In a crowded marketplace, it makes sense to differentiate your product offering. discoverIE (DSCV), or Acal as it was then, went down that road some time ago, transitioning away from volume distribution to a design-focused, higher-margin business. The move to a ‘value-add’ model was reflected in double-digit increases in constant-currency revenues and underlying operating profits during the 12 months to March, underpinned by a 27 per cent top-line expansion at the design and manufacturing (D&M) segment. The estimated sales value of project design wins, which are characterised as “a proxy measurement for new business creation”, was up 50 per cent on the prior year.
A higher proportion of D&M sales resulted in reduced stock turn from the corresponding period, along with an increase in group debtor days, due to the division – as a manufacturing centre – holding more raw material and more finished goods than in custom supply. However, the group kept working capital static as a percentage of final-quarter sales. Cash conversion remains solid at 85 per cent of underlying operating profits, while the step up in receivables and a 21 per cent increase in inventory show that discoverIE is gearing up for sales growth.
Broker finnCap gives adjusted cash profit of £35.4m for the March 2019 year-end, leading to EPS of 27.1p, from £29.3m and 22.2p in the prior year.
| DISCOVERIE GROUP (DSCV) | ||||
| ORD PRICE: | 426p | MARKET VALUE: | £304m | |
| TOUCH: | 426-435p | 12-MONTH HIGH: | 456p | LOW: 278p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 181p* | NET DEBT: | 41% | |
| Year to 31 March | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 212 | 4.2 | 3.0** | 6.80** |
| 2015 | 271 | 4.3 | 5.0 | 7.60 |
| 2016 | 288 | 9.4 | 11.4 | 8.05 |
| 2017 | 338 | 4.8 | 5.3 | 8.50 |
| 2018 | 388 | 15.8 | 16.7 | 9.00 |
| % change | +15 | +229 | +215 | +6 |
| Ex-div: | 14 Jun | |||
| Payment: | 31 Jul | |||
| *Includes intangible assets of £115m, or 161p a share **Restated to reflect £55m rights issue | ||||
