Morning Note – 18 April 2024

discoverIE - Back to organic growth

discoverIE’s March year-end update confirms a strong operational performance in challenging markets. Following two years when sales increased by +48%, FY 2024 Group sales were +1% ahead of 2023 at CER (reported -3%) driven by a +2% contribution from acquisitions and organic -1%. As expected, organic growth returned in the later part of the year (Q4 +2%, +11% sequentially) and the order book has reverted to normalised levels of c.4.5 months’ sales, which – combined with a continuing strong pipeli

discoverIE Group - Orders return to growth; FY24 earnings on track

discoverIE’s Q324 trading update confirmed a return to organic order growth, while the decline in organic revenue reflected the expected unwind of customer inventory. The company notes that margins remain robust and it anticipates meeting the board’s earnings expectations for FY24. We have reduced our revenue forecasts to reflect the strength of sterling versus a range of currencies but maintain our operating profit and EPS forecasts, resulting in a small uplift to operating margins in both year

Morning Note – 6 February 2024

discoverIE - Growth in design wins +25% YTD (up from +23% in H1)

The three key points in today’s update from discoverIE (for the first four months of H2) are that the growth in design wins (a measure of new business creation) has improved from +23% in H1 to +25% YTD, orders have returned to growth and the multiples paid for acquisitions are coming down. In January 2024, the group made a small, higher-margin bolt-on acquisition for the magnetics cluster in North America for a mid-single-digit EBIT multiple. Hence, metrics for long-term value creation on both a

discoverIE Group - Resilience from focus on strategic growth markets

discoverIE’s H124 results reflected improving profitability despite the expected lower demand due to customer destocking and the weaker economic environment. With normalisation of the order book effectively complete and strong growth in design win activity, the company is well positioned to grow as customer confidence returns. discoverIE is making good progress towards its margin targets and maintains its outlook for FY24. The company has an active pipeline of acquisition targets, which should f

Morning Note – 5 December 2023

discoverIE - Efficiencies driving margin, good forward visibility

discoverIE has reported an encouraging H1 2024 showing a resilient sales performance (flat in total, +4% CER) against strong comparators (+23% CER last year) in a difficult macro environment and an impressive increase in operating margins from 11.5% to 12.9%. Underlying EPS increased +8% and gearing of 1.6x is at the lower end of the target range. There remains significant opportunity for acquisitions, which – alongside targeting continued margin increases – provides upside potential to our fore

discoverIE Group - Innovative electronics for the industry

discoverIE is a leading designer and manufacturer of electronic components for industrial applications. Over the last 12 years, the company has broadened its product range, customer base and geographical presence via a series of acquisitions. It designs and manufactures customised and niche products, and expansion along the supply chain has helped discoverIE to grow operating margins. The company reports across two divisions: Sensing & Connectivity (15 businesses across nine countries with 13 ma

discoverIE Group - Strong growth in margins & design wins in H124

discoverIE’s trading update confirmed organic revenue growth and operating margin expansion in H124. The company expects to deliver FY24 underlying earnings in line with its recently upgraded expectations; we maintain our operating profit and EPS forecasts. As expected, the order book continues to normalise but still provides good visibility for H224, and strong design win activity provides support for growth in the medium term.

Morning Note – 11 October 2023

discoverIE - Margins ahead and design wins up +23%

In a positive H1 update, discoverIE has confirmed the Group continues to make good financial and strategic progress and is on track to deliver FY 2024E adj. EPS expectations. Sales progress has been held back -3% by foreign exchange effects, but H1 reported sales were up +1% supported by +1% organic growth and a +3% contribution from acquisitions. Operating margins are ahead of our expectations with a 100 bps increase to 12.5% now expected for the full year (our previous expectation 50 bps). Fac

discoverIE Group - Creating an industrial wireless connectivity cluster

discoverIE has acquired 2J Antennas Group, a Slovakian-based designer and manufacturer of antennas, for €52.5m/£45m in cash from existing facilities. As a technology platform acquisition, 2J will be combined with Antenova to create a new technology cluster for industrial wireless connectivity. The acquisition is expected to be accretive to underlying earnings in the first full year post completion; we maintain our FY24 underlying EPS forecast and raise our FY25 forecast by 0.8%.

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Morning Note – 16 April 2024

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Q1 Operating Results

Another Good Year of Diversified Growth with More to Come in 2024 CCapital have released their Q1 operating results. Overall, revenue has come in slightly lower than expected at $80.2m vs TamE of $85.9m but is largely tracking in line with our FY24 annual estimate and we note the company has maintained guidance. Drilling revenue for this quarter was impacted by a fall in utilisaztion rates as well as general remobilisation geographically but we expect a strong recovery throughout the year as k

Plant Health Care - China distribution with AMVAC

Plant Health Care announced it has signed a distribution agreement with AMVAC, an American Vanguard Company, to support commercialisation of novel fertiliser products incorporating Plant Health Care's Harpinαβ in China starting in 2024. The novel product combines Harpinαβ technology with an AMVAC fertiliser and is expected to help growers improve crop quality and yield as part of an integrated and environmentally responsible crop production programme. AMVAC continues to evaluate Plant Health Car

Morning Note – 15 April 2024

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appear

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

LIBERUM: Severfield: Erratum: Better EPS and cashflow, and buyback

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

PROGRESSIVE: Severfield: Step change in European and Indian outlook

Severfield’s full-year results to March will be ‘slightly above’ the Board’s expectations, according to today’s trading update, with net debt significantly better. We maintain our PBT estimates for both forecast years, which are ahead of consensus, but reduce our net debt for FY24E. Record orders were boosted by the steel specialist’s European operations, after last year’s Voortman acquisition, while the Indian JV has seen ‘another step up in profitability’. The group has also launched its first

Clean and competitive fertiliser

FY results: strong cash flow