Ohm My Profits! The Shocking Case for discoverIE
Written after the preliminary results 4th June 2025
DiscoverIE: The Investment Case in a Nutshell
discoverIE’s investment case is powered by record profits and rising margins—even as revenue dipped 3% due to sector-wide destocking. The company’s secret sauce? Targeting structural growth markets like renewables, medical, and (now) security, all underpinned by long-term demand. Operating costs fell 6%, margins hit a new high, and the dividend was raised again. As for US tariffs, management expects only limited direct impact, thanks to local manufacturing and the ability to pass on extra costs. In short: lower sales, fatter profits, big growth markets, and tariff concerns decreasing.
Sentiment and Outlook for discoverIE (Preliminary Results, 4 June 2025)
Sentiment:
Investor and analyst sentiment toward discoverIE is notably positive following today’s preliminary results. Shares surged 13–15% on the announcement, reflecting confidence in the company’s resilience, margin expansion, and strong cash generation despite a modest revenue decline.
Key Financial Highlights:
Revenue: £422.9 million (down 3% year-on-year, in line with expectations)
Adjusted Operating Profit: £60.5 million (up 6% reported, 8% at constant exchange rates)
Adjusted Operating Margin: 14.3% (up from 13.1%)
Adjusted EPS: 38.7p (up 5%)
Reported Profit Before Tax: £32.0 million (up 44%)
Dividend: 12.5p per share (up 4%)
Free Cash Conversion: 106%, well above target
Operational and Strategic Highlights:
discoverIE delivered record profits and earnings, with operating margins and cash flow exceeding targets.
The company upgraded its medium-term operating margin target to 17% by FY 2029/30 (previously 15% by FY 2027/28), reflecting confidence in further manufacturing efficiencies and commercial synergies.
Fourth-quarter orders rose sharply (up 15% organically), signaling a recovery as inventory destocking abates.
The Sensing & Connectivity division grew, supported by strong demand in data security and industrial applications, while Magnetics & Controls is recovering from earlier destocking.
Over £350 million in new design wins during the year support medium-term growth, with a robust pipeline of both organic and acquisition-led opportunities.
discoverIE added the high-growth security market as a fifth target sector, expanding its addressable market to over $30 billion.
The company expects limited direct impact from US tariffs and plans to pass on incremental costs as needed.
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