- Profit guidance raised at the start of the new financial year.
- Double-digit revenue and pre-tax profit growth forecast.
- Bumper order book.
Upgrades to earnings guidance was a good start to the new financial year for one small-cap electronics group. The business is exposed to structural growth in its key defence, medical and transport sectors as well as mega-trends offering strong opportunities such as robotics, drones and automation. The group is also reaping the benefits of a smart looking acquisition in the US and has the balance sheet strength to fund further bolt-on deals. A forward rating of 9.3 times cash profit to enterprise valuation fails to acknowledge its robust prospects.
A key driver of growth has been defence and security contract work, buoyed by geopolitical tensions that have sparked a renewed focus on global defence spending despite government budget constraints. The segment increased its contribution from 14 to 18 per cent of group revenue in the 12-months to 31 March 2023 and analysts expect this side of the business to boost its revenue contribution significantly in the new financial year.
