FINANCIAL REVIEW CONTINUED
Profit before tax and EPS Following the reduction in net finance costs, adjusted profit before tax for the year of £51.9m was £1.8m higher (+4%) than last year (FY 2024/25: £50.1m) with adjusted EPS for the year increasing by 4% to 40.3p (FY 2024/25: 38.7p). FY 2025/26 FY 2024/25 £m PBT EPS PBT EPS Adjusted 51.9 40.3p 50.1 38.7p Adjusting items Amortisation of acquired intangibles (16.3) (16.2) Acquisition & disposal credit/(expenses) 0.5 (1.9) Reported 36.1 29.4p 32.0 25.0p
Balance sheet Net assets of £328.6m at 31 March 2026 were £20.6m higher than at the end of the last financial year (31 March 2025: £308.0m). The increase primarily relates to net profit after tax for the year of £29.0m being partly offset by dividends paid during the year of £12.2m. The movement in net assets is summarised below. £m FY 2025/26 Net assets at 31 March 2025 308.0 Net profit after tax 29.0 Dividend paid (12.2) Currency net assets – translation impact 2.1 Gain on defined benefit scheme 0.2 Issue of shares 0.2 Share based payments (inc tax) 1.3 Net assets at 31 March 2026 328.6 Risks and uncertainties The principal risks faced by the Group, which are set out in further detail on pages 79 to 84, comprise: the economic environment, particularly linked to the geopolitical issues arising from the ongoing conflicts in the Middle East and Ukraine; the imposition of US trade tariffs and counter tariffs; 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; control risk; product liability; liquidity and debt covenants; exposure to adverse foreign currency movements; and non-compliance with legal and regulatory requirements. The Board reviewed the Group’s principal risks and the mitigating actions and processes in place during the financial year. The Board’s view is that risks associated with the macroeconomic environment, including the impact from US tariffs and cyber attacks have 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.
Capital expenditure levels are expected to increase to c.£9m for next year with the completion of the Indian facility and a new facility in Norway. £55.5m of adjusted operating cash flow was generated in the year (FY 2024/25: £62.3m) being 91% of adjusted operating profit, comfortably ahead of our 85% target (FY 2024/25: 103%). This conversion rate is lower than last year due to investments in working capital to support growth. Finance cash costs of £7.2m were £1.8m below last year due to lower net debt balances during the year and lower base rates for our main borrowing currencies (Sterling, US Dollars and Euros), all of which reduced during the year. Corporate income tax payments of £10.7m were broadly in line with last year (FY 2024/25: £10.6m). Free cash flow (being cash flow before dividends and acquisitions) of £36.6m was generated in the year (FY 2024/25: £40.4m) at a free cash conversion rate of 92% of adjusted earnings, again ahead of our 85% target (FY 2024/25: 106%). Over the past decade, the Group has consistently achieved high levels of adjusted operating cash and free cash conversion, both averaging around 100%. Banking facilities The Group has a £240m syndicated banking facility which, in November 2025, was extended to May 2030 with extension options to May 2032. In addition, the Group has an £80m accordion facility which it can use to extend the total facility up to £320m, subject to bank approval. The syndicated facility is available both for acquisitions and for working capital purposes and comprises seven lending banks. As part of the renewal, our gearing covenant was increased from 3.0x to 3.5x which provides us with additional flexibility to operate temporarily above the upper end of our target gearing range of 2.0x to optimise execution of our acquisition pipeline. With net debt (excluding IFRS 16 leases in accordance with our banking covenants) at 31 March 2026 of £80.5m, the Group’s gearing ratio at the end of the year (being net debt excluding IFRS 16 leases divided by Adjusted EBITDA as annualised for acquisitions) was 1.2x. With the acquisition of Trival completed in April 2026 and the recently announced acquisition of 3G, proforma gearing at 31 March 2026 was 2.2x which is forecast to reduce to 1.8x by the end of this new financial year, comfortably within our target range. Defined benefit pension scheme In January 2025, the Group completed the buy-in of its legacy UK defined benefit pension scheme with Just Retirement Limited for a premium of £29.1m, funded primarily from existing scheme assets. The buy-in delivers greater security for scheme members, whilst substantially removing the Group’s exposure to defined benefit liabilities and investment, longevity, interest rate and inflation risks in respect of the scheme.
After adjusting items, reported profit before tax was £36.1m, 13% higher than last year (FY 2024/25: £32.0m) with reported fully diluted earnings per share of 29.4p, 18% ahead of last year (FY 2024/25: 25.0p). Working capital and asset returns ratios Working capital at 31 March 2026 was £81.8m (FY 2024/25: £79.0m) with a £2.4m increase from acquisitions and £1.3m of working capital investment offset by a £0.9m reduction from foreign exchange translation. This is equivalent to 16.6% of final quarter annualised sales at CER, a 0.6ppts improvement on last year (FY 2024/25: 17.2%). Working capital KPIs have remained robust during the year with debtor days of 47 (1 day higher than last year), creditor days of 74 (6 days lower than last year) and stock turns of 3.2 (0.1 turns higher than last year). ROCE for the year of 15.2% was above our 15.0% target although slightly below last year (FY 2024/25: 15.8%) due to the impact of acquisitions and operational investment this year. Return on Tangible Capital Employed (“ROTCE”) for the year, which excludes goodwill, intangible assets and non- operational assets, was 45.1%. This illustrates both the strong returns being generated by the Group’s operational assets, and our capital-light requirements with capital expenditure of only 1.5% of sales (FY 2024/25: 1.4%). ROTCE was 7.0ppts lower than last year (FY 2024/25: 52.1%) due to £13m of additional right-of-use assets, capitalised under IFRS16. Cash flow Net debt at 31 March 2026, excluding IFRS16 leases, was £80.5m, compared with £94.3m at 31 March 2025 with the reduction in the year of £13.8m driven by strong free cash generation partly offset by the acquisition of Storm, payment of earn-outs and last year’s final dividend.
Acquisitions and disposals cash outflow of £9.5m in the year comprised £4.3m for the acquisition of Storm, £2.8m payment of earnouts related to Hivolt and CPI, £1.1m of acquisition expenses, £0.7m of integration expenses and £0.6m of acquisition & disposal completion payments. Dividends of £12.2m were paid during the year, an increase of 4% over the prior year. The impact of movements in Sterling in the year led to an FX loss of £0.6m compared with an FX gain last year of £1.4m. The Group’s policy is to hold net debt in currencies aligned to the currency of its cash flows in order to protect the gearing of the Group. Adjusted operating cash flow and free cash flow for the year (see definitions in note 6 to the Group consolidated Financial Statements) compared with last year are shown below:
£m
FY 2025/26 FY 2024/25
Adjusted profit before tax
51.9
50.1 10.4
9.1
Net finance costs Non-cash items
14.5
15.1
(7.9)
IFRS 16 - lease payments
(7.5)
Adjusted EBITDA
67.6
68.1
(5.5) (6.6)
Changes in working capital
0.3
Capital expenditure
(6.1)
Adjusted operating cash flow
55.5
62.3
(7.2)
Finance costs
(9.0) (10.6)
(10.7)
Taxation
(1.0)
Legacy pension Free cash flow
(2.3)
36.6
40.4
Adjusted EBITDA of £67.6m was £0.5m lower than last year (FY 2024/25: £68.1m) due to lower non-cash items, principally being a lower share-based payment charge. During the year, the Group invested £5.5m in working capital supporting strong sales and orders in the final quarter. This compares with a small inflow last year of £0.3m. Capital expenditure of £6.6m was invested during the year, being 1.5% of sales, similar to last year (FY 2024/25: £6.1m at 1.4% of sales). This included investment in our expanded Thailand facility and our new Indian facility (due to complete in August 2026) together with various new production line extensions.
£m
FY 2025/26 FY 2024/25
(94.3)
Opening net debt
(104.0)
Simon Gibbins Group Finance Director
36.6
Free cash flow (see table below)
40.4
(12.2) (9.5)
Dividends
(11.7) (19.8)
Acquisitions & disposals
0.1
Equity issuance
–
(0.6) (0.6)
Amortisation of debt fees Foreign exchange impact Net debt at 31 March
(0.6)
1.4
(80.5)
(94.3)
36
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discoverIE Group plc Innovative Electronics
Annual Report and Accounts for the year ended 31 March 2026
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