discoverIE Group (LON: DSCV) will resume paying dividends due to ‘resilient trading’ for the six months to 30 September with ‘an improved outlook and a strong balance sheet’.
In a trading update for the six months ended 30 September 2020, the electronics designer and supplier said that despite operational challenges presented by the Covid-19 pandemic, trading had remained resilient and the group had benefited from a focus on target markets.
discoverIE said it ended the first half of the financial year with ‘good momentum,’ with orders being ahead of sales in September and growing by 6% organically over the prior year. Similarly, the trend continued into October with orders at a similar level and ahead of sales.
Group sales for the H120 were 6% below H119 on both a reported basis and on a constant exchange rates (CER) basis, or 8% lower on an organic basis, with sales in target markets performing ‘significantly ahead of other sectors.’
The group’s Design & Manufacturing division saw sales 3% lower than last year at CER and 7% lower organically, while Custom Supply sales were 10% lower organically, it reported.
discoverIE continues to be ‘well-funded with good liquidity’. The group reported a strong cash flow throughout H120, with gearing at the end of September reducing to 1.05 times annual adjusted underlying earnings (EBITDA) compared with 1.25 times at 31 March 2020.
Outlook
As a result of ‘resilient trading, improving outlook and strong balance sheet’, the Group will reinstate dividends, with an interim payment to be declared in its half-year results published next month.
Shares in discoverIE Group have traded strongly and consistently at above 600p over the past months and opened this morning 1.18% lower at 655p following the news.
Separately, discoverIE has acquired Phoenix America for an upfront payment of £8.5m on a debt free, cash free basis with further contingent cash consideration of up to £1.2m, payable subject to the achievement of certain profit growth targets over a three year period.
Based in Indiana, United States, Phoenix is a designer and manufacturer of magnetically actuated sensors, encoders and related products for industrial customers in the US.
The business will operate within discoverIE’s Design & Manufacturing division and is expected to benefit from good cross-selling opportunities in both the US and Europe.
discoverIE highlighted to investors that Phoenix had reported sales for its year ended 31 December 2019 $6.4m (£4.9m) with underlying operating profit of $1.25m (£1.0m).
‘With a clear strategy focused on long-term high-quality growth markets, a strong funnel of design wins and acquisition targets, the Group is well positioned for growth,’ it concluded.
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