Specialist electronic components maker DiscoverIE (LON:DSCV) posted record FY26 earnings which marginally topped forecasts. The firm also said the outlook for FY27 was ‘positive’ and earnings were set to meet expectations.
Strong finish
For the year to March, sales increased 5% to £443.3 million, fractionally above the consensus of £442.5 million. Adjusted EPS (earnings per share) rose 4% to 40.3p, again slightly higher than the consensus.
The firm had a ‘strong finish’ to the FY with organic sales rising 5% in Q4 and orders rising 14%. The order book at 31 March was £165m or 4.5 months of annualised H2 sales, providing good visibility for FY27.
After 18 months of widespread industrial market destocking, organic sales growth was driven by Europe and Germany in particular. DiscoverIE has no direct exposure to the Middle East, and its US production base means tariffs have a limited impact.
‘The group has delivered another set of robust results where profits and earnings reached new highs,’ commented CEO Nick Jefferies. ‘The business saw a return to strong levels of organic orders and sales growth by the year end, which has continued into the new year.’
These results represent a solid performance in challenging markets, where de-stocking has been the main feature. Sales and earnings hit a new record, although due to recent strength in the share price you wouldn’t know it from the market’s reaction.
Moreover, cash flow was strong and reached 92% of adjusted earnings, ahead of the firm’s 85% target. Also, the operating margin is steadily rising towards the company’s target of 17% by the 2029/30 FY.
It’s worth bearing in mind the group operates in a market worth $30 billion annually. The market is also highly fragmented, so DiscoverIE is able to take share off smaller rivals as well as find accretive acquisitions.
Analysts at Cavendish note DiscoverIE shares trade at a significant discount to those of Diploma (LON:DPLM) and Halma (LON:HLMA). Their price target of £11.10 tallies closely with our initial target of £11.50, meaning a further 50%-plus upside from here.
Disclaimer: The author owns shares in DiscoverIE and Halma
Read the press release here:
https://discoverieplc.com/investors/overview/default.aspx
