discoverIE Group PLC (LON:DSCV) returned to organic revenue growth in September and in the last two months the group has seen orders running ahead of sales.
The designer and supplier of customised electronics saw its momentum checked by the coronavirus (COVID-19) pandemic in the six months to the end of September but the second half of its financial year has started well enough for the company to resume dividend payments.
Revenue in the reporting period eased to £217.9mln from £232.0mln in the corresponding period of last year. Like-for-like (LFL) sales were down 8% year-on-year, with the group’s Design & Manufacturing (D&M) division seeing a 7% decline in LFL sales while the Custom Supply division’s sales were 11% lower than a year earlier.
discoverIE said the performance in its target markets of renewable energy, medical, transportation, industrial & connectivity, which account for 68% of group sales, has been better than in other markets.
Orders for the period were 18% lower than last year organically as a result of the uncertainty created by the pandemic. Orders increased sequentially through the second quarter with a return to organic growth in September of 6%, and ahead of sales.
At the end of September, the order book was valued at £140mln, 10% lower than last year, or 11% lower organically.
Profit before tax declined to £7.7mln from £10.4mln the year before. Free cash flow for the period was £20.1mln, which resulted in roughly £20mln being wiped off net debt, which stood at £42.1mln at the end of September.
With an improving outlook and strong cash flow, the board has recommended the resumption of dividend payments, starting with an interim dividend of 3.15p, up from 2.97p last year.
Having taken swift action to cope with the pandemic, the group is mindful of the potential disruption of Brexit but said it does not anticipate a material direct impact from Britain’s exit from the European Union (EU), as only 13% of its sales are in the UK, from products made outside of the EU.
Changes have been made to some warehousing and logistics to hold a buffer stock in the country of demand to minimise the effects of any border disruption.
"The group took quick action to reduce costs and preserve cash as the pandemic spread, and with our focus on structural growth markets and a flexible operating structure, we have delivered a resilient performance whilst preserving the capabilities to benefit from conditions as they improve,” said Nick Jefferies, the group’s chief executive officer in the results statement.
“The second half has started well with orders ahead of sales and up on last year. With the group's continued focus on the structural growth markets of renewable energy, medical, electrification of transportation and industrial & connectivity, we expect to continue to perform ahead of wider markets and make further progress on our strategic priorities,” he added.