Adding sensors to the Design & Manufacturing portfolio

Acal’s acquisition of Variohm adds the first specialist sensor business to Design & Manufacturing and moves the company closer to its mid-term target of generating 75% of revenues from the division. The acquisition, costing up to £13.85m in cash, is being funded by the recent placing of 6.42m shares at 220p per share. Management expects the deal, together with the placing, to be earnings enhancing in FY18 and we lift our normalised FY18e EPS forecast by 3.4%. The stock is trading at a c 30% discount to its peer group, representing a good entry point in our view.