Last close As at 05/08/2026
GBP8.23
▲ 24.00 (3.00%)
Market capitalisation
GBP802m
Research: TMT
discoverIE anticipates reporting FY24 underlying EPS in line with board expectations. After a period in mid-FY24 of working down inventory, customers appear to be reverting to normal ordering patterns, with Q424 organic revenue growth of 2% y-o-y and 11% q-o-q and a strong pipeline of design wins at year-end. We have revised our forecasts to reflect lower revenue, partly due to a disposal, but maintain our profit forecasts, which results in operating margin expansion in FY24 and FY25.
discoverIE Group |
FY24 EPS in line; good margin progress |
FY24 trading update |
Electrical components |
19 April 2024 |
Share price performance
Business description
Next events
Analyst
discoverIE Group is a research client of Edison Investment Research Limited |
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discoverIE anticipates reporting FY24 underlying EPS in line with board expectations. After a period in mid-FY24 of working down inventory, customers appear to be reverting to normal ordering patterns, with Q424 organic revenue growth of 2% y-o-y and 11% q-o-q and a strong pipeline of design wins at year-end. We have revised our forecasts to reflect lower revenue, partly due to a disposal, but maintain our profit forecasts, which results in operating margin expansion in FY24 and FY25.
Year |
Revenue |
PBT* |
Diluted EPS* |
DPS |
P/E |
Yield |
03/22 |
379.2 |
37.6 |
29.4 |
10.80 |
23.5 |
1.6% |
03/23 |
448.9 |
46.3 |
35.2 |
11.45 |
19.6 |
1.7% |
03/24e |
435.2 |
47.2 |
35.6 |
12.10 |
19.4 |
1.8% |
03/25e |
453.1 |
49.9 |
37.1 |
12.50 |
18.6 |
1.8% |
Note: *PBT and EPS as per discoverIE’s underlying metric (excludes amortisation of acquired intangibles and exceptional items).
Closing FY24 with positive momentum
discoverIE expects to report a 3% revenue reduction for FY24 due to translation, with revenue growth at constant exchange rates of 1%, comprising 2% growth from acquisitions and a 1% organic revenue decline. Organic revenue was up 2% in Sensing & Connectivity (S&C) while reducing 2% in Magnetics & Controls (M&C). Customers reduced their inventory levels in mid-FY24 but this appears to be largely complete now and the order book has normalised to c 4.5 months of sales. Q424 organic sales grew 2% y-o-y (vs Q324 -7% y-o-y) and 11% q-o-q, with 7% organic growth for S&C and a 1% reduction for M&C. Robust gross margins combined with tight operating cost control mean the H224 operating margin is expected to be higher than the 12.9% reported in H124. Gearing at year-end was 1.5x.
Bolt-ons and disposal support further margin growth
The company made two bolt-on acquisitions in March in the Beacon and Foss clusters, paying a mid-single-digit EBIT multiple for each. The company has also agreed to sell Santon’s lower-margin solar switches production unit, with completion expected in FY25. The combined effect of these transactions should boost operating profitability. We have revised our forecasts to reflect lower revenue but have maintained our operating profit and EPS forecasts, driving operating margins closer to the company’s medium-term 15% target.
Valuation: Organic growth key to upside
The stock trades at an 11% discount to its broader UK industrial technology peer group on FY24 P/E and at a larger discount to peers with a similar decentralised operating model (such as Halma and Spirax). Considering that the earnings outlook has been maintained and discoverIE continues to make excellent progress towards its margin targets, we believe this discount is overdone. The focus on strategic growth markets should reduce cyclicality compared to the wider market and we note that the company has previously demonstrated its ability to manage costs and cash flow through periods of weaker demand.
Changes to forecasts
We have revised our forecasts to reflect lower reported revenue in FY24 due to currency translation and the effect of the Santon disposal on FY25 revenue. We maintain our underlying operating profit and EPS forecasts. This results in operating margin improvement of 0.2pp to 13.0% in FY24 and 0.4pp to 13.4% in FY25, bringing the company closer to its medium-term 15% target.
Exhibit 1: Changes to forecasts
£m |
FY24e old |
FY24e new |
Change |
y-o-y |
FY25e old |
FY25e new |
Change |
y-o-y |
Revenues |
442.1 |
435.2 |
(1.6%) |
(3.0%) |
467.0 |
453.1 |
(3.0%) |
4.1% |
EBITDA |
71.8 |
71.8 |
(0.0%) |
9.8% |
76.6 |
76.6 |
0.0% |
6.7% |
EBITDA margin |
16.2% |
16.5% |
0.3% |
1.9% |
16.4% |
16.9% |
0.5% |
0.4% |
Underlying operating profit |
56.4 |
56.4 |
(0.0%) |
8.9% |
60.9 |
60.9 |
0.0% |
8.0% |
Underlying operating margin |
12.8% |
13.0% |
0.2% |
1.4% |
13.0% |
13.4% |
0.4% |
0.5% |
Normalised operating profit |
58.8 |
58.8 |
(0.0%) |
8.3% |
63.3 |
63.3 |
0.0% |
7.6% |
Normalised operating margin |
13.3% |
13.5% |
0.2% |
1.4% |
13.6% |
14.0% |
0.4% |
0.5% |
Underlying PBT |
47.2 |
47.2 |
(0.0%) |
2.0% |
49.8 |
49.9 |
0.0% |
5.5% |
Normalised PBT |
49.6 |
49.6 |
(0.0%) |
1.7% |
52.2 |
52.3 |
0.0% |
5.3% |
Normalised net income |
36.8 |
36.8 |
(0.0%) |
2.0% |
38.5 |
38.5 |
0.0% |
4.6% |
Normalised diluted EPS (p) |
37.4 |
37.4 |
(0.0%) |
1.8% |
38.9 |
38.9 |
0.0% |
4.0% |
Underlying diluted EPS (p) |
35.6 |
35.6 |
(0.0%) |
1.1% |
37.1 |
37.1 |
0.0% |
4.3% |
Reported basic EPS (p) |
21.9 |
21.9 |
(0.0%) |
(1.8%) |
23.1 |
23.1 |
0.0% |
5.5% |
Dividend per share (p) |
12.1 |
12.1 |
0.0% |
5.7% |
12.5 |
12.5 |
0.0% |
3.3% |
Net (debt)/cash |
(99.2) |
(104.1) |
4.9% |
143.9% |
(88.5) |
(88.5) |
(0.0%) |
(15.0%) |
Net debt/EBITDA (x) |
1.4 |
1.5 |
1.3 |
1.3 |
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 |
435.2 |
453.1 |
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) |
(17.0) |
(18.6) |
||
Exceptionals |
(4.3) |
(2.6) |
(6.5) |
(1.4) |
(1.9) |
(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 |
37.5 |
41.3 |
||
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 |
52.3 |
Profit Before Tax (FRS 3) |
|
|
12.2 |
13.5 |
17.1 |
29.1 |
28.3 |
30.3 |
Tax |
(3.3) |
(4.0) |
(7.4) |
(7.8) |
(7.3) |
(8.0) |
||
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 |
21.0 |
22.3 |
||
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 |
21.0 |
22.3 |
||
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 |
21.9 |
23.1 |
EPS - IFRS diluted (p) |
|
|
16.5 |
13.0 |
26.3 |
21.7 |
21.3 |
22.5 |
Dividend per share (p) |
2.97 |
10.15 |
10.80 |
11.45 |
12.10 |
12.50 |
||
EBITDA Margin (%) |
14.6 |
14.5 |
14.8 |
14.6 |
16.5 |
16.9 |
||
Normalised operating margin (before am, SBP and except.) (%) |
10.6 |
10.5 |
11.8 |
12.1 |
13.5 |
14.0 |
||
discoverIE underlying operating margin (%) |
10.0 |
10.2 |
10.9 |
11.5 |
13.0 |
13.4 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
236.4 |
244.6 |
326.5 |
335.9 |
388.0 |
373.4 |
Intangible Assets |
182.2 |
190.8 |
263.3 |
272.0 |
323.2 |
306.3 |
||
Tangible Assets |
46.3 |
45.9 |
45.4 |
44.4 |
45.3 |
47.6 |
||
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 |
186.9 |
205.6 |
Stocks |
68.4 |
67.7 |
77.8 |
90.0 |
90.6 |
94.8 |
||
Debtors |
90.1 |
84.9 |
78.0 |
74.6 |
77.5 |
81.4 |
||
Cash |
36.8 |
29.2 |
108.8 |
83.9 |
17.5 |
28.1 |
||
Current Liabilities |
|
|
(103.6) |
(107.8) |
(190.3) |
(151.2) |
(142.5) |
(146.2) |
Creditors |
(94.0) |
(102.2) |
(114.2) |
(107.3) |
(98.6) |
(102.3) |
||
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) |
(120.4) |
(109.6) |
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) |
(23.9) |
(18.1) |
||
Net Assets |
|
|
200.5 |
208.4 |
290.4 |
303.6 |
311.9 |
323.3 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
48.0 |
56.8 |
42.5 |
52.1 |
55.7 |
69.1 |
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) |
(8.5) |
(9.2) |
||
Acquisitions/disposals |
(73.6) |
(20.5) |
(46.8) |
(25.1) |
(68.5) |
(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) |
(11.9) |
||
Net Cash Flow |
3.8 |
12.7 |
16.9 |
(10.4) |
(60.0) |
15.7 |
||
Opening net cash/(debt) |
|
|
(63.3) |
(61.3) |
(47.2) |
(30.2) |
(42.7) |
(104.1) |
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) |
(1.4) |
(0.0) |
||
Closing net cash/(debt) |
|
|
(61.3) |
(47.2) |
(30.2) |
(42.7) |
(104.1) |
(88.5) |
Source: discoverIE Group, Edison Investment Research
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Research: Healthcare
Despite the recent setback with the INITIUM trial (first-line treatment of patients with unresectable or metastatic malignant melanoma), Ultimovacs has reinstated its commitment to press on with its clinical development of its cancer vaccine, UV1, across other target indications. The principal near-term focus will be on the anticipated results of Phase II FOCUS (head and neck cancer) and DOVACC (ovarian cancer) trials in Q324 and H125, respectively, and will inform its subsequent strategic direction. To remain funded to these milestones, the company has enforced stringent cost control measures, including activity level adjustments, reprioritisation of operations and a 40% workforce reduction, to support runway extension to Q425 (the company estimates its cash burn will be NOK15m/quarter).