- Group celebrates record order book
- Strategy focuses on structural growth markets
Revenue and profit at discoverIE (DSCV) are well ahead of the pre-Covid period, after a strong six months of trading. The component specialist, which designs and manufactures electronics for industry, said its underlying earnings for the full year are now set to exceed expectations.
discoverIE proved resilient during Covid-19. Its long-term customer base and recurring revenue stream helped to stabilise its income, and its focus on markets that have structural growth opportunities – such as renewable energy, healthcare and transport – sheltered it from the worst of the pandemic.
The group has since streamlined the business, selling off its distribution arm for £50m in order to focus solely on design and manufacturing. Over the past six months, revenue from continuing operations has risen by 21 per cent year on year, and is 17 per cent higher than in 2019. Its underlying profit margin has also moved into double figures for the first time, and its half-year dividend has been boosted by 6 per cent to 3.35p a share
Looking ahead, discoverIE has a record period-end order book of £198m, up 71 per cent organically on last year. There are also opportunities for growth. The group is seeking to expand beyond its core European sales base, and has made three US-based acquisitions in the past year. Meanwhile, organic growth during the period was strongest in Asia, which accounted for 22 per cent of ongoing group sales.
To fuel its expansion plans, the group raised £53.4m in September from an equity placing, and reported free cash flow of £28.1m for the last 12 months. Net debt has increased significantly, however, and now stands at £75.6m – £33.5m more than last year.
Supply chain issues could still prove troublesome, and some of discoverIE’s sites are still suffering from higher absence rates. However, the group’s resilience, together with its growth prospects, look promising. According to Peel Hunt, the shares are trading on a price-to-earnings ratio of 37 times its revised EPS for financial year 2022, a premium that "reflects the recent performance during a period that has put the model to the test". Buy.
Last IC View: Buy, 648p, 1 Dec 2020
| DISCOVERIE (DSCV) | ||||
| ORD PRICE: | 986p | MARKET VALUE: | £935m | |
| TOUCH: | 986-988p | 12-MONTH HIGH: | 1,274p | LOW: 560p |
| DIVIDEND YIELD: | 1% | PE RATIO: | 39 | |
| NET ASSET VALUE: | 284p* | NET DEBT: | 46% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2020 | 144 | 5.60 | 4.20 | 3.15 |
| 2021 | 174 | 6.40 | 3.30 | 3.35 |
| % change | +21 | +14 | -21 | +6 |
| Ex-div: | 16 Dec | |||
| Payment: | 14 Jan | |||
| *Includes intangible assets of £270m, or 284p a share | ||||
