Delignit is delivering across the board with growing evidence that well-defined strategic development is paying off. While 2017 performance was impressive (EBITDA up a third), the pace may accelerate thanks to recent bumper investment in capacity, efficiencies and a more diversified revenue base, allied with continued positive conditions. Indeed, management looks to double annual revenue at enhanced margin by 2022, which suggests that, as for 2017, current year guidance of sales up 8%+ at broadly similar margin may be cautious. Robust finances (FY17 net debt/EBITDA of 0.8x) support investment and dividend growth (+67% in 2017).
Continued clear EBITDA margin outperformance (9.4% in H2, giving 9.2% for FY17 against guidance of 7.5-8.3%) made up comfortably for a slight revenue miss (+6% in H2, giving +9% for FY17 against expected +10-15%). Investment-led economies of scale again drove notable growth (20%) in second-half EBITDA, if less than the step change 42% of H1. While Automotive, Delignit’s principal sector, took a relative pause (revenue up 2%), albeit still buoyant on the back of strong OEM business and new orders from car makers, Technological Applications stepped up materially (+16%), thanks to early returns from contracts for floor solutions for trains from the European subsidiary of an Asian group. Once more, exports were the driver (+17% in H2 and +33% for the full year), endorsing the strategic broadening.
Management expects more of the same in 2018 thanks to buoyant target markets, a good order book and increasing invitation to major tenders reflecting Delignit’s reputation for development and technology. Guidance is for EBITDA margin at least that of 2017 on a similar rate of revenue growth (8%+). Last year’s margin beat suggests that, on such volume gain, the company’s forecast may prove cautious.
The 2017 earnings surprise was greeted with a rapid c 50% share price rise, so current consolidation is understandable, pending further signs of Delignit’s strong growth prospects. Also, its FY17 P/E ratio of c 39x is at a sizeable premium to both its wood processing and automotive supplier peer groups. Management guidance (no consensus data available) for 2018 gives EV/EBITDA of c 16x (vs peer average c 5x).