2022
3 The reduction in Malcolm Diamond’s fee in FY 2022/23 reflects his retirement from the Board on 1 November 2022
4 The increase in Tracey Graham’s fees for FY 2022/23 and FY 2023/24 reflect her appointment as Senior Independent Director from 1 November 2022
5 The increase in Rosalind Kainyah’s fee in FY 2022/23 reflects her appointment towards the end of FY 2021/22, with FY 2022/23 showing a full year of fees, as well as
her appointment as Chair of the Sustainability Committee from 1 April 2022
6 The increase in Bruce Thompson’s fees for FY 2022/23 and FY 2023/24 reflect his appointment as Chairman from 1 November 2022.
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). The principal reason for the changes between 2020,
2021 and 2022 are the changes in the overall remuneration of the Group Chief Executive, with a voluntary reduction in salary
and bonuses in 2021 during Covid and a full bonus payout in 2022. In 2023, the ratios returned closer to pre-pandemic levels.
Year
Method
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
2024
Option B
60:1
45:1
26:1
2023
Option B
86:1
69:1
43:1
2022
Option B
117:1
68:1
44:1
2021
Option B
63:1
47:1
25:1
2020
Option B
83:1
57:1
40:1
1
The Company determined the remuneration figures for the employee at each quartile with reference to a date of 31 March 2024
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.
£
25th
percentile
Median
75th
percentile
Salary
£25,000
£30,000
£50,227
Total pay and benefits
£25,750
£34,400
£59,691
The 2024 median CEO pay ratio of 45:1 is significantly lower than last year (69:1). This reflects the lower variable remuneration
earned by the Group Chief Executive this year (see page 127), combined with the higher salary, pay and benefits earned by the
wider workforce (£34,400 in FY24, up from £32,311 last year).
136
Annual Report and Accounts for the year ended 31 March 2024
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.
£
2024
£m
2023
£m
change
%
Remuneration paid to or receivable by all employees
112.1
105.71
6%
Distributions to Shareholders by way of dividends (net of share issues)
11.2
10.5
7%
1
Prior year remuneration to all employees restated by £8.8m, to include the correct direct labour costs.
Statement of implementation of the remuneration policy in the financial year ending 31 March 2025
The table below sets out a summary of how the remuneration policy will apply during 2024/25.
Remuneration
element
Remuneration for year ending 31 March 2025
Base salary
■
Salaries for FY 2024/25 are:
–
£530,082 for the Group Chief Executive (no increase).
–
£346,984 for the Group Finance Director (no increase).
As part of the Policy review undertaken by the Committee, it was proposed that increases of 11.3% and
13.0% would be made for the Group Chief Executive and the Group Finance Director respectively1. As set
out in the Annual Statement, while there was support from investors for the increase, at the request of
the management team no increases will be made from 1 April 2024. Instead the Committee will consider
an appropriate time to implement these increases, either later this year or next. Base salary increases
across the Group for FY 2024/25 vary according to local conditions, with up to 20% in some countries.
Pension
■
Cash equivalent of 8% of salary (in line with the UK workforce).
■
Any new or promoted Executive Directors will have a pension contribution of 8% of salary, which is in
line with 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 60% on operating profit, 24% on operating cashflow, 8% on strategic
objectives, and 8% on environmental, social and governance (“ESG”) matters. Due to the close link
between targets and the long-term strategy, the bonus targets for the year ending 31 March 2025
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.
■
Mandatory deferral of 20% of any bonus earned into discoverIE shares for a period of three years
under the new Deferred Share Bonus Plan.
LTIP
■
LTIP awards for FY 2024/25 will be at 175% of salary for the Group Chief Executive and 160% of salary
for the Group Finance Director2 which is in line with last year and lower than the proposed LTIP policy
limit. The Remuneration Committee will consider whether any adjustment to the award level is
required as a result of share price movement.
■
Performance metrics and targets will be based 45% on underlying EPS growth, 45% on Relative TSR
and 10% on achievement of carbon emission reductions.
■
The EPS range will require growth of 5% p.a. for threshold vesting and 12% p.a. growth for full vesting.
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.
■
The TSR peer group will be the FTSE 250 (excluding Investment Trusts). Threshold vesting (25%) will
apply for median performance and full vesting (100%) will require upper quartile or higher.
■
The carbon emission reduction target will be based on the reductions in the Group’s carbon
emissions achieved by CY20263 against the CY2021 baseline. Threshold vesting (25%) will apply for a
reduction of 50% and maximum vesting will apply for a reduction of 70%.
Shareholding
guidelines
■
A shareholding guideline of 250% of salary applies for the Group Chief Executive and Group Finance
Director.
137
Corporate Governance
discoverIE Group plc Innovative Electronics
DIRECTORS’ REMUNERATION REPORT continued
1
As set out in the Annual Statement, the Committee undertook a benchmarking exercise as part of the Policy review. The peer group was based on companies of a
broadly similar size to discoverIE by market capitalisation, comprising the following companies: AG Barr, AO World, Ascential, Auction Technology Group, Bakkavor,
Baltic Classifieds, C&C Group, Centamin, Ceres Power, Chemring, Clarkson, Crest Nicholson, Currys, Diversified Energy, Elementis, Empiric Student Property, FDM
Group, Ferrexpo, FirstGroup, Future, Genuit, Great Portland Estates, Helios Towers, Hilton Food, Ibstock, Integrafin, IP Group, JD Wetherspoon, John Wood, Jupiter
Fund Management, Just Group, Keller, Marshalls, ME Group, Mobico, Moonpig, Morgan Advanced Materials, Morgan Sindall, Puretech Health, PZ Cussons, Redde
Northgate, Senior, Sirius Real Estate, Spirent Communications, SThree, TI Fluid Systems, Tullow Oil, Tyman, WAG Payment Solutions and Workspace Group.
2 Additional awards may be granted to the Group Finance Director in return for him bearing some of the Company’s liability to Employer’s National Insurance arising
on the exercise of the grant referred to above. The additional award ensures that he is in a neutral position on an after-tax basis, assuming no change in the tax rate.
3 To be measured on an underlying basis and based on the assumption that the methodology used to calculate CY2026 outcome is no harder than that used to
calculate CY2022 carbon emissions (including the conversion factors used to convert energy use into tCO2e figures) and that the availability and pricing of renewable
electricity is consistent with CY2022 market conditions.
The fees for the Non-Executive Directors have not changed and are as follows:
As at 1 April 2024
Basic fee
(£)
Committee
Chair fee
(£)
SID fee
(£)
Total
£
Bruce Thompson
187,200
–
–
187,200
Celia Baxter
52,500
–
–
52,500
Tracey Graham
52,500
10,000
10,000
72,500
Rosalind Kainyah
52,500
10,000
–
62,500
Clive Watson
52,500
10,000
–
62,500
Role of the Remuneration Committee
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, which can be found on the Group’s website. The members of the Committee are set out on page 113.
The Committee also considers the recommendations of the Group Chief Executive with regard to senior management 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.
Advisers
During the year, the Committee received independent advice on executive remuneration from FIT Remuneration
Consultants LLP (“FIT”). FIT was appointed by the Committee 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 2024 were £55,533, based partly on a fixed fee basis and partly on time spent.
Shareholder voting
As at 1 April 2023
For1
Against
Withheld2
2021 binding vote on the Directors’
Remuneration Policy
69,269,506
94.65%
3,914,398
5.35%
117,514
2023 Approval of the Remuneration Report
(excl. Policy)
79,145,375
98.53%
1,180,225
1.47%
7,727
1
Includes votes at the Chairman’s discretion.
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 resolution.
138
Annual Report and Accounts for the year ended 31 March 2024
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE FINANCIAL STATEMENTS
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
UK-adopted international accounting
standards 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 UK-
adopted international accounting
standards 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 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 also 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.
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 the
Corporate Governance report, confirms
that, to the best of their knowledge:
■
the Group financial statements,
which have been prepared in
accordance with UK-adopted
international accounting standards,
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 and financial
position 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.
139
Corporate Governance
discoverIE Group plc Innovative Electronics
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 2024 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 UK-adopted
international accounting standards
as applied in accordance with
the provisions of the Companies
Act 2006;
■
the company financial statements
have been properly prepared in
accordance with United Kingdom
Generally Accepted Accounting
Practice (United Kingdom
Accounting Standards, including
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, which comprise: the
Consolidated Statement of Financial
Position and the Company Statement
of Financial Position as at 31 March
2024; the Consolidated Statement
of Profit or Loss, the Consolidated
Statement of Comprehensive Income,
the Consolidated and the Company
Statements of Changes in Equity and
the Consolidated Statement of Cash
Flows for the year then ended; and
the notes to the financial statements,
comprising material accounting policy
information and other explanatory
information.
Our opinion is consistent with our
reporting to the Audit and Risk
Committee.
Basis for opinion
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 33,
we have provided no non-audit services
to the company or its controlled
undertakings in the period under audit.
Our audit approach
Overview
Audit scope
■
We conducted full scope audits at 21
components across the UK, Europe
and Rest of the World and specific
audit procedures on a further 10
components across the UK, Europe,
North America and Asia.
■
The components where we
conducted audit procedures,
together with work performed
at the Group level, accounted
for approximately 73% of the
Group’s revenue and 79% of the
Group’s absolute underlying profit
before tax.
■
We undertook a full scope audit of
the Company’s complete financial
information for the purposes of
the audit of the group financial
statements.
Key audit matters
■
Carrying value of goodwill (group)
■
Accounting for acquisitions (group)
■
Carrying value of investments
(parent)
Materiality
■
Overall group materiality:
£2,400,000 (FY23: £2,300,000) based
on 5% of the Group’s underlying
profit before tax from continuing
operations (FY23: 5% of the Group’s
underlying profit before tax from
continuing operations).
■
Overall company materiality:
£3,000,000 (FY23: £3,000,000)
based on 1% of total assets.
■
Performance materiality: £1,800,000
(FY23: £1,725,000) (group) and
£2,250,000 (FY23: £2,250,000)
(company).
The scope of our audit
As part of designing our audit, we
determined materiality and assessed
the risks of material misstatement in
the financial statements.
Key audit matters
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.
This is not a complete list of all risks
identified by our audit.
Accounting for acquisitions is a new key
audit matter this year. Otherwise, the
key audit matters below are consistent
with last year.
140
Annual Report and Accounts for the year ended 31 March 2024
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill (group)
Refer to pages 100 to 106 (Audit and Risk
Committee Report), note 2 (Material
accounting judgements and estimates)
and note 18 for the related disclosures on
goodwill.
The Group recorded £231.7m of goodwill
at 31 March 2024 (31 March 2023: £188.1m).
The increase in 2024 is primarily due to
acquisitions during the financial year.
As required by IAS 36, management
has performed its annual goodwill
impairment assessment on the Group’s
cash generating units (CGUs). Goodwill
is impaired when its carrying amount
exceeds its recoverable amount.
The recoverable amount of a CGU is
determined based on the higher of its
value-in-use and fair value less cost to sell.
The value-in-use is dependent on
estimates of future cash flows of the
underlying CGUs which inherently
involves significant management
estimation and there is a risk that if the
CGU does not achieve these cash flow
estimates it could give rise to impairment
charges.
The impairment assessment performed
by management contains a number
of significant assumptions relating to 5
years sales compound annualised growth
(CAGR), pre-tax discount rate and long-
term growth rate. These assessments also
include the estimated costs associated
with the effects of climate change,
including the future cost of the Group’s
commitments to reach net zero by 2030.
During the year, the Group agreed to
sell certain assets of its Santon solar
business unit (the “disposal group”)
included in one of the Group’s CGU (note
12). In accordance with IFRS 5, a plan to
dispose of an asset is considered to be an
impairment indicator. As a result of this
assessment, a £1.7m (£nil in FY23) write-
down charge of goodwill was recognised
during the year ended 31 March 2024.
We focused our work on the CGUs where the headroom between the value-
in-use and the carrying value of the assets was lowest and consequently those
CGUs that were most sensitive to changes in key assumptions.
We obtained management’s value-in-use models and tested the
mathematical integrity.
We compared the Group’s year-end market capitalisation to management’s
value-in-use estimate for the Group as a whole and to the Group’s net assets.
We validated the carrying amounts of the relevant assets that are directly
and exclusively attributable to the CGU which are subject to impairment
testing to the underlying accounting records, making sure that there was
appropriate consistency between the assets and liabilities that were included
in management’s assessment and the related cash flows.
We evaluated the determination of the Group’s CGUs. We utilised our in-house
valuation experts to evaluate the appropriateness of the methodology used
in the impairment models, including challenging management’s pre-tax
discount rates and long term growth rates.
We compared the cash flows used in the impairment models to the Board
approved budget and we challenged the assumptions underpinning the
estimated costs associated with climate change.
For all CGUs, we stress tested management’s revenue growth, profit margin
and head office cost allocation assumptions and we have separately
benchmarked implied multiples required to cover the carrying value of
relevant assets at each CGU to recent transaction multiples for acquired
businesses. We have corroborated the revenue growth rates to third party
industry research and challenged management where inconsistencies
were noted.
We evaluated the historical accuracy of management’s budgeting and
forecasting and we compared the revenue growth and profit margins to
historical actuals and modelled the break-even points to assess whether
further testing was required and to assess whether additional disclosures
should be provided in the Financial Statements.
Based on these procedures, we concluded that there were three CGUs where
headroom was lower and where the CGUs were sensitive to reasonably
possible changes in key assumptions that could cause material impairment.
Further procedures focused on these three CGUs within the Sensing &
Connectivity division.
For the three CGUs, we performed additional procedures including further
testing of the 5 years sales CAGR assumption. We tested management’s
assumptions to a number of external sources including expected market
growth rates, tested the order backlog on a sample basis, reviewed design wins
and compared the revenue growth to historical actuals. We also performed
independent sensitivity analysis by stress testing the key assumptions which
includes revenue growth rate, gross profit margin and discount rate.
We assessed the appropriateness of management’s decision to provide
additional disclosure about sensitivities in note 18 of the Financial Statements
in relation to three CGUs within the Sensing & Connectivity division. More
broadly, we considered whether the disclosures in note 18 complied with
IAS 36.
Based on the procedures performed, we noted no material issues arising from
our work.
141
Financial Statements
discoverIE Group plc Innovative Electronics
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC continued
Key audit matter
How our audit addressed the key audit matter
Accounting for acquisitions
(group)
Refer to pages 100 to 106 (Audit and Risk
Committee Report), note 2 (Material
accounting judgements and estimates)
and note 11 for the related disclosures on
business combinations.
During the year, the Group acquired 5
businesses (31 March 2023: 2 businesses)
for a total consideration of £87.8m (31
March 2023: £23.8m). Goodwill of £49.3m
(31 March 2023: £11.5m) and customer
relationships and other intangible
assets totalling £32.8m (31 March 2023:
£10.4m) were also recorded following the
acquisitions.
The valuation of the customer
relationship assets is complex and
requires management estimation as
it is dependent on estimates of future
cash flows, discount rates and customer
attrition rates.
Our focus was on the 3 larger acquisitions namely Silvertel, 2J Antennas and
Shape, as they represent more than 87% of the total consideration, goodwill
and customer relationships and other intangible assets. We tested acquisition
transactions and employed our in-house valuation experts to evaluate the
three major acquisitions. This evaluation focused on the appropriateness
of the methodology used to value customer relationships, the suitability of
the discount rates and attrition rates and the mathematical accuracy of the
models used.
Alongside the work by our in-house specialists, we challenged the
management specifically on the key assumptions relating to the attrition rate,
discount rate and future cash flows. We also evaluated the appropriateness of
the inputs used to derive attrition rates, reasonableness of future cash flows
against historical data and approved acquisition business cases and performed
sensitivity analyses on these estimates.
We considered the disclosures in note 11 of the Financial Statements and based
on the procedures performed, we noted no material issues arising from our
work on acquisitions.
Carrying value of investments
(parent)
Refer to note 2 (Material accounting
judgements and estimates) and note 5
of the Company Financial Statements for
the related disclosures on the carrying
value of investments.
The Company holds investments in its
subsidiaries of £189.3m (FY23: £187.0m).
As required by IAS 36, management has
assessed if there is any indication that the
investments balance may be impaired at
the reporting date. If any such indication
exists, the entity shall estimate the
recoverable amount of the asset.
The assessment of potential impairment
indicators involves management
judgement. No impairment indicators
were identified by management at
the reporting date and no material
impairment charge has been recorded
in 2024.
We evaluated management’s assessment of whether any indicators of
impairment existed, which included comparing the carrying values of
investments in subsidiaries with their net assets at 31 March 2024.
For investments where the net assets were lower than the carrying values,
we assessed their recoverable value by reference to the value in use of the
investments compared to their carrying values at 31 March 2024. Where
applicable, we verified that the recoverable values of investments were
consistent with the recoverable values of the related CGUs tested for goodwill
impairment purposes leveraging the audit work undertaken as part of the
Group audit.
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, the short and longer term growth rates and operating income forecasts.
We considered whether the disclosures in note 5 of the Company Financial
Statements complied with relevant accounting requirements. Based on the
procedures performed, we noted no material issues arising from our work.
142
Annual Report and Accounts for the year ended 31 March 2024
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.
We conducted full scope audits at 21
components across the UK, Europe and
Rest of the World and specific audit
procedures on a further 10 components
across the UK, Europe, North America
and Asia which were selected based on
their size or risk characteristics. Of these,
we identified 6 material components
in the UK, 6 in Europe and 2 in Asia. No
components were identified as being
financially significant. The remainder
of the full scope components and
specified procedures components
were included in Group audit scope
to achieve sufficient coverage and to
address specific risk characteristics.
In establishing the overall approach
to the Group audit, we determined
the type of work that needed to
be performed by us, as the Group
engagement team, or by component
auditors within PwC UK and from other
PwC network firms and other firms
operating under our instruction. Where
the work was performed by component
auditors, we determined the level of
involvement we needed to have in the
audit work at those components to be
able to conclude whether sufficient
appropriate audit evidence had been
obtained as a basis for our opinion on
the consolidated Financial Statements
as a whole.
The Group consolidation, Financial
Statement disclosures and corporate
functions were audited by the Group
engagement team. This included our
work over taxation, goodwill, acquisition
accounting and retirement benefit
obligations. Taken together, the
components and corporate functions
where we conducted audit procedures
accounted for approximately: 73%
(FY23: 81%) of the Group’s revenue and
79% (FY23: 87%) of the Group’s absolute
underlying profit before tax from
continuing operations. This provided
the evidence we needed for our
opinion on the consolidated Financial
Statements taken as a whole. This was
before considering the contribution to
our audit evidence from performing
audit work at the Group level, including
disaggregated analytical review
procedures, which covered certain
of the Group’s smaller and lower risk
components that were not directly
included in our Group audit scope.
Our audit of the Company Financial
Statements was undertaken in the UK
and included substantive procedures
over all material balances and
transactions by the group team.
The impact of climate risk
on our audit
As part of our audit, we enquired of
management to understand and
evaluate the Group’s risk assessment
process in relation to climate change
including any changes in the
assessment compared to the prior year.
We reviewed management’s paper
which sets out their assessment of
climate change risk to the Group and
the impact on the financial statements.
In evaluating the completeness of
the risks identified, we considered
any changes in management’s
paper compared to the prior year
assessment which was reviewed by our
internal specialists and we challenged
management on how they considered
the potential financial impacts of
the Group’s net zero commitment in
their assessment. We considered the
principal risk relates to the assumptions
made in the forecasts prepared by
management and used in their
assessment of the carrying value of
goodwill. In responding to the risks
identified, we specifically considered
how climate change risk would impact
these assumptions including the future
costs of the Group’s commitment
to reach net zero by 2030 and costs
of compliance with current legal
requirements. We also read the
disclosures in relation to climate
change made in the TCFD section of
the Annual Report to ascertain whether
the disclosures are materially consistent
with the financial statements and
our knowledge from our audit. Our
responsibility over other information is
further described in the reporting on
other information section of this report.
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.
143
Financial Statements
discoverIE Group plc Innovative Electronics
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC continued
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
£2,400,000 (FY23: £2,300,000).
£3,000,000 (FY23: £3,000,000).
How we
determined it
5% of the Group’s underlying profit before
tax from continuing operations (FY23: 5% of
the Group’s underlying profit before tax from
continuing operations).
1% of total assets.
Rationale for
benchmark applied
We believe that underlying profit before
tax from continuing operations provides a
consistent year-on-year basis for determining
materiality and is the most relevant
performance measure to the key stakeholders
of the Group and is a generally accepted
auditing benchmark.
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 £70,000 to £2,160,000.
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% (FY23: 75%) of
overall materiality, amounting to
£1,800,000 (FY23: £1,725,000) for
the group financial statements and
£2,250,000 (FY23: £2,250,000) 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 £120,000 (group audit)
(FY23: £110,000) and £150,000 (company
audit) (FY23: £150,000) as well as
misstatements below those amounts
that, in our view, warranted reporting
for qualitative reasons.
Conclusions relating to
going concern
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:
■
Evaluation of management’s base
case and downside case scenarios,
understanding and evaluating the
key assumptions;
■
Validation that the cash flow
forecasts used to support
management’s impairment, going
concern and viability assessments
were consistent;
■
Assessment of the historical
accuracy and reasonableness of
management’s forecasting;
■
Consideration of the Group’s
available financing and debt
maturity profile;
■
Testing of the mathematical
integrity of management’s liquidity
headroom, sensitivity and stress
testing calculations;
■
Undertaking independent
sensitivities;
■
Assessment of the reasonableness
of management’s planned or
potential mitigating actions; and
■
Review of the related disclosures in
the 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.
144
Annual Report and Accounts for the year ended 31 March 2024
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 2024 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.
Corporate governance
statement
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,
included within the Viability Statement
and Principal Risks and Uncertainties
within the Strategic Report 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 and company 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.
145
Financial Statements
discoverIE Group plc Innovative Electronics
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC continued
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:
■
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.
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 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 and tax legislation.
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:
■
Discussions with 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;
■
Evaluation of the effectiveness of
management’s controls designed
to prevent and detect irregularities;
■
Identification and testing of
significant manual journal entries
which exhibited higher risk
attributes;
■
Assessment of matters reported on
the Group’s whistleblowing helpline
and the results of management’s
investigation of such matters;
■
Testing of assumptions and
judgements made by management
in making significant accounting
estimates; and
■
Reviewing Financial Statement
disclosures and testing the
disclosures to supporting evidence.
146
Annual Report and Accounts for the year ended 31 March 2024
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 members on 13 July
2017 to audit the financial statements
for the year ended 31 March 2018
and subsequent financial periods.
The period of total uninterrupted
engagement is 7 years, covering
the years ended 31 March 2018 to 31
March 2024.
Other matter
The company is required by the
Financial Conduct Authority Disclosure
Guidance and Transparency Rules to
include these financial statements in an
annual financial report prepared under
the structured digital format required
by DTR 4.1.15R – 4.1.18R and filed on
the National Storage Mechanism of
the Financial Conduct Authority. This
auditors’ report provides no assurance
over whether the structured digital
format annual financial report has been
prepared in accordance with those
requirements.
Christopher Hibbs
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory
Auditors
London
4 June 2024
147
Financial Statements
discoverIE Group plc Innovative Electronics
CONSOLIDATED STATEMENT
OF PROFIT OR LOSS
for the year ended 31 March 2024
Notes
2024
£m
2023
£m
Revenue
4
437.0
448.9
Operating costs
7
(405.8)
(414.3)
Operating profit
7
31.2
34.6
Finance income
9
3.9
1.6
Finance costs
9
(12.9)
(7.1)
Profit before tax
22.2
29.1
Tax expense
10
(6.7)
(7.8)
Profit for the year
15.5
21.3
Earnings per share
14
Basic, profit for the year
16.2p
22.3p
Diluted, profit for the year
15.8p
21.7p
SUPPLEMENTARY STATEMENT
OF PROFIT OR LOSS INFORMATION
for the year ended 31 March 2024
Underlying performance measures
Notes
2024
£m
2023
£m
Operating profit
7
31.2
34.6
Add back: Acquisition and disposal expenses
6
9.8
1.4
Amortisation of acquired intangible assets
19
16.2
15.8
Underlying operating profit
57.2
51.8
Profit before tax
22.2
29.1
Add back: Acquisition and disposal expenses
6
9.8
1.4
Amortisation of acquired intangible assets
19
16.2
15.8
Underlying profit before tax
48.2
46.3
Underlying earnings per share
6
36.8p
35.2p
The above consolidated Statement of Profit or Loss should be read in conjunction with the accompanying notes.
148
Annual Report and Accounts for the year ended 31 March 2024
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
for the year ended 31 March 2024
Notes
2024
£m
2023
£m
Profit for the year
15.5
21.3
Other comprehensive loss:
Items that will not be subsequently reclassified to profit or loss:
Actuarial loss on defined benefit pension scheme
32
(1.2)
(1.2)
Tax credit relating to defined benefit pension scheme
10
0.3
0.3
(0.9)
(0.9)
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign subsidiaries
(7.7)
0.7
(7.7)
0.7
Other comprehensive loss for the year, net of tax
(8.6)
(0.2)
Total comprehensive income for the year, net of tax
6.9
21.1
The above consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
149
Financial Statements
discoverIE Group plc Innovative Electronics
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
as at 31 March 2024
Notes
2024
£m
2023
£m
Non-current assets
Property, plant and equipment
15
20.5
25.2
Intangible assets – goodwill
17
231.7
188.1
Intangible assets – other
19
97.8
83.9
Right of use assets
16
20.6
19.2
Pension asset
32
0.3
2.3
Other receivables
21
0.2
6.0
Deferred tax assets
10
9.9
11.2
381.0
335.9
Current assets
Inventories
20
80.1
90.0
Trade and other receivables
21
88.8
74.6
Current tax assets
1.3
1.3
Cash and cash equivalents
22
110.8
83.9
Assets held for sale
12
6.7
–
287.7
249.8
Total assets
668.7
585.7
Current liabilities
Trade and other payables
29
(87.5)
(95.2)
Other financial liabilities
23
(78.7)
(39.9)
Lease liabilities
16
(5.7)
(4.0)
Current tax liabilities
(8.3)
(10.4)
Provisions
26
(5.2)
(1.7)
(185.4)
(151.2)
Non-current liabilities
Trade and other payables
29
(4.6)
(4.1)
Other financial liabilities
23
(136.1)
(86.7)
Lease liabilities
16
(14.4)
(14.8)
Provisions
26
(3.6)
(4.2)
Deferred tax liabilities
10
(23.0)
(21.1)
(181.7)
(130.9)
Total liabilities
(367.1)
(282.1)
Net assets
301.6
303.6
Equity
Share capital
30
4.8
4.8
Share premium
192.0
192.0
Merger reserve
2.9
2.9
Currency translation reserve
(2.1)
5.6
Retained earnings
104.0
98.3
Total equity
301.6
303.6
The above consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
The Financial Statements on pages 148 to 202 were approved by the Board of Directors on 4 June 2024 and signed on its
behalf by:
Nick Jefferies
Simon Gibbins
Group Chief Executive
Group Finance Director
150
Annual Report and Accounts for the year ended 31 March 2024
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 March 2024
Attributable to equity holders of the Company
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Currency
translation
reserve
£m
Retained
earnings
£m
Total
equity
£m
At 1 April 2022
4.7
192.0
10.5
4.9
78.3
290.4
Profit for the year
–
–
–
–
21.3
21.3
Other comprehensive income/(loss)
–
–
–
0.7
(0.9)
(0.2)
Total comprehensive income
–
–
–
0.7
20.4
21.1
Shares issued (note 30)
0.1
–
–
–
–
0.1
Share-based payments including tax
–
–
–
–
2.5
2.5
Transfer to retained earnings
–
–
(7.6)
–
7.6
–
Dividends (note 13)
–
–
–
–
(10.5)
(10.5)
At 31 March 2023
4.8
192.0
2.9
5.6
98.3
303.6
Profit for the year
–
–
–
–
15.5
15.5
Other comprehensive loss
–
–
–
(7.7)
(0.9)
(8.6)
Total comprehensive (loss)/income
–
–
–
(7.7)
14.6
6.9
Share-based payments including tax
–
–
–
–
2.3
2.3
Dividends (note 13)
–
–
–
–
(11.2)
(11.2)
At 31 March 2024
4.8
192.0
2.9
(2.1)
104.0
301.6
The above consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
151
Financial Statements
discoverIE Group plc Innovative Electronics
CONSOLIDATED STATEMENT
OF CASH FLOWS
for the year ended 31 March 2024
Notes
2024
£m
2023
£m
Net cash flow from operating activities
25
41.2
36.3
Investing activities
Acquisition of businesses, net of cash acquired
(82.8)
(22.8)
Contingent consideration related to business acquisitions
–
(2.3)
Purchase of property, plant and equipment
(4.8)
(5.4)
Purchase of intangible assets – software
(0.1)
(0.2)
Interest received
3.9
1.4
Net cash used in investing activities
(83.8)
(29.3)
Financing activities
Proceeds from borrowings
24
79.4
61.8
Repayment of borrowings
24
(28.9)
(44.9)
Payment of lease liabilities
(6.1)
(5.2)
Dividends paid
13
(11.2)
(10.5)
Net cash generated from financing activities
33.2
1.2
Net increase in cash and cash equivalents1
(9.4)
8.2
Net cash and cash equivalents at 1 April
43.4
36.9
Effect of exchange rate fluctuations
(2.5)
(1.7)
Net cash and cash equivalents at 31 March
31.5
43.4
Reconciliation to cash and cash equivalents in the consolidated Statement
of Financial Position
Net cash and cash equivalents shown above
31.5
43.4
Add back: bank overdrafts
23
79.3
40.5
Cash and cash equivalents presented in current assets in the consolidated
Statement of Financial Position
22
110.8
83.9
The above consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
1
Further information on the consolidated Statement of Cash Flows is provided in notes 24 and 25.
152
Annual Report and Accounts for the year ended 31 March 2024
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 March 2024
1. Reporting entity and authorisation of Financial Statements
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 2024 were authorised for issue by the Board
of Directors on 4 June 2024. discoverIE Group plc is a public limited company incorporated and domiciled in England, UK and
the registered office is disclosed on page 209. The Company’s ordinary shares are traded on the London Stock Exchange.
The material 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
Statement of compliance
The Group’s consolidated Financial Statements have been prepared and approved by the Directors in accordance with UK-
adopted International Accounting Standards (UK-adopted IAS) in conformity with the requirements of the Companies Act
2006 and the disclosure guidance and transparency rules sourcebook of the United Kingdom’s Financial Conduct Authority.
The separate Financial Statements of the Company have been prepared and approved by the Directors in accordance
with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101). On publishing the Company’s Financial
Statements here together with the Group’s Financial Statements, the Company is taking advantage of the exemption in
section 408 of the Companies Act 2006 not to present its individual Statement of Profit or Loss and related notes that form a
part of these approved Financial Statements.
The following exemptions from the requirements of the UK-adopted IAS have been applied in the preparation of the
Company’s Financial Statements, in accordance with FRS 101:
•
Cash Flow Statement and respective disclosures and information;
•
Disclosures in relation to capital management;
•
Disclosures in relation to financial instruments;
•
Disclosures in respect of the compensation of key management personnel; and
•
Disclosures in respect of transactions between two or more members of the 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 equity-settled share-based payments;
•
Certain disclosures required by IFRS 13 ‘Fair Value Measurement’.
Basis of preparation
The Group consolidated Financial Statements and the Company Financial Statements are prepared under the historical cost
convention, unless otherwise stated.
The Group and Company Financial Statements are presented in Pounds Sterling and all values are rounded to the nearest
hundred thousand except as otherwise indicated.
The Group has engaged in an ongoing review of expected climate change impacts on the business and its assets and liabilities
to establish any adjustments required and what reporting is necessary in its consolidated Financial Statements for the year
ended 31 March 2024. The ongoing risk assessment is detailed within the climate-related risks and opportunities section on
page 76 of the Risk Management section and in the Summary Disclosure Against TCFD Recommendations on pages 65 to 70
in the Strategic Report.
The process has involved a review of all balance sheet line items and future cash flows, to identify if any of these items is
expected to be materially impacted in a negative or positive way by weather, legislative, societal or revenue/cost changes.
The conclusion of the review was that, whilst there will undoubtedly be impacts on the Group, the highly disaggregated
nature of the operations of the Group and the target markets the Group operates in, significantly reduces the risk profile
of the Group to impacts from weather-related changes. The changes necessary to achieve the Group’s net zero by 2030
commitment is not expected to have a materially adverse impact on the cash flows of the Group and indeed, warmer
climates may present enhanced opportunities in our target markets as disclosed on pages 24 to 29 of this report. Societal
and legislative impacts are not considered to have a material impact on any one segment such that we need to break
out reporting in a different way to previous years. Judgements are not considered to be significant, although clearly
understanding of climate change is developing with time. The area with the most judgement is goodwill impairment testing
and a description is given in note 18 of the incremental processes undertaken to assess the climate change impact on the
valuations. Management review has concluded that there is no material impact and that no further disclosure is required.
153
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Going concern
In line with IAS 1 “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 1 to 85. 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 38 to 43.
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 its current debt facilities of £240m committed up to the end of August 2027.
The Viability Base Case, as stated on pages 82 to 83 has been subjected to sensitivity analysis involving flexing a number of
the underlying key assumptions, both individually and in conjunction. The sensitivities take into account the principal risks
and uncertainties set out on pages 75 to 81, notably instability in the economic environment, underperformance of acquired
businesses, climate-related risks, loss of key customers and suppliers, major business disruption, liquidity restriction, debt
covenants and adverse foreign currency movements.
The most severe but plausible downside scenario assumes a worsening of the economic environment caused by a number of
factors including geo-political events and significant reduction in consumer demand due to continuing inflationary pressures
and elevated interest rates. This downside scenario results in a significant decline in second half sales of FY 2024/25, negative
sales growth in FY 2025/26 and modest growth thereon in FY 2026/27. Additionally, operating margin was reduced, working
capital materially increased, significant one-off expenditures included (such as product liability, major customer insolvency or
litigation, climate change, cyber-security incident), interest rates increased, and the Group effective tax rate increased.
After factoring in all of the significant additional downsides, there remains good headroom both in terms of liquidity and
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, has low customer/supplier concentration, has a global supply chain network, diverse
manufacturing capacity, and has well-established 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 75 to 81 of the Strategic
Report.
Reverse stress testing has also been applied to the most plausible downside scenario to determine the level of downside that
would be required before the Group would breach its existing financial covenants or current liquidity headroom during the
assessment period. The reverse stress test was conducted on the basis that certain mitigating actions would be undertaken to
reduce overheads and capital expenditure during the period as sales declined and, on that basis, a fall in underlying operating
margin to below 6% in FY 2024/25 would be required before such a breach occurred. The Board considers the possibility of
such a scenario to be remote and further mitigation, such as hiring freezes, pay and bonus reductions, headcount reductions,
reduction in planned capital expenditure, suspension of dividend payments and equity raise, would be available if future
trading conditions indicated that such an outcome were possible.
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 2024 to continue as a going concern.
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 Financial Statements.
Basis of consolidation
The Group’s consolidated Financial Statements consolidate the results of discoverIE Group plc and entities controlled by the
Company (its subsidiaries).
The consolidated Financial Statements comprise the Financial Statements of the Group and its subsidiaries for the year
ended 31 March 2024. Subsidiaries are entities controlled by the Group. 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 it. In assessing control, the Group takes into account: (i) the power over the investee (i.e. existing rights that give it the
current ability to direct its relevant activities); (ii) exposure, or rights, to variable returns from its involvement with the investee;
and (iii) the ability to use its power over the investee to affect its returns.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
2. Accounting policies continued
154
Annual Report and Accounts for the year ended 31 March 2024
The Group reassesses whether or not it controls a subsidiary 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 and ceases
when the Group loses control of the subsidiary. Assets, liabilities, profits and losses of a subsidiary acquired or disposed of
during the year are included in the consolidated Financial Statements from the date control commences until the date
control ceases.
When necessary, adjustments are made to the Financial Statements of subsidiaries to bring their accounting policies in 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.
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.
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 relevant conditions at
the acquisition date.
Any contingent consideration payable to the vendor is measured and recognised at fair value through profit and loss
(“FVTPL”) at the acquisition date. Subsequent changes to the fair value of the contingent consideration, which is deemed to
be an asset or liability, are recognised in accordance with IFRS 9 “Financial Instruments: Classification and measurement”
either in the consolidated Statement of Profit or Loss or in the consolidated Statement of Comprehensive Income.
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 over the net identifiable amounts of the fair value of
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 standard. 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 (“CGUs”) 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 a reportable operating segment.
Where goodwill forms part of a CGU, and part of the operation within that unit is disposed of, the goodwill associated with
the disposed 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 CGU retained.
Non-current assets held for sale
An asset or liability is classified as held for sale if it is available for immediate sale in its present condition subject only to terms
that are usual and customary for sales of such assets and that it is highly probable the asset will be sold within one year from
the date of classification. Non-current assets classified as held for sale and the assets of a disposal group classified as held
for sale are presented separately from the other assets in the consolidated Statement of Financial Position. The liabilities of
a disposal group classified as held for sale are presented separately from other liabilities in the consolidated Statement of
Financial Position. Additional disclosures are provided in note 12.
Investments (Company only)
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.
2. Accounting policies continued
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Financial Statements
discoverIE Group plc Innovative Electronics
Intangible assets – other
Other intangible assets that are separately acquired by the Group are stated at cost less accumulated amortisation and
impairment losses. Other intangible assets acquired through a business combination are recognised at fair value at the date
of acquisition less accumulated amortisation and impairment losses from the date of acquisition. Amortisation is charged to
the Statement of Profit or Loss within operating costs on a straight-line basis over the useful economic lives of the intangible
assets. The estimated useful economic lives are as follows:
(a) Software (implementation costs of IT systems)
3 to 10 years
(b) Acquired intangible assets:
•
Customer relationships
5 to 12 years
•
Patents
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; (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 five and ten years and charged to the Statement of Profit or Loss.
The Group only capitalises costs relating to the configuration and customisation of Software-as-a-service arrangements
(“SaaS”) as intangible assets where control of the asset exists. Costs that are paid to SaaS suppliers in advance of the service
provided are recognised in prepayments and amortised over the service period.
All other development expenditure is written off in the accounting period in which it is incurred.
Property, plant and equipment
Items of owned property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Cost consists of all those elements which are directly attributable to bringing the asset into working condition for its intended
use. Where there has been an indication of impairment in value such that the recoverable amount of an asset falls below
its net book value, provision is made for such impairment. Wherever possible, individual assets are tested for impairment.
However, impairment can often be tested only for groups of assets because the cash flows upon which the calculation is
based do not arise from the use of a single asset. In these cases, impairment is measured for the smallest group of assets (the
cash generating unit) that produces a largely independent income stream.
The cost of property, plant and equipment is charged to the Statement of Profit or Loss on a straight-line basis over the
assets’ estimated useful economic lives, taking into account their estimated residual value. The principal annual rates of
depreciation are:
Land and buildings
Freehold property
2% to 4% per annum
Leasehold buildings
Shorter of lease term and useful life
Land
Not depreciated
Leasehold improvements
10% to 20% per annum or over the life of the lease if shorter
Plant and equipment
5% to 33% per annum
Impairment of non-financial assets
The carrying amounts of the Group’s assets, other than inventories and deferred tax assets, are reviewed at each balance
sheet date to determine whether there is any indication of impairment. If such an indication exists, the asset’s recoverable
amount is estimated. An impairment loss is recognised whenever the carrying amount of the asset or its cash generating unit
exceeds its recoverable amount. Impairment losses are recognised in the Statement of Profit or Loss.
The recoverable amount of assets is the greater of their net selling price and value-in-use. In assessing value-in-use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs. A CGU is the
smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other
assets or groups of assets.
When estimating the future cash flows for the value-in-use calculation, the Group includes projections of cash outflows
including central costs that are necessarily incurred to generate the cash inflows and that can be directly attributed or
allocated on a reasonable and consistent basis to each CGU.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
2. Accounting policies continued
156
Annual Report and Accounts for the year ended 31 March 2024
Impairment losses recognised in respect of CGUs are allocated first against the carrying value of any goodwill allocated to that
unit, and then against the carrying values of other assets in the unit, on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when
there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to
determine the recoverable amount.
Financial instruments
Financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions
of the instrument.
Unconditional receivables and payables are recognised as assets or liabilities when the Group becomes a party to the contract
and, as a consequence, has a legal right to receive or a legal obligation to pay cash. However, recognition of financial assets
to be acquired and financial liabilities to be incurred as a result of a firm commitment to purchase or sell goods or services,
such as trade receivables and trade payables, is usually delayed until at least one of the parties has performed under the
agreement and the ordered goods or services have been shipped, delivered or rendered.
A forward contract that is within the scope of IFRS 9, such as a forward foreign exchange contract, is recognised as an asset
or a liability on the commitment date at which point the fair value of the right and obligation are usually equal and the net
fair value of the forward contract on initial recognition is zero. If the net fair value of the right and obligation is not zero, the
contract is recognised as an asset or liability.
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risk and rewards of
ownership of the financial asset are transferred, or in which the Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the financial asset.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group
also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially
different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a
financial liability, the difference between the carrying amount extinguished and the consideration paid is recognised in the
Statement of Profit or Loss.
Offsetting financial instruments
Financial assets and liabilities are only 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.
Allowance for expected credit losses
The Group measures loss allowances for financial assets, including trade receivables, at an amount equal to lifetime expected
credit losses (“ECL”). This requires consideration of both historical and forward-looking information when considering potential
impairment of trade receivables. A provision matrix is used to calculate the expected credit loss, which is based upon historical
observed default rates adjusted for forward-looking information to create an adjusted default rate, which is applied to the
outstanding invoices at the balance sheet date.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
Credit-impaired financial assets
At each reporting date the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial
asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of
the financial asset have occurred, such as a significant change in the credit risk profile of a customer, a debt has become
significantly overdue or a contract default.
Write-off of financial assets
The gross carrying amount of a financial asset is written down to its recoverable amount when the Group has no reasonable
expectation of recovering a financial asset in its entirety or a portion thereof.
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. The fair value of derivative
foreign exchange instruments is determined on initial recognition at forward market exchange rates at inception of the
contract and subsequently remeasured based on forward market exchange rates at the balance sheet date.
2. Accounting policies continued
157
Financial Statements
discoverIE Group plc Innovative Electronics
Inventories
Inventories comprise finished goods, goods held for resale, raw materials 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.
Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial Position comprise cash balances and short-term deposits with an
original maturity of three months or less. Bank overdrafts represent short-term borrowings repayable on demand and are
shown within other financial liabilities in the Statement of Financial Position.
The cash balances are separately presented gross in the consolidated Statement of Financial Position, rather than netted off
against overdraft held either by the same entity, or other Group entities, with the same bank, despite the existence of a legal
right of set off.
Borrowings
Borrowings are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial recognition,
borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the
Statement of Profit or Loss over the period of the borrowings on an effective interest basis.
Provisions
A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation
as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Where the effect is material, provisions are discounted to present value. The unwinding of the discount is recognised as a
finance cost.
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the
restructuring has either commenced or has been publicly announced. Future operating costs are not provided for.
The Group also recognises provisions for dilapidation, warranty, retirement indemnity and severance.
Leasing
The Group assesses at contract inception whether a contract is, or contains, a lease, that is, if the contract conveys the right to
control the use of an identified asset for a period of time in exchange for consideration.
Separating components of a contract
Contracts usually combine different kinds of obligation of the supplier, which may be formed by lease components or lease
and non-lease components, such as maintenance or services. The Group identifies the lease and non-lease components and
accounts for those separately, applying the relevant standard to each one. Consideration is allocated to each lease component
on the basis of the relative standalone price of the lease component and the aggregate standalone price of the non-lease
component.
Lease term
The Group considers the lease term as the non-cancellable period of the lease plus periods covered by an option to extend
or an option to terminate if the lessee is reasonably certain to exercise the extension option or not exercise the termination
option.
i) Right of use assets
The Group recognises right of use assets at the commencement date of the lease. Right of use assets are measured at cost,
less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost
of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, any lease payments made
at or before the commencement date, provision for decommissioning the asset at the end of the contract, less any lease
incentives received.
Right of use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of
the assets. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise
of a purchase option, depreciation is calculated using the estimated useful life of the asset.
ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees, when applicable.
The lease payments also include, when applicable, the exercise price of a purchase option reasonably certain to be exercised
by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to
terminate.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
2. Accounting policies continued
158
Annual Report and Accounts for the year ended 31 March 2024
Variable lease payments that do not depend on an index or a rate are usually recognised as expenses in the period in which
the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. The incremental borrowing rate is a
combination of country-specific 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 of the Group.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for
the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, such
as a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the
underlying asset.
Any adjustment of the lease liability is reflected as an adjustment to the right of use asset. If the carrying amount of the right
of use asset has already been reduced to zero, the remaining remeasurement is recognised in the Statement of Profit or Loss.
The Group has adopted the practical expedient under IFRS 16 not to recognise right of use assets and lease liabilities for short-
term leases, with a lease term of 12 months or less, and leases in which the underlying asset is of low value. Lease payments
relating to these leases are expensed to the Statement of 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.
Pensions
Payments to defined contribution pension schemes are charged as an expense as they fall due.
In respect of defined benefit pension schemes, the position 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.
Obligations to provide future benefits to employees earned through prior service are estimated and discounted to present
value. Plan assets are measured at fair value. The cost of providing benefits under the defined benefit plans is determined by
actuarial valuation, using the projected unit credit method.
Any pension asset surplus would be fully recoverable by the Group in line with the rules of the scheme. Therefore, the IAS 19
surplus is recognised in full under current accounting standards.
Actuarial remeasurement of the net defined benefit asset or liability comprises (a) actuarial gains and losses, (b) the return on
plan assets in excess of the amount included in net interest on the net defined benefit asset or liability, and (c) any change in
the effect of the asset ceiling (where applicable), excluding any amount included in net interest on the net defined benefit
asset or liability; and is recognised immediately in the Statement of Financial Position with a corresponding entry in retained
earnings through Other Comprehensive Income in the period in which it occurs. Remeasurement gains or losses are not
reclassified to profit or loss in subsequent periods.
Share-based payments
Certain employees of the Group receive remuneration in the form of share-based payments, whereby employees render
services as a consideration for equity instruments (equity-settled transactions). The Group operates a “Long Term Incentive
Plan – LTIP” and an “Approved and unapproved executive share option scheme – CSOP”.
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date the grant is
made, calculated using an option pricing model, and is recognised as an expense over the three-year 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.
For the LTIP, 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, also taking into consideration the impact of forfeitures and
cancellations during the year. The movement in cumulative expense since the previous reporting date is recognised in the
Statement of Profit or Loss, with a corresponding entry in equity.
The CSOP awards are subject only to continuing service of the employee. At each reporting date, the cumulative expense,
calculated on a straight-line basis over the three-year vesting period, and taking into consideration forfeitures and
cancellations during the year, is recognised in the Statement of Profit or Loss, with a corresponding entry in equity.
The issuance by the Company to its subsidiaries employees 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.
2. Accounting policies continued
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Financial Statements
discoverIE Group plc Innovative Electronics
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. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject
to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The
Group measures its tax balances either based on the most likely amount or the expected value, depending on which method
provides a better prediction of the resolution of the uncertainty.
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 or Other Comprehensive Income if it relates to items that are credited
or charged to equity or Other Comprehensive Income respectively. Otherwise, income tax is recognised in the Statement of
Profit or Loss.
Pillar Two legislation was substantively enacted in the UK on 20 June 2023 based on model rules published by the
Organisation for Economic Co-operation and Development (the “Pillar Two legislation”). The legislation is effective for the
financial year beginning 1 April 2024 for the Group. The Group has performed an assessment of its potential exposure to
income taxes arising under Pillar Two legislation and the Group’s annual revenue does not meet the legislation’s threshold
of €750m. In addition, the tax rates in the jurisdictions in which the Group operates are above 15%. Therefore no specific
disclosures have been included as a result of the amendment to IAS 12 relating to the Pillar Two rules referred to in note 3.
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 Statement of Profit or Loss.
The Group recognises currency gains and losses arising from the retranslation of the opening net assets of foreign operations
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 Statement of Profit or Loss.
Revenue recognition
The Group realises revenue from its principal activities through the sale of highly differentiated electronic products in four
target markets: renewable energy, transportation, medical and industrial & connectivity.
Revenue is recognised in a way that depicts the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the Group expects to be entitled in exchange for those goods or services, excluding value
added tax and other sales related taxes. Transaction price is allocated to each performance obligation on the basis of the
relative standalone selling prices of each distinct good or service promised in the contract. If a standalone selling price is not
observable, the Group estimates it.
The transaction price may include a discount or a variable amount of consideration that relates entirely or to a part of the
contract. The Group will review the requirements and specify when the variable amount should be allocated to one or more,
but not all, performance obligations in the contract.
Control of a good or service is obtained when the customer has the ability to direct the use of and obtain substantially all
the benefits from the good or service. The Group recognises revenue from product sales at a point in time on shipment, on
delivery or when goods are accepted by the customer, depending on the Incoterm used for the sale transaction.
Product support and maintenance services are recognised over the period of the service delivery as the customer receives the
benefit of the service over time; progress is measured by reference to service periods.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
2. Accounting policies continued
160
Annual Report and Accounts for the year ended 31 March 2024
When another party is involved in providing goods or services to the customer, the Group determines whether the nature
of its promise is a performance obligation to provide the specified goods or services itself (principal) or to arrange for those
goods or services to be provided by the other party (agent) and recognises revenue accordingly.
Contract balances
Receivables
Receivables are billed under the terms of the contract for delivered goods and services that are not conditional on anything
other than the passage of time. They are recognised initially at the amount of consideration that is unconditional and are
subsequently measured at amortised cost using the effective interest method, less loss allowance. These assets are classified
as trade receivables.
Contract liabilities
Contract liabilities represent the Group’s unsatisfied obligation(s) for the transfer of goods or services to the customer
for which consideration has been received from the customer; and/or advance payments received from a customer in
consideration of future performance obligations.
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.
Dividends paid
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.
Dividend income
Dividend income is recognised in the Statement of Profit or Loss on the date the Group’s right to receive payment is
established.
Material accounting judgements and estimates
The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and other applicable factors, the results of which
form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from
other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from
these estimates and any revisions to estimates are recognised prospectively.
Information about judgements, assumptions and estimation uncertainties as at 31 March 2024 that could result in a material
adjustment to the carrying amount of assets and liabilities in the next financial year is addressed regarding:
•
Impairment of non-financial assets (Group and Company): Goodwill is tested annually for impairment, in accordance
with IAS 36. The Group is required to ensure that its assets are not impaired and are carried at no more than their
recoverable amount, measured based on their fair value less cost to sell or value-in-use. Assets which do not generate
independent cash flows are required to be grouped together into CGUs and tested for impairment. In determining the
recoverable amount of an asset or CGU, estimates and assumptions must be made in determining the value of those
future cash flows. For a CGU this includes assessment of future revenue, operating profit, discount rates and long-term
growth rates. Central costs that are necessarily incurred to generate the cash inflows and that can be directly attributed
or allocated on a reasonable and consistent basis to each CGU are included in the value-in-use calculation. Uncertainty
inherent in making judgements and estimates means that there is a risk that the estimated recoverable amount could
result in a material adjustment in future accounting periods. Note 18 provides more details.
•
Measurement of defined benefit asset/obligation (Group only): The present value of the defined benefit asset/
obligation 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 and balance sheet position include discount rates, inflation and
mortality rates. Any changes in these assumptions will impact the carrying amount of defined benefit asset/obligation.
The actuarial assumptions used in determining the carrying amount at 31 March 2024 are set out in note 32.
•
Fair value of assets acquired in a business combination (Group only): Estimates are made in the assessment of fair
value of the consideration and net assets acquired, including the identification and valuation of intangible assets and their
useful lives. Estimates used include customer attrition rates, discount rate and trading forecast. Note 11 provides details of
business combinations.
•
Value of investments (Company only): 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,
using estimates such as for future revenue, operating profit, discount rates and long-term growth rates to calculate
present values.
2. Accounting policies continued
161
Financial Statements
discoverIE Group plc Innovative Electronics
•
Cash offsetting (Group and Company): Judgements are made when assessing the intention to net settle outstanding
overdraft positions at the balance sheet date in order to meet the disclosure requirements for presenting cash balances
net of overdrafts in the consolidated and Company Statement of Financial Position. For the year ended 31 March 2024, the
offsetting criteria for balances within the Group’s cash pooling arrangements have not been met, therefore, balances have
not been offset.
•
Classification of assets as held for sale (Group): Judgements are made when assessing if the carrying amount of
certain assets will be recovered principally through the sale rather than through continuing use, as well as if they are
available for immediate sale in its present condition and the sale is highly probable. These assets are presented as assets
held for sale in the consolidated Statement of Financial Position. For the year ended 31 March 2024, the Group has £6.7m
of assets related to the disposal of the Santon solar business unit, classified as held for sale. Note 12 provides details.
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 2023:
•
IAS 12 Taxation: International Tax Reform – Pillar Two Model Rules – Amendment
•
IAS 12 Taxation: relating to Deferred tax related to assets and liabilities arising from a single transaction – Amendment
•
IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies – Amendment
•
IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates –
Amendment; and
•
IFRS 17 Insurance Contracts.
These and other amendments, changes and improvements to IFRS issued by the International Accounting Standard Board
(“IASB”) have had no material impact on the Group and Company’s current financial results or financial position.
New standards not yet applied
Certain new accounting standards, amendments to accounting standards and interpretations have been published that are
not mandatory for 31 March 2024 reporting period and have not been early adopted by the Group. None of these are expected
to have a material impact on the Group’s financial results in the current or future reporting periods.
4. Revenue
Group revenue is analysed below:
2024
£m
2023
£m
Sale of goods
431.4
442.4
Rendering of services
5.6
6.5
Total revenue
437.0
448.9
5. Operating segment information
The Reportable Operating Segments of the Group include two distinct divisions, Magnetics & Controls (“M&C”) and Sensing
& Connectivity (“S&C”). Within each of these reportable operating segments are aggregated business units with similar
characteristics such as the nature of customers, 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. Unallocated costs relate to central head office administration costs that are not directly
attributable to the Operating Segments.
Segment revenue and results
2024
Magnetics
& Controls
£m
Sensing &
Connectivity
£m
Unallocated
Costs
£m
Total
£m
Revenue
265.1
171.9
–
437.0
Result
Underlying operating profit/(loss)
40.6
28.9
(12.3)
57.2
Acquisition and disposal expenses
(2.2)
(7.6)
–
(9.8)
Amortisation of acquired intangible assets
(6.6)
(9.6)
–
(16.2)
Operating profit/(loss)
31.8
11.7
(12.3)
31.2
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
2. Accounting policies continued
162
Annual Report and Accounts for the year ended 31 March 2024
2023
Magnetics &
Controls
£m
Sensing &
Connectivity
£m
Unallocated
Costs
£m
Total
£m
Revenue
280.8
168.1
–
448.9
Result
Underlying operating profit/(loss)
38.4
25.6
(12.2)
51.8
Acquisition and disposal expenses
–
(1.8)
0.4
(1.4)
Amortisation of acquired intangible assets
(6.3)
(9.5)
–
(15.8)
Operating profit/(loss)
32.1
14.3
(11.8)
34.6
Segment assets and liabilities
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 asset, tax assets and liabilities, cash, borrowings and overdrafts, central assets (Head Office assets) and central
liabilities (Head Office liabilities), as shown below:
2024
Assets and liabilities
Magnetics
& Controls
£m
Sensing &
Connectivity
£m
Unallocated
£m
Total
£m
Segment assets (excluding goodwill and other intangible assets)
124.7
74.4
199.1
Goodwill and other intangible assets
146.7
182.8
329.5
271.4
257.2
528.6
Central assets
11.1
11.1
Cash and cash equivalents
110.8
110.8
Pension asset
0.3
0.3
Current and deferred tax assets
11.2
11.2
Assets classified as held for sale
6.7
6.7
Total assets
271.4
263.9
133.4
668.7
Segment liabilities
(65.2)
(45.2)
(110.4)
Central liabilities
(10.6)
(10.6)
Other financial liabilities
(214.8)
(214.8)
Current and deferred tax liabilities
(31.3)
(31.3)
Total liabilities
(65.2)
(45.2)
(256.7)
(367.1)
Net assets/(liabilities)
206.2
218.7
(123.3)
301.6
2023
Assets and liabilities
Magnetics
& Controls
£m
Sensing &
Connectivity
£m
Unallocated
£m
Total
£m
Segment assets (excluding goodwill and other intangible assets)
128.5
76.8
205.3
Goodwill and other intangible assets
120.7
151.3
272.0
249.2
228.1
477.3
Central assets
9.7
9.7
Cash and cash equivalents
83.9
83.9
Pension asset
2.3
2.3
Current and deferred tax assets
12.5
12.5
Total assets
249.2
228.1
108.4
585.7
Segment liabilities
(70.5)
(42.9)
(113.4)
Central liabilities
(10.6)
(10.6)
Other financial liabilities
(126.6)
(126.6)
Current and deferred tax liabilities
(31.5)
(31.5)
Total liabilities
(70.5)
(42.9)
(168.7)
(282.1)
Net assets/(liabilities)
178.7
185.2
(60.3)
303.6
5. Operating segment information continued
163
Financial Statements
discoverIE Group plc Innovative Electronics
Other segment information
Depreciation and
amortisation1
Additions to non-
current assets2
2024
£m
2023
£m
2024
£m
2023
£m
Magnetics & Controls
12.8
12.9
42.2
5.9
Sensing & Connectivity
14.7
13.7
54.0
25.4
Central
0.3
0.3
0.1
0.3
27.8
26.9
96.3
31.6
1
Includes depreciation and amortisation of right of use assets, property, plant and equipment and intangibles.
2
Magnetics & Controls additions to non-current assets comprised intangible assets £15.8m (2023: £nil), goodwill £20.0m (2023: £nil), right of use assets £3.2m (2023:
1.8m) and tangible assets £3.2 (2023: £4.1m). Sensing & Connectivity additions to non-current assets comprised intangible assets £17.1m (2023: £10.5m), goodwill
£29.3m (2023: £11.5m), right of use assets £5.3m (2023: £1.2m) and tangible assets £2.3m (2023: £2.2m). Central additions to non-current assets comprised right of
use assets £0.1m (2023: £0.2m) and tangible assets £nil (2023: £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:
Revenue from external
customers
Non-current
assets
2024
£m
2023
£m
2024
£m
2023
£m
UK
52.5
49.6
140.1
77.0
Europe
206.1
221.1
115.9
157.5
North America, Asia and Rest of world
178.4
178.2
124.7
99.1
437.0
448.9
380.7
333.6
In the year ended 31 March 2024, the Group had no customer that represented 10% or more of total Group revenue (2023: no
customer).
6. Underlying performance measures
These Financial Statements include underlying 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 as they
represent the underlying operating performance of the Group and facilitate internal comparisons of performance over time.
Underlying 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 and acquisition-related 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 trading results of acquired
businesses are included in underlying performance.
The Directors consider there to be the following key underlying performance measures:
Underlying operating profit
“Underlying operating profit” is defined as operating profit excluding acquisition and disposal related costs (namely
amortisation of acquired intangible assets and acquisition and disposal expenses).
Acquisition and disposal expenses comprise transaction costs relating to acquisitions and disposals, contingent consideration
relating to the retention of former owners of acquired businesses, adjustments to previously estimated contingent
consideration, costs related to integration of acquired businesses into the Group and expenses incurred in relation to the
disposal of the Santon solar business unit.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
5. Operating segment information continued
164
Annual Report and Accounts for the year ended 31 March 2024
Underlying EBITDA
“Underlying EBITDA” is defined as underlying operating profit with depreciation, amortisation, equity-settled share-based
payment expense and IAS 19 pension cost added back.
Underlying operating margin
“Underlying operating margin” is defined as underlying operating profit divided by revenue.
Underlying profit before tax
“Underlying profit before tax” is defined as profit before tax excluding acquisition and disposal related costs (namely
amortisation of acquired intangible assets and acquisition and disposal expenses).
Underlying tax charge / Underlying effective Tax Rate (“ETR”)
“Underlying tax charge” is defined as the tax charge adjusted for the tax effect of the acquisition and disposal related costs
(namely amortisation of acquired intangible assets and acquisition and disposal expenses) and other tax charges and credits
relating to acquisitions and disposals.
“Underlying ETR” is defined as underlying tax charge divided by underlying profit before tax.
Underlying profit after tax
“Underlying profit after tax” is defined as profit for the year excluding acquisition and disposal related costs (namely
amortisation of acquired intangible assets and acquisition and disposal expenses), net of the tax effect on underlying profit.
Underlying earnings per share
“Underlying earnings per share” is calculated as underlying profit before tax reduced by the underlying effective tax charge,
divided by the weighted average number of ordinary shares (for diluted earnings per share purposes) in issue during the year.
Underlying operating cash flow / Underlying operating cash flow conversion
“Underlying 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 and lease payments.
“Underlying operating cash flow conversion” is defined as underlying operating cash flow divided by underlying operating
profit.
Free cash flow / Free cash flow conversion
“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.
“Free cash flow conversion” is free cash flow divided by underlying profit after tax.
Return on capital employed (“ROCE”) / Return on tangible capital employed (“ROTCE”)
“ROCE” is defined as underlying operating profit, including the annualisation of profits of acquired businesses, as a
percentage of net assets excluding net debt, deferred consideration related to discontinued operations, assets held for sale
and legacy defined benefit pension asset/(liability).
“ROTCE” is defined as ROCE excluding the value of acquired goodwill and intangibles, lease liabilities, provision and tax
balances.
Organic and CER revenue growth
“CER revenue growth” is defined as growth rates at constant exchange rates, excluding the impact of nil margin, one-off
increase in semiconductor pass-through costs.
“Organic revenue growth” is defined as CER revenue growth adjusted for the effect of acquisitions/disposals in the last
12 months.
Gearing ratio
Gearing ratio is defined as net debt divided by underlying EBITDA, including the annualisation of acquired businesses,
adjusted for lease payments.
The tables below show the reconciliation to the IFRS reporting measures, for the main underlying performance measures
used by the Group.
6. Underlying performance measures continued
165
Financial Statements
discoverIE Group plc Innovative Electronics
Underlying operating profit / Underlying EBITDA
Underlying operating profit and EBITDA are calculated as follows:
2024
£m
2023
£m
Operating profit
31.2
34.6
Add back
Acquisition and disposal expenses
(a)
9.8
1.4
Amortisation of acquired intangibles
(b)
16.2
15.8
Underlying operating profit
57.2
51.8
Add back
Depreciation and amortisation
12.5
11.7
Share-based payment and IAS 19 pension cost
3.4
2.9
Underlying EBITDA
73.1
66.4
a. Acquisition expenses comprise £3.1m of transaction costs in relation to the acquisition of Silvertel, 2J, Shape, DTI, IKN and
ongoing transactions, and £0.8m charge relating to the movement in fair value of contingent consideration and assets
acquired on past acquisitions. Disposal expenses comprise £5.9m of costs in relation to the disposal of the Santon solar
business unit.
During the prior year, acquisition and disposal expenses of £1.4m comprised £1.8m of transaction costs in relation to the
acquisition of CDT, Magnasphere and ongoing transactions, £1.5m charge relating to the movement in fair value of contingent
consideration and assets acquired on past acquisitions, offset by £0.4m credit relating to disposal costs in connection with the
Acal BFi disposal in 2022, and £1.5m in relation to insurance receipts relating to a previous year acquisition of CPI.
b. Amortisation charge for intangible assets recognised on acquisition is £16.2m being the amortisation of acquired customer
relationships and patents. The equivalent charge last year was £15.8m. The increase relates to the seven acquisitions during
the last two years offset by lower amortisation on fully written down acquired intangible assets on past acquisitions.
Underlying profit before tax
Underlying profit before tax is calculated as follows:
2024
£m
2023
£m
Profit before tax
22.2
29.1
Add back
Acquisition and disposal expenses
9.8
1.4
Amortisation of acquired intangible assets
16.2
15.8
Underlying profit before tax
48.2
46.3
Underlying effective tax rate
Underlying effective tax rate (“ETR”) is calculated as follows:
2024
£m
2023
£m
Underlying profit before tax
48.2
46.3
Total tax charge
6.7
7.8
Add back tax effect of amortisation of acquired intangible assets and acquisition and
disposal expenses and other tax charges and credits relating to acquisitions and disposals
5.3
3.9
Underlying tax charge
12.0
11.7
Underlying effective tax rate
24.9%
25.3%
Underlying profit after tax / Underlying earnings per share
Underlying profit after tax and earnings per share are calculated as follows:
2024
£m
2023
£m
Profit for the year
15.5
21.3
Add back
Acquisition and disposal expenses
9.8
1.4
Amortisation of acquired intangible assets
16.2
15.8
Tax charge relating to the above adjustments
(5.3)
(3.9)
Underlying profit after tax
36.2
34.6
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
6. Underlying performance measures continued
166
Annual Report and Accounts for the year ended 31 March 2024
2024
Number
2023
Number
Weighted average number of shares for basic earnings per share
95,835,775
95,426,255
Effect of dilution – share options
2,450,593
2,917,061
Adjusted weighted average number of shares for diluted earnings per share
98,286,368
98,343,316
Underlying earnings per share
36.8p
35.2p
Underlying operating cash flow / Free cash flow
2024
£m
2023
£m
Underlying EBITDA
73.1
66.4
Lease payments
(6.8)
(5.8)
EBITDA (incl. lease payments)
66.3
60.6
Changes in working capital
(2.2)
(6.4)
Capital expenditure
(4.9)
(5.6)
Underlying operating cash flow
59.2
48.6
Net interest paid
(7.7)
(5.0)
Tax payments
(12.5)
(9.0)
Legacy pension scheme funding
(2.0)
(1.6)
Free cash flow
37.0
33.0
ROCE / ROTCE
ROCE and ROTCE are calculated as follows:
2024
£m
2023
£m
Net assets
301.6
303.6
Less:
Deferred consideration in relation to disposed businesses
(6.3)
(6.0)
Net debt
104.0
42.7
IAS 19 pension asset
(0.3)
(2.3)
Assets held for sale
(6.7)
–
Adjusted net assets
392.3
338.0
Less:
Goodwill
(231.7)
(188.1)
Acquired intangible assets
(96.2)
(82.7)
Deferred tax assets and liabilities
13.1
9.9
Current tax assets and liabilities
7.0
9.1
Lease liabilities
20.1
18.8
Provisions
8.8
5.9
Tangible Capital
113.4
110.9
Underlying operating profit
57.2
51.8
Add:
Annualisation of acquired businesses
4.2
1.8
Annualised operating profit
61.4
53.6
ROCE
15.7%
15.9%
ROTCE
54.1%
48.3%
6. Underlying performance measures continued
167
Financial Statements
discoverIE Group plc Innovative Electronics
Organic and CER revenue growth
Organic and CER revenue growth are calculated as follows:
2024
£m
2023
£m
Revenue
437.0
448.9
FX translation impact
–
(12.7)
One-off increase in semiconductor pass-through cost
–
(5.0)
Underlying (CER) revenue
437.0
431.2
Acquisitions and disposals
(32.6)
(23.1)
Organic revenue
404.4
408.1
Organic growth for the Group compared with last year is calculated at constant exchange rates (“CER”) and is shown
excluding the first 12 months of acquisitions post completion (CDT in June 2022, Magnasphere in January 2023, Silvertel in
August 2023, 2J in September 2023, Shape in January 2024, DTI in March 2024 and IKN in March 2024) and the results of the
Santon solar business unit.
Gearing ratio
Gearing ratio is calculated as follows:
2024
£m
2023
£m
Net debt
104.0
42.7
Underlying EBITDA
73.1
66.4
Lease payments
(6.8)
(5.8)
Annualisation of acquired businesses
4.2
2.0
Adjusted EBITDA
70.5
62.6
Gearing ratio
1.5
0.7
7. Operating profit
2024
£m
2023
£m
Revenue
437.0
448.9
Direct materials/direct labour
(255.0)
(274.9)
Other cost of goods sold
(5.0)
(4.8)
Selling and distribution costs
(41.0)
(45.4)
Administrative expenses
(104.8)
(89.2)
Operating profit
31.2
34.6
Operating costs are as follows:
2024
£m
Restated1
2023
£m
Employee costs (note 8)
114.7
107.9
Depreciation of property, plant and equipment (note 15)
4.7
4.6
Depreciation of right of use assets (note 16)
6.6
5.8
Amortisation of other intangible assets (note 19)
16.5
16.5
Costs related to disposal group (note 6)
5.9
–
Expected credit losses (note 21)
0.4
0.6
Net foreign exchange differences
0.8
0.3
Inventories:
Cost of inventories
218.6
238.7
Write-down of inventories to net realisable value
0.4
1.5
Other expenses
37.2
38.4
Operating costs
405.8
414.3
1
Prior year employee costs have been restated by £8.8m, from £99.1m to £107.9m, to include the correct direct labour costs.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
6. Underlying performance measures continued
168
Annual Report and Accounts for the year ended 31 March 2024
2024
£m
2023
£m
Operating costs
405.8
414.3
Less
Acquisition and disposal expenses
(9.8)
(1.4)
Amortisation of acquired intangibles
(16.2)
(15.8)
Underlying operating costs
379.8
397.1
8. Employee costs and Directors’ emoluments
2024
£m
Restated2
2023
£m
Wages and salaries
97.2
90.9
Social security costs
11.2
10.8
Other pension costs
3.7
4.0
Share-based payments (note 31)
2.6
2.2
114.7
107.9
2
Prior year wages and salaries have been restated by £8.8m, from £82.1m to £90.9m, to include the correct direct labour costs.
The average monthly number of employees (including Executive Directors) during the year was as follows:
2024
Number
2023
Number
Sales and marketing
349
277
Manufacturing and services
3,630
4,075
Administration
462
511
4,441
4,863
At 31 March 2024 the Group had 4,543 employees (2023: 4,697).
Directors’ emoluments
2024
£
2023
£
Aggregate emoluments in respect of qualifying services
1,675,544
1,760,013
Aggregate employer contribution to a defined contribution pension scheme and pay in lieu of
pension for two directors
70,164
94,225
1,745,708
1,854,238
Highest paid Director
Emoluments in respect of qualifying services
1,042,670
1,099,011
Pension contributions to the defined contribution scheme and pay in lieu of pension
42,406
67,534
1,085,076
1,166,545
Aggregate emoluments for the Non-Executive Directors were £428,450 (2023: £398,167). Further details of all Directors’
emoluments are provided in the Remuneration Report on pages 113 to 138.
9. Finance income/(costs)
2024
£m
2023
£m
Interest receivable and similar income
3.9
1.6
Finance income
3.9
1.6
Finance costs on bank loans and overdrafts
(11.6)
(5.9)
Finance costs on lease liabilities
(0.7)
(0.6)
Amortisation of borrowing costs
(0.6)
(0.6)
Finance costs
(12.9)
(7.1)
7. Operating profit continued
169
Financial Statements
discoverIE Group plc Innovative Electronics
10. Tax expense
The major components of the corporation tax expense are summarised below:
2024
£m
2023
£m
Current taxation:
UK corporation tax
–
0.4
UK adjustments in respect of prior years
(0.3)
0.2
(0.3)
0.6
Overseas tax
10.8
11.9
Overseas adjustments in respect of prior years
(1.3)
0.1
9.5
12.0
Total current taxation expense
9.2
12.6
Deferred taxation
Origination and reversal of temporary differences within the UK
(0.8)
(1.3)
Origination and reversal of temporary differences overseas
(1.9)
(1.8)
Adjustment in respect of prior years
0.3
(1.2)
Increased recognition of historic losses
(0.1)
(0.3)
Impact of tax rate changes
–
(0.2)
Total deferred taxation credit
(2.5)
(4.8)
Tax expense reported in the consolidated Statement of Profit or Loss
6.7
7.8
Tax recognised in other comprehensive expense
2024
£m
2023
£m
Decrease in deferred tax liability on pension
0.3
0.1
Current tax credited in respect of defined benefit pension scheme
–
0.2
Tax reported in other comprehensive expense
0.3
0.3
Tax recognised in equity
2024
£m
2023
£m
(Decrease)/Increase in deferred tax asset on share-based payments
(0.3)
0.4
Tax reported in equity
(0.3)
0.4
The effective rate of taxation for the year is higher (2023: higher) than the standard rate of taxation in the UK of 25% (2023: 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 2024 and 31 March 2023 respectively is presented below:
2024
£m
2023
£m
Profit before tax
22.2
29.1
Profit before taxation multiplied by standard rate of corporation tax in the UK of 25% (2023: 19%)
5.6
5.5
Effect of:
Differences in overseas tax rates
0.3
1.8
Tax losses not recognised
0.5
0.6
Non-deductible expenses
1.7
1.3
Increased recognition of historic losses
(0.1)
(0.3)
Impact of tax rate changes on deferred tax
–
(0.2)
Adjustments to deferred taxation expense in respect of prior years
0.3
(1.2)
Adjustments to current taxation expense in respect of prior years
(1.6)
0.3
Total tax reported in the consolidated Statement of Profit or Loss
6.7
7.8
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
170
Annual Report and Accounts for the year ended 31 March 2024
Deferred tax
Deferred tax liabilities
2024
£m
2023
£m
Accelerated capital allowances
(0.5)
(0.5)
Intangibles
(20.2)
(18.3)
Pensions
(0.1)
(0.6)
Other temporary differences
(2.2)
(1.7)
Gross deferred tax liabilities
(23.0)
(21.1)
Deferred tax assets
Decelerated capital allowances
–
0.1
Pensions
0.5
0.5
Tax losses
1.8
3.2
Share-based payment plans
4.2
4.4
Other temporary differences
3.4
3.0
Gross deferred tax assets
9.9
11.2
£5.1m of deferred tax assets (2023: £3.6m) and £4.8m of deferred tax liabilities (2023: £4.4m) are expected to be recovered or
settled no more than 12 months after the reporting period. £4.8m of deferred tax assets (2023: £7.6m) and £18.2m of deferred
tax liabilities (2023: £16.7m) are expected to be recovered or settled more than 12 months after the reporting period.
Movements in deferred tax
Accelerated
capital
allowances
£m
Intangibles
£m
Pensions
£m
Tax
losses
£m
Share-
based
payments
£m
Other
temporary
differences
£m
Total
£m
At 1 April 2022
(0.8)
(18.3)
(0.2)
3.4
3.8
0.2
(11.9)
(Charged)/credited
- to profit and loss
0.5
3.2
–
(0.2)
0.2
1.1
4.8
- to other comprehensive income
–
–
0.1
–
–
–
0.1
- directly to equity
–
–
–
–
0.4
–
0.4
Transfers
(0.1)
–
–
–
–
0.1
–
Exchange differences on
translation of foreign subsidiaries
–
(0.5)
–
–
–
(0.1)
(0.6)
Acquisition-related movements
–
(2.7)
–
–
–
–
(2.7)
At 31 March 2023
(0.4)
(18.3)
(0.1)
3.2
4.4
1.3
(9.9)
(Charged)/credited
- to profit and loss
(0.1)
3.8
0.2
(1.4)
0.1
(0.1)
2.5
- to other comprehensive income
–
–
0.3
–
–
–
0.3
- directly to equity
–
–
–
–
(0.3)
–
(0.3)
Transfers
–
–
–
–
–
–
–
Exchange differences on
translation of foreign subsidiaries
–
0.3
–
–
–
–
0.3
Acquisition-related movements
–
(6.0)
–
–
–
–
(6.0)
At 31 March 2024
(0.5)
(20.2)
0.4
1.8
4.2
1.2
(13.1)
At 31 March 2024, £1.4m (2023: £2.8m) of the deferred tax asset in respect of tax losses relates to tax jurisdictions in which tax
losses were incurred in the current or preceding period. The recognition of the deferred tax asset is supported by forecasts of
sufficient future taxable profits in the relevant jurisdictions.
At 31 March 2024, the Group had not recognised any deferred tax asset in respect of tax losses of approximately £26.1m
(2023: £24.2m). Deferred tax assets are not recognised where there is insufficient evidence that losses will be utilised.
10. Tax expense continued
171
Financial Statements
discoverIE Group plc Innovative Electronics
At 31 March 2024, a £1.3m deferred tax liability (2023: £1.0m) 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 £19.9m (2023: £23.7m). 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.
An increase in the UK corporation tax rate to 25% had been substantively enacted at 31 March 2022, with effect from 1 April
2023. A rate of 25% has been applied in the measurement of the Group’s UK-based deferred tax assets and liabilities at 31
March 2024.
11. Business combinations
Acquisitions in the year ended 31 March 2024
Acquisition of Silvertel
On 30 August 2023, the Group completed the acquisition of Silver Telecom Limited (“Silvertel”), a company incorporated in
the United Kingdom by acquiring 100% of the shares of its parent company SLV Holdings Limited. Silvertel is a designer and
manufacturer of differentiated, high-performance Power-over-Ethernet (“PoE”) modules and complementary products for
global industrial electronic connectivity markets.
Silvertel was acquired for an initial cash consideration of £23.0m before expenses, funded from the Group’s existing debt
facilities. In addition, contingent payments of up to £23.0m will be payable subject to Silvertel’s EBIT performance over the
next four years. This includes up to £4.0m payable subject to continuous employment during the performance period.
The provisional fair value of the identifiable assets and liabilities of Silvertel at the date of acquisition was:
Provisional
fair value
recognised
at acquisition
£m
Intangible assets – other (incl. customer relationships)
9.3
Property, plant and equipment
0.1
Right of use assets
0.2
Inventories
2.6
Trade and other receivables
1.4
Net cash
1.6
Trade and other payables
(0.9)
Current tax liabilities
(0.4)
Deferred tax liabilities
(2.4)
Lease liabilities
(0.2)
Total identifiable net assets
11.3
Provisional goodwill arising on acquisition
14.5
Total investment
25.8
Discharged by
Initial cash consideration
23.0
Contingent consideration
2.8
25.8
Net cash outflows in respect of the acquisition comprise:
Total
£m
Cash consideration
23.0
Transaction costs (included in operating cash flows) 1
0.6
Net cash acquired
(1.6)
22.0
1
Acquisition costs of £0.6m were expensed as incurred in the period ended 31 March 2024. These were included within operating costs.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
10. Tax expense continued
172
Annual Report and Accounts for the year ended 31 March 2024
Included in cash flow from investing activities is the cash consideration of £23.0m and the pre-acquisition tax settled of £0.3m,
offset by the net cash acquired of £1.6m.
From the date of acquisition to 31 March 2024, Silvertel contributed £3.5m to revenue and a loss of £0.9m to profit after tax of
the Group. If the business combination had taken place at the beginning of the year, the consolidated revenue for the Group
would have been £440.0m and the consolidated profit after tax for the Group would have been £15.5m.
The goodwill is attributable to the workforce and the high profitability of the acquired business. It will not be deductible for
tax purposes. Included in the £14.5m of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured, due to their nature. These include the value of expected operational benefits. All the
acquired receivables are expected to be collected.
Acquisition of 2J Antennas
On 12 September 2023, the Group completed the acquisition of 2J Antennas Group (“2J”), by acquiring 100% equity and voting
rights of 2J Antennas, s.r.o. (Slovakia), 2J Antennas UK Limited and 2J Antennas USA Corp.
2J is a leading designer and manufacturer of high-performance antennas for industrial electronic connectivity applications.
2J was acquired for an initial cash consideration of £44.9m (€52.4m), before expenses, funded from the Group’s existing debt
facilities.
The provisional fair value of the identifiable assets and liabilities of 2J at the date of acquisition was:
Provisional
fair value
recognised
at acquisition
£m
Intangible assets – other (incl. customer relationships)
16.2
Property, plant and equipment
0.5
Right of use assets
0.2
Inventories
2.8
Trade and other receivables
1.9
Cash and cash equivalents
1.3
Overdraft
(0.4)
Trade and other payables
(1.1)
Current tax
(1.6)
Deferred tax liabilities
(3.4)
Lease liabilities
(0.2)
Total identifiable net assets
16.2
Provisional goodwill arising on acquisition
28.7
Total investment
44.9
Discharged by
Cash
44.9
Net cash outflows in respect of the acquisition comprise:
Total
£m
Cash consideration
44.9
Transaction costs (included in operating cash flows) 1
1.0
Net cash acquired
(0.9)
45.0
1
Acquisition costs of £1.0m were expensed as incurred in the period ended 31 March 2024. These were included within operating costs.
Included in cash flow from investing activities is the cash consideration of £44.9m and settlement of pre-acquisition tax
liabilities of £0.1m, offset by the net cash acquired of £0.9m.
From the date of acquisition to 31 March 2024, 2J contributed £7.5m to revenue and loss of £1.0m to profit after tax of the
Group. If the business combination had taken place at the beginning of the year, the consolidated revenue for the Group
would have been £442.2m and the consolidated profit after tax for the Group would have been £15.1m.
11. Business combinations continued
173
Financial Statements
discoverIE Group plc Innovative Electronics
The goodwill is attributable to the workforce and the high profitability of the acquired business. It will not be deductible for
tax purposes. Included in the £28.7m of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured, due to their nature. These include the value of expected operational benefits. All the
acquired receivables are expected to be collected.
Other acquisitions
Shape
On 24 January 2024, the Group completed the acquisition of Shape LLC (“Shape”), a company incorporated in the US, by
acquiring 100% of the membership interests of Shape LLC.
Shape is a US-based designer and manufacturer of specialty transformer equipment. Shape was acquired for an initial cash
consideration of £7.9m ($10.0m), before expenses, funded from the Group’s existing debt facilities.
DTI
On 6 March 2024, the Group completed the acquisition of Diamond Technologies, Inc. (“DTI”), a company incorporated in the
US, by acquiring 100% of DTI shares.
DTI specialises in customised data collection products geared primarily to original equipment manufacturers (“OEM”),
including OEM focused embedded barcode, RFID, vision and embedded gateway and controller solutions. DTI was acquired
for an initial cash consideration of £6.6m ($8.4m), before expenses, funded from the Group’s existing debt facilities. In addition,
a contingent payment of up to £3.2m will be payable subject to DTI’s financial performance over the next three years, subject
to the seller’s continuous employment during the performance period.
IKN
On 16 March 2024, the Group completed the acquisition of IKN AS (“IKN”), a company incorporated in Norway, by acquiring
100% of IKN AS shares .
IKN specialises in products and services for data centres, networking and cabling systems. IKN was acquired for an initial
cash consideration of £2.5m (NOK 33.6m), before expenses, funded from the Group’s existing debt facilities In addition, a
contingent payment of up to £0.3m (NOK 3.4m) will be payable subject to IKN’s revenue performance over the period ending
31 December 2024 and subject to IKN achieving certain integration targets.
The combined provisional fair value of the identifiable assets and liabilities of the three acquisitions above, at the date of
acquisition was:
Provisional
fair value
recognised
at acquisition
£m
Intangible assets – other (incl. customer relationships)
7.3
Property, plant and equipment
0.1
Right of use assets
1.1
Inventories
2.8
Trade and other receivables
2.4
Net cash
0.8
Trade and other payables
(2.1)
Current tax liabilities
(0.1)
Deferred tax liabilities
(0.2)
Lease liabilities
(1.1)
Total identifiable net assets
11.0
Provisional goodwill arising on acquisition
6.1
Total investment
17.1
Discharged by
Initial cash consideration
17.0
Contingent consideration
0.1
17.1
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
11. Business combinations continued
174
Annual Report and Accounts for the year ended 31 March 2024
Net cash outflows in respect of the acquisition comprise:
Total
£m
Cash consideration
17.0
Transaction related bonuses
0.8
Transaction costs (included in operating cash flows) 1
0.9
Net cash acquired
(0.8)
17.9
1
Acquisition costs of £0.9m were expensed as incurred in the period ended 31 March 2024. These were included within operating costs.
Included in cash flow from investing activities is the cash consideration of £17.0m and the transaction bonus of £0.8m, offset
by the net cash acquired of £0.8m.
From the date of acquisition to 31 March 2024, IKN, DTI and Shape contributed £2.1m to revenue and profit of £0.1m to profit
after tax of the Group. If the business combination had taken place at the beginning of the year, the consolidated revenue for
the Group would have been £453.2m and the consolidated profit after tax for the Group would have been £15.8m.
The goodwill is attributable to the workforce and the high profitability of the acquired businesses. It will not be deductible
for tax purposes. Included in the £6.1m of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured, due to their nature. These include the value of expected operational benefits. All the
acquired receivables are expected to be collected.
Acquisitions in the year ended 31 March 2023
There have been no changes to the provisional fair values of the assets and liabilities acquired in the prior year.
Acquisition of CDT
On 30 June 2022, the Group completed the acquisition of CDT 123 Limited and CustomDesignTechnologies Ltd (“CDT”) via
the purchase of 100% of the share capital and voting equity interests of CDT 123 Limited which is a company incorporated in
the United Kingdom. CDT was acquired for an initial cash consideration of £5m, before expenses, funded from the Group’s
existing debt facilities.
The fair value of the identifiable assets and liabilities of CDT at the date of acquisition were:
Fair value
recognised
at acquisition
£m
Intangible assets – other (customer relationships)
2.0
Right of use assets
0.2
Inventories
0.9
Trade and other receivables
0.3
Net cash
0.3
Trade and other payables
(0.3)
Current tax liabilities
(0.3)
Deferred tax liabilities
(0.5)
Lease liabilities
(0.2)
Total identifiable net assets
2.4
Provisional goodwill arising on acquisition
2.6
Total investment
5.0
Discharged by
Cash
5.0
5.0
11. Business combinations continued
175
Financial Statements
discoverIE Group plc Innovative Electronics
Net cash outflows in respect of the acquisition comprise:
Total
£m
Cash consideration
5.0
Transaction costs (included in operating cash flows) 1
0.2
Net cash acquired
(0.3)
4.9
1
Acquisition costs of £0.2m were expensed as incurred in the period ended 31 March 2023. These were included within operating costs.
Included in cash flow from investing activities is the cash consideration of £5.0m and the net cash acquired of £0.3m.
From the date of acquisition to 31 March 2023, CDT contributed £2.0m to revenue and loss of £0.1m to profit after tax of the
Group. If the business combination had taken place at the beginning of the year, the consolidated revenue for the Group
would have been £449.8m and the consolidated profit after tax for the Group would have been £21.5m.
The goodwill is attributable to the workforce and the high profitability of the acquired business. It will not be deductible for
tax purposes. Included in the £2.6m 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 benefits that are
not easily quantifiable. All the acquired receivables are expected to be collected.
Acquisition of Magnasphere
On 18th January 2023, the Group completed the acquisition of Magnasphere Corporation (“Magnasphere”), a company
based in the US. The acquisition was structured as a “Reverse Triangular Merger”, whereby a newly incorporated subsidiary of
discoverIE US Holdings Inc was merged into Magnasphere. The net result was the same as if discoverIE had simply acquired
100% of the shares of Magnasphere.
Magnasphere is a US-based designer and manufacturer of high-performance magnetic sensors and switches for industrial
electronic markets including access control, data centres and specialist vehicles.
Magnasphere was acquired for a cash consideration of £18.8m ($22.9m) and funded from the Group’s existing debt facilities.
The fair value of the identifiable assets and liabilities of Magnasphere at the date of acquisition were:
Fair value
recognised
at acquisition
£m
Property, plant and equipment
0.3
Intangible assets – other (customer relationships)
8.2
Intangible assets – other (patents)
0.2
Right of use assets
0.3
Inventories
1.7
Trade and other receivables
1.3
Net cash
2.6
Trade and other payables
(2.3)
Current tax liabilities
(0.1)
Deferred tax liabilities
(2.0)
Lease liabilities
(0.3)
Total identifiable net assets
9.9
Provisional goodwill arising on acquisition
8.9
Total investment
18.8
Discharged by
Cash
18.8
18.8
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
11. Business combinations continued
176
Annual Report and Accounts for the year ended 31 March 2024
Net cash outflows in respect of the acquisition comprise:
Total
£m
Fair value of cash consideration
18.8
Transaction-related payment to seller
1.7
Transaction costs (included in operating cash flows) 1
0.7
Net cash acquired
(2.6)
18.6
1
Acquisition costs of £0.7m were expensed as incurred in the year ended 31 March 2023. These were included within operating costs.
Included in cash flow from investing activities is the cash consideration of £18.8m, a £1.7m transaction-related payment to the
seller and the net cash acquired of £2.6m.
From the date of acquisition to 31 March 2023, Magnasphere contributed £1.1m to revenue and loss of £0.2m to profit after
tax of the Group. If the business combination had taken place at the beginning of the year, the consolidated revenue for the
Group would have been £454.5m and the consolidated profit after tax for the Group would have been £21.5m.
The goodwill is attributable to the workforce and the high profitability of the acquired business. It will not be deductible for
tax purposes. Included in the £8.9m 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 benefits that are
not easily quantifiable. All the acquired receivables are expected to be collected.
12. Assets held for sale
In December 2023, the Group agreed to sell certain assets of its Santon solar business unit (the “disposal group”) based in the
Netherlands. The consideration for the disposal comprises £2.6m plus up to £3.4m in relation to inventory transferred to the
buyer. Completion of the sale is subject to the transfer of production lines, inventory and other related assets to the buyer’s
location. In conjunction with this disposal, the Group also intends to sell its manufacturing facility in the Netherlands with
the retained business moving to a smaller facility. The disposals of both the solar business unit and the manufacturing facility
are expected to complete in the financial year ending 31 March 2025 and expected to generate net cash inflow of c.£7m after
costs. As the Group expects to recover the carrying value of these assets through a sale transaction within the next financial
year, in accordance with IFRS 5 ‘Assets held for sale and discontinued operations’, the disposal group and the manufacturing
facility have been classified as assets held for sale at the balance sheet date for the year ended 31 March 2024.
The disposal group is not considered to be a major line of operation and does not represent one of the Group’s cash
generating units. Accordingly its results are not presented as a discontinued operation for the years ended 31 March 2024 and
31 March 2023.
In accordance with IFRS 5, a plan to dispose of an asset is considered to be an impairment indicator. Therefore, the assets
of the disposal group and the manufacturing facility have been tested for impairment and measured at the lower of their
carrying amount and fair value less cost to sell at the time of the reclassification. This has resulted in the recognition of a write-
down of £2.7m relating to the goodwill and other intangible assets of the disposal group during the year ended 31 March
2024. There was no impact on the carrying value of the manufacturing facility. This is a level 2 measurement as per the fair
value hierarchy as set out in note 28.
The assets included as held for sale and that are presented within total assets of the Sensing & Connectivity segment (note 5),
are the following:
2024
£m
Disposal group held for sale
Non-current assets
Property, plant and equipment
2.1
Intangible assets – other
0.2
Current assets
Inventory
1.9
4.2
Non-current assets
Property, plant and equipment
2.5
Total assets classified as held for sale
6.7
11. Business combinations continued
177
Financial Statements
discoverIE Group plc Innovative Electronics
13. Dividends
Dividends recognised in equity as distributions to equity holders in the year:
2024
£m
2023
£m
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2023 of 7.90p (2022: 7.45p)
7.6
7.1
Interim dividend for the year ended 31 March 2024 of 3.75p (2023: 3.55p)
3.6
3.4
Total amounts recognised as equity distributions during the year
11.2
10.5
Proposed for approval at AGM:
2024
£m
2023
£m
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2024 of 8.25p (2023: 7.90p)
7.9
7.6
Summary
Dividends per share declared in respect of the year
12.00p
11.45p
Dividends per share paid in the year
11.65p
11.00p
Dividends paid in the year
£11.2m
£10.5m
14. Earnings per share
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the
Company 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 calculations.
2024
£m
2023
£m
Profit after tax for the year
15.5
21.3
2024
Number
2023
Number
Weighted average number of shares for basic earnings per share
95,835,775
95,426,255
Effect of dilution – share options
2,450,593
2,917,061
Adjusted weighted average number of shares for diluted earnings per share
98,286,368
98,343,316
Basic earnings per share
16.2p
22.3p
Diluted earnings per share
15.8p
21.7p
At the year-end, there were 2,713,941 ordinary share options in issue that could potentially dilute underlying earnings per share
in the future, of which 2,450,593 are currently dilutive (2023: 3,025,959 in issue and 2,917,061 dilutive).
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
178
Annual Report and Accounts for the year ended 31 March 2024
15. Property, plant and equipment
Land and
buildings
£m
Leasehold
improvements
£m
Plant and
equipment
£m
Total
£m
Cost
At 1 April 2022
8.8
3.9
37.0
49.7
Additions
0.2
0.2
5.0
5.4
Disposals
–
–
(0.2)
(0.2)
Business acquired (note 11)
–
–
0.3
0.3
Exchange adjustments
0.4
–
1.0
1.4
At 31 March 2023
9.4
4.1
43.1
56.6
Additions
0.9
0.3
3.6
4.8
Disposals
–
–
(1.2)
(1.2)
Business acquired (note 11)
–
–
0.7
0.7
Assets held for sale (note 12)
(2.5)
–
(2.1)
(4.6)
Exchange adjustments
(2.3)
1.3
(0.1)
(1.1)
At 31 March 2024
5.5
5.7
44.0
55.2
Accumulated depreciation
At 1 April 2022
2.6
1.4
22.2
26.2
Charge for the year
0.3
0.5
3.8
4.6
Disposals
–
–
(0.2)
(0.2)
Exchange adjustments
0.2
–
0.6
0.8
At 31 March 2023
3.1
1.9
26.4
31.4
Charge for the year
0.3
0.5
3.9
4.7
Disposals
–
–
(1.0)
(1.0)
Exchange adjustments
(2.2)
1.1
0.7
(0.4)
At 31 March 2024
1.2
3.5
30.0
34.7
Net book value at 31 March 2024
4.3
2.2
14.0
20.5
Net book value at 31 March 2023
6.3
2.2
16.7
25.2
Land and buildings includes land with a cost of £0.8m (2023: £0.4m) that is not subject to depreciation.
At 31 March 2024 the Group had contractual capital expenditure commitments for plant and equipment and leasehold
improvements of £0.2m (2023: £nil) for which no provision has been made.
179
Financial Statements
discoverIE Group plc Innovative Electronics
16. Leases
16.1 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 three and ten years. Lease contracts generally
include extension and termination options.
16.2 Carrying value of right of use assets
Set out below are the carrying amounts of right of use assets recognised and movements during the year:
Land and
buildings
£m
Plant and
machinery
£m
Total
£m
At 1 April 2022
19.8
2.1
21.9
Exchange adjustments
(0.2)
0.1
(0.1)
Additions/modifications
1.8
1.0
2.8
Depreciation charge
(4.7)
(1.1)
(5.8)
Terminations
(0.1)
–
(0.1)
Business acquired (note 11)
0.5
–
0.5
At 31 March 2023
17.1
2.1
19.2
Exchange adjustments
(0.5)
0.1
(0.4)
Additions/modifications
5.9
1.2
7.1
Depreciation charge
(5.4)
(1.2)
(6.6)
Terminations
(0.2)
–
(0.2)
Business acquired (note 11)
1.3
0.2
1.5
At 31 March 2024
18.2
2.4
20.6
16.3 Carrying value of lease liabilities
Set out below are the carrying amounts of lease liabilities and the movements during the year:
Total
£m
At 1 April 2022
(21.1)
Additions/modifications
(2.4)
Interest for the year
(0.6)
Lease payments
5.8
Business acquired (note 11)
(0.5)
At 31 March 2023
(18.8)
Exchange adjustments
0.5
Additions/modifications
(6.6)
Interest for the year
(0.7)
Lease payments
6.8
Terminations
0.2
Business acquired (note 11)
(1.5)
At 31 March 2024
(20.1)
2024
£m
2023
£m
Current liabilities
5.7
4.0
Non-current liabilities
14.4
14.8
20.1
18.8
Payment of lease liabilities is shown under Financing Activities in the consolidated Statement of Cash Flows.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
180
Annual Report and Accounts for the year ended 31 March 2024
16.4 Amounts recognised in the consolidated Statement of Profit or Loss
2024
£m
2023
£m
Depreciation of right of use assets
6.6
5.8
Interest expense (included in finance costs)
0.7
0.6
7.3
6.4
During the year ended 31 March 2024, a total of £0.2m was recognised in the consolidated Statement of Profit or Loss relating
to payments under short-term and low-value leases (2023: £0.2m)
16.5 Extension and termination options
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. Extension and termination options with a high
probability of being exercised are included in the measurement of the lease liability and right of use asset.
There are no lease contracts in place as at 31 March 2024 which include variable lease payments (2023: none).
17. Intangible assets – goodwill
Cost
£m
At 1 April 2022
175.7
Business acquired (note 11)
11.5
Exchange adjustments
0.9
At 31 March 2023
188.1
Business acquired (note 11)
49.3
Exchange adjustments
(4.0)
At 31 March 2024
233.4
Impairment
£m
At 31 March 2023
–
Impairment charge1
(1.7)
At 31 March 2024
(1.7)
Net book value at 31 March 2024
231.7
Net book value at 31 March 2023
188.1
1
Write-down of intangible assets related to the disposal group (note 12).
18. Impairment testing of goodwill
Goodwill acquired through business combinations is allocated to cash-generating units (“CGUs”) and tested annually for
impairment. Newly acquired entities might be a single CGU until such time as they can be integrated.
The Group’s operations are organised into two distinct divisions, Magnetics & Controls (“M&C”) and Sensing & Connectivity
(“S&C”). Within each division are aggregated business units which generate largely independent cash inflows and are
considered to be individual CGUs from an impairment testing perspective.
The carrying value of goodwill is analysed as follows:
2024
£m
2023
£m
Magnetics & Controls
106.4
89.0
Sensing & Connectivity
125.3
99.1
231.7
188.1
The movement in goodwill compared to prior year relates mainly to the movement in foreign exchange rates and to Silvertel,
2J, Shape, DTI and IKN which were acquired in the year (note 11).
16. Leases continued
181
Financial Statements
discoverIE Group plc Innovative Electronics
The significant amounts of goodwill are analysed below:
2024
£m
2023
£m
Noratel
30.3
31.6
Beacon
40.3
41.2
Sens-Tech
27.4
27.4
2J 1
28.7
–
The Group defines significant as 10% of the total carrying value of goodwill.
1
The goodwill for 2J as at 31 March 2024 represented 12% of the total carrying value of the Group goodwill. Given the acquisition completed
during the financial year ended 31 March 2024, management considers that the carrying value of this CGU materially approximates to the
fair value of the consideration paid on acquisition.
The recoverable amount of each CGU is based on value-in-use calculations. The key assumptions used in these calculations
relate to future revenue (Compound Annual Growth Rate – “CAGR”), discount rates and long-term growth rates. Cash
flow forecasts for the five-year period from the reporting date are based on the FY 2024/25 Board approved budget and
management projections thereon, which are based on historical experience and market outlook.
Cash flow projections included in the impairment review models include management’s view of the impact of climate
change, including costs related to the effects of climate change, as well as the future costs of the Group’s commitment to
achieve net zero carbon emissions by 2030. The potential increased costs, less any benefits that may occur, to meet these
commitments are not expected to be material and have therefore resulted in no impairments during the year ended 31
March 2024.
A long-term growth rate (“LTGR”) beyond the five-year period of 2% has been applied consistently across all CGUs (2023: 2%)
and is based on the average long-term inflation targets.
Discount rates reflect the current market assessment of the risks specific to each CGU. The discount rate was estimated
based on the average percentage weighted average cost of capital for the industry and then further adjusted for country-
specific risk.
The table below discloses the discount rates and growth rates for each significant CGU:
Pre-tax discount rate
5-year sales CAGR
2024
%
2023
%
2024
%
2023
%
Noratel
14.5
17.3
4.5
6.0
Beacon
12.8
13.3
5.0
13.6
Sens-Tech
13.3
13.3
4.4
13.0
The double-digit sales CAGR for Beacon and Sens-Tech in the prior year related mainly to the recovery from supply chain
disruptions.
Sensitivity to changes in assumptions
The Group’s forecast is based on a range of assumptions to determine the value of expected future cash flows. Deviations
against those plans and assumptions in terms of revenue and margin projections, operating and capital costs and successful
achievement of strategic objectives are all inherently uncertain. Headroom in the impairment test for each CGU has been
tested for sensitivity to reasonably possible adverse changes in forecast cash flows, discount rates and long-term growth rates.
Overall, adequate headroom is available against material impairment risk.
Management has identified three CGUs within the Sensing & Connectivity division, which represent 5%, 3% and 2% of the total
carrying amount of goodwill in the Group as at 31 March 2024, where changes in the value-in-use assumptions may lead to
the recoverable amount of the CGU to be less than its carrying value. The assumptions made in estimating the value of the
future cash flow for these CGUs are pre-tax discount rates of 12.5%, 12.0% and 12.3% respectively, 5-year Sales CAGR of 8.9%, 6.6%
and 8.7% respectively and an LTGR of 2% for all three CGUs. The headroom for these CGUs are £2.8m, £2.6m and £2.9m at the
date of the assessment.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
18. Impairment testing of goodwill continued
182
Annual Report and Accounts for the year ended 31 March 2024
The assumptions that would result in the recoverable amount equalling the carrying amount are 5-year sales CAGR of 8.0%
(a reduction of 0.9 percentage points), long-term growth rate of 1.5% (a reduction of 0.5 percentage points), and a pre-tax
discount rate of 12.7% (an increase of 0.2 percentage points) for the CGU representing 5% of the total carrying value of the
Group goodwill, 5-year sales CAGR of 5.0% (a reduction of 1.6 percentage points), long-term growth rate of 1.5% (a reduction
of 0.5 percentage points), and a pre-tax discount rate of 12.5% (an increase of 0.5 percentage points) for the CGU representing
3% of the total carrying value of the Group goodwill, and 5-year sales CAGR of 7.8% (a reduction of 0.9 percentage points),
long-term growth rate of 1.5% (a reduction of 0.5 percentage points), and a pre-tax discount rate of 12.7% (an increase of 0.4
percentage points) for the CGU representing 2% of the total carrying value of the Group goodwill.
A reduction in LTGR of 0.5% reduces the headroom in the three CGUs by £0.9m, £0.7m and £0.5m respectively and an increase
of one percentage point in the pre-tax discount rate reduces the headroom in the three CGUs by £1.7m, £1.3m and £1.0m
respectively. A reduction in the 5-year sales CAGR of 2 percentage points reduces the headroom in the three CGUs by £2.5m,
£1.7m and £2.9m respectively.
None of the changes to individual assumptions above would lead to the carrying amount of the three CGUs exceeding their
recoverable amount.
For all other CGUs it can be demonstrated that, under reasonable downside sensitivity, there remains sufficient headroom in
the recoverable amount of the CGU goodwill balances.
19. Intangible assets – other
Acquired intangibles
Software &
development
£m
Customer
relationships
£m
Patents &
brands
£m
Total
£m
Cost
At 1 April 2022
5.2
132.4
5.5
143.1
Business acquired (note 11)
–
10.2
0.2
10.4
Additions
0.2
–
–
0.2
Disposals
(0.7)
–
–
(0.7)
Exchange adjustment
–
1.5
–
1.5
At 31 March 2023
4.7
144.1
5.7
154.5
Business acquired (note 11)
0.6
32.2
–
32.8
Additions
0.1
–
–
0.1
Disposals
(0.3)
–
–
(0.3)
Assets held for sale (note 12)
–
–
(0.3)
(0.3)
Exchange adjustment
–
(3.2)
0.6
(2.6)
At 31 March 2024
5.1
173.1
6.0
184.2
Accumulated amortisation
At 1 April 2022
3.1
49.8
2.6
55.5
Charge for the year
0.7
15.3
0.5
16.5
Disposals
(0.1)
–
–
(0.1)
Exchange adjustment
(0.2)
(1.1)
–
(1.3)
At 31 March 2023
3.5
64.0
3.1
70.6
Charge for the year
0.3
15.8
0.4
16.5
Impairment charge1
–
0.3
0.7
1.0
Disposals
(0.3)
–
–
(0.3)
Exchange adjustment
–
(2.0)
0.6
(1.4)
At 31 March 2024
3.5
78.1
4.8
86.4
Net book value at 31 March 2024
1.6
95.0
1.2
97.8
Net book value at 31 March 2023
1.2
80.1
2.6
83.9
1
Write-down of goodwill related to the disposal group (note 12).
18. Impairment testing of goodwill continued
183
Financial Statements
discoverIE Group plc Innovative Electronics
20. Inventories
2024
£m
2023
£m
Finished goods and goods for resale
27.9
37.9
Raw materials and work in progress
52.2
52.1
Total inventories
80.1
90.0
At 31 March 2024, the provision for realisable value against total inventories was £8.5m (2023: £8.0m).
21. Trade and other receivables
Current
2024
£m
2023
£m
Trade receivables
69.3
62.4
Other receivables
15.7
9.4
Prepayments
3.8
2.8
88.8
74.6
Trade receivables are non-interest bearing; are generally on 30 to 60 days’ terms and are shown net of expected credit losses.
Current year other receivables includes £6.1m related to the current portion of the deferred consideration receivable for the
disposal of the Acal BFi business.
All of the Group’s trade and other receivables are regularly reviewed for indicators of impairment. The credit risk exposure
inherent in the Group’s trade receivables is measured and recognised as an impairment provision on initial recognition,
based on the expected credit loss method, as required by IFRS 9. Specific provision for impairment may also be required
where a specific increase in credit risk is identified, or a credit event has occurred. Provisions for general credit risk exposure
is measured with reference to the age of a receivable as debts which are overdue present a specific impairment risk indicator
regarding recoverability.
In total, the Group has recognised impairment provisions of £2.3m (2023: £2.2m), against trade receivables. This includes a
total of £1.2m (2023: £1.1m) of specific provisions for impairment due to increased default risk and unresolved disputes, as
well as provision for expected credit losses of £1.1m (2023: £1.1m). Across the Group, general expected credit loss risk has been
assessed to be low due to the size, nature and diversification of customers across the divisions. The increase during the year is
mainly attributable to macro-economic factors such as increase in interest rates, which are incorporated in the assessment of
the Group’s expected credit losses performed annually.
The movements in the impairment provisions for trade receivables during the year were as follows:
2024
£m
2023
£m
At 1 April
2.2
1.6
Charge for the year
0.4
0.6
Exchange adjustments
(0.3)
–
At 31 March
2.3
2.2
Details of the net trade receivables ageing are set out below:
Overdue
Total
£m
Not
yet due
£m
<30
days
£m
30–60
days
£m
60–90
days
£m
90–120
days
£m
>120
days
£m
2024
69.3
58.6
8.5
1.4
0.6
0.2
–
2023
62.4
51.9
8.6
0.9
0.5
0.5
–
Non-Current
2024
£m
2023
£m
Other receivables
0.2
6.0
The other receivables amount of £0.2m (2023: £6.0m) relates to deferred consideration receivable in relation to the disposal of
Vertec Scientific SA Proprietary Limited. Prior year included a deferred consideration receivable for the disposal of the Acal BFi
business, which is now presented under current other receivables.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
184
Annual Report and Accounts for the year ended 31 March 2024
22. Cash and cash equivalents
2024
£m
2023
£m
Cash at bank and in hand
110.8
83.9
The cash balances are separately presented gross in the consolidated Statement of Financial Position, rather than netted off
against overdraft held either by the same entity, or other Group entities, with the same bank, despite the existence of a legal
right of set off. The net cash position as at 31 March 2024 is £31.5m (2023: £43.4m). Refer to note 24.
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 (£89.8m with financial institutions with credit rating of AA- (2023: £60.0m), £12.1m with
financial institutions with credit rating of A+ (2023: £11.8m), £nil with financial institutions with credit rating BBB- (2023: £0.2m),
and the remaining balance of £8.9m with various financial institutions with credit rating of A- or higher (2023: £11.9m) in line
with its treasury policy. The fair value of cash and cash equivalents is £110.8m (2023: £83.9m).
23. Other financial liabilities
Current
Non-current
Effective
interest
rate %
Maturity
2024
£m
2023
£m
2024
£m
2023
£m
Bank overdrafts
Variable
On demand
79.3
40.5
–
–
Unsecured bank loans
Variable
–
–
0.1
–
Revolving Credit Facility (“RCF”)
Variable
–
–
137.4
88.1
Capitalised debt costs
(0.6)
(0.6)
(1.4)
(1.4)
Total other financial liabilities
78.7
39.9
136.1
86.7
Lease liabilities
5.7
4.0
14.4
14.8
Trade and other payables (note 29)
73.8
78.8
4.6
4.1
Total
158.2
122.7
155.1
105.6
Interest on overdrafts is based on floating rates linked to SONIA, SOFR and EURIBOR.
Included in unsecured bank loans is a Euro-denominated loan of £0.1m (2023: £nil).
At 31 March 2024, the RCF drawdowns of £137.4m (2023: £88.1m) were denominated in Sterling, US Dollar and Euro which bear
interest based on SONIA, SOFR and EURIBOR, plus a facility margin.
Trade and other payables above include only contractual obligations.
The maturity of the gross contractual financial liabilities is as follows:
At 31 March 2024
Within
1 year
£m
2–5
years
£m
>5
years
£m
Total
£m
Fixed and floating rate
78.7
136.1
–
214.8
Lease liabilities
6.4
12.2
4.1
22.7
Trade and other payables
73.8
4.6
–
78.4
158.9
152.9
4.1
315.9
At 31 March 2023
Within
1 year
£m
2–5
years
£m
>5
years
£m
Total
£m
Fixed and floating rate
39.9
86.7
–
126.6
Lease liabilities
6.0
11.7
5.1
22.8
Trade and other payables
78.8
4.1
–
82.9
124.7
102.5
5.1
232.3
185
Financial Statements
discoverIE Group plc Innovative Electronics
The carrying amount of the Group’s other financial liabilities excluding lease liabilities is denominated in the following
currencies:
2024
£m
2023
£m
Sterling
86.0
55.8
Euro
93.3
55.9
US Dollar
82.4
67.9
Other currencies
31.5
29.9
293.2
209.5
24. Movements in cash and net debt
Year to 31 March 2024
1 April
2023
£m
Cash flow
£m
Non-cash
changes
£m
31 March
2024
£m
Cash and cash equivalents
83.9
29.2
(2.3)
110.8
Bank overdrafts
(40.5)
(38.6)
(0.2)
(79.3)
Net cash
43.4
(9.4)
(2.5)
31.5
Bank loans over one year
(88.1)
(51.1)
1.7
(137.5)
Capitalised debt costs
2.0
0.6
(0.6)
2.0
Total loan capital
(86.1)
(50.5)
1.1
(135.5)
Net debt
(42.7)
(59.9)
(1.4)
(104.0)
Lease liability
(18.8)
6.8
(8.1)
(20.1)
Net debt (incl. lease liability)
(61.5)
(53.1)
(9.5)
(124.1)
Bank loans over one year above include £137.4m (2023: £88.1m) drawn down against the Group’s revolving credit facility.
Bank overdrafts reflect the aggregated gross overdrawn balances of Group companies (even if those companies have other
positive cash balances). The overdrafts and cash and cash equivalents are held with the Group’s relationship banks with a legal
right to offset.
Year to 31 March 2023
1 April
2022
£m
Cash flow
£m
Non-cash
changes
£m
31 March
2023
£m
Cash and cash equivalents
108.8
(23.4)
(1.5)
83.9
Bank overdrafts
(71.9)
31.6
(0.2)
(40.5)
Net cash
36.9
8.2
(1.7)
43.4
Bank loans over one year
(67.8)
(18.6)
(1.7)
(88.1)
Capitalised debt costs
0.7
1.7
(0.4)
2.0
Total loan capital
(67.1)
(16.9)
(2.1)
(86.1)
Net debt
(30.2)
(8.7)
(3.8)
(42.7)
Lease liability
(21.1)
5.8
(3.5)
(18.8)
Net debt (incl. lease liability)
(51.3)
(2.9)
(7.3)
(61.5)
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
23. Other financial liabilities continued
186
Annual Report and Accounts for the year ended 31 March 2024
25. Reconciliation of cash flows from operating activities
2024
£m
2023
£m
Profit for the year
15.5
21.3
Tax expense
6.7
7.8
Net finance costs
9.0
5.5
Depreciation of property, plant and equipment
4.7
4.6
Depreciation of right of use assets
6.6
5.8
Amortisation of intangible assets – other
16.5
16.5
Write-down of assets related to disposal group – other intangible assets
1.0
–
Write-down of asset related to disposal group – goodwill
1.7
–
Loss on disposal of property, plant and equipment
0.2
–
Loss on disposal of intangible assets
–
0.6
Change in provisions
2.6
(0.2)
Pension scheme funding
(2.0)
(1.6)
IAS 19 pension charge
0.8
0.7
Contingent consideration related to business acquisitions
–
(4.0)
Business disposal costs
–
(1.2)
Associated taxes on LTIPs
(0.3)
(0.6)
Impact of equity-settled share-based payment expense and associated taxes
2.6
2.2
Operating cash flows before changes in working capital
65.6
57.4
Decrease/(Increase) in inventories
14.5
(8.6)
(Increase)/Decrease in trade and other receivables
(3.0)
5.0
Decrease in trade and other payables
(11.1)
(1.7)
Decrease/(Increase) in working capital
0.4
(5.3)
Cash generated from operations
66.0
52.1
Interest paid
(11.6)
(6.2)
Interest paid on lease liabilities
(0.7)
(0.6)
Income taxes paid
(12.5)
(9.0)
Net cash flow from operating activities
41.2
36.3
26. Provisions
Retirement
and
severance
indemnity
£m
Dilapidation
£m
Other
£m
Total
£m
At 1 April 2022
2.3
2.1
1.5
5.9
Arising during the year
–
0.4
0.4
0.8
Arising from business combinations
–
0.2
–
0.2
Utilised
(0.3)
–
(0.2)
(0.5)
Released
(0.1)
–
(0.4)
(0.5)
Exchange difference
0.1
–
(0.1)
–
At 31 March 2023
2.0
2.7
1.2
5.9
Arising during the year
0.4
0.5
2.5
3.4
Arising from business combinations
0.1
0.1
0.1
0.3
Utilised
(0.1)
–
(0.3)
(0.4)
Released
–
–
(0.1)
(0.1)
Exchange difference
(0.3)
–
–
(0.3)
At 31 March 2024
2.1
3.3
3.4
8.8
187
Financial Statements
discoverIE Group plc Innovative Electronics
Analysis of total provisions:
2024
£m
2023
£m
Current
5.2
1.7
Non-Current
3.6
4.2
8.8
5.9
The retirement indemnity provision of £2.0m (2023: £1.9m), relates to retirement and leaving indemnity schemes in Sri
Lanka £0.9m (2023: £0.9m), India £0.6m (2023: £0.8m), France £0.2m (2023: £0.1m), Netherlands £nil (2023: £0.1m), Germany
£0.1m (2023: £nil), Denmark £0.1m (2023: £nil) and Slovakia £0.1m (2023: £nil). 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.
The key actuarial assumptions used in relation to valuation of the Sri Lankan scheme comprise of mortality rates, staff
turnover (16% up to age of 54 and zero thereafter) (2023: 17% up to the age of 54 and zero thereafter), retirement age (60 years)
(2023: 60 years), discount rate (12% p.a.) (2023: 17% p.a.) and salary increases (10% p.a.) (2023: 16% p.a.).
The severance provision of £0.1m (2023: £0.1m) relates to severance costs payable to employees.
The dilapidation provision of £3.3m (2023: £2.7m) relates to exit costs to be incurred at the end of leasehold contracts for
properties within the Group.
Other provisions relates primarily to warranty provisions £0.4m (2023: £0.7m), restructuring provisions of £1.9m relating mainly
to the Santon solar business unit disposal (2023: £0.1m) and other provisions of £1.1m (2023: £0.4m). The provisions greater than
one year are expected to be utilised within one to three years.
27. 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 have any hedges in place at the year-end against exposure to interest rate risk.
A 1% decrease in interest rates on the Group’s debt position during the year ended 31 March 2024, would have increased the
Group’s profit before tax by approximately £1.3m (2023: £0.7m).
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 inventory 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.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
26. Provisions continued
188
Annual Report and Accounts for the year ended 31 March 2024
The US Dollar and Euro represent the main foreign exchange translational exposures for the Group. The following table
demonstrates the sensitivity of the Group’s profit before tax to a 10% strengthening in Sterling against US Dollar and Euro.
Profit before tax – gain/(loss)
2024
£m
2023
£m
10% strengthening in Sterling against Euro
(0.5)
(0.7)
10% strengthening in Sterling against US Dollar
(1.1)
(0.5)
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% (2023: 5%) of Group sales.
Management of liquidity risk
The Group manages its exposure to liquidity risk and maximises its flexibility in meeting changing business needs through
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 2024, the Group had net cash of £31.5m (2023: £43.4m). The Group had total working capital facilities available of
£246.8m (2023: £246.3m) with a number of major UK and overseas banks, of which £240m (2023: £240m) were committed
facilities. The Group had drawn £137.4m against total facilities at 31 March 2024 (2023: £88.1m). In addition, the Group has an
£80m accordion facility that it can use to extend the total facility up to £320m. The syndicated facility is available both for
acquisitions and for working capital purposes. The facilities are subject to certain financial covenants, which had significant
headroom at 31 March 2024.
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 increases bank borrowings, issues new shares or changes the amount of
dividends paid to Shareholders. In respect of this objective, the Group has a target gearing range of between 1.5 and 2.0 times.
Gearing at 31 March 2024 was at the bottom of the range at 1.5 times (2023: 0.7).
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 23, cash and cash
equivalents in note 22 and equity attributable to Shareholders.
27. Financial risk controls continued
189
Financial Statements
discoverIE Group plc Innovative Electronics
28. Financial assets and liabilities
Fair values
The Group’s principal non-derivative financial instruments comprise bank loans and overdrafts, cash and short-term
borrowings. The Group also holds other financial instruments such as trade receivables and trade payables that arise directly
from the Group’s trading operations.
Derivative financial instruments are represented by short-term foreign currency forward contracts placed by the Group with
external banks as part of the Group’s cash management and foreign currency risk management activities. The fair value of
derivative foreign exchange instruments is determined on initial recognition at forward market exchange rates at inception
of the contract and subsequently remeasured based on forward market exchange rates at the balance sheet date. As at 31
March 2024, the fair value of derivatives was £nil (2023: £0.1m). Prior year position is included within other receivables in note 21.
The carrying values of the Group’s trade and other receivables, trade and other payables and assets held for sale are
disclosed in notes 21, 29 and 12. The carrying value of these items approximates book value due to the short maturity of these
instruments.
The carrying values of the Group’s other financial assets and financial liabilities are set out below by category. Carrying values
for all financial assets and liabilities are equivalent to fair values.
Carrying
amount
2024
£m
Fair
value
2024
£m
Carrying
amount
2023
£m
Fair
value
2023
£m
Financial assets
Cash at bank and in hand
110.8
110.8
83.9
83.9
Financial assets at amortised cost
Deferred consideration
6.3
6.3
6.0
6.0
Financial liabilities at amortised cost
Bank overdrafts and short-term borrowings
(79.3)
(79.3)
(40.5)
(40.5)
Non-current interest-bearing loans and borrowings:
Fixed and floating rate borrowings
(135.5)
(135.5)
(86.1)
(86.1)
Lease liabilities
(20.1)
(20.1)
(18.8)
(18.8)
Financial liabilities at fair value through profit and loss (“FVTPL”)
Contingent consideration
(6.7)
(6.7)
(4.1)
(4.1)
The methods and assumptions used to determine the fair value of financial assets and liabilities are set out below.
All material changes in fair value of financial instruments as at the balance sheet date have been recognised in the
consolidated Statement of Profit or Loss. Impairment reviews did not identify any material impairment of financial assets
from carrying values as reported at the balance sheet date and, as such, no material impairments are included in the
consolidated Statement of Profit or Loss.
Fair value methods and assumptions
Forward foreign exchange contracts (forwards) – the fair value of forward foreign currency contracts is determined with
reference to observable yield curves and foreign exchange rates at the reporting date. The FX contracts outstanding with
banks at the year-end had a maturity of one year or less.
Loans and borrowings – the fair value of loans and borrowings has been calculated by discounting future cash flows, where
material, at prevailing market interest rates.
Fair Value Hierarchy
For financial assets and financial liabilities measured at fair value, as set out in the tables above, the fair value measurement
techniques are based upon applying unadjusted, quoted market rates or prices or inputs other than quoted prices that are
observable for the assets or liability either directly or indirectly.
IFRS 13 “Financial Instruments: Disclosures” requires financial instruments measured at fair value to be analysed into a fair
value hierarchy based upon the valuation technique used to determine fair value. The highest level in this hierarchy is Level 3
within which inputs that are not based on observable market data for the asset or liability are applied.
The valuation techniques used by the Group for the measurement of derivative financial instruments, loans and deferred
consideration are considered to be within Level 2, which includes inputs other than quoted prices included within Level 1 that
are observable either directly or indirectly.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
190
Annual Report and Accounts for the year ended 31 March 2024
28. Financial assets and liabilities continued
Contingent consideration is included in Level 3 of the fair value hierarchy. The fair value is determined considering the
expected payment, discounted to present value using a risk-adjusted discount rate. The expected payment is determined
separately in respect of each individual earn-out agreement taking into consideration the expected level of profitability of
each acquisition. The unobservable inputs are the projected forecast measures that are assessed on an annual basis. Changes
in the fair value of contingent consideration relating to updated projected forecast performance measures are recognised in
the consolidated Statement of Profit or Loss in the period that the change occurs.
Reconciliation of Level 3 fair value for contingent consideration payable on acquisitions:
2024
£m
2023
£m
At 1 April
4.1
8.8
Contingent consideration arising from current year acquisitions payable in future years
3.0
–
Contingent consideration paid in the current year relating to previous years’ acquisitions
–
(6.3)
Costs charged to the consolidated Statement of Profit or Loss:
Subsequent adjustments on acquisitions
(0.3)
1.3
Exchange difference
(0.1)
0.3
At 31 March
6.7
4.1
Subsequent adjustments on acquisitions of £0.3m credit (2023: £1.3m debit) and exchange differences of £0.1m credit (2023:
£0.3m debit) are included within operating costs.
Contingent consideration is sensitive to forecast operating profits of the relevant acquired businesses. At 31 March 2024, the
estimated fair value of contingent consideration payable on acquisitions would increase/(decrease) by £2.4m (2023: £1.0m) if
projected forecast profits were higher/lower by c.20%.
29. Trade and other payables
Current
2024
£m
2023
£m
Trade payables
44.7
51.6
Other payables
27.9
26.1
Accrued expenses and contract liabilities
14.9
17.5
87.5
95.2
Trade payables are non-interest bearing and are settled in accordance with credit terms. Other payables and accrued
expenses are non-interest bearing and are settled throughout the year. Included in current year other payables is contingent
consideration of £2.2m relating to acquisitions in the current and prior years (2023: £nil), employee-related payable of £14.7m
(£11.5m), VAT payable of £4.0m (2023: £3.6m), a total of £3.6m of customers deposits (2023: £5.7m) and £3.4 other payables
(2023: £5.3m).
Contract liabilities relate to contracts with customers, recognised and measured in accordance with the requirements of IFRS
15, and relate to either advance payments received for goods to be delivered in the future or amounts invoiced in respect
of performance obligations which are not yet satisfied in full and due to be satisfied within a period of 12 months from the
reporting date.
Contract liabilities as at 31 March 2024 amounted to £1.2m (2023: £1.1m). Revenue recognised in the reporting period that was
included in the contract liability balance at the beginning of the period amounted to £1.0m (2023: £1.0m).
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 £2.0m (2023: £2.3m) subject to such an arrangement.
Non-Current
2024
£m
2023
£m
Other payables
4.6
4.1
Included in non-current trade and other payables is £4.5m contingent consideration relating to acquisitions in the current
and prior years (2023: £4.1m).
191
Financial Statements
discoverIE Group plc Innovative Electronics
30. Share capital
Allotted, called up and fully paid
2024
Number
2024
£m
2023
Number
2023
£m
Ordinary shares of 5p each
96,356,109
4.8
96,356,109
4.8
During the year to 31 March 2024, no shares were issued to the Group’s Employee Benefit Trust (2023: 900,000). At 31 March
2024 the Trust held 414,600 shares (2023: 690,092). During the year to 31 March 2024, employees exercised 275,492 share
options under the terms of the various share option schemes (2023: 378,333).
31. 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 consolidated Statement of Profit or Loss in respect of each of these
schemes is:
2024
£m
2023
£m
a) discoverIE Group plc long-term incentive plan (“the LTIP”)
2.6
2.2
b) Approved and unapproved executive share option schemes
–
–
2.6
2.2
a) The LTIP
Since 2008, the Group has operated the LTIP as a replacement for the approved and unapproved executive share option
scheme detailed below. 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 two-
year holding period from the date of vesting.
For awards made in the year ended 31 March 2024, the performance conditions are as follows:
•
45% 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 FTSE250 Index;
•
45% of the award is based on the Company’s absolute earnings per share (“EPS”) performance;
•
10% of the award is subject to the Company’s ESG performance (“ESG”), based on the Company’s reduction in carbon
emissions;
•
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 model and Black-Scholes model. 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 31 March 2024:
Grant date
14 June
2023
TSR
14 June
2023
EPS
14 June
2023
ESG
14 June
2023
EPS/Local
Share price at grant date
£9.38
£9.38
£9.38
£9.38
Exercise price
nil
nil
nil
nil
Number of employees
15
15
15
22
Shares under option
184,082
184,082
40,907
82,637
Vesting period (years)
3
3
3
3
Expected volatility
40.83%
40.83%
40.83%
40.83%
Option life (years)
10
10
10
10
Expected life (years)
5
5
5
5
Risk-free rate of return
4.72%
4.72%
4.72%
4.72%
Expected dividend yield
nil
nil
nil
nil
Fair value
£6.49
£8.90
£8.90
£8.91
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
192
Annual Report and Accounts for the year ended 31 March 2024
Awards granted in the year ended 31 March 2023:
Grant date
21 June
2022
TSR
21 June
2022
EPS
21 June
2022
EPS/Local
Share price at grant date
£6.50
£6.50
£6.50
Exercise price
nil
nil
nil
Number of employees
14
14
19
Shares under option
245,981
245,981
105,716
Vesting period (years)
3
3
3
Expected volatility
41.5%
41.5%
41.5%
Option life (years)
10
10
10
Expected life (years)
5
5
5
Risk-free rate of return
2.5%
2.5%
2.5%
Expected dividend yield
1.7%
1.7%
1.7%
Fair value
£3.25
£5.71
£5.71
The expected volatility is based on historical volatility over the period of time commensurate with the expected term
immediately prior to the date of grant. The expected life is the average expected period to exercise. The risk-free rate of return
used in the valuation is the rate of interest obtainable from government securities over a period commensurate with the
expected term of the equity incentive.
The total charge for the year relating to the LTIP schemes was £2.6m (2023: £2.2m).
Outstanding LTIP
A summary of the awards that have been granted under the LTIP and remain outstanding is given below:
At 31 March 2024
Outstanding at
1 April 2023
Granted
during the year
Forfeited
during the year
Exercised
during the year
Outstanding at
31 March 2024
Exercise
dates
5,500
–
–
–
5,500
2022–2026
629,140
–
–
(176,150)
452,990
2023–2027
390,924
–
(3,834)
(74,582)
312,508
2023–2028
620,943
–
(6,412)
–
614,531
2024–2029
547,867
–
(41,539)
–
506,328
2025–2030
371,739
–
(12,814)
–
358,925
2026–2031
592,086
–
(18,071)
–
574,015
2027–2032
–
491,708
(3,208)
–
488,500
2028–2033
3,158,199
491,708
(85,878)
(250,732)
3,313,297
At 31 March 2023
Outstanding at
1 April 2022
Granted
during the year
Forfeited
during the year
Exercised
during the year
Outstanding at
31 March 2023
Exercise
dates
74,067
–
–
(68,567)
5,500
2022–2026
733,347
–
–
(104,207)
629,140
2023–2027
465,795
–
–
(74,871)
390,924
2023–2028
704,630
–
–
(83,687)
620,943
2024–2029
585,286
–
(1,360)
(36,059)
547,867
2025–2030
373,670
–
(1,931)
–
371,739
2026–2031
–
597,678
(5,592)
–
592,086
2027–2032
2,936,795
597,678
(8,883)
(367,391)
3,158,199
The weighted average remaining contractual life for the share options outstanding at 31 March 2024 is 6.2 years (2023: 6.5
years) and the weighted average share price for the exercises during the year ended 31 March 2024 was £8.07 (2023: £7.89).
The range of exercise prices for options outstanding at the end of the year was £nil (2023: £nil).
31. Share-based payment plans continued
193
Financial Statements
discoverIE Group plc Innovative Electronics
b) 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 Black-Scholes 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
14 June
2023
21 June
2022
Share price at grant date
£9.38
£6.5
Exercise price
£9.18
£6.87
Number of employees
10
7
Shares under option
19,011
15,179
Vesting period (years)
3
3
Expected volatility
37.51%
40.8%
Option life (years)
10
10
Expected life (years)
6.5
6.5
Risk-free rate of return
4.72%
2.5%
Expected dividends expressed as a dividend yield
1.22%
1.7%
Fair value
£3.82
£2.31
The expected volatility is based on historical volatility over the period of time commensurate with the expected term
immediately prior to the date of grant. The expected life is the average expected period to exercise. The risk-free rate of return
used in the valuation is the rate of interest obtainable from government securities over a period commensurate with the
expected term of the equity incentive.
The total charge for the year relating to the approved and unapproved share option schemes was £39k (2023: £21k).
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 2024
Outstanding at
1 April 2023
Granted
during the year
Forfeited
during the year
Exercised
during the year
Outstanding at
31 March 2024
Exercise price
(pence)
Exercise
dates
1,691
–
–
(1,691)
–
219.50
2020–2027
9,580
–
–
(9,580)
–
402.00
2021–2028
10,693
–
–
(4,549)
6,144
421.17
2022–2029
11,374
–
–
–
11,374
603.60
2023–2030
11,731
–
–
–
11,731
803.00
2024–2031
15,179
–
(1,324)
–
13,855
686.80
2025–2032
–
19,011
(1,129)
–
17,882
918.00
2026–2033
60,248
19,011
(2,453)
(15,820)
60,986
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
31. Share-based payment plans continued
194
Annual Report and Accounts for the year ended 31 March 2024
At 31 March 2023
Outstanding at
1 April 2022
Granted
during the year
Forfeited
during the year
Exercised
during the year
Outstanding at
31 March 2023
Exercise price
(pence)
Exercise
dates
1,691
–
–
–
1,691
219.50
2020–2027
9,580
–
–
–
9,580
402.00
2021–2028
12,673
–
–
(1,980)
10,693
421.17
2022–2029
12,731
–
–
(1,357)
11,374
603.60
2023–2030
11,731
–
–
–
11,731
803.00
2024–2031
–
15,179
–
–
15,179
686.80
2025–2032
48,406
15,179
–
(3,337)
60,248
Changes in share options
A reconciliation of option movements over the year to 31 March 2024 is shown below:
2024
2023
Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Outstanding at 1 April
60,248
£5.88
48,406
£5.51
Granted
19,011
£9.18
15,179
£6.87
Exercised
(15,820)
£3.88
(3,337)
£4.95
Forfeited
(2,453)
£7.93
–
–
Outstanding at 31 March
60,986
£7.35
60,248
£5.88
Exercisable at 31 March
17,518
£5.40
21,964
£3.97
The weighted average remaining contractual life for the share options outstanding at 31 March 2024 is 7.7 years (2023: 7.3 years).
The range of exercise prices for options outstanding at the end of the year was £4.21 to £9.18 (2023: £2.20 to £8.03).
32. 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 31 March 2024, 94 employees were active members of the
discoverIE scheme (2023: 91). The total cost charged to the consolidated Statement of Profit or Loss in relation to the UK-
based discoverIE scheme was £459,000 (2023: £595,000). Employer contributions in respect of other UK-based schemes and
overseas pension schemes were £650,000 (2023: £730,000) and £2,812,000 (2023: £2,587,000) respectively. Total contributions
payable in the next financial year are expected to be at rates broadly similar to those in FY 2023/24 but based on actual salary
levels in FY 2024/25.
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 Group, 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.
31. Share-based payment plans continued
195
Financial Statements
discoverIE Group plc Innovative Electronics
Based upon the results of the triennial funding valuation at 31 March 2021, the Sedgemoor Scheme’s Trustees agreed
with Sedgemoor Limited on behalf of the participating employers to continue the same rate of participating employer’s
contributions under the deficit recovery plan agreed at the previous valuation at 31 March 2018. This required contributions
of £1.9m over the year to 31 March 2022, with future contributions of £1.9m p.a. increasing by 3% each April payable over the
period to 30 April 2024. After the valuation, in December 2022, it was agreed with the Trustees that, with effect from January
2023, these contributions could be paid into an escrow account to the benefit of the Trustees unless and until such time as
pension benefits are fully secured with an insurer and the scheme wound up. For the year ended 31 March 2024, a total of
£2.0m (2023: £0.2m) was paid into the escrow account and is reported under trade and other receivables.
The estimated amount of total employer contributions expected to be paid to the Sedgemoor Scheme during FY 2024/25 is
£nil (FY 2023/24 actual: £nil). £0.8m is expected to be paid into the escrow account in FY 2024/25.
There is a risk that adverse experience could lead to a requirement for Sedgemoor Limited to make additional contributions
to recover any deficit that arises.
The main actuarial assumptions used are set out as follows:
2024
2023
Rate of increase of pensions in payment
2.5%
2.5%
Discount rate
4.8%
4.8%
Inflation assumption – RPI
3.4%
3.5%
Inflation assumption – CPI*
2.3%
2.4%
*3.3% from 2030
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 “S3NA” table, projected from 2013 and with long-term
improvement rates in line with CMI 2021 core projections based on each member’s actual date of birth with a long-term
annual rate of improvement of 1.25% p.a., allowing for a 10% weighting of 2022 mortality date reflecting the best estimate
impact on long-term mortality trends brought about by the Covid-19 pandemic.
The weighted average duration of the defined benefit obligation at 31 March 2024 was 10 years (2023: 10 years).
The Directors consider that, were a pension asset to be realised in respect of this scheme after all member benefits have been
paid and after the scheme is wound up, this would be fully recoverable by the Group in line with the rules of the scheme.
Therefore, the IAS 19 surplus is recognised in full under current accounting standards.
The investment strategy is set by the Trustees of the Sedgemoor Scheme in consultation with the Company. The current
strategy is to invest in liability-driven investments, corporate bonds, asset-backed securities and liquidity funds. As part
of this strategy, the Trustees hedge the Scheme against future changes in gilt market-implied interest rate and inflation
expectations relative to a prudent valuation of the liabilities based on the yield on gilts (as such, the Scheme over-hedges
these risks relative to the IAS 19 liability value).
As the Sedgemoor Scheme mostly invests in pooled funds, the fair value of assets reflects the fund managers’ valuation rather
than quoted prices in active markets, however, the fund values are all based on the prices of the underlying investments
within each fund. Remeasurements are recognised immediately through other comprehensive income.
The charges recognised in the consolidated Statement of Profit or Loss in respect of defined benefit schemes are as follows:
2024
£m
2023
£m
Pension charge (recognised in operating costs)
0.9
0.7
Past service cost
The charges recognised in the consolidated Statement of Comprehensive Income are as follows:
Remeasurement (losses)/gains:
2024
£m
2023
£m
Return on plan assets (excluding amounts included in net interest expense)
(1.4)
(7.9)
Actuarial changes arising from changes in actuarial assumptions
0.2
6.7
Actuarial loss recorded in the consolidated Statement of Comprehensive Income
(1.2)
(1.2)
There was no additional actuarial loss relating to the unfunded retirement and leaving indemnity schemes (note 26) recorded
in the consolidated Statement of Comprehensive Income.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
32. Pension continued
196
Annual Report and Accounts for the year ended 31 March 2024
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:
2024
£m
2023
£m
Bonds
6.9
8.4
Cash
5.9
1.2
Liability-driven investments
6.3
7.8
Infrastructure
–
4.7
Asset-backed security
9.0
8.8
Fair value of scheme assets
28.1
30.9
Present value of funded defined benefit obligations
(27.8)
(28.6)
Asset recognised in the consolidated Statement of Financial Position
0.3
2.3
Over the year to 31 March 2024, the surplus reduced from £2.3m to £0.3m. The movement related to pension administration
costs of £0.8m (2023: £0.6m) and actuarial losses of £1.2m (2023: £1.2m) recognised in the consolidated Statement of
Comprehensive Income.
Changes in the present value of the defined benefit obligation are as follows:
2024
£m
2023
£m
Opening defined benefit obligations
28.6
36.3
Net interest cost
1.3
1.0
Actuarial losses/(gains) due to:
Experience on benefit obligation
0.1
0.4
Changes in financial assumptions
(0.1)
(7.1)
Changes in demographic assumptions
(0.2)
–
Benefits paid
(1.9)
(2.0)
Closing defined benefit obligations
27.8
28.6
Changes in the fair value of the scheme assets are as follows:
2024
£m
2023
£m
Opening fair value of scheme assets
30.9
39.0
Interest on scheme assets
1.4
1.0
Actual return on plan assets less interest on plan assets
(1.4)
(7.9)
Pension administration costs
(0.9)
(0.7)
Contributions
–
1.5
Benefits paid
(1.9)
(2.0)
Closing fair value of scheme assets
28.1
30.9
Sensitivities
The sensitivity of the 2024 pension liabilities to changes in assumptions are as follows:
Assumption
Change in assumption
Increase in
scheme
deficit
£m
Discount rate
Decrease by 0.5%
1.4
Inflation
Increase by 0.5%
0.5
Life expectancy
Increase by 1 year
1.5
32. Pension continued
197
Financial Statements
discoverIE Group plc Innovative Electronics
33. Auditors’ remuneration
During the year the Group paid fees for the following services from auditors:
2024
£m
2023
£m
Auditors’ remuneration:
Audit of the Group Financial Statements (including the Company)
0.9
0.7
Audit of local subsidiary Financial Statements
1.0
0.9
Audit fees
1.9
1.6
The fee for non-audit services was £123k (2023: £119k), of which £112k (2023: £110k) relates to interim review and £11k (2023:
£9k) relates to reporting required by regulators in overseas countries.
34. Related party disclosures
As at 31 March 2024 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 that qualify to take the statutory audit exemption as set out within section 479A
of the Companies Act 2006 for the year ended 31 March 2024 are listed below. discoverIE Group plc will guarantee the debts
and liabilities of those companies at the balance sheet date in accordance with section 479C of the Companies Act 2006.
Audit exempt entities within section 479A of Companies Act 2006
Name
Company Number
CDT 123 Limited
09637514
Contour Holdings Limited
06846542
Cursor Controls Holdings Limited
09472278
CustomDesignTechnologies Ltd
02081576
discoverIE Electronics Limited
06556285
discoverIE Nordic Holdings Limited
09056483
Heason Technology Limited
06322037
Herga Technology Limited
00533707
Santon Switchgear Limited
03207845
SLV Holdings Limited
09943868
Variohm Holdings Limited
05783452
Xi-Tech Limited
07068708
The country of incorporation and registration for the entities above is England and the registered address is
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford, Surrey, GU2 7AH.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
198
Annual Report and Accounts for the year ended 31 March 2024
Name and nature of business
Registered address
Country of incorporation
and registration
Management Services - Head Office
discoverIE Management Services
Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Operating Companies
2J Antennas s.r.o
Štefánikova 61, 085 01 Bardejov
Slovakia
2J Antennas UK Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
2J Antennas USA Corporation
2020 W Guadalupe Rd, Suite 8, Gilbert Arizona, 852
USA
Antenova Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Calculagraph Company (trading as
Control Products Inc)
280 Ridgedale Avenue, East Hanover, New Jersey 07936
USA
Coil-Mag LLC (trading as IMAG
Electronics)
160 South Illinois Street, Hobart, Indiana, 46342-4512
USA
Coil-Tran de Mexico, S.A. DE C. V.2
Calle Matamoros 124, Colonia Centro, Municipio Agualeguas,
Nuevo Leon, Mexico, CP 65800
Mexico
Coil-Tran LLC (trading as Hobart
Electronics and Noratel US)
160 South Illinois Street, Hobart, Indiana, 46342-4512
USA
Contour Electronics Asia Limited
Room 601, 6/F Shing Yip Industrial Building, 19-21 Shing Yip
Street, Kwun Teng, Kowloon
Hong Kong
Contour Electronics Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Cursor Controls Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
CustomDesignTechnologies Ltd
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Danselbud Noratel Transformator
sp. z o.o.
ul. Szczecinska 1K, Dobra Szczecinska PL-72-003
Poland
Diamond Technologies Inc.
43 Broad Street Unit C103, Hudson, MA 01749
USA
EMC Innovation Limited1
Woolim Lions Valley C-409, 283 Bupyeong-daero,
Bupyeong-gu, Cheongcheon-Dong, Incheon
South Korea
Flux A/S
Industrivangen 5, 4550 Asnaes
Denmark
Flux International Limited
41/27, 23 Village No. 6, Phuncharoen Lane, Bangna-Trad
K.M. 16.5 Road, Bang Chalong Sub-district, Bang Phli
District, Samut Prakan Province, 10540
Thailand
Foshan Noratel Electric Co Limited1
NO 22-2 Xingye Road, Zone C Shishan Science &
Technology Industrial Park, Nanhai District, Foshan City,
Guangdong Province 528225
China
Foss Fiberoptisk Systemsalg AS
Dansrudveien 45, N-3036 Drammen
Norway
Foss Fibre Optics s.r.o
Odborarska 52, 831 02 Bratislava
Slovakia
Hectronic AB
P.O. Box 3002, 750 03 Uppsala
Sweden
Herga Technology Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
IKN AS
Økernveien 121, 0579 Oslo
Norway
Limitor GmbH
Dieselstraße 22, 73660 Urbach
Germany
Limitor Hungaria Kft
Pécs, Makay István út 13/b, 7634
Hungary
Limitor Solutions GmbH
Dieselstraße 22, 73660 Urbach
Germany
Logic PD, Inc. (trading as Beacon
Embedded Works)
6201 Bury Drive, Eden Prairie, MN 55346
USA
Magnasphere Corporation
850 New Burton Road, Suite 201, Dover, DE 19904
USA
MTC Micro Tech Components GmbH Hausener Straße 9, 89407 Dillingen a.d., Donau
Germany
34. Related party disclosures continued
199
Financial Statements
discoverIE Group plc Innovative Electronics
Name and nature of business
Registered address
Country of incorporation
and registration
Myrra Deutschland GmbH
Lebacher Straße 4, 66113 Saarbrucken
Germany
Myrra Hong Kong Limited
42/F Central Plaza,18 Harbour Road, Wanchai
Hong Kong
Myrra Power sp. z o.o.
Ul Warszawska 1, 05-310 Kaluszyn
Poland
Myrra SAS
2 Boulevard de La Haye, 77600 Bussy-Saint-Georges
France
Noratel AS
Elektroveien 7, 3300 Hokksund
Norway
Noratel Canada Inc
267 Matheson Boulevard East, Unit 2, Mississauga,
ON L4Z 1X8
Canada
Noratel Denmark A/S
Naverland 15, 2600 Glostrup, Copenhagen
Denmark
Noratel Finland OY
Kiertokatu 5, PB 11, 24280 Salo, Helsinki
Finland
Noratel Germany AG
Elsenthal 53, DE-94481 Grafenau, Bremen
Germany
Noratel India Power Components
Pvt Limited
Nila Technopark, Trivandrum, Kerala, 695581
India
Noratel International (Private)
Limited
P.O Box 15, Phase II, KEPZ, Katunayake
Sri Lanka
Noratel Power Engineering LLC
3780 Kilroy Airport Way, Suite 200, Long Beach, CA 90822
USA
Noratel Sp. z o.o.
ul. Szczecinska 1K, Dobra Szczecinska, PL-72-003
Poland
Noratel Sweden AB
Lars Lindahlsväg 2, Box 108, Laxå 69522
Sweden
Noratel UK Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
NSI bvba
Haakstraat 1A, 3740 Bilzen
Belgium
Phoenix America LLC
850 New Burton Road, Suite 201, Dover, DE 19904
USA
Santon Circuit Breaker Services B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Netherlands
Santon GmbH
Oberstrasse 1, Altes Rathaus Hinsbeck, Postfach 5217, 41334
Nettetal
Germany
Santon Group B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Netherlands
Santon Hekendorpstraat B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Netherlands
Santon Holland B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Netherlands
Santon International B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Netherlands
Santon Switchgear Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Sens-Tech Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Shape LLC
850 New Burton Road, Suite 201, Dover, DE 19904
USA
Silver Telecom Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Stortech Electronics Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Variohm-Eurosensor Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Vertec Scientific Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Zhongshan Myrra Electronic Co
Limited1
39-2 Industrial Road, Xiaolan Industrial Park, Xiaolan Town,
528400, Zhongshan, Guandong Province
China
Holding Companies
Aramys SAS
2 Boulevard de La Haye, 77600 Bussy-Saint-Georges
France
CDT 123 Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Contour Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Cursor Controls Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
34. Related party disclosures continued
200
Annual Report and Accounts for the year ended 31 March 2024
Name and nature of business
Registered address
Country of incorporation
and registration
discoverIE Electronics Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
discoverIE Europe Holding BV
Hekendorpstraat 69, 3079 DX Rotterdam
Netherlands
discoverIE France Holdings SAS
2 Boulevard de la Haye, Parc Gustave Eiffel, 77600 Bussy-
Saint-Georges
France
discoverIE Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
discoverIE Nordic Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
discoverIE US Holdings Inc.
850 New Burton Road, Suite 201, Dover, DE 19904
USA
EWAC Holding B.V.
Hekendorpstraat 69, 3079 DX Rotterdam
Netherlands
Sedgemoor Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
SLV Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Trafo Holding AS
Elektroveien 7, Hokksund, 3300
Norway
Variohm Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Xi-Tech Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Dormant Companies
Acal BFi Iberia SL
Doctor Flemíng, 3 - 9" derecha, 28036 - Madrid
Spain
Acal Electronics Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
ACTECH Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Advanced Crystal Technology Limited 2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Amega Electronics Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Amega Group Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Bosunmark Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Gothic Crellon Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Heason Technology Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Radiatron Components Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Radiatron Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Sedgemoor Group Pension Trustees
Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Sedgemoor Group Supplementary
Pension Trustees Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Sedgemoor Holdings Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
Townsend-Coates Limited
2 Chancellor Court, Occam Road, Surrey Research Park,
Guildford, Surrey, GU2 7AH
England
1 Zhongshan Myrra Electronic Co Limited, EMC Innovation 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
34. Related party disclosures continued
201
Financial Statements
discoverIE Group plc Innovative Electronics
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 Management Committee as set out on page 97. Remuneration is set out below in aggregate. The charge for share-
based payments of £2.3m (2023: £1.8m) relates to the Group’s LTIP as detailed in note 31.
2024
£m
2023
£m
Short-term employee benefits
4.7
5.0
Pension benefits
0.2
0.2
Share-based payments
2.3
1.8
7.2
7.0
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
There were no transactions with Directors (other than the payment of salaries and fees and the provision of employee
benefits as outlined in the Remuneration Report) during the year.
35. 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:
Year to 31 March 2024
Year to 31 March 2023
Closing
rate
Average
rate
Closing
Rate
Average
rate
US Dollar
1.2643
1.2566
1.2369
1.2058
Euro
1.1695
1.1585
1.1374
1.1576
Norwegian Krone
13.6814
13.3524
12.9595
11.9778
36. Events after the reporting date
There were no matters arising, between the balance sheet date and the date on which these Financial Statements were
approved by the Board of Directors, requiring adjustment in accordance with IAS 10 “Events after the Reporting Period”. The
following important non-adjusting events should be noted:
Dividends
A final dividend of 8.25p per share (2023: 7.90p), amounting to a dividend of £7.9m (2023: £7.6m) and bringing the total
dividend for the year to 12.0p (2023: 11.45p), was declared by the Board on 4 June 2024. The Group Financial Statements do not
reflect this dividend.
NOTES TO THE GROUP CONSOLIDATED
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
34. Related party disclosures continued
202
Annual Report and Accounts for the year ended 31 March 2024
COMPANY STATEMENT
OF FINANCIAL POSITION
as at 31 March 2024
Notes
2024
£m
2023
£m
Non-current assets
Investments
5
189.3
187.0
189.3
187.0
Current assets
Debtors
6
95.3
106.9
Cash at bank and in hand
33.1
18.2
128.4
125.1
Total assets
317.7
312.1
Current liabilities
Creditors: amounts falling due within one year
7
(31.2)
(37.8)
(31.2)
(37.8)
Non-current liabilities
Other financial liabilities
8
–
(3.6)
–
(3.6)
Total liabilities
(31.2)
(41.4)
Net assets
286.5
270.7
Capital and reserves
Called up share capital
9
4.8
4.8
Share premium account
192.0
192.0
Merger reserve
2.9
2.9
Profit and loss account
86.8
71.0
Total Shareholders’ funds
286.5
270.7
The profit of the Company for the financial year ended 31 March 2024 was £24.4m (2023: £12.7m).
These Financial Statements on pages 203 to 206 were approved by the Board of Directors on 4 June 2024 and signed on its
behalf by:
Nick Jefferies
Simon Gibbins
Group Chief Executive
Group Finance Director
203
Financial Statements
discoverIE Group plc Innovative Electronics
COMPANY STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 March 2024
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Profit and
loss
account
£m
Total
£m
At 1 April 2022
4.7
192.0
10.5
59.0
266.2
Profit for the year
–
–
–
12.7
12.7
Share-based payments
–
–
–
2.2
2.2
Shares issued
0.1
–
–
–
0.1
Transfer to profit and loss account
–
–
(7.6)
7.6
–
Dividends
–
–
–
(10.5)
(10.5)
At 31 March 2023
4.8
192.0
2.9
71.0
270.7
Profit for the year
–
–
–
24.4
24.4
Share-based payments
–
–
–
2.6
2.6
Dividends
–
–
–
(11.2)
(11.2)
At 31 March 2024
4.8
192.0
2.9
86.8
286.5
At 31 March 2024, an amount of £63.2m (2023: £50.0m) out of the total £86.8m (2023: £71.0m) in the profit and loss account 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 in the Company is dependent on dividends received from subsidiary companies meeting the definition of qualifying
consideration within the guidance referred to above, and on the available cash resources of the Group and other accessible
sources of funds. The level of distributable reserves is subject to any future restrictions or limitations at the time such
distribution is made.
204
Annual Report and Accounts for the year ended 31 March 2024
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the year ended 31 March 2024
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”) and in accordance with the Companies Act
2006. These Financial Statements are prepared on the going concern basis and under the historical cost convention modified
for fair values, as described in note 2 to the consolidated Financial Statements.
2. Summary of material accounting policies
The summary of material accounting policies for the Company is described in note 2 to the consolidated Financial
Statements.
3. Profit of the Company
The profit of the company for the financial year was £24.4m (2023: £12.7m). Dividends income received from subsidiary
undertakings amounted to £34.4m (2023: £42.4m). By virtue of section 408(3) of the Companies Act 2006, the Company is
exempt from presenting a separate Statement of Profit or Loss.
4. Employees
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. Directors’ emoluments are shown in note 8 to
the consolidated Financial Statements.
5. Investments
Subsidiary
undertakings
£m
At 1 April 2022
203.4
Transfer of investment
(18.6)
Share-based payments
2.2
At 31 March 2023
187.0
Impairment of investment
(0.3)
Share-based payments
2.6
At 31 March 2024
189.3
Details of all direct and indirect holdings in subsidiaries are provided in note 34 of the consolidated Financial Statements.
Equity investments in subsidiary undertakings are reviewed annually for indicators of impairment of the carrying value,
measured at cost less accumulated impairment losses. Where the net assets of a subsidiary fall below the carrying amount
of the investment, an impairment test is performed. The impairment test compares the carrying amount to the estimated
recoverable amount, calculated based on value in use of the forecast business cash flows, discounted at the Company’s pre-
tax discount rate.
6. Debtors
2024
£m
2023
£m
Amounts falling due within one year:
Amounts owed by subsidiary undertakings
88.7
101.5
Corporation tax
2.8
1.2
Other debtors
2.3
1.3
Prepayments
0.1
0.1
Deferred tax asset
1.4
2.8
95.3
106.9
Amounts owed by subsidiary undertakings bore interest at a Sterling base rate plus a margin of 1.75% (2023: 1.75%). All
amounts are repayable on demand. There are no material expected credit losses recognised for these receivables.
At 31 March 2024, the Company has recognised a deferred tax asset of £1.4m (2023: £2.8m) in respect of losses. Deferred tax
assets are recognised to the extent that there are sufficient forecast future taxable profits against which the Company’s losses
can be offset. At 31 March 2024, the Company had not recognised a deferred tax asset in respect of tax losses of approximately
£4.3m (2023: £7.3m).
205
Financial Statements
discoverIE Group plc Innovative Electronics
7. Creditors: amounts falling due within one year
2024
£m
2023
£m
Bank loans and overdrafts
7.6
3.6
Amounts owed to subsidiary undertakings
21.4
31.6
Other payables
0.7
1.4
Accruals
1.5
1.2
31.2
37.8
Amounts owed to subsidiary undertakings bore interest at a nil rate (2023: nil rate) and are repayable on demand.
8. Other financial liabilities
Other financial liabilities of £nil at 31 March 2024 (2023: £3.6m) comprised drawdowns on the Group’s Revolving Credit Facility
(see note 23 to the consolidated Financial Statements). The amount was denominated in Sterling and bore interest based on
SONIA.
9. Called up share capital
Allotted, called up and fully paid
2024
Number
2024
£m
2023
Number
2023
£m
Ordinary shares of 5p each
96,356,109
4.8
96,356,109
4.8
During the year to 31 March 2024, no shares were issued to the Group’s Employee Benefit Trust (2023: 900,000).
At 31 March 2024, there were outstanding options for employees of subsidiaries to purchase up to 3,374,283 (2023: 3,218,447)
ordinary shares of 5p each between 2023 and 2034 at prices ranging from £nil per share to £9.18 per share. These are subject
to certain performance conditions as disclosed in note 31 of the consolidated Financial Statements. During the year to 31
March 2024, employees exercised 275,492 share options under the terms of the various schemes (2023: 378,334). The shares
exercised during the year ended 31 March 2024 were settled by the Trust.
10. Related parties
The Company is exempt under the terms of FRS 101 from disclosing related party transactions with wholly owned entities that
are part of the Group as these transactions are fully eliminated on consolidation.
11. Financial guarantees
The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries. These guarantees are financial
guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments
when due in accordance with the terms of their borrowings. Borrowings by subsidiary undertakings totalling £137.4m (2023:
£88.1m) which are included in the Group’s borrowings (note 23) have been guaranteed by the Company.
12. Share-based payments
For detailed disclosures of share-based payments granted to the employees of subsidiaries refer to note 31 of the consolidated
Financial Statements.
13. 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 IAS 10, Events after the
reporting period. The following important non-adjusting events should be noted:
Dividends
A final dividend of 8.25p per share (2023: 7.90p), amounting to a dividend of £7.9m (2023: £7.6m) and bringing the total
dividend for the year to 12.0p (2023: 11.45p), was declared by the Board on 4 June 2024.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS continued
for the year ended 31 March 2024
206
Annual Report and Accounts for the year ended 31 March 2024
FIVE YEAR RECORD
2024
£m
2023
£m
2022
£m
2021
£m
2020
£m
Consolidated Statement of Profit or Loss –
continuing operations1
Revenue
437.0
448.9
379.2
302.8
303.3
Underlying operating profit
57.2
51.8
41.4
30.8
30.8
Underlying profit before tax
48.2
46.3
37.6
27.2
26.5
Profit before tax
22.2
29.1
17.1
13.5
13.2
Profit for the year from continuing operations
15.5
21.3
9.7
9.5
9.3
Earnings per share – continuing operations
Underlying earnings per share
36.8p
35.2p
29.4p
22.4p
24.4p
Diluted earnings per share
15.8p
21.7p
10.1p
10.3p
10.6p
Dividend per share
12.0p
11.45p
10.8p
10.15p
2.97p
Consolidated Statement of Financial Position
Net debt
(104.0)
(42.7)
(30.2)
(47.2)
(61.3)
Non-current assets
381.0
335.9
326.5
244.6
236.4
Net assets
301.6
303.6
290.4
208.4
200.5
The figures up to 2022 exclude the results of discontinued operations mainly related to the disposal of the Acal BFi business.
207
Additional Information
discoverIE Group plc Innovative Electronics
PRINCIPAL LOCATIONS
Group head office
Location
Company
City
United Kingdom
discoverIE Group plc
discoverIE Management Services
Guildford
Guildford
Operating companies
Location
Company
City
United Kingdom
CDT
Contour Electronics
Cursor Controls
Heason Technology
Herga Technology
Noratel UK
Positek
Sens-Tech
Silvertel
Stortech Electronics
Variohm-Eurosensor
Vertec Scientific
Brackley
Hook
Newark
Horsham
Bury St. Edmunds
Nantwich
Cheltenham
Egham
Newport
Harlow
Towcester
Reading
Belgium
NSI
Bilzen
Canada
Noratel Canada
Ontario
China Mainland
Foshan Noratel Electric
Zhongshan Myrra Electronic
Foshan
Zhongshan
Denmark
Noratel Denmark
Flux
Glostrup
Asnaes
Finland
Noratel Finland
Salo
France
Myrra SAS
Bussy-Saint-Georges
Germany
Limitor
MTC Micro Tech Components
Noratel Germany
Variohm-Eurosensor
Urbach
Dillingen
Grafenau, Bremen
Heidelberg
Hong Kong
Contour Asia
Myrra Hong Kong
Kowloon
Wanchai
Hungary
Limitor Hungaria
Pecs
India
Noratel India Power Components
Kerala, Bangalore
Mexico
Hobart Electronics
Agualeguas, Nogales
Netherlands
Santon
Rotterdam
Norway
Foss
Noratel Norway
Drammen
Hokksund, Hamar
Poland
Myrra Poland
Noratel Poland
Kaluszyn
Szczecinska
Slovakia
2J Antennas
Foss Fibre Optics
Bardejov
Bratislava
South Korea
EMC Innovation
Cheongcheon-Dong
Sri Lanka
Noratel International
Katunayake
Sweden
Hectronic
Noratel Sweden
Uppsala
Laxa, Vaxjo
Taiwan
Antenova Asia
Taipei
Thailand
Flux International
Bangkok
USA
2J Antennas
Beacon EmbeddedWorks
Control Products Inc (CPI)
Diamond Technologies (DTI)
Noratel US
Magnasphere
Phoenix America
Shape
Gilbert, AZ
Eden Prairie, MN
East Hanover, NJ
Hudson, MA
Hobart, IN
Waukesha, WI and Goshen, IN
Fort Wayne, IN
Addison, IL
208
Annual Report and Accounts for the year ended 31 March 2024
The production of this report supports the work of the
Woodland Trust, the UK’s leading woodland conservation
charity. Each tree planted will grow into a vital carbon store,
helping to reduce environmental impact as well as creating
natural havens for wildlife and people.
FINANCIAL CALENDAR 2024/25
CORPORATE INFORMATION
Annual General Meeting
26 July 2024
Results
Interim results for the six months to 30 September 2024
Preliminary announcement for the year to 31 March 2025
Annual Report 2025
Early December 2024
Early June 2025
Late June 2025
Registered office
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: 02008246
Auditors
PricewaterhouseCoopers LLP
Corporate solicitors
White & Case LLP
Principal bankers
Bank of Ireland
Clydesdale Bank plc
Citibank NA Inc
Danske Bank A/S
Fifth Third Commercial Bank
HSBC Bank UK plc
KBC Bank NV
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
www.shareview.co.uk
Stockbroker
Peel Hunt LLP
209
Additional Information
discoverIE Group plc
2 Chancellor Court
Occam Road, Surrey Research Park
Guildford, Surrey
GU2 7AH
Telephone +44 (0)1483 544500
www.discoverIEplc.com