“Edison’s accessible and high-quality research gives us the opportunity to communicate an independent perspective of Tyman to a wide variety of potential stakeholders.”
Currency in GBP
Last close As at 26/05/2023
GBP7.84
▲ 1.00 (0.13%)
Market capitalisation
GBP755m
Research: TMT
discoverIE has acquired Cursor Controls Group, a UK-based designer and manufacturer of human-to-machine interface products for £19m in initial cash consideration. Management expects the deal to be immediately earnings enhancing and to boost group operating margins. This acquisition follows the group’s strategy to build the Design & Manufacturing (D&M) business and to grow the proportion of international revenues.
discoverIE Group |
Expanding margins and international exposure |
Acquisition |
Electronic & electrical equipment |
25 October 2018 |
Share price performance
Business description
Next events
Analysts
discoverIE Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
discoverIE has acquired Cursor Controls Group, a UK-based designer and manufacturer of human-to-machine interface products for £19m in initial cash consideration. Management expects the deal to be immediately earnings enhancing and to boost group operating margins. This acquisition follows the group’s strategy to build the Design & Manufacturing (D&M) business and to grow the proportion of international revenues.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/17 |
338.2 |
17.8 |
19.9 |
8.5 |
19.3 |
2.2 |
03/18 |
387.9 |
22.6 |
23.0 |
9.0 |
16.7 |
2.3 |
03/19e |
426.3 |
25.8 |
25.5 |
9.5 |
15.1 |
2.5 |
03/20e |
442.5 |
27.6 |
26.9 |
9.8 |
14.3 |
2.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Human-to-machine interface (HMI) acquisition
discoverIE has acquired Cursor Controls Group (CCG), a UK-based designer and manufacturer of human-to-machine interface technology that includes trackballs, touchpads, trackpads and ruggedised keyboards. Products are customised for specific applications, with 60% of revenues generated from the medical and industrial sectors. 90% of revenues are generated outside the UK, of which 40% are from America, Asia and other non-EU markets. CCG will operate within the D&M division, and will retain its brand identity and management team.
£19m consideration; immediately EPS enhancing
discoverIE is paying initial cash consideration of £19m on a debt-free/cash-free basis, funded from existing facilities, and will pay out up to £4m in contingent consideration dependent on targets achieved over the three years ended 31 December 2021. In CY17, CCG generated revenues of £7.9m, adjusted operating profit of £2.1m (26% margin) and £0.3m reported PBT. The deal values CCG at 9.0x trailing operating profit, vs 14.5x for discoverIE. We have upgraded our forecasts: revenues +0.9% in FY19 and +2.0% in FY20, and normalised EPS up 1.8% in FY19 and 4.2% in FY20. We estimate that at the end of FY20 net debt/EBITDA will increase from 1.4x to 1.8x.
Valuation: 13% discount to peers
The stock is trading on a P/E of 15.1x for FY19e, at a 13% discount to its peer group average. With continuing growth and higher margins, further progress in increasing the weighting of business towards D&M (including accretive acquisitions), combined with good control over the profitability of the Custom Supply business should help to close the valuation gap further. The stock is also supported by a dividend yield of more than 2%.
Exhibit 1: Financial summary
£m |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019e |
2020e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||||
Revenue |
|
|
177.4 |
211.6 |
271.1 |
287.7 |
338.2 |
387.9 |
426.3 |
442.5 |
Cost of Sales |
(123.0) |
(148.6) |
(186.7) |
(195.1) |
(227.2) |
(261.2) |
(285.6) |
(296.5) |
||
Gross Profit |
54.4 |
63.0 |
84.4 |
92.6 |
111.0 |
126.7 |
140.7 |
146.0 |
||
EBITDA |
|
|
7.4 |
9.1 |
16.6 |
19.8 |
24.3 |
29.3 |
35.0 |
37.4 |
Operating Profit (before am, SBP and except.) |
6.1 |
7.7 |
14.0 |
17.0 |
20.6 |
25.2 |
30.2 |
32.5 |
||
Operating Profit (before am. and except.) |
|
5.5 |
7.1 |
13.4 |
16.3 |
20.0 |
24.5 |
29.4 |
31.6 |
|
Amortisation of acquired intangibles |
(0.7) |
(1.0) |
(2.1) |
(2.8) |
(3.9) |
(4.9) |
(6.0) |
(6.0) |
||
Exceptionals |
(3.4) |
(0.9) |
(5.2) |
(2.1) |
(8.4) |
(1.1) |
(4.2) |
(3.2) |
||
Share-based payments |
(0.6) |
(0.6) |
(0.6) |
(0.7) |
(0.6) |
(0.7) |
(0.8) |
(0.9) |
||
Operating Profit |
1.4 |
5.2 |
6.1 |
11.4 |
7.7 |
18.5 |
19.2 |
22.4 |
||
Net Interest |
(0.5) |
(0.8) |
(1.6) |
(1.8) |
(2.8) |
(2.6) |
(4.4) |
(5.0) |
||
Profit Before Tax (norm) |
|
|
5.6 |
6.9 |
12.4 |
15.2 |
17.8 |
22.6 |
25.8 |
27.6 |
Profit Before Tax (FRS 3) |
|
|
0.7 |
4.2 |
4.3 |
9.4 |
4.8 |
15.8 |
14.6 |
17.2 |
Tax |
1.4 |
(0.5) |
(1.4) |
(2.2) |
(1.3) |
(4.0) |
(3.6) |
(4.3) |
||
Profit After Tax (norm) |
4.6 |
6.0 |
10.0 |
11.8 |
13.6 |
17.1 |
19.4 |
20.7 |
||
Profit After Tax (FRS 3) |
2.1 |
3.7 |
2.9 |
7.2 |
3.5 |
11.8 |
10.9 |
12.9 |
||
Average Number of Shares Outstanding (m) |
39.2 |
43.1 |
57.6 |
63.3 |
65.4 |
70.8 |
72.9 |
73.3 |
||
EPS - normalised & diluted (p) |
|
|
11.3 |
13.1 |
16.4 |
17.8 |
19.9 |
23.0 |
25.5 |
26.9 |
EPS - IFRS basic (p) |
|
|
(4.8) |
3.0 |
5.0 |
11.4 |
5.3 |
16.7 |
15.0 |
17.6 |
EPS - IFRS diluted (p) |
|
|
(4.7) |
2.8 |
4.8 |
10.9 |
5.1 |
15.8 |
14.4 |
16.8 |
Dividend per share (p) |
6.2 |
6.8 |
7.6 |
8.1 |
8.5 |
9.0 |
9.5 |
9.8 |
||
Gross Margin (%) |
30.7 |
29.8 |
31.1 |
32.2 |
32.8 |
32.7 |
33.0 |
33.0 |
||
EBITDA Margin (%) |
4.2 |
4.3 |
6.1 |
6.9 |
7.2 |
7.6 |
8.2 |
8.4 |
||
Operating Margin (before am, SBP and except.) (%) |
3.4 |
3.6 |
5.2 |
5.9 |
6.1 |
6.5 |
7.1 |
7.4 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
30.9 |
33.1 |
88.6 |
108.4 |
122.2 |
144.2 |
158.4 |
152.0 |
Intangible Assets |
24.2 |
25.5 |
69.9 |
88.2 |
100.7 |
115.0 |
127.9 |
121.8 |
||
Tangible Assets |
3.1 |
3.5 |
13.8 |
14.7 |
16.0 |
23.4 |
24.7 |
24.4 |
||
Deferred tax assets |
3.6 |
4.1 |
4.9 |
5.5 |
5.5 |
5.8 |
5.8 |
5.8 |
||
Current Assets |
|
|
81.8 |
92.7 |
127.3 |
128.3 |
148.4 |
166.2 |
178.3 |
181.9 |
Stocks |
19.3 |
19.4 |
39.8 |
42.9 |
50.1 |
60.6 |
66.6 |
70.3 |
||
Debtors |
44.7 |
48.3 |
60.2 |
65.5 |
77.3 |
82.4 |
91.1 |
94.6 |
||
Cash |
17.8 |
18.1 |
26.7 |
19.9 |
21.0 |
21.9 |
19.3 |
15.7 |
||
Current Liabilities |
|
|
(50.9) |
(58.3) |
(62.1) |
(61.7) |
(78.1) |
(93.4) |
(102.4) |
(105.9) |
Creditors |
(46.6) |
(51.5) |
(61.9) |
(60.9) |
(77.1) |
(87.0) |
(96.0) |
(99.5) |
||
Short term borrowings |
(4.3) |
(6.8) |
(0.2) |
(0.8) |
(1.0) |
(6.4) |
(6.4) |
(6.4) |
||
Long Term Liabilities |
|
|
(10.3) |
(19.0) |
(61.1) |
(73.1) |
(68.7) |
(87.7) |
(99.5) |
(86.6) |
Long term borrowings |
(1.7) |
(9.5) |
(45.5) |
(57.2) |
(50.0) |
(67.9) |
(82.9) |
(77.9) |
||
Other long term liabilities |
(8.6) |
(9.5) |
(15.6) |
(15.9) |
(18.7) |
(19.8) |
(16.6) |
(8.7) |
||
Net Assets |
|
|
51.5 |
48.5 |
92.7 |
101.9 |
123.8 |
129.3 |
134.7 |
141.5 |
CASH FLOW |
||||||||||
Operating Cash Flow |
|
|
5.7 |
6.1 |
6.6 |
14.6 |
20.5 |
21.7 |
26.6 |
31.8 |
Net Interest |
(0.6) |
(0.8) |
(1.6) |
(1.8) |
(2.8) |
(2.6) |
(4.4) |
(5.0) |
||
Tax |
(1.4) |
(0.9) |
(3.3) |
(4.3) |
(3.0) |
(3.7) |
(5.2) |
(5.9) |
||
Capex |
(1.3) |
(1.4) |
(2.5) |
(2.3) |
(3.4) |
(4.3) |
(6.0) |
(4.5) |
||
Acquisitions/disposals |
(0.5) |
(9.2) |
(37.3) |
(19.8) |
(11.8) |
(25.4) |
(22.0) |
(8.0) |
||
Financing |
5.7 |
0.1 |
52.7 |
0.0 |
13.6 |
(1.5) |
0.0 |
0.0 |
||
Dividends |
(2.3) |
(2.7) |
(3.6) |
(4.9) |
(5.2) |
(6.2) |
(6.6) |
(7.0) |
||
Net Cash Flow |
5.3 |
(8.8) |
11.0 |
(18.5) |
7.9 |
(22.0) |
(17.6) |
1.5 |
||
Opening net cash/(debt) |
|
|
6.3 |
11.8 |
1.8 |
(19.0) |
(38.1) |
(30.0) |
(52.4) |
(70.0) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.2 |
(1.2) |
(31.8) |
(0.6) |
0.2 |
(0.4) |
0.0 |
(0.0) |
||
Closing net cash/(debt) |
|
|
11.8 |
1.8 |
(19.0) |
(38.1) |
(30.0) |
(52.4) |
(70.0) |
(68.6) |
Source: discoverIE, Edison Investment Research
|
|
Research: TMT
GB Group’s H119 update confirmed that the business is trading in line with expectations, with underlying organic revenue growth of 11% and underlying operating profit growth of 7% compared to H118. While our underlying forecasts are unchanged, we have upgraded our estimates to reflect the recent Vix Verify Global acquisition, which results in a 2.7% increase in our normalised FY20 EPS forecast.
Get access to the very latest content matched to your personal investment style.
