Last close As at 05/08/2026
GBP8.23
▲ 24.00 (3.00%)
Market capitalisation
GBP802m
Research: TMT
discoverIE has acquired 2J Antennas Group, a Slovakian-based designer and manufacturer of antennas, for €52.5m/£45m in cash from existing facilities. As a technology platform acquisition, 2J will be combined with Antenova to create a new technology cluster for industrial wireless connectivity. The acquisition is expected to be accretive to underlying earnings in the first full year post completion; we maintain our FY24 underlying EPS forecast and raise our FY25 forecast by 0.8%.
discoverIE Group |
Creating an industrial wireless connectivity cluster |
Acquisition |
Electrical components |
14 September 2023 |
Share price performance
Business description
Next events
Analyst
discoverIE Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
discoverIE has acquired 2J Antennas Group, a Slovakian-based designer and manufacturer of antennas, for €52.5m/£45m in cash from existing facilities. As a technology platform acquisition, 2J will be combined with Antenova to create a new technology cluster for industrial wireless connectivity. The acquisition is expected to be accretive to underlying earnings in the first full year post completion; we maintain our FY24 underlying EPS forecast and raise our FY25 forecast by 0.8%.
Year |
Revenue |
PBT* |
Diluted EPS* |
DPS |
P/E |
Yield |
03/22 |
379.2 |
37.6 |
29.4 |
10.80 |
24.6 |
1.5% |
03/23 |
448.9 |
46.3 |
35.2 |
11.45 |
20.6 |
1.6% |
03/24e |
469.5 |
47.2 |
35.6 |
12.00 |
20.4 |
1.7% |
03/25e |
496.2 |
49.8 |
37.1 |
12.50 |
19.5 |
1.7% |
Note: *PBT and EPS as per discoverIE’s underlying metric, excluding amortisation of acquired intangibles and exceptional items.
High-margin antenna acquisition
2J is a leading designer and manufacturer of high-performance antennas for industrial connectivity applications based in Bardejov, Slovakia, with subsidiaries in the UK and US and customers in more than 50 countries. In CY22, 2J reported revenue of €18.1m/£15.5m, PBT of €4.4m/£3.8m and underlying operating profit of €3.7m/£3.2m (20.6% margin vs discoverIE’s 11.5% in FY23). While CY23 revenue is likely to reduce due to customers working through inventory, a return to organic growth is then expected. The deal equates to a trailing price/EBIT multiple of 14.2x, at the upper end of previous deals, but we estimate that, including synergies, it reduces to c 10x. By FY28, management expects 2J to exceed the group’s 15% return on investment target. We raise our FY24/FY25 revenue forecasts by 1.5%/3.2% and underlying operating margin by 0.1pp /0.3pp to 12.0%/12.3%.
Creating a new technology cluster
discoverIE’s acquisitions typically fall into two camps: bolt-ons that expand its position in an existing business and platform deals to create a new position in a technology. This acquisition is the latter, and 2J is to be combined with Antenova, discoverIE’s existing antenna business, to create an industrial wireless connectivity cluster within the Sensing & Connectivity division that can take advantage of growth in areas such as industrial internet of things, robotics and AI-controlled systems.
Valuation: Trading at a discount to peers
The stock is trading at a small discount to its broader UK industrial technology peer group on a P/E basis for FY24, but at a more significant discount compared to peers with a similar decentralised operating model (such as Halma and Spirax). The focus on strategic growth markets supports sustained organic revenue growth and we see potential for upside to earnings through operating margin expansion and accretive acquisitions. With pro forma net debt/EBITDA of 1.6x at end-FY23 compared to the target range of 1.5–2.0x, discoverIE still has headroom for further acquisitions and a strong pipeline of opportunities.
Changes to forecasts
Exhibit 1: Changes to forecasts
£m |
FY24e old |
FY24e new |
Change |
y-o-y |
FY25e old |
FY25e new |
Change |
y-o-y |
Revenues |
462.5 |
469.5 |
1.5% |
4.6% |
480.7 |
496.2 |
3.2% |
5.7% |
EBITDA |
70.4 |
71.8 |
2.0% |
9.8% |
73.4 |
76.6 |
4.4% |
6.7% |
EBITDA margin |
15.2% |
15.3% |
0.1% |
0.7% |
15.3% |
15.4% |
0.2% |
0.1% |
Underlying operating profit |
55.0 |
56.4 |
2.6% |
8.9% |
57.7 |
60.9 |
5.5% |
8.0% |
Underlying operating margin |
11.9% |
12.0% |
0.1pp |
0.5% |
12.0% |
12.3% |
0.3pp |
0.3% |
Normalised operating profit |
57.4 |
58.8 |
2.5% |
8.3% |
60.1 |
63.3 |
5.3% |
7.6% |
Normalised operating margin |
12.4% |
12.5% |
0.1pp |
0.4% |
12.5% |
12.8% |
0.3pp |
0.2% |
Underlying PBT |
47.2 |
47.2 |
0.0% |
2.0% |
49.4 |
49.8 |
0.8% |
5.6% |
Normalised PBT |
49.6 |
49.6 |
0.0% |
1.7% |
51.8 |
52.2 |
0.8% |
5.3% |
Normalised net income |
36.8 |
36.8 |
0.0% |
2.0% |
38.2 |
38.5 |
0.8% |
4.6% |
Normalised diluted EPS (p) |
37.4 |
37.4 |
0.0% |
1.8% |
38.6 |
38.9 |
0.8% |
4.0% |
Underlying diluted EPS (p) |
35.5 |
35.6 |
0.0% |
1.1% |
36.8 |
37.1 |
0.8% |
4.3% |
Reported basic EPS (p) |
23.4 |
23.4 |
0.1% |
4.7% |
24.8 |
25.1 |
1.2% |
7.4% |
Dividend per share (p) |
12.0 |
12.0 |
0.0% |
4.8% |
12.5 |
12.5 |
0.0% |
4.2% |
Net (debt)/cash |
(55.7) |
(101.8) |
83.0% |
138.5% |
(47.2) |
(94.8) |
100.8% |
(6.9%) |
Net debt/EBITDA (x) |
0.9 |
1.5 |
0.6 |
1.2 |
Source: Edison Investment Research
Exhibit 2: Financial summary
£m |
2020 |
2021 |
2022 |
2023 |
2024e |
2025e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
297.9 |
302.8 |
379.2 |
448.9 |
469.5 |
496.2 |
EBITDA |
|
|
43.6 |
44.0 |
56.1 |
65.4 |
71.8 |
76.6 |
Normalised operating Profit (before am, SBP and except.) |
31.6 |
31.9 |
44.8 |
54.3 |
58.8 |
63.3 |
||
Underlying operating Profit (before am. and except.) |
29.8 |
30.8 |
41.4 |
51.8 |
56.4 |
60.9 |
||
Amortisation of acquired intangibles |
(9.0) |
(11.1) |
(14.0) |
(15.8) |
(16.0) |
(16.0) |
||
Exceptionals |
(4.3) |
(2.6) |
(6.5) |
(1.4) |
(1.0) |
(1.0) |
||
Share-based payments |
(1.8) |
(1.1) |
(3.4) |
(2.5) |
(2.4) |
(2.4) |
||
Operating Profit |
16.5 |
17.1 |
20.9 |
34.6 |
39.4 |
43.9 |
||
Net Interest |
(4.3) |
(3.6) |
(3.8) |
(5.5) |
(9.2) |
(11.0) |
||
Profit Before Tax (norm) |
|
|
27.3 |
28.3 |
41.0 |
48.8 |
49.6 |
52.2 |
Profit Before Tax (FRS 3) |
|
|
12.2 |
13.5 |
17.1 |
29.1 |
30.2 |
32.8 |
Tax |
(3.3) |
(4.0) |
(7.4) |
(7.8) |
(7.8) |
(8.6) |
||
Profit After Tax (norm) |
21.8 |
21.6 |
30.8 |
36.1 |
36.8 |
38.5 |
||
Profit After Tax (FRS 3) |
8.9 |
9.5 |
9.7 |
21.3 |
22.4 |
24.2 |
||
Discontinued operations |
5.4 |
2.5 |
15.5 |
0.0 |
0.0 |
0.0 |
||
Net income (norm) |
21.8 |
21.6 |
30.8 |
36.1 |
36.8 |
38.5 |
||
Net income (FRS 3) |
14.3 |
12.0 |
25.2 |
21.3 |
22.4 |
24.2 |
||
Ave. Number of Shares Outstanding (m) |
84.0 |
88.8 |
93.0 |
95.4 |
95.9 |
96.4 |
||
EPS - normalised & diluted (p) |
|
|
25.1 |
23.4 |
32.1 |
36.7 |
37.4 |
38.9 |
EPS - underlying, diluted (p) |
|
|
24.4 |
22.4 |
29.4 |
35.2 |
35.6 |
37.1 |
EPS - IFRS basic (p) |
|
|
17.0 |
13.5 |
27.1 |
22.3 |
23.4 |
25.1 |
EPS - IFRS diluted (p) |
|
|
16.5 |
13.0 |
26.3 |
21.7 |
22.8 |
24.4 |
Dividend per share (p) |
2.97 |
10.15 |
10.80 |
11.45 |
12.00 |
12.50 |
||
EBITDA Margin (%) |
14.6 |
14.5 |
14.8 |
14.6 |
15.3 |
15.4 |
||
Normalised operating margin (before am, SBP and except.) (%) |
10.6 |
10.5 |
11.8 |
12.1 |
12.5 |
12.8 |
||
discoverIE underlying operating margin (%) |
10.0 |
10.2 |
10.9 |
11.5 |
12.0 |
12.3 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
236.4 |
244.6 |
326.5 |
335.9 |
389.0 |
377.0 |
Intangible Assets |
182.2 |
190.8 |
263.3 |
272.0 |
323.7 |
309.4 |
||
Tangible Assets |
46.3 |
45.9 |
45.4 |
44.4 |
45.8 |
48.1 |
||
Deferred tax assets |
7.9 |
7.9 |
17.8 |
19.5 |
19.5 |
19.5 |
||
Current Assets |
|
|
197.4 |
183.6 |
266.2 |
249.8 |
202.4 |
218.9 |
Stocks |
68.4 |
67.7 |
77.8 |
90.0 |
95.2 |
100.6 |
||
Debtors |
90.1 |
84.9 |
78.0 |
74.6 |
86.2 |
95.2 |
||
Cash |
36.8 |
29.2 |
108.8 |
83.9 |
19.8 |
21.8 |
||
Current Liabilities |
|
|
(103.6) |
(107.8) |
(190.3) |
(151.2) |
(155.6) |
(156.8) |
Creditors |
(94.0) |
(102.2) |
(114.2) |
(107.3) |
(111.7) |
(112.9) |
||
Lease liabilities |
(5.3) |
(4.8) |
(4.7) |
(4.0) |
(4.0) |
(4.0) |
||
Short term borrowings |
(4.3) |
(0.8) |
(71.4) |
(39.9) |
(39.9) |
(39.9) |
||
Long Term Liabilities |
|
|
(129.7) |
(112.0) |
(112.0) |
(130.9) |
(120.9) |
(110.8) |
Long term borrowings |
(93.8) |
(75.6) |
(67.6) |
(86.7) |
(81.7) |
(76.7) |
||
Lease liabilities |
(14.7) |
(16.7) |
(16.4) |
(14.8) |
(14.8) |
(14.8) |
||
Other long term liabilities |
(21.2) |
(19.7) |
(28.0) |
(29.4) |
(24.4) |
(19.3) |
||
Net Assets |
|
|
200.5 |
208.4 |
290.4 |
303.6 |
314.9 |
328.3 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
48.0 |
56.8 |
42.5 |
52.1 |
56.6 |
60.4 |
Net Interest |
(3.7) |
(3.1) |
(3.3) |
(4.8) |
(8.7) |
(10.5) |
||
Tax |
(6.4) |
(7.2) |
(7.1) |
(9.0) |
(12.8) |
(13.7) |
||
Capex |
(6.3) |
(3.9) |
(6.2) |
(5.6) |
(9.0) |
(9.2) |
||
Acquisitions/disposals |
(73.6) |
(20.5) |
(46.8) |
(25.1) |
(68.0) |
(2.0) |
||
Financing |
53.9 |
(6.6) |
47.2 |
(7.5) |
(6.0) |
(6.1) |
||
Dividends |
(8.1) |
(2.8) |
(9.4) |
(10.5) |
(11.2) |
(11.8) |
||
Net Cash Flow |
3.8 |
12.7 |
16.9 |
(10.4) |
(59.1) |
7.0 |
||
Opening net cash/(debt) |
|
|
(63.3) |
(61.3) |
(47.2) |
(30.2) |
(42.7) |
(101.8) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(1.8) |
1.4 |
0.1 |
(2.1) |
0.0 |
0.0 |
||
Closing net cash/(debt) |
|
|
(61.3) |
(47.2) |
(30.2) |
(42.7) |
(101.8) |
(94.8) |
Source: discoverIE, Edison Investment Research
|
|
Research: TMT
Checkit reported annual recurring revenue (ARR) growth of 24% y-o-y in H124, with more than half of the growth from upsells and cross-sells to its existing customer base. Revenue was 19% higher y-o-y and EBITDA losses nearly halved y-o-y. We have upgraded our FY24 EBITDA forecast on better gross margins and operating efficiencies. Recent contract wins provide upsell potential and the recent John Lewis contract renewal highlights the stickiness of the technology.