discoverIE Group PLC (LON:DSCV) has said its business model is “resilient and flexible” and added that it had been encouraged by the continued “demand for its products” during the coronavirus (COVID-29) pandemic.
The commentary was provided as part of an update on electronics designer's performance in the year just gone that was coupled with an assessment on current trading trends.
The former first: sales increased by 8% year-on-year in the 12 months ended March 31, 2020, meaning earnings will be slightly ahead of the company’s revised expectations following a strong recovery in China.
The order book, meanwhile, was up 7% at a record £159mln, though sales to date for the first quarter are currently 10% lower on an organic basis compared with last year. This is partly the result of brief shutdowns of facilities in Sri Lanka, India and the US.
Operationally, the business adapted quickly after the global lockdown with the electronics designer, manufacturer and distributor reporting that its supply chain had remained resilient throughout the international crisis.
Turning to the balance sheet, discoverIE said it has £120mln of undrawn borrowings, while its gearing of 1.3-times earnings and interest cover of 12-times were “comfortably within the limits required under our facility agreements”.
“Whilst our financial position is strong, we have taken prudent action to preserve cash and reduce operating expenses,” the firm added ion its trading update.
It has deferred non-essential capital investment and discretionary spending; bonuses and pay rises have been put on hold and new hiring has been frozen; the board and executive team have taken a 20% salary cut for three months.
Its acquisition plans have also been suspended. However, discoverIE said: “The board believes that there will be significant scope for the group to progress its successful acquisition strategy as the situation stabilises and a good pipeline of opportunities continues to be developed.”
Looking ahead, the group said customer demand remained “relatively resilient”. It has a strong order book and its core markets “should help to reduce the ongoing impact from COVID-19”.
It added: “The duration and breadth of the market disruption arising from this situation remain unclear and therefore we do not believe it is appropriate to provide financial guidance for the current year at this early stage.
“Nevertheless, we are encouraged by the continued demand for our differentiated products and the response by our businesses which has enabled us to continue to operate effectively.”