DicoverIE Share Price Fell 4.0% on the Latest Trading Update

The DiscoverIE Group PLC (LON: DSCV) share price fell 4.0% after releasing a trading update for the four months to 31 January 2024. The company is an international leader in designing and manufacturing bespoke electronics for industrial applications. The company is achieving strong financial and strategic milestones and anticipates meeting its Board's full-year underlying earnings expectations.

During the Period, discoverIE experienced a 3% organic growth in orders year-over-year, marking the first increase since the quarter ending in September 2022. This growth mirrored sales, showing a stable progression.

Despite a 4% decrease in Group sales at constant exchange rates (CER) following a significant 50% growth over the previous two years, a 3% revenue boost from recent acquisitions helped mitigate a 7% drop in organic sales. This drop was anticipated as customers adjusted their inventories. 

Both divisions of the Group displayed similar trends. The commencement of Q4 saw a return to organic sales growth, maintaining strong profit margins. Year-to-date (YTD), Group sales rose by 1% at CER, with acquisitions contributing 3%, although organic sales saw a slight 2% decline.

The Company has maintained high gross margins and controlled operating costs effectively, resulting in an improved YTD underlying profit organically, further enhanced by acquisitions. 

The third quarter saw a significant rise in design wins, contributing to a 25% increase YTD, with 90% targeting key growth markets. These wins are crucial for future organic revenue, supported by a robust pipeline of prospects.

The integration of Silvertel and 2J Antennas, acquired in August and September 2023, respectively, is on track and meeting expectations. The Company also reported strong cash flow, with financial gearing dropping to 1.5x by 31 December 2023, down from 1.6x as of 30 September 2023.

In January 2024, discoverIE completed a strategic acquisition in North America for the Noratel magnetics cluster, focusing on higher margin opportunities, acquired at a mid-single-digit EBIT multiple.

With a strategic plan aimed at sustained and structural international growth, a varied customer portfolio, a solid order book, a record number of design wins, and ongoing acquisition initiatives, discoverIE's business model remains resilient. The Company is well-equipped to continue advancing its strategic goals despite fluctuating market conditions.

Discoverie Group share price. 

The DiscoverIE share price fell 4.01% to trade at 731.0p from Monday’s closing price of 761.5p.