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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Volex Plc | LSE:VLX | London | Ordinary Share | GB0009390070 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -4.50 | -1.39% | 318.50 | 317.50 | 318.50 | 325.50 | 318.00 | 318.50 | 1,021,254 | 16:35:19 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Electronic Components, Nec | 722.8M | 36.8M | 0.2031 | 15.66 | 576.08M |
From Apr 2019 to Apr 2024
TIDMVLX
RNS Number : 1111W
Volex PLC
10 November 2017
10 November 2017
VOLEX plc
Half year results for the 26 weeks ended 1 October 2017
'Best first half operating profit performance for 5 years'
Volex plc ('Volex'), the global provider of cable assemblies, today announces its interim results for the 26 weeks to 1 October 2017 ('H1 FY2018').
Hot Features
Premium
26 weeks to 26 weeks to
1 October 2 October %
Financial Summary 2017 2016 Change
------------------------------------- ------------ ----------------- -------------
Revenue $161.4m $166.1m (2.8%)
Underlying* operating profit /
(loss) $5.5m $4.3m 26.8%
Statutory operating profit / (loss) $5.1m ($4.6m) Nm
Underlying* profit / (loss) before
tax $4.5m $3.3m 37.6%
Statutory profit / (loss) before
tax $4.2m ($5.6m) Nm
Basic earnings / (loss) per share 3.9c (7.5c) Nm
Underlying diluted earnings /
(loss) per share 4.3c 2.5c 72.0%
Cash generated by / (used by)
operations ($0.4m) $11.3m Nm
Net cash $5.8m $5.2m 12.2%
* Before non-recurring items and share-based payments
Financial highlights
-- A statutory operating profit of $5.1 million is the best result in the past 5 years, reflecting an improved underlying operating performance and an absence of one-off restructuring costs.
-- Group revenue is down by $4.6 million on the prior period primarily as a result of a further $11.0 million decline in our largest Power customer's revenues.
-- Revenue from other customers increased by 4.8% with the Cable Assemblies division showing a 8.0% revenue increase.
-- Underlying operating profit is up 26.8% on H1 FY2017 despite the overall Group reduction in sales.
-- A statutory profit before tax of $4.2m and a reduced effective tax rate of 14.8% yields a basic EPS of 3.9c
-- Despite investment in inventory of $5.3m over the period, the Group remains in a net cash position of $5.8 million.
-- Refinancing completed in June 2017 with facility reduced from $45 million to $30 million following significant cash generation over the past 18 months.
-- Intention to move to AIM in order to have greater flexibility to pursue growth and partnership opportunities
Nat Rothschild, Executive Chairman, said:
"I am pleased to report that the Group has returned to profitability. The restructuring activities taken in previous periods have allowed the Group to operate more efficiently and we are now seeing growth from both new and existing customers as we diversify our revenues.
We have enjoyed a particularly strong six months in our Cable Assemblies division which has seen revenue increase by 8% in comparison to the prior year. When we strip-out the Cable Assemblies revenue contribution from our largest Power customer and our largest European telecoms customer, both of which have continued their decline, the remainder of the Cable Assemblies revenue grew by 20%. This growth has been driven across all sectors with our North American logistics business proving exceptionally buoyant.
As reported in July, this growth continues to present operational challenges at our facility in Mexico as we invest in additional staff and raw materials to cope with the increase in demand. However, operational efficiency initiatives executed in prior periods have allowed the Cable Assemblies division to maintain overall margins despite significant labour cost inflation and inefficiencies caused by expansion.
The Power Cords division's revenue continued its decline, down 10% on the prior year, with the division's largest customer's Power revenue down by 25%. We believe that this customer's revenue has now stabilised as new products move into commercial production in the second half. The division's decline had been previously forecast and hence the restructuring activities taken in the prior year had been focused on this division. As a result, despite the lost revenue, gross margin and operating profit are significantly ahead of the prior year, despite the reduction in sales. In addition, our previously announced joint venture agreement with a Taiwanese manufacturer, producing competitively priced Volex-branded AC raw cables, began commercial production in the period and we hope to see margin benefit from this during the next year.
We are encouraged by the progress made in the first half of the year and the improvement in profitability. We expect competition to remain tough in the second half and cost inflation to continue in both raw materials and labour rates. However, with a strong sales pipeline and our optimised cost base following last year's restructuring, we are optimistic about the prospects of the business in the second half."
For further information please contact:
Volex plc
Nathaniel Rothschild, Group Executive Chairman +65 6788 7833
Daren Morris, Group Chief Financial Officer +44 208 017 3240
RESULTS FOR THE 26 WEEKSED 1 OCTOBER 2017
Introduction
The Board is pleased to report its results for the half year to 1 October 2017 which has seen the Group record its strongest first half profit performance in five years. Whilst total Group revenue fell by 2.8%, the revenue from our higher margin Cable Assemblies division actually grew by 8.0% with growth spread across many accounts. This move towards our higher margin business, the impact of cost reduction measures taken in previous periods and favourable movements in foreign exchange resulted in not only an increase in underlying operating profit to $5.5m (H1 FY2017: $4.3m) but also an increase in statutory operating profit to $5.1m (H1 FY2017: loss of $4.6m).
The Group revenue reduction of $4.6 million to $161.4 million was primarily as a result of a continued decline in revenues from our largest Power customer and our largest European telecoms customer. Excluding these two customers, total revenue was up by $8.9m (7.3%) on the prior period. Whilst this growth was principally from a number of existing customers, we did add a new account with revenue in excess of $1 million during the period. As previously noted, the lead time for on-boarding new accounts is 12 to 18 months and therefore we expect to see further benefit from the new sales strategy (announced in the last annual report) over the next twelve months. We believe the revenue from our largest Power customer has now stabilised with an upturn in revenue expected as new product developments move into commercial production.
In light of the anticipated decline in revenue, a number of actions were taken in the prior year to align the cost base with future performance. These actions coupled with a reduced depreciation charge following the prior year impairment of assets and a favourable movement in the Chinese Renminbi to US Dollar exchange rate have helped improve the gross margin from 16.9% to 17.9% in the period.
Underlying operating expenditure was down $0.3 million on the prior period to $23.4 million leading to an underlying operating profit of $5.5 million, up 26.8% on the prior period. With no repeat of the large scale restructuring programmes that took place in the prior year nor any further plant and machinery impairments, non-recurring charges are $nil in the period (H1 FY2017: $8.7 million) resulting in a statutory operating profit of $5.1 million (H1 FY2017: a loss of $4.6 million)
During the period, Volex invested $0.3 million in return for a 26.1% shareholding in Kepler SignalTek Limited ('KST'), a manufacturer of medical, high-frequency data transmission and specialist industrial cable assemblies. KST is currently in the start-up phase but once commercial production is underway, these cables will provide Volex with an enhanced specialist cable assemblies product offering.
In June 2017, the Group successfully completed the refinancing of its senior credit facility with the facility reducing from $45 million to $30 million in light of the recent success in cash generation.
Further detailed analysis of the trading divisions is given on the subsequent pages.
Trading performance
Power Cords Division
$'000 26 weeks 26 weeks 52 weeks
ended 1 ended 2 ended 2 April
October October 2017
2017 2016
Specified customers* 23,307 31,212 53,892
Other customers 67,221 69,191 134,364
---------- ---------- ----------------
Revenue 90,528 100,403 188,256
---------- ---------- ----------------
Underlying gross
profit 14,030 14,234 27,523
Underlying gross
margin 15.5% 14.2% 14.6%
Operating costs (11,327) (12,765) (24,295)
---------- ---------- ----------------
Underlying operating
profit 2,703 1,469 3,228
========== ========== ================
Underlying operating
margin 3.0% 1.5% 1.7%
---------------------- ---------- ---------- ----------------
*Largest Power customer and largest European Telecoms customer
Volex designs and manufactures power cords, duck heads and related products that are sold to the manufacturers of a broad range of electrical and electronic devices and appliances. Volex products are used in laptops, PCs, tablets, printers, TVs, games consoles, power tools, kitchen appliances and vacuum cleaners.
The Power Cords division revenue for H1 FY2018 was $90.5 million, down 9.8% on the prior period. The division's largest customer continued its decline with revenue down 25.3% on the prior year. As previously highlighted, this customer had announced that its newly designed laptop range was to be sold with a USB-C charger rather than a traditional power cord. We believe that revenues with this customer have now stabilised with new products moving from the development phase to commercial production over the coming months. We also expect stronger sales of our historic duck head range as the power requirements of several of our customer's key products increase. Away from the division's largest customer, the global PC market continues to shrink with global shipments in the period April to September 2017 down 4% on the corresponding period in the prior year whilst the printer and PC peripherals market is largely flat. As a consequence we saw a reduction in sales to OEM's associated with these markets.
Helping offset the decline in sales to Volex's traditional markets, the Group began power cord production for one of the world's leading electric vehicle manufacturers. Having been in discussion and development with this customer for more than twelve months, the Group is thrilled to see commercial production finally commence and expect this account to become a significant multi-million dollar account over the coming years. Production of these power cords is from our largest factory in China which is set to become a market leading facility in the manufacture of high power electric vehicle cords.
With Volex's traditional PC and peripherals markets set to continue their decline, competition here will only intensify. Therefore it is vitally important, if the Power Cords division is to turnaround its recent performance, for it to seek out new end markets that value Volex's expert knowledge in the manufacture of high power distribution cables and its reputation for quality and safety.
The underlying Power Cords gross profit has reduced to $14.0 million from $14.2 million in H1 FY2017, representing a gross margin of 15.5% (H1 FY2017: 14.2%). The principal reasons for the margin improvement include:
-- A reduced cost base following the restructuring activities that took place in the prior year. These activities included downsizing our factory footprint, closing a number of warehousing hubs and transferring production to lower cost factories
-- A reduced plant and machinery depreciation charge following the $12.5 million impairment charge taken in the prior year.
-- A stronger US Dollar versus the Chinese Renminbi helping reduce the cost of our Chinese direct labour.
Offsetting the above has been an increase in the cost of many of our raw materials. Copper is a significant component within our power cables and the spot price has increased by approximately 22% year on year. The impact of this raw material cost increase has largely been mitigated through customer price increases and an active commodity hedging policy. We expect to see further raw material pricing pressure in the second half of the year.
During the period, our previously announced joint venture agreement with a Taiwanese manufacturer, producing competitively priced Volex-branded AC raw cables, began commercial production. By period end, Volex had consumed 760km of this cable reflecting approx. 1.0% of the period's cable demand. This is forecast to grow over the coming years.
Operating costs have reduced by $1.4 million to $11.3 million following the cost reduction actions taken in FY2017 principally with respect to headcount, reduced office rental and sales hub costs and lower depreciation.
As a consequence of the above, underlying operating profit for H1 FY2018 was $2.7 million, up 84.0% on the prior period.
Cable Assemblies Division
$'000 26 weeks 26 weeks 52 weeks
ended 1 ended 2 ended 2 April
October October 2017
2017 2016
Specified customers* 6,389 12,057 21,296
Other customers 64,532 53,637 110,032
---------- ---------- ----------------
Revenue 70,921 65,694 131,328
---------- ---------- ----------------
Underlying gross
profit 14,841 13,788 27,936
Underlying gross
margin 20.9% 21.0% 21.3%
Operating costs (9,596) (8,976) (17,408)
---------- ---------- ----------------
Underlying operating
profit 5,245 4,812 10,528
========== ========== ================
Underlying operating
margin 7.4% 7.3% 8.0%
---------------------- ---------- ---------- ----------------
*Largest Power customer and largest European Telecoms customer
Volex designs and manufactures a broad range of cables and connectors (ranging from high speed copper and fiber-optic cables to complex customised optical cable assemblies) that transfer electronic, radio-frequency and optical data. Volex products are used in a variety of applications including data networking equipment, data centres, wireless base stations and cell site installations, mobile computing devices, medical equipment, factory automation, vehicle telematics, agricultural equipment and alternative energy generation.
Revenue for H1 FY2018 was $70.9 million, up 8.0% on the prior period. Stripping out the revenue decline observed from our largest Power customer (to whom we also sell internal harnesses) and our largest European telecoms customer (that continues to see its market share decline), revenue was up 20.3%. This increase was spread over multiple customers, across many sectors. Our leading North American logistics customer recovered strongly as the revenue cycle turned in Volex's favour with a doubling of sales. A number of customers operating in the healthcare and robotics space also posted high double digit revenue growth and a well-known online retailer is set to become a significant new account for the division.
The underlying gross profit has increased to $14.8 million from $13.8 million, representing a gross margin of 20.9% (H1 FY2017: 21.0%). During the period, the division has suffered significant labour cost increases in Mexico and certain operational difficulties as the Mexico facility has expanded to meet the sales growth. These adverse movements, however, have largely been offset by a change in the product mix during the period to higher margin product and the absence of our loss making Brazil facility closed in the prior year.
Operating costs have increased by $0.6 million to $9.6 million primarily due to foreign exchange losses arising from the movement in the Mexican Peso versus the US Dollar. In the prior year, in the run up to the US presidential election the US Dollar strengthened against the Peso making the Peso payables cheaper, however, in the current year the reverse has happened with the Peso rebounding.
As a result of the above, underlying divisional operating profit for the period increased from $4.8 million in H1 FY2017 to $5.2 million in H1 FY2018.
Non-recurring items and share-based payments
No non-recurring charges have been recognised in H1 FY2018.
The non-recurring charge of $8.7 million in the prior period comprised of a $6.2 million non-cash impairment charge against Power Cords assets, a $1.1 million charge in relation to the closure of our Brazil operations, $0.5 million of severance payments arising from the downsizing of functions and facilities across the Group, $0.6 million of one-off consultancy costs in relation to manufacturing optimisation and a $0.3 million charge in relation to the sub-let of an onerous lease in North America.
The share-based payments expense of $0.4 million in the period is $0.2 million up on the prior period due to the issue of new employee share option awards.
Tax
The Group incurred a tax charge of $0.7 million (H1 FY2017: $1.1 million) representing an underlying effective tax rate of 14.8% (H1 FY2017: 32.4%), consistent with our expectation of the underlying ETR for the full year. The reduction in the ETR reflects the tax effects of structural changes made within the Group.
Half year position and cash flows
Balance sheet and refinancing
Net assets as at H1 FY2018 are $48.5 million, up $2.2 million from the prior year end.
Included within this is a $5.6 million increase in inventory to $41.6 million. This increase is partly due to a stock build in advance of Golden Week and the closure of our Chinese factories, partly in preparation for a strong third quarter and partly to support our largest customer who requested an expansion of the supplier managed owned inventory programme.
During the period the Group invested $0.3 million in acquiring 26.1% of the share capital of Kepler SignalTek Limited ('KST'), a Hong Kong company manufacturing medical, high-frequency data transmission and specialist industrial cable assemblies. This investment is being treated as an associate in the Group accounts and as such the accounts reflect 26.1% of the start-up costs incurred by KST post investment. As a result, at period end the carrying value of the associate has been reduced to $0.2 million.
The Group was in a net cash position of $5.8 million at H1 FY2018, $5.5 million lower than at the prior year end. This cash outflow has principally funded the increase in inventory noted above.
As reported in the year end accounts, in June 2017 the Group obtained a one year extension on its senior credit facility which now runs to June 2019. As part of the refinancing, the available facility was reduced from $45 million to $30 million, reflecting the Group's success in recent years to generate cash. $0.5 million of costs were incurred in arranging this extension, all of which have been capitalised and are being amortised over the period of the facility.
Cash flows
The underlying business consumed $1.6 million of cash through its operating activities (H1 FY2017: generated $13.3 million), largely as a result of the stock build noted above. In addition, a further $0.6 million (H1 FY2017: $4.2 million) of non-recurring operational cash spend was incurred, largely in payment of severance fees accrued at prior year end.
$1.1 million of capital expenditure was incurred on tooling and machinery throughout the Group, a similar level to the prior year. This low level of capital expenditure in comparison to the long term average for the Group reflects the joint investment arrangements now agreed with many of our customers in advance of entering into significant new product lines.
Proposed move to AIM
The Board is continuously reviewing its available options to ensure Volex meets its long-term strategic goal of being a more diversified and stable business. These options may include acquisitions, divestments, strategic partnerships as well as investment in organic growth. In the highly competitive markets Volex operates, Volex must be lean and agile, operating with a low cost base and quick to react to opportunities.
Given this strategic intent, and given the Company's current size and market capitalisation, the Board has considered whether it is still appropriate for the Company's Ordinary Shares to be admitted to trading on the Main Market and has concluded that Volex would benefit from a move to AIM.
Outlook
Volex's core markets are expected to remain highly competitive in the near term. Second half revenues are forecast to be at a similar level to that achieved in the first half with the strong sales pipeline helping off-set the traditional seasonality seen in the business.
Cost inflation in both raw materials and labour rates is expected to continue and where we are unable to pass these increases onto our customers, we will look to improve factory operational efficiency further, particularly in our Mexico facility. We will continue to monitor closely the cost base of the Group and where necessary will take further cost reduction actions.
Given the strong sales pipeline and the optimised cost base following last year's restructuring, we are confident in delivering a trading performance for the full year in line with the Board's expectations.
Risks and uncertainties
Risks to Volex are anticipated and regularly assessed and internal controls are enhanced where necessary to ensure that such risks are appropriately mitigated. The principal risks and uncertainties facing the Group in the second half of the year remain those detailed in the FY2017 Annual Report and Accounts on pages 20 to 23, a copy of which is available on the website at www.volex.com.
The principal risks and uncertainties are summarised as:
-- Competitor risk; -- Customer concentration; -- Supplier dependency; -- Quality and product failure; -- Product development; -- Key personnel retention; -- Breach of financial covenants and liquidity; -- Copper price volatility; -- Foreign exchange rate movements; and -- Compliance with legislation and regulations.
Responsibility statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU.
-- the interim management report includes a fair review of the information required by DTR 4.2.7R:
o an indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and
o a description of the principal risks and uncertainties for the remaining six months of the year.
-- the interim management report includes a fair review of the information required by DTR 4.2.8R:
o related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group in that period, and
o any changes in the related party transactions described in the Annual Report 2017 that could have a material effect on the financial position or performance of the Group in the current period.
Nathaniel Rothschild Daren Morris
Executive Chairman Group Chief Financial Officer
10 November 2017 10 November 2017
Unaudited consolidated income statement
For the 26 weeks ended 1 October 2017 (26 weeks ended 2 October 2016)
26 weeks ended 1 October 26 weeks ended 2 October
2017 2016
Before Non- Before Non-
non-recurring recurring non-recurring recurring
items and items and items and items and
share-based share-based share-based share-based
payments payments Total payments payments Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
---------------------------- ----- -------------- ------------ --------- -------------- ------------ ---------
Revenue 2 161,449 - 161,449 166,097 - 166,097
Cost of sales (132,578) - (132,578) (138,075) (6,966) (145,041)
---------------------------- ----- -------------- ------------ --------- -------------- ------------ ---------
Gross profit 28,871 - 28,871 28,022 (6,966) 21,056
Operating expenses (23,407) (388) (23,795) (23,714) (1,945) (25,659)
---------------------------- ----- -------------- ------------ --------- -------------- ------------ ---------
Operating profit/(loss) 2 5,464 (388) 5,076 4,308 (8,911) (4,603)
Share of net profit/(loss)
from associates 7 (52) - (52) - - -
Finance income 8 - 8 11 - 11
Finance costs (873) - (873) (1,014) - (1,014)
Profit/(loss) on ordinary
activities before taxation 4,547 (388) 4,159 3,305 (8,911) (5,606)
Taxation 4 (674) - (674) (1,072) - (1,072)
---------------------------- ----- -------------- ------------ --------- -------------- ------------ ---------
Profit/(loss) for the
period attributable to
the owners of the parent 3,873 (388) 3,485 2,233 (8,911) (6,678)
---------------------------- ----- -------------- ------------ --------- -------------- ------------ ---------
Earnings/(loss) per share
(cents)
Basic 5 4.4 3.9 2.5 (7.5)
Diluted 5 4.3 3.8 2.5 (7.5)
---------------------------- ----- -------------- ------------ --------- -------------- ------------ ---------
52 weeks ended 2 April
2017
Before Non-
non-recurring recurring
items and items and
share-based share based
payments payments Total
Notes $'000 $'000 $'000
---------------------------- ----- -------------- ------------ ---------
Revenue 2 319,584 - 319,584
Cost of sales (264,125) (13,112) (277,237)
---------------------------- ----- -------------- ------------ ---------
Gross profit 55,459 (13,112) 42,347
Operating expenses (46,380) (2,588) (48,968)
---------------------------- ----- -------------- ------------ ---------
Operating profit/(loss) 2 9,079 (15,700) (6,621)
Finance income 19 - 19
Finance costs (1,898) - (1,898)
---------------------------- ----- -------------- ------------ ---------
Profit/(loss) on ordinary
activities before taxation 7,200 (15,700) (8,500)
Taxation 4 1,238 214 1,452 ---------------------------- ----- -------------- ------------ --------- Profit/(loss) for the period attributable to the owners of the parent 8,438 (15,486) (7,048) ---------------------------- ----- -------------- ------------ --------- Earnings/(loss) per share (cents) Basic 5 9.5 (7.9) Diluted 5 9.5 (7.9) ---------------------------- ----- -------------- ------------ ---------
Unaudited consolidated statement of comprehensive income
For the 26 weeks ended 1 October 2017 (26 weeks ended 2 October 2016)
(Audited)
26 weeks 26 weeks 52 weeks
to to to
1 October 2 October 2 April
2017 2016 2017
$'000 $'000 $'000
-------------------------------------------------- ------------- ------------- ----------
Profit/(loss) for the period 3,485 (6,678) (7,048)
Items that will not be reclassified subsequently
to profit or loss:
Actuarial gain/(loss) on defined benefit
pension schemes 617 (1,767) (2,143)
Tax relating to items that will not be - - -
reclassified
-------------------------------------------------- ------------- ------------- ----------
617 (1,767) (2,143)
Items that may be reclassified subsequently
to profit or loss:
Gain/(loss) on hedge of net investment
taken to equity - (292) (350)
Gain/(loss) arising on cash flow hedges
during the period 253 105 317
Exchange gain/(loss) on translation of
foreign operations (2,485) 2,366 3,743
Tax relating to items that may be reclassified - - -
-------------------------------------------------- ------------- ------------- ----------
(2,232) 2,179 3,710
Other comprehensive income/(loss) for
the period (1,615) 412 1,567
Total comprehensive income/(loss) for
the period 1,870 (6,266) (5,481)
-------------------------------------------------- ------------- ------------- ----------
Unaudited consolidated statement of financial position
As at 1 October 2017 (2 October 2016)
(Audited)
1 October 2 October 2 April
Note 2017 2016 2017
$'000 $'000 $'000
---------------------------------- ------ ----------- ----------- ----------
Non-current assets
Goodwill 2,584 2,512 2,414
Other intangible assets 544 692 593
Property, plant and equipment 17,709 24,763 18,085
Investments in associates 7 248 - -
Other receivables 759 1,007 843
Derivative financial instruments - - 22
Deferred tax asset 2,955 821 2,948
---------------------------------- ------ ----------- ----------- ----------
24,799 29,795 24,905
---------------------------------- ------ ----------- ----------- ----------
Current assets
Inventories 41,628 39,989 36,040
Trade receivables 60,030 55,267 53,448
Other receivables 8,091 6,663 7,703
Current tax assets 178 619 505
Derivative financial instruments 688 106 380
Cash and bank balances 8 23,464 33,432 29,565
---------------------------------- ------ ----------- ----------- ----------
134,079 136,076 127,641
---------------------------------- ------ ----------- ----------- ----------
Total assets 158,878 165,871 152,546
---------------------------------- ------ ----------- ----------- ----------
Current liabilities
Borrowings 8 1,003 - -
Trade payables 54,953 56,956 51,156
Other payables 27,211 21,516 24,993
Current tax liabilities 4,579 5,765 5,346
Retirement benefit obligation 770 748 719
Provisions 362 1,227 358
88,878 86,212 82,572
---------------------------------- ------ ----------- ----------- ----------
Net current assets 45,201 49,864 45,069
---------------------------------- ------ ----------- ----------- ----------
Non-current liabilities
Borrowings 8 16,667 28,270 18,230
Other payables 463 419 432
Deferred tax liabilities 1,326 1,955 1,239
Retirement benefit obligation 2,971 3,772 3,682
Provisions 85 - 84
21,512 34,416 23,667
---------------------------------- ------ ----------- ----------- ----------
Total liabilities 110,390 120,628 106,239
---------------------------------- ------ ----------- ----------- ----------
Net assets 48,488 45,243 46,307
---------------------------------- ------ ----------- ----------- ----------
Equity attributable to owners of
the parent
Share capital 39,755 39,755 39,755
Share premium account 7,122 7,122 7,122
Non-distributable reserve 2,455 2,455 2,455
Hedging and translation reserve (6,486) (5,785) (4,254)
Own shares (867) (867) (867)
Retained earnings 6,509 2,563 2,096
---------------------------------- ------ ----------- ----------- ----------
Total equity 48,488 45,243 46,307
---------------------------------- ------ ----------- ----------- ----------
Unaudited Consolidated Statement of Changes in Equity
For the 26 weeks ended 1 October 2017 (26 weeks ended 2 October 2016)
Share Non-distributable Hedging Retained
Share premium reserves and translation earnings/ Total
capital account reserve Own shares (losses) equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------------- --------- --------- ------------------ ----------------- ----------- ----------- --------
Balance 3 April 2016 39,755 7,122 2,455 (7,964) (867) 10,851 51,352
Profit for the
period
attributable to the
owners of the
parent - - - - - (6,678) (6,678)
Other comprehensive
income/ (loss) for
the period - - - 2,179 - (1,767) 412
--------------------- --------- --------- ------------------ ----------------- ----------- ----------- --------
Total comprehensive
income/ (loss) for
the period - - - 2,179 - (8,445) (6,266)
Reserve entry for
share option
charges/(credit) - - - - - 157 157
Balance at 2 October
2016 39,755 7,122 2,455 (5,785) (867) 2,563 45,243
--------------------- --------- --------- ------------------ ----------------- ----------- ----------- --------
Balance 2 April 2017 39,755 7,122 2,455 (4,254) (867) 2,096 46,307
Profit for the
period
attributable to the
owners of the
parent - - - - - 3,485 3,485
Other comprehensive income/ (loss) for the period - - - (2,232) - 617 (1,615) --------------------- --------- --------- ------------------ ----------------- ----------- ----------- -------- Total comprehensive income/ (loss) for the period - - - (2,232) - 4,102 1,870 Reserve entry for share option charges/(credit) - - - - - 311 311 Balance at 1 October 2017 39,755 7,122 2,455 (6,486) (867) 6,509 48,488 --------------------- --------- --------- ------------------ ----------------- ----------- ----------- --------
Unaudited consolidated statement of cash flows
For the 26 weeks ended 1 October 2017 (26 weeks ended 2 October 2016)
(Audited)
26 weeks 26 weeks 52 weeks
to to to
1 October 2 October 2 April
Notes 2017 2016 2017
$'000 $'000 $'000
-------------------------------------------- ------- ------------- ------------- ----------
Profit/(loss) for the period 3,485 (6,678) (7,048)
Adjustments for:
Finance income (8) (11) (19)
Finance costs 873 1,014 1,898
Income tax expense 674 1,072 (1,452)
Share of net proft/(loss) from associates 52 - -
Depreciation of property, plant and
equipment 1,546 2,830 4,927
Impairment of property, plant and
equipment - 6,593 12,491
Amortisation of intangible assets 59 355 441
Loss on disposal of property, plant
and equipment 8 5 61
Share option charge/(credit) 388 170 468
Effects of foreign exchange rate changes - 279 407
Increase/(decrease) in provisions (382) (2,664) (3,837)
-------------------------------------------- ------- ------------- ------------- ----------
Operating cash flow before movements
in working capital 6,695 2,965 8,337
(Increase)/decrease in inventories (5,279) 1,653 5,382
(Increase)/decrease in receivables (6,130) 2,137 2,376
Increase/(decrease) in payables 4,310 4,566 3,070
Movement in working capital (7,099) 8,356 10,828
Cash generated by operations (404) 11,321 19,165
------------- ------------- ----------
Cash generated by operations before
non-recurring items 147 15,510 24,906
Cash utilised by non-recurring items (551) (4,189) (5,741)
------------- ------------- ----------
Taxation paid (1,227) (1,606) (2,102)
Interest paid (483) (607) (1,166)
-------------------------------------------- ------- ------------- ------------- ----------
Net cash generated from/(used in)
operating activities (2,114) 9,108 15,897
-------------------------------------------- ------- ------------- ------------- ----------
Cash flow from investing activities
Interest received 8 11 19
Proceeds on disposal property, plant
and equipment 11 99 201
Purchases of property, plant and equipment (1,051) (1,031) (2,464)
Purchases of intangible assets (2) (76) (68)
Investments in associates (300) - -
Net cash generated from/(used in)
investing activities (1,334) (997) (2,312)
-------------------------------------------- ------- ------------- ------------- ----------
Cash flow before financing activities (3,448) 8,111 13,585
------------- ------------- ----------
Cash generated/(used) before non-recurring
items (2,897) 12,300 19,326
Cash utilised in respect of non-recurring
items (551) (4,189) (5,741)
------------- ------------- ----------
Cash flow from financing activities
Repayment of borrowings (3,000) - (9,240)
Refinancing costs paid (494) (552) (582)
New bank loans raised - - -
Net cash generated from/(used in)
financing activities 8 (3,494) (552) (9,822)
-------------------------------------------- ------- ------------- ------------- ----------
Net increase/(decrease) in cash and
cash equivalents (6,942) 7,559 3,763
Cash and cash equivalents at beginning
of period 8 29,565 25,574 25,574
Effect of foreign exchange rate changes (162) 299 228
-------------------------------------------- ------- ------------- ------------- ----------
Cash and cash equivalents at end of
period 8 22,461 33,432 29,565
-------------------------------------------- ------- ------------- ------------- ----------
Notes to the Interim Statements
1. Basis of preparation
These interim financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the 52 weeks ended 2 April 2017, which have been prepared in accordance with IFRSs as adopted by the European Union.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information presented for the 26 weeks ended 1 October 2017 and the 26 weeks ended 2 October 2016 ('H1 FY2017') has not been reviewed by the auditors. The financial information for the 52 weeks ended 2 April 2017 ('FY 2017') is extracted and abridged from the Group's full accounts for that year. The statutory accounts for FY 2017 have been filed with the Registrar of Companies for England and Wales and have been reported on by the Group's auditors. The Report of the Auditors was not qualified and did not contain a statement under Section 498 of the Companies Act 2006.
The interim report was approved by the Board of Directors on 10 November 2017.
This interim report can be downloaded or viewed via the Group's website at www.volex.com. Copies of the annual report for the financial year ended 2 April 2017 are available at the Company's registered office at Holbrook House, 34-38 Hill Rise, Richmond, Surrey, London, TW10 6UA, UK and can also be downloaded or viewed via the Group's website.
The Group's forecast and projections, taking reasonable account of possible changes in trading performance, show that the Group should operate within the level of the committed senior credit facility for the foreseeable future and should comply with associated covenants over this period. The Group also has access to and uses additional uncommitted facilities. Further, the Group has a number of mitigating actions available to it, should actual performance fall below the current financial forecasts. The Directors have the financial controls and monitoring available to them to put in place those mitigating actions in a timely fashion if they see the need to do so. The Directors therefore believe that the Group is well placed to manage its business within its covenants. Accordingly, they continue to adopt the going concern basis in preparing these condensed financial statements.
The same presentation and methods of computation are followed in these condensed financial statements as applied in the Group's latest annual financial statements. Following the investment in Kepler Signaltek Limited during the period the company has an associate investment. In line with IAS28 'Investments in Associates and Joint Ventures' the company uses the equity method of accounting for associates.
These condensed financial statements have also been prepared using accounting policies consistent with International Financial Reporting Standards as adopted for use in the European Union ('IFRS') and which are consistent with those disclosed in the annual report and accounts for the year ended 2 April 2017. There are no standards, amendments to standards or interpretations that are both mandatory for the first time for the financial year ending 1 April 2018 and expected to have a material impact on the Group's results.
2. Business and geographical segments
Business segments
The internal reporting provided to the Group's Board for the purpose of resource allocation and assessment of Group performance is based upon the nature of products which the Group supplies. In addition to the operating divisions, a Central division exists to capture all of the corporate costs incurred in supporting the operations.
Division Description
----------------- -----------------------------------------------------------
Power Cords The sale and manufacture of electrical power products
to manufacturers of electrical / electronic devices
and appliances. These include laptop / desktop computers,
printers, televisions, power tools and floor cleaning
equipment.
----------------- -----------------------------------------------------------
Cable Assemblies The sale and manufacture of cables permitting the transfer
of electronic, radio-frequency and optical data. These
cables can range from simple USB cables to complex
high speed cable assemblies and are used in numerous
devices including medical equipment, data centres,
telecoms networks and the automotive industry.
----------------- -----------------------------------------------------------
Central Corporate costs that are not directly attributable
to the manufacture and sale of the Group's products
but which support the Group in its operations. Included
within this division are the costs incurred by the
executive management team and the corporate head office.
----------------- -----------------------------------------------------------
The Board believes that the segmentation of the Group based upon product characteristics allows it to best understand the Group's performance and profitability.
The following is an analysis of the Group's revenues and results by reportable segment.
26 weeks to 1 October 26 weeks to 2 October
2017 2016
--------------------------------------- ------------------------ ------------------------
Revenue Profit/(loss) Revenue Profit/(loss)
$'000 $'000 $'000 $'000
--------------------------------------- -------- -------------- -------- --------------
Power Cords 90,528 2,703 100,403 1,469
Cable Assemblies 70,921 5,245 65,694 4,812
Unallocated central costs (excluding
share-based payments) (2,484) (1,973)
--------------------------------------- -------- -------------- -------- --------------
Divisional results before share-based
payments and non-recurring
items 161,449 5,464 166,097 4,308
Non-recurring items - (8,741)
Share-based payments (388) (170)
--------------------------------------- -------- -------------- -------- --------------
Operating profit/(loss) 5,076 (4,603)
Share of net profit/(loss) (52) -
from associates
Finance income 8 11
Finance costs (873) (1,014)
--------------------------------------- -------- -------------- -------- --------------
Profit/(loss) before tax 4,159 (5,606)
Tax (674) (1,072)
--------------------------------------- -------- -------------- -------- --------------
Profit/(loss) after tax 3,485 (6,678)
--------------------------------------- -------- -------------- -------- --------------
2. Business and geographical segments (continued)
(Audited)
52 weeks to 2 April
2017
--------------------------------------- ---------- ------------------------
Revenue Profit/(loss)
$'000 $'000
--------------------------------------- ---- ---- -------- --------------
Power Cords 188,256 3,228
Cable Assemblies 131,328 10,528
Unallocated central costs (excluding
share-based payments) - (4,677)
--------------------------------------------------- -------- --------------
Divisional results before share-based
payments and non-recurring
items 319,584 9,079
Non-recurring items (15,232)
Share-based payments (468)
--------------------------------------------------- -------- --------------
Operating profit/(loss) (6,621)
Finance income 19
Finance costs (1,898)
--------------------------------------------------- -------- --------------
Profit/(loss) before tax (8,500)
Tax 1,452
--------------------------------------------------- -------- --------------
Profit/(loss) after tax (7,048)
--------------------------------------------------- -------- --------------
The accounting policies of the reportable segments are in accordance with the Group's accounting policies.
The non-recurring items charge within operating profit for the period was $nil (H1 FY2017: $8,741,000, FY2017: $15,232,000) was split $nil (H1 FY2017: $6,485,000, FY2017: $12,740,000) to Power Cords, $nil (H1 FY2017: $1,616,000, FY2017: $1,754,000) to Cable Assemblies and $nil (H1 FY2017: $640,000, FY2017: $738,000) to Central.
Other segmental information
External revenue Non-current assets
(excluding deferred tax assets)
---------------------------------------- ----------------------------------------
(Audited) (Audited)
26 weeks 26 weeks 52 weeks 26 weeks 26 weeks 52 weeks
to to to to to to
1 October 2 October 2 April 1 October 2 October 2 April
2017 2016 2017 2017 2016 2017
$'000 $'000 $'000 $'000 $'000 $'000
----------------- ------------- ------------- ---------- ------------- ------------- ----------
Geographical segments
Asia (excluding
India) 88,758 96,773 182,079 16,562 23,764 16,914
North America 45,040 39,503 78,084 1,048 1,202 1,090
Europe 25,512 25,878 52,752 3,440 3,136 3,179
India 2,139 2,360 4,929 794 857 774
South America - 1,583 1,740 - 15 -
161,449 166,097 319,584 21,844 28,974 21,957
----------------- ------------- ------------- ---------- ------------- ------------- ----------
3. Non-recurring items and share-based payments
(Audited)
26 weeks to 26 weeks to 52 weeks
to
1 October 2 October 2 April
2017 2016 2017
$'000 $'000 $'000
---------------------------------------- ------------- ------------- ----------
Impairment - 6,166 12,491
Restructuring costs - 1,636 1,656
Manufacturing optimisation consultancy - 621 815
Movement in onerous lease provision - 318 270
Total non-recurring items - 8,741 15,232
Share-based payments (credit) / charge 388 170 468
---------------------------------------- ------------- ------------- ----------
Non-recurring items and share-based
payments 388 8,911 15,700
---------------------------------------- ------------- ------------- ----------
Costs that are one-off in nature and significant, such as restructuring costs or impairment charges, are deemed to be non-recurring by virtue of their nature and size. They are included under the statutory classification appropriate to their nature but are separately disclosed on the face of the income statement to assist in understanding the financial performance of the Group.
During H1 FY2018, the Group has not recorded any non-recurring charges.
In the prior year, following a downturn in Power revenue (particularly with the Group's largest customer), a full review of the Group's cost base was performed. As a result of this, the largest Power factory was downsized with one of the three available buildings returned to the landlord. This resulted in impairment of the associated fit-out costs. Further the number of production lines running in the remaining two buildings was reduced resulting in the impairment of the redundant plant, machinery and tooling. Finally, given the reduced sales from the largest customer and the already thin margins, the forecast profitability from the continuing lines was assessed and deemed insufficient to support the associated fixed asset cost base. As a consequence, an impairment charge of $11,987,000 (H1 FY2017: $6,166,000) was recorded in the Power Cords division. In addition during FY2017 the Cable Assemblies division recorded a $491,000 impairment charge following the closure of Volex Do Brasil Ltda.
During the prior year, the Group also incurred $1,656,000 (H1 FY2017: $1,636,000) of restructuring spend in response to the reduced revenues. The non-recurring cost included the departure of the Head of Engineering and an operational element relating to the reduction of direct and indirect manufacturing headcount in a number of factories, the removal of certain middle-management roles and redundancies associated with the closure of our Brazil, Ireland, Austin and Jakarta operations.
Following his appointment in November 2016, the Executive Chairman sought to address the production issues facing our factories across the globe in order to make them more cost competitive. To support the management function, an external manufacturing consultancy was employed on a fixed term contract of 9 months, to advise on manufacturing best practice and implementation. This contract expired in December 2016 at a cost of $815,000 (H1 FY2017: $621,000).
During FY2017 the Group incurred an onerous lease charge of $270,000 primarily in relation to the sub-let of a property in North America. The sub-lease was for the full head lease term and mirrored the head lease clauses with the exception of an initial quarter rent free period.
The Group has a share based payment charge of $388,000 in H1 FY2018 (H1 FY2017: charge of $170,000, FY2017: charge of $468,000). The increase reflects the cost of employee share options granted during FY2017.
4. Tax charge
The Group tax charge for the period is based on the forecast tax charge for the year as a whole and has been influenced by the differing tax rates in the UK and the various overseas countries in which the Group operates.
5. Earnings per ordinary share
The calculations of the earnings per share are based on the following data:
26 weeks 26 weeks 52 weeks
to to to
1 October 2 October 2 April
2017 2016
$'000 $'000 2017
Earnings/(loss) $'000
-------------------------------------------- ------------ ------------ -----------
Earnings/(loss) for the purpose of basic
earnings per share 3,485 (6,678) (7,048)
Adjustments for:
Non-recurring items - 8,741 15,232
Share based payments charge/(credit) 388 170 468
Tax effect of above adjustments - - (214)
-------------------------------------------- ------------ ------------ -----------
Underlying earnings 3,873 2,333 8,438
-------------------------------------------- ------------ ------------ -----------
Weighted average number of ordinary shares No. shares No. shares No. shares
-------------------------------------------- ------------ ------------ -----------
Weighted average number of ordinary shares
for the purpose of basic earnings per
share 88,956,532 88,956,532 88,956,532
Effect of dilutive potential ordinary
shares - share options 1,874,381 38,862 281,330
-------------------------------------------- ------------ ------------ -----------
Weighted average number of ordinary shares
for the purpose of diluted earnings per
share 90,830,913 88,995,394 89,237,862
-------------------------------------------- ------------ ------------ -----------
Basic earnings/(loss) per share Cents Cents Cents
------------------------------------------------- ------ ------ ------
Basic earnings/(loss) per share from continuing
operations 3.9 (7.5) (7.9)
Adjustments for:
Non-recurring items - 9.8 17.1
Share based payments charge/(credit) 0.5 0.2 0.5
Tax effect of above adjustments - - (0.2)
------------------------------------------------- ------ ------ ------
Underlying basic earnings per share 4.4 2.5 9.5
------------------------------------------------- ------ ------ ------
Diluted earnings/(loss) per share
------------------------------------------------- ------ ------ ------
Diluted earnings/(loss) per share 3.8 (7.5) (7.9)
Adjustments for:
Non-recurring items - 9.8 17.1
Share based payments charge/(credit) 0.5 0.2 0.5
Tax effect of above adjustments - - (0.2)
------------------------------------------------- ------ ------ ------
Underlying diluted earnings per share 4.3 2.5 9.5
------------------------------------------------- ------ ------ ------
The underlying earnings per share has been calculated on the basis of continuing activities before non-recurring items and the share-based payments charge, net of tax. The Directors consider that this earnings per share calculation gives a better understanding of the Group's earnings per share in the current and prior period.
6. Own shares
(Audited)
26 weeks 26 weeks 52 weeks
to to to
1 October 2 October 2 April
2017 2016
$'000 $'000 2017
$'000
------------------------------------ ------------- ------------- ----------
At the start and end of the period 867 867 867
------------------------------------ ------------- ------------- ----------
The own shares reserve represents the cost of shares in the Company held by the Volex Group plc Employee Share Trust to satisfy future share option exercises under the Group's share option schemes.
The number of ordinary shares held by the Volex Group plc Employee Share Trust at 1 October 2017 was 1,295,361 (H1 FY2017: 1,295,361, FY2017: 1,295,361).
7. Investments in associates
On the 12 April 2017 the Group acquired 26.09% of the voting shares in Kepler SignalTel Limited (a company incorporated in Hong Kong) for consideration of $300,000. The company manufacturers medical, high frequency data transmission and specialist industrial cable assemblies from a facility in China. As part of the shareholder agreement Volex is entitled to appoint one of the three Directors to the company.
Summarised financial information in respect of the company is set out below. The summarised information below represents amounts before intragroup eliminations.
As at
1 October
2017
$'000
Current assets 788
Non-current assets 199
Current liabilities (38)
Non-current liabilities -
---------------------------------------------------------------- ------------
Net assets 949
---------------------------------------------------------------- ------------
26 weeks
to
1 October
2017
$'000
Revenue -
Profit/(loss) for the period (201)
Other comprehensive income for the period -
---------------------------------------------------------------- ------------
Total comprehensive income for the period (201)
---------------------------------------------------------------- ------------
A reconciliation of the above summarised financial information to the
carrying amount of the interests in the consolidated financial statements
is set out below:
As at
1 October
2017
$'000
Net assets of the associate 949
Proportion of the Group 26.09%
---------------------------------------------------------------- ------------
Carrying amount of the Group's interest in Kepler SignalTel
Limited 248
---------------------------------------------------------------- ------------
8. Analysis of net debt
Other
2 April Cash Exchange non-cash 1 October
movement changes 2017
$'000
2017 flow $'000 $'000
$'000 $'000
--------------------------- --------- -------- ----------- ---------- -----------
Cash and cash equivalents 29,565 (6,942) (162) - 22,461
Bank loans (18,720) 3,000 (1,636) - (17,356)
Debt issue costs 490 494 44 (339) 689
--------------------------- --------- -------- ----------- ---------- -----------
Net debt 11,335 (3,448) (1,754) (339) 5,794
--------------------------- --------- -------- ----------- ---------- -----------
(Audited)
1 October 2 October 2 April
2017 2016
$'000 $'000 2017
$'000
------------------------------------------------ ----------- ----------- ----------
Cash and bank balances 23,464 33,432 29,565
Overdrafts (included in short term borrowings) (1,003) - -
Cash and cash equivalents 22,461 33,432 29,565
------------------------------------------------ ----------- ----------- ----------
9. Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
In April 2018 the company made a $300,000 investment in Kepler Signaltek Limited in return for 26.09% of the voting shares. The venture is equity accounted for as an associate. Other than the initial investment, there have been no further transactions with the associate during the period.
10. Contingent Liabilities
As a global Group, subsidiary companies, in the normal course of business, engage in significant levels of cross-border trading. The customs, duties and sales tax regulations associated with these transactions are complex and often subject to interpretation. While the Group places considerable emphasis on compliance with such regulations, including appropriate use of external legal advisors, full compliance with all customs, duty and sales tax regulations cannot be guaranteed.
Through the normal course of business, the Group provides manufacturing warranties to its customers and assurances that its products meet the required safety and testing standards. When the Group is notified that there is a fault with one of its products, the Group will provide a rigorous review of the defective product and its associated manufacturing process and if found at fault and contractually liable will provide for costs associated with recall and repair as well as rectify the manufacturing process or seek recompense from its supplier. The Group does not provide for such costs where fault has not yet been determined and investigations are ongoing.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FSAFAUFWSEDF
(END) Dow Jones Newswires
November 10, 2017 02:00 ET (07:00 GMT)
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