TIDMDSCV
RNS Number : 7744R
discoverIE Group plc
09 November 2021
For Release:
7.00am, 9 November 2021
discoverIE Group plc
Sale of Acal BFi Distribution Business
-- Sale of Custom Supply distribution business, Acal BFi, for
total cash consideration of GBP50m
-- Accelerates growth strategy with the Group now solely focused
on the higher margin Design & Manufacturing ("D&M")
division, the principal driver of the Group's financial
performance
-- Increases exposure to structurally growing target markets and
positively impacts operating margin
-- Proforma gearing reduces to 1.0x, leaving significant capacity for further acquisitions
discoverIE Group plc (LSE: DSCV, "discoverIE", the "Group" or
the "Company"), a leading international designer and manufacturer
of customised electronics to industry , today announces the sale of
Acal BFi ("Acal BFi"), the Group's electronic component
distribution business.
The Company has agreed to sell Acal BFi to H2 Equity Partners,
for a total cash consideration of GBP50m, on a debt free, cash free
basis, comprising an upfront payment of GBP45m, together with GBP5m
of deferred consideration(1) (the "Transaction"). The Transaction
is subject to certain consultation requirements(2) and regulatory
approvals, with completion expected in the current financial year.
Sale proceeds will be used to reduce the Group's net debt and to
progress the design and manufacturing growth strategy.
For the year ended 31 March 2021 ("FY21"), Acal BFi reported
revenues of GBP148.7m, profit before tax of GBP4.0m and gross
assets of GBP60.1m. The total consideration represents a multiple
of approximately 7x pre-Covid average underlying operating
profits.
Acal BFi is a European specialist electronic components
distributor, with operating companies in the UK, Germany, France,
Italy, the Nordic region and Benelux and will continue under its
existing management team, led by Paul Webster. Following the
planned disposal of Vertec SA announced last month, the sale of
Acal BFi concludes discoverIE's exit from its Custom Supply
distribution business and leaves the Group wholly focused on design
and manufacturing, the principal driver of the Group's financial
performance.
The Group's D&M division has grown strongly over the last 10
years, both organically and through acquisitions. In FY21, D&M
accounted for 65% of Group revenues and 87% of Group underlying
profit contribution with an operating margin of 12.7% (compared
with 3.6% in Custom Supply).
The D&M businesses are focused on markets with long term
structural growth drivers, namely renewable energy, medical,
transportation and industrial & connectivity. In FY21, sales
into these four target markets accounted for 75% of D&M
revenue. Including its recent acquisitions, the division generates
c. 40%(3) of its sales outside Europe. Acal BFi will continue to
sell the Group's D&M products, building on the successful cross
selling activity of previous years.
On completion, proforma gearing(4) at 30 September 2021 will
reduce to 1.0x, well below the Group's target range of 1.5x to
2.0x. The Group continues to have a strong pipeline of further
D&M acquisition opportunities and the sale proceeds provide
additional capacity to progress the Group's growth strategy.
discoverIE's proven growth strategy remains unchanged,
being:
1) to g row sales well ahead of GDP over the economic cycle by
focusing on the structural growth markets that form our target
markets;
2) to move up the value chain into higher margin products;
3) to acquire businesses with attractive growth prospects and strong operating margins;
4) to further internationalise the business by developing operations in North America and Asia.
Restated Financial information
Acal BFi and Vertec SA were classified as held for sale as at 30
September 2021 and will be treated as a discontinued operation for
reporting purposes in accordance with IFRS5. The profit after tax
of the discontinued operation up to 30 September 2021 will be
reported as a single line item in the consolidated statement of
comprehensive income. The Group's balance sheet, statement of cash
flows and underlying notes to the financial statements will be
amended accordingly. Prior year comparatives will be similarly
restated, where applicable, to enable shareholders to understand
the underlying trends.
Nick Jefferies, Group Chief Executive of discoverIE, said:
"The Group has developed significantly in recent years, with a
substantial and higher growth design and manufacturing business
becoming the core of operations. The sale of Acal BFi concludes the
Group's exit from the business of distribution, with discoverIE
becoming solely a global designer and manufacturer of customised
electronics with higher operating margins, and provides additional
resources to invest further in our growth.
We are pleased to have found a new home for Acal BFi so that it
can continue to grow under the existing management team, who have
served discoverIE well over many years. We wish them and the whole
Acal BFi workforce every success under their new ownership.
As recently announced in our trading update, the ongoing Group
delivered an excellent performance in the first half of the current
financial year with a record order book alongside strong growth in
orders and sales compared with last year and also the pre-covid
period two years ago.
With a clear strategy focused on long-term, high quality,
structural growth markets across Europe, North America and Asia, a
diversified customer base and a strong pipeline of acquisition
opportunities, the Group is well positioned to make further
progress on its key priorities."
For further information please contact:
discoverIE 01483 544 500
Nick Jefferies, Group Chief Executive
Simon Gibbins, Group Finance Director
Lili Huang, Investor Relations
Buchanan (Financial PR) 020 7466 5000
Chris Lane
Toto Berger
Jack Devoy
Notes:
1. The deferred consideration is payable on the third
anniversary of completion of the Transaction and accrues interest
at a rate of 5% per annum in the intervening period.
2. The terms of the transaction are structured to ensure that
the decision to sell the French operations of Acal BFi is only
taken following completion of an information and consultation
process with the Social and Economic Committee of Acal BFi France
SAS as required pursuant to French law.
3. The recent acquisitions of Beacon EmbeddedWorks and Antenova
Limited increased D&M sales outside Europe for the year ended
31 March 2021 on a proforma basis from 37% to 40%.
4. Gearing is defined as net debt divided by underlying EBITDA
(excluding IFRS 16, annualised for acquisitions).
5. Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) ("MAR") prior to its release as part
of this announcement and is disclosed in accordance with the
Company's obligations under Article 17 of those Regulations.
Notes to Editors:
About discoverIE
discoverIE Group plc is an international group of businesses
that designs and manufactures innovative components for electronic
applications.
The Group provides application-specific components to original
equipment manufacturers ("OEMs") internationally. By designing
components that meet customers' unique requirements, which are then
manufactured and supplied throughout the life of their production,
a high level of repeating revenue is generated with long term
customer relationships.
With a focus on key markets driven by structural growth and
increasing electronic content, namely renewable energy, medical,
transportation and industrial & connectivity, the Group aims to
achieve organic growth that is well ahead of GDP and to supplement
that with targeted complementary acquisitions. The Group has an
ongoing commitment to reducing the impact of its operations on the
environment, while its key markets are aligned with a sustainable
future.
The Group employs c.5,000 people and its principal operating
units are located in Continental Europe, the UK, China, Sri Lanka,
India and North America.
The Group is listed on the Main Market of the London Stock
Exchange and is a member of the FTSE250, classified within the
Electrical Components and Equipment subsector.
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END
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November 09, 2021 02:00 ET (07:00 GMT)
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