Enabling
technology for a
sustainable world
Annual Report and Accounts
for the year ended 31 March 2022
CONTENTS
WELCOME TO THE 2022
ANNUAL REPORT
electronics that deliver value to our
customers, while making positive
impacts on the environment,
society and people’s lives.
Visit our investor website
www.discoverIEplc.com
It contains a wide range of information of interest to institutional and
private investors including:
■ Latest news and press releases
■ Reports and presentations
Strategic Report
Highlights 02
Investment Case 03
Group at a Glance 04
Chairman’s Statement 10
Our Business Model 14
Market Review 16
Our Strategy 18
Our Strategy in Action 20
Key Strategic Indicators 24
Key Performance Indicators 25
Strategic and Operational Review 26
Financial Review 36
Risk Management 42
Viability Statement 52
Principal Risks and Uncertainties 54
Sustainability Report 60
Stakeholder Engagement 75
Non-financial Information Statement 78
Section 172 Statement 79
Corporate Governance
The Board 82
The Group Executive Committee 84
Corporate Governance Report 86
Audit and Risk Committee Report 97
Nomination Committee Report 104
Directors’ Report 106
Directors’ Remuneration Report 109
Statement of Directors’
Responsibilities in Respect of the
Financial Statements
133
Financial Statements
Independent Auditor’s Report to the
members of discoverIE Group plc 134
Consolidated Income Statement 146
Supplementary Income Statement
Information 146
Consolidated Statement
of Comprehensive Income 147
Consolidated Statement
of Financial Position 148
Consolidated Statement
of Changes in Equity 149
Consolidated Statement of
Cash Flows 150
Notes to the Group
Financial Statements 151
Company Balance Sheet 213
Company Statement
of Changes in Equity 214
Notes to the Company
Financial Statements 215
Additional Information
Five Year Record 218
Principal Locations 219
Financial Calendar 2022/23 220
Corporate Information 220
Our vision is to be
a leading innovator
in electronics,
internationally.
Over the past 11 years, we have transformed from a European distribution business to
an electronic engineering, design and manufacturing group with our own product
development and a global manufacturing footprint.
We aim to go further, to become the world’s leading innovator in customised
electronics by continuing to build capabilities and strengthen our presence
beyond Europe.
The change of
business model
enables us to
move up the
value chain and
improve our
margins
Read more on
Our Journey
Page 05
Read more on
Our Business
Model
Page 14
We target
markets that
are exhibiting
structural
growth and
are driven by
technology
Read more on
Our Markets
Page 16
We’re
committed
to making a
positive impact
through our
operations and
our products
Read more on
Sustainability
Page 60
Our strategy
of focusing on
sustainable
growth markets,
bolstered
by earnings
enhancing
acquisitions,
has enabled
us to achieve
substantial
growth
Read more on
Our Strategy
Page 18
Read more on
Corporate
Governance
Page 86
01
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
HIGHLIGHTS
Notes
1
These figures relate to continuing operations.
Continuing operations excludes the results of the
Acal BFi and Vertec SA businesses, and profit on
sale, following their disposals during the year. These
two businesses have been treated under IFRS 5 as
discontinued operations.
2
‘Underlying Operating Profit’, ‘Underlying
Operating Margin”, ‘Underlying Profit before
Tax’ and ‘Underlying EPS’ are non-IFRS financial
measures used by the Directors to assess the
underlying performance of the Group. These
measures relate to continuing operations and
exclude acquisition-related costs (amortisation
of acquired intangible assets of £14.0m and
acquisition expenses of £6.5m) totalling £20.5m.
Equivalent underlying adjustments within the FY
2020/21 underlying results totalled £13.7m.
3
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 (Phoenix was
acquired in October 2020, Limitor in February
2021, CPI in May 2021, Antenova in August 2021
and Beacon in September 2021). Organic growth
compared with two years ago excludes the first 24
months of acquisitions so also excludes Sens-Tech
acquired in October 2019. The average Sterling rate
of exchange against the Euro strengthened by 5%
compared with the average rate last year, by 2% on
average against the three Nordic currencies, and by
5% compared with the US dollar rate for last year.
4
Target is for Scope 1 and Scope 2 carbon emissions
and is based on an intensity measure of tonnes
of CO2 equivalent per £m revenue (tco2e/£m
revenue). Historic figures have been adjusted to
exclude disposals in FY 2021/22 and acquisitions
completed in the last 12 months.
5
Free cash flow is cash flow before dividends,
acquisitions, disposals and equity issuance. Free
cash flow conversion rate of 136% of net profit in FY
2020/21 (linked to an inflow of working capital with
organic sales down 4%). 77% in FY 2021/22 (linked to
an outflow of working capital with organic sales up
18%) giving 102% for the 2 year period (with organic
sales up 14%).
6
Gearing ratio is defined as net debt divided by
underlying EBITDA (annualised for acquisitions).
7
Growth rates for the period FY 2017/18 to FY 2021/22
excludes the Covid year FY 2021/22 so the growth
from FY 2019/20 to FY 2021/22 is treated as one year.
8
Unless stated, growth rates refer to the comparable
prior year period.
“ This has been a year
of record growth,
with excellent
progress towards
our key strategic
targets.”
Nick Jefferies
Group Chief Executive
REVENUE
£379.2m
(FY21: £302.8m)
+25%
UNDERLYING
OPERATING PROFIT
£41.4m
(FY21: £30.8m)
+34%
UNDERLYING EPS
29.4p
(FY21: 22.4p)
+31%
REPORTED OPERATING
PROFIT
£20.9m
(FY21: £17.1m)
+22%
REPORTED FULLY
DILUTED EPS
26.3p
(FY21: 13p)
+102%
FULL YEAR DIVIDEND
PER SHARE
10.8p
(FY21: 10.15p)
+6%
Record growth in orders & sales
driven by focus on structurally
growing target markets
■ 76% of sales into UNSDG aligned
sectors of renewables, medical,
transport, industrial & connectivity
■ Organic
3
orders: +36% (v FY 2020/21)
and +32% (v pre-Covid period FY
2019/20)
■ Organic sales: +18% (v FY 2020/21)
and +14% (v FY 2019/20)
■ Total sales +25% (v FY 2020/21) and
+25% (v FY 2019/20)
Delivering strong financial
performance
■ Underlying operating profit from
continuing operations: +34%
■ Underlying EPS from continuing
operations: +31%
Excellent progress towards key
strategic targets
■ Underlying operating margin
increased by 0.7ppts to 10.9% (target:
13.5%)
■ Like-for-like carbon emissions
reduced by 33% since CY 2019 (v 50%
target by 2025)
■ Free cash conversion
5
over two years
of 102% of net profit (v 85% target)
Three international acquisitions
completed for £85m, well supported
equity placing for net £53m
■ Beacon, Antenova and CPI; now fully
integrated
Sale of Acal BFi completes exit from
the business of distribution
■ Continuing operations arranged
into two new divisions: Magnetics
& Controls (“M&C”) and Sensing &
Connectivity (“S&C”)
Group well positioned for
furthergrowth
■ Record order book of £224m (organic:
+62% v Mar 2021; +71% v Mar 2020)
■ Pipeline of acquisition opportunities
in development
■ Gearing
6
of 0.6x, well below our
target of 1.5x to 2.0x; significant
funding headroom available
■ New financial year started well
– continued strong organic
revenue growth
02
Strategic Report
discoverIE Group plc Innovative Electronics
INVESTMENT CASE
Sustainable growth markets
Proven strategy
for growth
Differentiated product offering
Strong
financials
Consistent
shareholder return
Increasing electronic content and electrification
of products and processes drives demand for
electrical and electronic components. We prioritise
four markets with structural, sustainable growth.
Customised electronic solutions based on
commercially proven technologies, designed
to meet customers’ unique requirements. We
manufacture and supply the components
throughout the life of the end products.
Grow well ahead of GDP through
the economic cycle by focusing on
target markets and an expanding
product offering, bolstered by
earnings enhancing acquisitions.
Proven track record of delivering
strategic and financial targets.
Sustainable, profitable growth
and excellent cash generation.
The strong balance sheet with a
gearing of well below our 1.5x – 2x
target allows ample headroom for
further acquisitions.
Disciplined capital allocation with
a track record of value enhancing
acquisitions drive capital
appreciation and progressive
dividends.
Predicted growth in
ourtarget markets
7-12% p.a
Longest customer
relationship
30+ years
Target markets:
Renewable energy,
Transportation,
Medical, and Industrial
and Connectivity
Long lasting
customer
relationships and
stable, recurring
revenue
1
Design and manufacturing businesses only; excludes Custom Supply business which was sold in March 2022.
2
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.
3
Share price of last trading day of the year and dividend of the year.
Revenue
growth
1
of
38%
CAGR from
FY 2014-FY 2022
Underlying operating
profit growth
1
of
28%
CAGR from
FY 2018-FY 2022
Dividend
growth of
6%
CAGR
FY 2012-FY 2022
Free cash flow
conversion
2
of
116%
on average over
four years to
FY 2022
Total shareholder
return
3
of
515%
FY 2012-FY 2022
Read more in Our Business Model on pages 14 to 15
03
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
GROUP AT A GLANCE
discoverIE is an international group of businesses designing and manufacturing
innovative electronic components for industrial applications. We offer customers
differentiated products in key growth markets on a global scale.
To create innovative electronics
that help to improve the world
and people’s lives
■ We have high ethical standards and integrity
■ We strive for the best
■ We are Green
■ We care for our colleagues
■ We are innovative
■ We are a trusted business partner
The culture we aim to build
■ Honest, reliable and trusting
■ Decentralised decision-making close to the
customer
■ Open, constructive communication and
willingness to listen
■ Treat everybody equally and value the
importance of diversity
■ Performance driven
To be a leading innovator in
electronics, internationally
To grow our business in customised electronics
by focusing on markets with sustained
growth prospects, complemented by value
enhancingacquisitions.
Our strategy has four pillars:
To design and supply innovative
electronics that help our
customers create ever better
technical solutions
Guided by our Purpose, sustainability is integrated into
our business model, strategy and risk management.
Targets and performance are linked to the
remunerations of the Group Executive Committee
(“GEC”) and the management of each business unit.
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
Our purpose
Our values
Our culture
Our vision
Our strategy Our approach to sustainability
Our mission
Grow sales well
ahead of GDP
Move up the
value chain
Acquire high
quality businesses
Further
internationalise
Read more in Our Strategy on pages 18 to 23
04
Strategic Report
discoverIE Group plc Innovative Electronics
Our journey
discoverIE (formerly Acal) was established in 1986 as an electronic component
and IT distributor, capitalising on the rise of digitalisation. As demands rose,
the distribution market became highly competitive.
Since 2011, the Group has shifted its focus from distribution to design and
manufacturing (“D&M”). The D&M business model allows the Group to move
up the value chain and provide more value-added products to customers. It
divested several businesses deemed to be non-core and redirected capital
into building its own D&M capabilities, through both organic growth and
acquisitions.
The sale of the Custom Supply business marked the Group’s exit from the
distribution business. discoverIE is now a pure design and manufacturing
company that focuses on sustainable industrial markets.
We have transformed the Group over the past 11 years, from a European distribution
business into an electronic engineering group, with our own product development
and a global manufacturing footprint.
Disposal of
Custom Supply
In March 2022, the Group
completed the sale of the
Custom Supply business,
which included Acal BFi,
to H2 Equity Partners
for a total consideration
of £50m on a debt free
cash free basis. The sale
concluded the Group’s
exit from the distribution
business, leaving the
Group focused wholly on
design and manufacture,
the principal driver of
the Group’s financial
performance in the last
five years.
Standardised
components
Specialised components
and systems
2010
Custom supply
distribution
model
Characteristics
–
Highly
competitive
market
– Scale matters
Characteristics
–
Design,
customisation
and
manufacturing
know-how
as core
competency
– Long-lasting
customer
relationships
and recurring
revenue
Custom Supply
Design and Manufacture
We have broadened our
product range, customer
base and geographical
presence over the last
11 years
Number of acquisitions
with design and
manufacturing
capabilities
19
Average return on
capital employed in last
five years
c.15%
Read more on our business
model on pages 14 to 15
Characteristics
–
Diversify from
distribution
and building
design and
manufacture
capabilities
– Lower volatility
2017
Transitioning
to design and
manufacture
model
2022
Design and
manufacture
sole focus
05
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
Our divisions
discoverIE operates two segments:
Magnetics & Controls (M&C) and
Sensing & Connectivity (S&C).
Following the disposal of the distribution business,
the Group divided the 20 business units within the
ongoing D&M division into two operating segments:
M&C and S&C. The new structure enables greater
collaboration between business units and improves
visibility for the Group’s growth initiatives.
The new divisions align business units by product and
technology area.
M&C
M&C £234.7m
M&C
M&C £29.8m
S&C
S&C £144.5m
S&C
S&C £23.3m
Revenue
Underlying
operating
profit
GROUP AT A GLANCE
Magnetics & Controls
Magnetic components for
use in power conversion,
signal conditioning and
switching
Sensing components for
sensing, measuring and
controlling temperature,
movement, pressure, force,
position, load, weight and
incline, x-ray detection
and imaging
Components for
use in remote
control, monitoring,
communication and
interface control
Connectivity components
for switching, transmitting
& receiving wirelessly,
fibre optic components,
electromagnetic shielding,
cable connection
Sensing & Connectivity
06
Strategic Report
Innovative ElectronicsdiscoverIE Group plc
How our customised products work
Motion sensing and control
Application: Wind scanner
A full scale multiple LIDAR-based laser scanner system
to measure wind turbulence in three dimensions around
wind turbines to further understand wind turbulence
effects on existing turbines on wind farm sites and
complex terrains worldwide. The captured data is then
shared with wind systems designers and scientists to
develop turbines with higher efficiencies and improved
safety and life span.
Customer benefits:
We design, prototype and manufacture the positioning
systems with associated motion controls and all
interfacing cabling, as well as on-site assembly and
functional testing.
MAGNETICS & CONTROLS
Comprises the magnetic components and the embedded
computing and interface controls businesses. It
consists of eight businesses, across 16 countries with 20
manufacturing sites.
How our customised products work
Embedded microsystem
Application: Implantable vision restoration
An embedded solution for a ground breaking implantable
medical device that delivers artificial vision for patients
with retinitis pigmentosa, a medical condition that can
cause severe vision impairment. The device uses an
ocular implant that receives wireless signals from a pair of
eyeglasses and subsequently stimulates remaining retinal
cells to restore visual function.
Customer benefits:
We developed an embedded system that is less than one
square inch, that can be fitted into the glasses without
compromising their compact design. It has reliable
processing power and a long product life, also meeting
stringent US and European regulatory requirements. We
provide support throughout the entire product life cycle.
End use examples
■
Encoders in solar trackers to obtain reliable
positioning of tilt and azimuth angles
■ X-ray detectors for bone density measurement
and X-ray scans
■ Wireless antennas for robotic control
SENSING & CONNECTIVITY
Comprises a cluster of five sensing component
businesses and seven communication and
connectivity businesses, across 9 countries with 10
manufacturing sites.
End use examples
■
Liquid-cooled power reactors and transformers for wind
power systems
■ Trackballs for ultrasound system control panel
■ Ruggedised control board with anti-vibration technology
and waterproof sealing for marine applications
FY21/22
FY20/21
FY19/20
£23.3m
£17.9m
£15.5m
FY21/22
Underlying operating profit
Revenue
FY20/21
FY19/20
£144.5m
£110.5m
£112.4m
FY21/22
FY20/21
FY19/20
£29.8m
£21.2m
£23.4m
FY21/22
Underlying operating profit
Revenue
FY20/21
FY19/20
£234.7m
£192.9m
£190.4m
07
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
GROUP AT A GLANCE
Our global reach
discoverIE is an international
electronics engineering group,
designing and manufacturing
customised electronic components
for industrial applications.
30
Manufacturing
sites
20
Countries in which
we operate
66
Countries in which our
products are sold
4,886
Employees
globally
North America
We have expanded our
operations and customer portfolio
in North America in the past three
years through several acquisitions.
We have manufacturing facilities in the
USA and Mexico.
16%
Group revenue
442
Employees
08
Strategic Report
discoverIE Group plc Innovative Electronics
Asia
Asia is our fastest growing
market, driven by high demand
for electrical components for
renewable energy. We have
manufacturing facilities in China,
India, Sri Lanka and Thailand, serving
domestic markets as well as exports.
24%
Group revenue
2,982
Employees
Europe
Europe is currently discoverIE’s
largest market. We have
manufacturing facilities in the UK, the
Netherlands, Poland, Hungary, Slovakia
and the Nordic region, producing
electrical and electronic components,
sensors, HMI devices and microsystems.
60%
Group revenue
1,462
Employees
09
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
CHAIRMAN’S STATEMENT
This year saw discoverIE recover very
strongly from the effects of Covid the
previous year, to deliver record organic
growth in orders, sales and order book
compared with both last year and
the pre-Covid period two years ago,
resulting in record Group profitability
for its continuing operations.
“ The Board is excited
by the opportunity
to continue building
a global business
and contribute
to a sustainable
environment.”
Malcolm Diamond MBE
Chairman
The exit from the business of
distribution has enabled the
Group to be fully focussed on
its core strategy of designing
and manufacturing customised
electronics for industrial
applications through two new
divisions, with disposal proceeds
available for re-investment into
further high quality, higher margin
acquisitions.
Cash generation has again been
strong, reflecting both the quality
of earnings generated and the
efficient, capital-light nature of the
Group’s operating model. Gearing
is now at its lowest level in eight
years, with significant funding
headroom for further acquisitions.
The Group is committed to
reducing the impact of its business
operations on the environment.
Along with its focus on selling into
markets that are aligned with a
sustainable future, the Group has
made excellent progress towards
its target of reducing its carbon
emissions by 50% by 2025 and
is currently developing its net
zero plan.
Strategy
discoverIE is a customised
electronics business operating
internationally, focusing on
structurally growing, sustainable
markets driven by increasing
electronic content and where
there is an essential need for its
products. The Group’s product
range is highly differentiated,
being customised for specific
applications.
With the Group’s target
markets being worldwide and
major customers operating
internationally, the business
is expanding both within and
beyond Europe, building an
international electronics group
supplying complex, value-added
solutions for customers.
GROUP REVENUE
£379.2m
UNDERLYING
OPERATING PROFIT
£41.4m
10
Strategic Report
discoverIE Group plc Innovative Electronics
Alongside organic growth,
acquisitions are another key
factor in building discoverIE. Since
2011, the Group has acquired 19
specialist, high margin design
and manufacturing businesses
which have been integrated
successfully and have helped to
accelerate its growth. discoverIE
has a disciplined approach to
acquisitions and continues
to see significant scope for
further expansion with several
opportunities in development.
The Group’s capital-light model
delivers strong cash flows which
management looks to reinvest
into accelerating the strategy and
delivering further value creation for
shareholders.
Sustainability and
Positive Impact
This is the first year that the UK
requirement of TCFD reporting
(Task Force on Climate-Related
Financial Disclosures) comes into
force. The Group has undertaken
a preliminary assessment of the
resilience of its business model
and strategy, and potential
impact of climate change over
the short and medium term. It
has 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 opportunities presented to
theGroup.
The Group’s business model of
designing and manufacturing
customised electronics for
industrial applications is well
established. Aligning its purpose
with the UN Sustainable
Development Goals (“UN SDGs”),
the Group creates 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 our four target
markets, we play an essential role
in achieving a cleaner, healthier,
and more sustainable world.
The Group also aims to be a
socially responsible employer,
adhering to the highest ethical
standards both internally and
externally through its supply chain,
with excellent employee relations
and a commitment to increasing
diversity in the workplace.
Emphasising its importance to
the business, a Sustainability
Committee of the Board has been
established with responsibility for
setting the sustainability strategy,
overseeing its implementation
and ensuring progress. Reporting
to the Board, the Group
Executive Committee also has
responsibility for Environmental,
Social and Governance (“ESG”)
implementation and each member
has the achievement of ESG
objectives included in their annual
incentive plans.
Recognising the Group’s
achievements and strong strategic
focus on sustainable development,
MSCI awarded the Group an “A”
rating in its 2022 ESG Rating
assessment. It acknowledged
the Group’s strong performance
against global industry peers
in various areas, including
opportunities in clean tech and
corporate governance.
Acquisitions and disposals
The Group made three
acquisitions during the year for a
total consideration of £85m on a
cash free, debt free basis. Control
Products Inc (“CPI”), a US based
designer and manufacturer of
custom, rugged sensors and
switches was acquired in May
2021 and Antenova Limited, a UK
and Taiwan based designer and
manufacturer of antennas and
radio frequency (RF) modules
was acquired in August 2021.
Both businesses now operate
within the Sensing & Connectivity
division. Beacon EmbeddedWorks
(“Beacon”), a US based designer
and manufacturer of custom
embedded computing boards, was
acquired in September 2021 and
now operates within the Magnetics
& Controls division.
All three businesses retain their
distinct identity and high-quality
management teams, and have
now been fully integrated into
the Group. Their complementary
product ranges and wider access
to customers is expected to create
cross-selling opportunities in the
Group’s target markets and drive
further growth.
We are delighted to welcome the
employees of all three businesses
into the Group.
Additionally during the year, the
Group completed the disposals
of the Acal BFi and Vertec SA
distribution businesses, which
has enabled the Group to be fully
focussed on its core strategy of
designing and manufacturing
custom electronics for industrial
applications.
We wish all employees of Acal BFi
and Vertec SA well for the future
and thank them for their excellent
and long-standing contributions to
the Group.
Group Results Summary
Continuing Group sales for the year
increased by 25% to £379.2m (+28%
CER), with underlying operating
profit, which excludes acquisition
related costs, increasing by 34% to
£41.4m. Underlying profit before
tax increased by 38% to £37.6m,
with underlying earnings per share
for the year increasing by 31% to
29.4p (FY 2020/21: 22.4p).
11
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
CHAIRMAN’S STATEMENT
After underlying adjustments for
acquisition costs, together with
taxation costs and the inclusion
of net profits from discontinued
operations, net profit for the year
on a reported basis increased by
110% to £25.2m (FY 2020/21: £12.0m)
with fully diluted earnings per
share increasing by 102% to 26.3p
(FY 2020/21: 13.0p).
Strong free cash flow over the
last two years represents 102% of
underlying net profits, well ahead
of the Group’s 85% target despite
strong organic sales growth
requiring investment in working
capital. Net debt at 31 March 2022
was £30.2m (31 March 2021: £47.2m)
and a gearing ratio of 0.6x, well
below our target range of 1.5x to
2.0x, leaves considerable headroom
for further accretive acquisitions.
Alongside the acquisitions of
Antenova in August 2021 and
Beacon in September 2021,
the balance sheet was further
strengthened by way of a well-
supported equity placing that
raised net proceeds of £53.4m.
Together with strong organic cash
flows, these acquisitions provide
the Group with an excellent
platform from which to continue
to execute its growth strategy. On
behalf of the Board, I would like
to thank shareholders for their
support.
Increased Dividend
The Board is recommending a
6% (0.45 pence) increase in the
final dividend per share to 7.45
pence per share, giving a full year
dividend per share of 10.8 pence,
and representing a cover against
underlying earnings of 2.7 times (FY
2020/21: 2.4 times). Since 2010, the
annual dividend per share has more
than doubled.
The Board believes that, as an
acquisitive growth company,
maintaining a progressive dividend
policy is appropriate along with a
long-term dividend cover of over
three times on an underlying
basis. This approach along with
the continued growth of the
Group should enable funding of
both sustainable dividend growth
and a higher level of investment
in acquisitions from internally
generated resources.
The final dividend is payable on
2 August 2022 to shareholders
registered on 24 June 2022.
Employees and Culture
On behalf of the Board, I would like
to thank everybody at discoverIE
for their commitment and hard
work through the unprecedented
circumstances of the last two
years when their flexibility,
resilience, initiative and support
have demonstrated, beyond
all expectations, their quality,
capability and dedication.
The Group comprises
approximately 4,900 employees in
20 countries around the world and
by adopting an entrepreneurial
and decentralised operating
environment, together with
rigorous planning, review, support,
investment and controls, the
Group has created an ambitious
and successful culture, with
a commitment to increasing
diversity across the organisation.
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
Board and Group Executive
Committee Strengthened;
Chairman-elect announced.
Two additional senior level
appointments were made during
the year.
■ Rosalind Kainyah MBE joined
the Board in January 2022
as a Non-Executive Director.
Rosalind brings many years of
senior management, executive
12
Strategic Report
discoverIE Group plc Innovative Electronics
and board experience in
international environments.
She has extensive experience
in sustainability matters and
currently runs Kina Advisory,
a consultancy advising on
ESG matters for businesses.
Previously, Rosalind held senior
executive roles at Tullow Oil, as
Vice President, External Affairs &
Corporate Social Responsibility,
and at De Beers SA in various
roles, latterly as President
of its US business. On 1 April
2022, Rosalind was appointed
chair of the newly established
Sustainability Committee of the
Board with responsibility for the
Group’s sustainability strategy,
policies and performance of
discoverIE and driving further
progress.
■ Paul Hill joined the Group
Executive Committee (“GEC”)
in December 2021 and since
February 2022, has been leading
the newly established Sensing &
Connectivity division. Paul brings
extensive experience in the
electronics and technology sector
having held senior operational
roles in both hardware and
software companies.
Having started his career
in electronics engineering,
Paul has worked in electronic
components, smart card
systems and electronic design
and manufacturing businesses.
More recently Paul led private
equity held businesses and
joined from Antenova, our
recent acquisition, where he
was Chief Executive Officer.
Paul also has Group-wide
responsibility for evolving our
approach to developing design
opportunities.
After seven enjoyable years with
discoverIE during which time
the Group has ascended into the
FTSE250, I am today announcing
my intention to step down as
Chairman of the Group from 1
November 2022. I am pleased to
announce that my colleague Bruce
Thompson will become Chairman
from that date.
Bruce has been a Non-Executive
Director of the Group since
February 2018, and the Group’s
Senior Independent Director
since March 2019. Bruce is also
Chairman of Avon Protection plc
and prior to joining the Group, was
Chief Executive Officer of Diploma
plc for over 20 years. I am also
pleased to announce that Tracey
Graham, a member of the Board
since November 2015 and Chair
of the Remuneration Committee,
will succeed Bruce as Senior
Independent Director.
Summary
The Group is building a high-
quality business that is delivering
strong results with excellent
prospects. The customised
electronics market remains highly
fragmented, providing scope to
further build capability and extend
geographic coverage through
disciplined acquisitions.
The Board is excited by the
opportunities ahead to continue
building a global business that
attracts and retains high quality
employees, delivers exceptional
value to our customers, grows long
term returns for our shareholders,
contributes to the creation of a
sustainable environment and
adheres to the highest standards.
Throughout the year, the Group
has again demonstrated the
quality and resilience of its
businesses and, with good levels of
operational and funding capacity,
is well positioned for continued
growth in the year ahead.
Malcolm Diamond
Chairman
14 June 2022
13
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
Customers
■ Improved usability and effectiveness of the
products we design and manufacture results
in enhanced performance of our customers’
applications, which also benefits their own
customers and end users.
■ We enable customers to differentiate their own
products from their competitors.
■ Quality, reliability, and efficiency are achieved and
ensured by having full control of the end-to-end
process of designing and manufacturing.
■ Flexible and short lead times.
Employees
We have created an environment that encourages
innovation and ambition. Each employee has the
opportunity to grow and be their best while knowing
that their safety and wellbeing are cared for. Our
decentralised operating model engenders trust and
loyalty. Employees near the frontline are empowered
to make decisions and take initiative.
Shareholders
We consistently generate attractive returns for our
shareholders over the long term while minimising
risks. Asour manufacturing activities have a low
carbon nature and our products are used in many
decarbonisation activities, we also contribute to the
net-zero goals of our shareholders.
Communities
We contribute positively to the communities in
which we operate through local employment, tax
revenue and community engagement. We also play
our role in decarbonisation through our operation
processes and our products.
Suppliers
Our geographical footprint allows us to engage
with suppliers at their locations. We enable smaller
suppliers to expand their global network via our
international supply chain.
OUR BUSINESS MODEL
Value creation for our stakeholders
Our business model of designing and manufacturing customised products has
proven to be resilient and flexible, evident in our performance track record, even
during the most challenging times of the pandemic.
Our inputs
Our colleagues
We have 4,886 colleagues worldwide and the number
is still growing. 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 understand
themarket where they operate.
Expertise and know-how
We have been active in the electronics market for over three
decades and have accumulated a vast amount of expertise
and knowledge. This allows us to develop new products in
response to changing technologies.
Intellectual property
We have unique technology patents, which are used in
many of our customised products. In most instances, we
also retain the intellectual property rights of the products
designed for customers’ specific requirements.
Manufacturing capability
We have 30 manufacturing facilities in 20 countries,
including China, India, Mexico, Poland, Sri Lanka,
the Netherlands, the UK, and the USA, producing
high-quality products consistently and reliably in
locations close to our customers.
Financials
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.
Sustainability approach
Our purpose and values provide a clear framework for
decision making. We strive for the highest performance
and ethical standards, while making a positive difference
to the world and people’s lives.
14
Strategic Report
discoverIE Group plc Innovative Electronics
Our main activities
We design and manufacture electrical and electronic components for original equipment manufacturers (“OEMs”).
Core to our value proposition is the understanding of our customers’ design challenges and the design
and manufacture of engineered products to meet their needs. These are then supplied over the life of the
customer’s production, typically five to seven years.
Our products contain
copper, aluminium
and plastics. Some
of our products also
use components
such as printed circuit
boards (“PCB”) and
microprocessing chips.
We work closely with
our customers, who
are primarily OEMs, to
develop appropriate
solutions to solve their
technical challenges,
which often require
adaptations of standard
products or completely
new ones.
With know-how and
in-house manufacturing
capabilities, we have
control of the production
process, ensuring
both high standards
and reliability. Quality
is assured through
our advanced testing
procedures.
We supply customers
with customised
products consistently
throughout the project’s
lifetime and provide
support thereafter.
We work with and sell
directly to OEMs who are
often makers of larger
systems, such as wind
systems, solar equipment,
and MRI scanners. In
some countries, we also
sell through distributors.
Long-lasting customer
relationships
We have been supplying many
of our customers for decades.
Our long-lasting customer
relationships are built upon
our product knowledge and
expertise, manufacturing know-
how, product quality and reliability
and reliable delivery. Our highly
skilled engineers work closely with
customers, developing a deep
understanding of their industry
and sharing knowledge and
insights.
Long product cycles
andrepeatrevenues
Our products are a small but
essential part of larger systems
which have a life cycle of typically
seven years. Once designed into
the system, they stay throughout
the lifetime of the system design.
This means repeat revenues for
the Group.
Low capital requirements
andcarbon emissions
Most customised products are
created for specific projects,
which tend to be long-lasting
and require a low volume and
high mix, manual or semi-manual
production model. The investment
requirements and carbon footprint
for such are relatively low.
Original
equipment
manufacturers
Deliver
customised
solutions
Manufacture
customised
products
Design and
customise
products
Raw materials
&components
Focused on specialist components & solutions
Collaboration
Distributors
15
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
MARKET REVIEW
Sustainable
growth market
We focus on four target markets,
which account for 76% of
Group revenue: renewable
energy, transportation, medical
and industrial automation &
connectivity.
These are expected to
drive the Group’s organic revenue
well ahead of GDP over the
economic cycle.
Growth in these markets is driven
by global macro trends, such as
the need for renewable sources
of energy, electrification of
transportation systems, an ageing
affluent population and expanding
infrastructure.
Revenue from target markets
1
(% of total revenue)
76%
Other
Industrial &
Connectivity
Medical
Renewable
energy
Transport
1. Based on Group FY 2021/22 revenue of £379.2m
2. UN SDGs United Nations Sustainable
Development Goals
3. International Energy Agency (IEA)
4. Research and markets
5. Research and markets
6. Statistics
Target
markets
Renewable
Energy
Transportation Medical Industrial and
Connectivity
Growth rate p.a.
+7%
2019-2030
3
+20%
2021-2029
4
+11.8%
2021-2030
5
+22.8%
2021-2029
6
Mega trend
■ Decarbonisation
■ Energy source diversification
■ Vehicle Electrification
■ Smart transportation
■ Sensing, analytics and artificial
intelligence
■ Industrial automation
■ Connectivity
■ Internet of Things
Market drivers
■ Changing regulations &
new standards
■ Government initiatives
■ Tightening emissions regulations
■ Mass-transit and route vehicles
■ Growing public awareness
■ ‘Safety-centric’ agenda
■ Rising life expectancy and growing
middle class population
■ Growing geriatric population
■ Increasing use of radiation therapy
in diagnosis and treatment
■ Proliferation of smart devices
■ Next generation wireless
technology
■ ‘Big data’
Technology
integration
■ Increasing scale of wind turbines
■ Smart grid and energy efficient technology
■ Sensing technology
■ Smart charging
■ High speed rail
■ Electrification of mass transit
■ Artificial intelligence & machine
learning
■ Sensing and analytics
■ Automation and robotics
■ Automation and robotics
■ Smart factories
■ Artificial intelligence
■ 5G technology
discoverIE’s
solutions
Power & Magnetics
■ Liquid cooled power reactors and transformers
for wind power systems
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
Power & Magnetics
■ Traction transformers for railway
rolling stock applications
■ E-Mobility charging
infrastructure (EV, eBus, Marine,
& heavy duty vehicles)
Control Systems & Displays
■ Ruggedised CPU modules and
carrier board s for automatic
guided vehicles
■ Ruggedised HMI devices with
antivibration technology and
waterproof sealing for marine
applications
■ Master controllers for trains
Sensing & Detections
■ Torque, load and force sensors for
aircraft braking systems, actuation
systems and in flight controls
Connectors & Communications
■ Battery isolation switches for trains
■ CCTV for public transportation
Power & Magnetics
■ Built-in transformers and inductors
for MRI scanners
Control Systems & Displays
■ Trackballs for ultrasound systems
■ Panel PCs for blood pressure
diagnostics
■ Single board computers for electro
cardiographs
■ Optical implants for restoring vision
to the visually impaired
Sensing & Detections
■ Pressure sensors in oxygen tanks
and thermal compression units
■ Cable extension transducers for
use in oncology machines and MRI
machines
■ X-ray detectors for bone density
measuring and X-ray scans
Connectors & Communications
■ Anti-microbial and sterilisable
cables for medical equipment
Power & Magnetics
■ Transformers for process
machines and robotics
Control Systems & Displays
■ Control systems for industrial
robotic applications
■ Smart control panels for indoor
climate control
Sensing & Detections
■ Light detectors for harmful gas
emissions
■ Linear & rotary potentiometers
for steering systems and throttle
position in engines of agricultural
vehicles
Connectors & Communications
■ Wireless antennas for robotic
control
■ Fibre optics connectors
■ Circuit breakers for ships
UN SDGs
Alignment
16
Strategic Report
discoverIE Group plc Innovative Electronics
Target
markets
Renewable
Energy
Transportation Medical Industrial and
Connectivity
Growth rate p.a.
+7%
2019-2030
3
+20%
2021-2029
4
+11.8%
2021-2030
5
+22.8%
2021-2029
6
Mega trend
■ Decarbonisation
■ Energy source diversification
■ Vehicle Electrification
■ Smart transportation
■ Sensing, analytics and artificial
intelligence
■ Industrial automation
■ Connectivity
■ Internet of Things
Market drivers
■ Changing regulations &
new standards
■ Government initiatives
■ Tightening emissions regulations
■ Mass-transit and route vehicles
■ Growing public awareness
■ ‘Safety-centric’ agenda
■ Rising life expectancy and growing
middle class population
■ Growing geriatric population
■ Increasing use of radiation therapy
in diagnosis and treatment
■ Proliferation of smart devices
■ Next generation wireless
technology
■ ‘Big data’
Technology
integration
■ Increasing scale of wind turbines
■ Smart grid and energy efficient technology
■ Sensing technology
■ Smart charging
■ High speed rail
■ Electrification of mass transit
■ Artificial intelligence & machine
learning
■ Sensing and analytics
■ Automation and robotics
■ Automation and robotics
■ Smart factories
■ Artificial intelligence
■ 5G technology
discoverIE’s
solutions
Power & Magnetics
■ Liquid cooled power reactors and transformers
for wind power systems
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
Power & Magnetics
■ Traction transformers for railway
rolling stock applications
■ E-Mobility charging
infrastructure (EV, eBus, Marine,
& heavy duty vehicles)
Control Systems & Displays
■ Ruggedised CPU modules and
carrier board s for automatic
guided vehicles
■ Ruggedised HMI devices with
antivibration technology and
waterproof sealing for marine
applications
■ Master controllers for trains
Sensing & Detections
■ Torque, load and force sensors for
aircraft braking systems, actuation
systems and in flight controls
Connectors & Communications
■ Battery isolation switches for trains
■ CCTV for public transportation
Power & Magnetics
■ Built-in transformers and inductors
for MRI scanners
Control Systems & Displays
■ Trackballs for ultrasound systems
■ Panel PCs for blood pressure
diagnostics
■ Single board computers for electro
cardiographs
■ Optical implants for restoring vision
to the visually impaired
Sensing & Detections
■ Pressure sensors in oxygen tanks
and thermal compression units
■ Cable extension transducers for
use in oncology machines and MRI
machines
■ X-ray detectors for bone density
measuring and X-ray scans
Connectors & Communications
■ Anti-microbial and sterilisable
cables for medical equipment
Power & Magnetics
■ Transformers for process
machines and robotics
Control Systems & Displays
■ Control systems for industrial
robotic applications
■ Smart control panels for indoor
climate control
Sensing & Detections
■ Light detectors for harmful gas
emissions
■ Linear & rotary potentiometers
for steering systems and throttle
position in engines of agricultural
vehicles
Connectors & Communications
■ Wireless antennas for robotic
control
■ Fibre optics connectors
■ Circuit breakers for ships
UN SDGs
Alignment
17
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
OUR STRATEGY
“ We have pursued
a clear strategy
that focuses on
structural growth
markets.”
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.
Our strategic priorities
Over the years, we have pursued a clear strategy,
investing in initiatives that enhance design
opportunities for customised products and targeting
structural growth markets. Following the sale of the
Custom Supply distribution business, we now focus
purely on design and manufacture opportunities.
Our strategy has four strategic priorities:
Grow sales well
ahead of GDP
Move up the
value chain
Acquire high quality
businesses
Further
internationalise
Impact of climate change
Our initial assessments of various CO
2
emission
concentration pathway scenarios have shown
that we are exposed to certain risks in the
transition to a low carbon economy, such as:
■ Higher prices of raw materials, such as copper
and aluminium, driven by policy changes
■ Production disruptions as a result of power
and labour shortages
However, the commercial opportunities
presented outweigh such risks, and our business
model and strategic focus on our target markets
are well suited to capture these opportunities,
such as:
■ Increasing demand for renewable energy,
especially wind and solar, in which we already
have an established position
■ Increasing demand for electric vehicles and
related infrastructure drives higher demand
for electrical and electronic components
See pages 46 to 50 for a summary of our climate-
related risks and opportunities and our TCFD
Report on pages 67 to 69 for more detail.
Further analysis is ongoing to quantify such
potential impacts and we will report our findings
in due course.
18
Strategic Report
discoverIE Group plc Innovative Electronics
A
Increase underlying
operatingmargin
B
Build sales beyond
Europe
C
Increase target
market sales
D
Reduce carbon
emissions
1
Instability in the
economicenvironment
5
Loss of major
suppliers
6
Technological
changes
2
Business acquisitions
underperformance
7
Major business
disruption
8
Cyber
security
4
Loss of major
customers
Key strategic indicators
19
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
Strategic priorities Progress to date
Link to key
strategic
indicators
Link
to risks
Grow sales well ahead of GDP
over 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, at 7-12% p.a.
The Group has delivered on
average 7% annual organic
growth since FY 2014. 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 have increased from
56% in FY 2017 to 76% in FY 2022.
We aim to achieve 85% sales from
target markets by FY 2025.
B
C
1
7
8
4
5
Move up the value chain
where operating margins are
higher. We aim to achieve this by
leveraging synergies amongst our
business units, improving efficiency
and through acquisitions.
The Group’s underlying operating
margin has tripled since FY 2014
to 10.9% in FY 2022. This was
achieved primarily by disposing
of the lower margin Custom
Supply distribution business, as
well as operational leverage.
A
2
6
7
4
5
Acquire high qualitybusinesses
with attractive growth prospects
and strong, sustainable margins. In
a fragmented market, opportunities
exist to consolidate certain
manufacturers of customised
products for the Group’s common
customer base. We have a clear
approach to acquisitions and the
target businesses must have the
discoverIE DNA.
The Group has acquired 19 design
and manufacturing businesses
in the past ten years, investing a
total of £350m. The businesses
that joined the Group more than
two years ago have delivered a
return on investment of 14% on
average.
A
A
B
C
D
1
2
Further internationalise
the business by expanding in North
America and Asia. Having started
as a British business, the Group
has established a strong footprint
in Europe over the years. We are
expanding our operations in North
America and Asia where demands
for our products are growing fast.
We have grown sales for our
design and manufacture
business outside Europe from
5% of total Group sales in FY
2014 to 40% in FY 2022 through
a combination of organic
expansion and acquisitions.
B
1
2
7
Risks
OUR STRATEGY IN ACTIONOUR STRATEGY
IN ACTION
Having joined discoverIE Group in July 2014, Noratel is a
global designer and manufacturer of electromagnetic
components, specifically medium and high power
transformers and chokes.
In the eight years since acquisition,
we have provided Noratel with
strategic guidance, focusing on
organic growth in our four target
markets. We have also invested
to support the business’ growth
plan in Asia and North America,
including:
■ Upscaled production facilities,
including a new manufacturing
facility in India
■ Rationalised manufacturing
facilities in North America
■ Strengthened its finance team
■ Added two bolt-on acquisitions –
Plitron and Hobart - to strengthen
its position in North America
■ Optimised working capital
As a result, the business achieved
revenue growth of 9% p.a. between
FY 2014/15 and FY 2021/22, now
with 75% of its revenue from target
markets, compared with 62% in
FY 2015. Sales outside Europe
increased from 28% to 47%, and
operating margin improved by
4%over the eight years.
Today, Noratel, with 2,600
employees, has grown into
a leading electromagnetic
components supplier to all major
producers of wind systems.
REVENUE
SPLIT
Renewable energy
Transportation
Medical
Industrial & Connectivity
Other
Impact from operations: Impact from products:
Noratel Group
Investing in growth
20
Strategic Report
Innovative ElectronicsdiscoverIE Group plc
MTC Micro Tech Components was one of the Group’s
early acquisitions. MTC manufactures and supplies
electromagnetic shielding products, serving primarily
the European and Asian industrial electronic market.
Having become a member of
the discoverIE Group in 2011, MTC
has always been at the forefront
of environmental management
amongst the Group’s operating
businesses. For instance, it was
the first to achieve ISO14001
Environmental Management
System accreditation. Over
the years, it has implemented
energy saving measures, such as
introducing smart meters, at its
facilities in Germany and South
Korea, as well as encouraging
behavioural changes amongst its
workforce.
Moreover, it has developed new
products that are more eco-
friendly, such as halogen-free EMI
shielding gaskets. In 2019, MTC
launched the “MTC GO GREEN”
initiative, replacing all packaging,
such as bubble wrap and plastic
fillings, with recyclable materials,
which were converted from old
cardboard packaging.
Impact from operations: Impact from products:
MTC
Go Green
REVENUE
SPLIT
Renewable energy
Transportation
Medical
Industrial & Connectivity
Other
21
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
Impact from products:
OUR STRATEGY
IN ACTION
Headquartered in the UK with an R&D
centre in Taiwan, Antenova designs and
manufactures a range of antennas for
the internet of things (“IoT”), particularly
industrial connectivity applications.
Typical applications are vehicle telematics
trackers, medical monitoring systems,
EV charging systems and smart grids.
Antennas play an essential part in
industrial automation and smart city
infrastructure.
discoverIE acquired Antenova in August 2021 for a
cash consideration of £18.2m on a debt free, cash free
basis. Antenova was expected to generate c. £8.0m
sales and £2.2m underlying operating profit in 2021. It
is now part of the Sensing & Connectivity division.
Acquisition of
Antenova
22
Strategic Report
Innovative ElectronicsdiscoverIE Group plc
Impact from products:
Beacon EmbeddedWorks is a Minneapolis, US-based designer, manufacturer
andsupplier of custom System-on-Module (“SOM”) embedded computing boards
and related software, supplying the medical, industrial and aerospace & defence
markets in the US. SOMs are miniature circuit boards that integrate system
functions into a single, compact module, offering the functionality of a computer
ina package that is highly versatile.
Beacon EmbeddedWorks’ award-winning SOMs are
designed for long product lifecycles and extreme
conditions, enabling customers to have complete
customisation and accelerate their product
development.
discoverIE acquired Beacon EmbeddedWorks in
September 2021 for a cash consideration of $80.5m
on a debt free, cash free basis. It is now part of the
Magnetics & Controls division.
In the year ended 31 December 2020, Beacon
EmbeddedWorks delivered sales of $28.1m and an
underlying operating profit of $5.9m. The acquisition
has expanded the Group’s international footprint
significantly in North America.
A SOM solution
developed for
a groundbreaking
implantable medical
device that delivers
useful artificial vision for
patients with retinitis
pigmentosa.
Acquisition of
Beacon EmbeddedWorks
23
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
KEY STRATEGIC INDICATORS
A
Increase underlying operating margin
FY25 Target >13.5% Definition
Underlying
operating profits
as a percentage
of sales.
Commentary
Underlying operating margin exceeded 10% for the first time with
8.0% reported in FY 2019/20 and 7.7% in FY 2020/21 as a business
including Custom Supply. The Group benefited both from the
strong organic sales growth delivered during the year and the exit
from the lower margin distribution business. With this exit, the
FY 2024/25 margin target was increased during the year to 13.5%
(previously12.5%).
FY14
FY18
FY17
FY16
FY15
3.4%
6.3%
5.7%
5.9%
4.9%
FY22
1
FY20
FY19
8.0%
10.9%
7.0%
B
Build sales beyond Europe
2
FY25 Target 45% Definition
Sales in the
Americas, Asia and
Africa. Excludes
the UK and
Europe.
Commentary
Sales beyond Europe in the year increased by 13ppts to 40% of Group
revenue from 27% two years ago (and 28% last year) driven by three
factors. Firstly, the exit from distribution which was a UK/European
focused business (c.7ppts increase); secondly, the five acquisitions in
the last 18 months in particular Beacon, Phoenix and CPI which are
all US based (c.3ppts); thirdly, organic growth during the year was
strongest in Asia and North America (c.3ppts). Accordingly the target
for FY 2024/25 was increased during the year to 45% (previously 40%).
FY14
FY18
FY17
FY16
FY15
5%
19%
17%
19%
12%
FY22
1
FY20
FY19
27%
40%
21%
C
Increase target market sales
2
FY25 Target 85% Definition
The proportion
of Group revenue
that is derived
from sales into our
target markets.
Commentary
Target market sales in the year increased by 8ppts to 76% of Group
revenue from 68% two years ago (and 70% last year) of which 5ppts
reflects the exit from the distribution businesses. A further 5ppts
improvement has been delivered through a combination of organic
growth being more weighted to these long-term structural growth
markets with a 2ppts reduction from the five acquisitions in the
last 18 months which, while well aligned with these markets, are
currently below our average rate. The FY 2024/25 target remains as
85% of sales from target markets.
FY18
FY17
62%
56%
FY22
1
FY20
FY19
68%
76%
66%
D
Reduce carbon emissions
FY25 Target 50% Definition
The proportionate
reduction in
carbon emissions
intensity from the
Group’s operations
from the 2019 base
year (measured
on a tCO2e / £m
revenue basis).
Commentary
A new target was introduced in November 2020 for the reduction of
carbon emissions from the Group’s existing businesses by 50% over five
years. Additionally, for new acquisitions, we are targeting that within
the first five years of ownership, at least 50% of their energy demand
is generated from renewable sources. For calendar year 2021, carbon
emissions reduced by 30% on a like-for-like basis (calendar year 2020:
6% like-for-like reduction). During this year, capital has been invested
in projects to reduce carbon emissions by switching to clean energy,
including solar panel installations in Sri Lanka, and an air source heat
pump in Poland, two of the Group’s major manufacturing facilities.
FY22
1
FY20
6%
3
33%
1 Continuing operations. FY 2021/22 shown as growth over the pre-Covid period FY 2019/20 as this reflects the actual ongoing growth of the
business. FY 2013/14 to FY 2019/20 are for total operations before disposals, as reported at the time.
2 As a percentage of Group revenue.
3 The reported figure was 19.23% reduction in 2020. It was reduced to 6% after adjusting for the effects of Covid to provide an underlyingmeasure.
24
Strategic Report
Innovative ElectronicsdiscoverIE Group plc
KEY PERFORMANCE INDICATORS
1
Sales growth
CER Continuing Organic
Commentary
Organic sales increased by 14% compared with the pre-
Covid year FY 2019/20 (comprising 18% organic growth this
year offsetting a 4% organic reduction during the Covid
period). This follows average annual organic growth of 9%
for the preceding three years and illustrates the strong
through-cycle organic growth of the business.
FY14
FY18
FY17
FY16
FY15
17%
11%
14%
6%
36%
FY22
1
FY20
FY19
8%
27%
14%
FY14
FY18
FY17
FY16
FY15
3%
11%
3%
(1)%
9%
FY22
1
FY20
FY19
5%
14%
10%
Target Well Ahead of GDP
2
Underlying EPS growth
3
Dividend growth
T
FY14
FY18
FY17
FY16
FY15
20%
16%
10%
13%
31%
FY22
1
FY20
FY19
11%
20%
22%
arget >10%
Commentary
Underlying EPS increased
by 20% compared with the
pre-Covid year FY 2019/20
(comprising 31% growth this
year offsetting an 8% reduction
during FY 2019/20).
FY14
FY18
FY17
FY16
FY15
10%
6%
6%
6%
11%
FY22
1
FY20
FY19
6%
2
6%
6%
Target Progressive
Commentary
The dividend is being
increased by 6%, continuing
our progressive policy
whilst providing for a higher
proportion of investment in
acquisitions from internally
generated resources. This
progressive policy has seen a
doubling of the dividend per
share since 2010, whilst dividend
cover on an underlying basis has
increased to 2.7x.
4
ROCE
3
5
Operating profit conversion
3
FY14
FY18
FY17
FY16
FY15
15.2%
13.7%
11.6%
13.0%
12.0%
FY22
1
FY20
FY19
16.0%
14.7%
15.4%
Target >15%
Commentary
ROCE for the year for
continuing operations was
14.7% compared with 16.0%
two years ago, and 0.2ppts
higher than last year (FY
2020/21: 14.5%). The reduction
compared to two years ago
is mainly a result of recent
larger acquisitions and the
discontinuation of Custom
Supply. Acquisitions will often
be dilutive to the Group ROCE
in the near term.
FY14
FY18
FY17
FY16
FY15
100%
85%
100%
136%
104%
FY22
1
FY20
FY19
106%
101%
93%
Target >85% of underlying
operating profit
Commentary
Operating profit conversion
into cash was very strong again
at 101% of underlying operating
profit on average over the last
2 years (comprising 80% this
year during a period of very
strong organic growth and the
resulting need for additional
working capital along with
further inventory additions
(£4m) to ease supply chain
issues, and 128% in the prior
(Covid) year during which
working capital was released).
This is significantly ahead of
the 85% target and reflects the
tight management of working
capital and expenditure
through the economic
cycle. Over the last ten years,
operating cash conversion has
been consistently strong.
6
Free cash conversion
3
T
FY22
1
FY20
FY19
104%
102%
94%
arget >85% of underlying
net profit
Commentary
Free cash conversion has
also been very strong at 102%
of underlying net profit, on
average over the last 2 years
comprising 77% conversion this
year and 136% conversion in the
prior 12 month (Covid) period.
Again, this is significantly ahead
of the 85% target
1
Continuing operations. FY 2021/22 shown as growth over the pre-Covid period FY 2019/20 as this reflects the actual 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 2 of the Group financial statements.
25
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
STRATEGIC AND
OPERATIONAL REVIEW
“ The Group has
performed
strongly and is
well positioned in
a rapidly changing
environment,
proving both
resilient and
flexible”
Nick Jefferies
Group Chief Executive
Overview
The Group had a strong year
delivering record organic growth
building on the progress made in
the Covid-impacted prior year, and
the pre-Covid period two years ago.
Since FY 2017/18 as the customised
design and manufacturing strategy
gathered momentum, ongoing
Group organic sales have grown
by 10% CAGR while underlying EPS
has grown by 26% CAGR.
With the exit this year from
the lower margin business of
electronic distribution, discoverIE is
now solely focused on the design
and manufacture of customised
and niche, innovative electronics.
Five higher margin acquisitions
have been made over the last 18
months (three during the year),
further progressing us towards our
medium-term goals of becoming
a higher margin Group, focused
on international and sustainably-
aligned target markets, generating
strong cash flows. Our low gearing
leaves us with considerable
headroom for further acquisitions.
Continuing Group sales for the
year increased by 28% at CER,
being 18% higher organically
than last year and 14% higher
organically than the pre-Covid
period two years ago. Performance
in our target markets, which now
account for 76% of Group sales,
continues to be strong, helping to
deliver an underlying operating
margin of 10.9%, up 3.2ppts since
last year and up 0.7ppts on a
continuing basis.
Orders grew by 36% organically
compared with last year and by
32% compared with two years
ago following the build-up of a
strong pipeline of design wins
over several years. This resulted
in a record order book of £224m,
respectively 62% and 71% higher
organically than last year and
two years previously. Whilst over
80% of the order book is for
delivery within twelve months
from the time of order, we have
seen customers continue to place
longer term orders. Over the
course of the new financial year,
we expect the order book level to
normalise as it converts into sales.
The agility of the Group’s model
and the capabilities of our
employees have enabled our
businesses to respond effectively
to the operational challenges
caused by Covid and ongoing
supply chain headwinds, including
semiconductor shortages which
delayed sales in the second half of
the year in two of our 20 businesses.
Positioned well in a
changingworld
The Group is well positioned in an
environment of rapidly changing
global events and conditions,
proving both resilient and flexible.
With 30 manufacturing sites and
operations around the world
supplying international and
multinational customers, the
Group is responding quickly to
the growing trend of customers
localising production, both for risk
mitigation and environmental
reasons. Additionally, with our
manufacturing using only a
low proportion of bought-in
components, the majority being
manufactured in-house from raw
materials, our exposure to external
supply chain restrictions is reduced
(but not eliminated).
Gross margins have been robust
despite supply chain headwinds
and inflationary pressures. The
Group’s products are essential
components, amounting to a small
proportion of a customer’s system
cost, and sustain resilient margins.
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discoverIE Group plc Innovative Electronics
The Group operates a capital-
light business model focused
on organic growth, operating
efficiencies and high quality,
accretive acquisitions. Selling into
high quality markets with long
term growth prospects, the Group
expects to continue to grow ahead
of the wider industry, converting
revenue growth into profits and
earnings into cash. Since 2017/18,
organic sales from continuing
operations have grown by 10%
CAGR, approximately double that
of global industrial production
growth, with underlying operating
profit growing by 34% CAGR and
underlying earnings per share by
26% CAGR. Over the same period,
conversion of operating profits
into operating cash flow exceeded
100% p.a. on average.
Creating a sustainable business is
one of the Group’s top priorities.
As detailed further below, actions
to halve our like-for-like carbon
emissions are underway and
making good progress. More
widely, our Group ESG priorities
have been established with
detailed plans and targets set.
Group Strategy
The Group designs and
manufactures customised and
niche electronic components,
operating internationally and
focusing on structurally growing
markets that are driven by
increasing electronic content and
where there is an essential need
for our products. With our target
markets and global customer
base, the business is expanding
both in Europe and beyond, with
40% of continuing Group sales
being outside Europe, as we
build a geographically diverse
electronics group.
The continuing Group has
been built through organic
growth, operational efficiency
and 19 carefully selected and
integrated acquisitions over
the past 11 years to create a
specialist, high margin design
and manufacturing business. We
have a well-developed approach
to acquisitions and the use of
capital, and see significant scope
for further expansion of the Group
with a number of opportunities in
development.
The Group’s strategy comprises
four elements:
1. Grow sales well ahead of GDP
over the economic cycle by
focussing on the structural
growth markets that form our
sustainable target markets;
2. Move 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 developing
operations in North America
and Asia.
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 reducing our impact
on the environment.
Sustainability and our
positiveimpact
The Group’s purpose aligns with
the United Nations’ Sustainability
Development Goals (“UN SDGs”).
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, we play an
essential role in contributing to the
following UN SDGs:
■ SDG3 – Ensure healthy lives and
promote well-being for all ages
■ SDG7 – Ensure access to
affordable, reliable, sustainable
and modern energy for all
■ SDG9 – Build resilient
infrastructure, promote inclusive
and sustainable industrialisation
and foster innovation
■ SDG11 – Make cities and human
settlements inclusive, safe,
resilient and sustainable
■ SDG13 – Take urgent action to
combat climate change and its
impact
Please see pages 60 to 74
for our Sustainability Report,
which outlines the progress we
have made.
27
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
STRATEGIC AND
OPERATIONAL REVIEW
Target Markets – Aligned with
structurally growing, sustainable
markets
With global GDP expected to
grow by around 4% CAGR 2020-
26 (Source: Statista) and global
industrial production forecast to
also grow by around 4% in 2022,
discoverIE continues to focus on
its four target markets which are
expected to grow at higher rates
than other industrial markets:
renewable energy, medical,
electrification of transportation,
and industrial automation &
connectivity. Together they
account for 76% of continuing
Group sales.
For the Group, these markets
continue to show above average
revenue growth. Over the last five
years, continuing Group organic
sales have grown by 10% CAGR
with target market sales growing
by 12% CAGR while non-target
markets have grown by 6% CAGR.
Growth in these target markets
is driven by increasing electronic
content and by global mega
trends such as the accelerating
need for renewable sources
of energy, an ageing affluent
population, vehicle electrification
and industrial automation.
i) Renewable Energy
Mega trend – decarbonisation
and diversification of energy
sources
The world’s drive towards net zero
will require a global shift towards
electricity as a main source of
power and the majority of new
electricity capacity is expected
to come from solar and wind.
The International Energy Agency
(“IEA”) estimates that demand
for global electricity will need to
double to achieve net zero by
2050 and expects that the share of
renewables in electricity generation
will increase from 29% in 2020 to
60% in 2030 and as high as 90% by
2050. Shorter-term, the IEA predicts
that renewables will account for
up to 95% of the global increase in
power capacity between 2020 and
2026 with solar alone accounting
for half the growth. The growth in
solar and wind energy is partially
driven by the fall in costs: research
by the World Resources Institute
has shown that the cost of solar
photovoltaic electricity has fallen
by 85% since 2010; the cost of
both onshore and offshore wind
electricity has halved during the
same period.
ii) Medical
Mega trend – sensing, analytics
and artificial intelligence
Growth in the global medical
and healthcare markets is driven
by the rise in chronic diseases,
a growing geriatric population,
rising disposable income and
improved access to healthcare
facilities. Moreover, the use of
electronic content is increasing
as a result of the proliferation of
digital technologies and the rising
adoption of electronic devices for
rapid and enhanced patient care
diagnostics as well as the rise in
minimal-invasive surgeries and
non-invasive diagnostic devices.
The medical electronics market is
expected to maintain its above-
average growth, with Precedence
Research predicting a global
market growth of 11.8% CAGR for
2021-2030.
iii) Transportation
Mega trend – smart transportation,
vehicle electrification
Safety, efficiency and
environmental impact are key
trends driving the rise in electronic
content in the global transport
market with improving technology
and falling costs leading the
growing demand for electronics.
The Group continues to focus on
niche applications, especially in rail,
bus and delivery vehicles, together
with the growing demand for
interconnectivity of the transport
infrastructure and the emergence
of smart cities.
Data Bridge Research estimates
that the smart transportation
market will grow at 11.1% CAGR
from 2021-2029, whilst Research
and Markets predicts CAGR
growth of nearly 20% in the global
electronic connectivity in the
transportation market between
2021 and 2030.
iv) Industrial Automation &
Connectivity
Mega trend – growth in robotics,
industrial automation and
connectivity
The market for autonomous mobile
robots is expanding rapidly across
multiple sectors of industry such
as warehousing, aviation, medicine
and healthcare, and farming.
Furthermore, the increasing
adoption of the internet of things
(“IoT”) and artificial intelligence
(“AI”), the rising awareness of
safety and security as well as the
increasing demand for predictive
maintenance and efficient supply
chain management is driving
the underlying growth of global
industrial IoT markets. Fortune
Business Insights predicts an
average growth of 9.8% from 2021
to 2029 in the global industrial
automation market, and Statista
expects growth of as much as
22.8% CAGR in the global industrial
IoT market during 2021 – 2028.
With a focus on sustainable
markets, the Group continues
to concentrate on improving
efficiency in industrial market
applications that are aligned
with a sustainable growth
agenda, including fibre optic and
wireless connectivity applications.
28
Strategic Report
discoverIE Group plc Innovative Electronics
Examples of new and emerging
applications include areas in smart
agriculture such as pollination and
crop management.
Engineering-led Sales Model
Our business model has three core
capabilities:
■ Engineering – our primary
and leading differentiator. By
understanding our customers’
design challenges we design
and create products that
address their specific needs.
■ Manufacturing – we
manufacture individually
designed products to a
repeatedly and consistently
high standard at one or more
of our production facilities
internationally.
■ Logistics – we supply our
products internationally to
customers’ various production
locations over the life of their
demand, typically for five to
seven years.
We apply these capabilities to
develop long term, embedded
relationships with our customers
as follows:
■ Understanding customer needs
By listening to and
understanding customers’
needs, we help solve their
technical challenges to create
more effective, efficient,
productive and sustainable
equipment and comply
with increasingly stringent
environmental, health, safety and
performance requirements.
■ Enduring customer
relationships
Our sales model creates a
unique understanding of
customers’ needs and builds
long term relationships that last
for many years.
■ Engineering-led solutions
By applying our extensive
technical knowledge of
applications and design, our
engineers create unique
products for customers’
specific needs.
■ Recurring revenues
Our designs are specified into
our customers’ system designs,
leading to multiple years of
repeated monthly demand
and creating stable, recurring
revenue streams.
■ Regional manufacturing
Manufacturing locations in
Europe, Asia and North America
provide regional supply for
customers, reducing transit
times, costs and environmental
impact as well as providing
flexibility and reducing risk of
disruption.
Additionally, we acquire businesses
with similar characteristics,
building our product capability
and international presence.
With many customers operating
internationally, it is necessary for
us to have a presence in multiple
regions of the world and with the
market being highly fragmented,
numerous opportunities exist for
us to acquire complementary
businesses.
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
STRATEGIC AND
OPERATIONAL REVIEW
The Group made further
significant progress with its KSIs
during this year. Alongside strong
organic growth, the exit from
distribution has resulted in a
positive step change in the KSIs,
which is explained as follows:
■ Underlying operating margin
exceeded 10% for the first time
and follows 8.0% reported
in FY 2019/20 and 7.7% in FY
2020/21 when the business
included Custom Supply. The
Group benefited both from the
strong organic sales growth
delivered during the year and
the exit from the lower margin
distribution business. With this
exit, the FY 2024/25 margin
target was increased during the
year to 13.5% (previously 12.5%).
■ Sales beyond Europe in the year
increased by 13ppts to 40% of
Group revenue from 27% two
years ago (and 28% last year)
driven by three factors. Firstly,
the exit from distribution which
was a UK/European focused
business (c.7ppts increase);
secondly, the five acquisitions in
the last 18 months in particular
Beacon, Phoenix and CPI which
are all US based (c.3ppts); thirdly,
organic growth during the year
was strongest in Asia and North
America (c.3ppts). Accordingly
the target for FY 2024/25 was
increased during the year to 45%
(previously 40%).
■ Target market sales in the year
increased by 8ppts to 76% of
Group revenue from 68% two
years ago (and 70% last year)
of which 5ppts reflects the exit
from the distribution businesses.
A further 5ppts improvement
has been delivered through a
combination of organic growth
being more weighted to these
long-term structural growth
markets with a 2ppts reduction
from the five acquisitions in the
last 18 months which, while well
aligned with these markets, are
currently below our average
rate. The FY 2024/25 target
remains as 85% of sales from
target markets.
■ A new target was introduced
in November 2020 for the
reduction of carbon emissions
intensity from the Group’s
existing businesses by 50%
over five years. Additionally,
for new acquisitions, we are
targeting that within the first
five years of ownership, at least
50% of their energy demand
is generated from renewable
sources. For calendar year 2021,
carbon emissions reduced
by 33% on a like-for-like basis
(calendar year 2020: 6% like-
for-like reduction). During this
year, capital has been invested
in projects to reduce carbon
emissions by switching to clean
energy, including solar panel
installations in Sri Lanka, and
an air source heat pump in
Poland, two of the Group’s major
manufacturing facilities.
Key Strategic and Performance Indicators
Since 2014, the Group’s progress with its strategic objectives and its financial performance has been measured
through key strategic indicators (“KSIs”) and key performance indicators (“KPIs”). The KSI targets have been
raised as they are achieved, and in November 2021 the targets were raised again following the announced exit
from the distribution businesses. For tracking purposes, the KSIs and KPIs in the table below remain as reported
at the time rather than adjusted for disposals. Given the one-off impact of Covid in FY 2020/21, we have shown
in the tables below this year’s growth for both KSIs and KPIs relative to the pre-Covid period two years ago (FY
2019/20) to illustrate the development of the Group. This year’s growth relative to both FY2019/20 and FY 2020/21
is discussedbelow.
Key Strategic Indicators
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY22
1
FY25
Targets
1. Increase underlying
operating margin
3.4% 4.9% 5.7% 5.9% 6.3% 7.0% 8.0% 10.9% 13.5%
2. Build sales beyond Europe
2
5% 12% 17% 19% 19% 21% 27% 40% 45%
3. Increase target market sales
2
56% 62% 66% 68% 76% 85%
4. Carbon emissions reduction 6%
3
33% 50%
1
Continuing operations. FY 2021/22 shown as growth over the pre-Covid period FY 2019/20 as this reflect the actual ongoing growth of the business.
FY 2013/14 to FY 2019/20 are for total operations before disposals, as reported at the time.
2
As a percentage of Group revenue.
3
First test was CY20 compared to CY19.
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Strategic Report
discoverIE Group plc Innovative Electronics
Key Performance Indicators
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY22
1
FY25
Targets
1. Sales growth
CER
Continuing organic
17%
3%
36%
9%
14%
3%
6%
(1%)
11%
11%
14%
10%
8%
5%
27%
14%
Well ahead of
GDP
2. Underlying EPS growth 20% 31% 10% 13% 16% 22% 11% 20% >10%
3. Dividend growth 10% 11% 6% 6% 6% 6% 6%
2
6% Progressive
4. ROCE
3
15.2% 12.0% 11.6% 13.0% 13.7% 15.4% 16.0% 14.7% >15%
5. Operating profit
conversion
3
100% 104% 100% 136% 85% 93% 106% 101% >85% of underlying
operating profit
6. Free cash conversion
3
94% 104% 102% >85% of underlying
net profit
1
Continuing operations. FY 2021/22 shown as growth over the pre-Covid period FY 2019/20 as this reflects the actual 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 2 of the Group financial statements
The Group also made further
significant progress with its KPIs
during the year. Given the one-
off impact of Covid last year, this
year’s growth is shown relative to
the pre-Covid period FY 2019/20
illustrating the development of the
Group. This year’s growth relative
to both FY 2019/20 and FY 2020/21
is discussed below.
The performance of each of our
Group KPIs for this year are as
follows:
■ Organic sales increased by 14%
compared with the pre-Covid
year FY 2019/20 (comprising
18% organic growth this year
offsetting a 4% organic reduction
during the Covid period). This
follows average annual organic
growth of 9% for the preceding
three years and illustrates the
strong through-cycle organic
growth of the business.
■ Underlying EPS increased by 20%
compared with the pre-Covid
year FY 2019/20 (comprising 31%
growth this year offsetting an 8%
reduction during FY 2019/20).
■ The dividend is being
increased by 6%, continuing
our progressive policy
whilst providing for a higher
proportion of investment in
acquisitions from internally
generated resources. This
progressive policy has seen a
doubling of the dividend per
share since 2010, whilst dividend
cover on an underlying basis has
increased to 2.7x.
■ ROCE for the year for continuing
operations was 14.7% compared
with 16.0% two years ago,
and 0.2ppts higher than last
year (FY 2020/21: 14.5%). The
reduction compared to two
years ago is mainly a result of
recent larger acquisitions and
the discontinuation of Custom
Supply. Acquisitions will often
be dilutive to the Group ROCE in
the near term.
■ Operating profit conversion into
cash was very strong again at
101% of underlying operating
profit on average over the last
2 years (comprising 80% this
year during a period of very
strong organic growth and the
resulting need for additional
working capital along with
further inventory additions
(£4m) to ease supply chain
issues, and 128% in the prior
(Covid) year during which
working capital was released).
This is significantly ahead of
the 85% target and reflects the
tight management of working
capital and expenditure through
the economic cycle. Over
the last ten years, operating
cash conversion has been
consistently strong.
■ Free cash conversion has
also been very strong at 102%
of underlying net profit, on
average over the last 2 years
comprising 77% conversion this
year and 136% conversion in the
prior 12 month (Covid) period.
Again, this is significantly ahead
of the 85% target.
31
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
STRATEGIC AND
OPERATIONAL REVIEW
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
operating across 16 countries. The
great majority of the products are
manufactured in-house at one of
the division’s 20 manufacturing
facilities, with its principal ones
being in China, India, Mexico,
Poland, Sri Lanka, Thailand, the US
and the UK. Geographically, 6% of
sales are in the UK, 49% in rest of
Europe, 17% in North America and
28% in Asia.
During the year, the Group’s
production facilities established new
normal ways of operating after the
disruption of Covid and the Group’s
production capacity has returned
to output capacity levels capable of
satisfying strong sales growth rates.
To meet future growth, capacity is
being expanded in the US and India,
and production began as scheduled
at the Group’s new larger facility in
Nogales, Mexico.
Orders were very strong in the
year, increasing by 36% organically
to £280.0m with a book to bill
ratio of 1.19:1 (FY 2020/21: 1.06:1).
The strong order performance led
to sales increasing organically by
22% with strong organic growth
across all regions: Asia growing
organically by 30% driven by very
strong organic growth in India,
North America 28% and Europe &
UK by 17%.
Combined with a 5% sales increase
from acquisitions, overall sales
increased by 27% CER. Including
the impact of translation from
a stronger Sterling on average,
reported divisional revenue
increased by 23% to £234.7m
(FY 2020/21: £190.4m). This was
achieved despite ongoing supply
chain headwinds, in particular
semiconductor shortages
which have delayed sales in two
businesses within the division.
Underlying operating profit of
£29.8m was £6.8m (+29%) higher
than last year at CER and £6.4m
(+27%) higher on a reported basis
(FY 2020/21: £23.4m) with an
underlying operating margin of
12.7%, 0.4ppts higher than last year
(FY 2020/21: 12.3%) reflecting the
positive effect of organic growth.
Gross margin reduced slightly as
delays to semiconductor supplies
temporarily reduced volume
throughput.
Sensing & Connectivity Division
(“S&C”)
The S&C division designs,
manufactures and supplies
highly differentiated sensing and
connectivity components for
industrial applications through 12
businesses operating across nine
countries. The vast majority of
the products are manufactured
in-house at one of the divisions 10
Divisional Results
Following the Group’s exit from distribution, the Custom Supply division has been treated as discontinued
operations, with the Design & Manufacturing (“D&M”) division housing all of the Group’s ongoing operating
businesses. Reflecting this development and in line with certain growth initiatives, during the final quarter,
theGroup arranged the D&M division into two operating segments, the Magnetics & Controls division (“M&C”)
and the Sensing & Connectivity division (“S&C”).
This new structure, which aligns business units by technology area, will enable greater collaboration
betweenbusiness units, improve visibility for the Group’s growth initiatives and increases management
bandwidth for further growth. Both divisions have similar exposure to the Group’s target markets and
geographies. The management and structure of each business unit is unchanged.
The divisional results for the continuing Group for the year ended 31 March 2022 are set out and reviewed below.
FY 2021/22 FY2020/21
Revenue
£m
Underlying
operating
profit
£m Margin
Revenue
£m
Underlying
operating
profit
£m Margin
Reported
revenue
growth
Organic
revenue
growth
Organic
order
growth
M&C 234.7 29.8 12.7% 190.4 23.4 12.3% 23% 22% 36%
S&C 144.5 23.3 16.1% 112.4 15.5 13.8 29% 11% 36%
Unallocated (11.7) (8.1)
Total 379.2 41.4 10.9% 302.8 30.8 10.2% 25% 18% 36%
1
Underlying operating profit excludes acquisition-related costs and results of discontinued operations
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discoverIE Group plc Innovative Electronics
manufacturing facilities, with its
principal ones being in Hungary,
the Netherlands, Norway, Slovakia,
the US and the UK. Geographically,
20% of sales are in the UK, 49% in
Europe, 14% in North America and
17% in Asia.
As with the M&C division orders
were very strong, increasing by 36%
organically to £173.0m with a book
to bill ratio of 1.20:1 (FY2020/21: 1.0:1).
The strong order performance
led to sales increasing organically
by 11%, with 13% organic growth
across Europe and 6% growth
in Asia. Sales in North America
were flat year-on-year due to the
slower recovery of certain transport
infrastructure projects and
semiconductor supply delays.
Combined with a 20% sales
increase from acquisitions, overall
sales increased by 31% CER.
Including the impact of translation
from a stronger Sterling on
average, reported divisional
revenue increased by 29% to
£144.5m (FY 2020/21: £112.4m). This
was achieved despite a slower post
Covid recovery in some of our UK
based businesses.
Underlying operating profit of
£23.3m was £7.9m (+51%) higher
than last year at CER and £7.8m
(+50%) higher on a reported
basis (FY 2020/21: £15.5m) with an
underlying operating margin of
16.1%, 2.3ppts higher than last year
(FY 2020/21: 13.8%) reflecting the
positive effect of organic growth
coupled with higher margin
acquisitions.
Design Wins
Project design wins are a
measurement of new business
creation. By working with
customers at an early stage in their
project design cycle, opportunities
are identified for our products to
be specified into their designs,
which in turn lead to future
recurring revenue streams.
The Group has a strong bank of
design wins built up over several
years that creates the basis for the
growth in orders and sales now
being experienced. During the
year, design wins in the continuing
business increased by 52% over the
prior year and by 12% over the pre-
Covid period two years ago. 86%
of design wins were in the Group’s
target markets.
Additionally, during the year, new
project design activity increased
strongly, being broad based across
all markets. The total pipeline of
ongoing projects continues at a
very high level.
Acquisitions
The businesses we acquire are
typically led by entrepreneurs
who wish to remain following
acquisition. We encourage this
as it helps retain a decentralised,
entrepreneurial and dynamic
culture. The market is highly
fragmented with many
opportunities to acquire and
consolidate.
We acquire businesses that
are successful and profitable
with good growth prospects
and where we invest for growth
and operational performance
development. According to
the circumstances, we add
value in some of or all of the
following areas:
Strategy, sales and products
■ Developing the longer term
strategy of the business;
■ Internationalising sales channels
and expanding the customer
base, including via cross-selling
initiatives and focusing sales
development onto target
market areas;
■ Developing and expanding the
product range;
■ Developing and implementing
sustainability initiatives.
Talent management
■ Investing in management
capability (‘scaling up’) and
succession planning;
■ Peer networking and
collaboration.
Investment
■ Capital investment in
manufacturing and
infrastructure;
■ Improving manufacturing
efficiency;
■ Infrastructure efficiencies, such
as warehousing and freight;
■ Expansion through further
acquisitions.
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
STRATEGIC AND
OPERATIONAL REVIEW
Controls and support
■ Implementing robust financial
controls;
■ Finance and related support,
such as treasury, banking, legal,
tax, insurance, consolidation.
During the year, the Group
completed three acquisitions:
1. In May 2021, Control Products
Inc (“CPI”), a US designer and
manufacturer of custom,
rugged sensors and switches,
for $11.4m (£8.1m) on a debt free,
cash free basis.
2. In August 2021, Antenova, a UK
designer and manufacturer of
antennas and radio frequency
(RF) modules for industrial
connectivity applications, for
£18.2m on a debt free, cash free
basis.
3. In September 2021, Beacon
EmbeddedWorks (“Beacon”),
a US designer, manufacturer
and supplier of custom System-
on-Module (SOM) embedded
computing boards and related
software, principally supplying
the medical and industrial
markets in the US. Beacon was
acquired for $80.5m (£58.8m) on
a debt free, cash free basis.
All three have retained their
distinct brand identities and
high-quality management. Their
complementary product ranges
and wider access to customers will
create cross-selling opportunities
in our target markets which are
expected to drive further growth.
The Group has completed
19 acquisitions since 2011,
contributing to growth in
continuing Group revenues from
£15m in FY 2012/13 to £379m
this year. 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 14 businesses
acquired since 2011 and owned
for at least two years delivered a
return on investment this year of
18.8%, an increase of 1.5ppts over
last year (FY2020/21: 17.3% based
on 13 acquisitions greater than 2
years old).
Summary and Outlook
These results reflect the strength
of the discoverIE business model
which is performing well in
good demand conditions and
an inflationary environment and
follows a resilient performance
through the weaker Covid
conditions of the year before.
With record growth in orders,
sales, order book and underlying
earnings per share, which
increased by 31%, continuing
revenues and earnings are now
well ahead of the pre-Covid period.
I would like to thank all of our
employees around the Group
for their tremendous effort and
flexibility over the last two years
that has led to these results.
We are also making good progress
on our sustainability initiatives. By
switching our sites to renewable
sources of energy where possible,
the Group’s like-for-like carbon
emissions were 33% lower in
calendar year 2021 than 2019 and
we are on track to achieve our goal
of a 50% reduction by 2025.
Following the Group’s exit during
the year from the business of
distribution, discoverIE is now
solely focused on the design
and manufacture of customised
electronics for industrial
applications; our continuing focus
is on achieving organic growth and
new design wins in sustainable
target markets, together with
accretive acquisitions. The Group is
well-funded, with a strong balance
sheet and cash flow, and has
significant funding headroom for
further acquisitions.
The new financial year has started
well, with continued strong growth
in organic sales, and the order
book at record high levels. While
supply chain headwinds and
inflationary pressures remain, they
are expected to be manageable.
With a clear strategy focused on
long-term, high quality, structural
and sustainable growth markets
across Europe, North America
and Asia, a diversified customer
base, a record order book and
a strong pipeline of acquisition
opportunities, the Group is well
positioned to make further good
progress in the year ahead.
Nick Jefferies
Group Chief Executive
14 June 2022
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discoverIE Group plc Innovative Electronics
35
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
FINANCIAL REVIEW
“ Continuing Group
underlying profit
for the year was
£41.4m, delivering
an underlying
operating margin
of10.9%.”
Simon Gibbins
Group Finance Director
Revenue
Continuing Group sales of £379.2m were 18% higher organically than last year (FY 2020/21: £302.8m), and with
acquired businesses (Phoenix and Limitor acquired last year, and CPI, Antenova and Beacon added this year)
adding 10%, continuing sales increased by 28% CER. A stronger Sterling during the year, particularly compared
with the US Dollar and Euro, reduced sales by 3% on translation for a net growth in reported continuing
Group sales of 25%. Compared with two years ago, sales increased by 27% CER with 14% organic growth and
13% through acquisitions (the five acquisitions above together with Sens-Tech which was acquired in the last
twoyears). The effects on the Group of the conflict in Ukraine are negligible.
Continuing Revenue £m
FY
2021/22
FY
2020/21 %
FY
2021/22
FY
2019/20 %
Reported 379.2 302.8 25% 379.2 303.3 25%
FX translation impact (6.9) (5.5)
Underlying (CER) 379.2 295.9 28% 379.2 297.8 27%
Acquisitions: last 12mths (31.3)
Acquisitions: last 24mths (40.9)
Organic 347.9 295.9 18% 338.3 297.8 14%
Orders and Order Book
Continuing Group orders increased by 48% CER to
£453.0m, and by 36% organically compared with the
Covid-impacted prior year and importantly, by 48%
CER and 32% organically compared with the pre-
Covid year two years ago.
The book to bill ratio for the year was 1.19:1 (H1:
1.26:1; H2: 1.12:1) building on the momentum of the
second half last year (book to bill: 1.16:1) as the Group
recovered from the sharp impact of Covid in the first
half last year (book to bill: 0.90:1). Two years ago the
comparable book to bill ratio was 1.03:1.
While this year’s second half ratio was lower than the
first half, this was due to the stronger comparators
with organic orders still being 1% higher than in the
firsthalf.
During the year, the Group order book for continuing
operations also grew very strongly and finished the
year at a record level of £224m, being 86% (CER)
higher than a year ago. Organically the order book
increased by 62% in the year and by 71% compared
with the pre-Covid period two years ago. Sequentially,
the order book increased by 13% (CER) during the
second half.
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discoverIE Group plc Innovative Electronics
Group Operating Profit and Margin
Continuing Group underlying operating profit for the
year was £41.4m, a 34% increase on last year (FY 2020/21:
£30.8m), delivering an underlying operating margin of
10.9%, 0.7ppts higher than last year (FY 2020/21: 10.2%).
Underlying operating profit growth has been achieved
through a combination of organic growth, efficient
operational execution and acquisitions. Operationally,
incremental profits on organic sales growth of
£7.3m have been delivered across the two divisions,
being a drop-through ratio of 14%. During the year
there has been progressive investment in operating
expenditure across both divisions to support organic
growth this year and in the future, with an average
investment of 5.5% p.a. over the last two years. Gross
margins have been robust despite supply chain
headwinds, although semiconductor shortages, which
have delayed sales in two of our 20 businesses, have
impacted their manufacturing recovery rates with
Group organic margin reducing 0.7ppts overall.
£m Underlying Operating Profit
FY 2020/21 30.8
Gross profit on organic sales growth 19.4
Organic gross margin (2.3)
Investment in opex (9.8)
Organic profit growth – operations 7.3
Profit from acquired companies 6.5
Investment in central capabilities (0.8)
Additional LTIP charge (1.9)
Foreign exchange impact (0.5)
FY 2021/22 41.4
Acquired companies contributed £6.5m of underlying
operating profit since acquisition being CPI, Antenova
and Beacon acquired this year, together with an
annualisation of profits from Phoenix and Limitor
acquired last year.
Centrally, the Group has invested £0.8m in additional resources to support growth plans, including ESG, risk &
internal audit and IT to support operating company system upgrades. Further investment is anticipated in the
next 12 months in particular in M&A and IT.
The EPS growth impact on share based payment accruals, the accrued cost of national insurance
contributions (“NIC”) on LTIPs and the increased rate of NIC since April 2022 have added an additional cost of
£1.9m relative to last year.
Reported Group continuing operating profit for the year (after accounting for the underlying adjustments
discussed below) was £20.9m, £3.8m (+22%) higher than last year.
FY2021/22 FY2020/21
Continuing operations £m
Operating
Profit
Finance
Cost
Profit
before tax
Operating
profit
Finance
cost
Profit
before tax
Underlying 41.4 (3.8) 37.6 30.8 (3.6) 27.2
Underlying adjustments
Acquisition expenses (6.5) – (6.5) (1.2) – (1.2)
Amortisation of acquired intangibles (14.0) – (14.0) (11.1) – (11.1)
IAS 19 pension cost – – – (1.4) – (1.4)
Reported 20.9 (3.8) 17.1 17.1 (3.6) 13.5
Underlying Adjustments
Underlying adjustments for the year comprise acquisition & integration expenses of £6.5m (FY 2020/21: £1.2m),
and the amortisation of acquired intangibles of £14.0m (FY 2020/21: £11.1m). From this year, the IAS 19 pension
administration cost has been taken as a continuing cost of the business. Last year’s pension cost comprised
the administration cost of £0.4m and a one off adjustment of £1.0m relating to historic commutation terms for
legacy scheme members.
Acquisition expenses of £6.5m are the costs associated with acquisition activity during the year of £3.0m,
principally of CPI, Antenova and Beacon, accrued contingent consideration costs of £3.1m and the £0.4m for
the integration of Hobart into Noratel. The £2.9m increase in the amortisation charge since last year to £14.0m
relates to the amortisation of intangibles relating to the five acquisitions since the first half of last year. The
annualised amortisation charge for next year is approximately £16.5m.
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
FINANCIAL REVIEW
Financing Costs
Net finance costs for the year were £3.8m (FY 2020/21: £3.6m) and include a £0.6m charge for leased assets
under IFRS 16 (FY 2020/21: £0.6m). Finance costs related to banking facilities of £3.2m (FY 2020/21: £3.0m) were
slightly higher than last year reflecting marginally higher average net debt during the year.
Underlying Tax Rate
The underlying effective tax rate for continuing operations for the year was 25%, 1ppt ahead of last year’s rate
(FY 2020/21: 24%) reflecting increased profits accruing in higher tax territories.
The overall effective tax rate for continuing operations was 43% (FY 2020/21: 30%). This was higher than the
underlying effective tax rate due to there being no tax relief on certain acquisition-related expenses and a
lower rate of tax relief on the amortisation of acquired intangibles (both within underlying adjustments above).
The effective tax rate (“ETR”) on intangibles was further impacted this year by the enactment of the increase in
the UK corporate tax rate from 1 April 2023, resulting in a one-off increase in the deferred tax liability (a non-
cash item).
FY 2021/22 FY 2020/21
£m PBT ETR PBT ETR
Continuing operations 37.6 25% 27.2 24%
Acquisition expenses (6.5) 12% (1.2) 10%
Amortisation of acquired intangibles (14.0) 9% (11.1) 19%
IAS 19 pension cost – – (1.4) 19%
Total reported 17.1 43% 13.5 30%
Group Profit Before Tax and EPS
Continuing Group underlying profit before tax for the year of £37.6m was £10.4m higher (+38%) than last
year (FY 2020/21: £27.2m), with underlying EPS for the year increasing by 31% to 29.4p (FY 2020/21: 22.4p). The
increase in underlying EPS was lower than that for underlying profit before tax due to the higher effective tax
rate (+1ppt) and the issuance of new equity in September 2021 increasing fully diluted shares by 4% to 95.8m
shares (FY 2020/21: 92.2m shares). The annualised fully diluted shares for the full year is expected to be
c. 98mshares.
After the underlying adjustments above, reported profit before tax on continuing operations was £17.1m, an
increase of £3.6m (+27%) compared with last year (FY 2020/21: £13.5m). With the reported effective tax rate for
the year of 43% being higher than last year’s rate of 30% (as mentioned above), the resulting reported fully
diluted earnings per share on continuing operations was 10.1p, 0.2p lower than last year (FY 2020/21: 10.3p).
FY 2021/22 FY 2020/21
Continuing operations £m PBT EPS PBT EPS
Underlying 37.6 29.4p 27.2 22.4p
Underlying adjustments
Acquisition & integration expenses (6.5) (1.2)
Amortisation of acquired intangibles (14.0) (11.1)
IAS 19 pension cost – (1.4)
Reported 17.1 10.1p 13.5 10.3p
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Strategic Report
discoverIE Group plc Innovative Electronics
Discontinued Operations
During the year, the Group completed the disposals of the Acal BFi and Vertec SA distribution businesses
which have been treated for accounting purposes as discontinued operations. In accordance with IFRS 5,
net profits (profit after tax or “PAT”) of discontinued operations, which includes the profit on disposal of the
businesses, have been shown separately to the results of the continuing operations.
FY 2021/22 FY 2020/21
Total operations £m PBT EPS PBT EPS
Continuing operations 9.7 10.1p 9.5 10.3p
Discontinued operations 15.5 16.2p 2.5 2.7p
Total operations 25.2 26.3p 12.0 13.0p
Working Capital
Working capital at 31 March 2022 was £57.2m, equivalent to 13.9% of annualised second half sales at CER and
was £4.4m (7%) lower than the prior year-end (31 March 2021: £61.6m). This reduction is due to the disposal of
the Custom Supply division in the year which had £15.6m of the Group’s working capital last year end.
For continuing operations, working capital increased by £11.2m to support the significant increase in sales
(+28% growth CER) and at 13.9% was 0.4ppts better as a percentage of annualised second half sales at CER
(FY2020/21: 14.3%) reflecting continuing tight management across the Group. Debtor days were 47 days,
creditor days were 80 days and stock turns were 3.4 turns. Stock turns reduced by 0.3 turns on a continuing
basis (£4m) reflecting the increase in inventories given current supply chain pressures. Working capital
performance was similar in both divisions.
Cash Flow for Continuing Operations
Net debt at 31 March 2022 was £30.2m compared with
£47.2m at 31 March 2021.
£m
FY
2021/22
FY
2020/21
Opening net debt at 1 April (47.2) (61.3)
Free cash flow
(see table below)
21.8 28.1
Discontinued operations 38.4 9.5
Acquisition-related costs (87.6) (21.8)
Equity issuance (net of taxes) 52.6 0.1
Dividends paid (9.4) (2.8)
Foreign exchange impact 1.2 1.0
Net debt at 31 March (30.2) (47.2)
Net acquisition-related costs of £87.6m in the year
comprised £58.8m for the acquisition of Beacon in
September 2021, £18.2m for Antenova in August 2021
and £8.1m for CPI in May 2021 (all on debt free, cash
free bases). Additionally there were £2.5m of expenses
associated with acquisitions during the year. Together
with the acquisitions of Phoenix and Limitor during
the six month period ended 31 March 2021, a total of
£109.4m has been spent on acquisitions during the
last 18 months.
Group acquisitions were partly funded from a
6% placing of shares in September 2021 which
raised net equity proceeds of £53.4m; £0.8m of
national insurance contributions paid in respect
of executive share options which were exercised
during the year. Net cash of £38.4m was raised
from discontinued operations with a further £5m
of deferred consideration due to the Group in three
years’ time. Dividends of £9.4m were paid during the
year, compared to only £2.8m last year when no final
FY 2019/20 dividend was declared as management
sought to preserve cash at the outset of Covid.
39
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
FINANCIAL REVIEW
Operating cash flow and free cash flow for continuing
operations (see definitions in note 2 to the Group
financial statements) for the year compared with last
year are shown below.
£m
FY
2021/22
FY
2020/21
Underlying profit before tax 37.6 27.2
Net finance costs 3.8 3.6
Non-cash items 12.5 10.4
Total EBITDA 53.9 41.2
IFRS 16 (5.1) (4.2)
EBITDA (pre IFRS16) 48.8 37.0
Working capital (10.2) 5.6
Capital expenditure (5.5) (3.1)
Operating cash flow 33.1 39.5
Finance costs (3.2) (3.1)
Taxation (6.2) (6.5)
Legacy pensions (1.9) (1.8)
Free cash flow 21.8 32.0
Operating cash
(ex working capital)
43.3 28.1
Free cash flow
(ex working capital)
32.0 22.5
EBITDA of £53.9m was 31% higher than the Covid-
impacted last year (FY 2020/21: £41.2m) and the
pre-Covid period two years ago (FY 2019/20: £41.2m)
reflecting strong organic sales growth combined with
contributions from the five acquisitions made in the
last 18 months.
During the year, the Group invested £10.2m in working
capital to support organic sales growth contrasting
with last year’s £5.6m inflow resulting from the
reduction in sales following the onset of Covid. In
combination, over the last two years only £0.7m has
been invested in working capital despite organic sales
growth of 14% across that period, reflecting further
significant improvements in working capital efficiency.
Capital expenditure of £5.5m was invested during
the year including capacity expansions in Mexico and
on ESG initiatives including solar panels in Sri Lanka,
the Group’s largest facility. This saw a return to more
normal levels following a reduction during the
Covid-impacted last year to maintenance levels only
(FY 2020/21: £3.1m). Capital expenditure levels are
expected to increase next year to around £8.5m for the
full year as we continue to invest in additional capacity,
system upgrades and the roll out of our ESG initiatives.
£33.1m of operating cash was generated in the year.
While this was below last year’s £39.5m, this was due
to working capital inflows last year of £5.6m resulting
from the reduction in sales due to Covid. Excluding
working capital, operating cash was up 28% on last
year. £33.1m of operating cash flow represents 80%
of underlying operating profit (FY 2020/21: 128%).
While this was below our 85% target due to the
strong organic sales growth, the two year conversion
rate of 101% is well ahead. Over the last ten years, the
Group has consistently achieved high levels of cash
conversion, averaging in excess of 100%.
Finance cash costs of £3.2m were marginally ahead
of last year while corporate income tax payments
of £6.2m were £0.3m lower than last year reflecting
refunds of R&D tax credits.
Free cash flow (being cash flow before dividends,
acquisitions, disposals and equity issuance) for the
year was £21.8m. While this was 22% lower than
the prior year, it was 42% higher excluding working
capital. Our free cash flow conversion rate this year
was 77% of underlying net profit (FY 2020/21: 136%).
While this was below our 85% target due to the strong
organic sales growth, the two year conversion rate
of 102% is well ahead illustrating the strength of the
Group’s cash generation.
Banking Facilities
During May 2022, the Group increased its syndicated
banking facility from £180m to £240m and extended
the remaining term of the facility by two years out
to four years ending in June 2026, with an option
exercisable by the Group to extend the facility by a
further year to June 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 now comprises seven lending banks.
With net debt at 31 March 2022 of £30.2m, the Group’s
gearing ratio at the end of the year (being net debt
divided by underlying EBITDA as annualised for
acquisitions) was 0.6x, the lowest Group gearing
ratio since 2015. With our target gearing range being
between 1.5x and 2.0x, there is plenty of funding
capacity for future acquisitions.
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Strategic Report
discoverIE Group plc Innovative Electronics
Balance Sheet
Net assets of £290.4m at 31 March 2022 were £82.0m
higher than at the end of the last financial year (31
March 2021: £208.4m). The increase primarily relates
to the net issuance of equity of £53.5m (nearly all
being the equity placing in September 2021) and net
profit after tax for the year of £25.2m (which includes
the profit on disposal of discontinued operations).
This has been partly offset by dividend payments
this year of £9.4m. The movement in net assets is
summarised below:
£m
FY
2021/22
Net assets at 31 March 2021 208.4
Net profit after tax 25.2
Dividend paid (9.4)
Net equity issuance 53.5
Currency net assets – translation impact 7.6
Gain on defined benefit scheme 1.7
Share based payments (inc tax) 3.4
Net assets at 31 March 2022 290.4
Defined Benefit Pension Scheme
The Group’s IAS19 pension position associated with
its legacy defined benefit pension scheme improved
during the year by £3.7m, from a £1.0m deficit at
31 March 2021 to a £2.7m surplus at 31 March 2022.
This partly results from contributions of £1.9m made
by the Group; and also from increased corporate
bond yields increasing discount rates over the year.
These are partly offset by increases in future inflation
expectations and updated demographic assumptions
during the year.
Risks and Uncertainties
The principal risks faced by the Group are covered in
more detail on pages 54 to 59. These risks comprise:
the economic environment, particularly linked to
the geo-political issues arising from the ongoing
Ukraine conflict and also from Covid; 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 existing and
emerging risks and the mitigating actions and
processes in place during the financial year,
giving specific consideration to the impact of the
Ukraine conflict, supply chain headwinds and
Covid. The Board view that risks associated with the
macroeconomic environment and supply chain
for existing and acquired businesses has increased
during the financial year with no material change to
the relative importance or quantum of the Group’s
other principal risks.
The risk assessment and review are 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 mitigation actions
where practicable. Some level of risk, however, will
always be present. The Group is well positioned to
manage such risks and uncertainties, if they arise,
given its strong balance sheet, committed banking
facility of £240m and the adaptability we have as an
organisation.
Simon Gibbins
Group Finance Director
14 June 2022
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
RISK MANAGEMENT
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 IT, and
are responsible for the
integration of the risk
management framework
Group Internal Audit
– Monitors compliance with
the Group’s internal controls
and policies
– Conducts or commissions
internal audits
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 Executive Committee
– Management of the Group and delivery of the strategy
– Monitoring of key risks and compliance with relevant laws
– Regular reviews of the Group’s risk management framework
Sustainability Committee
– Oversees the Group’s overall sustainability progress
– Reviews climate-related risks and the Group’s response
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.
Independent reporting line
The Company’s risk management
framework follows a three lines
of defence model. The first
line of defence is operational
management in our businesses.
Day-to-day risk management
controls, policies and procedures
are implemented and monitored
by the local management teams
with oversight and review by
Divisional Management. This
is conducted within a series
of delegated authority levels.
Relevant internal control systems
are in place to identify, evaluate
and manage the Group’s
business risks.
The second line of defence
comprises Group functions such
as risk, finance, IT, treasury and
tax. This focuses on monitoring
and compliance with risk 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. The team conducted
the majority of its audit activities
remotely during FY 2021/22 due
to the ongoing Covid travel
restrictions but is expecting this
to change as restrictions ease
globally. 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.
During FY 2021/22, the Group Risk
and Internal Audit function began
preparations for complying with
the proposals outlined in the UK’s
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discoverIE Group plc Innovative Electronics
Department for Business, Energy and Industrial
Strategy (“BEIS”) reform of UK corporate governance
and audit oversight.
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
Executive Committee and the Board. Having a clear
understanding of our strategy and objectives assists
with the effective identification and management of
existing or emerging risks that have the potential to
prevent or hinder these objectives from being achieved.
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 country
represents more than 22% of Group turnover or
profit.
■ Most of the Group’s businesses operate on separate
IT systems, which assists in minimising the risks
of a major cyber security incident affecting the
wider Group. During FY 2021/22, 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 a Security Operations
Centre (“SOC”) to monitor and respond to IT security
threats 24/7.
■ 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, there exists the ability to
switch production between certain sites if needed.
An independent review conducted during FY
2021/22 found that the level of risk posed by climate
change to each of the Group’s sites was low.
■ The Group has very limited reliance on any single
customer or supplier, with the largest customer
representing approximately 8% 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.
The Group’s performance and adaptability
throughout the Covid pandemic demonstrates the
resilience of the Group’s model.
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
Investment in
facilities
Product safety
Operating in new
markets
Business
development
initiatives
Health & safety
Acquisitions Cyber risks
New customers
and suppliers in
existing markets
Regulatory/
covenant
compliance
Foreign exchange
translational risk
Foreign exchange
transactional risk
Markets with
greater business
cyclicality
Environmental
risks
Regardless of the appetite in respect of a particular
risk, all risks are identified and managed in the
appropriate manner.
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
RISK MANAGEMENT
Enterprise Risk Management
discoverIE applies the 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 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 Executive Committee. This review
focuses on:
– the materiality of each of the risks identified
– prioritisation of the allocation of the Group’s resources to the most important areas
– clarity of ownership for each of the risks identified
This review takes into account the Group’s risk appetite in respect of the various types of risk
identified.
The Group Risk Register 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 FY 2021/22) is set out on pages 54 to 59.
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
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discoverIE Group plc Innovative Electronics
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 period.
■ a comprehensive review of all risks within the Group Risk Register is completed shortly prior to the Group’s
full-year preliminary results announcement.
The Group Risk function is continually looking to improve the Group’s Enterprise Risk Management framework
and is currently looking to increase the frequency with which reviews of the Group Risk Register take place
to further improve the Group’s agility in responding to emerging risks. Further information on the Group’s
principal risks and uncertainties (“PRUs”) is detailed on pages 54 to 59.
A key element in assessing the Group’s principal risks is considering likelihood and potential magnitude of
impact, over a range of time horizons, as well as whether the risks are new or emerging, or have changed in
importance during the year. The below diagram provides a summary of the PRUs on that basis.
Risk heat map
Impact
IncreasingDecreasing
Decreasing Increasing
Likelihood
9
11
14
7
8
6
10
13
2
4
3
5
1
12
1
Instability in the economic
environment
2
Business acquisitions
underperformance
3
Climate-related risks
4
Loss of key customers
5
Loss of key suppliers /
supply
6
Technological changes
7
Major business disruption
8
Cyber security
9
Loss of key personnel
10
Product liability
11
Inventory obsolescence
12
Liquidity and debt
covenants
13
Foreign currency
14
Non-compliance with
legal and regulatory
requirements
KEY
Category of risk:
Strategic Risk
Operational Risk
Financial Risk
Regulatory/Compliance Risk
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
RISK MANAGEMENT
Ongoing monitoring, mitigation and improvement
In addition to the processes outlined above, key
risks, and the internal control processes adopted to
address these risks, are monitored on an ongoing
basis. Among other controls, this includes a review by
the Group Executive Committee in all of its regularly
scheduled meetings (typically seven per year) and
escalation to the Board of any material developments
as and when they arise.
discoverIE continually pursues improvements in
its Enterprise Risk Management Framework. A
summary of this continual cycle of risk identification,
establishment of systems and processes to mitigate,
communication and ongoing monitoring, is outlined
in the below diagram.
Climate-related risks and opportunities
To ensure that the Group continues to thrive under
a changing climate, we have undertaken an initial
analysis of the resilience of our business model and
strategy in two climate scenarios – world surface
temperatures to rise by less than 2C and by more than
4C compared with pre-industrial levels – representing
the best and worst case scenarios.
The assumptions used in our analysis are from the
Intergovernmental Panel on Climate Change (“IPCC”)
Representative Concentration Pathway (“RCP”), the
International Energy Agency (“IEA”) and other publicly
available information.
We assess a number of parameters, such as policy
changes and market trends, under each scenario
over the short, medium and long term. The analysis
shows that the risks the Group faces during the
transition to a low carbon economy are low and more
than outweighed by the opportunities in the short to
medium terms; and that the physical risks over the
long term in the worst case scenario can be mitigated.
Further analysis will be carried out in the next 12
months to quantify the potential financial impact,
which will be reported in the next year’s Annual Report.
Objective:
foster a culture of
risk management
to effectively
execute discoverIE’s
sustainable
strategy
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46
Strategic Report
discoverIE Group plc Innovative Electronics
Below 2°C (RCP 2.6 Scenario) Exceed 4°C (RCP 8.5 Scenario)
Surface
temperature
1
The “best case” scenario that is in line
with the Paris Agreement’s stated
2°C limit / 1.5°C aim.
The “worst case” scenario that projects world
surface temperatures to rise by more than
4°C compared with the pre-industrial period.
Emissions
2
Aggressive mitigation and ambitious carbon
reductions. Carbon emissions to peak
around 2020 then decline on a linear path
and become net negative before 2100.
No mitigation, “Business as Usual” and
emissions continue rising at the current rate
until 2100.
Carbon price Prices in OECD markets reach $224/tonne
by 2030 and $120/tonne by 2050 based on a
scenario of limited supply of carbon credits
3
.
Prices remain at $30/tonne.
4
Energy mix
5
Increasing proportion of energy from
renewable sources, primarily solar and wind.
Fossil fuels remain the main energy source.
1
IPCC AR5 Synthesis Report, p11
2
IPCC AR5 Synthesis Report, p9
3
Bloomberg Long-Term Carbon Offset Outlook 2022
4
OECD Effective Carbon Rates 2021
5
IEA Net Zero by 2050 – a roadmap for the global energy sector, p63
Global average surface temperature change
(relative in 1986-2005)
Annual anthropogenic
CO
2
emissions
2000 2050
39
Year
2100
(˚C)
-2
0
2
4
6
RCP4.5
RCP6.0
RCP2.6
RCP8.5
32
WGIII scenario categories:
>1000
720-1000
580-720
530-580
480-530
430-480
Historical emissions RCP scenarios:
RCP8.5
RCP6.0
RCP4.5
RCP2.6
2000
2050
Year
2100
Annual emissions(GtC02/yr)
-100
0
100
200
Full range of the WGIII AR5
scenario database in 2100
Source: IPCC AR5 Synthesis Report
47
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
Description
Potential
impact Our response
Transition risks
Short term
Policy &
regulation
Aggressive policies
to mitigate carbon
emissions drive
increases in carbon
pricing
Low Over 80% of the Group’s Scope 1 and 2 carbon
emissions are from the electricity it consumes. We
are switching our operations to renewable tariffs
where available and have also started investing in
onsite generation, such as the installation of solar
panels in Sri Lanka and heat pumps in Norway and
Poland. We also have plans in place to reduce our
energy consumption and other carbon emission
factors, such as cars and gas heating, which will
reduce our reliance on carbon offset. This risk is
therefore considered to be immaterial.
Technology New and emerging
technologies
substitute existing
products and
services and/or
disrupt the existing
business model
Low The Group’s products and services are all based
on technologies that are ubiquitous (e.g.,
electromagnetic) and essential for the functioning
of electrical and electronic systems. The Group’s
core competencies are design and customisation,
and manufacturing know-how. Our manufacturing
processes are often manual or semi-manual value-
added assemblies suited for the low volume high mix
production mode required for custom-made products.
Such a production model is less susceptible to
technology changes and does not require substantial
capital investment. Further, where technologies do
change, our approach of designing-in our products to
our end customers’ products means that we are well
positioned to benefit from such changes, both as a
result of being part of the technical innovation and,
once designed-in, long life spans of use. Therefore, the
risk of technology disruption is considered negligible.
Market Increased cost of raw
materials
Medium Our products primarily consist of basic materials such
as copper, aluminium and plastics. An increased cost
of such raw materials will increase our production
costs. Our products are designed and customised
for specific applications and are priced according to
project specifications. The Group hedges the costs
of raw materials two to three months ahead, which
helps to reduce any negative financial impact.
The Group’s supply chain is resilient, which has
been proven through the course of the pandemic.
There is ongoing continuous mitigation to identify
sustainable multiple sources where possible.
RISK MANAGEMENT
Short term – 2-3 years
Medium term – 4-7 years
Long term – up to 2050
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Description
Potential
impact Our response
Transition risks
Short to medium term
Market Unexpected and
abrupt increase in
energy costs
Low Energy is a relatively small part of the Group’s
operational costs. The impact from any rise in energy
costs is unlikely to be material.
Shifts in customer
behaviour
Low The nature of our products (magnetics, components,
boards and sensors) are highly adaptable to a variety
of end products, and the exposure of the Group to
consumer electronics is negligible.
Our business model is designing and manufacturing
customised electronics for specific applications.
Our engineers work closely with our customers on
solutions that are designed to solve their technical
issues. This approach allows us to gain insights of
emerging trends. We have positioned ourselves in
structural growth markets and expect to benefit
from shifts in behaviour over the long-term.
Medium term
Reputation Increased
stakeholder concern
on climate change
Low The electronic components and equipment industry
is considered a relatively low carbon emitter and the
Group’s exposure to carbon-heavy industries such as
oil and gas is immaterial.
Since 2020 we have had plans in place to actively
reduce carbon emissions in our operations and
aim to achieve a 50% reduction in intensity on 2019
emission levels by 2025. In 2021, we reduced our
carbon emissions intensity by 33% on a like-for-like
basis compared to 2019 levels. The Group expects to
invest c £3m by 2025 on carbon reduction initiatives.
Hence, the climate-related reputational risk to the
Group is relatively low.
Short term – 2-3 years
Medium term – 4-7 years
Long term – up to 2050
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
RISK MANAGEMENT
Description
Potential
impact Our response
Physical risks
Long term
Acute Production
disruptions and
higher costs from
impacts on the
workforce as a result
of increased severity
of extreme weather
events such as
cyclones and floods
Low The Group’s manufacturing facilities are in 30
locations across Asia, Europe and North America.
If necessary, some production activities can be
transferred to other locations to ensure business
continuity. The Group has experience of transferring
manufacturing between sites where circumstances
have required us to do so.
Chronic Increased
operational, capital
and insurance costs
due to changes in
extreme variability
in weather patterns,
rising temperatures,
and sea levels
Medium The Group has a number of manufacturing facilities
in coastal areas. The IPCC RCP 8.5 scenario (the worst
case) projects global temperatures to rise by 3.2-5.4°C
by 2100 vs pre-industrial levels and sea levels rise to
peak at 0.8 metres. Based on this scenario, our initial
assessment conducted through the coastal risks
screening tool indicated that the physical risks to
our manufacturing facilities are considered low. Only
one of the Group’s 30 manufacturing facilities could
be affected and the Group would mitigate this by
relocating the facility if necessary.
Description
Potential
impact Our response
Opportunities
Short to medium term
Markets High The Group’s strategy focuses on markets with
sustainable growth, such as renewable energy,
electrification of transportation, industrial automation
and connectivity. Over 50% of the Group’s sales were
from these markets in FY 2021/22. Demand in these
markets is expected to accelerate during the transition
to a low carbon economy. With the knowledge and
know-how, and strong position that we have in these
markets, the Group is well placed to capitalise on
these trends.
Energy
source
Medium Switching to renewable energy supplies and active
reductions of carbon emissions means that the Group:
■ is less exposed to future fossil fuel price increases
■ is less sensitive to changes in cost of carbon
■ increases capital availability as more investors
prefer low-emissions producers
Short term – 2-3 years
Medium term – 4-7 years
Long term – up to 2050
Please see pages 67 to 69 for our other Task Force on
Climate-related Financial Disclosures (“TCFD”).
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
VIABILITY STATEMENT
In accordance with section 4.31 of the 2018 UK
Corporate Governance Code, the Directors have
assessed the viability of the Group over a 3-year
period to 31 March 2025. 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 2025. 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 2023 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, latest views on supplier and
customer payments impacting working capital and
applicable forecast foreign exchange rates.
The budget for the financial year ending 31 March
2023 assumes a steady organic growth supported by
a very strong backlog of orders at the year end. Future
growth for the financial years 2023/24 and 2024/25
assume steady sales growth for those years (in total
“The Viability Base Case”).
Banking facilities and headroom
The Group has a syndicated banking facility of £240m
which is committed up to the end of June 2026,
beyond the viability assessment period with an option
exercisable by the Group to extend the facility by a
further year to June 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 IFRS16, of less than 3.0x and
2. Interest cover: Adjusted EBITDA to interest
(excluding IFRS16) greater than 4.0x.
At 31 March 2022, the Group had net debt of £30.2m
and was significantly inside these covenants with
gearing of 0.6x and interest cover of 20x.
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 2022.
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 54 to 59, notably instability in
the economic environment, underperformance of
acquired businesses, climate related risks, loss of key
customers and suppliers, major business disruption,
liquidity restriction, liquidity and debt covenants and
adverse foreign currency movements.
The most severe but plausible downside scenario
assumes a worsening of the economic environment
caused by a prolonged Ukraine conflict, significant
reduction in consumer demand due to inflationary
pressures and resurgence of Covid-19. This downside
scenario results in a significant decline in second
half sales of FY 2022/23, negative sales growth in FY
2023/24 and modest growth thereon in FY 2024/25.
Additionally, gross margin was reduced, working
capital materially increased, significant one-off
expenditures included (product liability, major
customer insolvency or litigation, climate change),
interest rates increased significantly and an increase
in the Group effective tax rate.
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Strategic Report
discoverIE Group plc Innovative Electronics
After factoring in the significant additional downsides
to the Viability Base Case, there remains good
headroom both in terms of liquidity and our banking
covenants. This is supported by the fact that the
Group sells a wide portfolio of different products
across a diverse set of industries and geographies, 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.
Reverse 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 be at risk of breaching 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 2% 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 Strategic Report on pages 02 to 81 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 54 to 59
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.
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Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
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 52 and 53.
The categories of risk are similar to last year, save that retirement benefit obligations has been de-classified as
a principal risk following the Group’s legacy defined benefit pension scheme moving into surplus.
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,
pandemics or
geopolitical
changes
■ Reduction in sales
■ Lower margins
■ Closure of factories
and suppliers
stopping production
■ Difficulty raising
equity and debt,
impacting growth
ability
■ Market position as a specialist
supplier focused on core
target markets with diversified
locations and product offerings
■ Executive team actively
managing ongoing impact of
COVID-19
■ A long-term credit facility is in
place with significant headroom
■ Careful monitoring of stock
levels and customers in relevant
geographies to identify any
issues early
■ Flexible production and
warehouse facilities to enable
movement of production and
supply to other countries if
required
■ Vigilance entering markets
that are politically or financially
unstable
Increase
■ Increased global pressure on
prices and supply chain, causing
shortages of some raw materials
and components
■ Rising interest rates and inflation
increase the cost of borrowing
■ COVID-19 impact on global
markets generally reduced
during the year, as economies
start to rebound, partly offset by
lockdowns in China
■ Economic crisis in Sri Lanka
Link to KSIs: A B C
Link to KPIs: 1 2 3 4 5 6 7
2. Business acquisitions underperformance
■ A degree of
uncertainty
exists in valuing
acquisitions
and evaluating
potential synergies
■ Post-acquisition
risks arise due to
change of control
and integration
challenges
■ Financial
impact due to
underperformance
of acquisitions
■ Loss of key
employees and their
expertise
■ Expected synergies
are not realised
■ 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
■ Specific risk management
programme for first 12 months
post-acquisition before becoming
part of the Group ongoing
internal audit programme
Increase
■ A more volatile external
economic environment
increases the risk of making
acquisitions
■ CPI, acquired in May 2021 and
Antenova acquired in August
2021, have performed well since
acquisition
■ Beacon, acquired in September
2021, has been impacted
by a global shortage of
semiconductors
Link to KSIs: A B C
Link to KPIs: 1 2 3 4 5 6
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Risk description Potential impact Mitigating actions Change in the year
3. Climate-related risks
■ Global warming
leads to greater
extremes of
weather events
and other
local issues
■ Our products or
other activities
or decisions
in relation to
climate related
risks may be
judged negatively
by external
stakeholders
■ The operations of
Group facilities are
affected by the
impact of climate
change (e.g.,
through weather
related events)
■ Supply chains are
affected due to the
impact of climate
change on their
operations
■ Customer revenues
are impacted by
climate related
effects on their
businesses
■ Reputational impact
and deterioration
of relationships
with external
stakeholders
and staff
■ An initial assessment of the
physical risks of climate change
to the Group’s facilities has been
conducted using the Munich
Re database; the preliminary
analysis indicates that such risks
are considered to be low. Please
see pages 46 to 50 for our TCFD
scenario analysis and our TCFD
Report on pages 67 to 69.
■ The Group has diverse supply
chains and the ability to switch
from individual suppliers that
encounter issues
■ Given the Group’s target
markets, customer revenues are
expected to increase as a result
of climate-related matters which
could offset the risk impact in
other areas
■ ESG matters are discussed
at all meetings of the Board,
Sustainability Committee and
Group Executive Committee, to
ensure that the right activities
are being prioritised and
implemented
No change
■ An analysis of the resilience of
our business model and strategy
to temperature rises of below
2ºC and more than 4ºC was
completed in the year
Link to KSIs: D
Link to KPIs: 1 2 3 4 5 6 7
Operational risk
4. 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. 8% of Group
revenues)
■ Culture of high-quality service
and long-term customer
relationships
■ Robust quality management
systems (including ISO9001)
No change
Link to KSIs: A B
Link to KPIs: 1 2 5 6
5. Loss of key suppliers/supply
■ A key supplier
undergoes
change of
ownership, suffers
major business
disruption or
quality issues
■ Negative impact on
production
■ Damaged
relationships with
key customers
■ Reduced sales
■ Low dependency on any single
supplier
■ 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
Increase
■ Changes in the external
environment have caused
shortages in the supply of some
materials and components
Link to KSIs: A
Link to KPIs: 1 2
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PRINCIPAL RISKS AND
UNCERTAINTIES
Risk description Potential impact Mitigating actions Change in the year
6. 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
No change
■ Acquisitions in the year increase
the diversity of the product
portfolio
Link to KSIs: A C
Link to KPIs: 1 2
7. Major business disruption
■ Sustained
disruption to
production arising
from a major
incident at one or
more sites
■ Insufficient
production to deliver
goods on order
■ Damaged
relationships with
key customers
■ Reduced sales
■ Reputational
damage
■ Insufficient production to deliver
goods on order
■ Damaged relationships with key
customers
■ Reduced sales
No change
■ Acquisition of CPI and Beacon,
with facilities in the US
■ Acquisition of Antenova, with
facilities in Taiwan
Link to KSIs: A B
Link to KPIs: 1 2 3 4 5 6 7
8. Cyber security
■ System downtime
or loss of data due
to inadequate
systems or
external attack
■ Business disruption
■ Reduced service to
customers
■ Financial loss
■ Theft of and/
or access to
confidential data
■ Reputational
damage
■ Central IT security policy
■ Robust anti-virus and anti-spam
software and specialised target
threat protection services
■ Robust backup procedures
in place
■ Secure private networking
■ Recommendations from third-
party cyber security assessments
completed in the prior year have
been implemented
■ Different operating units
operating on separate IT
systems minimises risk of a
major incident impacting the
wider Group
No change
■ External environment has led
to increased number of cyber-
attacks on businesses globally
■ Group wide investment in
enhanced end-point security
solutions, with central
monitoring capability, now
rolled out.
■ Increased investment and
headcount within Group IT
team, including new Group
Head of IT
Link to KSIs: A
Link to KPIs: 1 2 5 6
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Risk description Potential impact Mitigating actions Change in the year
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 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
No change
Link to KSIs: A
Link to KPIs: 1 2
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
No change
Link to KPIs: 1 2 3 5 6
11. Inventory obsolescence
■ Stock is held that
has reduced or nil
realisable value
■ Financial loss ■ Orders built to specific customer
requirements; many are non-
cancellable, and non-returnable
■ Purchasing to reliable sales
forecasts
■ Provisioning and write-off
policies to cover potential
obsolescence
No change
Link to KSIs: A
Link to KPIs: 2 4
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PRINCIPAL RISKS AND
UNCERTAINTIES
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 an existing
revolving credit facility of
£240m which runs to June 2027
with c.£190m undrawn at the
year end
■ Central treasury function oversees
the Group’s cash resources and
financing requirements
■ Regular review of headroom
against committed facilities and
financial covenants
■ Working capital controls and
monitoring of key working
capital metrics
■ Issuance of equity from time
to time to support acquisitions
programme
■ Acquiring high margin, high
cash generative businesses
No change
■ Gearing reduced in the year
from 1.1x to 0.6x
■ Revolving credit facility
increased from £180m to
£240m, with term extended
from June 2024 to June 2026,
with a Group option to extend to
June 2027
Link to KPIs: 3 4 5 6
13. Foreign currency
■ With only 10% of
sales in Sterling,
the Group deals in
many currencies
for both its
purchases and
sales, which differ
to its reporting
currency, and
so the Group
has translational
and operational
exposures to
foreign currency
fluctuations
■ Reduction of the
Group’s reported
results
■ Lower gross and
operating margins
■ Use of forward currency
contracts to hedge committed
and forecast sales and purchases
in foreign currency
■ Currency borrowings as a
natural hedge against same
currency assets
■ Central review of foreign
currency exposures
No change
Link to KPIs: 2 5 6
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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
■ Supplier code of conduct issued
during the year and annual
supplier audits undertaken
across the Group
■ 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
No change
■ TCFD regulations came into
force this financial year
Link to KPIs: 5 6
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
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SUSTAINABILITY REPORT
“ The Group’s
strategy and way
of operating is
focused on meeting
our goals without
compromising the
ability of future
generations to
meettheir own.”
Rosalind Kainyah
Chair of the Sustainability Committee
Dear Shareholder,
I am delighted to have joined the discoverIE Board
and to have been asked to chair the newly established
Sustainability Committee.
The Committee has now been formed and will have a
pivotal role in shaping how the Group evolves going
forward. Please see www.discoverIEplc.com for the
Committee’s Terms of Reference.
During my induction, one of the most thorough I’ve
experienced, I met with senior management and
visited several of the Group’s operating businesses.
The experience confirmed what I had heard
about a well-run organisation full of energy and
entrepreneurial spirit, and with the concept of
sustainability driving and integrated into core
business. The Group’s strategy and way of operating
is focused on meeting our present needs without
compromising the ability of future generations to
meet their own.
In this report, I will report on discoverIE’s sustainability
achievements to date and plans for the future. This is
also the first year that the UK mandatory requirement
of TCFD (Task Force for Climate-related Financial
Disclosures) reporting comes into force. The Group has
conducted an initial assessment of the resilience of its
business model and strategy, and potential impacts
of climate change under several transition pathway
scenarios in the short, medium, and long terms. It
has concluded that the Group may be exposed to
certain risks during the transition to a low carbon
economy, however such risks are outweighed by the
opportunities presented to the Group. See the TCFD
section starting on page 67 for more details.
discoverIE’s business model of designing and
manufacturing customised products has stood the
test of time, even during the most challenging period
of the pandemic. The Group’s focus on target markets
that have long-term structural growth characteristics
has proven to be the right strategic choice, evident
in the Group’s outperformance in these markets
relative to other markets. Additionally, these target
markets, namely renewable energy, electrification of
transportation, medical, and industrial automation &
connectivity, are in the areas where the Group can fulfil
its purpose – that is to create innovative electronics
that help improve the world and people’s lives. They
are also aligned with the UN Sustainable Development
Goals (“UN SDGs”). See pages 61 and 62 for the positive
impacts from our products and operations.
This Report comprises:
■ Part 1 – The positive impacts we create through our
products and operations
■ Part 2 – A summary of our “three pillars” on which
our sustainability programme is based (Our Planet,
Our Products, Our People)
■ Part 3 – Governance arrangements
■ Part 4 – Our Priorities & TCFD Report
■ Part 5 – Key metrics
The Group had already undertaken a materiality
assessment to help identify those topics that are most
significant for its operations and is keen to prioritise
its efforts accordingly (see pages 60 and 61 of last
year’s Annual Report for a summary).
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Part 1 - Our positive impacts
UN
SDG What is this
How our products create
positiveimpacts
How our operations create
positiveimpacts
Ensure healthy lives
and promote well-
being for all ages
We design and make products that
go into medical devices and systems,
such as ultrasound machines and
defibrillators, contributing directly to
the health and wellbeing of people.
The Group’s sensing products
are used in environmental
management systems, such as
indoor temperature monitoring and
water treatment plants.
Applicable markets:
The Group has 30 manufacturing
sites. It’s our responsibility to ensure
that our employees operate in a safe
and clean environment. Our health &
safety representatives to employees
ratio at the end of 2021 was 1:38,
well ahead of guidance, and our
accidents and near misses records
were better than the benchmark.
See page 74 for health & safety
performance.
Several of our operating businesses
have implemented flexible and
hybrid working at the end of the
pandemic to enable employees to
achieve a better work-life balance.
A number of them have also
completed mental health first
aider training, which is increasingly
important given the wider impact
that the pandemic and associated
lockdowns have had on mental
health.
Ensure access to
affordable, reliable,
sustainable and
modern energy
for all
Renewable energy is the target
market for both our electromagnetic
and sensing products. We provide
transformers, switches, and
sensors for wind and solar systems,
supporting the expansion and
adoption of renewable and clean
energy.
Applicable markets:
We support the growth of renewable
energy generation by switching to
clean energy tariffs where possible.
Higher demand leads to more
investment.
Where possible, we invest in
renewable energy self-generation,
such as building roof top solar
panels in our Sri Lankan plant,
contributing to overall renewable
energy capacity.
Renewable Energy Transportation Medical Industrial and Connectivity
Applicable Markets Key:
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Annual Report and Accounts for the year ended 31 March 2022
SUSTAINABILITY REPORT
UN
SDG What is this
How our products create
positiveimpacts
How our operations create
positiveimpacts
Build resilient
infrastructure,
promote inclusive
and sustainable
industrialisation and
foster innovation
We supply connectivity solutions
that underpin the “Internet of
Things” (“IoT”) that brings people and
communities together and enables
automation and efficiency.
Applicable markets:
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.
Make cities and
human settlements
inclusive, safe,
resilient and
sustainable
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.
Applicable markets:
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,
local employment, donations and
volunteering.
Take urgent action
to combat climate
change and its
impacts
Our focus on products that reduce
or replace carbon emissions, and
aiding electrification, automation
and improving efficiencies, assists in
combating climate change.
Applicable markets:
We play our part in tackling climate
change by reducing resource
consumption, such as energy and
water, recycling where possible in
our operations.
We also design products that are
more energy efficient and less
harmful to the environment than
the ones they replace.
Renewable Energy Transportation Medical Industrial and Connectivity
Applicable Markets Key:
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discoverIE Group plc Innovative Electronics
Part 2 - Our “Three Pillars”
The diagram below summarises the core pillars of our sustainability strategy (Our Planet, Our Products and
Our People), how they come together to meet Our Purpose, and how they are underpinned by our internal
governance arrangements.
Our Purpose
To create innovative electronics that help to improve the world and people’s lives.
Our Planet
Improving our impact on the
environment
Complementing the benefits
that our products bring to our
customers, our own internal
initiatives will reduce our
carbon footprint and improve
other environmental impacts.
Our Products
Ensuring product safety and
reliability
Our products provide
considerable benefits to
customers.
Our processes ensure the
consistency of how we make
our products, increasing safety
and reliability.
Our People
Keeping our people safe
and happy
Our people are critical to
our success and keeping
them safe and happy is a
key priority.
Our products require a
high degree of technical
expertise.
Underpinned by our Governance and Risk Management
Our strategy will be achieved through ongoing processes to ensure its delivery is managed effectively.
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Annual Report and Accounts for the year ended 31 March 2022
SUSTAINABILITY REPORT
The Board
Ultimate responsibility for all Group operations, including sustainability
Sustainability
Committee
Group
Sustainability
Team
Group
Executive
Committee
Divisional
Management
Operating
Company
Management
Part 3 – Governance
The following diagram summarises the Group’s overall governance arrangements for its sustainability programme.
Audit & Risk
Committee
Remuneration
Committee
While the Board has ultimate responsibility for sustainability matters (including climate-related risks), it relies
on the input and guidance of its various Committees, as well as the Group Executive Committee (“GEC”).
The Remuneration Committee ensures that pay is aligned with the Group’s ESG objectives, the Audit & Risk
Committee considers governance and risks relating to sustainability matters and climate-related risks in
particular, and the Sustainability Committee helps set the Group’s overall ESG strategy and ensures the Board
has access to the knowledge and skills required in this area.
The GEC is responsible for overseeing implementation of strategy throughout the Group, with each member of
the GEC having ESG-specific targets within their personal objectives and bonus plans. However, it is operating
companies that run the Group’s operations and ultimately have to put the Group’s sustainability plans into
action. The decision-making process involves all stakeholders working together. The Group Sustainability
Team drives initiatives throughout the Group, liaising with operating companies to consider what is practical
and feasible, and reporting into the GEC and Sustainability Committee, who provide challenge and direction.
This is a constant and evolving process as a result of which strategy, priorities, plans and actions are aligned.
During the year, the Group adopted new and updated Policies, held ESG workshops and implemented various
initiatives, as noted elsewhere in this Annual Report. All of these actions were as a direct result of the processes
outlined above.
While we have made good progress already, further work is required in this evolving area. This will involve all
of the above stakeholders working closely together, alongside external advisors to provide further insights,
challenge and guidance. The Group has carefully considered its governance arrangements in this context and
will keep these under review as we continue to make progress in this key area.
Risk & Internal
Audit Dept
KEY
Reporting line
Collaboration
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discoverIE Group plc Innovative Electronics
As well as the general governance structures in place as set out above, 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 ■ During the year ended 31 March 2022, the Group undertook a
risk assessment specifically focused on anti-bribery & corruption
matters, updated its Policy (which is in the process of being
translated into all of the Group’s predominant languages) and
commenced additional training.
■ Board Diversity Policy ■ The Board adopted its first Diversity Policy in May 2021 and updated
it in May 2022, with revised targets in line with latest guidance.
■ 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.
■ 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 has occurred. A secure and confidential
hotline to an independent third party is provided and has been
made available and advertised to all staff at all of the Group’s
locations.
Pages 42 to 46 set out our general approach to risk management.
In addition to those general processes, and in addition to ongoing supplier checks conducted by our
businesses in the normal course of trading, the Group conducted a centralised audit of the Group’s largest
suppliers during the year. That audit was focused primarily on compliance with our Supplier Code of Conduct
and our Modern Slavery Statement. The audit covered suppliers representing 62% of Group procurement
spend. No major concerns were identified but potential improvements were identified with a small number of
suppliers. This programme of Group-wide supplier audits will continue on an annual basis.
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SUSTAINABILITY REPORT
Part 4 – Our Priorities & TCFD Report
Our Planet
Greenhouse gas emissions
Addressing carbon emissions is a global challenge
that discoverIE stands to benefit from due to its
target markets. The technological requirements of the
transition to a low carbon economy and the related
market response to that challenge present significant
opportunities for us as we continue to grow.
We are also committed to playing our part in directly
reducing our carbon emissions and so, as announced
previously, have set ourselves an initial target to reduce
our emissions by 50% from 2019 levels within five years.
This will be achieved through a combination of buying
electricity from renewable sources, implementing
energy reduction measures (including those identified
through our programme of energy audits) and
installing renewable energy electricity sources on
site, as appropriate. A number of sites already use
onsite renewable energy sources to reduce emissions,
including heat pumps in Poland and Norway, and an
onsite solar array in New Jersey.
During the year ended 31 March 2022:
■ We continued to reduce our carbon emissions.
As at the end of CY2021, our emissions were 33%
lower than CY2019 levels, demonstrating the good
progress made towards our 50% reduction target
■ We completed the first phase of installation of
solar panels at our site in Sri Lanka. This is now
operational and we will move onto the second and
third phases shortly
■ Third party energy audits were conducted at a
number of sites, identifying further opportunities to
increase energy efficiency
■ The proportion of our car fleet that is now hybrid or
fully electric increased from 19%
1
of vehicles to 26%
1
The figure reported last year (9%) included Acal BFi; the above
figure of 19% excludes Acal BFi from prior year figures.
Our programme of energy audits will continue in the
coming year and we will continue to switch company
vehicles to electric or hybrid as leases expire and
suitable options are available. Once each energy audit
is completed, a schedule of recommended actions
is agreed. The decision as to whether to implement
the recommended actions is made on a return
on investment (“ROI”) basis, focused on both the
reduction in emissions achieved and cost savings that
will accrue to the business over the life of the relevant
investment. As an example, the upfront investment on
the solar panels being installed in Sri Lanka is expected
to be repaid in full four to five years after being
commissioned and thereafter reduce ongoing costs.
Waste
All Group companies take measures to minimise
waste in the manufacture of products, use recycling
options where available and reduce packaging.
Although the majority of our products are non-
hazardous, where such 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.
The Group has implemented procedures to comply
with the Restriction of the Use of Hazardous
Substances in Electrical and Electronic Equipment
Regulations 2004 (“RoHS”), the Waste Electrical and
Electronic Equipment Regulations 2006 (“WEEE”),
the Producer Responsibility Obligations (Packaging
Waste) Regulations 2005 and the Waste Batteries and
Accumulators Regulations 2009.
Water
We have undertaken a preliminary assessment of the
Group’s use of water and determined that the risk of
water scarcity is not a material concern. The Group does
not use water within its production processes, with the
exception of a single, minor process within one business
unit. The only water used is for sanitary and drinking
purposes.
ISO14001 accreditations
ISO 14001 is an internationally agreed standard that
sets out the requirements for an environmental
management system. It helps organisations improve
their environmental performance through more
efficient use of resources and reduction of waste,
gaining a competitive advantage and the trust of
stakeholders. Importantly, it provides an objective
and independently assessed view of an organisation’s
environmental credentials.
Last year, the Group set itself a target to ensure that
at least 80% of its operations (measured by revenue)
would be covered by an ISO14001 accreditation by
2025. As at the end of CY2021, that figure stood at 63%
and the accreditation process has already started at a
number of our other businesses, with more scheduled
next year and the year after. From feedback received,
it is clear that both customers and suppliers value our
businesses having this in place.
There were no fines relating to environmental non-
compliance during the year or the previous 3 years.
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TCFD Report
The following report is prepared in accordance with the UK Listing Rule 9.8.6(8) and is consistent with
the recommended disclosures of the 2017 final report of the Taskforce for Climate-Related Financial
Disclosures(“TCFD”).
To identify climate-related risks and opportunities (“CRO”), in 2021 the Group conducted an initial assessment of
the resilience of its business model and strategy in the best and worst case scenarios of climate change. Details
can be found in the Risk Management section on pages 46 to 50. Further analysis will be carried out in the next
12 months to quantify the potential financial impact, which will be reported in the next year’s Annual Report.
The Group’s current strategy for climate change is set based on the Group’s Scope 1 and Scope 2 emissions,
where data is available. The Group operates a decentralised model, which increases the scale and complexity
of capturing Scope 3 emissions from its supply chain, which are not currently disclosed. The Group plans to
identify and quantify these Scope 3 emissions within the next two years and to start reporting in FY2024. The
Group’s climate change strategy may change accordingly to take into account all Scope 3 emissions if they are
deemed material. Scope 3 emissions from the Group’s own operations are disclosed on page 73.
Governance Disclosures
Recommended disclosure
a) Describe the board’s oversight
of climate-related risks and
opportunities.
The Board exercises oversight of climate-related risks and
opportunities through:
■ the Sustainability Committee, which comprises the whole Board.
The Chair of the Committee has 30 years of combined operational,
management and board level experience in ESG. The Committee
sets the Group’s sustainability strategy and monitors the
implementation of the strategy
■ the Risk and Audit Committee, which assesses and reviews
climate-related risks and opportunities as part of the risk
management process
■ the Remuneration Committee, which sets the Group’s
remuneration policy and ensures that sustainability objectives and
performance are linked to management’s remuneration.
See the Group’s sustainability governance framework on page 64.
Recommended disclosure
b) Describe management’s role in
assessing and managing climate-
related risks and opportunities.
Climate-related risks are reviewed as part of our six-monthly Risk
Register review, along with all other risks.
■ Group Executive Committee (“GEC”) is responsible for the
development and implementation of the Group’s sustainability
strategy, and setting specific objectives and targets for all Group
companies. It reports to the Sustainability Committee on all
sustainability-related matters, including climate action
■ Group Sustainability Team, formed by members with sustainability,
finance, legal and operations experience, is responsible for
monitoring, reviewing, consolidating and reporting Group
companies’ progress on sustainability implementation. It works
with the operating business units to deliver sustainability goals
and reports to the GEC
■ Operating company management is responsible for the
implementation of sustainability strategy within their individual
business units.
See the Group’s sustainability governance framework on page 64.
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SUSTAINABILITY REPORT
Strategy Disclosures
Recommended disclosure
a) Describe the climate-related risks
and opportunities the organisation
has identified over the short,
medium, and long term.
See Risk Management section on pages 46 to 50 for the disclosures
a) and b).
Recommended disclosure
b) Describe the impact of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning.
Recommended disclosure
c) Describe the resilience of the
organisation’s strategy, taking into
consideration different climate
related scenarios, including a 2ºC or
lower scenario.
The Group’s business model is designing and manufacturing
customised electronics for industrial applications. Our engineers
work closely with our customers on creating innovative solutions to
solve their technical challenges, which enables us to gain insights
and knowledge of emerging technology and trends.
The Group’s products (magnetics, sensors, control interface and
systems, and connectivity components) are essential components
and enable the functioning of any electrical and electronic systems.
The Group’s strategy of focusing on the markets that play a critical
role in decarbonisation, such as renewable energy and industrial
automation, ensures that our products and services remain relevant
over the long term and that the Group can capitalise on the growth
opportunities during the transition to a low carbon economy.
The Group’s TCFD scenario analysis can be found on pages 46 to 50
and a summary of our climate related risks and opportunities is in
the Principal Risks and Opportunities section on page 55.
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Risk Management Disclosures
Recommended disclosure
a) Describe the organisation’s
process for identifying and
assessing climate-related risks.
The Group, with the help of external consultants, conducted
a materiality assessment in 2020 as part of its overall risk and
sustainability assessment. The process included identifying the areas
that were relevant to the Group and its stakeholders (i.e., customers,
employees, suppliers and shareholders) and roundtable discussions of
GEC and divisional management who represented the views from the
operating businesses. A broad range of economic, environmental, social
and governance risks were considered and each risk was prioritised
according to its importance to the Group and to its stakeholders
The materiality assessment and matrix can be found on page 60 of
the 2021 Annual Report.
Recommended disclosure
b) Describe the organisation’s
processes for managing climate-
related risks.
Climate-related risks are managed within the Group’s risk
management processes, which are outlined in the Enterprise Risk
Management framework on pages 42 to 46.
Recommended disclosure
c) Describe how processes
for identifying, assessing, and
managing climate-related risks are
integrated into the organisation’s
overall risk management.
The process of identifying and assessing climate-related risks can
be found in Recommended disclosure a) and b) above. Once the
risks are identified and assessed, they are managed through the
processes defined by the Group’s Enterprise Risk Management
framework on an ongoing basis.
Metrics and Targets Disclosures
Recommended disclosure
a) Disclose the metrics used by
the organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process.
Energy efficiency and climate change, including carbon emissions,
are measured and reported on an annual basis in the form of energy
consumption, total carbon emissions in Scope 1 and 2, and carbon
intensity. See page 73 for details.
Recommended disclosure
b) Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3 GHG
emissions, and the related risks.
See page 73 for Scope 1, Scope 2 and Scope 3 emissions related to
the Group’s operations (excluding Scope 3 emissions incurred in the
supply chain).
Recommended disclosure
c) Describe the targets used by the
organisation to manage climate-
related risks and opportunities and
performance against targets.
The Group’s carbon emission reduction target, set in November 2020,
is to reduce the Group’s like-for-like emission intensity by 50% by 2025
from the 2019 levels. Like-for-like is defined as continuing operations
only, excluding the disposed businesses and acquisitions completed
since 1 January 2020. For the calendar year 2021, the Group has
reduced its carbon emission intensity by 33% compared with 2019
levels. Further details can be found on page 73. The Group targets
to increase sales into the four target markets to 85% by FY 2024/25.
Further details can be found on page 24.
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SUSTAINABILITY REPORT
Our People
Keeping our people safe and happy
Health, safety and wellbeing
The Group aims to provide clean, healthy and safe working conditions. In addition to compliance with local
regulations, discoverIE promotes working practices that protect the health, safety and wellbeing of its
employees and other persons who enter its premises. In line with that aim, the Group introduced a new Group
Health & Safety Policy in 2020, to reinforce responsibilities and minimum standards. A summary is as follows:
Responsibility
& Ownership
The Group operates a decentralised management structure. The management of each of
our businesses is best placed to identify and manage the health and safety risks relevant
to their business. They must ensure that those risks are properly identified and managed.
Minimum
Requirements
The Policy sets out certain minimum expectations, which are for individual management
teams to determine how best to achieve within their businesses. The minimum
expectations include the following:
■ Each business to have its own local Health & Safety Policy and communicate to all
concerned
■ Appropriate resources must be in place
■ Responsible individuals to be identified within each business and those individuals to
have suitable training
■ Appropriate documentation to be maintained
■ A “speak up” culture is to be encouraged, with employees positively asked to identify
potential risks or hazards and bring them to the attention of those responsible for
health and safety
■ Appropriate risk assessments to be performed and recommendations actioned
■ Training to be provided
Reporting Operating companies report each month in respect of health and safety issues, including
the number of on-site accidents, near misses and mitigation. Please see the table on
page 74 for a summary of the Group’s lost time incidents.
As at 31 December 2021, the Group had over 120 health & safety representatives across our workforce of c. 5,000
employees, a ratio of 1:38, which is well ahead of guidance and a further improvement on our ratio of 1:47 at
the end of the prior year. The Group conducted over 5,500 hours of health & safety training in the year to 31
December 2021.
Recognising the importance of a structured and objectively verifiable approach to Health & Safety, the Group
has set an ambitious target to ensure that at least 80% of its global workforce is working in operations covered
by an ISO45001 health and safety management system. The bulk of this programme is scheduled for CY2023
and CY2024, with preparation currently underway.
A number of our businesses also have employee assistance and mental health support programmes in place
for staff.
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Equality and Diversity
Among its duties, the Sustainability Committee is
responsible for oversight of the Group’s diversity
and discrimination policies and progress has been
made during the year, with increased diversity within
the Board, Senior Management (being the Group
Executive Committee and its direct reports), and in
the Group’s operational management (see page 74
for details).
The Group is committed to ensuring our people
are treated with respect, are empowered and
appropriately rewarded. Our employment policies
are based on equal opportunities for all, and on
there being no discrimination on grounds of gender,
race/ethnicity, social background, religion, sexual
orientation, family responsibilities (pregnancy),
disabilities, political opinion, age, sensitive medical
condition or trade union membership.
The policies are fair, equitable and consistent with the
skills and abilities of employees and the needs of the
Group’s businesses and aim to ensure that everyone is
accorded equal opportunity for recruitment, training
and promotion. The Group does not tolerate any
sexual, physical or mental harassment.
Our Board Diversity Policy can be found on the
Company website: www.discoverIEplc.com. See page
74 for details of our gender diversity as a group.
Development and training
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
extensive training opportunities are available across
the Group. We provide technical training to staff, as
relevant for their role. This is scheduled and tracked.
Some of the Group’s operating companies have
structured apprenticeship schemes for technical staff.
Employees are actively encouraged to undertake
further learning, such as National Vocational
Qualifications or similar level courses, as well as
continual professional development to maintain any
relevant professional accreditations.
The vast majority of employees receive annual
performance appraisals.
Recruitment and retention
Clear and fair terms of employment and a
competitive remuneration policy are in place. It
is Group policy to communicate with employees
on major matters to encourage them to take an
interest in the affairs of their employing company
and the Group. In addition to the Workforce Advisory
Panel that has been established in accordance with
Provision 5 of the UK Corporate Governance Code,
each operating company is encouraged to maintain
effective employee engagement arrangements,
including keeping employees aware of the financial
and economic factors affecting their employing
company’s performance. Please see pages 75 and 90
for further details of our engagement.
The Group remains supportive of the employment
and advancement of disabled persons. Full
consideration is given to applications for employment
from disabled persons, where the candidate’s
particular aptitudes and abilities are consistent with
meeting adequately the requirements of the job.
Opportunities are available to disabled employees for
training, career development and promotion. Where
existing employees become disabled, it is the Group’s
policy to provide continuing employment, wherever
practicable, in the same or an alternative position
and to provide appropriate training and support to
achieve this aim.
Community Engagement
Our businesses operate within their local
communities and discoverIE encourages active
engagement. Many of our businesses employ local
people from the community in which they operate.
Support for local good causes includes charitable
donations and, in certain businesses, opportunities for
staff to volunteer. Examples of this include the Group’s
continued support of the Community Foundation for
Surrey and, in Minnesota, staff volunteering to pack
donation bags for people in Haiti.
As well as supporting these causes directly, initiatives
such as these motivate staff and increase their sense
of purpose in working for an organisation that is keen
to play a positive role in society.
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The Group produces high-quality, reliable products that bring considerable benefits to
customers and the environment alike.
Raw materials are procured from
responsible sources, in accordance
with the principles in our Supplier
Code of Conduct, Modern Slavery
statement and Conflict Minerals
Policy (all available at www.
discoverIEplc.com). These are
verified through both local checks
and the Group-wide supplier
audit programme summarised
on page 65. In the event of non-
compliance we would engage with
the supplier to seek measures to
rectify the non-compliance.
Wherever possible, recycled raw
materials are used in production
processes (such as for copper and
aluminium, as appropriate).
Our products typically have long
life spans. At the end of their
lives, products are disposed of in
accordance with the applicable
standards.
The quality and safety of our
products is ensured and monitored
through the widespread adoption
of ISO9001 systems. As at 31
December 2021, 95% of the Group’s
products (measured by revenue)
were manufactured under an
ISO9001 accredited system. The
Group receives very few customer
complaints and fault / return rates
are very low.
For a summary of some of the
benefits that our products bring
to the world, including how they
help the global fight against
climate change, and help people
personally, please see our Impact
Report 2021 (available at www.
discoverIEplc.com).
Our Products
Fulfilling our purpose and ensuring
product safety & reliability
SUSTAINABILITY REPORT
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Part 5 – Key Metrics
Carbon Emissions
The Group’s carbon intensity, measured on a like-for-like basis
1
, decreased by 33.12% from the CY2019 base year
to CY2021.
Total Emissions (tonnes) Like-for-like Emissions (tonnes)
Location-based 2019 2020 2021 2019 2020 2021
Scope 1 2,742.01 1,644.70 2,106.43 1,862.73 1,133.58 1,331.35
Scope 2 7,298.55 6,600.54 7,628.40 7,030.06 6,380.30 7,202.17
Total Scope 1 & 2
3
10,040.56 8,245.24 9,734.83 8,892.79 7,513.88 8,533.52
Scope 3
3
590.38 604.08 741.97 572.80 588.28 711.38
Total emissions 10,630.94 8,849.32 10,476.80 9,465.59 8,102.16 9,244.90
Intensity – tCO
2
e / £m revenue (Scope
1 & 2)
21.76 18.25 17.67 29.90 25.26 25.85
Total Emissions (tonnes) Like-for-like Emissions (tonnes)
Market-based 2019 2020 2021 2019 2020 2021
Scope 1 2,742.01 1,644.70 2,106.43 1,862.73 1,133.58 1,331.35
Scope 2 7,895.54 6,732.61 6,087.65 7,527.46 6,450.74 5,640.12
Total Scope 1 & 2
3
10,637.55 8,377.31 8,194.08 9,390.19 7,584.32 6,971.47
Scope 3
3
588.34 590.17 601.65 570.76 575.38 578.34
Total emissions 11,225.89 8,967.48 8,795.73 9,960.95 8,159.70 7,549.81
UK based emissions % 9.36 4.46 6.84 n/a n/a n/a
Intensity – tCO
2
e / £m revenue
(Scope 1 & 2)
23.05 18.54 14.87 31.57 25.50 21.12
Scope 1 & 2 intensity reduction
vs 2019 (%) n/a 19.57% 35.48% n/a 19.23%
2
33.12%
Total Energy Consumption Like-for-like Energy Consumption
2019 2020 2021 2019 2020 2021
Energy consumption (kWh) 26,423,158 22,687,513 27,012,262 21,609,107 19,465,803 21,791,630
Energy intensity
(kWh/£m revenue) 57,252 50,210 49,029 72,653 65,444 66,005
UK based energy consumption not
disclosed
12.70 9.92 n/a n/a n/a
Notes:
1
The “Total Emissions” columns include all companies owned by the Group as at the end of each calendar year. The “Like-for-like Emissions”
columns represent continuing operations only, i.e. excluding Acal BFi and Vertec SA which are treated as discontinued operations. The
like-for-like figures also exclude acquisitions completed since 1 January 2020
2
The reported figure of 19.23% reduction in 2020 was reduced to 6% after adjusting for the effects of Covid to provide an underlying measure.
3
Scope 1 and Scope 2 emissions are generated directly from the Group’s operations (Scope 1) and indirectly through the energy consumed by
the Group (Scope 2). Scope 3 emissions are related to the Group’s operations only and exclude emissions from the Group’s supply chain.
4
Emissions data is reported in accordance with the UK Government’s ‘Environmental Reporting Guidelines: Including Streamlined Energy
and Carbon Reporting Guidance’, and the GHG Protocol Corporate Reporting Standard, using the 2020 emission conversion factors
published by the Department for Environment, Food and Rural Affairs (Defra) and the Department for Business, Energy & Industrial
Strategy (BEIS). The assessment follows the dual reporting approach for assessing Scope 2 emissions from electricity usage. The operational
control approach has been used.
5
All of the data in the above table has been independently assessed by Carbon Footprint Ltd, a leading carbon & energy management
company.
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SUSTAINABILITY REPORT
Health & Safety
Lost-time incident frequency rate (LTIFR) information
FY19 FY20 FY21 FY22
Lost time incidents (LTIs) 10 18 15 19
Average head count 4281 4394 4269 4522
LTIFR 0.13 0.22 0.19 0.23
Notes:
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
LTIFR is the Number of LTI 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).
3
Reported head count includes all full-time and part-time employees and contractors.
4
There were no fatalities among the Group’s employees or contractors during any of the four years stated above.
Diversity
Senior Management Operational Management
2
All employees
FY22 (No.) FY22 (%) FY21 (%) FY22 (No.) FY22 (%) FY21 (%) FY22 (No.) FY22 (%) FY21 (%)
Total 30 66 4,886
Male 24 80 85 42 64 82 2,604 53 50
Female 6 20 15 24 36 18 2,282 47 50
1
Senior Management is the Group Executive Committee and Direct Reports.
2
Operational Management is defined as divisional management at Group level and the most senior managers in the Group’s
operatingbusinesses.
Other ESG KPIs
2021
1
2022
2025
Target
Our Planet
ISO 14001 accreditations
2
61% 63% 80%
Energy audits
3
13% 23% 80%
Company cars (EV/hybrid)
4
19% 26% 50%
Our People
ISO45001 accreditations
5
6% 5% 80%
H&S Representatives
6
1:52 1:38 1:50
Staff Turnover 10% 13% <15%
Our Products
ISO9001 accreditations
7
88% 95% 80%
1
All of the 2021 figures are restated so as to exclude Acal BFi and Vertec SA (now sold).
2
Measured as a % of Group revenues generated by operations with a ISO14001 accreditation.
3
Measured as a % of the number of the Group’s sites that have had an energy audit since 2017.
4
Measured as the % of the Group’s company cars that are electric or hybrid.
5
Measured as the % of the Group’s employees that work in operations covered by an ISO45001 occupational health & safety management
system. While no new accreditations were completed in the year, a number are underway and expect to be completed during 2023.
6
Measured as the proportion of health & safety representatives to the overall number of employees.
7
Measured as a % of Group revenues generated by operations with a ISO9001 accreditation.
Rosalind Kainyah
Chair of Sustainability Committee
14 June 2022
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STAKEHOLDER ENGAGEMENT
Stakeholder engagement
The Group considers it important to engage with our various stakeholder groups in a proactive and
constructive manner and the below provides a summary of the ways in which we do so.
Why it is important to engage Stakeholder key interests Ways we engage
Our people
Employee engagement is critical
to our success. We work to create
a diverse and inclusive workplace
where employees can reach their
full potential. Engaging with our
employees ensures we can retain
and develop the best talent.
■ Health and safety
■ Reward
■ Career opportunities
■ Employee engagement
■ Training and development
■ Wellbeing
■ Reputation
■ Annual performance evaluations
■ Employee surveys
■ Employee meetings
■ Workforce advisory panel
■ Newsletters
■ Employee events
■ Apprenticeship programme
■ Recognition and reward
Our companies
We operate in a decentralised
model where our companies
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
■ Quarterly business reviews
■ Regular site visits
■ Company management forums
■ Support in specialist areas, such as
tax, legal and commercial
■ Sustainability workshops
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
■ 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
■ Customer-specific events
■ Geographical footprint allows us to
meet customers in their locations
■ Satisfaction surveys
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Why it is important to engage Stakeholder key interests Ways we engage
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
■ Joint customer visits
■ Supplier audits
■ Employee training
■ Quarterly business reviews
■ Geographical footprint allows
smaller suppliers to operate
globally
■ Logistics efficiencies
■ Supplier conferences
Shareholders
To understand their requirements
and generate returns and value. We
ensure that we provide fair, balanced
and understandable information
to shareholders and investment
analysts and work to ensure that
they have a strong understanding
of our strategy, performance, culture
and ambition.
■ roh
■ innci prormnc nd
conomic impc
■ ovrnnc nd rnsprnc
■ Opring nd innci
inormion
■ Conidnc in h roup’s
drship
■ Dividnd groh
■ Regular market updates
■ Investor presentations
■ Individual meetings
■ Investor roadshows
■ Corporate website, including
dedicated investor section
■ Shareholder consultations
■ Annual reports
■ Annual General Meetings
■ Capital Markets Days
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
■ Charitable donations and
volunteering
■ Corporate and operating
company websites
■ Local environmental initiatives
STAKEHOLDER ENGAGEMENT
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The Group promotes policies and procedures across
the Group which consider the interests of the Group’s
employees, the need to foster reasonable business
relationships with suppliers, customers and others,
the impact of the Group’s operations on its workforce,
the community and the environment, and the
maintenance of high standards of business conduct.
Our policies and procedures include the following:
■ Anti-bribery and corruption
■ Business ethics
■ Health and safety
■ Whistleblowing
■ Board Diversity Policy
■ Supplier Code of Conduct
■ Conflict Minerals Policy
■ Environmental Policy
■ Human Rights Policy
■ Group Tax Strategy
Day-to-day responsibility for implementation of
these policies (other than the Board Diversity Policy)
is delegated to the management of discoverIE’s
operating companies, under the supervision of the
Group Executive Committee. Where appropriate,
the Group policies and procedures are supported
by the local operating companies’ policies, all within
a framework established by the Board and Group
Executive Committee, intended to ensure that we
operate as a Group to the highest standards.
The Group also has due diligence processes in
place to support the ongoing assessment and
management of risks associated with both existing
and newly acquired companies and the development
of relationships with new suppliers.
These include site visits by both executive and non-
executive management, meetings with customers
and suppliers and, where relevant, asking our
suppliers to confirm compliance with Group policies.
Management are committed to environmental, social
and governance affairs in its actions, and endeavours
to show due respect for human rights and works to
high standards of integrity and ethical propriety.
As an international organisation, discoverIE takes
account of cultural differences between the various
territories in which it operates. discoverIE’s values
are essential to how it operates and to the long-term
success and growth of the Group.
discoverIE believes that who we are and how we
behave matters not only to our employees but the
many other stakeholders who have an interest in
our business. None of the Group’s staff have been
disciplined or dismissed for any matter in relation
to anti-bribery, corruption or whistleblowing in the
current year or any of the last three fiscal years.
Stakeholder engagement remains vital to building
a sustainable business and we interact with many
stakeholders at different levels of the Group.
Engagement is carried out by those most relevant to
the stakeholder group or issue. The table on pages 75
and 76 identifies some of our stakeholders and how
discoverIE engages with them.
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Annual Report and Accounts for the year ended 31 March 2022
NONFINANCIAL
INFORMATIONSTATEMENT
In accordance with sections 414CA and 414CB of the Companies Act 2006, we have
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 60 to 74 and pages 66 to 69 in particular
(Our Planet, including our TCFD Report).
■ Please see climate-related risks and opportunities on pages 46 to 50 (which includes
TCFD scenario analysis) and on page 55.
■ Please see pages 42 to 46 for our general approach to risk management and page
64 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, for which please see our Corporate Governance
Report on pages 86 to 96.
Employee matters ■ Please see pages 70 and 71 (Our People), 75 (Stakeholder engagement – Our people),
80 (Section 172 statement) and 90 (Employee engagement).
Social matters
■ Please see pages 76 and 77.
Human Rights
■ Please see pages 65, 77 and 121.
Anti-bribery and
corruption matters
■ Please see page 65 (Anti-Bribery & Corruption Policy and Whistleblowing Policy).
■ Please also see pages 77, 91, 98 and 100.
Business Model ■ Please see pages 14 and 15 for Our Business Model.
■ Please see pages 16 and 17 for our target markets, pages 18 to 23 for a summary
ofourstrategy and pages 4 to 7 for a summary of the Group.
Policies ■ The following codes, policies and standards can be found at our Group website
(www.discoverieplc.com):
– Whistleblowing Policy
– Anti-bribery 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 54 to 59.
Non-Financial KPIs
■ Our non-financial key performance indicators are set out on pages 73 and 74.
78
Strategic Report
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 (amongst other matters) to:
■ The likely consequences of any decision in the
long term;
■ The interests of the company’s employees;
■ The need to foster the company’s business
relationships with suppliers, customers and others;
■ The impact of the company’s operations on the
community and environment;
■ The desirability of the company maintaining
a reputation for high standards of business
conduct; and
■ The need to act fairly as between members of the
company.
The information below describes how the Directors
have had regard to the matters referred to in
Section 172 of the Act in performing their duties and
constitutes the Board’s Section 172 Statement for the
year ended 31 March 2022. 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 FY 2021/22, the Board:
Established a new Sustainability Committee (with effect from
1 April 2022). This new Committee will have dedicated responsibility for
considering the Group’s response to ESG matters and to sustainability in
general.
Considered a number of acquisition proposals. The Board only approves
such a transaction if it is satisfied, after full consideration, that it meets
the Section 172(1) requirement that it is most likely to promote the
success of the Company for the benefit of its members as a whole,
and it considers the value forecasted to be added to the Group by an
acquisition, over a defined future period. This judgement is recorded.
The Board also considered the disposals of Acal BFi and Vertec SA, each
of which were approved and completed during the year.
Received presentations on specific business areas and, through
ongoing discussion with the business leaders, determined strategic
priorities for a three-year period, and the development of robust
supporting operating plans.
Agreed the Group’s principal risks, considered emerging risks and
received regular risk management and internal control reviews
throughout the year, including specific consideration of risks arising
from the Covid outbreak and Russia/Ukraine conflict.
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.
79
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
SECTION 172 STATEMENT
Section 172 of the Companies
Act 2006 (the “Act”) The discoverIE Board’s response
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 FY 2021/22, the Board:
Received updates on how Covid was affecting staff and the measures
being implemented within businesses to minimise the risk of the
pandemic spreading across the workforce, including working from
home where possible.
Continued to operate a Workforce Advisory Panel, to ensure that the
communications between the Board, Group Executive Committee,
individual operating companies and Group staff were optimised.
Reviewed Board and Senior Management diversity and succession,
remuneration and employment relations and arrangements across
the Group.
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 FY 2021/22:
Noting the continuing pressure that businesses have been under
during the Covid pandemic, the Board ensured that suppliers
continued to be paid on time and that the Group continued to serve
our customers effectively.
The Board regularly considered the marketplaces within which
the Group’s customers operate and the challenges they face, and
opportunities available. This helped shape the way in which resources
were allocated in order to ensure that the Group was well positioned to
meet customer needs.
Community & Environment
(s. 172(d))
Wherever the Group operates, it
forms a part of its local community
and more broadly, seeks to
ensure that it provides a positive
contribution to the environment.
During the year:
The Board continued its focus on environmental, social and governance
matters and, in particular, established a new Sustainability Committee,
further details of which can be found in the Sustainability Report on
pages 60 to 74.
The Board also 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 FY 2021/22:
The Board received regular reports from the Group Risk Manager
designed to strengthen governance and compliance, integration of
new and recent acquisitions into the Group, and the identification and
management of existing and emerging risks.
The Board had updates and training on key areas of law and regulation.
The Board approved the Company’s Modern Slavery Act Statement.
80
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discoverIE Group plc Innovative Electronics
Section 172 of the Companies
Act 2006 (the “Act”) The discoverIE Board’s response
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 order to do this the Board:
Maintains close relations with its main shareholders through regular
dialogue, both after the publication of full-year and half-year results.
Approved value-enhancing acquisitions, CPI in May 2021, Antenova in
August 2021 and Beacon in September 2021.
Receives 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 2022, 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.
The Strategic Report, as set out on pages 02 to 81, has been approved by the Board.
On behalf of the Board
Nick Jefferies Simon Gibbins
Group Chief Executive Group Finance Director
14 June 2022 14 June 2022
81
Strategic Report
Annual Report and Accounts for the year ended 31 March 2022
THE BOARD
Malcolm Diamond MBE
Non-Executive Chairman
Nick Jefferies
Group Chief Executive
Simon Gibbins
Group Finance Director
Tracey Graham
Non-Executive Director
Bruce Thompson
Senior Independent
Director
Clive Watson
Non-Executive Director
Rosalind Kainyah
Non-Executive Director
Greg Davidson
Group General Counsel
&Company Secretary
R
N
S
G
N
S
G
S
A
N
R
S
A
N
R
S
A
N
R
S
A
N
R
S
G
Appointment to
the Board
Chairman since April 2017,
Non-Executive Director
since November 2015
Appointment to
the Board
January 2009
Appointment to
the Board
July 2010
Appointment to
the Board
November 2015
Appointment to
the Board
Senior Independent
Director since March 2019,
Non-Executive Director
since February 2018
Appointment to
the Board
September 2019
Appointment to the
Board
January 2022
Appointment
November 2019
Tenure
6 years
Tenure
13 years
Tenure
11 years
Tenure
6 years
Tenure
4 years
Tenure
2 years
Tenure
6 months
Tenure
N/A
Independent
Yes
Independent
No
Independent
No
Independent
Yes
Independent
Yes
Independent
Yes
Independent
Yes
Independent
No
Previous experience
Malcolm brings
considerable commercial
and international
business experience
to the Board, as well as
City investor knowledge
and expertise. Prior to
joining the Board, he was
Executive Chairman and
Chief Executive of Trifast
plc and, among other
previous appointments,
was Senior Non-Executive
Director of Dechra
Pharmaceuticals Plc and
a Non-Executive Director
of Unicorn AIM VCT plc.
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
DeLa Rue Cash Systems.
Prior to that she was
President of Sequoia
Voting Systems, Customer
Services Director at AXA
Insurance and held senior
positions atHSBC.
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
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 Engineeringplc.
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
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
None.
External appointments
None.
External appointments
None.
External appointments
Non-Executive Director
of Link Scheme Limited,
Senior Independent
Director of Ibstock plc, and
Non-Executive Director of
Close Brothers Group plc.
External appointments
Non-Executive Director
and Chair of Avon
Protection plc.
External appointments
Non-Executive Director
of Breedon Group plc,
Non-Executive Director
of Kier Group plc and
Non-Executive Director
of Trifastplc.
External appointments
Non-Executive Director
of GEM Diamonds Ltd
and Non-Executive
Director of CalBank plc.
External appointments
None.
82
discoverIE Group plc Innovative Electronics
Corporate Governance
Malcolm Diamond MBE
Non-Executive Chairman
Nick Jefferies
Group Chief Executive
Simon Gibbins
Group Finance Director
Tracey Graham
Non-Executive Director
Bruce Thompson
Senior Independent
Director
Clive Watson
Non-Executive Director
Rosalind Kainyah
Non-Executive Director
Greg Davidson
Group General Counsel
&Company Secretary
R
N
S
G
N
S
G
S
A
N
R
S
A
N
R
S
A
N
R
S
A
N
R
S
G
Appointment to
the Board
Chairman since April 2017,
Non-Executive Director
since November 2015
Appointment to
the Board
January 2009
Appointment to
the Board
July 2010
Appointment to
the Board
November 2015
Appointment to
the Board
Senior Independent
Director since March 2019,
Non-Executive Director
since February 2018
Appointment to
the Board
September 2019
Appointment to the
Board
January 2022
Appointment
November 2019
Tenure
6 years
Tenure
13 years
Tenure
11 years
Tenure
6 years
Tenure
4 years
Tenure
2 years
Tenure
6 months
Tenure
N/A
Independent
Yes
Independent
No
Independent
No
Independent
Yes
Independent
Yes
Independent
Yes
Independent
Yes
Independent
No
Previous experience
Malcolm brings
considerable commercial
and international
business experience
to the Board, as well as
City investor knowledge
and expertise. Prior to
joining the Board, he was
Executive Chairman and
Chief Executive of Trifast
plc and, among other
previous appointments,
was Senior Non-Executive
Director of Dechra
Pharmaceuticals Plc and
a Non-Executive Director
of Unicorn AIM VCT plc.
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
DeLa Rue Cash Systems.
Prior to that she was
President of Sequoia
Voting Systems, Customer
Services Director at AXA
Insurance and held senior
positions atHSBC.
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
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 Engineeringplc.
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
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
None.
External appointments
None.
External appointments
None.
External appointments
Non-Executive Director
of Link Scheme Limited,
Senior Independent
Director of Ibstock plc, and
Non-Executive Director of
Close Brothers Group plc.
External appointments
Non-Executive Director
and Chair of Avon
Protection plc.
External appointments
Non-Executive Director
of Breedon Group plc,
Non-Executive Director
of Kier Group plc and
Non-Executive Director
of Trifastplc.
External appointments
Non-Executive Director
of GEM Diamonds Ltd
and Non-Executive
Director of CalBank plc.
External appointments
None.
Committee membership
A
Audit and Risk Committee
G
Group Executive Committee
N
Nomination Committee
R
Remuneration Committee
S
Sustainability Committee Chairman of the Committee
83
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
THE GROUP
EXECUTIVE COMMITTEE
Nick Jefferies
Group Chief Executive
Simon Gibbins
Group Finance Director
Greg Davidson
Group General Counsel
&Company Secretary
For biography see
page 82
For biography see
page 82
For biography see
page 83
Jeremy Morcom
Group Head of Corporate
Development
Martin Pangels
Group Commercial
Director - Magnetics &
Controls Division
Paul Hill
Group Commercial
Director - Sensing &
Connectivity Division
Jeremy was appointed
Group Head of Corporate
Development in March
2017. A physicist by
background, he has over
25 years’ experience in
industrial mergers and
acquisitions, initially in
investment banking and
then in industry, leading
the corporate development
programmes at Spectris
plc and Invensys plc.
Martin joined discoverIE in
July 2010 after working as
an advisor to the business.
Prior to joining discoverIE,
he spent nine years at
Electrocomponents plc,
where he was Regional
General Manager for
Europe, and six years with
Bain & Company as a
strategy consultant.
Paul joined the Group
Executive Committee
in December 2021. Paul
joined from Antenova,
one of the Group’s latest
acquisitions, where he was
Chief Executive Officer.
Having started his career
in electronics engineering,
Paul has worked in
electronic components
and smart card systems,
and held senior operational
and board roles in both
hardware and software
companies.
84
discoverIE Group plc Innovative Electronics
Corporate Governance
85
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
CORPORATE GOVERNANCE REPORT
“ The Group’s
governance
structures aim to
meet the societal
and environmental
challenges of today
whilst positioning
us for continued
growth.”
Malcolm Diamond MBE
Chairman
Chairman’s Governance
Overview
discoverIE is a strong business,
with a clear purpose and set of
values. This is underpinned by a
governance structure that enables
the Group’s long-term objectives
to be met.
The 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 world today.
Malcolm Diamond MBE
14 June 2022
86
discoverIE Group plc Innovative Electronics
Corporate Governance
Compliance with the UK Corporate Governance Code 2018
During the year ended 31 March 2022, the Company complied with the UK Corporate Governance Code 2018
(the “Code”), with the exception of provision 38 (alignment of pensions) which, in accordance with guidance,
the Company will comply with from 1 January 2023.
Section Progress made Further Information
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.
Read more on
pages 88 to 91
Division of
Responsibilities
The respective roles and responsibilities of the Executive and
Non-Executive Directors are clear and consistently applied,
providing for constructive and effective dialogue and clear
accountability.
Read more on
pages 92 and 93
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 2022, an
externally facilitated evaluation of the Board and its Committees
was completed.
Read more on
pages 94 and 95
Audit, Risk and
Internal control
The Board has established clear processes and procedures
to ensure that risks are carefully identified, monitored and
mitigated against and then reported externally in an open and
transparent manner. This helps ensure that the Company’s
financial statements are fair, balanced and understandable.
Effective risk management is critical to achieving our strategy.
Read more on
page 96
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.
Read more on
page 96
87
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
CORPORATE GOVERNANCE REPORT
Board Leadership and Company Purpose
Current composition and changes to the
Boardinthe year
Details of the current members of the Board are set
out on pages 82 and 83.
In the prior year, it was identified that the Board would
benefit from additional ESG experience. As such,
Rosalind Kainyah was appointed to the Board during
the year ended 31 March 2022. Bruce Thompson is
Senior Independent Director, Tracey Graham is Chair
of the Remuneration Committee and Clive Watson is
Chair of the Audit and Risk Committee.
All of the Non-Executive Directors have considerable
expertise in their respective roles.
Section 172 Statement
The Board takes seriously all of its duties, including
those set out in section 172 of the Companies Act
2006. The statement required by section 172(1)
explaining how it has taken those duties into account
can be found on pages 79 to 81.
Stakeholder engagement
We engage proactively with our stakeholder groups.
Read more on pages 75 to 77
Sustainability
Provision 1 of the Code deals with the Company
generating value over the long term in the context
offuture risks and opportunities. This is addressed
in the Sustainability Report and in the Risk
Management section.
Read more on pages 60 to 74
Read more on pages 42 to 59
88
discoverIE Group plc Innovative Electronics
Corporate Governance
Good governance
Following the introduction of the new Code in 2018, the Board reviewed the Group’s governance frameworks
and its purpose, culture and values.
Our Purpose:
To create innovative electronics that help to improve the world and people’s lives.
Values and Culture
Values
■ To operate with the highest ethical standards
and integrity
■ To strive for the highest performance
standards, not accepting of mediocrity
■ To support the protection of the environment
through our products and solutions while
minimising our direct environmental impact
■ To be a responsible employer, with a safe
working environment
■ To respect, empower, engage and develop our
employees in an entrepreneurial environment
■ To add value and be a trusted partner to
customers, suppliers and shareholders
Culture
■ Honest, reliable and trusting
■ Decentralised decision-making close to the
customer
■ Open, constructive communication and
willingness to listen
■ Non-political, non-bureaucratic
■ Performance, target and results driven
Vision:
To be a leading innovator in electronics
internationally.
Mission:
To design and supply innovative customised
electronics that help our customers create ever
better technical solutions around the world.
We aim to achieve this through a motivated,
entrepreneurial and empowered workforce
that adheres to the highest ethical and quality
standards.
In doing so we expect to create value for
shareholders, while being seen as an attractive
andresponsible employer and a trusted partner
forcustomers and suppliers.
Strategy:
To grow our business in customised electronics
by focusing on markets with sustained growth
prospects, driven by an increasing electronic
content and where there is an essential need
forour products.
Strategic Priorities:
This strategy comprises the following priorities:
■ Grow sales well ahead of GDP over the
economic cycle by focusing on structural
growth markets
■ Move up the value chain into higher margin
products
■ Acquire businesses with attractive growth
markets and strong operating margins
■ Further internationalise the business by
developing sales in North America and Asia
■ Generate strong cash flows and sustainable
returns while reducing impact on the
environment
Progress against our objectives is measured
through our key strategic indicators (KSIs) and
key performance indicators (KPIs) . Details are set
out on pages 24 and 25.
89
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
CORPORATE GOVERNANCE REPORT
Employee Engagement
A high-quality workforce is vital to the success of the
Group. There are a range of employee engagement
initiatives in place across the Group and these include
the following:
■ Works Councils and staff representative meetings
■ Employee meetings
■ Quarterly performance updates
■ Staff surveys
■ Social and team-building events
■ Health & wellbeing reviews
■ Workforce Advisory Panel
Since 2009, as part of its annual calendar the
Board visits the Group’s operating sites, meeting
management and employees directly.
In 2017, the Board visited Flux (Copenhagen), in
2018 the Board visited Myrra and Noratel (both in
China) and, in 2019, the Board visited Cursor Controls
(Newark, UK). Lockdown restrictions meant that
Board visits were not possible during 2020 and 2021
but now that they have eased the Board will be
visiting Variohm (in the UK) later this year and will
schedule similar visits for future years.
The Board aims to visit as much of the Group as
possible, visiting facilities in a variety of locations
internationally. The Board gains a deeper
understanding of the business, local complexities,
working conditions, the level of skills and expertise
in each facility, the concerns and aspirations of staff,
and any issues that the leadership or staff may wish to
discuss with the Board.
The purpose of the Workforce Advisory Panel is to
ensure that the “employee voice” is heard, that the
Board is aware of any issues or concerns that staff
may have and to ensure that their views are taken
into account and influence the Board’s decision-
making, where appropriate. This helps the Board to
monitor and assess the culture of the organisation.
A number of operational changes have already
been implemented as a result of the interaction. In
the coming year, it is intended that this will include
increased collaboration between different businesses
within the Group.
Time Allocation, Board and Committee Meetings and Attendance
During the year, attendance by Directors at Board and Committee meetings was as follows:
Committees
Director Board Audit and Risk Remuneration Nomination Overall Attendance %
Malcolm Diamond 9 / 9 3 / 3 5 / 5 2 / 2 100%
Simon Gibbins 9 / 9 – – – 100%
Tracey Graham 9 / 9 3 / 3 5 / 5 2 / 2 100%
Nick Jefferies 9 / 9 – – 2 / 2 100%
Rosalind Kainyah 2 / 2 1 / 1 2 / 2 – 100%
Bruce Thompson 9 / 9 3 / 3 5 / 5 2 / 2 100%
Clive Watson 9 / 9 3 / 3 5 / 5 2 / 2 100%
1
Appointed 1 January 2022
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.
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Board activities
Topic Key activities and discussions in 2021/22 Key priorities in 2022/23
Strategy
■ Oversaw the Group’s continuing response to Covid
■ Reviewed and approved the acquisitions of CPI,
Antenova and Beacon
■ Reviewed and approved the disposals of Acal BFi
and Vertec SA
■ Reviewed key strategic indicators (“KSIs”) and key
performance indicators (“KPIs”)
■ 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
Risk and risk
management
■ Carried out robust assessment of principal and
emerging risks (see pages 54 to 59)
■ Considered the Group’s exposure to climate related
and other ESG risks
■ Conducted a fresh risk assessment of anti-bribery
and corruption risks and updated the Group’s Anti-
Bribery Policy
■ 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
■ Established a new Sustainability Committee
(formally taking effect from 1 April 2022)
■ Continued focus on the composition, balance and
effectiveness of the Board
■ Considered and approved a range of supplier-
focused Group Policies
■ 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
conflict in Ukraine
■ Engaged with institutional shareholders, investors
and other stakeholders throughout the year
■ Reviewed and approved the FY 2020/21
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 externally facilitated evaluation of
the Board, its Committees and individual Directors
■ Focus on increasing diversity
both for the Board and across
the Group more generally
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Corporate Governance
CORPORATE GOVERNANCE REPORT
Division of Responsibilities
discoverIE is led by a strong and experienced
Board with a broad range of skills, experience and
knowledge.
Throughout the year under review, the Board
consisted of Malcolm Diamond as Non-Executive
Chairman, Tracey Graham, Rosalind Kainyah
(appointed 1 January 2022), Bruce Thompson and
Clive Watson as Non-Executive Directors, with Nick
Jefferies as Group Chief Executive and Simon Gibbins
as Group Finance Director.
The composition of the Board is kept under review
by the Nomination Committee on an annual basis.
Following the Group’s entry to the FTSE250 during
the year, it was decided that an additional Non-
Executive Director should be added to the Board,
with the relevant appointee bringing specific ESG
expertise to the Board. Accordingly, Rosalind Kainyah
was recruited and joined the Board on 1 January 2022.
The Nomination Committee considers the size and
composition of the Board to be appropriate to the
Group’s business and strategy but would continue to
benefit from increased diversity.
The Non-Executive Directors constructively challenge
management proposals where appropriate and
carefully monitor management performance and
reporting on an ongoing basis. The Company has
both a Chairman and a Group Chief Executive.
There is a clear division of responsibilities, which has
been agreed by the Board, and a summary of their
respective roles is described 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 Executive Committee.
The Group Chief Executive is assisted in meeting his
responsibilities by the Group Executive Committee.
Role of the Board
■ Setting the long-term objectives and commercial
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 Executive Committee and to
the Audit and Risk, Remuneration, Nomination and
Sustainability Committees.
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Governance framework
The Board
Chaired by Malcolm Diamond
Meets a minimum of six times a year.
Accountable to shareholders for the long-term success of the Group. This is achieved via a clear division
of responsibilities between the Chairman and Group Chief Executive, the setting of strategic aims and
ensuring that the necessary resources are in place.
Nomination Committee
Chaired by Malcolm Diamond
The Nomination Committee regularly reviews
the structure, size and composition of the Board
and its Committees. It identifies and nominates
suitable candidates to be appointed to the
Board (subject to Board approval) and considers
diversity, culture, talent and succession generally.
Further information on the Nomination
Committee is on pages 104 to 105
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 97 to 103
Remuneration Committee
Chaired by Tracey Graham
The Remuneration Committee reviews and
recommends to the Board the framework and
policy for the remuneration of the Chairman,
the Executive Directors and the Group Executive
Committee.
The Committee ensures that the remuneration
policy of the Group reflects the Group’s strategy.
Further information on the Remuneration
Committee is on pages 109 to 132
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 60 to 74
Group Executive Committee
The Group Executive Committee comprises: Nick Jefferies, who is the Chairman of the Committee, together
with Simon Gibbins, Greg Davidson, who is also the Secretary, Jeremy Morcom, Paul Hill and Martin Pangels.
The Committee typically meets 6 – 7 times a year and is responsible for the Group’s day-to-day operations,
for delivering results, and for driving growth and ensuring this is done in a sustainable and ethical manner.
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Corporate Governance
CORPORATE GOVERNANCE REPORT
Composition, succession and evaluation
Current Composition
The biographies of the current members of the Board
are set out on pages 82 and 83.
Work of the Nomination Committee
The Nomination Committee Report, which can be
found on pages 104 to 105, describes the work of the
Nomination Committee in ensuring that the Board
continues to have the right mix of skills, knowledge
and experience, and the process for ensuring that
there is an effective process in place for succession
planning. As noted in last year’s Nomination
Committee Report, the Board considered that steps
should be taken to improve the diversity of the
Board and wider Group. During the year, Rosalind
Kainyah was appointed to the Board and the Board
has adopted a revised Board Diversity Policy which
includes targeting a minimum 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.
Bruce Thompson is the Senior Independent Director
and is available to shareholders should they have
concerns that cannot be resolved through other
channels. Following Malcolm Diamond’s retirement
later in the year on 1 November 2022, Bruce
Thompson will become Chairman and Tracey Graham
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
Gender diversity
Female (2)
29%
Male (5)
71%
Independence
Executive (2)
29%
Non-executive (5)
71%
Board tenure
<1 year (1)
14%
>1 year (6)
86%
Ethnic diversity
Mixed/
multiple ethnic group (1)
14%
White (6)
86%
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Corporate Governance
Evaluation
In accordance with the Code, the Board and each
of its Committees undertakes an evaluation each
financial year. During the year ended 31 March 2022,
the Company engaged Independent Audit Ltd, a
global leader in Board evaluation processes, to lead
an externally-facilitated review of the Board and its
Committees. The Company has no other relationship
with Independent Audit. An externally facilitated
review will be conducted at least every three
years. A summary of the process and findings are
providedbelow.
Step 1
An online questionnaire assessing the
performance of the Board and each of its
Committees was created by the external
facilitator. This was circulated to all members of
the Board and the respective Committees, along
with regular internal and external attendees at
meetings of the Board and each Committee.
Responses to those questionnaires were
submitted online to the external facilitator.
Step 2
Two observers from the external facilitator attended
a meeting of the Board and each Committee.
Step 3
The external facilitator prepared a preliminary
report, summarising both the responses
received to the questionnaires, as well as the
observations made by the attendees at the
Board and Committee meetings. A meeting was
then scheduled with the Chairman and Group
Company Secretary to discuss that report.
Step 4
The external report was then circulated to
all members of the Board and discussed at
the following Board meeting. Actions for
improvement were decided upon.
A summary of the 2021 Board evaluation is
detailed in the box opposite.
Summary of the 2022
Board evaluation
Board composition
The composition of the Board was positively
rated but diversity and succession planning
should be improved.
Board’s expertise
The Board’s understanding of the views and
requirements of major investors and other
stakeholders was rated positively.
Board dynamics
The interaction among and between Board
members was rated highly, with there being a
positive atmosphere and strong relationships,
set in the context of proper and constructive
challenge.
Management of meetings
The management of meetings and the structure
of the Committees, together with Board support,
was generally appropriate, with improvements
possible in relation to the scheduling and
prioritisation of agenda items.
Risk management
The effectiveness with which the Board takes
risk into account when making decisions
was positively rated. Further details on the
Group’s approach to risk are set out in the Risk
Management section of this Annual Report on
pages 42 to 59.
Re-election
In accordance with the Code, all Directors stand for
re-election annually at each AGM.
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Corporate Governance
CORPORATE GOVERNANCE REPORT
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 42 to 46.
■ The Group’s Principal Risks and Uncertainties are
set out on pages 54 to 59.
■ Finally, the Audit & Risk Committee Report on
pages 97 to 103 provides further details as to how
the Committee provides oversight, and supports
the Board, in relation to matters relating to audit,
risk and internal controls generally.
Remuneration
The Board’s approach to remuneration is set out in
the Remuneration Report (see pages 109 to 132). In
its approach to remuneration, during the year ended
31 March 2022, the Company complied fully with
the Code, with the exception of provision 38 of the
Code (alignment of pensions). The Remuneration
Committee has decided that employer pension
contributions for any newly appointed Executive
Directors shall be the same as those for the general
UK workforce and that the contributions for the
current Executive Directors will be aligned with the
general workforce with effect from 1 January 2023.
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
14 June 2022
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Corporate Governance
AUDIT AND RISK COMMITTEE REPORT
“ The Committee’s role
is central in bringing
together the Group’s
risk management
activities and control
environment.”
Clive Watson
Chairman of the Audit Committee
Member Member since
Clive Watson 2019
Tracey Graham 2017
Bruce Thompson 2019
Rosalind Kainyah 2022
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
environment to ensure adherence to policies, the
integrity of financial reporting and the maintenance
of a strong risk-focused culture. Following recent
and upcoming regulatory changes, this includes
consideration and review of the Group’s exposure to
climate-related risks and opportunities. As Chair of
the Audit and Risk Committee, I attend the annual
general meeting and make myself available for
any shareholder questions within the Committee’s
remit. The Committee oversees and reviews the
management of risk, financial results, and the Group
Internal Audit function.
Key responsibilities of the Committee:
■ Consideration of the appropriateness of the
accounting principles, policies and practices
adopted in the Group’s accounts
■ Review of external financial reporting and
associated announcements to ensure they are fair,
balanced and understandable
■ Managing the appointment and remuneration
of the Group’s external auditor, together with an
assessment of the effectiveness and independence
of the audit, including the policy on the award of
non-audit services
■ Initiating and supervising a competitive tender
process for the external audit, as and when required
■ Oversight of Group Internal Audit
■ Ensuring the effectiveness of the Group’s risk
management processes and internal controls
■ Oversight and update of the Group Risk Register
■ Oversight of the Group’s whistleblowing
procedures in conjunction with the Board. If
any issues are reported that require further
investigation, this is typically conducted by the
Group Internal Audit function, which reports back
to the Committee as to their findings and whether
any further action is necessary or desirable. During
the year a small number of reports were made,
with the majority proving to be routine HR matters.
None of the matters reported were found to be a
cause for concern.
■ Monitoring compliance with the UK Corporate
Governance Code
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Corporate Governance
AUDIT AND RISK COMMITTEE REPORT
Meetings
During the year, the Committee met three times
and also met privately with the external auditor. The
Committee comprised the people shown in the table
on page 97, all of whom are Non-Executive Directors.
In addition to the Committee members, the Group
Finance Director, representatives from the external
auditor, the Head of Risk and Internal Audit, the
Group Risk and Internal Audit Manager and the
Group Financial Controller attended 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 received sufficient,
reliable and timely information from management on
significant changes to financial accounting standards
and reporting requirements, regulatory and
governance changes and developments concerning
risk management, fraud prevention and detection,
and cyber security. As Chair of the Committee, I report
to the Board on any significant matters arising from
the activities of the Committee.
The Board is satisfied that the members of the
Committee have both recent and relevant experience
(as set out on pages 82 and 83) and that, therefore,
the Committee as a whole has competence in the
sector in which the Group operates. The Committee
is satisfied that the Group’s executive compensation
arrangements do not prejudice robust controls and
good stewardship.
Committee activities during FY 2021/22 and FY
2022/23 to date
May 2021
■ Reviewed the results of the external audit of the FY
2020/21 Annual Report and Accounts
■ Reviewed the going concern and viability statements
■ Reviewed the FY 2020/21 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
■ Reviewed and approved the internal audit charter
■ Half yearly review of the Group Risk Register,
including agreeing key risks for inclusion in the FY
2020/21 Annual Report and Accounts
November 2021
■ Reviewed half year results and judgemental
accounting areas
■ Reviewed regulatory updates
■ Reviewed a high level approach to address the
requirements for a UK Sarbanes-Oxley style regime,
to strengthen the internal controls over financial
reporting, included within the Department for
Business, Energy & Industrial Strategy’s proposals
Restoring trust in audit and corporate governance
■ Half yearly review of the Group Risk Register
including, in particular, subsidiary risk reporting
■ Reviewed proposed enhancements to the Group’s
Anti-Bribery Programme, including a policy review
and the selection of a learning management
system to facilitate Group-wide online training
■ Reviewed and approved the internal audit charter
January 2022
■ Reviewed the external audit planning report for
FY 2021/22 Annual Report and Accounts (including
review and approval of audit scope and fees)
■ Agreed a risk management and internal audit
programme and resource requirements in detail
for FY 2022/23, and at a high level for the following
three years
May 2022
■ Reviewed the results of the external audit of the FY
2021/22 Annual Report and Accounts
■ Reviewed the going concern and viability
statements
■ Reviewed the FY 2021/22 Annual Report and
Accounts including assessing and confirming
the changes in presentation of the Consolidated
Statement of Profit and Loss (see Note 2 to the
Financial Statements) and that the Report was fair
balanced and understandable
■ Assessed & 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
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■ Half yearly review of the Group Risk Register,
including agreeing key risks for inclusion in the FY
2021/22 Annual Report and Accounts
Standing items
■ Update on internal audits conducted and progress
with management’s implementation of actions
■ Update on alignment of newly acquired businesses
to group policies and procedures
■ Update on risk management projects
■ Update on 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.
Significant matters considered and
decisions taken
As part of the monitoring of the integrity of the
financial statements, the Committee assesses
whether suitable accounting policies have been
adopted and whether management has made
appropriate estimates and judgements. The
viewpoint of the external auditor is sought when
undertaking these assessments.
During the year, the Committee’s review of other significant accounting and financial reporting issues
included a focus on the key areas outlined as follows:
Impairment of
goodwill
A consideration of the carrying value of goodwill and the assumptions underlying the
impairment review. The judgements in relation to goodwill impairment largely relate to
the assumptions underlying the calculations of the recoverable amount of the business
unit being tested for impairment, primarily the achievability of long-term business plans
and macroeconomic assumptions underlying the valuation process. The assumptions
are sensitised to ensure that there is adequate headroom between the recoverable
amount and the carrying value of the business being tested for impairment.
Specifically, this included a review of any businesses not performing in line with
expectations, to assess any potential impact on the carrying value of goodwill.
Accounting for
acquisitions and
disposals
A review of the accounting for the acquisitions of CPI, Antenova and Beacon, and the
disposals of Acal BFi and Vertec SA, during the year, including the appropriateness of
the assumptions used in assessing the fair value of assets and liabilities acquired and
disposed.
Presentation of
discontinued
operations
A review of the appropriateness of presenting the results of the disposed businesses
during the year as discontinued operations.
Change in
operating
segments
Review the appropriateness of the revised reportable operating segments. Following
the exit from its distribution business the Group has been divided into two operating
segments, the Magnetics & Controls division (“M&C”) and the Sensing & Connectivity
division (“S&C”).
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.
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AUDIT AND RISK COMMITTEE REPORT
The recognition
and valuation
of judgemental
provisions
A determination of the appropriateness of the assumptions used in the recognition and
valuation of judgemental provisions which relate mainly to onerous contracts, inventory,
severance indemnities, acquisition earn-out arrangements, long-term incentive plans,
restructuring and integration.
Presentation of
underlying profit
adjustments
A review of the appropriateness of items disclosed as exceptional items and acquisition-
related costs (including amortisation of acquired intangibles and acquisition expenses)
in the Supplementary income statement information and notes to the Group financial
statements, in line with the Group’s stated policy.
Climate related
financial
disclosures
An evaluation of impact of climate change on the Group financial statements in
accordance with the TCFD framework. The process has involved a review of all balance
sheet line items and future cash flows, to identify if any of these items are expected to
be materially impacted in a negative or positive way by weather, legislative, societal or
revenue/cost changes.
Going Concern and
Viability
A review of the paper prepared by management on the Group’s going concern and
viability assessment. This included a review of underlying forecast and 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, appropriately
tested first by the Committee and then reviewed by
the external auditor, and that the disclosures made in
this Annual Report and Accounts were appropriate.
In respect of each significant matter reviewed
by the Committee, the Committee considered
the assumptions made, the reasonableness of
judgements in their context, and how such matters
have been presented. The Committee evaluated and
challenged each of these to ensure that the Annual
Report and Accounts is complete and accurate in all
material respects.
Tax and Treasury
The Committee 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.
Risk management and internal controls
The Board has overall responsibility for the Group’s
risk appetite and risk management. This includes
determining the nature and extent of the risks it is
willing to take in achieving the Group’s strategy and
objectives. The Board is ultimately responsible for the
effectiveness of the risk management strategy and
framework, and internal controls systems.
Oversight of risk management is undertaken by
the Committee, in accordance with its terms of
reference. In order to ensure the effectiveness of the
risk management and internal control systems, the
Committee undertook a number of key activities
during the year, including:
■ Consideration of the risk management activities
during the year (including particular focus on
specific areas of cyber security anti-bribery,
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
■ 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
■ Revew of the annual Audit and Risk Committee
agenda.
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Review of Internal Controls
The Group’s finance department includes a separate
Group Internal Audit function. This is led by the
Head of Risk and Internal Audit who is part of the
Group management team and reports to the Group
Financial Director and, independently, to me, as Chair
of the Committee.
Internal Audit
The Group Internal Audit function’s primary purpose
is to provide risk-based and independent assurance,
advice and insight to help improve all aspects of the
organisation’s governance and system of internal
control, including management of risk. The remit of
the internal audit function covers discoverIE Group
plc and all of its subsidiaries. Resource in the function
increased from two to three staff during FY 2021/22,
plus support from the Group Projects Manager,
external consultants and outsourced providers as
deemed necessary. Further details on the operation of
the Group Internal Audit function can be found in the
Risk Management section on pages 42 to 46.
The Audit and Risk Committee has overall
responsibility for reviewing the effectiveness of the
Group’s internal control framework and the Group
Internal Audit function. As part of this, we ensure that
the Group Internal Audit function has unrestricted
scope, the necessary resources, and appropriate
access to information, to enable it to perform its
function effectively. The suitability of resources
available to the Group Internal Audit function was
considered in the year. The Committee also reviews
regular updates on internal audit work carried out
and the actions taken by management to implement
the recommendations of internal audit reviews.
A programme of internal audit activities has been
completed during the year. The scope of work carried
out by the Group Internal Audit function generally
focuses on the internal financial and operational
controls within each business, particularly in recently
acquired businesses. Further internal audit work is
outsourced to external providers, where appropriate.
While no system of controls can provide absolute
assurance against material misstatement or loss,
the Group’s systems are designed to manage, rather
than eliminate, the risk of failure to achieve business
objectives and provide reasonable, and not absolute,
assurance against material misstatement or loss. As
part of the annual review of the effectiveness of the
Group’s internal controls, the Committee, on behalf
of the Board, has regard to the 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 2021/22 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.
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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 business
■ a comprehensive planning process, which starts
with a strategic plan and culminates in an annual
budget and a long-term plan
■ regular rolling forecasting throughout the year of
orders, sales, profitability, cash flow, working capital
and balance sheets
■ a regular review of actual performance against
budget and forecasts
■ clearly defined procedures for the authorisation of
major new investments and commitments
■ a requirement for each operating company to
maintain a system of internal controls appropriate
to its own local business environment.
The Finance team is responsible for producing
financial information that is timely, accurate and in
accordance with applicable laws and regulations. In
addition, it is responsible for the distribution of financial
information, both internally and externally. Key
financial and operational performance is reported on
a timely basis and measured against both the Board-
approved budget, management’s rolling forecasts
and comparable information from prior periods. A
review of the financial statements is completed by
management to ensure that the financial position
and results of the Group are appropriately reflected. All
financial information published externally by the Group
is approved by the Board.
The above procedures apply to discoverIE Group plc
and all of its subsidiary companies.
External audit
The Committee is responsible for managing the
relationship with the Group’s external auditor on
behalf of the Board including their appointment,
remuneration, independence and performance.
During the year the Committee’s activities in respect
of external audit were as follows:
■ considering the re-appointment of the external
auditor
■ considering and approving the audit
approach and scope of the audit undertaken
by 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.
Audit performance and effectiveness
The performance and effectiveness of the external
auditor and related audit is reviewed annually by the
Committee. This covers the robustness of the audit at
both a Head Office and entity level.
The review covers the following:
■ Robustness of the audit plan and, in particular, the
identification of significant risks
■ Execution of the above plan, including the 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.
AUDIT AND RISK COMMITTEE REPORT
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The Committee concluded that the audit team
had the necessary professionalism, experience
and understanding of the business to carry out
a thorough and robust audit. As a result, the
performance of PwC was considered satisfactory.
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 Company is closely related to
external auditor independence and objectivity. The
Committee recognises that the independence of the
external auditor may risk becoming compromised if it
also acts as the Company’s consultant and adviser to
any material extent.
The Committee accepts that certain work of a non-
audit nature is best undertaken by the external
auditor. The Committee reviewed its policy on the
provision of non-audit services during the year to
ensure that there is no likelihood of any impairment
of external auditor independence or objectivity.
The non-audit services that were provided by the
external auditor during the financial year, the fee
for which totalled £4,139 (0.25% of the audit fee)
(FY2020/21: £8,000: 0.6%), were not considered to
adversely impact the independence of the external
auditor, were in line with Group’s policy on non-audit
services and were permissible under Ethical Standards.
The Company last undertook a tender for external
audit services in 2017 which led to the appointment
of PwC which conducted its first audit of the Group
for the year ended 31 March 2018. There are no
contractual obligations restricting the Committee’s
choice of external auditors. The external auditors are
required to rotate the audit partner at least every
five years and the current lead audit partner, Chris
Hibbs, was assigned to the discoverIE audit in 2021.
The Committee recommended to the Board that it
proposes to shareholders that PwC be re-appointed
at the annual general meeting.
Additional key areas of focus in 2022/23
■ Continue to assess progress against additional
measures being rolled out following cyber
risk review
■ Further assessment of exposure to ESG-related
risks including to climate-related risks and
opportunities
■ Review the accounting for new acquisitions
■ Monitor the development and assess the impact
of the UK’s audit and governance reform proposals
as set out in the BEIS consultation published on 18
March 2021
Terms of reference
The Committee’s terms of reference are available
upon request and are on the Company’s website:
www.discoverIEplc.com.
Clive Watson
Chairman of the Audit and Risk Committee
14 June 2022
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Corporate Governance
NOMINATION COMMITTEE REPORT
“ The Committee
helps ensure that
the Group has strong
and responsible
leadership, aligned
to our purpose
andculture.”
Malcolm Diamond MBE
Chairman of the Nomination
Committee
Member Member since
Malcolm Diamond 2017
Tracey Graham 2018
Nick Jefferies 2009
Rosalind Kainyah 2022
Bruce Thompson 2019
Clive Watson 2021
The Group Company Secretary acts as Secretary to the Committee.
2021/22 key achievements
■ Recommended to the Board
the appointment of Rosalind
Kainyah, which was duly
approved
■ Identification of priorities for
thecoming year
Key areas of focus in 2022/23
■ Increasing diversity across
the Group
■ Appointment of a new
Non-Executive Director given
my planned retirement in
November 2022
■ Continued evaluation of
knowledge and skills
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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, especially in relation to
succession planning and diversity. The Committee’s
recommendations were made after careful
consideration of the independence, performance and
ability to continue to contribute to the Board of the
relevant people, in the light of the knowledge, skills,
commitment and experience required.
Composition
The majority of the Committee members are
independent Non-Executive Directors. During the
year under review, the Committee was chaired by me,
with Tracey Graham, Bruce Thompson, Clive Watson,
Rosalind Kainyah (with effect from January 2022) 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 and
Remuneration Committees.
■ To review, as part of the annual assessment
exercise, the time commitment of the Non-
Executive Directors to the role and to their external
appointments.
Appointment of Directors
The Committee’s principal role is to make
recommendations to the Board on suitable
candidates to fill Board vacancies, as and when
they arise, or when other changes or appointments
may be desirable. In managing this process, the
Committee takes into account the Board’s existing
balance of skills, knowledge and experience and has
due regard for diversity. Unless the appointment is as
an Executive Director, for which a suitable candidate
is available from within the Group, the Committee
will create a short-list of suitable candidates for
final selection by the Committee. References from
appropriate third parties will then be taken on the
prospective director. Candidates meet all members of
the Committee, which then makes recommendations
to the Board. Adopted practice is for all members of
the Board to meet with the relevant candidate before
an appointment is made.
As noted earlier in this Annual Report and Accounts,
Bruce Thompson will succeed me as Chairman of the
Board following my retirement on 1 November 2022.
Bruce’s appointment as Chairman followed a rigorous
and detailed process conducted by the Committee
and assisted by Russell Reynolds, a leading advisory
firm that specialises in the appointment of Board
members for listed companies. 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 appointment of a successor to
the chairmanship. Bruce Thompson absented himself
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 74 of the Sustainability Report for a
summary of the Group’s current gender diversity and
page 94 of the Corporate Governance Report for the
current Board composition.
Terms of reference
The Committee’s terms of reference are available
upon request and are on the Company’s website:
www.discoverIEplc.com
Malcolm Diamond MBE
Chairman of the Nomination Committee
14 June 2022
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Corporate Governance
DIRECTORS’ REPORT
The Directors’ report for the financial year ended 31 March 2022 is set out below.
Certain matters required to be included in the Directors’ report are included in the
Strategic report, as the Board considers them to be of strategic importance, as follows:
Disclosure Location
Future business developments Throughout the Strategic Report (page 02 to 81)
Risk management Risk management and principal risks and uncertainties (pages 42 to 59)
Employee engagement Please see pages 75 and 90.
Greenhouse gas emissions Sustainability Report (pages 60 to 74)
Stakeholder engagement Please see pages 75 to 76
The Group’s policies and processes for managing
its capital, its financial risk management objectives,
its financial instruments and hedging activities and
exposure to credit and liquidity risk are disclosed in
note 27 to the Group financial statements on pages
195 to 197.
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 2022 and are shown on pages 146 to 212.
The key strategic and performance indicators of the
business are set out in the Strategic report on pages
02 to 81.
The Directors recommend a final dividend of 7.45p
per share (2020/21: 7.0p) which, together with the
interim dividend of 3.35p per share (2020/21: 3.15p),
makes a total dividend for the year of 10.8p per
ordinary share (2020/21: 10.15p). Subject to approval
by shareholders of the recommended final dividend,
the dividend award to shareholders for 2021/22
will total £10.3m (2020/21: £9.0m). If approved, the
Company will pay the final dividend on 2 August 2022
to shareholders on the register of members at 24
June 2022.
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 82 and 83 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 109 to 132.
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.
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.
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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 2022 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 2022, the Company’s issued share
capital consisted of 95,456,109 ordinary shares of 5p
each (no shares are held in treasury).
Details of movements in the Company’s issued share
capital can be found on page 199 in note 30 to the
Group financial statements.
Restrictions on transfer of securities in
theCompany
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 2022, 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:
abrdn 11,893,559 12.46%
Blackrock 6,715,225 7.03%
Kempen Capital
Management NV 5,040,000 5.28%
Impax Asset Management 4,318,765 4.52%
Montanaro Asset Mgt 3,945,000 4.13%
Legal & General
InvestmentMgt 3,407,972 3.57%
Wasatch Global Investors 3,149,817 3.30%
Swedbank Robur 3,073,873 3.22%
As at 10 June 2022, the Company had been notified
of, or was aware of, the following shareholders
holding 3% or more of the issued share capital of
theCompany:
Shareholder
Holdings
of ordinary
shares (5p)
% of issued
share capital
abrdn 12,082,475 12.66%
Blackrock 6,715,225 7.03%
Kempen Capital
Management NV 5,070,000 5.31%
Impax Asset Management 4,367,430 4.58%
Montanaro Asset Mgt 3,795,000 3.98%
Legal & General
InvestmentMgt 3,412,037 3.57%
Wasatch Global Investors 3,402,293 3.56%
Swedbank Robur 3,073,873 3.22%
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Corporate Governance
DIRECTORS’ REPORT
Authority to purchase own shares
At the annual general meeting held on 29 July 2021,
shareholders authorised the Company to purchase
in the market up to 10% of its issued share capital
(8,945,591 ordinary shares) and, as at 31 March 2022,
all of this authority remained in force and unused.
This authority is renewable annually, and a special
resolution will be proposed at the 2022 annual
general meeting to renew it. The Directors will only
purchase the Company’s shares in the market if
they believe it is in the best interest of shareholders
generally.
Change of control
Details of the Group’s borrowing facilities are provided
in the Finance review section of the Strategic report
on page 40. 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
2020/21: nil).
Auditor and disclosure of information to auditor
PricewaterhouseCoopers LLP have indicated their
willingness to continue in office and a resolution to
appoint them will be proposed at the annual general
meeting. In the case of each Director in office as at
the date of this report:
■ so far as the Director is aware, there is no relevant
audit information of which the Group and
Company’s auditors are unaware; and
■ they have taken all the steps that they ought
to have taken as a Director in order to make
themselves aware of any relevant audit information
and to establish that the Group and Company’s
auditors are aware of that information.
Annual General Meeting
The Notice of the annual general meeting to be
held at 11.30am on Thursday 28 July 2022 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 52 and 53, 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
14 June 2022
2 Chancellor Court,
Occam Road,
Surrey Research Park,
Guildford,
Surrey GU2 7AH
Registered number: 02008246
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discoverIE Group plc Innovative Electronics
Corporate Governance
DIRECTORS’ REMUNERATION REPORT
“ This has been an
excellent year for
performance and
strategic progress.”
Tracey Graham
Chair of the Remuneration
Committee
Member Member since
Tracey Graham (Chair) 2016
Malcolm Diamond 2017
Bruce Thompson 2018
Clive Watson 2020
Rosalind Kainyah 2022
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.
FY 2021/22 key achievements
■ Received strong shareholder approval for our
Directors’ Remuneration Policy at the 2021 annual
general meeting following consultation with the
Company’s largest shareholders
■ Granting of LTIP awards under the new Remuneration
Policy with the revised performance conditions
■ Approval of bonus outcomes for 2020/21
performance, including management’s proposed
reductions to formulaic outcomes
■ Considered the implications of the disposal of the
distribution business for incentives
■ Setting of appropriate incentive measures
and targets for Executive Directors and senior
management, including the introduction of a specific
ESG component in the annual bonus for 2022/23
■ A review of other remuneration-related items within
the UK Corporate Governance Code and the latest
views from investors and proxy voting agencies
■ Oversight of wider workforce remuneration, including
an increase to UK pension contribution rates
■ Consideration of gender pay gap data
Key areas of focus in FY 2022/23
■ Review the competitiveness of remuneration for
Executive Directors and senior management and
its alignment with strategy
■ Review of pay across the discoverIE workforce
■ Set incentive targets and determine incentive
outcomes for Executive Directors and senior
management
■ Keeping abreast of corporate governance and
regulatory developments
■ Monitoring of performance against all personal
objectives, including in particular the sustainability/
ESG measures included in the objectives for
the Executive Directors and Group Executive
Committee
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
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 2022. This report comprises:
■ This Annual Statement which summarises the work
of the Remuneration Committee (the ‘Committee’)
in FY 2021/22.
■ The Directors’ Remuneration Policy (the ‘Policy’)
which sets the parameters for how our Directors
are remunerated and which took effect from
29July 2021, the date of its approval at our 2021
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 2022 and (ii) how we
intend to implement the new Policy in FY 2022/23.
At the 2021 AGM, we received clear support for our
Directors’ Remuneration Policy and I am grateful for
the feedback received as part of the review process.
During the last year, the focus shifted to implementing
the policy and ensuring there is appropriate alignment
between pay outcomes and performance.
Business performance and resulting remuneration
outcomes for the year ending 31 March 2022
The Group has performed exceptionally well this year,
with very strong financial performance, completion of
the Group’s long-term strategy to exit the distribution
business through the disposals of both Acal BFi and
Vertec SA, and good progress against ESG initiatives,
including a 33% reduction in like-for-like carbon
emissions intensity and completion of the first phase
of solar panel installations in Sri Lanka. The Group also
completed three acquisitions, further expanding its
footprint outside Europe.
This has been a significant year of strategic progress
and I would like to thank all of our staff globally for
their tremendous efforts in what has been a very
successful year for the Group.
Annual bonus for FY 2021/22
The annual bonus for both Executive Directors for FY
2021/22 was based on operating profit targets (60%),
simplified working capital (24%) and non-financial
objectives (16%).
Based on the strong performance as set out above,
actual underlying operating profit of £41.4m was
above the maximum target, performance against
the Simplified Working Capital target exceeded
maximum and non-financial objectives were
determined to have been met in full. This results in an
overall bonus payout of 100% of maximum for both
directors.
The Remuneration Committee has considered
carefully whether any adjustment is required to the
formulaic outcomes to reflect the underlying financial
and non-financial performance of the business. By way
of context, the Executive Directors voluntarily reduced
their bonus outcomes for performance in FY 2020/21
to reflect the impact of the pandemic on the business.
However, this year, the Committee believes that the
bonus outcome is a fair reflection of the very strong
performance of the business during the year and its
strategic progress.
In line with the remuneration policy, 20% of the bonus
will be delivered in deferred share awards. Further
details of the bonus for FY 2021/22 are set out in the
Annual Report on Remuneration.
2019 long term incentives vesting
The Group Chief Executive and Group Finance
Director received awards under the LTIP on 30 April
2019 that were based on absolute TSR, relative TSR
and EPS performance criteria.
■ Relative TSR – discoverIE delivered a TSR of 104.5%
over the three-year period to 31 March 2022 which
ranked in the top 10% of the TSR peer group (for
the second consecutive three-year cycle), thereby
achieving this element in full.
■ Absolute TSR – discoverIE’s TSR of 104.5% over the
period was above CPI + 30%, thereby achieving this
element in full.
■ EPS – EPS grew by 44%, which was in excess of the
maximum target. Acal BFi was included in both
the base year and in the final year to the date of
disposal (11 months).
This performance has resulted in all of the LTIP awards
granted in April 2019 vesting in full. The Committee
believes this vesting outcome is warranted given the
exceptional share price and earnings growth over
the three-year period. Therefore, no discretion has
been applied to adjust the formulaic outcomes. These
shares will be subject to a two-year holding period
before they become exercisable.
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Application of policy in 2023
■ Base salary: The Remuneration Committee has
reviewed base salary levels across the business
in the context of the current high inflationary
environment. The Group Chief Executive’s base
salary will be increased by 4% in line with increases
of c.4%-5% across the UK employee group. The
Group Finance Director’s base salary will be
increased by 2.5% and his pension will increase
by 1.5% in line with the general UK workforce
contribution rate. Base salary increases in the
rest of the business will be higher, with up to 15%
increases in some territories.
■ Pension: As outlined in last year’s report, the Group
Chief Executive’s pension contribution will reduce
from 15% of salary to the UK workforce rate from 1
January 2023.
■ 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.
The bonus measures and weightings for financial
measures will remain unchanged for FY 2022/23
with 60% based on operating profit targets, and 24%
on Simplified Working Capital. The non-financial
objectives (16%) element will be split into two equal
parts with 8% based on strategic objectives and the
other 8% on ESG-related objectives.
■ LTIP: In line with our policy, 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 equally
between relative TSR and EPS growth. The EPS
growth targets have been increased for the
second consecutive year so that the threshold
and maximum targets are 5%p.a. and 13%p.a.
respectively. Vesting of the EPS element shall
also be subject to an underpin requiring the
Committee to be satisfied with the Group’s annual
rate of return on capital employed (“ROCE”) over
the measurement period. Further details of the
approach for 2022 can be found in the Annual
Report on Remuneration.
The Remuneration Committee considered the
appropriate LTIP grant level for FY 2022/23 and
believes granting at 175% of salary and 160% of salary
for the Group Chief Executive and Group Finance
Director is appropriate, having taken into account the
following factors:
i. The EPS targets have been made tougher
compared with previous grants and full vesting will
only occur if EPS grows by more than 44% over the
three-year period. Furthermore, as set out in our
March 2022 investor presentation, our mid-range
targets attached to the delivery of our Key Strategic
Indicators have increased, supporting our ambition
of significantly growing operating margin and
earnings.
ii. The grant level is in line with and, in the case
of the Group Finance Director, below the limit
approved by shareholders at the 2021 annual
general meeting. In the first year of the new Policy,
the Committee granted at below the approved
policy levels, demonstrating a prudent approach to
adopting the higher shareholder approved limit.
iii. The proposed grant levels for FY 2022/23 reflect the
strong performance of the business and executives
over the last year as set out in the business
performance section above and are in line with
those in businesses of a similar size to discoverIE.
The Remuneration Committee will consider the share
price at the time of grant when finalising award levels,
expected to be in June 2022. Whilst the Committee
recognises that the prevailing share price at the time
of writing is lower than the share price at the time
of last year’s award, when considered over a longer
period, the prevailing price is significantly higher than
the prices used to determine LTIP levels in the four
prior years, 2017 to 2020.
There will be a single advisory vote at the AGM on
28 July 2022 to approve this directors’ remuneration
report. I hope you find the information in the report
clear and are able to support this resolution. If you
have any questions on our policy or on this report
then please contact me via the Company Secretary.
Tracey Graham
Chair of the Remuneration Committee
14 June 2022
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
Remuneration at a glance
When determining the Remuneration Policy,
the Committee has ensured that the Directors’
Remuneration Policy and practices are consistent
with the six factors set out in Provision 40 of the
Corporate Governance Code:
CLARITY
Our Directors’ Remuneration Policy is well understood
by our senior executive team and the Company
invited its principal shareholders and shareholder
representative groups to consult on the updated
Remuneration Policy and received good feedback. This
report sets out the remuneration arrangements for the
Executive Directors in a clear and transparent way.
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 2022 are
also shown.
Corporate performance for the year
Revenue
£379.2m
Underlying Operating Profit
£41.4m
Underlying EPS
29.4p
Remuneration outcomes for the Executive
Directors for the year ended 31 March 2022
Nick
Jefferies
£000
Simon
Gibbins
£000
Salary FY 2021/22 490 326
Bonus (£k and as
% of salary) 735 150% 407 125%
Taxable benefits 11 12
Pension benefits/
allowance 74 21
Value of LTIP
vesting 1,270 703
Single figure
of total
remuneration 2,580 1,469
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The annual bonus for the year ending 31 March 2022
was based on the achievement against financial
and non-financial measures. The bonus outcomes
for the year were 150% of salary for the Group Chief
Executive and 125% for the Group Finance Director. In
accordance with the Remuneration Policy, 20% of the
bonus will be in the form of deferred shares.
LTIP awards were granted to both executive directors
on 29 April 2019. These awards were based on absolute
and relative TSR conditions, and EPS performance,
measured for the three-year period ending 31 March
2022. The Company’s TSR performance, being in the
top 15% of the TSR peer group, and with an Absolute
TSR growth of 104.5%, each over that three-year period,
has resulted in full vesting of those elements of award.
Total EPS growth for the period FY 2018/19 to FY 2021/22
was 12.9% CAGR, which resulted in full vesting of that
element (see page 125 for further details). As a result, all
of the 2019 LTIP award vested. The performance of the
Acal BFi business was included for both the base year
(in full) and for the final year (for the 11 months until
disposal).
The values of these awards at the time of vesting are
shown in the above table. Awards are subject to a
two-year holding period.
DIRECTORS’ REMUNERATION POLICY
This part of the Directors’ Remuneration Report sets
out the remuneration policy which was approved
at the annual general meeting on 29 July 2021 and
which took 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 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 primary aims of the policy are to deliver
a remuneration package that is:
■ Aligned with discoverIE ’s strategy at this stage
of its development and supports the business’s
medium and long-term plans
■ Consistent with practice internally and externally
■ Competitive and fair compared against companies
of our size and geographical complexity
■ Focused on delivering long-term sustainable returns
■ Compliant with shareholders’ latest views on
executive pay and the requirements of the 2018 UK
Corporate Governance Code
■ Able to attract and retain high calibre Executive
Directors and senior managers in a challenging
and competitive business environment
■ Reduces complexity, delivering an appropriate
balance between fixed and variable pay.
When implementing the policy, the Committee:
■ Takes account of pay and employment conditions
elsewhere in the Group
■ Ensures that incentive arrangements encourage
responsible behaviour in all aspects of the
Company’s business, including financial, social,
environmental and governance aspects; do
not encourage excessive risk-taking; and are
compatible with the Company’s risk policies and
procedures. The Committee has the discretion to
take these factors into account when adjudicating
bonus and LTIP outcomes.
■ Enters into open dialogue and consults with key
shareholders, when looking to make material
changes to the remuneration policy.
■ Considers market practice in terms of the structure
and levels of executive remuneration.
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Remuneration policy table
Element, purpose
and link to strategy
Operation Maximum
opportunity
Performance
targets
Base salary 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.
To attract and retain
quality staff.
Benefits Directors, along with other senior
UK executives, may receive certain
benefits such as a car allowance,
life assurance and critical illness
cover, and family medical
insurance.
Any reasonable business-related
expense (and any tax thereon) can
be reimbursed if determined to
be a taxable benefit.
Executive Directors will be eligible
to participate in any all-employee
share plan operated by the
Company, on the same terms as
other eligible employees.
For external and internal
appointments or relocations,
the Company may pay certain
relocation and/or incidental
expenses as appropriate.
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
To help retain
employees and
remain competitive
in the marketplace.
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Element, purpose
and link to strategy
Operation Maximum
opportunity
Performance
targets
Pension The Company operates a defined
contribution pension scheme.
Executive Directors may take a
cash allowance in lieu of pension
contributions
The Group Chief Executive
currently receives a Company
contribution of 15% of base
salary which will reduce to the
contribution rate applying to
the majority of the UK workforce
rate in place at the time (8% of
salary) from 1 January 2023.
For the Group Finance Director,
and any new Executive
Directors appointed to the
Board, the pension contribution
will be in line with the majority
of the UK workforce.
Not applicable
To facilitate long-
term savings
provisions.
Annual bonus Bonus is based on performance
targets determined and reviewed
by the Committee and are
selected to be relevant for the year
in question.
Any payment is discretionary and
the bonus payable is determined
by the Committee after the
financial year-end, based on
performance against these targets.
Financial objectives are updated
to reflect acquisitions, disposals
and currency movements during
the year.
20% of any bonus earned is
deferred into discoverIE shares
for a period of three years. Where
applicable, dividends may accrue
on deferred bonus shares.
Malus and clawback provisions
apply to cash and deferred
elements of the bonus, applying in
the event of material misstatement
of the Company’s financial results,
an error of calculation or in the
event of serious misconduct,
material reputational damage or
corporate failure.
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
and Simplified Working Capital.
Non-financial measures
may include strategic
measures directly linked to
theCompany’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.
To reward the
achievement of
annual financial and
strategic business
targets.
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DIRECTORS’ REMUNERATION REPORT
Element, purpose
and link to strategy
Operation Maximum
opportunity
Performance
targets
Long Term
Incentive Plan
Awards of conditional shares
or nil-cost options are typically
granted annually, which vest
after three years dependent on
the achievement of performance
conditions and continued service.
Vested awards are subject to a
two-year post vesting holding
period (net of tax, if applicable) in
respect of their vested awards.
Dividend equivalents may be paid
in respect of awards to the extent
they vest by reference to dividends
declared during the award’s
vesting period and holding period.
Malus and clawback may apply to
vested and unvested LTIP awards in
the event of material misstatement
of the Company’s financial results,
an error of calculation or in the
event of serious misconduct,
material reputational damage or
corporate failure.
The Company’s share schemes are
funded through a combination
of shares purchased in the
market and newly issued shares,
as appropriate. The Company
monitors the number of shares
issued under the schemes and
their impact on dilution limits.
The maximum award in respect
of any one financial year is an
award over shares of market
value at grant of 175% of salary.
The Committee may increase
the grant size of an LTIP
award on grant (subject to
the maximum award limit) if
the award terms include that
participants bear the cost of the
Company’s liability to employer’s
National Insurance arising on
the settlement of their awards.
The increased award size
ensures that the participants
are in a neutral position on an
after-tax basis, assuming no
change in tax rates.
The Company is committed
to remaining within the
Investment Association’s 10%
dilution limit.
Performance metrics reflect
the Group’s strategic goals and
milestones.
The performance conditions
may include, and are not
limited to, relative or absolute
TSR, earnings per share growth,
return based measures,
strategic measures and ESG-
related objectives.
The Committee retains
discretion to set alternative
weightings or performance
measures for awards granted
over the life of the policy.
Threshold performance will
normally result in no more than
25% of the award vesting.
The Committee retains
discretion to adjust vesting
levels taking into account
such factors as it considers
relevant, including, but
not limited to, the overall
performance of the Company
or the relevant Participant
who holds the Award.
To motivate
Executives to deliver
Shareholder value
over the longer
term.
Shareholding
guidelines
Executive Directors are expected
to accumulate the required
shareholding requirement.
Shares held which are no
longer subject to performance
conditions count towards the
requirement (on a net of tax
basis, if applicable).
Executive Directors are required
to retain at least 50% of their net
of tax vested share awards until
the in-employment shareholding
guideline is met.
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 the date
of approval by shareholders
of this policy. This excludes
any shares vesting from share
plan awards made before such
approval and shares purchased
with own funds.
Not applicable.
To further align
the interests
of Executives
with those of
Shareholders.
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Notes to the remuneration policy table
Performance conditions and target setting
Each year, the Committee will determine the
weightings, measures and targets as well as timing of
grants and payments for the annual bonus and LTIP
plans within the approved remuneration policy and
relevant plan rules (or documents). The Committee
considers a number of factors which assist in forming
a view. These include, but are not limited to, the
strategic priorities for the Company over the short to
long term, shareholder feedback, the risk profile of
the business and the macroeconomic climate.
The current Annual Bonus Scheme is measured
against a balance of profitability, cash management
and the delivery of key strategic areas of importance
for the business. The profitability metric used for FY
2022/23 is adjusted underlying operating profit and
the cash management metric is Simplified Working
Capital.
The LTIP measures currently used are EPS growth
targets and relative TSR. These measures were
identified as those most relevant to driving
sustainable bottom-line business performance, as
well as providing value for shareholders.
Targets are set against the annual and long-term
plans, taking into account analysts’ forecasts, the
Company’s strategic plans, prior year performance,
estimated vesting levels and the affordability of
pay arrangements. Targets are set to provide an
appropriate balance of risk and reward to ensure that,
while being motivational for participants, maximum
payments are only made for exceptional performance.
Discretions and judgements
The Committee will operate the annual bonus plan
and long-term incentive plan according to their
respective rules and ancillary documents. Consistent
with market practice, the Committee has discretion
in a number of respects in relation to the operation of
each plan. Discretions include:
■ who participates in the plan;
■ determining the timing of grants of awards and/or
payments;
■ determining the quantum of an award and/or
payment;
■ determining the extent of vesting;
■ how to deal with a change of control or
restructuring of the Group;
■ whether an Executive Director or a senior manager
is a good/bad leaver for incentive plan purposes and
whether the proportion of awards that vest do so at
the time of leaving or at the normal vesting date(s);
■ how and whether an award may be adjusted in
certain circumstances (e.g., for a rights issue, a
corporate restructuring or for special dividends);
■ what the weighting, measures and targets should
be for the annual bonus plan and LTIP plans from
year to year; and
■ the Committee also retains the ability within the
policy to vary and/or adjust targets and/or set
different measures or weightings for the annual
bonus plan and LTIP plans, if events occur that
cause it to consider it appropriate to do so, and, in
the case of the LTIP, any amended performance
conditions are not materially less challenging than
the original conditions would have been but for the
events in question.
Any discretion exercised by the Committee in the
adjustment of performance conditions will be fully
explained to shareholders in the relevant report. If the
discretion is material and upwards, the Committee
will consult with major shareholders in advance.
All historical awards that have been granted before
the date this policy came into effect and still remain
outstanding (including those detailed on page 127
of the Annual Report on Remuneration) and remain
eligible to vest based on their original award terms.
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.
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DIRECTORS’ REMUNERATION REPORT
Element Recruitment policy
Base salary New Executive Director appointments will be offered a salary in line with the existing remuneration
policy. The Committee will take into account a number of factors, including the current pay
for other Executive Directors, external market forces, the expertise, skills and experience of the
individual and current level of pay.
Where the Committee has set the salary of a new appointment at a discount to the market level
initially until proven, they may receive an uplift or a series of planned increases to bring the salary to
the appropriate market position over time.
Benefits Benefits provision would be in line with normal policy.
The Committee may agree that the Company will meet appropriate relocation costs and/or
incidental expenses as appropriate.
Pension Pension contribution (or a cash allowance in lieu of contribution) provision will be no more than the
general workforce contribution rate in place at the time.
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.
Depending on the timing of the appointment, the Committee may deem it appropriate to set
different annual bonus performance conditions for the first performance year of appointment.
Long Term
Incentive Plan
An LTIP award may be granted upon appointment but not in excess of the limits set out in the policy.
An LTIP award may be made shortly following an appointment (assuming the Company is legally
permitted to do so).
Compensation
for forfeited
remuneration
The approach in respect of compensation for forfeited remuneration in respect of a previous
employer will be considered on a case-by-case basis taking into account all relevant factors, such as
performance achieved or likely to be achieved, the proportion of the performance period remaining
and the form of the award.
The Committee retains the ability to make use of the relevant Listing Rule to facilitate the “buy-out”.
Any “buy-out” awards would have a fair value no higher than the remuneration forfeited.
In the case of an internal appointment, any variable pay element awarded in respect of the prior role would
be allowed to pay out according to its terms, adjusted as relevant to take into account the appointment.
Chairman and non-
executive directors
For the appointment of a new Chairman or Non-Executive Director, the fee arrangement would
be set in accordance with the approved Remuneration Policy.
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Corporate Governance
Notice period and payment for loss of office
It is the Company’s policy that Executive Directors should have service contracts incorporating a maximum notice
period of one year. However, it may be necessary occasionally to offer longer initial notice periods to new Directors.
Under the terms of their service contracts, any termination payments are not predetermined but are determined
in accordance with the Director’s contractual rights, taking account of the circumstances and the Director’s duty
to mitigate loss. The Company’s objective is to manage its exposure to the risk of a potential termination payment.
Non-Executive Directors have letters of appointment for a term of three years, subject to re-appointment
by shareholders at each annual general meeting. In line with the UK Corporate Governance Code, they are
generally renewed for no more than nine years in aggregate. Non-Executive Directors are not eligible for
payment on termination, other than payment to the end of their notice periods.
Name Role
Date of original
appointment Expiry of current term
Malcolm Diamond Chairman 1 November 2015 31 October 2024
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
Bruce Thompson Non-Executive Director 26 February 2018 25 February 2024
Clive Watson Non-Executive Director 2 September 2019 1 September 2022
Other than their service contracts, no contract of
significance, to which any member of the discoverIE
Group is a party and in which a Director is or was
materially interested, subsisted at the end of, or
during, the year.
Termination payments for Executive Directors
On termination, the Company will normally make a
payment in lieu of notice (“PILON”) which is equal to
the aggregate of the base salary and cash equivalent
of other benefits for the applicable notice period.
The Company may pay the PILON either as a lump
sum or in equal monthly instalments, from the date
on which the employment terminates until the end
of the relevant period. If alternative employment is
commenced, for each month that instalments of the
PILON remain payable, the monthly amount paid
may be reduced by the amount received from such
alternative employment.
If identified as a ‘good leaver’ for the purposes of the
bonus plan, the bonus payout will be pro-rated based
on the Committee’s reasonable assessment of the
achievement of the performance measures in respect
of the relevant financial year.
The treatment of LTIP awards on termination will
be in accordance with the plan rules and, where
appropriate, at the discretion of the Committee.
If identified as a ‘good leaver’ under the LTIPs and
share option schemes’ rules, (including those good
leavers identified as being at the discretion of the
Committee), outstanding awards may be exercised,
normally pro rata for service up until the date of leaving
and subject to the outcome of the performance
conditions, either on the normal release or on such
earlier date as the Committee may determine.
The Committee may also agree to make payments in
respect of statutory employment claims, reasonable
legal fees, outplacement and accrued holiday or
sick leave.
Change of control or restructuring
On a change of control, all LTIP awards will be
released, subject to performance requirements and
will ordinarily be prorated according to completion of
the vesting period. In line with market practice and
the Plan rules, the final treatment of any awards is
subject to the discretion of the Committee.
There are no enhanced bonus provisions on a change
of control.
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DIRECTORS’ REMUNERATION REPORT
Comparison with remuneration policy for
otheremployees
The Company’s approach to salary reviews
is consistent throughout the Company with
consideration given to responsibility, experience,
performance, salary levels in comparable
organisations and the Company’s ability to pay.
Differing bonus arrangements (which are normally
discretionary) operate elsewhere in the organisation
and, subject to role, employees are entitled to benefits
such as healthcare, car allowance (or Company-
funded vehicle), life assurance and critical illness cover.
Fees for Non-Executive Directors
Fees for the Non-Executive Directors are determined
on behalf of the Board by the Non-Executive
Directors’ Remuneration Committee. When
determining fees, due regard is given to fees paid to
Non-Executive Directors in other similarly-sized UK
quoted companies, the time commitment and the
responsibilities of the roles. Non-Executive Directors
cannot participate in any of the Company’s share
incentive schemes and no Director is involved in
any decision regarding their own remuneration.
As disclosed on page 122 of this Annual Report and
Accounts, additional fees, over and above the base fee
payable to the Non-Executive Directors, are payable
for chairing the Audit & Risk, Remuneration and
Sustainability Committees and for acting as Senior
Independent Director.
Fees are normally reviewed annually to ensure that
they reflect an individual’s time commitment and
responsibilities.
External appointments
The Executive Directors are entitled to accept one
appointment outside the Group, provided that the
Chairman’s permission is obtained in advance of
accepting an appointment and specific approval is
given by the Board. Neither of the Executive Directors
who served during the year held any non-executive
appointments outside the Group.
Illustrations of the application of the Executive Directors’ remuneration policy
The bar charts below illustrate some possible outcomes of the application of the policy (approved by
shareholders at the annual general meeting on 29 July 2021) for the year ending 31 March 2023.
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
£589
100%
£1,194
£0
£250
£500
£750
£1,000
£1,250
£1,500
£1,750
£2,000
£2,250
£2,750
£2,500
49%
32%
19%
Maximum
£2,245
26%
34%
40%
Max with
growth
£2,691
22%
28%
33%
17%
£’000
Minimum On-target
£372
100%
£714
52%
29%
19%
Maximum
£1,323
28%
32%
40%
Max with
growth
£1,590
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., salary, pension and benefits as disclosed in the single figure table).
2
Target assumes that 25% of the LTIP award vests (based on an award with a face value of 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 Long Term Incentive Plan (“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.
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Projected values do not take into account dividend
accrual or additional awards granted as a result of
any agreement by an Executive Director to incur the
Company’s liability to employers’ National Insurance.
Consideration of employment conditions
elsewhere in the Group
The remuneration policy, which has been implemented
for the current Executive Directors, is more weighted
towards performance-related pay than for other
employees. The reason for this is to establish a clear
link between remuneration received by the Executive
Directors and the creation of shareholder value.
As mentioned on page 113 of this Annual Report and
Accounts, when setting the policy the Committee
takes account of pay and employment conditions
elsewhere in the Group, but has not used any
remuneration comparison measures between the
Executive Directors and other employees.
Employee Engagement
As outlined on pages 75 and 90, 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. In addition to those
existing mechanisms, during the year the Group
consulted specifically on UK pensions provision. That
consultation reflected on both the need to improve
pensions for our staff, as well as wider inflationary
pressures (both in the UK and globally). The outcome
of that review was an increase in pension provision
across the UK workforce. Additionally, management
was consulted globally in preparation for the
publication of the Group’s Human Rights Policy
(available at www.discoverieplc.com), in which the
Group states that it is committed to paying wages
at rates that are meaningfully ahead of minimum
statutory rates.
Consideration of Shareholder views
The Committee’s policy is to receive updates on
the views of shareholders and their representative
bodies on best practice, and take these into account.
It seeks the views of key shareholders on matters
of remuneration in which it believes they may be
interested. This includes a comprehensive shareholder
consultation exercise undertaken with the Group’s
largest shareholders in determining the changes
applied to this Directors’ Remuneration Policy.
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
Information subject to audit
The table below shows the total remuneration earned by executive directors for the year ended 31 March 2022
and the prior year.
Single total figure of remuneration for each Executive Director (audited)
Salary
£000
Benefits
1
£000
Pension
2
£000
Total Fixed
Remuneration
Bonus
3
£000
LTIP
4
£000
Total Variable
Remuneration
Total
£000
Nick
Jefferies
FY22 490 11 74 575 735 1,270 2,005 2,580
FY21 443 11 62 516 333 868 1,201 1,717
Simon
Gibbins
FY22 326 12 21 359 407 703 1,110 1,469
FY21 295 12 18 324 178 442 620 944
1
Taxable benefits comprise car allowance (£9,000 each) and family medical insurance. The total value of benefits for 2022 were £11,388 and
£11,856 for Nick Jefferies and Simon Gibbins respectively.
2
Pension in the year under review for Nick Jefferies and Simon Gibbins was paid as cash in lieu of pension and was equal to 15% and 6.5% of
salary respectively.
3
For performance in the year under review, a bonus of 150% and 125% of salary was earned by Nick Jefferies and Simon Gibbins, respectively.
Further details of performance against the targets can be found on pages 123 to 124. In accordance with the Remuneration Policy, 20% of
these bonuses will be in the form of deferred 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.
4
The LTIP award granted to Nick Jefferies and Simon Gibbins on 30 April 2019 vested in full on 30 April 2022. Further details of performance
against the targets can be found on page 125. Of the FY22 LTIP values shown in the table above (which are based on the share price at 30
April 2022 of £7.64), £570,189 of Nick Jefferies and £315,581 of Simon Gibbins, is attributed to share price growth over the vesting period. No
discretion was applied by the Remuneration Committee. Dividends will accrue on these awards between the date of vesting and exercise.
Single total figure of remuneration for Non-Executive Directors (audited)
Basic fee
2
Committee Chair fees SID fee Total
FY22
£
FY21
£
FY22
£
FY21
£
FY22
£
FY21
£
FY22
£
FY21
£
Malcolm Diamond 147,000 133,000 – – – – 147,000 133,000
Tracey Graham 48,300 43,700 8,400 7,600 – – 56,700 51,300
Rosalind Kainyah
1
12,075 – – – – – 12,075 –
Bruce Thompson 48,300 43,700 _ – 8,400 7,600 56,700 51,300
Clive Watson 48,300 43,700 8,400 7,600 – – 56,700 51,300
1
Joined the Board on 1 January 2022
2
Each of the Executive and Non-Executive Directors agreed to a 20% reduction in their base fees for the three-month period from June 2020
to August 2020.
Incentive outcomes for Executive Directors for the year ended 31 March 2022
Annual bonus in respect of performance for the year
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 strong performance during the year, both the profit performance and Simplified Working Capital
were above the maximum target and non-financial objectives were determined to have been met in full. This
performance has resulted in bonuses of 100% of maximum.
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Further details, including the targets set and performance against each of the metrics, are provided in the
table below:
Weighting Threshold
1
Target
(50% payable)
Maximum
(100% payable) Actual
Bonus earned
(% of maximum)
Group underlying operating
profit (£m) 60% £29.46m £33.7m £37.9m £41.4m 100%
SWC 24% 23.1% 22.0% 20.9% 20.7% 100%
Individual objectives 16% see below 100%
Outcome (% of max) 100%
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
Audited information
3
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 (for continuing operations)
Each Executive Director was given a number of individual non-financial objectives, tailored to their role and to
business requirements in the year under review. Nick Jefferies and Simon Gibbins each achieved their non-
financial objectives in full.
Nick Jefferies
Objective Performance Assessment
Develop growth drivers for achieving 5-year plan
(organic growth and acquisitions)
Record levels of organic growth and design wins
Three key acquisitions
Achieved
Develop ESG initiatives, implementation and
reporting (including target markets, carbon
initiatives, reporting analytics, annual report
development for sustainability and social
initiatives)
Target markets aligned to UN SDGs
Carbon reduction plan making good progress
Energy audit and ISO accreditation plans in place
Initial TCFD reporting included in the Annual Report
and publication of updated ESG-aligned policies
Increased diversity at Head Office and in senior
Group management
Achieved
Increase sales in target markets in line with
KSI objectives
Target market sales increase to 76% of Group
revenue
Achieved
Develop international investor base Non-UK investors increased by 5% Achieved
Develop organisation to support growth New Investor Relations and ESG executive appointed Achieved
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Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
DIRECTORS’ REMUNERATION REPORT
Simon Gibbins
Objective Performance Assessment
Ensure adequacy of group funding for growth Extension of the Group’s revolving credit facility
secured (£240m, plus £80m accordion, to June 2027)
Achieved
Develop ESG initiatives, implementation and
reporting
Increased resource & investment in carbon reduction
initiatives
Updated Policies, including Supplier Code of
Conduct, Conflict Minerals Policy, Human Rights
Policy, revised Anti-Bribery & Corruption Programme,
extended schedule of supplier audits
New internal controls, including updated Group
Accounting Manual, detailed Senior Accounting
Officer review
Achieved
Develop international investor and analyst base Non-UK investors increased by 5% Achieved
Further develop internal audit function and
resource
Additional resource recruited into Risk & Internal
Audit team and tax teams
Achieved
Manage increased tax scrutiny as a ‘large’ business Successful subsidiary risk and anti-bribery and
corruption reviews completed
Planning and initial activities undertaken in
preparation for the impact of the UK’s audit and
governance reform proposals as set out in the BEIS
consultation published on 18 March 2021 (‘UK Sox’)
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 full payout for this element of
their respective bonuses. This means that, in total for the year under review, Nick Jefferies earned a bonus of 150%
of his salary and Simon Gibbins earned a bonus of 125% of his 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 100% 150% £735,138 £588,110 £147,028
Simon Gibbins 100% 125% £406,875 £325,500 £81,375
The deferred shares will vest three years after grant. Other than the malus and clawback terms referred to on
page 115, there are no conditions, whether performance or non-performance related, attached to these shares.
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Corporate Governance
2019 LTIP vesting (audited)
LTIP Awards were granted on 30 April 2019 to Nick Jefferies and Simon Gibbins with vesting dependent on
relative TSR performance against a comparator group made up of constituents of the FTSE Small Cap Index
(1/3), absolute TSR in excess of CPI (1/3) from 31 March 2019 to 31 March 2022 and the growth in EPS between the
year ended 31 March 2019 and the year ended 31 March 2022 (1/3). The specific targets were as follows:
Relative TSR ranking against the FTSE Small Cap (1/3 weighting)
Relative TSR ranking against peers % of award vesting Actual performance
Upper quartile (or above) 100% discoverIE’s TSR over the period
was 104.5% which ranked the
company in the upper quartile of
the peer group.
100% vesting
Between median and upper
quartile
Straight-line vesting between
25%and 100%
Below median performance 0%
Absolute TSR performance (1/3 weighting)
Absolute TSR performance % of award vesting Actual performance
Equal to or above CPI +30ppts 100% discoverIE’s TSR over the period
was 104.5% which was in excess of
CPI+30ppts.
100% vesting
Between CPI +10ppts and CPI
+30ppts
Straight-line vesting between
25%and 100%
Below CPI +10ppts 0%
EPS Performance (1/3 weighting)
EPS growth from FY18 to FY21 % of award vesting Actual performance
Equal to or above 12ppts pa 100% 12.9ppts growth over the three-
year period
100% vesting
Between 5ppts pa and 12ppts pa Straight-line vesting between
25%and 100%
Below 5ppts pa 0%
The disposal of Acal BFi was announced on 9 November 2021 and completed on 3 March 2022, shortly before
the year end. Given that Acal BFi was part of the Group for the majority of FY 2021/22, the EPS condition was
measured by including Acal BFi for the whole of the base year (as it was within the Group for the whole of
that year) and for 11 months of the final year (i.e., up to the date of disposal). The growth over the period is
12.9%p.a., which is higher than the maximum hurdle. Therefore, this element of the award also vested in full.
No discretion was applied. This element of the award would also have vested in full if Acal BFi had been fully
removed from the calculations.
The three performance measures were met in full and therefore all of the 2019 LTIP award vested. 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.
125
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
DIRECTORS’ REMUNERATION REPORT
Share awards made during the year (audited)
The following LTIP awards were granted on 29 July 2021:
Director
Face value as %
of salary Face value
1
Number
of shares
Threshold
vesting
(% of
face value)
Maximum
vesting
(% of
face value)
End of
performance
period
Nick Jefferies 150% £735,137 74,482
25% 100%
31 March 2024
Simon Gibbins 135% £439,425 44,521 31 March 2024
1
The face value of the awards is based on a share price of £9.87, being the three-day average share price directly prior to the grant of the award.
In addition to the grants set out above, 12,413 awards were granted to Nick Jefferies and 7,441 awards were
granted to Simon Gibbins (with a face value of £122,516 and £73,443 respectively, based on a share price of
£9.87), in return for them bearing the Company’s liability to employer’s National Insurance arising on the
exercise of such grants. The additional awards ensure they are in a neutral position on an after-tax basis,
assuming unchanged tax rates. The awards were granted on the same date and under the same conditions as
those set out in the table above.
Vesting of these awards is subject to the following performance conditions:
Relative TSR ranking against the FTSE Small Cap excluding Investment Trusts (50% 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 (50% weighting)
EPS Growth % of award vesting
Equal to or above 12ppts per annum 100%
Between 5ppts and 12ppts per annum Straight-line vesting between 25% and 100%
Below 5ppts per annum 0%
Performance is measured over three years from 1 April 2021 to 31 March 2024 using, for the TSR measure, share
prices averaged over the previous month, prior to the start and end of the performance period. In the case of
EPS Growth, performance will be measured from FY 2020/21 to FY 2023/24. Vested shares will be subject to an
additional two-year holding period.
Deferred bonus share awards: As part of the terms of the bonus relating to FY2020/21, 20% of Nick Jefferies’
annual bonus was deferred into shares. On 25 June 2021, 3,703 shares were acquired at a price of £9.44 per share
(representing 20% of the FY 2020/21 bonus net of tax).
Pension arrangements (audited)
The Company does not operate a defined benefit pension scheme for Executive Directors. Pension contributions/
cash allowances for the Executive Directors are set out in the policy table on page 115 of this Report.
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Directors’ interests under the Long-Term Incentive Plans
Movements in the Executive Directors’ holdings of nil-cost options under the LTIPs during the year are shown
below. The performance criteria for the LTIPs are set out on page 126.
Number held
at 31.03.22
Movements during the year
Number
held at
31.03.21
Vested
but not
exercised
Share
value at
31.03.22
£ When exercisableGranted Vested Exercised Lapsed
Nick
Jefferies
0
1
– – 245,192 – 245,192 0 0 N/A
0
2
– – 223,567 – 223,567 0 0 N/A
242,788(v)
3
– – – – 242,788 242,788 1,933,169 Mar 2022 to Mar 2027
123,998(v)
4
– – – – 123,998 123,998 977,104 Mar 2023 to Mar 2028
166,236(v)
5
– 166,236 – – 166,236 166,236 1,309,940 Apr 2024 to Apr 2029
127,039(nv)
6
– – – – 127,039 – 1,001,067 Jul 2025 to Jun 2030
74,482 (nv)
7
74,482 – – – – – 586,918 Jul 2026 to Jul 2031
Simon
Gibbins
0
8
– – 120,192 – 120,192 0 0 N/A
0
9
– – 98,437 – 98,437 0 0 N/A
106,900(v)
10
– – – – 106,900 106,900 842,372 Mar 2022 to Mar 2027
63,190(v)
11 12
– – – – 63,190 63,190 497,937 Mar 2023 to Mar 2028
92,006(v)
13
14
– 92,006 – – 92,006 92,006 725,007 Apr 2024 to Apr 2029
62,500(nv)
15
– – – – 62,500 – 492,500 Jul 2025 to Jun 2030
44,521 (nv)
16
44,521 – – – – – 350,825 Jul 2026 to Jul 2031
(v)= vested; (nv) = non-vested
1
The award, in the form of a nil-cost option over 245,192 shares in the Company was made to Nick Jefferies on 31 March 2015. The performance conditions
attached to the award resulted in 100% vesting on 31 March 2018. These options were exercised on 7 December 2021.
2
The award, in the form of a nil-cost option over 223,567 shares in the Company was made to Nick Jefferies on 31 March 2016. The performance
conditions attached to the award resulted in 100% vesting on 31 March 2019. These options were exercised on 28 March 2022.
3
The award, in the form of a nil-cost option over 242,788 shares in the Company was made to Nick Jefferies on 31 March 2017. The performance
conditions attached to the award resulted in 100% vesting on 31 March 2020.
4
The award, in the form of a nil-cost option over 163,371 shares in the Company was made to Nick Jefferies on 29 March 2018. The performance
conditions attached to the award resulted in 75.9% vesting (123,998 options) on 29 March 2021.
5
The award, in the form of a nil-cost option over 166,236 shares in the Company was made to Nick Jefferies on 30 April 2019. The performance conditions
attached to the award resulted in 100% vesting on 30 April 2022.
6
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.
7
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 in addition to the 74,482 shares set out above and is subject to the same vesting and exercise conditions.
8
The award, in the form of a nil-cost option over 120,192 shares in the Company was made to Simon Gibbins on 31 March 2015. The performance
conditions attached to the award resulted in 100% vesting on 31 March 2020. These options were exercised on 7 December 2021.
9
The award, in the form of a nil-cost option over 98,437 shares in the Company was made to Simon Gibbins on 31 March 2016. The performance
conditions attached to the award resulted in 100% vesting on 31 March 2020. These options were exercised on 25 March 2022.
10
The award, in the form of a nil-cost option over 106,900 shares in the Company was made to Simon Gibbins on 31 March 2017. The performance
conditions attached to the award resulted in 100% vesting on 31 March 2020.
11
The award, in the form of a nil-cost option over 83,255 shares in the Company was made to Simon Gibbins on 29 March 2018. The performance
conditions attached to the award resulted in 75.9% vesting (63,190 options) on 29 March 2021.
12
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.
13
The award, in the form of a nil-cost option over 92,006 shares in the Company was made to Simon Gibbins on 30 April 2019. The performance
conditions attached to the award resulted in 100% vesting on 30 April 2022.
14
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.
15
An additional award of 10,446 nil-cost options was made on 30 June 2020 such that Simon Gibbins is in a net neutral position after tax, assuming
unchanged tax rates, as a result of his agreement to take on the Company’s liability to employer’s National Insurance on the June 2020 award. This is in
addition to the 62,500 shares set out above and is subject to the same vesting and exercise conditions.
16
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 in
addition to the 44,521 shares set out above and is subject to the same vesting and exercise conditions.
127
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
DIRECTORS’ REMUNERATION REPORT
Directors’ interests (audited)
The interests of the Directors, who held office as at 31 March 2022 (including family interests) in ordinary shares
(fully paid, 5p) of the Company, were as follows:
Shares held at 31 March 2022
Unencumbered
shares held at
31 March 2021
Value of current
shareholding
(% of salary)
Unencumbered
shares
Nil cost
options
vested but
not exercised
and outside of
holding period
Nil cost options
vested but
subject to
additional
holding period
Nil cost options
subject to
performance
conditions
Nick Jefferies 1,241,830
1
242,788 290,234 201,521 981,400 2,744%
Simon Gibbins 388,264 106,900 155,196 107,021 267,489 1,536%
Tracey Graham 10,330 – – – 9,358
Malcolm Diamond 30,982 – – – 27,316
Bruce Thompson 45,000 – – – 25,000
Clive Watson 19,125 – – – 12,500
Rosalind Kainyah 656 – – –
1
Nick Jefferies holds 1,222,477 shares outright. In line with the Remuneration Policy, 20% of the FY 2018/19 to FY 2020/21 bonuses were deferred into
shares. The figure of 1,241,830 includes the shares bought with those deferred bonuses, which were 9,694, 5,956 and 3,703 shares respectively.
2
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 2022 are unchanged from those at 31 March 2022. The values of current
shareholdings for Nick Jefferies and Simon Gibbins have been valued using the share price as at 31 March 2022
of 788p and include all options that have vested and are based on salaries as at 1 June 2022.
Executive Directors are required to build up/maintain a shareholding of at least 200% of salary, including LTIP
shares where performance conditions no longer apply, within five years. Both of the Executive Directors have
met the current shareholding requirements. In accordance with the remuneration policy, Executive Directors are
required to build up/maintain a shareholding of at least 250% of salary within seven years. Both of the Executive
Directors meet the shareholding requirements. The figures for shares/nil cost options subject to performance
conditions exclude any additional awards to Executive Directors in respect of employer’s National Insurance.
Dilution
The Company’s share schemes are funded through a combination of shares purchased in the market and
newly issued shares, as appropriate. The Company monitors the number of shares issued under the schemes
and their impact on dilution limits.
As at 31 March 2022, approximately 4.90m shares (5.1% in the last ten years) have been, or may be, issued to settle
awards made in the last ten years in connection with all share schemes and executive share schemes, respectively.
The Company is committed to remaining within The Investment Association’s 10% in 10 years dilution limit.
Payments for loss of office (audited)
There were no payments for loss of office during the year.
Payments to past Executive Directors (audited)
There were no payments to past Executive Directors during the year.
This represents the end of the audited section of the Report.
Pay for performance
The graph below shows Total Shareholder Return (TSR) in terms of change in value (with dividends deemed
to be reinvested gross on the ex-dividend date) of an initial investment of £100 on 1 April 2012 between that
date and 31 March 2022 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. This index has been updated from the FTSE
SmallCap index shown in previous reports to reflect the Company’s entry into the FTSE 250. 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.
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31 Mar 2012 31 Mar 2013 31 Mar 2014 31 Mar 2015 31 Mar 202231 Mar 2016 31 Mar 2017 31 Mar 2018 31 Mar 202031 Mar 2019 31 Mar 2021
400
350
300
250
200
150
100
50
0
DiscoverIE Return Index FTSE Small Cap Return Index Source: Refinitiv Datastream
Total Shareholder Return
Group Chief Executive single figure of total remuneration history
Note: The Company’s share price was adjusted following the rights issue in June 2014.
Nick Jefferies was Group Chief Executive throughout the period shown in the table below.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Single figure of total
remuneration (£’000) 999 572 1,246 1,321 665 1,803 1,796 2,093 1,717 2,580
Salary (£’000) 320 320 330 425 429 438 453 467 443 490
Bonus outcome
(% of maximum) 20 55 59 60 43.5 63.7 69.2 62.0 60.1 100
LTIP outcome
(%ofmaximum) 88 9 100 100 – 100 100 100 75.9 100
Turnover (£m) 177 212 271 288 338 387.9 438.9 466.4 454.3 379.2
Underlying
operating profit
(£m) 5 7 13 16 20 24.5 30.6 37.1 35.2 41.4
1
Continuing operations
129
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
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
Salary or fees Benefits Bonus Salary or fees Benefits Bonus
Employees 5% 0% 44% 5% 0% 153%
Executive Directors
Nick Jefferies -5% -3% -8% 11%
1
2% 121%
Simon Gibbins -5% -3% -8% 11%
1
2% 129%
Non-Executive Directors
Malcolm Diamond -5% – – 11%
1
– –
Tracey Graham -5% – – 11%
1
– –
Rosalind Kainyah n/a
2
– – n/a
2
– –
Bruce Thompson -5% – – 11%
1
– –
Clive Watson -5% – – 11%
1
– –
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 last year’s Report. Without that reduction, the underlying increase in salary and fees was 5%.
2
Joined the Board in January 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 and a full payout this year.
Year Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
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 31/3/22.
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 20,063 30,104 50,141
Total pay and benefits 22,109 37,977 58,426
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.
Theinformation is based on like-for-like constant currency and includes annualised prior year acquisitions.
£
2022
£m
2021
£m
change
%
Remuneration paid to or receivable by all employees 84.1 70.0 +20%
Distributions to shareholders by way of dividends (net of share issues) 9.4 2.8 +236%
DIRECTORS’ REMUNERATION REPORT
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Statement of implementation of the remuneration policy in the financial year ending 31 March 2023
The table below sets out a summary of how the remuneration policy will apply during 2022/23.
Remuneration element Remuneration for year ending 31 March 2023
Base salary
■ Salaries for FY 2022/23 are:
– £509,695 for the Group Chief Executive (4% increase).
– £333,638 for the Group Finance Director (2.5% increase).
The UK workforce increase was c.4-5% and higher increases of up to 15% were made
in certain overseas territories the Group operates in.
Pension
■ Cash equivalent of 15% of salary for Group Chief Executive until 31 December 2022 and
reducing to 8% from 1 January 2023 (in line with the majority of the UK workforce).
The Group Finance Director’s pension will increase from 6.5% to 8.0% of salary.
■ Any new or promoted Executive Directors will have a pension contribution of 8.0%
of salary, which is in line with the majority of the UK workforce.
Annual bonus
■ The maximum bonus opportunity will be 150% of salary for Group Chief Executive
and 125% of salary for Group Finance Director.
■ Target bonus opportunity is 50% of maximum.
■ Performance metrics are based 60% on operating profit, 24% on simplified working
capital, 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 2023 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.
LTIP
■ LTIP awards for FY 2022/23 will be made in line with policy, with grant sizes of 175%
of salary for the Group Chief Executive and 160% of salary for the Group Finance
Director
1
. The Remuneration Committee has considered whether any adjustment
to the award level is required as a result of share price movement and concluded
that no adjustment is required, reflecting the Group’s high growth over a multi-
year period.
■ Performance metrics and targets will be based 50% on underlying EPS growth and
50% on Relative TSR.
■ The EPS range has been increased for the second consecutive year and will require
growth of 5%p.a. for threshold vesting and 13%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.
Shareholding
guidelines
■ A shareholding guideline of 200% of salary applies for the Group Chief Executive
and Group Finance Director, to be achieved within five years and 250% after
seven years.
1
Additional awards may be granted to the Group 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.
131
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
DIRECTORS’ REMUNERATION REPORT
The fees for the Non-Executive Directors increased with effect from 1 April 2022, as follows:
As at 1 April 2022
Basic fee
(£)
Committee
Chair fee
(£)
SID fee
(£)
Total
£
Malcolm Diamond 156,000 – – 156,000
Tracey Graham 50,000 10,000 – 60,000
Rosalind Kainyah 50,000 10,000 – 60,000
Bruce Thompson 50,000 – 10,000 60,000
Clive Watson 50,000 10,000 – 60,000
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 Committee also considers the recommendations of the Group Chief Executive with regard to the
members of the Group Executive Committee who are not Executive Directors, in determining their
remuneration packages, including bonuses, incentive payments, share options and other share-based awards.
The Group Company Secretary provides administrative support.
Advisers
During the year, the Committee received independent advice on executive remuneration from FIT
Remuneration Consultants LLP (“FIT”). FIT were appointed by the Committee in 2019 following a competitive
tender process. FIT is a signatory to the Remuneration Consultants’ Code of Conduct. FIT does not provide
any services other than advice to the Remuneration Committee and the Committee considers FIT to be
independent and objective. The fees paid to FIT for advising the Committee for the financial year ended
31March 2022 were £41,667 based partly on a fixed fee basis and partly based on time spent.
Shareholder voting
As at 1 April 2022 For
1
Against Withheld
2
2021 binding vote on the Directors’
Remuneration Policy
69,269,506 94.65% 3,914,398 5.35% 117,514
2021 Approval of the Remuneration Report
(excl. Policy)
71,560,905 97.78% 1,623,000 2.22% 117,513
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
132
discoverIE Group plc Innovative Electronics
Corporate Governance
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 Corporate Governance report confirm 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.
133
Annual Report and Accounts for the year ended 31 March 2022
Corporate Governance
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 2022 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.
■ the Company Financial Statements have been
properly prepared in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law); and
■ the Financial Statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
We have audited the Financial Statements, included
within the Annual Report, which comprise: the
consolidated Statement of Financial Position and
the Company Statement of Financial Position as at 31
March 2022; the consolidated Statement of Profit or
Loss, the consolidated Statement of Comprehensive
Income, the consolidated and the Company
Statement of Changes in Equity, and the consolidated
Statement of Cash Flows for the year then ended;
and the notes to the Group and Company Financial
Statements, which include a description of the
significant accounting policies.
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 7 to the
consolidated Financial Statements, we have provided
no non-audit services to the company or its controlled
undertakings in the period under audit.
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discoverIE Group plc Innovative Electronics
Financial Statements
Our audit approach
Overview
Audit scope
■ We conducted full scope audits at 20 components
across the UK, Europe and Rest of the World
and specific audit procedures on a further 11
components across the UK, Europe and Rest of
the World.
■ The components where we conducted audit
procedures, together with work performed at the
Group level, accounted for approximately 80%
of the Group’s revenue and 82% of the Group’s
absolute underlying profit before tax from
continuing operations.
■ Certain Company account balances were included
in scope for the audit of the consolidated Financial
Statements. However, we determined that the
Company did not require a full scope audit of its
complete financial information for the purposes of
the audit of the consolidated Financial Statements.
Key audit matters
■ Carrying value of goodwill (Group)
■ Reporting of underlying adjustments (Group)
■ Accounting for acquisitions and disposals (Group)
■ Carrying value of investments (Company)
Materiality
■ Overall Group materiality: £1,877,000 (2021:
£1,574,400) based on 5% of the Group’s underlying
profit before tax from continuing operations.
■ Overall Company materiality: £3,015,000 (2021:
£1,417,000) based on 1% of total assets.
■ Performance materiality: £1,407,000 (2021:
£1,180,800) (Group) and £2,261,000 (2021: £1,062,700)
(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 and disposals is a new key
audit matter this year. COVID-19 and going concern
considerations, which was a key audit matter last
year, is no longer included because of the Group’s
recovery from the effects of COVID-19 in the year,
the diversified nature of the Group’s operations and
available liquidity and forecast covenant headroom
over the going concern period. Otherwise, the key
audit matters below are consistent with last year.
135
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC
Key audit matter How our audit addressed the key audit matter
Carrying value of goodwill (Group)
Refer to page 97 (Audit and Risk
Committee Report), note 2 (Significant
accounting judgements and estimates)
and note 18 for the related disclosures on
goodwill.
The Group recorded £175.7 million of
goodwill at 31 March 2022 (2021: £127.9
million).
As required by IAS 36, management has
performed its annual goodwill impairment
assessment on the Group’s cash
generating units (CGUs).
The carrying value of goodwill is
dependent on future cash flows of the
underlying CGUs which inherently involves
significant management estimation and
there is a risk that if management 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 principally relating
to revenue growth rates, discount rates
and future profitability. These assessments
also include the estimated costs associated
with the effects of climate change,
including the future costs of the Group’s
target to reduce carbon emissions by 50%
from 2019 levels by 2025.
No impairment charge has been recorded
in the year ended 31 March 2022.
We focused our work on the CGUs where the headroom
between the value-in-use and the carrying value of the assets
was lowest or those CGUs that were sensitive to changes in
key assumptions.
We obtained management’s value-in-use impairment models
and we 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
net assets 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 utilised our in-house valuation experts to evaluate the
appropriateness of the methodology used in the impairment
models, including challenging the discount rates and long-
term growth rates. We compared the cash flows used in
the impairment models to the Board approved budget, we
challenged the assumptions underpinning the estimated
costs associated with climate change; and we evaluated the
determination of the Group’s 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 net assets at each CGU to
recent transaction multiples for acquired businesses.
We considered external market data on growth in target
markets. We challenged management’s methodology and
performed further sensitivities resulting in some changes
to management’s model. We also evaluated the historical
accuracy of management’s budgeting and forecasting and
we compared the revenue growth and profit margins to
historical actuals and modelled their break even points to
assess whether further testing was required and whether
additional disclosures should be provided in the Financial
Statements.
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discoverIE Group plc Innovative Electronics
Financial Statements
Key audit matter How our audit addressed the key audit matter
Carrying value of goodwill (group) -
continued
Where headroom was more sensitive to changes in key
assumptions, we undertook further procedures. These
included additional sensitivity analysis and testing of revenue
growth rates to third party industry research. Where these
CGUs were recently acquired, we have compared pre-
acquisition performance to forecast results post acquisition.
Based on these procedures, we concluded that there was only
one CGU where headroom was lower and where the CGU was
sensitive to reasonably possible changes in key assumptions
that could cause material impairment. Further procedures
focused on this one CGU within the Sensing & Connectivity
division; in particular the revenue growth rates, the discount
rate, the long-term growth rate and future operating margins.
We obtained a bridge of actual loss in FY22 to the forecast
profit in FY23 and tested management’s assumptions to a
number of external sources including third party growth rates
and other audit evidence, and we tested the non-recurring
nature of a sample of one-off costs incurred in FY22.
We assessed the appropriateness of management’s decision
to provide additional disclosures about sensitivities in note
18 of the Financial Statements in relation to the one CGU
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.
137
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC
Key audit matter How our audit addressed the key audit matter
Reporting of underlying adjustments
(Group)
Refer to Audit and Risk Committee Report
page 97; Accounting policies (note 2); and
note 6 (Underlying profit before tax).
£20.5 million (2021: £13.7 million) of net costs
are presented as adjustments to the Group’s
underlying profit before tax. These include:
■ £6.5 million of acquisition expenses; and
■ £14.0 million of amortisation of acquired
intangible assets.
The Group presents underlying
performance measures on the face of the
consolidated Statement of Profit or Loss as
supplementary information.
Management believes that the presentation
of underlying performance measures
provides investors with a means of
evaluating the performance of the Group
on a consistent basis, similar to the way in
which management evaluates performance.
The determination of which items are
classified as adjustments to underlying
profit is subject to judgement and therefore
need to be classified appropriately and
presented consistently.
We considered the appropriateness of the adjustments
made to the statutory profit before tax to derive underlying
performance.
In order to do this, we considered:
■ The Group’s accounting policy on non-underlying items.
■ The application of IFRS, in particular IAS 1; and
■ FRC Thematic Review on Alternative Performance Measures
(APMs) issued in October 2021.
We challenged management on the appropriateness of the
classification of each item, having considered the nature of
each item and that the basis for the classification is clearly
disclosed and applied consistently from one year to the next.
We also considered the risk that the Group’s accounting policy
could be manipulated to help achieve profit targets.
We also considered the risk of one-off gains during the
year not being properly identified and therefore presented
inappropriately within underlying profit.
Having considered the nature and quantum of these items,
overall, we were satisfied that the classification of adjustments
to the Group’s underlying profit in the consolidated Financial
Statements for the year ended 31 March 2022 was appropriate
and consistently applied.
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discoverIE Group plc Innovative Electronics
Financial Statements
Key audit matter How our audit addressed the key audit matter
Accounting for acquisitions and disposals
(Group)
Refer to Audit and Risk Committee Report
page 97; Accounting policies (note 2); note
11 (business combinations) and note 12
(discontinued operations and assets held
for sale).
In FY 2021/22, the Group acquired 3
businesses (FY 2020/21: 2 businesses) for
total consideration of £89.2m (FY 2020/21:
£22.3m). Goodwill of £52.9m (FY 2020/21:
£9.9m) and customer relationships and
other intangible assets totalling £37.7m (FY
2020/21: £9.8m) were recorded.
The valuation of the customer relationships
requires management estimation as
it is dependent on estimates of future
cash flows, customer attrition rates and
discount rates.
In FY22, the Group exited its distribution
business by completing the disposal
of Acal BFi and Vertec Scientific SA
Proprietary Limited.
The Acal BFi disposal generated net
consideration of £42.6m, with Vertec
Scientific SA Proprietary Limited
generating net consideration of £2.2m. The
combined profit on disposal was £6.6m.
Accounting for disposals (specifically
the Acal BFi business given its size) is
complex and needs to be accounted for
and disclosed in the consolidated Financial
Statements in accordance with the
requirements of IFRS 5.
We tested each of the three acquisitions in the year. We
utilised our in-house valuation experts to evaluate the
appropriateness of the methodology used to value customer
relationships and to test the appropriateness of the discount
rates. We compared the customer termination rates and
future cash flows to historical data and to the approved
acquisition business cases and we performed sensitivities on
these estimates.
We considered the disclosures in note 11 of the consolidated
Financial Statements and we are satisfied that these
disclosures are appropriate. Based on the procedures
performed, we noted no material issues arising from our work
on acquisitions.
Our work on disposals focused on Acal BFi given its size.
We determined whether the business met the definition
of discontinued operations (for disposals) in accordance
with the applicable framework, IFRS 5; and we tested the
gain recognised on disposal. We challenged management
on the date of deconsolidation of the Acal business. We
tested the consideration paid and the fair value of deferred
consideration. We also tested on a sample basis the
transactions in the period prior to disposal.
We reviewed the disclosures in note 12 of the consolidated
Financial Statements to ensure these are in line with relevant
accounting requirements; and we specifically assessed the
classification of profits between operating activities prior to
disposal and the gain on disposal.
Based on the procedures performed, we noted no material
issues arising from our work on disposals.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC
Key audit matter How our audit addressed the key audit matter
Carrying value of investments (Company)
Refer to note 2 (Judgement and key
sources of estimation uncertainty)
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 £203.4 million (2021:
£201.3m).
We focused on this area due to the size of
the investment balances with a focus on
the risk of impairment arising in company’s
investments in two entities with a carrying
value of £18.5m and £25.7m respectively
including the Group’s service company
that derives revenue from intercompany
recharges.
Management has performed an
assessment of the recoverable amount of
the investments and compared this to the
carrying value using the same cash flow
methodology applied in the impairment
test for goodwill described above.
No impairment charge has been recorded
in the year ended 31 March 2022.
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 2022.
For investments where an indicator of impairment was noted,
including 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 2022 . 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, and the
short and longer term growth rates and operating income
forecasts.
We assessed the appropriateness of management’s decision
to provide additional disclosures about sensitivities in note
5 of the Company Financial Statements in relation to the
Company’s investment with the carrying value of £18.5m.
More broadly, we considered whether the disclosures in note
5 complied with relevant accounting requirements.
Based on the procedures performed, we noted no material
issues arising from our work.
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 performed full scope audits and specific audit
procedures at 31 components across the UK, Europe
and Rest of the World which were selected based
on their size or risk characteristics of which 4 entities
were brought into Group audit scope in FY22. Of
these, we identified 4 material components in
the UK, 6 in Europe and 1 in Rest of the World. 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 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.
In addition to instructing and reviewing the reporting
from our component audit teams, we conducted file
reviews for material components and participated in
key meetings with component audit teams and had
regular dialogue with component teams throughout
the year.
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discoverIE Group plc Innovative Electronics
Financial Statements
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: 80% (2021: 75%) of the Group’s revenue
and 82% (2021: 81%) 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.
As part of the audit, we enquired of management
to understand and evaluate the Group’s risk
assessment process in relation to climate change.
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 engaged our internal climate change experts to
assist us in reviewing management’s assessment and
challenged management on how they considered
the potential financial impacts of the Group’s carbon
reduction target in their assessment. We considered
the key risk to relate to the assumptions made in
the forecast 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 target to reduce carbon emissions by 50%
from 2019 levels by 2025 as discussed in the carrying
value of goodwill key audit matter. We also read
the disclosures in relation to climate change made
in the Sustainability Report and Risk Management
sections 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.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole
asfollows:
Financial Statements - Group Financial Statements - Company
Overall materiality £1,877,000 (2021: £1,574,400). £3,015,000 (2021: £1,417,000).
How we determined it 5% of underlying profit before tax
from continuing operations of
the Group
1% of total assets
Rationale for benchmark applied We believe that underlying
profit before tax from continued
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.
We believe that total assets is the
most appropriate measure to
assess a holding company, and
is a generally accepted auditing
benchmark.
141
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC
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 £126,000 to £1,497,000.
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% (2021:
75%) of overall materiality, amounting to £1,407,000
(2021: £1,180,800) for the Group Financial Statements
and £2,261,000 (2021: £1,062,700) for the Company
Financial Statements.
In determining the performance materiality, we
considered a number of factors - the history of
misstatements, risk assessment and aggregation risk
and the effectiveness of controls - and concluded that
an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit and Risk Committee that we
would report to them misstatements identified during
our audit above £85,000 (Group audit) (2021: £78,720)
and £150,750 (Company audit) (2021: £78,720) 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.
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,
which includes reporting based on the Task Force
on Climate-related Financial Disclosures (TCFD)
recommendations. 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.
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discoverIE Group plc Innovative Electronics
Financial Statements
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
beenincluded.
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 2022 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 is
materially consistent with the Financial Statements
and our knowledge obtained during the audit, and
we have nothing material to add or draw attention to
in relation to:
■ The directors’ confirmation that they have carried
out a robust assessment of the emerging and
principal risks;
■ The disclosures in the Annual Report that describe
those principal risks, what procedures are in place
to identify emerging risks and an explanation of
how these are being managed or mitigated;
■ The directors’ statement in the Financial
Statements about whether they considered it
appropriate to adopt the going concern basis
of accounting in preparing them, and their
identification of any material uncertainties to the
Group’s and Company’s ability to continue to do so
over a period of at least twelve months from the
date of approval of the Financial Statements;
■ The directors’ explanation as to their assessment of
the Group’s and Company’s prospects, the period
this assessment covers and why the period is
appropriate; and
■ The directors’ statement as to whether they have a
reasonable expectation that the Company will be
able to continue in operation and meet its liabilities
as they fall due over the period of its assessment,
including any related disclosures drawing attention
to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the
longer-term viability of the Group was substantially
less in scope than an audit and only consisted of
making inquiries and considering the directors’
process supporting their statement; checking that
the statement is in alignment with the relevant
provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with
the Financial Statements and our knowledge and
understanding of the Group and Company and their
environment obtained in the course of the audit.
In addition, based on the work undertaken as part
of our audit, we have concluded that each of the
following elements of the corporate governance
statement is materially consistent with the Financial
Statements and our knowledge obtained during
the audit:
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF discoverIE GROUP PLC
■ 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, the Waste Electrical and Electronic
Equipment Regulations 2006 directive 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 Companies Act
2006 and taxation. 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;
■ Assessment of matters reported on the Group’s
whistleblowing helpline and the results of
management’s investigation of such matters;
144
discoverIE Group plc Innovative Electronics
Financial Statements
■ 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.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations
that are not closely related to events and transactions
reflected in the Financial Statements. Also, the risk
of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete
populations of certain transactions and balances,
possibly using data auditing techniques. However, it
typically involves selecting a limited number of items
for testing, rather than testing complete populations.
We will often seek to target particular items for
testing based on their size or risk characteristics. In
other cases, we will use audit sampling to enable
us to draw a conclusion about the population from
which the sample is selected.
A further description of our responsibilities
for the audit of the Financial Statements is
located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of
our auditors’ report.
Use of this report
This report, including the opinions, has been prepared
for and only for the Company’s members as a
body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other
person to whom this report is shown or into whose
hands it may come save where expressly agreed by
our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to
report to you if, in our opinion:
■ we have not obtained all the information and
explanations we require for our audit; or
■ adequate accounting records have not been kept
by the Company, or returns adequate for our audit
have not been received from branches not visited
by us; or
■ certain disclosures of directors’ remuneration
specified by law are not made; or
■ the Company Financial Statements and the part of
the Directors’ remuneration report to be audited
are not in agreement with the accounting records
and returns.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit and
Risk Committee, we were appointed by the directors
on 13 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 5 years, covering the years ended 31
March 2018 to 31 March 2022.
Other matter
As required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R,
these Financial Statements form part of the ESEF-
prepared annual financial report filed on the National
Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF Regulatory
Technical Standard (‘ESEF RTS’). This auditors’ report
provides no assurance over whether the annual
financial report has been prepared using the single
electronic format specified in the ESEF RTS.
Christopher Hibbs (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
14 June 2022
145
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS
for the year ended 31 March 2022
Continuing operations notes
2022
£m
2021
restated*
£m
Revenue 4 379.2 302.8
Operating costs (358.3 ) (285.7 )
Operating profit 7 20.9 17.1
Finance income 9 0.4 0.3
Finance costs 9 (4.2 ) (3.9 )
Profit before tax 17.1 13.5
Tax expense 10 (7.4 ) (4.0 )
Profit for the year from continuing operations 9.7 9.5
Discontinued operations
Profit for the year from discontinued operations 12 15.5 2.5
Profit for the year 25.2 12.0
Earnings per share 14
Basic, profit from continuing operations 10.4 p 10.7 p
Diluted, profit from continuing operations 10.1 p 10.3 p
Basic, profit for the year 27.1 p 13.5 p
Diluted, profit for the year 26.3 p 13.0 p
SUPPLEMENTARY STATEMENT OF
PROFIT OR LOSS INFORMATION
Underlying Performance Measures (continuing operations) notes
2022
£m
2021
restated*
£m
Operating profit 7 20.9 17.1
Add back: Acquisition expenses 6 6.5 1.2
Amortisation of acquired intangible assets 19 14.0 11.1
IAS 19 pension charge 32 – 1.4
Underlying operating profit 41.4 30.8
Profit before tax 17.1 13.5
Add back: Acquisition expenses 6 6.5 1.2
Amortisation of acquired intangible assets 19 14.0 11.1
IAS 19 pension charge 32 – 1.4
Underlying profit before tax 37.6 27.2
Underlying earnings per share 14 29.4p 22.4p
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
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Financial Statements
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 March 2022
notes
2022
£m
2021
£m
Profit for the year 25.2 12.0
Other comprehensive income/(loss):
Items that will not be subsequently reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit pension scheme 32 2.2 (3.4 )
Deferred tax (charge)/credit relating to defined benefit pension
scheme 10 (0.5 ) 0.6
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign subsidiaries 9.6 (0.5 )
Reclassification of exchange differences on disposal of businesses 12 (2.0 ) –
Other comprehensive income/(loss) for the year, net of tax 9.3 (3.3 )
Total comprehensive income for the year, net of tax 34.5 8.7
147
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
as at 31 March 2022
notes
2022
£m
2021
restated*
£m
Non-current assets
Property, plant and equipment 15 23.5 23.5
Intangible assets – goodwill 17 175.7 127.9
Intangible assets – other 19 87.6 62.9
Right of use assets 16 21.9 22.4
Pension asset 32 2.7 –
Other receivables 21 5.9 –
Deferred tax assets 10 9.2 7.9
Current assets
Inventories 20 77.8 67.7
Trade and other receivables 21 78.0 84.9
Current tax assets 1.6 1.8
Cash and cash equivalents 22 39.4 29.2
Total assets 523.3 428.2
Current liabilities
Trade and other payables 29 (104.8 ) (94.8 )
Other financial liabilities 23 (2.0 ) (0.8 )
Lease liabilities 16 (4.7 ) (4.8 )
Current tax liabilities (7.7 ) (5.6 )
Provisions 26 (1.7 ) (1.8 )
(120.9 ) (107.8 )
Non-current liabilities
Trade and other payables 29 (2.7 ) (0.8 )
Other financial liabilities 23 (67.6 ) (75.6 )
Lease liabilities 16 (16.4 ) (16.7 )
Pension liability 32 – (1.0 )
Provisions 26 (4.2 ) (5.4 )
Deferred tax liabilities 10 (21.1 ) (12.5 )
(112.0 ) (112.0 )
Total liabilities (232.9 ) (219.8 )
Net assets 290.4 208.4
Equity
Share capital 30 4.7 4.4
Share premium 192.0 138.8
Merger reserve 10.5 19.9
Currency translation reserve 4.9 (2.7 )
Retained earnings 78.3 48.0
Total equity 290.4 208.4
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
The Financial Statements on pages 146 to 212 were approved by the Board of Directors on 14 June 2022 and
signed on its behalf by:
Nick Jefferies Simon Gibbins
Group Chief Executive Group Finance Director
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Financial Statements
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 March 2022
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 2020 4.4 138.8 22.7 (2.2 ) 36.8 200.5
Prior year restatement (note 2) – – – – (0.4 ) (0.4 )
At 1 April 2020 (restated) 4.4 138.8 22.7 (2.2 ) 36.4 200.1
Profit for the year – – – – 12.0 12.0
Other comprehensive loss – – – (0.5 ) (2.8 ) (3.3 )
Total comprehensive income – – – (0.5 ) 9.2 8.7
Share-based payments
includingtax – – – – 2.4 2.4
Transfer to retained earnings – – (2.8 ) – 2.8 –
Dividends (note 13) – – – – (2.8 ) (2.8 )
At 31 March 2021 (restated) 4.4 138.8 19.9 (2.7 ) 48.0 208.4
Profit for the year – – – – 25.2 25.2
Other comprehensive income – – – 7.6 1.7 9.3
Total comprehensive income – – – 7.6 26.9 34.5
Shares issued (note 30) 0.3 53.2 – – – 53.5
Share-based payments
includingtax – – – – 3.4 3.4
Transfer to retained earnings – – (9.4 ) – 9.4 –
Dividends (note 13) – – – – (9.4 ) (9.4 )
At 31 March 2022 4.7 192.0 10.5 4.9 78.3 290.4
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
CONSOLIDATED STATEMENT OF
CASH FLOWS
for the year ended 31 March 2022
notes
2022
£m
2021
£m
Net cash flow from operating activities 25 30.9 46.0
Investing activities
Acquisition of businesses, net of cash acquired (84.5 ) (20.8 )
Business disposal proceeds 12 37.3 –
Purchase of property, plant and equipment (5.4 ) (3.2 )
Purchase of intangible assets – software (0.8 ) (0.7 )
Proceeds from disposal of property, plant and equipment 0.4 0.3
Interest received 0.4 0.3
Net cash used in investing activities (52.6 ) (24.1 )
Financing activities
Net proceeds from the issue of shares 53.4 0.1
Proceeds from borrowings 24 94.1 9.3
Repayment of borrowings 24 (102.3 ) (27.8 )
Payment of lease liabilities (6.4 ) (6.1 )
Cash-settled share-based payments (0.1 ) –
Dividends paid 13 (9.4 ) (2.8 )
Net cash generated from/(used in) financing activities 29.3 (27.3 )
Net increase/(decrease) in cash and cash equivalents
1
Net cash and cash equivalents at 1 April 28.2 34.8
Effect of exchange rate fluctuations 1.1 (1.2 )
Net cash and cash equivalents at 31 March 36.9 28.2
Reconciliation to cash and cash equivalents in the consolidated
statement of financial position
Net cash and cash equivalents shown above 36.9 28.2
Add back: bank overdrafts 23 2.5 1.0
Cash and cash equivalents presented in current assets in the
consolidated statement of financial position 22 39.4 29.2
1 Further information on the consolidated statement of cash flows is provided in notes 24 and 25.
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Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
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 2022 were authorised for
issue by the Board of Directors on 14 June 2022. discoverIE Group plc is a public limited comp any incorporated
and domiciled in England , UK and the registered office is disclosed on page 207. The Company’s ordinary
shares are traded on the London Stock Exchange.
The significant accounting policies adopted by the Group are set out in note 2 and have been applied
consistently to all years presented in these consolidated Financial Statements.
2. Accounting policies
Statement of Compliance
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and
became UK-adopted International Accounting Standards, with future changes being subject to endorsement
by the UK Endorsement Board. The Group transitioned to UK-adopted International Accounting Standards
in its consolidated Financial Statements on 1 April 2021. This change constitutes a change in accounting
framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a
result of the change in framework.
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) and with requirements of
the Companies Act 2006 applicable to companies reporting under those standards.
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;
■ Disclosure in relation to capital management;
■ Disclosures in relation to financial instruments;
■ Disclosures in respect of the compensation of key management personnel;
■ 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 settled equity share-based payments;
■ Certain disclosures required by IFRS 13 Fair Value Measurement.
Basis of preparation
The Group 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 Financial
Statements for 2022. The ongoing risk assessment is detailed within the climate related risks and opportunities
section on pages 46 to 50 of the Risk Management section and on pages 67 to 69 of the Sustainability Report
in the Strategic Report section.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
2. Accounting policies continued
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, while 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 50% reduction in carbon emission from 2019 level 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 page 46 to 50 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.
Going concern
In line with IAS1 ‘Presentation of Financial Statements’ and revised guidance on ‘risk management, internal
control and related financial and business reporting’, management has taken into account all available
information about the future for a period of at least, but not limited to, 12 months from the date of approval of
the Financial Statements when assessing the Group’s and Company’s ability to continue as a going concern.
The Group’s business activities, together with factors which may adversely impact its future development,
performance and position, are set out in the Strategic Report on pages 02 to 81. 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 36 to 41.
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 committed facilities of £240m for
the foreseeable future.
The Viability Base Case, as stated on pages 52 to 53 has been subjected to sensitivity analysis involving flexing
a number of the underlying main assumptions, both individually and in conjunction. The sensitivities take into
account the principal risks and uncertainties set out on pages 54 to 59, notably instability in the economic
environment, underperformance of acquired businesses, climate related risks, loss of key customers and
suppliers, major business disruption, liquidity restriction, liquidity and debt covenants and adverse foreign
currency movements.
The most severe but plausible downside scenario assumes a worsening of the economic environment caused
by a prolonged Ukraine conflict, significant reduction in consumer demand due to inflationary pressures and a
resurgence of Covid-19. This downside scenario results in a significant decline in second half sales of FY 2022/23,
negative sales growth in FY 2023/24 and modest growth thereon in FY 2024/25. Additionally, operating margin
was reduced, working capital materially increased, significant one-off expenditures included (product liability,
major customer insolvency or litigation, climate change), interest rates increased significantly and an increase
in the Group effective tax rate.
After factoring in the significant additional downsides, there remains good headroom both in terms of liquidity
and our banking covenants. This is supported by the fact that the Group sells a wide portfolio of different
products across a diverse set of industries and geographies, 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 54 to 59 of the Strategic Report.
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Financial Statements
2. Accounting policies continued
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 be at risk of breaching 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 2% 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 2022 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 2022. 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.
The Group re-assesses 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, profit 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 into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of the Group are eliminated in full on
consolidation.
Prior year restatement
Discontinued Operations
The Group has restated the prior year comparatives in the consolidated Statement of Profit or Loss to exclude
the results of discontinued operations with the objective of ensuring that the amounts disclosed for the year
ended 31 March 2022 are comparable with the results for the year ended 31 March 2021 (the comparative
period). Details of the financial position and results for the discontinued operations can be found in note 12 to
the consolidated Financial Statements.
Following the disposal of the Group’s Custom Supply Division, the Group has reviewed its reporting of
operating performance to the Board, which is now organised into two new divisions: (i) Magnetics & Controls
(“M&C”) and (ii) Sensing & Connectivity (“S&C”). These have been assessed as the Reportable Operating
Segments of the Group as described in note 5 to these Financial Statements.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
2. Accounting policies continued
As a result, and according to requirements of IFRS 8 ‘Operating Segments’, the Group has changed the
disclosures in note 5 to reflect the new defined operating segments and has restated the corresponding items
of segment information for last year.
Presentation of the Consolidated Statement of Profit or Loss
Following the discontinuance of the Custom Supply division, there is a broad range of gross margins within
the operating companies of the Group which make operating profit margin a more consistent, reliable and
comparable indicator of ongoing performance of the continuing operations. Accordingly, the Company
has changed the presentation of the consolidated Statement of Profit and Loss for the year ending 31
March 2022 and the comparative prior year by amalgamating cost of sales, selling and distribution costs,
and administrative expenses into one line item namely operating costs. There is no change to the prior
year operating profit, profit before tax and profit for the year as a result of these presentational changes as
demonstrated in the below table:
2022
£m
2021
Restated*
£m
2021
original
£m
Revenue 379.2 302.8 454.3
Cost of Sales (233.0) (187.7) (299.0)
Gross profit 146.2 115.1 155.3
Selling and distribution costs (37.7) (32.3) (57.8)
Administrative expenses 87.6 (65.7) (76.8)
Operating profit 20.9 17.1 20.7
* Restated to exclude the results of discontinued operations as described in note 12 to the consolidated Financial Statements.
FY 2021/22 Financial Statements (with changes in presentation)
2021
Restated
£m
Revenue 302.8
Operating costs (285.7)
Operating profit 17.1
Configuration and Customisation costs in a Cloud Computing Arrangement
The Group has changed its accounting policy relating to the capitalisation of certain software costs; this
change follows the IFRIC Interpretation Committee’s agenda decision published in April 2021 and relates to the
capitalisation of costs of configuring or customising application software under ‘Software as a Service’ (‘SaaS’)
arrangements. The Group’s accounting policy has historically been to capitalise costs directly attributable to
the configuration and customisation of SaaS arrangements as intangible assets in the consolidated Statement
of Financial Position.
Following the adoption of the above IFRIC agenda guidance, the accounting policy was changed so that
the Group only capitalises costs relating to the configuration and customisation of SaaS arrangements as
intangible assets where control of the asset exists. As a result of this change in accounting policy, all current
SaaS arrangements were identified and assessed to determine if the Group has control of the asset.
For those arrangements where the Group does not have control of the developed asset, the Group
derecognised the intangible asset previously capitalised. The change in accounting policy led to adjustments
amounting to a £0.4m reduction in intangible assets and a £0.4m reduction in retained earnings in the
31 March 2021 consolidated Statement of Financial Position. The 2021 consolidated Statement of Profit or Loss
and Statement of Other Comprehensive Income have not been restated, as the impact on them is immaterial.
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Financial Statements
2. Accounting policies continued
Accordingly, the prior period consolidated Statement of Financial Position at 31 March 2021 have been restated
in accordance with IAS 8 requirements. The overall impact of the adjustment is not considered to be material
and, therefore, a consolidated Statement of Financial Position for 31 March 2020 has not been presented.
The tables below show the impact of the change in accounting policy on the previously reported financial position.
As previously
reported
2021
£m
Impact of
restatement
2021
£m
Restated
2021
£m
Intangible asset – other 63.3 (0.4) 62.9
Retained earnings 48.4 (0.4) 48.0
Underlying profits and earnings
These Financial Statements include alternative performance measures that are not prepared in accordance
with IFRS. These alternative performance measures have been selected by management to assist them
in making operating decisions as they represent the underlying operating performance of the Group and
facilitate internal comparisons of performance over time. See note 6.
Alternative performance measures are presented in these Financial Statements as management believe they
provide investors with a means of evaluating performance of the Group on a consistent basis, similar to the
way in which management evaluates performance, that is not otherwise apparent on an IFRS basis, given that
certain strategic non-recurring 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 alternative performance measures:
Underlying operating profit
“Underlying operating profit” is defined as operating profit from continuing operations excluding acquisition
related costs (namely amortisation of acquired intangible assets and acquisition expenses).
Acquisition expenses comprise transaction costs, contingent consideration relating to the retention of former
owners of acquired businesses, adjustments to previously estimated contingent consideration, and costs
related to integration of acquired businesses into the Group.
Underlying EBITDA
“Underlying EBITDA” is defined as underlying operating profit with depreciation, amortisation and equity
settled share-based payment expense added back.
Underlying profit before tax
“Underlying profit before tax” is defined as profit before tax from continuing operations excluding acquisition
related costs (namely amortisation of acquired intangible assets and acquisition expenses).
Underlying effective tax rate
“Underlying effective tax rate” is defined as the effective tax rate on underlying profit before tax.
Underlying earnings per share
“Underlying earnings per share” is calculated as underlying profit before tax reduced by the underlying
effective tax rate, divided by the weighted average number of ordinary shares (for diluted earnings per share
purposes) in issue during the year.
Operating cash flow
“Operating cash flow” is defined as underlying EBITDA adjusted for the investment in, or release of, working
capital and less the cash cost of capital expenditure.
Free cash flow
“Free cash flow” is defined as net cash flow from continuing operations before dividend payments, net
proceeds from equity fund raising, the cost of acquisitions and proceeds from business disposals.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
2. Accounting policies continued
Return On Capital Employed (“ROCE”)
“ROCE” is defined as underlying operating profit from continuing operations including the annualisation for
acquisitions as a percentage of net assets excluding net debt, deferred consideration related to discontinued
operations and legacy defined benefit pension asset/(liability).
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.
Non-current assets held for sale and discontinued operations
The Group reports a business as a discontinued operation when it has been disposed of in a period, or its future
sale is considered to be highly probable at the balance sheet date, and results in the cessation of a major line
of business or geographical area of operation. 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 balance sheet. The liabilities of a disposal group classified as
held for sale are presented separately from other liabilities in the balance sheet.
Discontinued operations are excluded from the results of continuing operations and are presented as a single
amount as profit or loss after tax from discontinued operations in the Statement of Profit or Loss. Additional
disclosures are provided in note 12. All other notes to the Financial Statements include amounts for continuing
operations, unless otherwise mentioned.
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 will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or
liability, will be recognised in accordance with IFRS 9 ‘Financial Instruments: Classification and measurement’
either in the consolidated Statement of Profit or Loss or in Other 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 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.
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Financial Statements
2. Accounting policies continued
Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill
associated with the disposed of operation is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is
measured based on the relative values of the operation disposed of and the portion of the CGU retained.
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 and supplier relationships 5 to 10 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 5 and 10 years and charged to the Statement of Profit or Loss.
The Group only capitalises costs relating to the configuration and customisation of SaaS arrangements 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 prepayment 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 life, 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 is 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
157
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
2. Accounting policies continued
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 cashflows 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 group 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.
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 entity 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 when 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.
Except for trade receivables without a significant financing component, a financial asset or a financial liability
that is not measured through profit or loss (FVTPL) is initially measured at fair value plus or minus transaction
costs that are directly attributable to its acquisition. A trade receivable without a significant financing
component is initially measured at the transaction price.
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.
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Financial Statements
2. Accounting policies continued
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 (ECLs). 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 over 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-down of financial assets
The gross carrying amount of a financial asset is written down to its recoverable amount when the Group has
no reasonable expectations 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.
Inventories
Inventories comprise goods held for resale and work in progress and are stated at the lower of cost and net
realisable value after making allowance for any obsolete or slow-moving items. Cost comprises direct materials,
inward carriage and, where applicable, direct labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition.
Cash and cash equivalents
Cash and cash equivalents in the consolidated Statement of Financial Position comprise cash balances and
short-term deposits with an original maturity of three months or less. For the purpose of the consolidated
Statement of Cash Flows, cash and cash equivalents comprise cash and cash equivalents as defined above, net
of outstanding bank overdrafts.
Borrowings
Borrowings are 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.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
2. Accounting policies continued
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.
A provision for an onerous contract is recognised when the expected benefits to be derived by the Group from
a contract are lower than the unavoidable cost of meeting its obligations under the contract.
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.
An asset can be identified either explicitly or implicitly. If implicitly, the asset is not mentioned in the contract,
but the supplier can fulfil the contract only by the use of a particular asset, in which case there may be an
identified asset. There is no identified asset if the supplier has a substantive right to substitute the asset.
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/services. The Group identifies the lease
and non-lease components and account for those separately, applying the relevant standard to each one.
Consideration is allocated to each lease component on the basis of the relative stand-alone price of the lease
component and the aggregate stand-alone price of the non-lease component.
Combination of contracts
Contracts are accounted together if they are entered into at or near the same time with the same counterparty
and in contemplation of another.
Lease term
The lease term is 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, and lease payments made at or before the commencement date 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.
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Financial Statements
2. Accounting policies continued
The lease payments also include 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.
Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless
they are incurred to produce inventories) 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 when the interest rate implicit in the lease is not readily determinable. The incremental
borrowing rate is a combination of government bond yields, used as a proxy for a risk-free rate, calculated over
various periods linked to existing lease terms. This rate is adjusted for borrowing costs and risks specific to
eachentity.
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, 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 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 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 benefit 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.
Actuarial remeasurement of the net defined benefit liability or asset 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), also excluding any
amount included in net interest on the net defined benefit liability or asset; 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
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 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 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.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
2. Accounting policies continued
At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which
the vesting period has expired and management’s best estimate of the achievement or otherwise of non-
market conditions and hence the number of equity instruments that will ultimately vest. The movement in
cumulative expense since the previous reporting date is recognised in the consolidated Statement of Profit or
Loss, with a corresponding entry in equity.
The issuance by the Company to its subsidiaries of a grant of options over the Company’s shares represents
additional capital contributions by the Company in its subsidiaries. The additional capital contribution is based
on the fair value of the grant issued, allocated over the underlying grant’s vesting period.
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 if it relates to items that are credited or charged to equity.
Otherwise income tax is recognised in the consolidated Statement of Profit or Loss.
Foreign currency translation
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate ruling
at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated
at the rate of exchange ruling at the reporting date and gains or losses on translation are included in the
consolidated Statement of Profit or Loss.
Currency gains and losses arising from the retranslation of the opening net assets of foreign operations are
recorded as a movement on reserves, net of tax. The differences that arise from translating the results of
overseas businesses at average rates of exchange, and their assets and liabilities at closing rates, are dealt with
in a separate currency translation reserve. All other currency gains and losses are dealt with in the consolidated
Statement of Profit or Loss.
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Financial Statements
2. Accounting policies continued
Revenue recognition
Revenue represents the fair value of the consideration received or receivable for goods, commission and other
services provided to third parties, after deducting discounts, VAT and similar taxes levied overseas. Revenue is
recognised 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.
Transaction price is allocated to each performance obligation on the basis of the relative stand-alone selling
prices of each distinct good or service promised in the contract. If a stand-alone 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 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.
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the Group satisfies a performance obligation
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 realises revenue from its principal activities through the sale of highly differentiated electronic
products on four target markets: renewable energy, transportation, medical and industrial & connectivity.
The following are the Group’s main revenue streams and criteria for control transfer:
a. Revenue from the sale of products
The Group recognises revenue from product sales at a point in time when the goods are delivered to, or
accepted by the customer, if later, and control over the goods is transferred.
To determine the point in time at which the control is transferred to the customer, the Group considers
whether or not:
a. The Group has a present right to payment for the asset;
b. The customer has acquired legal title to the asset;
c. The Group has transferred physical possession of the asset;
d. The customer has significant risks and rewards related to the ownership of the asset; and
e. The customer has accepted the asset.
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.
b. Revenue from rendering of services
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.
Discounts are allocated proportionately to all performance obligations in the contract, unless the Group can
demonstrate that the discount relates to one or more specific performance obligations.
Contract balances
Receivables
Receivables billed under the terms of the contract for delivered goods and services and are not conditional on
anything other than the passage of time. These assets are classified as Trade Receivables.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
2. Accounting policies continued
Contract liabilities
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 or/and payments received in advance 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.
Dividend 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.
Significant 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 2022 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 only): Goodwill is tested annually for impairment, in
accordance with IAS 36. An entity is required to ensure that its assets are not impaired and are carried at
no more than their recoverable amount, measured based on the sum of future cash flows expected to be
realised from sale or value-in-use. Assets which do not generate independent cash flows are required to be
grouped together into CGU’s 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.
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 the future accounting period(s). Note 18
provides more details;
■ Measurement of defined benefit obligations (Group only): The present value of the defined benefit
obligations depends on a number of factors that are determined on an actuarial basis using a number of
assumptions. The assumptions used in determining the net expense and balance sheet position include
discount rates, inflation and mortality rates. Any changes in these assumptions will impact the carrying
amount of defined benefit obligations. The actuarial assumptions used in determining the carrying amount
at 31 March 2022 are set out in note 32;
■ Fair value of assets acquired in a business combination (Group only): Estimates are made in assessment
of fair value of the consideration and net assets acquired, including the identification and valuation of
intangible assets and their useful lives. Estimates used include customer attrition rates, discount rate and
trading forecast. Note 11 provides details on business combinations;
164
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Financial Statements
2. Accounting policies continued
■ 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 like future revenue, operating profit,
discount rates and long term growth rates to calculate present values;
The following include information about judgements, assumptions and estimation uncertainties as at 31 March
2022 that are not considered significant and should not result in a material adjustment to the carrying amount
of assets and liabilities in the next financial year:
■ Recognition of deferred tax assets (Group only): Judgement around the availability of future taxable
profit against which tax deductible temporary differences and tax losses carried-forward can be utilised is
necessary for the recognition of deferred tax assets;
■ Estimating the incremental borrowing rate (Group only): Where entities in the Group are required to
recognise and measure a leasing liability, as lessee, lease payments should be discounted using the interest
rate implicit in the lease, but often this cannot be readily determined from the leasing contract. Instead, the
entity must determine its incremental borrowing rate, being the rate that the lessee would have to pay to
borrow over a similar term, with a similar security, the funds necessary to obtain an asset of a similar value
to the right of use asset, in a similar economic environment, considering factors such as the lessee’s credit
profile, borrowing currency and term of the lease. The process requires judgement in the determination of
an appropriate rate;
■ Inventories (Group only): The carrying amounts of inventories are stated with due allowance for excess,
obsolete or slow-moving items. The Directors exercise judgement in assessing net realisable value.
Provisions for slow-moving and obsolete inventory are based on management’s assessment of the nature
and condition of the inventory, including assumptions around future demand and market conditions;
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 2021:
■ IFRS 7 Financial Instruments: Disclosures – Amendment (replacement issues in the context of IBOR reform);
■ IFRS 9 Financial Instruments – Amendment (replacement issues in the context of IBOR reform);
■ IFRS 16 Leases – Amendment (replacement issue in the context of IBOR reform);
■ IAS 39 Financial Instruments: Recognition and Measurement – Amendment (replacement issues in the
context of the IBOR reform.
■ IFRS 16 Leases – Amendment (Covid-19-related rent concessions)
These and other amendments, changes and improvements to IFRS issued by 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 and interpretations have been published that are not mandatory for 31
March 2022 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.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
4. Revenue
Group revenue is analysed below:
2022
£m
2021
restated*
£m
Sale of goods 370.0 293.5
Rendering of services 9.2 9.3
Total revenue from continuing operations 379.2 302.8
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
5. Operating segment information
During the year, the Group completed the disposal of its Custom Supply Division, as described in note 12. As a
result of the disposal, the Group has reorganised its businesses into two distinct divisions, Magnetics & Controls
(“M&C”) and Sensing & Connectivity (“S&C). These have been assessed as the new Reportable Operating
Segments in accordance with IFRS 8 ‘Operating Segments’. The senior management structure has also been
aligned with these two segments.
Within each of the above reportable operating segment 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.
Segment revenue and results
2022
Magnetics &
Controls
£m
Sensing &
Connectivity
£m
Unallocated
Costs
£m
Total
continuing
operations
£m
Revenue 234.7 144.5 – 379.2
Result
Underlying operating profit/(loss) 29.8 23.3 (11.7) 41.4
Acquisition expenses (1.4) (5.1) – (6.5)
Amortisation of acquired intangible assets (4.8) (9.2) – (14.0)
Operating profit/(loss) 23.6 9.0 (11.7) 20.9
2021 (restated*)
Magnetics &
Controls
£m
Sensing &
Connectivity
£m
Unallocated
Costs
£m
Total
continuing
operations
£m
Revenue 190.4 112.4 – 302.8
Result
Underlying operating profit/(loss) 23.4 15.5 (8.1) 30.8
Acquisition expenses 0.4 (1.6) – (1.2)
Amortisation of acquired intangible assets (3.5) (7.6) – (11.1)
IAS 19 pension charge – – (1.4) (1.4)
Operating profit/(loss) 20.3 6.3 (9.5) 17.1
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
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Financial Statements
5. Operating segment information continued
Segment assets and liabilities
2022
Assets and liabilities
Magnetics &
Controls
£m
Sensing &
Connectivity
£m
Total
£m
Segment assets (excluding goodwill and other intangible assets) 126.3 69.4 195.7
Goodwill and other intangible assets 126.7 136.6 263.3
253.0 206.0 459.0
Central assets 11.4
Cash and cash equivalents 39.4
Pension asset 2.7
Current and deferred tax assets 10.8
Total assets 523.3
Segment liabilities (77.5) (41.9) (119.4)
Central liabilities (15.1)
Other financial liabilities (69.6)
Current and deferred tax liabilities (28.8)
Total liabilities (232.9)
Net assets 290.4
2021
Assets and liabilities
Magnetics &
Controls
£m
Sensing &
Connectivity
£m
Discontinued
operations
£m
Total
£m
Segment assets (excluding goodwill and other
intangible assets) 81.3 63.2 51.7 196.2
Goodwill and other intangible assets 65.1 114.6 10.2 189.9
146.4 177.8 61.9 386.1
Central assets 3.2
Cash and cash equivalents 29.2
Current and deferred tax assets 9.7
Total assets 428.2
Segment liabilities (45.0) (33.7) (36.3) (115.0)
Central liabilities (9.3)
Other financial liabilities (76.4)
Pension liability (1.0)
Current and deferred tax liabilities (18.1)
Total liabilities (219.8)
Net assets 208.4
For the purposes of monitoring segment performance and allocating resources between segments, the
Directors monitor the net assets attributable to each segment. Assets and liabilities are allocated to reportable
segments, with the exception of the pension liability, tax assets and liabilities, cash and all borrowings, central
assets (Head Office assets) and central liabilities (Head Office liabilities).
167
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
5. Operating segment information continued
Other segment information
Depreciation and
amortisation
1
Additions to non
current assets
1
2022
£m
2021
£m
2022
£m
2021
£m
Magnetics & Controls 10.8 8.9 76.1 1.9
Sensing & Connectivity 13.1 11.1 34.4 24.0
Central 0.3 0.4 0.8 1.7
24.2 20.4 111.3 27.6
1
Includes right of use assets, goodwill, acquired intangibles and related amortisation.
Magnetics & Controls additions comprised intangible assets £26.3m, goodwill £37.0m, right of use assets £9.3m
and tangible assets £3.5m. Sensing & Connectivity additions comprised intangible assets £13.1m, goodwill
£16.7m, right of use assets £3.3m and tangible assets £1.3m. Central additions comprised intangible assets
£0.2m and tangible assets £0.6m.
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
2022
£m
2021
restated*
£m
2022
£m
2021
£m
UK 41.8 36.0 79.9 57.3
Europe 181.2 155.4 145.4 166.7
Rest of the World 156.2 111.4 98.9 21.0
379.2 302.8 324.2 245.0
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
6. Underlying profit before tax
2022
£m
2021
restated*
£m
Profit before tax 17.1 13.5
Add back Acquisition expenses (a) 6.5 1.2
Amortisation of acquired intangible assets (b) 14.0 11.1
Total IAS 19 pension charge (c) – 1.4
Underlying profit before tax 37.6 27.2
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
The tax impact of the underlying profit adjustments above is a credit of £2.0m (2021: £2.5m).
a. Acquisition and merger related expenses of £6.5m comprise £2.6m of transaction costs in relation to the
acquisition of CPI, Antenova, Beacon and ongoing transactions; £3.5m charge relating to the movement in
fair value of contingent consideration and assets acquired on past acquisitions; and £0.4m charge in relation
to the integration of acquired businesses in North America.
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Financial Statements
6. Underlying profit before tax continued
During the prior year there were £1.2m of acquisition and merger related expenses. £1.0m of transaction
costs were incurred in relation to the acquisition of Phoenix, Limitor and ongoing transactions. There was a
net contingent consideration credit of £0.2m in relation to current and past acquisitions and £0.4m charge
in relation to the integration of acquired businesses in North America.
b. Amortisation charge for intangible assets recognised on acquisition of £14.0m being amortisation of
acquired customer relationships and patents. The equivalent charge last year was £11.1m. The increase
relates to the five acquisitions during the last two years (Phoenix in October 2020, Limitor in February 2021,
CPI in May 2021, Antenova in August 2021 and Beacon in September 2021).
c. Pension costs in the prior periods related to a one-off adjustment relating to historic commutation terms for
legacy scheme members.
7. Operating profit
Amounts charged/(credited) to the consolidated Statement of Profit or Loss are as follows
2022
£m
2021
restated*
£m
Employee costs (note 8) 86.0 71.1
Depreciation of property, plant and equipment (note 15) 4.7 4.5
Depreciation of right of use assets (note 16) 5.1 4.0
Amortisation of other intangible assets (note 19) 14.9 11.7
Expected Credit Losses (note 21) 1.2 0.2
Net foreign exchange differences (0.2) (0.1)
Inventories:
Cost of inventories 227.2 168.3
Write-down of inventories to net realisable value 2.6 1.7
Auditors’ remuneration:
Audit of the Group financial statements (including parent company) 0.6 0.4
Audit of local subsidiary financial statements 0.8 0.6
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
The fee for non-audit services was £4k (2021: £8k). These mainly relate toreporting required by regulators in
overseas countries.
8. Employee costs and Directors’ emoluments
2022
£m
2021
restated*
£m
Wages and salaries 70.6 58.5
Social security costs 10.3 8.5
Other pension costs 3.2 3.0
Share-based payments (note 31) 1.9 1.1
86.0 71.1
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
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Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
8. Employee costs and Directors’ emoluments continued
The average monthly number of employees (including Executive Directors) during the year was as follows:
2022
2021
restated*
Sales and marketing 264 262
Manufacturing and service 3,779 3,192
Administration 479 432
4,522 3,886
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
At 31 March 2022 the Group had 4,886 employees (2021: 4,024 restated).
Directors’ emoluments
2022
£
2021
£
Aggregate emoluments in respect of qualifying services 1,980,849 1,271,111
Aggregate contribution to defined contribution scheme 94,671 79,230
2,075,520 1,350,341
Highest paid director
Emoluments in respect of qualifying services 1,236,618 787,360
Pension contributions to the defined contribution scheme 73,514 61,523
1,310,132 848,883
Retirement benefits are accruing to two Directors under a defined contribution pension scheme (2021: two).
Further details of Directors’ emoluments are provided in the remuneration report on pages 109 to 132.
9. Finance income/(costs)
2022
£m
2021
restated*
£m
Interest receivable and similar income 0.4 0.3
Finance income 0.4 0.3
Finance costs on bank loans and overdrafts (3.1) (3.0)
Finance costs on lease liabilities (0.6) (0.4)
Amortisation of borrowing costs (0.5) (0.5)
Finance costs (4.2) (3.9)
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
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Financial Statements
10. Tax expense
The major components of the corporation tax expense are summarised below:
2022
£m
2021
restated*
£m
Current taxation:
UK corporation tax (0.1) –
UK adjustments in respect of prior years 0.2 –
0.1 –
Overseas tax 8.6 6.7
Overseas adjustments in respect of prior years 0.1 –
8.7 6.7
Total current taxation expense 8.8 6.7
Deferred taxation
Origination and reversal of temporary differences within the UK (1.3) (1.1)
Origination and reversal of temporary differences overseas (1.0) (1.2)
Increased recognition of historic losses 0.2 (0.4)
Impact of tax rate changes 0.7 –
Total deferred taxation credit (1.4) (2.7)
Tax expense reported in the consolidated Statement of Profit or Loss 7.4 4.0
Tax recognised in other comprehensive expense
2022
£m
2021
£m
(Decrease)/increase in deferred tax asset on pension (0.5) 0.6
Tax reported in other comprehensive expense (0.5) 0.6
Tax recognised in equity
2022
£m
2021
£m
Increase in deferred tax asset on share based payments 1.5 1.3
Tax reported in equity 1.5 1.3
171
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
10. Tax expense continued
The effective rate of taxation for the year is higher (2021: higher) than the standard rate of taxation in the UK of
19% (2021: 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 2022 and 31 March 2021
respectively is presented below:
2022
£m
2021
restated*
£m
Profit before tax 17.1 13.5
Profit before taxation multiplied by standard rate of corporation tax in the UK of
19% (2021: 19%) 3.2 2.6
Effect of:
Different tax rates in overseas companies 1.5 1.0
Tax losses not recognised 0.3 –
Non-deductible expenses 1.1 0.8
Decreased/(increased) recognition of historic losses 0.2 (0.4)
Impact of tax rate changes on deferred tax 0.7 –
Adjustments to current taxation expense in respect of prior years 0.4 –
Total tax reported in the consolidated Statement of Profit or Loss 7.4 4.0
Deferred tax
Deferred tax liabilities
2022
£m
2021
£m
Accelerated capital allowances (0.8) (0.3)
Intangibles (18.3) (11.1)
Pensions (0.6) –
Other temporary differences (1.4) (1.1)
Gross deferred tax liabilities (21.1) (12.5)
Deferred tax assets
Decelerated capital allowances – 0.2
Pensions 0.4 0.7
Tax losses 3.4 2.2
Share-based payment plans 3.8 3.5
Other temporary differences 1.6 1.3
Gross deferred tax assets 9.2 7.9
£2.6m of deferred tax assets and £3.6m of deferred tax liabilities are expected to be recovered or settled no
more than twelve months after the reporting period. £6.6m of deferred tax assets and £17.5m of deferred tax
liabilities are expected to be recovered or settled more than twelve months after the reporting period.
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Financial Statements
10. Tax expense continued
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 2020 – (11.5) – 2.2 2.2 (0.2) (7.3)
(Charged)/credited
- to profit and loss* (0.1) 2.1 0.1 – – 0.4 2.5
- to other comprehensive
income
– – 0.6 – – – 0.6
- directly to equity – – – – 1.3 – 1.3
Discontinued operations* – – – – – (0.1) (0.1)
Acquisition-related
movements
– (1.6) – – – – (1.6)
At 31 March 2021 (0.1) (11.0) 0.7 2.2 3.5 0.1 (4.6)
(Charged)/credited
- to profit and loss (0.5) 1.2 (0.3) 2.1 (1.2) 0.2 1.5
- to other comprehensive
income
– – (0.5) – – – (0.5)
- directly to equity – – – – 1.5 – 1.5
Discontinued operations (0.2) – (0.1) (0.9) – (0.1) (1.3)
Acquisition-related
movements
– (8.5) – – – – (8.5)
At 31 March 2022 (0.8) (18.3) (0.2) 3.4 3.8 0.2 (11.9)
* 2021 restated. Refer to note 2 to the consolidated Financial Statements.
At 31 March 2022, the Group had not recognised any deferred tax asset in respect of tax losses of approximately
£23.1m (2021: £19.8m). Deferred tax assets are not recognised where there is insufficient evidence that losses
will be utilised.
At 31 March 2022, a £0.6m deferred tax liability (2021: £0.5m) 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 £18.9m (2021: £12.9m). 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 19% will be applicable until the 25% rate becomes effective. Rates of 19% and 25%
have been applied in the measurement of the Group’s UK-based deferred tax assets and liabilities at 31 March
2022, based on an estimate of when the UK deferred tax is expected to crystallise.
173
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
11. Business combinations
Acquisitions in the year ended 31 March 2022
Acquisition of CPI
On 13 May 2021, the Group completed the acquisition of Control Products Inc (“CPI”) via the purchase of 100% of
the share capital and voting equity interests of Calculagraph Corporation, and which trades under the name of
Control Products Inc (“CPI”). CPI, based in the USA, is a designer and manufacturer of custom, rugged sensors
and switches.
CPI was acquired for an initial cash consideration of £8.9m ($12.5m), before expenses, funded from the Group’s
existing debt facilities. In addition, a contingent payment of up to £3.8m ($5.4m) will be payable subject to
CPI achieving certain operational and profit growth targets during the four-year period ending 31 March 2025.
£2.2m ($3.2m) fair value of contingent consideration has been accounted for in the purchase price at the
acquisition date.
The provisional fair value of the identifiable assets and liabilities of CPI at the date of acquisition were:
Provisional
fair value
recognised
at acquisition
£m
Intangible assets – other (customer relationships) 4.4
Right of use assets 0.6
Inventories 0.9
Trade and other receivables 0.4
Net cash 0.6
Trade and other payables (0.3)
Provisions (0.1)
Lease liabilities (0.6)
Total identifiable net assets 5.9
Provisional goodwill arising on acquisition 5.2
Total investment 11.1
Discharged by
Initial cash consideration 8.9
Contingent consideration 2.2
11.1
Net cash outflows in respect of the acquisition comprise:
Total
£m
Fair value of cash consideration 8.9
Transaction costs of the acquisition (included in operating cash flows)
1
0.5
Net cash acquired (0.6)
8.8
1
Acquisition costs of £0.4m and £0.1m were expensed as incurred in the period ended 31 March 2022 and the year ended 31 March 2021
respectively. These were included within operating costs (note 6).
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Financial Statements
11. Business combinations continued
Included in cash flow from investing activities is the cash consideration of £8.9m and the net cash acquired
of £0.6m.
From the date of acquisition to 31 March 2022, CPI contributed £5.7m to revenue and £0.7m 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 £379.7m and the consolidated profit after tax for the Group would
have been £9.8m.
Included in the £5.2m of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured from the acquiree, due to their nature. These include the value of expected
operational benefits.
All the acquired receivables are expected to be collected.
Acquisition of Antenova
On 25 August 2021, the Group completed the acquisition of 100% of the share capital and voting equity
interests of Antenova Ltd (“Antenova”). Antenova, based in the UK, is a designer and manufacturer of antennas
and radio frequency (RF) modules for industrial connectivity applications.
Antenova was acquired for a cash consideration of £20.9m, before expenses, funded from the Group’s existing
debt facilities.
The provisional fair value of the identifiable assets and liabilities of Antenova at the date of acquisition were:
Provisional
fair value
recognised
at acquisition
£m
Property, plant and equipment 0.2
Intangible assets – other (customer relationships) 8.2
Intangible assets – other (software) 0.1
Right of use assets 0.3
Inventories 1.0
Trade and other receivables 0.9
Net cash 3.0
Trade and other payables (1.2)
Current tax liabilities (0.1)
Deferred tax liabilities (1.9)
Lease liabilities (0.3)
Total identifiable net assets 10.2
Provisional goodwill arising on acquisition 10.7
Total investment 20.9
Discharged by
Cash 20.9
20.9
175
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
11. Business combinations continued
Net cash outflows in respect of the acquisition comprise:
Total
£m
Fair value of cash consideration 20.9
Transaction costs of the acquisition (included in operating cash flows)
1
0.6
Net cash acquired (3.0)
18.5
1
Acquisition costs of £0.6m were expensed as incurred in the year ended 31 March 2022. These were included within operating costs (note 6).
Included in cash flow from investing activities is the cash consideration of £20.9m and the net cash acquired
of £3.0m.
From the date of acquisition to 31 March 2022, Antenova contributed £4.8m to revenue and £0.3m 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 £382.9m and the consolidated profit after tax for the
Group would have been £10.2m.
Included in the £10.7m of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured from the acquiree, due to their nature. These include the value of expected
operational benefits.
All the acquired receivables are expected to be collected.
Acquisition of Beacon
On 2 September 2021, the Group completed the acquisition of Beacon EmbeddedWorks (“Beacon”) via the
purchase of 100% of the share capital and voting equity interests of Logic PD Inc which trades under the
name of Beacon EmbeddedWorks. Based in the USA, Beacon is a designer, manufacturer and supplier of
custom System on Module (SOM) embedded computing boards and related software, supplying the medical,
industrial and aerospace & defence markets in the USA.
Beacon was acquired for a cash consideration of £57.7m ($79.4m), before expenses, funded from the Group’s
existing debt facilities.
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Financial Statements
11. Business combinations continued
The provisional fair value of the identifiable assets and liabilities of Beacon at the date of acquisition were:
Provisional
fair value
recognised
at acquisition
£m
Property, plant and equipment 0.4
Intangible assets – other (customer relationships) 25.1
Right of use assets 2.2
Inventories 2.9
Trade and other receivables 1.9
Trade and other payables (3.6)
Provisions (0.2)
Deferred tax liabilities (6.3)
Lease liabilities (2.2)
Total identifiable net assets 20.2
Provisional goodwill arising on acquisition 37.0
Total investment 57.2
Discharged by
Initial cash consideration 57.7
Working capital purchase price adjustment (0.5)
57.2
Net cash outflows in respect of the acquisition comprise:
Total
£m
Fair value of cash consideration 57.7
Working capital purchase price adjustment (0.5)
Transaction costs of the acquisition (included in operating cash flows)
1
0.6
57.8
1
Acquisition costs of £0.9m were expensed as incurred in the period ended 31 March 2022. These were included within operating costs. £0.3m
of costs remained unpaid at 31 March 2022 (note 6).
Included in cash flow from investing activities is the cash consideration of £57.7m.
From the date of acquisition to 31 March 2022, Beacon contributed £9.0m to revenue and loss of £1.3m 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 £386.9m and the consolidated profit after tax for the
Group would have been £10.3m.
Included in the £37.0m of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured from the acquiree, due to their nature. These include the value of expected
operational benefits.
All the acquired receivables are expected to be collected.
177
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
11. Business combinations continued
Acquisitions in the year ended 31 March 2021
There have been no changes to the provisional fair values of the assets and liabilities acquired in the prior year.
Acquisition of Phoenix
On 13 October 2020, the Group completed the acquisition of the trade and assets of Phoenix America Inc
(“Phoenix”). The trade and assets were transferred to a newly incorporated company, Phoenix America LLC.
Phoenix was acquired for an initial cash consideration of £8.5m ($10.9m) and funded from the Group’s
existing debt facilities. In addition, a contingent payment of up to £1.2m ($1.5m) will be payable to the
management shareholder subject to Phoenix achieving certain profit targets during the three-year period
ended 31 December 2023. The fair value of the contingent consideration will be recognised in the consolidated
Statement of Profit or Loss over the performance period.
Phoenix, based in the USA, is a designer and manufacturer of magnetically actuated sensors, encoders and
related products for industrial customers.
The fair value of the identifiable assets and liabilities of Phoenix at the date of acquisition were:
Fair value
recognised
at acquisition
£m
Property, plant and equipment 0.5
Intangible assets – other 3.3
Inventories 0.7
Trade and other receivables 0.5
Trade and other payables (0.2)
Total identifiable net assets 4.8
Provisional goodwill arising on acquisition 3.7
Total investment 8.5
Discharged by
Cash 8.5
8.5
Included in the £3.7m of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured from the acquiree, due to their nature. These include the value of expected
operational benefits.
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Financial Statements
11. Business combinations continued
Net cash outflows in respect of the acquisition comprise:
Total
£m
Fair value of cash consideration 8.5
Transaction costs of the acquisition (included in operating cash flows)
1
0.4
8.9
1
Acquisition costs of £0.1m and £0.3m were expensed as incurred in the years ended 31 March 2021 and 31 March 2020 respectively. These
were included within operating costs (note 6).
Included in cash flow from investing activities is the cash consideration of £8.5m.
From the date of acquisition to 31 March 2021, Phoenix contributed £2.5m to revenue and £0.2m to profit after
tax of the Group. If the business combination had taken place at the beginning of the year, the consolidated
revenue for the Group would have been £305.0m and the consolidated profit after tax for the Group would
have been £9.8m.
Acquisition of Limitor
On 11 February 2021, the Group completed the acquisition of the Limitor Group (“Limitor”) via the purchase
of 100% of the share capital and voting equity interests of Limitor GmbH and its subsidiary company Limitor
Solutions GmbH and 100% of the share capital and voting equity interests of Limitor Hungaria Kft.
Limitor was acquired for an initial cash consideration of £12.8m (€14.6m), before expenses, funded from the
Group’s existing debt facilities. In addition, a contingent payment of up to £3.1m (€3.5m) will be payable
subject to Limitor achieving certain operational and profit growth targets during the three-year period ended
31 March 2024. £0.4m of contingent consideration has been accounted for in the purchase price with the
remaining fair value of the contingent consideration to be recognised in the consolidated Statement of Profit
or Loss over the performance period.
Limitor, based in Germany and Hungary, designs and manufactures custom thermal safety components for
industrial markets.
179
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
11. Business combinations continued
The fair value of the identifiable assets and liabilities of Limitor at the date of acquisition were:
Fair value
recognised
at acquisition
£m
Property, plant and equipment 0.8
Intangible assets – other 6.5
Inventories 0.7
Trade and other receivables 0.9
Cash and cash equivalents 1.0
Trade and other payables (0.8)
Current tax asset 0.1
Deferred tax liabilities (1.6)
Total identifiable net assets 7.6
Provisional goodwill arising on acquisition 6.2
Total investment 13.8
Discharged by
Initial cash consideration 12.8
Purchase price adjustment - settled in 2022 0.6
Contingent consideration 0.4
13.8
Included in the £6.2m of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured from the acquiree, due to their nature. These include the value of expected
operational benefits.
Net cash outflows in respect of the acquisition comprise:
Total
£m
Fair value of cash consideration 12.8
Purchase price adjustment – settled in 2022 0.6
Transaction costs of the acquisition (included in operating cash flows)
1
0.5
Net cash acquired (1.0)
12.9
1
Acquisition costs of £0.5m were expensed as incurred in the year ended 31 March 2021 and were included within operating costs (note 6).
Included in cash flow from investing activities is the cash consideration of £12.8m and the net cash acquired
of £1.0m.
From the date of acquisition to 31 March 2021, Limitor contributed £1.3m to revenue and £0.2m to profit after
tax of the Group. If the business combination had taken place at the beginning of the year, the consolidated
profit after tax for the Group would have been £10.2m and the consolidated revenue for the Group would have
been £309.7m.
The purchase price adjustment has changed the amount of Goodwill recognised for this acquisition.
180
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Financial Statements
12. Discontinued operations and assets held for sale
Disposals in the year ended 31 March 2022
During the year, the Group exited its distribution business by completing the disposal of its Acal BFi business
and Vertec Scientific SA Proprietary Limited, which together has been referred to as the disposal group.
The disposal of the Acal BFi business completed on 3 March 2022 for an initial cash consideration of £37.6m
net of normalised working capital adjustment and debt-like adjustments, and before expenses. In addition,
deferred consideration (loan note) of £5m will be payable 3 years from completion of the disposal.
The disposal of Vertec Scientific SA Proprietary Limited completed on 5 January 2022 for an initial cash
consideration of £1.3m, before expenses. In addition, deferred consideration of £0.9m will be payable over a
3-year period from completion.
The disposal group generated a profit on disposal of £6.6m, which is summarised below:
Total
£m
Net consideration 44.8
Net assets disposed of (33.1)
Cumulative exchange loss reclassified from equity to the consolidated Statement of Profit or
Loss (2.0)
Transaction costs (3.1)
Profit on disposal 6.6
Consideration received:
Net upfront cash consideration received 38.9
Deferred consideration 5.9
Net consideration receivable 44.8
Net assets disposed of:
Property, plant and equipment 1.4
Right of use assets 6.6
Intangible assets – Goodwill 9.4
Intangible assets – Other 1.0
Inventories 13.7
Trade and other receivables 34.8
Cash 1.6
Trade and other payables (26.4)
Current tax liabilities (1.4)
Lease liability (5.9)
Provisions (2.0)
Deferred tax assets 0.3
Net assets disposed of 33.1
Net cash inflow from disposal:
Cash consideration 38.9
Cash disposed (1.6)
Transaction costs of disposal (included in operating cash flows) (2.4)
Net cash inflow on disposal 34.9
181
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
12. Discontinued operations and assets held for sale continued
The results of the disposal group are shown as discontinued operations for the year and the prior year and are
presented below:
2022
£m
2021
£m
Revenue 162.7 151.5
Operating costs (150.3) (147.9)
Operating profit 12.4 3.6
Finance costs (0.2) (0.1)
Profit before tax from operating activities 12.2 3.5
Tax expense (2.9) (1.0)
Profit for the year from operating activities 9.3 2.5
Gain on sale of discontinued operations 6.6 –
Tax expense on gain on sale of discontinued operations (0.4) –
Profit for the year from discontinued operations 15.5 2.5
Earnings per share
2022
£m
2021
£m
Basic profit per share on discontinued operations 16.7p 2.8p
Diluted profit per share on discontinued operations 16.2p 2.7p
The operating profit for 2022 excludes £1.0m of depreciation charge on non-current assets as a result of them
being classified as held for sale as at 30 September 2021.
Operating costs include £0.1m (2021: £0.2m) for auditors remuneration in relation to discontinued operations.
Cash flows relating to trading activity of discontinued operations
2022
£m
2021
£m
Net cash inflow from operating activities 5.9 11.9
Net cash outflows from investing activities (0.3) (0.1)
Net cash outflows from financing activities (2.1) (2.3)
Net increase in cash and cash equivalents 3.5 9.5
13. Dividends
Dividends recognised in equity as distributions to equity holders in the year:
2022
£m
2021
£m
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2021 of 7.0p (2020: 0.0p) 6.2 –
Interim dividend for the year ended 31 March 2022 of 3.35p (2021: 3.15p) 3.2 2.8
Total amounts recognised as equity distributions during the year 9.4 2.8
182
discoverIE Group plc Innovative Electronics
Financial Statements
13. Dividends continued
Proposed for approval at AGM:
2022
£m
2021
£m
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2022 of 7.45p (2021: 7.0p) 7.1 6.2
Summary
Dividends per share declared in respect of the year 10.8p 10.15p
Dividends per share paid in the year 10.35p 3.15p
Dividends paid in the year £9.4m £2.8m
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 parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is the basic earnings per share after allowing for the dilutive effect of the conversion
into ordinary shares of the weighted average number of options outstanding during the year.
The following reflects the income and share data used in the basic and diluted earnings per share
computations:
2022
£m
2021
£m
Profit for the year attributable to equity holders of the parent:
Continuing operations 9.7 9.5
Discontinued operations 15.5 2.5
Profit after tax for the year 25.2 12.0
Number Number
Weighted average number of shares for basic earnings per share 93,015,684 88,753,576
Effect of dilution – share options 2,783,673 3,469,048
Adjusted weighted average number of shares for diluted earnings per share 95,799,357 92,222,624
Basic earnings per share from continuing operations 10.4p 10.7p
Diluted earnings per share from continuing operations 10.1p 10.3p
Basic earnings per share 27.1p 13.5p
Diluted earnings per share 26.3p 13.0p
Underlying earnings per share is calculated as follows:
2022
£m
2021
£m
Profit after tax for the year from continuing operations 9.7 9.5
Acquisition expenses 6.5 1.2
Amortisation of acquired intangible assets 14.0 11.1
IAS 19 pension charge – 1.4
Tax effect of the above (2.0) (2.5)
Underlying profit after tax 28.2 20.7
183
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
14. Earnings per share continued
Number Number
Weighted average number of shares for basic earnings per share 93,015,684 88,753,576
Effect of dilution – share options 2,783,673 3,469,048
Adjusted weighted average number of shares for diluted earnings per share 95,799,357 92,222,624
Underlying earnings per share 29.4p 22.4p
At the year end, there were 2,985,201 ordinary share options in issue that could potentially dilute underlying
earnings per share in the future, of which 2,783,673 are currently dilutive (2021: 3,928,273 in issue and 3,469,048
dilutive).
15. Property, plant and equipment
Land and
buildings
£m
Leasehold
improvements
£m
Plant and
equipment
£m
Total
£m
Cost
At 1 April 2020 11.4 4.0 32.8 48.2
Reclassification 0.3 (0.1) (0.2) –
Additions – 0.3 2.9 3.2
Disposals (0.3) (0.1) (0.5) (0.9)
Arising from business combinations (note 11) – 0.3 1.0 1.3
Exchange adjustments (0.7) – (1.4) (2.1)
At 31 March 2021 10.7 4.4 34.6 49.7
Additions – 0.9 4.5 5.4
Disposals – – (0.6) (0.6)
Arising from business combinations (note 11) 0.1 – 0.6 0.7
Business disposed (note 12) (2.0) (1.6) (2.4) (6.0)
Exchange adjustments – 0.2 0.3 0.5
At 31 March 2022 8.8 3.9 37.0 49.7
Accumulated depreciation
At 1 April 2020 3.4 2.2 17.4 23.0
Reclassification 0.3 (0.1) (0.2) –
Charge for the year 0.4 0.4 4.1 4.9
Disposals (0.1) (0.1) (0.4) (0.6)
Exchange adjustments (0.2) (0.2) (0.7) (1.1)
At 31 March 2021 3.8 2.2 20.2 26.2
Charge for the year 0.4 0.4 3.9 4.7
Disposals (0.1) – (0.4) (0.5)
Business disposed (note 12) (1.5) (1.3) (1.8) (4.6)
Exchange adjustments – 0.1 0.3 0.4
At 31 March 2022 2.6 1.4 22.2 26.2
Net book value at 31 March 2022 6.2 2.5 14.8 23.5
Net book value at 31 March 2021 6.9 2.2 14.4 23.5
184
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Financial Statements
15. Property, plant and equipment continued
Land and buildings includes land with a cost of £0.4m (2021: £0.8m) that is not subject to depreciation.
At 31 March 2022 the Group had non-contractual capital expenditure commitments for plant and equipment
and leasehold improvements of £0.6m (2021: £1.1m) for which no provision has been made. The commitments
are expected to be satisfied within one year of 31 March 2022.
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 3 and 10 years. Lease contracts
generally include extension and termination options and variable lease payments.
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 2020 18.7 2.4 21.1
Additions/modifications 6.7 1.7 8.4
Depreciation charge (5.0) (1.6) (6.6)
Exchange adjustments (0.5) – (0.5)
At 31 March 2021 19.9 2.5 22.4
Additions/modifications 8.8 1.0 9.8
Depreciation charge (4.8) (1.3) (6.1)
Terminations (0.5) (0.2) (0.7)
Business acquired (note 11) 1.9 1.2 3.1
Business disposed (note 12) (5.5) (1.1) (6.6)
At 31 March 2022 19.8 2.1 21.9
185
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
16. Leases continued
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 2020 (20.0)
Additions/modifications (8.1)
Interest for the year (0.6)
Lease payments 6.7
Exchange adjustments 0.5
At 31 March 2021 (21.5)
Additions/modifications (9.3)
Interest for the year (0.8)
Lease payments 7.2
Terminations 0.7
Business acquired (note 11) (3.1)
Business disposed (note 12) 5.9
Exchange adjustments (0.2)
At 31 March 2022 (21.1)
2022
£m
2021
£m
Current liabilities 4.7 4.8
Non-current liabilities 16.4 16.7
21.1 21.5
Payment of lease liabilities are shown under Financing Activities in the consolidated Statement of Cash Flows.
16.4 Amounts recognised in the consolidated Statement of Profit or Loss*
2022
£m
2021
restated*
£m
Depreciation of right of use assets 5.1 4.0
Interest expense (included in finance costs) 0.6 0.4
5.7 4.4
*The amounts presented above exclude discontinued operations.
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.
Variable lease payments based upon an index or rate are accounted for once rental amounts are changed.
186
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Financial Statements
17. Intangible assets – goodwill
Cost £m
At 1 April 2020 154.1
Arising from business combinations 9.3
Exchange adjustments 1.3
At 31 March 2021 164.7
Arising from business combinations 53.7
Business disposed (note 11) (46.2)
Exchange adjustments 3.5
At 31 March 2022 175.7
Impairment £m
At 1 April 2020 and at 31 March 2021 (36.8)
Business disposed (note 12) 36.8
At 31 March 2022 –
Net book value at 31 March 2022 175.7
Net book value at 31 March 2021 127.9
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 they can be
integrated.
Following disposal of the Group’s Custom Supply Division, as described in note 5, the Group’s operations
were reorganised 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:
2022
£m
2021
£m
Discontinued operations – 9.6
Magnetics & Controls 89.3 49.5
Sensing & Connectivity 86.4 68.8
175.7 127.9
The movement in goodwill compared to prior year relates to the movement in foreign exchange with the
exception of Acal BFi, which was disposed of during the year (note 12) and CPI, Antenova and Beacon which
were acquired in the year (note 11).
In the prior year, Noratel and Hobart businesses were integrated and therefore have been considered as
one CGU for impairment testing. During the year the recently acquired businesses namely Positek, Phoenix,
Limitor and CPI were integrated with the Variohm CGU. Prior to the integration, the individual businesses were
tested for impairment to ensure that there was no impairment on a standalone basis.
187
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
18. Impairment testing of goodwill continued
The significant amounts of goodwill is analysed below:
2022
£m
2021
£m
Noratel 34.7 33.6
Beacon 38.8 –
Variohm 24.0 17.6
Sens-Tech 27.4 27.4
124.9 78.6
The Group defines significant as 10% of the total carrying value of goodwill.
The recoverable amount of each CGU is based on value-in-use calculations. The key assumptions used in these
calculations relate to future revenue, operating margins, discount rates and long term growth rates. Cash flow
forecasts for the five-year period from the reporting date are based on FY 2022/23 board approved budget and
management projections thereon. Five-year Compound Annual Growth Rate (CAGR) for revenue between 3.6%
and 11.8% (2021: between 1% and 8%) and operating margins between 7% and 45% (2021: between 5% and 50%)
have been used depending on the size and sector in which the CGU operates. 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
a 50% reduction in carbon emissions in 2019 by 2025. 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 2022.
Long-term growth rate beyond the five-year period of 2% has been applied consistently across all CGUs
(2021: 2%).
Discount rates reflect the current market assessment of the risks specific to each CGU. The discount rate was
estimated based on the average percentage of a weighted average cost of capital for the industry and then
further adjusted for size premium and country specific risk. The risk adjusted pre-tax discount rate applied to
the cash flow projections of CGUs varies from 11% to 14% (2021: 13% to 15%).
The table below discloses the discount rates and short-term growth rates for each significant CGU:
Pre-tax discount rate 5 year Sales CAGR
2022
%
2021
%
2022
%
2021
%
Noratel 13.4 14.0 5.5 5.2
Beacon 11.7 – 11.8 –
Variohm 12.9 12.9 5.4 8.7
Sens-Tech 12.5 13.1 11.5 14.3
The double-digit sales CAGR for Beacon and Sens-Tech reflects the recovery from the Covid-19 pandemic and
ongoing 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 adverse changes in forecast cash flows,
discount rates and growth rate. Overall, adequate headroom is available against material impairment risk.
188
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Financial Statements
18. Intangible assets – goodwill continued
Management has identified one CGU within the Sensing & Connectivity division, which represents 3% of
the total carrying amount of goodwill in the Group as at 31 March 2022, 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 are an LTGR of 2%, a pre-tax discount rate of
11% and a 5 Year Sales CAGR of 5%. The headroom for this CGU is £14.3m at the date of the assessment.
The Table below shows the reduction in headroom created by a change in assumptions:
Reduction in
headroom
£m
Long-term growth rate – 1% decrease 3.0
Pre-tax discount rate – 1% increase 3.9
Sales CAGR – 2.4% decrease 8.8
None of the changes to individual assumptions above would lead to the carrying amount of the CGU
exceeding its recoverable amount.
The assumptions that would result in the recoverable amount equalling the carrying amount are 5 years sales
CAGR of 3% (a reduction of 2.4 percentage points), reduction in operating margin of 36%, long term growth
rate of 1.5% (a reduction of 0.5 percentage points), and a pre-tax discount rate of 11.4% (an increase of 0.50
percentage points).
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.
189
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
19. Intangible assets – other
Acquired intangibles
Software &
Development
£m
Customer/
Supplier
Relationships
£m
Patents &
Brands
£m
Total
£m
Cost
At 1 April 2020 13.5 86.1 5.6 105.2
Prior year restatement (note 2) (0.4) – – (0.4)
At 1 April 2020 (restated*) 13.1 86.1 5.6 104.8
Arising from business combinations – 9.9 – 9.9
Additions 0.6 – – 0.6
Exchange adjustment – 0.2 (0.1) 0.1
At 31 March 2021 13.7 96.2 5.5 115.4
Arising from business combinations 0.1 37.7 – 37.8
Additions 0.8 – – 0.8
Disposals (0.2) – – (0.2)
Business disposed (note 12) (9.2) (3.8) – (13.0)
Exchange adjustment – 2.3 – 2.3
At 31 March 2022 5.2 132.4 5.5 143.1
Accumulated amortisation
At 1 April 2020 10.2 28.5 1.6 40.3
Charge for the year 0.6 10.6 0.5 11.7
Exchange adjustment – 0.5 – 0.5
At 31 March 2021 10.8 39.6 2.1 52.5
Charge for the year 0.5 13.5 0.5 14.5
Business disposed (note 12) (8.2) (3.8) – (12.0)
Exchange adjustment – 0.5 – 0.5
At 31 March 2022 3.1 49.8 2.6 55.5
Net book value at 31 March 2022 2.1 82.6 2.9 87.6
Net book value at 31 March 2021 2.9 56.6 3.4 62.9
*2021 opening balance restated to reflect changes to Customisation and Configuration costs capitalised in Cloud Computing Arrangements
(note 2).
20. Inventories
2022
£m
2021
£m
Finished goods and goods for resale 33.2 34.2
Raw materials and work in progress 44.6 33.5
Total inventories 77.8 67.7
As at 31 March 2022, the provision for realisable value against total inventories was £6.9m (2021: £9.7m). £5.0m
reduction in provision relates to the disposal of the Acal BFi business offset by £2.2m increase in provision for
inventories in the continuing operations.
190
discoverIE Group plc Innovative Electronics
Financial Statements
21. Trade and other receivables
Current
2022
£m
2021
£m
Trade receivables 63.8 75.5
Other receivables 11.2 6.8
Prepayments 3.0 2.6
78.0 84.9
Trade receivables are non-interest bearing; are generally on 30 to 60 days’ terms and are shown net of expected
credit losses.
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 £1.6m (2021: £1.2m), against trade receivables. This
includes a total of £1.3m of specific provisions for impairment due to increased default risk and unresolved
disputes, as well as provision for expected credit losses of £0.3m. 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 movements in the impairment provisions for trade receivables during the year were as follows:
2022
£m
2021
£m
At 1 April 1.2 1.1
Charge for the year 1.2 0.2
Amounts written off – (0.1)
Business disposals (0.8) –
At 31 March 1.6 1.2
Details of the net trade receivables ageing are set out below:
Overdue
Total
£m
Not due
£m
<30 days
£m
30–60 days
£m
60–90 days
£m
90–120 days
£m
>120 days
£m
2022 63.8 56.1 6.7 0.7 0.2 – 0.1
2021 75.5 64.8 7.8 1.1 0.4 0.4 1.0
Non-Current
2022
£m
2021
£m
Other receivables 5.9 –
The other receivables amount of £5.9m (2021: nil) relates to deferred consideration receivable in relation to the
disposal of the Acal BFi business and Vertec Scientific SA Properitary Limited.
191
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
22. Cash and cash equivalents
2022
£m
2021
£m
Cash at bank and in hand 39.4 29.2
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 (£12.5m with HSBC; credit rating of AA-, £4.3m with Danske
Bank; credit rating of A+, £2.4m with KBC Bank; credit rating of A+, £1.5m with Citibank; credit rating of A+, and
the remaining balance of £18.7m with various financial institutions; credit rating of BBB- or higher) in line with
its treasury policy. The fair value of cash and cash equivalents is £39.4m (2021: £29.2m).
23. Other financial liabilities
Current Non-current
Effective
interest rate % Maturity
2022
£m
2021
£m
2022
£m
2021
£m
Bank overdrafts Variable On demand 2.5 1.0 – –
Unsecured bank loans Variable – 0.3 2.3 2.3
Revolving Credit Facility
(“RCF”) Variable – – 65.5 74.0
Capitalised debt costs (0.5) (0.5) (0.2) (0.7)
Total other financial
liabilities 2.0 0.8 67.6 75.6
Lease liabilities 4.7 4.8 16.4 16.7
Trade and other payables 87.9 79.3 2.7 0.8
Total 94.6 84.9 86.7 93.1
Interest on overdrafts is based on floating rates linked to SONIA.
Included in unsecured bank loans are USD-denominated loans of £2.2m (2021: £0.3m) carrying floating interest
rates linked to LIBOR and Euro-denominated loans of £0.1m (2021: £0.1m) carrying fixed interest rates of 8%.
At 31 March 2022, the RCF drawdowns of £65.5m were denominated in Sterling, US Dollars and Euros 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 2022
Within
1 year
£m
2–5
years
£m
>5
years
£m
Total
£m
Fixed and floating rate 5.4 67.6 – 73.0
Lease liabilities 5.4 13.3 5.1 23.8
Trade and other payables 87.9 2.7 – 90.6
98.7 83.6 5.1 187.4
192
discoverIE Group plc Innovative Electronics
Financial Statements
23. Other financial liabilities continued
At 31 March 2021
Within
1 year
£m
2–5
years
£m
>5
years
£m
Total
£m
Fixed and floating rate 0.8 75.6 – 76.4
Lease liabilities 5.5 11.1 7.6 24.2
Trade and other payables 79.3 0.8 – 80.1
85.6 87.5 7.6 180.7
The carrying amount of the Group’s other financial liabilities excluding lease liabilities is denominated in the
following currencies:
2022
£m
2021
£m
Sterling 45.3 40.5
Euro 38.2 68.2
US dollar 48.6 25.3
Other currencies 28.1 22.5
160.2 156.5
24. Movements in cash and net debt
Year to 31 March 2022
1 April
2021
£m
Cash flow
£m
Non cash
changes
£m
31 March
2022
£m
Cash and cash equivalents 29.2 9.0 1.2 39.4
Bank overdrafts (1.0) (1.4) (0.1) (2.5)
Net cash 28.2 7.6 1.1 36.9
Bank loans under one year (0.3) 0.3 – –
Bank loans over one year (76.3) 7.9 0.6 (67.8)
Capitalised debt costs 1.2 – (0.5) 0.7
Total loan capital (75.4) 8.2 0.1 (67.1)
Net debt (47.2) 15.8 1.2 (30.2)
Bank loans over one year above include £65.5m (2021: £74.0m) drawn down against the Group’s revolving
creditfacility.
Year to 31 March 2021
1 April
2020
£m
Cash flow
£m
Non cash
changes
£m
31 March
2021
£m
Cash and cash equivalents 36.8 (6.0) (1.6) 29.2
Bank overdrafts (2.0) 0.6 0.4 (1.0)
Net cash 34.8 (5.4) (1.2) 28.2
Bank loans under one year (2.8) 2.4 0.1 (0.3)
Bank loans over one year (95.0) 16.1 2.6 (76.3)
Capitalised debt costs 1.7 – (0.5) 1.2
Total loan capital (96.1) 18.5 2.2 (75.4)
Net debt (61.3) 13.1 1.0 (47.2)
Cash Flow movements for lease liabilities are shown in note 16.
193
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
24. Movements in cash and net debt continued
Supplementary information to the statement of cash flows
Underlying Performance Measure
2022
£m
2021
£m
Increase in net cash 15.8 13.1
Add: Business combinations 87.6 21.8
Dividends paid 9.4 2.8
Less: Net proceeds from share issue (52.6) (0.1)
Discontinued operations (38.4) (9.5)
Free cash flow 21.8 28.1
Net finance costs 3.2 3.1
Taxation 6.2 6.5
Legacy pension scheme funding 1.9 1.8
Operating cash flow 33.1 39.5
25. Reconciliation of cash flows from operating activities
2022
£m
2021
£m
Profit for the year 25.2 12.0
Tax expense 10.7 5.0
Net finance costs 4.1 3.7
Depreciation of property, plant and equipment 4.7 4.9
Depreciation of right of use assets 6.1 6.6
Amortisation of intangible assets – other 14.5 11.7
Gain on business disposal (6.6) –
Gain on disposal of property, plant and equipment (0.1) –
Change in provisions (0.3) 1.0
Pension scheme funding (1.9) (1.8)
IAS 19 pension charge 0.6 1.4
Impact of equity-settled share-based payment expense and associated taxes 1.3 1.1
Operating cash flows before changes in working capital 58.3 45.6
Increase in inventories (17.7) (0.1)
(Increase)/decrease in trade and other receivables (24.9) 5.5
Increase in trade and other payables 26.8 6.2
(Decrease)/increase in working capital (15.8) 11.6
Cash generated from operations 42.5 57.2
Interest paid (3.7) (3.4)
Interest paid on lease liabilities* (0.8) (0.6)
Income taxes paid (7.1) (7.2)
Net cash flow from operating activities 30.9 46.0
*In the prior year Financial Statements, interest paid on lease liabilities were presented under Financing activities.
194
discoverIE Group plc Innovative Electronics
Financial Statements
26. Provisions
Severance and
retirement
indemnity
£m
Other
£m
Total
£m
At 1 April 2020 3.3 2.3 5.6
Arising during the year 1.0 1.4 2.4
Utilised (0.2) – (0.2)
Released (0.2) (0.2) (0.4)
Exchange difference (0.2) – (0.2)
At 31 March 2021 3.7 3.5 7.2
Arising during the year 0.4 1.6 2.0
Arising from business combinations – 0.3 0.3
Business disposed (note 11) (1.4) (0.6) (2.0)
Utilised (0.2) (0.9) (1.1)
Released (0.3) (0.3) (0.6)
Exchange difference 0.1 – 0.1
At 31 March 2022 2.3 3.6 5.9
Analysis of total provisions:
2022
£m
2021
£m
Current 1.7 1.8
Non-Current 4.2 5.4
5.9 7.2
Severance and retirement indemnity
The severance provision relates to severance costs payable to employees.
Retirement indemnity provision of £2.2m (2021: £3.2m), relates to retirement and leaving indemnity schemes in
Sri Lanka £0.9m, India £0.7m, Norway £0.3, France £0.2m and Germany £0.1m. The schemes are unfunded. The
service cost, representing deferred salaries accruing to employees, is included as an operating expense and
determined by reference to local laws and actuarial assumptions where applicable.
Other
Other provisions relates primarily to dilapidations provisions £2.1m (2021: £2.0m), warranty provisions £0.5m
(2021: £0.6m), restructuring provisions of £0.1m (2021: £0.3m) and other provisions of £0.9m (2021: £0.6m). 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.
195
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
27. Financial risk controls continued
Interest Rate Benchmark Reform – Phase 2
As a result of the Interest Rate Benchmark Reform Phase 2, effective from periods beginning on or after 1
April 2021, the Group has assessed the impact of changes to the benchmark rates used required as a direct
consequence of the IBOR Reform on its financial instruments.
The Group’s has an overdraft facility that is based on floating rates linked to LIBOR. The facility agreement has
been amended to reflect the changes required as a direct consequence of the IBOR reform. The agreement
sets out the terms and conditions upon which the bank has agreed to make available to the Group a
committed multi option facility. The interest on overdraft facilities is payable by the Group and is calculated by
the bank, using its normal practices for calculation, each day.
Included in the unsecured bank loans are Euro-denominated loans and USD-denominated loans with fixed
interest rates. These are not linked to a benchmark rate affected by the reform and, therefore, no changes were
necessary.
The Group’s RCF for drawdowns denominated in Sterling and USD which bear interest based on GBP LIBOR
and USD LIBOR were amended to reflect the changes required by the IBOR reform. The interest charge is
now calculated based on the risk free reference rate SONIA (sterling overnight index average) and the secured
overnight financing rate (SOFR) administered by the Federal Reserve Bank of New York, respectively.
For the year ended 31 March 2022, the Group has applied the practical expedients provided under ‘phase
2’ amendments to its long-term debt recognised on the balance sheet in relation to its overdraft and RCF
drawdowns, reflecting changes to base interest rates used for the calculation of interest recognised in
the consolidated Statement of Profit or Loss of the Group. No impact from restatement was required as a
consequence of these changes.
The Group has assessed the impact of the IBOR reform on other financial arrangements in place as at 31 March
2022 and concluded that there is no material impact on the Groups Financial Statements.
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.
Based on the Group’s debt position at the year end, excluding lease liabilities, a 1% increase in interest rates
would decrease the Group’s profit before tax by approximately £0.3m (2021: £0.5m).
Management of foreign exchange risk
The Group’s shareholders’ equity, earnings and cash flows are exposed to foreign exchange risks, due to the
mismatch between the currencies in which it purchases stock and the final currency of sale to its customers.
It is Group policy to hedge identified significant foreign exchange exposure on its committed operating cash
flows. This is carried out centrally based on forecast orders and sales.
The following table demonstrates the sensitivity of the Group’s profit before tax to a 10% change in the rates of
Sterling against all other currencies, US Dollar against all other currencies and Euro against all other currencies,
with all other variables remaining constant due to changes in the fair value of monetary assets and liabilities.
£
currency impact
US$
currency impact
Euro
currency impact
2022
£m
2021
£m
2022
£m
2021
£m
2022
£m
2021
£m
Profit before tax – gain/(loss)
10% appreciation 0.3 0.2 0.5 1.1 – (0.6)
10% depreciation (0.4) (0.3) (0.5) (1.1) 0.1 0.8
196
discoverIE Group plc Innovative Electronics
Financial Statements
27. Financial risk controls continued
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
8% 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 2022, the Group had net cash of £36.9m (2021: £28.2m). The Group had total working capital
facilities available of £200.2m (2021: £190.4m) with a number of major UK and overseas banks, of which £180.0m
(2021: £180.0m) were committed facilities. The Group had drawn £70.3m against total facilities at 31 March 2022.
In addition, the Group has a £60m accordion facility which it can use to extend the total facility up to £240m.
The syndicated facility is available both for acquisitions and for working capital purposes. The facilities are
subject to certain financial covenants, which had significant headroom at 31 March 2022.
On 3 May 2022, the Group increased its syndicated banking facility from £180m to £240m and extended the
remaining term of the facility by two years out to four years ending in June 2026, with an option exercisable by
the Group to extend the facility by a further year to June 2027. In addition, the Group has an £80m accordion
facility which it can use to extend the total facility up to £320m.
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 increase bank
borrowings, issue new shares or change the amount of dividends paid to shareholders. In respect to this
objective, the Group has a target gearing range of between 1.5 and 2.0 times. Gearing at 31 March 2022 was
below the range at 0.6 times.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 23, cash
and cash equivalent and equity attributable to shareholders.
197
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
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 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 2022, the fair value of
derivatives was £nil (2021: £nil).
The carrying value of the Group’s trade and other receivables and trade and other payables are disclosed in
Notes 21 and 29. The carrying value of these items approximates book value due to the short maturity of these
instruments. The carrying value 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
2022
£m
Fair
value
2022
£m
Carrying
amount
2021
£m
Fair
value
2021
£m
Financial assets
Cash at bank and in hand 39.4 39.4 29.2 29.2
Financial liabilities at amortised cost
Bank overdrafts and short-term borrowings (2.5) (2.5) (1.3) (1.3)
Non-current interest-bearing loans and borrowings:
Fixed and floating rate borrowings (67.1) (67.1) (75.6) (75.6)
Lease liabilities (21.1) (21.1) (21.5) (21.5)
Contingent consideration (8.8) (8.8) (3.4) (3.4)
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 taken
to the 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 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 two years 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.
198
discoverIE Group plc Innovative Electronics
Financial Statements
28. Financial assets and liabilities continued
The valuation techniques used by the Group for the measurement of derivative financial instruments and
loans 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.
29. Trade and other payables
Current
2022
£m
2021
£m
Trade payables 56.0 56.8
Other payables 33.8 25.8
Accrued expenses and contract liabilities 15.0 12.2
104.8 94.8
Trade payables are non-interest bearing and are settled in accordance with credit terms. Other payables are
non-interest bearing and are settled throughout the year. Accrued expenses are non-interest bearing and
are settled throughout the year. Included in current year other payables is contingent consideration of £4.0m
which relates to the acquisition of Cursor Controls and £2.2m which relates to the acquisition of CPI. Prior year
includes contingent consideration of £2.6m which related to the acquisition of Cursor Controls.
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.
Revenue recognised in the reporting period that was included in the contract liability balance at the beginning
of the period amounted to £1.1m (2021: £0.9m).
Certain businesses in the Group participate in supply chain finance arrangements whereby suppliers may
elect to receive early payment of their invoices from a bank by factoring their receivable from discoverIE
entities. Included within trade payables is £0.9m (2021: £0.5m) subject to such an arrangement.
Non-Current
2022
£m
2021
£m
Other payables 2.7 0.8
Included in non-current trade and other payable is a £2.7m contingent payment relating to the acquisitions of
Limitor, Phoenix and CPI. For 2021, £0.8m related to the acquisitions of Sens-Tech, Limitor and Phoenix.
30. Share capital
Allotted, called up and fully paid
2022
Number
2022
£m
2021
Number
2021
£m
Ordinary shares of 5p each 95,456,109 4.7 89,455,915 4.4
During the year to March 2022, 650,000 shares were issued to the Group’s Employee Benefit Trust (2021:
750,000). At 31 March 2022 the Trust held 168,425 shares (2021: 689,307). During the year to 31 March 2022,
employees exercised 1,170,882 share options under the terms of the various share option schemes (2021:
60,693).
On 2 September 2021, 5,350,194 shares were issued for a gross consideration of £55.0m before costs and £53.5m
after costs. The shares were issued at 1,028 pence per share, which is equal to the mid-market closing price on 2
September 2021. £0.3m was share capital with the balance of £53.2m being allocated to share premium account.
199
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
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:
2022
£m
2021
£m
a) discoverIE Group plc long-term incentive plan (“the LTIP”) 2.1 1.1
b) Approved and Unapproved Executive Share Option Schemes – –
2.1 1.1
a) The LTIP
Since 2008, the Group has operated the LTIP as a replacement for the approved and unapproved executive
share option scheme detailed above. The LTIP involves a conditional award of shares on a grant of a nil-
cost option. The award of shares to Executive Directors and senior management is recommended by the
Remuneration Committee on the basis of such factors as their contribution to the Group’s success. The LTIPs
are equity settled and there are no cash settled alternatives. The vesting of an award is dependent on the
individual’s continued employment for a three-year period from the date of grant and the satisfaction by the
Company of certain performance conditions. The exercise of the awards is also subject to a two-year holding
period from the date of vesting.
For awards made in 2022, the performance conditions are as follows:
■ 50% of the award is based on the Company’s comparative total shareholder return (“TSR”) against a
comparator group made up of the constituents of the FTSE Small Cap Index;
■ 50% of the award is based on the Company’s absolute earnings per share (“EPS”) performance.
■ For certain operational management, 25% of the award is based on the Company’s absolute earnings per
share (“EPS”) performance and 75% of the award is based on local earnings targets.
■ For two operational management, 100% of the award granted is subject to local earnings targets.
Awards are valued using the Monte Carlo Simulation and Discounted Share Price models. No non-market
performance conditions were included in the fair value calculations. The fair value per award granted and the
assumptions used in the calculation are as follows:
Awards granted in the year ended 31 March 2022:
Grant date
29 July
2021
TSR
29 July
2021
EPS
29 July
2021
EPS/Local
26 August
2021
Local
Share price at grant date £10.4 £10.4 £10.4 £9.9
Exercise price nil nil nil nil
Number of employees 10 10 13 2
Shares under option 141,886 141,886 42,582 47,316
Vesting period (years) 3 3 3 3
Expected volatility 36.9% 36.9% 36.9% n/a
Option life (years) 10 10 10 10
Expected life (years) 5 5 5 3
Risk-free rate of return 0.1% 0.1% 0.1% n/a
Expected dividend yield 1.0% 1.0% 1.0% 1.0%
Fair value £7.64 £9.25 £9.28 £9.60
200
discoverIE Group plc Innovative Electronics
Financial Statements
31. Share-based payment plans continued
Awards granted in the year ended 31 March 2021:
Grant date
15 July
2020
EPS
30 June
2020
EPS
30 June
2020
TSR
30 June
2020
CPI
Share price at grant date £5.90 £5.12 £5.12 £5.12
Exercise price nil nil nil nil
Number of employees 20 11 11 11
Shares under option 150,165 160,766 160,766 160,766
Vesting period (years) 3 3 3 3
Expected volatility n/a n/a 32.6% 32.6%
Option life (years) 10 10 10 10
Expected life (years) 5 5 5 5
Risk-free rate of return n/a n/a -0.1% -0.1%
Expected dividend yield 1.9% 1.9% 1.9% 1.9%
Fair value £5.04 £4.38 £2.70 £2.37
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 £2.1m (2021: £1.1m).
Outstanding LTIP
A summary of the awards that have been granted under the LTIP and remain outstanding is given below:
At 31 March 2022
Outstanding at
1 April 2021
Granted
during the
year
Forfeited
during the
year
Exercised
during the
year
Outstanding
at
31 March 2022
Exercise
dates
581,344 – – (581,344) – 2020–2025
590,796 – – (516,729) 74,067 2021–2026
761,616 – – (28,269) 733,347 2022–2027
611,118 – (131,283) (14,040) 465,795 2023–2028
718,219 – (5,404) (8,185) 704,630 2024–2029
626,873 – (37,703) (3,884) 585,286 2025–2030
– 373,670 – – 373,670 2026–2031
3,889,966 373,670 (174,390) (1,152,451) 2,936,795
201
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
31. Share-based payment plans continued
At 31 March 2021
Outstanding at
1 April 2020
Granted
during the
year
Forfeited
during the
year
Exercised
during the
year
Outstanding
at
31 March 2021
Exercise
dates
615,574 – – (34,230) 581,344 2020–2025
590,796 – – – 590,796 2021–2026
761,616 – – – 761,616 2022–2027
611,118 – – – 611,118 2023–2028
727,062 – (8,843) – 718,219 2024–2029
– 632,463 (5,590) – 626,873 2025–2030
3,306,166 632,463 (14,433) (34,230) 3,889,966
The weighted average remaining contractual life for the share options outstanding at 31 March 2022 is 6.8 years
(2021: 6.6 years).
The range of exercise prices for options outstanding at the end of the year was nil (2021: nil).
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.
Theoptions vest after three years.
The exercise price of the options is equal to the closing mid-market price of the shares on the trading day prior
to the date of the grant. Exercise of all options is subject to continued employment. The life of each option
granted is ten years. There are no cash settlement alternatives.
Options are valued using the binomial option-pricing model. No non-market performance conditions were
included in the fair value calculations.
The fair value per option granted during the year and the assumptions used in the calculation are as follows:
Grant date June 2021
Share price at grant date £8.59
Exercise price £8.03
Number of employees 8
Shares under option 13,665
Vesting period (years) 3
Expected volatility 33.9%
Option life (years) 10
Expected life (years) 6.5
Risk-free rate of return 0.5%
Expected dividends expressed as a dividend yield 1.2%
Fair value £2.72
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 £nil (2021: £nil).
202
discoverIE Group plc Innovative Electronics
Financial Statements
31. Share-based payment plans continued
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 2022
Outstanding at
1 April 2021
Forfeited
during the
year
Exercised
during the
year
Granted
during the
year
Outstanding
at
31 March 2022
Exercise price
(pence)
Exercise
dates
1,691 – – – 1,691 219.50 2020–2027
9,580 – – – 9,580 402.00 2021–2028
12,789 (116) – – 12,673 421.17 2022–2029
14,247 (1,516) – – 12,731 603.60 2023–2030
– (1,934) – 13,665 11,731 803.00 2024–2031
38,307 (3,566) – 13,665 48,406
At 31 March 2021
Outstanding at
1 April 2020
Forfeited
during the
year
Exercised
during the
year
Granted
during the
year
Outstanding
at
31 March 2021
Exercise price
(pence)
Exercise
dates
26,853 – (25,162) – 1,691 219.50 2020–2027
9,580 – – – 9,580 402.00 2021–2028
12,789 – – – 12,789 421.17 2022–2029
– – – 14,247 14,247 603.60 2023–2030
49,222 – (25,162) 14,247 38,307
Changes in share options
A reconciliation of option movements over the year to 31 March 2022 is shown below:
2022 2021
Number
Weighted
average
exercise price Number
Weighted
average
exercise price
Outstanding at 1 April 38,307 £4.75 49,222 £3.07
Granted 13,665 £6.04 14,247 £6.04
Exercised – – (25,162) £2.20
Forfeited (3,566) £7.06 – –
Outstanding at 31 March 48,406 £5.51 38,307 £4.75
Exercisable at 31 March 11,271 £3.75 11,271 £3.75
The weighted average remaining contractual life for the share options outstanding at 31 March 2022 is 7.7 years
(2021: 8.2 years).
The range of exercise prices for options outstanding at the end of the year was £2.20 to £8.03 (2021: £2.20 to £6.04).
203
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
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 the year end, 190 employees were
active members of the discoverIE scheme (2021: 190). The total cost charged to the consolidated Statement
of Profit or Loss in relation to the UK-based discoverIE scheme was £362,000 (2021: £627,000). Employer
contributions in respect of other UK-based schemes and overseas pension schemes were £447,000 (2021:
£440,000) and £2,364,000 (2021: £2,598,000) respectively. The reductions in charges and contributions for the
year related to the costs for the business disposed, which have been presented as discontinued operations in
the Statement of Profit or Loss. Total contributions payable in the next financial year are expected to be at rates
broadly similar to those in 2021/22 but based on actual salary levels in 2022/23.
Defined benefit schemes
The acquisition of the Sedgemoor Group in June 1999 brought with it certain defined benefit pension
schemes, together ‘the Sedgemoor Scheme’. The Sedgemoor Scheme is funded by the Company,
provides retirement benefits based on final pensionable salary and its assets are held in a separate trustee-
administered fund.
Following the acquisition of the Sedgemoor Group, the Sedgemoor Scheme was closed to new members.
Shortly thereafter, employees were given the opportunity to join the discoverIE scheme and future service
benefits ceased to accrue to members under the Sedgemoor Scheme.
Contributions to the Sedgemoor Scheme are determined in accordance with the advice of independent,
professionally qualified actuaries and are set based upon funding valuations carried out every three years.
Based upon the results of the triennial funding valuation at 31 March 2018, the Sedgemoor Scheme’s Trustees
agreed with Sedgemoor Limited on behalf of the participating employers to continue the same rate of
participating employers’ contributions under the deficit recovery plan agreed at the previous valuation at
31 March 2015. This required contributions of £1.8m over the year to 31 March 2020, with future contributions
increasing by 3% each April payable over the period to 30 September 2022. These contributions are being
reviewed as part of the triennial funding valuation as at 31 March 2021 which is currently in progress.
The estimated amount of employer contributions expected to be paid to the Sedgemoor Scheme during FY
2022/23 is £1.0m (FY 2021/22: £1.9m).
The results of the triennial funding valuation as at 31 March 2021 were updated to the accounting date by an
independent qualified actuary in accordance with IAS 19.
The main actuarial assumptions used are set out as follows:
2022 2021
Rate of increase of salaries n/a n/a
Rate of increase of pensions in payment 2.6% 2.5%
Discount rate 2.8% 1.9%
Inflation assumption – RPI 3.8% 3.4%
Inflation assumption – CPI* 2.7% 2.3%
* 3.7% from 2031
204
discoverIE Group plc Innovative Electronics
Financial Statements
32. Pension continued
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 1.3% for males and for females.
The weighted average duration of the defined benefit obligation at 31 March 2022 was 12 years (2021: 13 years).
The investment strategy is set by the Trustee of the Sedgemoor Scheme in consultation with the Company.
The current strategy is to invest 45% of the assets in equities, property, infrastructure and other return
seeking investments and 55% in liability driven investments, corporate bonds and cash. As at 31 March 2022
the investment strategy hedged 75% of interest rate risk and 75% of inflation risk relative to the Sedgemoor
Scheme’s liability value for cash funding purposes.
As the Sedgemoor Scheme mostly invests in pooled funds, the fair value of assets reflect 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. Re-measurements 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:
2022
£m
2021
£m
Pension charge (recognised in operating costs) 0.6 1.4
Past Service cost
The charges recognised in the consolidated Statement of Comprehensive Income are as follows:
Re-measurement gains/(losses):
2022
£m
2021
£m
Return on plan assets (excluding amounts included in net interest expense) 0.3 0.6
Actuarial changes arising from changes in actuarial assumptions 2.0 (3.8)
Actuarial gain/(loss) recorded in the consolidated statement of
comprehensive income 2.3 (3.2)
An additional actuarial loss of £0.1m (2021: £0.2m) relating to the unfunded retirement and leaving indemnity
schemes (note 26) is recorded in the consolidated Statement of Comprehensive Income.
205
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
32. Pension continued
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:
2022
£m
2021
£m
Equities 3.0 3.5
Bonds 9.4 9.9
Property 4.9 4.1
Diversified Growth Fund 5.8 6.6
Cash 0.4 4.4
Liability driven investments 5.0 5.6
Infrastructure 4.5 4.5
Asset Backed Security 6.0 –
Fair value of scheme assets 39.0 38.6
Present value of funded defined benefit obligations (36.3) (39.6)
Asset/(liability) recognised in the consolidated Statement of Financial Position 2.7 (1.0)
Changes in the present value of the defined benefit obligation are as follows:
2022
£m
2021
£m
Opening defined benefit obligations 39.6 35.8
Net interest cost 0.7 0.9
Actuarial losses due to:
Experience on benefit obligation 0.7 (0.1)
Changes in financial assumptions (3.0) 3.9
Changes in demographic assumptions 0.3 –
Pension costs – 1.0
Benefits paid (2.0) (1.9)
Closing defined benefit obligations 36.3 39.6
Changes in the fair value of the scheme assets are as follows:
2022
£m
2021
£m
Opening fair value of scheme assets 38.6 37.6
Interest on scheme assets 0.8 0.9
Actual return on plan assets less interest on plan assets 0.3 0.6
Pension administration costs (0.6) (0.4)
Contributions 1.9 1.8
Benefits paid (2.0) (1.9)
Closing fair value of scheme assets 39.0 38.6
The prior year pension costs included £0.4m operating costs and a £1.0m charge relating to one-off adjustment
relating to historic commutation terms for legacy scheme members.
206
discoverIE Group plc Innovative Electronics
Financial Statements
32. Pension continued
Sensitivities
The sensitivity of the 2022 pension liabilities to changes in assumptions are as follows:
Assumption Change in assumption
Increase in
scheme deficit
£m
Discount rate Decrease by 0.5% 2.2
Inflation Increase by 0.5% 0.7
Life expectancy Increase by 1 year 1.9
33. Related party disclosures
As at 31 March 2022 the Group’s subsidiaries are set out below. Unless otherwise stated, the Group holds
(directly or indirectly) 100% of the total voting rights of all subsidiaries.
Except where noted, all material subsidiaries have a 31 March year end and the shares carry the same voting
rights as their effective interest.
UK registered subsidiaries exempt from audit: discoverIE Nordic Holdings Limited (company no. 09056483);
discoverIE Electronics Limited (06556285); Contour Holdings Limited (company no. 06846542); Variohm
Holdings Limited (company no. 05783452); Xi-Tech Limited (company no. 07068708), Cursor Controls Holdings
Limited (company no. 09472278), Positek Limited (company no. 02746707), Ixthus Instrumentation Limited
(company no. 04876913) and Heason Technology Limited (company no. 06322037) qualify to take the statutory
audit exemption as set out within section 479A of the Companies Act 2006 for the year ended 31 March 2022.
discoverIE Group plc will guarantee the debts and liabilities of those companies at the statement of financial
position date in accordance with section 479C of the Companies Act 2006.
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 GU2 7AH
England
Operating companies
Antenova Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford 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 SA de CV
2
Calle Matamoros 124, Colonia Centro, Municipio
Agualeguas, Nuevo Leon, CP 65800
Mexico
Coil-Tran LLC
(trading as Hobart Electronics)
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 GU2 7AH
England
Cursor Controls Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
207
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
Name and nature of business Registered address
Country of
incorporation
and registration
Danselbud Noratel Transformator Sp Zoo ul. Szczecinska 1K, Dobra Szczecinska PL-72-003 Poland
EMC Innovation Limited 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, Phuncaroen Lane,
Bangna-Trad Km 16.5, Bang Chalong (Bangkok),
Bang Phli District, Samut Prakan Province, 10540
Thailand
Foshan Noratel Electric Co Limited
1
NO 22-2 Xingye Road, Zone C Shishan Science &
Technology Industrial Park, Nanhai Distric, 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
Heason Technology Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Hectronic AB P.O. Box 3002, 750 03 Uppsala Sweden
Herga Technology Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
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
MTC Micro Tech Components GmbH Hausener Straße 9, 89407 Dillingen a.d., Donau Germany
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 Zoo 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 Incorporated 8-601 Magnetic Drive, Toronto, Ontario, M3J 3J2 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 2 KEPZ, Katunayake Sri Lanka
Noratel North America LLC 13663 Providence Road, Suite 345,
Weddington, NC 28104
USA
Noratel Power Engineering LLC 1117 East Janis Street, Carson, CA 90746 USA
Noratel SP Z.o.o ul. Szczecinska 1K, Dobra Szczecinska PL-72-003 Poland
Noratel Sweden AB Lars Lindahlsväg 2, Bo Lars Lindahlsväg 2,
Box 108, Laxå 69522
Sweden
Noratel UK Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
33. Related party disclosures
continued
208
discoverIE Group plc Innovative Electronics
Financial Statements
Name and nature of business Registered address
Country of
incorporation
and registration
NSI bvba Haakstraat 1A, 3740 Bilzen Belgium
Phoenix America LLC 850 New Burton Road, Suite 201, Dover, DE 19904 USA
Positek Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
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 GU2 7AH
England
Sens-Tech Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Stortech Electronics Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Variohm-Eurosensor Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Vertec Scientific Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Zhongshan Myrra Electronic Co Limited
1
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
Contour Holdings Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Cursor Controls Holdings Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
discoverIE BV Luchthavenweg 53, 5657 EA Eindhoven Netherlands
discoverIE Electronics Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
discoverIE Europe Holding BV Luchthavenweg 53, 5657 EA Eindhoven Netherlands
discoverIE France Holdings SAS 4 Allée du Cantal – ZI Petite Montagne Sud
– 91090 Lisses, Evry
France
discoverIE Holdings Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
discoverIE Nordic Holdings Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford 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 GU2 7AH
England
Trafo Holding AS Elektroveien 7, Hokksund, 3300 Norway
33. Related party disclosures
continued
209
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
Name and nature of business Registered address
Country of
incorporation
and registration
Variohm Holdings Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Xi-Tech Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Dormant companies
Acal BFi Iberia SL C/Anabel Segura, 7, Planta Acceso, 28108
Alcobendas, Madrid
Spain
Acal Electronics Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Acal Supply Chain Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Actech Holdings Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Advanced Crystal Technology Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Amega Electronics Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Amega Group Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
BFi Optilas Denmark A/S Jernabanegade 238, 4000 Roskilde Copenhagen Denmark
BFi Optilas Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Bosunmark Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Cabcon (UK) Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
DiscoverIE North America LLC 850 New Burton Road, Suite 201, Dover, DE 19904 USA
Eurosensor Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Gothic Crellon Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Ixthus Instrumentation Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Myrra Hispania Srl c/Mataro 43 Pol. Ind. les Grases,
08980 Saint Feliu De Llobregat, Barcelona
Spain
Radiatron Components Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Radiatron Holdings Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Sedgemoor Group Pension Trustees
Limited
2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Sedgemoor Group Supplementary
Pension Trustees Limited
2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Sedgemoor Holdings Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
Townsend-Coates Limited 2 Chancellor Court, Occam Road,
Surrey Research Park, Guildford GU2 7AH
England
33. Related party disclosures
continued
210
discoverIE Group plc Innovative Electronics
Financial Statements
1
Zhongshan Myrra Electronic Co Limited and Foshan Noratel Electric Co Limited have 31 December year ends
2
15% of Coil-Tran de Mexico SA de CV is owned by local management
Related parties
Remuneration of key management personnel
The Group considers key management personnel as defined in IAS 24 ‘Related Party Disclosures’ to be the
members of the Group Executive Committee as set out on page 84. Remuneration is set out below in aggregate.
The charge for share-based payments of £1.6m (2021: £0.7m) relates to the Group’s LTIP as detailed in note 31.
2022
£m
2021
£m
Short-term employee benefits 3.1 2.9
Pension benefits 0.2 0.2
Share-based payments 1.6 0.7
4.9 3.8
Terms and conditions of transactions with related parties
All transactions with related parties were on an arm’s length basis. Outstanding balances at year end are
unsecured and settlement occurs in cash.
Transactions with other related parties
Details of transactions with Directors are detailed in the Remuneration report on pages 109 to 132.
33. Related party disclosures
continued
211
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 31 March 2022
34. Exchange rates
The Statement of Profit or Loss 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 2022 Year to 31 March 2021
Closing
rate
Average
rate
Closing
Rate
Average
rate
US Dollar 1.3123 1.3668 1.3760 1.3075
Euro 1.1821 1.1761 1.1736 1.1207
Norwegian Krone 11.479 11.856 11.731 11.970
35. Events after the reporting date
There were no matters arising, between the Statement of Financial Position date and the date on which these
financial statements were approved by the Board of Directors, requiring adjustment in accordance with IAS 10,
Events after the reporting period. The following important non-adjusting events should be noted:
Dividends
A final dividend of 7.45p per share (2021: 7.0p), amounting to a dividend of £7.1m (2021: £6.2m) and bringing
the total dividend for the year to 10.8p (2021: 10.15p), was declared by the Board on 14 June 2022. The discoverIE
group Financial Statements do not reflect this dividend.
Revolving Credit Facility
On 3 May 2022, the Group increased its syndicated banking facility from £180m to £240m and extended the
remaining term of the facility by two years out to four years ending in June 2026, with an option exercisable by
the Group to extend the facility by a further year to June 2027. In addition, the Group has an £80m accordion
facility which it can use to extend the total facility up to £320m.
212
discoverIE Group plc Innovative Electronics
Financial Statements
COMPANY STATEMENT
OF FINANCIAL POSITION
as at 31 March 2022
notes
2022
£m
2021
£m
Non-current assets
Investments 5 203.4 201.3
203.4 201.3
Current assets
Debtors 6 81.3 29.9
Cash at bank and in hand 16.8 3.1
98.1 33.0
Total assets 301.5 234.3
Current liabilities
Creditors: amounts falling due within one year 7 (35.3) (15.0)
(35.3) (15.0)
Non-current liabilities
Other financial liabilities 8 – (9.3)
– (9.3)
Total liabilities (35.3) (24.3)
Net assets 266.2 210.0
Capital and reserves
Called up share capital 9 4.7 4.4
Share premium account 192.0 138.8
Merger reserve 10.5 19.9
Profit and loss account 59.0 46.9
Total shareholders’ funds 266.2 210.0
The profit of the Company for the financial year ended 31 March 2022 was £10.2m (2021: £7.4m profit).
These financial statements on pages 213 to 217 were approved by the Board of Directors on 14 June 2022 and
signed on its behalf by:
Nick Jefferies Simon Gibbins
Group Chief Executive Group Finance Director
213
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
COMPANY STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 March 2022
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Profit and
loss account
£m
Total
£m
At 1 April 2020 4.4 138.8 22.7 38.4 204.3
Profit for the year – – – 7.4 7.4
Share-based payments – – – 1.1 1.1
Transfer to profit or loss account – – (2.8) 2.8 –
Dividends – – – (2.8) (2.8)
At 31 March 2021 4.4 138.8 19.9 46.9 210.0
Profit for the year – – – 10.2 10.2
Share-based payments – – – 1.9 1.9
Shares issued (note 9) 0.3 53.2 – – 53.5
Transfer to profit or loss account – – (9.4) 9.4 –
Dividends – – – (9.4) (9.4)
At 31 March 2022 4.7 192.0 10.5 59.0 266.2
At 31 March 2022, an amount of £40.2m out of the total £59.0m in the profit and loss account and £7.6m out
of total £10.5m in the merger reserve is available for distribution, subject to filing these Financial Statements
with Companies House. When making a distribution to shareholders, the Directors determine profits available
for distribution by reference to guidance on realised and distributable profits under the Companies Act
2006 issued by the Institute of Chartered Accountants in England and Wales and the Institute of Chartered
Accountants of Scotland in April 2017. The profits of the Company have been received in the form of dividends
from subsidiary companies which have been paid to the Company in cash. The availability of distributable
reserves 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.
214
discoverIE Group plc Innovative Electronics
Financial Statements
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the year ended 31 March 2022
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 Group
consolidated Financial Statements.
2. Summary of significant accounting policies
The summary of significant accounting policies for the Company is described in note 2 to the Group
consolidated Financial Statements.
3. Profit of the company
The profit of the company for the financial year was £10.2m (2021: £7.4m profit). 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 shows in note 8 to the consolidated Financial Statements.
5. Investments
Subsidiary
undertakings
£m
At 1 April 2020 200.2
Share-based payments 1.1
At 31 March 2021 201.3
Share-based payments 2.1
At 31 March 2022 203.4
Details of all direct and indirect holdings in subsidiaries are provided in note 33 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.
The results of this review have not identified any further impairment of carrying value at the current reporting
date of 31 March 2022 (2021: nil). In respect of one of the investments in subsidiaries undertakings with the
carrying value of £18.5m, changes in the value-in-use assumptions may lead to the recoverable amount to be
less than its carrying value. The assumptions made in estimating the value of the future cash flow are an LTGR
of 2%, a pre-tax discount rate of 13.2% and a 5 Year Sales CAGR of 7%. A reduction in the long-term growth rate,
pre-tax discount rate and 5-year sales CAGR of 1ppt would result in impairment of £1.5m, £2.0m and £1.7m
respectively.
215
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
6. Debtors
2022
£m
2021
£m
Amounts falling due within one year:
Amounts owed by subsidiary undertakings 78.5 28.0
Corporation tax 1.9 1.7
Other debtors 0.8 0.1
Prepayments 0.1 0.1
81.3 29.9
Amounts owed by subsidiary undertakings bore interest at a sterling base rate plus a margin of 1.75% and at
USD one month LIBOR plus a margin of 2%. All amounts are repayable on demand. There are no material
expected credit losses recognised for these receivables.
At 31 March 2022, the Company had not recognised any deferred tax asset in respect of tax losses of
approximately £3.1m (2021: £2.1m). Deferred tax assets are not recognised where there is insufficient evidence
that losses will be utilised.
7. Creditors
2022
£m
2021
£m
Amounts falling due within one year:
Bank loans and overdrafts 8.4 1.9
Amounts owed to subsidiary undertakings 24.1 12.0
Other payables 1.3 0.1
Accruals 1.5 1.0
35.3 15.0
Amounts owed to subsidiary undertakings bore interest at a nil rate and are repayable on demand.
8. Other financial liabilities
Other financial liabilities of £nil at 31 March 2022 (2021: £9.3m) comprise drawdowns on the Group’s revolving
credit facility (see note 23 to the consolidated Financial Statements). The 2021 amount was denominated in
Sterling and bore interest based on SONIA.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the year ended 31 March 2022
216
discoverIE Group plc Innovative Electronics
Financial Statements
9. Called up share capital
Allotted, called up and fully paid
2022
Number
2022
£m
2021
Number
2021
£m
Ordinary shares of 5p each 95,456,109 4.7 89,455,915 4.4
During the year to March 2022, 650,000 shares were issued to the Group’s Employee Benefit Trust
(2021: 750,000).
On 2 September 2021, 5,350,194 shares were issued for a gross consideration of £55m before costs and £53.5m
after costs. The shares were issued at 1,028 pence per share, which is equal to the mid-market closing price
of 1,028 pence per share on 2 September 2021. £0.3m was share capital with the balance of £53.2m being
allocated to share premium account.
At 31 March 2022, there were outstanding options for employees of subsidiaries to purchase up to 2,985,201
(2021: 3,928,273) ordinary shares of 5p each between 2020 and 2031 at prices ranging from £nil per share to
£8.03 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 2022, employees exercised 1,170,882 share options under the
terms of the various schemes (2021: 60,693). The shares exercised during the year ended 31 March 2022 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 subsidiaries undertakings totalling £65.5m 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 7.45p per share (2021: 7.0p), amounting to a dividend of £7.1m (2021: £6.2m) and bringing the
total dividend for the year to 10.8p (2021: 10.15p), was declared by the Board on 14 June 2022.
Revolving Credit Facility
On 3 May 2022, the Group increased its syndicated banking facility from £180m to £240m and extended the
remaining term of the facility by two years out to four years ending in June 2026, with an option exercisable by
the Group to extend the facility by a further year to June 2027. In addition, the Group has an £80m accordion
facility which it can use to extend the total facility up to £320m.
217
Annual Report and Accounts for the year ended 31 March 2022
Financial Statements
FIVE YEAR RECORD
2022
£m
2021
restated*
£m
2020
restated*
£m
2019
restated*
£m
2018
restated*
£m
Group Statement of Profit or Loss –
continuing operations
Revenue 379.2 302.8 303.3 268.2 224.4
Underlying operating profit 41.4 30.8 30.8 22.5 17.0
Underlying profit before tax 37.6 27.2 26.5 19.0 14.4
Profit before tax 17.1 13.5 13.2 11.2 7.3
Profit for the year from continuing
operations 9.7 9.5 9.3 8.6 5.1
Earnings per share – continuing
operations
Underlying earnings per share 29.4p 22.4p 24.4p 19.0p 14.6p
Diluted earnings per share 10.1p 10.3p 10.6p 11.3p 6.9p
Dividend per share 10.8p 10.15p 2.97p 9.55p 9.0p
Group statement of financial position
Net debt (30.2) (47.2) (61.3) (63.3) (52.4)
Non-current assets 326.5 244.6 236.4 149.2 136.4
Net assets 290.4 208.4 200.5 134.7 126.8
The figures for 2020 onwards included the impact of the adoption of IFRS 16.
* The Group has restated the prior year comparatives in the consolidated Statement of Profit or Loss to exclude the results of discontinued
operations with the objective of ensuring that the amounts disclosed for the year ended 31 March 2022 are comparable with the results for
the year ended 31 March 2021 and earlier years (the comparative periods). Details of the financial position and results for the discontinued
operations can be found in note 12 to the consolidated Financial Statements.
218
discoverIE Group plc Innovative Electronics
Other Information
PRINCIPAL LOCATIONS
Group head office
Location Company City
United Kingdom discoverIE Group plc
discoverIE Management Services Limited
Guildford
Operating companies
Location Company City
United Kingdom
Antenova Limited
Contour Electronics Limited
Cursor Controls Ltd
Herga Technology Limited
Noratel UK Limited
Sens-Tech Limited
Stortech Electronics Limited
Variohm-Eurosensor Limited
Vertec Scientific Limited
Hatfield
Hook
Newark
Bury St. Edmunds
Nantwich
Egham
Harlow
Towcester, Cheltenham, Horsham
Reading
Belgium NSI BVBA Bilzen
Canada Noratel Canada Inc Ontario
China Mainland Foshan Noratel Electric Co Limited
Zhongshan Myrra Electronic Co Limited
Foshan City
Zhongshan
Denmark Noratel Denmark A/S
Flux A/S
Glostrup
Asnaes
Finland Noratel Finland OY Salo
France Myrra SAS Bussy-Saint-Georges
Germany
Limitor GmbH
Limitor Solutions GmbH
MTC Micro Tech Components GmbH
Noratel Germany AG
Santon GmbH
Variohm-Eurosensor
Urbach
Urbach
Dillingen
Grafenau, Bremen
Nettetal
Heidelberg
Hong Kong Contour Asia Limited
Myrra Hong Kong Limited
Kowloon
Wanchai
Hungary Limitor Hungaria Elektromechanikai Gyarto Kft. Pecs
India Noratel India Power Components Pvt Limited Kerala, Bangalore
Mexico Hobart Electronics Agualeguas, Nogales
Netherlands Santon Holland BV Rotterdam
Norway Foss AS
Noratel AS
Drammen
Hokksund, Hamar
Poland Myrra Poland sp. z o.o.
Noratel sp. z o.o
Kaluszyn
Szczecinska
Slovakia Foss Fibre Optics s.r.o. Bratislava
South Korea EMC Innovation Limited Cheongcheon-Dong
Sri Lanka Noratel International Pvt Limited Katunayake
Sweden Hectronic AB
Noratel Sweden AB
Uppsala
Laxa, Vaxjo
Taiwan Antenova Asia Taipei
Thailand Flux International Limited Bangkok
USA
Calculagraph Company
Hobart Electronics
IMAG Electronics
Logic PD, Inc.
Noratel North America LLC
Noratel Power Engineering LLC
Phoenix America LLC
East Hanover, NJ
Hobart, IN
Tempe, AZ
Eden Prairie, MN
Charlotte, NC
Long Beach, CA
Fort Wayne, IN
219
Annual Report and Accounts for the year ended 31 March 2022
Other Information
FINANCIAL CALENDAR 2022/23
CORPORATE INFORMATION
Annual General Meeting 28 July 2022
Results
Interim results for the six months to 30 September 2022 Late November 2022
Preliminary announcement for the year to 31 March 2023 Early June 2023
Annual Report 2023 Late June 2023
Registered office
discoverIE Group plc
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
Telephone: 0371 384 2001
Stockbroker
Peel Hunt LLP
220
discoverIE Group plc Innovative Electronics
Other Information
discoverIE Group plc
2 Chancellor Court
Occam Road, Surrey Research Park
Guildford, Surrey
GU2 7AH
Telephone +44 (0)1483 544500
Fax +44 (0)1483 544550
www.discoverIEplc.com