Volex Share Discussion Threads

[blusteradjuster] 19/11/2024 07:34

- Stating their only growth is by acquisition when there’s recently reported ~10% organic growth

- Stating TTG’s EBITDA is $31m when it clearly is higher as per recently reported trading update

It’s just not good analysis.

[valhamos] 19/11/2024 07:24

Dave "dont know where your EBITDA numbers are from" as stated in my post they were quoted from the TTG H1 announcement of 8 August and the VLX H1 results last week. It's all there in those two RNS.

[ayl30] 19/11/2024 07:23

Volex rallying support for TT takeoverhttps://www.thetimes.com/article/5f6186a3-6f28-4dad-94af-afdf42588206?shareToken=02bb83725f020e26b0ed8d8a86d7fcec

[shaker45] 19/11/2024 02:30

Yes I think he would, if a hostile bid gets too costly. He doesn't need vlx share price punished more, when debt ratio getting higher.
His team may have other targets in their sights

[disc0dave46] 18/11/2024 23:26

Net debt exc lease liabilities and with the TTG bid as it stands would increase their net debt from $154m to $437m. It is a big deal IMO.Red - agree they didn't discuss the TTG deal. So zero mention of funding and debt post any bid.

[blusteradjuster] 18/11/2024 23:12

That 2.3 (190 x 2.3 = 437) likely to be 2 (say 205 x 2 = 410) by, what, March 2025?

It’s just not a big deal - although maybe NR could signal the intention to pay down debt:EBITDA leverage post acquisition to a target value of {insert number below 2 here} by {insert date here} to calm the markets wrt further acquisitions.

[redartbmud] 18/11/2024 22:40

dd

Nat started by saying that under the takeover rules he was not allowed to comment on the bid for TTE.

red

[disc0dave46] 18/11/2024 21:42

ValAs per my post 7276 I said 2.3x.But that's at the bid price for TTG that was thrown out.Can ping numbers back and forwards (dont know where your EBITDA numbers are from), but either way debt going from 1.3x to 2.3x or higher.They didn't mention in the presentation anything related to TTG. Will leave it there.

[valhamos] 18/11/2024 20:50

Dave

Figures from TTG half-year to 30 June 2024 and Volex half-year to 30 Sept 2024


net debt for covenant purposes

TTG $141m (£111m)
VLX $154m

add on debt to pay cash for TTG shares $142m (£112m) gives total debt $437m

EBITDA for covenant calculation

TTG $73m (£57m)
VLX $117m

combined EBITDA of $190m giving a covenant ratio of 2.3

So the 2.3 does include the impact of cash for TTG shares. You may still think the debt is too high but at least this clears up your point about how the cash for the TTG shares would be funded.

[disc0dave46] 18/11/2024 20:27

bluster
Would challenge your EBITDA v op profit tbh but even taking your mid range EBITDA it still gives 2.3x for VKX excluding any increase in the cash offer for TTG.
Just flagging that I’m concerned about VLX level of debt.

[valhamos] 18/11/2024 20:22

At the end of the TTG half-year results to 30 June 2024 announced 8 August there is a explanation (APM12) of the covenant ratio calculation. The preceding 12 months EBITDA adjusted for the purposes of the covenant ratio is £57.2m or $72.6m.

It will be lower as a result of recent trading updates but TTG do suggest the covenant ratio will remain around 2.0 so maybe not that much lower or else there has been a corresponding reduction in debt.

[blusteradjuster] 18/11/2024 20:09

Where does $31m for TTG EBITDA come from, Dave?

£37-42m is $47-53m.

EBITDA is generally lower than operating profit.


TTG TU - last Friday.

“As a result of continued subdued demand in the North American components market and the operational improvement plans only benefiting financial results from 2025, the Board expects FY24 adjusted operating profit to be at the lower end of our previously stated range of £37m-42m”

[disc0dave46] 18/11/2024 19:49

Val
“Volex is suggesting it is funded through debt - hence their pro-forma covenant ratio of approx 2.0x”

Not read they have obtained funding for the £112m cash element, sorry where have they said that?.
My calcs gives EBITDA to debt ratio of circa 2.6x if you include TTG forecast EBITDA (say $31m) and VLX (say $134m) and debt ex lease liabilities of $134m for TTG, $154m VLX plus the $142m debt (you say for the £112n TTG cash element), that’s 2.6x.
Have they said it’s 2x post taking on TTG?.

[valhamos] 18/11/2024 19:30

Dave - why do you need clarity around the £112m cash element? Volex is suggesting it is funded through debt - hence their pro-forma covenant ratio of approx 2.0x. If for some reason it were to be funded through additional shares then the pro-forma covenant ratio is approx 1.5x.

Volex will want to have a look at the books to firm up on their numbers, a lot depends on the TTG institutional shareholders, if they are interested in an offer being made they will have to force the TTG board to cooperate. If they can't do that then they can't be that bothered about an offer, in which case Volex should walk away.

[blusteradjuster] 18/11/2024 18:40

The combined group would have annual revenues of, what, $1.7bn?

Previous target was $1.2bn by FY2027.


It’s not a stretch to expect that TTG would be the last sizeable acquisition for a couple of years.

A couple of years during which the leverage ratio would likely fall to substantially below 2.

[valhamos] 18/11/2024 17:58

disc0dave46 - According to Volex the combined group would have pro-forma day one covenant leverage of c.2.0x, within Volex's target range of 1.5 - 2.0x. This includes the cash cost of acquiring the TTG shares.

This would be up from 1.3 but why do you think that is a problem?

You suggest it "hinders potential future acquisitions thus growth" but once Volex has digested a TTG acquisition - and it would take a couple of years - leverage will have reduced.

[ayl30] 18/11/2024 17:20

Having gfone public with the bid, do you really think Nat would walk away at this point?

[disc0dave46] 18/11/2024 17:01

Perhaps the down ticker can post up where they think the cash element would be coming from for their previous offer for TTG....£112m!. Which clearly if Nat is dead set on getting TTG will need to be raised even higher, more VLX shares (more dilution) or more cash per TTG share (more debt funding and interest charges).

[disc0dave46] 18/11/2024 15:59

Group Rev +30%, organic +9.7% (core inflation 4%, was 6.5% in May). When does inorganic become organic?

[exesail] 18/11/2024 15:33

Looks as though black rock have continued selling TTG could get a discounted way into VLX if the market doesn’t absorb them? Rule 8 through the day could spark some interest

[blusteradjuster] 18/11/2024 15:21

That would be fair enough - if it weren't for this from the results last Friday.


Group revenue increased by 30.4% to $518.2m (H1 FY2024: $397.5m) including strong organic growth of 9.7% with notable increases in Electric Vehicles and Consumer Electricals sales



"Their entire business model in terms of growth is based on an acquisition strategy"

[disc0dave46] 18/11/2024 14:17

Their entire business model in terms of growth is based on an acquisition strategy so not any surprise to the market IMO. Think the negativity was / is more about their level of debt IMO. Taking on TTG puts their covenant net debt to about 2.2x (assuming underlying EBITDA this FY of circa $134m and net debt $154m plus $139m TTG). Up from its current 1.3x is a significant shift and hinders potential future acquisitions thus growth (although there's headroom as covenants is 3x).Thought they had recently agreed a $50m debt facility but again anybody any views on how they are funding the cash element of the TTG proposal? (a Rothschild won't struggle to raise funds but at what dilution and cost to the business?).

[ijamlon] 18/11/2024 13:06

Agree, but I believe NR will deeply calculate the right price and walk-away levels. Also, the whole story about TT claiming someone else offered loads more money but it was kind of informal and they didn’t mention it to shareholders, and the discussion is not ongoing sounds very fishy. Either they got a takeover offer which needs to be disclosed by law, or it’s some insubstantial bit of pub chat. TT’s response is all part of the normal dance to extract the best price and/or protect management jobs. This is far from over