RE: Excellent H1 trading statement today14 Oct 2019 10:13
Here's some extracts from Finncap's new note FYI - note the focus on growing sectors like renewables, medical, transport etc rather than cyclical sectors like semiconductors. Finncap also note there's plenty of headroom for further acquisitions:
"Q2 stronger than Q1
In a positive H1 update, discoverIE has confirmed it is on track to meet its full year expectations following +9% sales growth in H1 (+5% organic) and gross margin consistent with the prior year. Organic growth was +4% in Q1 and +6% in Q2. The order book has increased by +15% (+11% organically) to £153m, of which 80% is for delivery over the next 12 months. Despite the wider economic caution, discoverIE continues to make strong progress, providing further evidence of the
success of its strategy of focusing on structurally growing markets. We reiterate our 535p target price.
Improving rate of progress. Group sales increased by +11% in Q2 up from +8% in Q1 generating +9% for H1 (on a reported and CER basis). Organically sales grew by +6% in Q2 up from +4% in Q1, generating +5% for H1.
Driven by Design & Manufacturing. Q2 organic sales growth in Design & Manufacturing (D&M) was +12% up from +4% in Q1, leading to +7% in H1. The strongest parts were renewables (wind and solar) and Asia. D&M accounted for 64% of H1 group sales up from 61% at the year end and we forecast this division to account for 80% of FY 2020E group profits.
Strong orders. Group orders for Q2 grew by 7% organically, up from 3% in Q1. Orders were similarly driven by strong growth in the D&M division, with Custom Supply division orders being down slightly. The Group order book at 30 September
2019, of which over 80% is for delivery over the next twelve months, was £153m, an increase of 15% at CER and 11% organically over last year.
Supported by acquisitions. The two most recent acquisitions (acquired in April) are settling in well, with integration progressing as expected. Both businesses are high quality, high margin custom design businesses, selling into international markets.
Firepower for further acquisitions. Post the year end, a £28m fund raise was completed and two acquisitions completed at an initial cost of £21m. We forecast net debt/EBITDA of 1.1x in FY 2020."
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