The highlight of discoverIE Group PLC's interims was the improvement in the operating margin, according to a note from Stifel, the US investment bank.
Stifel's research highlights that while much of the information in discoverIE's update was pre-flagged in October, including a sales increase of 4% in constant exchange rates (CER) and 1% organic growth, there are new and encouraging details.
Notably, the year-on-year margin progress was significant, increasing by 1.4 percentage points to 12.9%, which is about half a percentage point higher than Stifel's forecast.
It also pointed to discoverIE's positive order trends post-period, with the order book strengthening in recent weeks and showing year-on-year growth in constant currency terms since the end of the first half.
This suggests the specialist electronics group is experiencing much more positive trends compared to some industrial and tech companies that reported weak trading in October. Furthermore, the process of order normalisation seems to have completed, Stifel said.
Another area of strong progress highlighted by Stifel was in mergers and acquisitions (M&A). The acquisition returns during the period were impressive at 19.2% in EBIT ROI terms.
Recent transactions, including 2J and Silvertel, are integrating well. Additionally, with an active pipeline of about 400 companies and around 15 live discussions, and a net debt/EBITDA ratio at the end of the period at 1.6x, discoverIE has the capacity for more deals, the bank reckons.
The company’s strong cash conversion rate of 91% in the first half also positions it well for rapid deleveraging without additional transactions, Stifel noted.
The market also appeared to share the US investment bank's optimism, with the shares up 49p at 653.00p.