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Investing.com -- Investing.com -- Discoverie Group PLC (LON:DSCV) shares climbed +1.4% as the market responded to a pre-close trading update indicating a resilient performance despite lower year-on-year (YoY) sales.
The company reported that FY25F sales were down 7% in constant currency (OCC) terms and 3% in reported terms compared to the previous year, slightly below the Jefferies estimate of a 2% decline.
However, fourth-quarter sales showed signs of recovery, with the S&C division posting a 5% YoY growth in OCC sales, while the M&C division saw a 10% decline due to customer overstocking.
The company’s order intake in the fourth quarter was particularly encouraging, with a 15% YoY increase in OCC terms. Management highlighted tight operational control of costs and reported "excellent" free cash flow (FCF).
The second half of FY25F EBITA margin is expected to outperform the first half’s 13.8%, contributing to the stock’s positive movement.
Discoverie’s net debt to EBITDA ratio is anticipated to be 1.45x at the end of the year, slightly below the target range of 1.5x–2.0x. The outlook for FY25F is also optimistic, with results projected to be "slightly ahead" of the Board’s expectations.
The company’s narrative on tariffs remained robust, with strategies in place to mitigate the impact through a flexible international manufacturing footprint and the potential to expand US manufacturing. The expectation is to pass on price rises, as peers may be more affected by the tariffs.
Jefferies noted the significance of the order intake and recent broker upgrades, suggesting a positive market reaction. "Interestingly, there have been two broker upgrades in the last few days, hence expectations have risen into this update, but we still expect a positive reaction, driven by the strong yoy order intake numbers," Jefferies said in a note.