NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2026
6. Adjusted performance measures continued
6. Adjusted performance measures continued The tables below show the reconciliation to the IFRS reporting measures, for the main adjusted performance measures used by the Group.
Adjusted operating costs “Adjusted operating costs” is defined as operating costs excluding acquisition and disposal-related costs. Adjusted EBITDA “Adjusted EBITDA” is defined as adjusted operating profit excluding the impact of IFRS16 and with depreciation, amortisation, equity-settled share-based payment expense and IAS 19 pension cost added back. Adjusted operating margin “Adjusted operating margin” is defined as adjusted operating profit divided by revenue. Adjusted profit before tax “Adjusted profit before tax” is defined as profit before tax excluding acquisition and disposal-related costs. Adjusted tax charge / Adjusted effective tax rate (“ETR") "Adjusted tax charge” is defined as the tax charge adjusted for the tax effect of the acquisition and disposal-related costs. “Adjusted ETR” is defined as adjusted tax charge divided by adjusted profit before tax. Adjusted profit after tax “Adjusted profit after tax” is defined as adjusted profit before tax less adjusted tax charge. Adjusted earnings per share “Adjusted earnings per share – diluted” is calculated as adjusted profit after tax, divided by the weighted average number of ordinary shares (for diluted earnings per share purposes) in issue during the period. “Adjusted earnings per share – basic” is calculated as adjusted profit after tax, divided by the weighted average number of ordinary shares (for basic earnings per share purposes) in issue during the period. Adjusted operating cash flow / Adjusted operating cash conversion “Adjusted operating cash flow” is defined as adjusted EBITDA, plus/minus the investment in, or release of, working capital and less the cash cost of capital expenditure. “Adjusted operating cash conversion” is defined as adjusted operating cash flow divided by adjusted operating profit. Free cash flow / Free cash flow conversion “Free cash flow” is defined as net cash flow before dividend payments, the cost of acquisitions and proceeds from business disposals. “Free cash conversion” is free cash flow divided by adjusted profit after tax. Return on capital employed (“ROCE”) / Return on tangible capital employed (“ROTCE”) “ROCE” is defined as adjusted operating profit, including the annualisation of profits of acquired businesses, as a percentage of net assets excluding net debt, deferred consideration related to discontinued operations and legacy defined benefit pension liability. “ROTCE” is defined as ROCE excluding the value of acquired goodwill and intangibles, lease liabilities, provisions and tax balances. Organic and CER revenue growth “CER revenue growth” is defined as growth rates at constant exchange rates. “Organic revenue growth” is defined as CER revenue growth excluding the first 12 months of acquisitions post completion, and adjusted for disposals. Gearing ratio Gearing ratio is defined as net debt divided by adjusted EBITDA, including the annualisation of acquired businesses.
Adjusted operating profit / Adjusted EBITDA Adjusted operating profit and EBITDA are calculated as follows:
2025 (restated) 1 £m
2026 £m
45.2
Operating profit
42.4
5.3
Add back:
Net acquisition and disposal expenses
(a) (b)
3.6
(5.8)
Contingent consideration
(1.7)
16.3 61.0 12.6
Amortisation of acquired intangibles
16.2 60.5 12.4
Adjusted operating profit
Add back:
Depreciation and amortisation
1.9
Share-based payment and IAS 19 pension cost
2.7
(7.9)
Less:
Lease payments
(7.5)
Adjusted EBITDA
67.6
68.1
1 Prior year Adjusted EBITDA restated to exclude the impact of IFRS16.
(a) Net acquisition and disposal expenses comprise £2.3m of transaction costs in relation to the acquisitions of Storm Interface, Trival, 3G and ongoing transactions, £0.4m of integration and restructuring expenses across the Group, £2.2m related to changes in fair value of inventory and £0.4m equalisation of Guaranteed Minimum Pensions (“GMPs”) in the legacy Sedgemoor Group Pension Fund. During the prior year, net acquisition and disposal expenses of £3.6m comprised £1.4m of transaction costs in relation to the acquisitions of Burster, Hivolt and ongoing transactions, and £3.1m of integration and restructuring expenses related to the establishment of our operating clusters mainly associated with removing duplicate positions in our Magnetics & Sensing clusters, £1.2m related to changes in fair value of inventory, offset by £2.1m gain on disposal of the Santon solar business.
(b) Movement in fair value of contingent consideration on past acquisitions. Adjusted profit before tax Adjusted profit before tax is calculated as follows:
2026 £m
2025 £m
36.1
Profit before tax
32.0
5.3
Add back:
Net acquisition and disposal expenses
3.6
(5.8) 16.3 51.9
Contingent consideration
(1.7)
Amortisation of acquired intangible assets
16.2 50.1
Adjusted profit before tax
Adjusted effective tax rate Adjusted effective tax rate (“ETR”) is calculated as follows
2026 £m
2025 £m
51.9
Adjusted profit before tax
50.1 7.4 4.6 12.0
7.1 5.1
Total tax charge
Add back tax effect of net acquisition and disposal-related costs
12.2
Adjusted tax charge
23.5%
Adjusted effective tax rate
24.0%
168
169
discoverIE Group plc Innovative Electronics
Annual Report and Accounts for the year ended 31 March 2026
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