discoverIE Group plc (LON:DSCV) reported strong FY18 results: organic growth of 6% was boosted by acquisitions and currency to generate reported revenue growth of 14.7% and normalized EPS growth of 15.8%. The company is making good progress in its strategy to grow the Design and Manufacturing (D&M) business through a combination of organic growth and recent acquisitions. We expect further accretive acquisitions to move the company towards its target of generating 75% of revenues from the D&M business, and view progress towards this target as the key driver of share price performance.
FY18: Strong trading and restructuring benefits
Strong order intake through the year resulted in group organic constant currency revenue growth of 6% in FY18, with 11% growth for D&M and flat revenues for Custom Supply (CS). Recent restructuring within CS enabled operating margin growth from 3.2% in FY17 to 4.5% in FY18 despite flat revenues. Normalized group operating margin expanded 0.4pp to 6.5%, and annualizing the Santon acquisition would have been 6.9%. The group reported normalized EPS 6.5% ahead of our forecast, with net debt coming in 6.7% lower than our forecast.
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