What discoverIE does
discoverIE Group PLC (LON:DSCV) designs, manufactures and supplies highly differentiated, innovative components for electronics applications.
The group – which changed its name from Acal in 2017 – provides application-specific components to original equipment manufacturers (OEMs) internationally using its in-house engineering capability.
It focuses on key markets which are driven by structural growth and increasing electronic content, namely renewable energy, transportation, medical and industrial connectivity.
It employs around 4,000 people and its principal operating units are located in Continental Europe, the UK, China, Sri Lanka, India and North America.
How it is doing
In a trading update in October, the company said trading in the July-September quarter was good and the company is on track to meet full-year expectations.
Group sales in what is the second quarter of the groups fiscal year were up 11% year-on-year on a constant exchange rates (CER) basis and by 9% in the first half of the fiscal year.
The groups margins remained in line with those from a year earlier.
Like-for-like (LFL) sales on a CER basis were up by 6% in the second quarter, accelerating from the 4% growth in the first quarter and cranking up the half-year growth rate to 5%.
The Design & Manufacturing (D&M) division was the star performer, notching up 12% year-on-year LFL growth on a CER basis in the first half of the fiscal year, lifting its share of group revenues to 64% from 61% at the end of the previous fiscal year.
The Custom Supply divisions LFL revenues were on par with the same period of 2018.
Group orders for the second quarter grew by 7% on an LFL basis, up from 3% in the first quarter, leading to first-half group order growth of 4%.
Once again, the D&M division did the heavy lifting, with orders in Custom Supply division orders down slightly from a year earlier.
DiscoverIEs order book as at the end of September stood at £153mln, of which more than four-fifths is for delivery over the next twelve months.
The end-September 2019 order book was up 15% in CER terms and by 11% on an LFL basis.
“With a clear strategy focused on markets that offer long term sustainable organic growth prospects and an active pipeline of acquisition opportunities, the board expects to make further progress throughout the year,” the groups statement said.
Shortly after the update, the firm also announced that it had acquired Xi-Tech, a maker of specialist sensing and data acquisition modules for x-ray and optical detection applications.
The company is paying £58mln to acquire the UK company and its Sens-Tech subsidiary on a debt-free, cash-free basis, with a further cash consideration of up to £12mln due to be paid if Xi-Tech hits certain profit targets over a three-year period.
To reduce gearing following the acquisition, discoverIE is proposing to raise roughly £33mln by placing shares at 415p per share – a discount of 3.9% to last nights closing price of 432p.
Following the acquisition and the placing, gearing, calculated as net debt to adjusted underlying earnings (annualised for acquisitions), at 30 September 2019 would have increased from 1.4x to 1.7x on a pro forma basis, which is still within the company's target range of 1.5x to 2.0x.
Sens-Tech is based in the UK and serves the transport security, medical, food processing and industrial markets.
In the year to the end of March, it reported revenue of £15mln, profit before tax of £4.4mln and underlying earnings before interest and tax (EBIT) of £5.3mln.
DiscoverIE said the acquisition would create further organic growth opportunities in its target markets, particularly medical, transportation and industrial & connectivity.
The acquisition would also increase the groups international footprint as Sens-Tech makes roughly 70% of iRead More – Source
