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discoverIE builds record order book

The electronics group's first-quarter sales are down by a tenth
discoverIE builds record order book

discoverIE (DSCV) finished its 2020 financial year with a record order book of £159m, which included big wins in the medical, renewable wind energy and rail transport sectors. The acquisitive electronics group continues to generate a sizeable proportion of turnover (64 per cent) from its higher-margin design and manufacturing (D&M) activities. It made three acquisitions in the year, and these helped boost underlying profitability. Consequently, it has lifted its margin target by four percentage points to 12.5 per cent.

IC TIP: Buy at 508p

discoverIE hasn’t emerged completely unscathed from the coronavirus pandemic. Its first-quarter sales were down by around 10 per cent, and the group was forced to close a handful of its 27 factories earlier in the year, although these have all now been reopened. The group lost £1.5m of D&M sales owing to coronavirus, while sales volumes were also constrained by de-stocking in its third quarter, particularly in the US and Germany.

Broker Peel Hunt forecasts adjusted pre-tax profits of £26.1m and EPS of 21.9p for March 2021, rising to £27.5m and 23p in FY2022.

DISCOVERIE (DSCV)   
ORD PRICE:508pMARKET VALUE:£454m
TOUCH:508-516p12-MONTH HIGH:606pLOW: 330p
DIVIDEND YIELD:0.6%PE RATIO:30
NET ASSET VALUE:224p*NET DEBT:41%**
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20162889.411.48.05
20173384.85.38.50
2018†38814.615.09.00
201943919.320.09.55
202046619.517.02.97
% change+6+1-15-69
Ex-div:na   
Payment:na   
*Includes intangible assets of £182m, or 203p a share **Includes lease liabilities of £20m †Restated to reflect fraud costs recovered from insurance