TIDMVLX
RNS Number : 7504F
Volex PLC
09 November 2022
09 November 2022
Volex plc
Half year results for the 26 weeks ended 2 October 2022
A diverse and resilient business delivering profitable growth
alongside continued investment to support expansion
Volex plc ("Volex", the "Company", or the "Group"), the global
supplier of integrated manufacturing services and power products,
today announces its half year results for the 26 weeks ended 2
October 2022 ("H1 FY2023").
26 weeks to 26 weeks to
2 October 3 October %
Financial Summary 2022 2021 Change
---------------------------------- ------------ ----------- -------------
Revenue $357.5m $292.7m 22.1%
Underlying* operating profit $32.1m $27.3m 17.6%
Statutory operating profit $24.5m $21.2m 15.6%
Underlying* profit before tax $29.1m $25.5m 14.1%
Statutory profit before tax $21.5m $19.4m 10.8%
Basic underlying* earnings per
share 14.4c 13.8c 4.3%
Interim dividend per share 1.3p 1.2p 8.3%
Net debt (before operating lease
liabilities) $98.8m $22.3m
Net debt $117.0m $40.1m
* Before adjusting items (non-recurring items and amortisation
of acquired intangibles) and share-based payments
Financial and Operational Highlights
-- Organic revenue growth of 14.3% delivering total revenue for
H1 FY2023 of $357.5m, which also included $35m from
acquisitions
-- Underlying operating profit increased by 17.6% to $32.1m,
underpinned by robust customer demand and proactive management of
inflationary cost increases
-- Underlying operating margin of 9.0% demonstrates effective
inflation management and cost control
-- Robust customer demand across our markets, supported by
additional contract wins with new and existing customers
-- Review Display Systems Group ("RDS") acquired in the UK for
initial consideration of $6m to enhance our capabilities and
accelerate growth in this market
-- Integration and transition plans for recent acquisitions are progressing well
-- Good progress made towards five-year growth plan supported by
continued customer-led investment programme
-- Interim dividend increased by 8.3% to 1.3 pence per share
Market Highlights
-- Electric Vehicles - strong momentum continues with 53%
organic revenue growth delivered through a diverse product set
-- Consumer Electricals - continued new customer project wins,
despite a challenging market, leveraging the Group's global
footprint and low-cost manufacturing infrastructure
-- Medical - resilient demand continues as supply chain challenges begin to subside
-- Complex Industrial Technology - strong growth reflecting
improving supply chain and the delivery of new customer
projects
Outlook
-- Continuing confidence in our ability to deliver our strategic
objectives and to utilise our compelling commercial proposition in
markets with structural, long-term growth drivers
-- We are mindful of broader macroeconomic developments but
remain confident that our diversified end market exposure and
unique global footprint stand us in good stead
-- Our strong financial position creates a platform for
long-term growth through organic investment and acquisitions
-- We remain on track to deliver revenues and underlying
operating profit in line with market expectations
Nat Rothschild, Volex's Executive Chairman said:
"We have built a strong, resilient business, aligned to key
market sectors with long-term structural growth characteristics. We
have shown that we are capable of managing supply chain and
inflationary pressures effectively, while simultaneously continuing
to win new projects and expand opportunities with existing
customers.
"We continue to report strong organic sales growth, building on
the momentum generated last year whilst maintaining our margins
within our target range and demonstrating our ability to
effectively pass through inflationary-driven increases.
"In June, we set out an ambitious new five-year plan, to grow
our revenues to $1.2 billion by FY2027 and these results
demonstrate the value added by our investment programme and our
ongoing ability to deliver against this plan.
"We are confident that our strategy and operating model provide
us with the opportunity to deliver long-term organic growth
alongside complementary, earnings-enhancing acquisitions. Our
strong performance in the first half of the year, clear strategy
and pipeline of customer opportunities underpins our confidence to
reaffirm our outlook for the remainder of the year."
Analyst Presentation
A live presentation for analysts will be held online at 12.00 pm
GMT on 9 November 2022. If you are an analyst and would like to
join for this briefing, please send an email to
Volex@powerscourt-group.com. Log in details for the meeting will be
communicated to attendees.
Investor Presentation
A live presentation will be held online at 2.00 pm GMT on 9
November 2022 on the Investor Meet Company ("IMC") platform. This
online presentation is open to all existing and potential
shareholders. Questions can be submitted during the live
presentation.
Investors can sign up to IMC and add to meet Volex via:
https://www.investormeetcompany.com/volex-plc/register-investor
For further information please contact:
+44 (0)7747 488
Volex plc 785
Nat Rothschild, Executive Chairman
Jon Boaden, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Joint
Broker) +44 (0)20 7496 3000
Shaun Dobson / George Tzimas
HSBC Bank plc (Joint Broker) +44 (0)20 7991 8888
Simon Alexander / Joe Weaving
Powerscourt +44 (0)20 7250 1446
James White / Nicholas Johnson / Maxim Hibbs
About Volex plc
Volex plc (AIM: VLX) is a global leader in integrated
manufacturing for performance-critical applications and a supplier
of power products. We serve a diverse range of markets and
customers, with particular expertise in cable assemblies,
higher-level assemblies, data centre power and connectivity,
electric vehicles, and consumer electricals. We are headquartered
in the UK and operate from 19 manufacturing locations with a global
workforce of over 8,000 employees across 22 countries. Our products
are sold through our own locally based sales teams and through
authorised distributor partners to Original Equipment Manufacturers
and Electronic Manufacturing Services companies worldwide. All of
the products and services that we offer are integral to the
increasingly complex digital world in which we live, providing
power and connectivity from the most common household items to the
most complex medical equipment. For more information, please visit
www.volex.com
Definitions
The Board of Volex considers that current consensus market
expectations for revenue are $691.7 million (with a range of $690
million to $693 million) and for underlying operating profit are
$62.8 million (with a range of $62.3 million to $64.0 million).
The Group presents some significant items separately to provide
clarity on the underlying performance of the business. This
includes significant one-off costs and income such as acquisition
related costs, the non-cash amortisation of intangible assets
acquired as part of business combinations, and share-based
payments. Further detail on adjusting items is provided in Note
3.
Underlying operating profit is operating profit before adjusting
items and share-based payments. Underlying free cash flow is net
cash flow before financing activities excluding cash flows
associated with the acquisitions of businesses and cash utilised in
respect of adjusting items. Net debt (before operating lease
liabilities) represents cash and cash equivalents, less bank loans
and debt issue costs, but excluding operating lease liabilities.
The lease liabilities include $18.2 million of operating lease
liabilities ($17.8 million at 3 October 2021).
Organic revenue growth is calculated using constant exchange
rates ("CER") by taking the total reported revenue (excluding the
impact of acquisitions and disposals) divided by the preceding
financial year's revenue at the current year's exchange rates.
Return on capital employed is calculated as the last twelve
months underlying operating profit as a percentage of average net
assets excluding net cash/debt.
Forward looking statements
This announcement contains certain forward-looking statements
which have been made by the Directors in good faith using
information available up until the date they approved the
announcement. Forward-looking statements should be regarded with
caution as by their nature such statements involve risk and
uncertainties relating to events and circumstances that may occur
in the future. Actual results may differ from those expressed in
such statements, depending on the outcome of these uncertain future
events.
RESULTS FOR THE 26 WEEKSED 2 OCTOBER 2022
Overview
Volex deploys its extensive manufacturing experience and design
expertise to support the delivery of diverse, complex and
safety-critical solutions to a broad range of global customers. Our
market leading capability is focused on profitable sectors that
deliver organic growth and attractive returns.
During the period, revenue grew by 22.1%, including
acquisitions, compared to the prior year. At constant exchange
rates, organic revenue growth was 14.3%. This builds on the
momentum delivered in FY2022 when organic revenue growth for the
full year was 19.4%, as key markets recovered from the effects of
Covid-19. The current organic growth rate is ahead of our average
growth rate over the last three years, demonstrating the impact of
the recent strategy in accelerating the performance of the
business.
With a range of complementary capabilities and manufacturing
specialisms, Volex is a robust and resilient business. This creates
opportunities to enhance the depth and breadth of customer
relationships. Incremental sales are achieved through leveraging an
extensive global footprint as well as investing in additional
capabilities that support customers' requirements.
Volex is well positioned in key markets that demonstrate
long-term structural growth drivers, including Electric Vehicles,
Medical and Complex Industrial Technology. Our diverse customer
base and ability to add value in key production processes has
delivered growth despite a challenging manufacturing backdrop.
Global events have disrupted supply chains, extended lead times and
increased costs. However, our proactive approach to addressing each
of these challenges, combined with our expertise in procurement and
planning tools, have maintained production output with only a
modest increase in inventory levels, minimising the risk of
unscheduled interruptions. Higher material and labour costs have
been passed through to customers while value is maintained through
the continuous optimisation of processes. Volex's global footprint
satisfies the demands from customers who are looking to evolve and
reconfigure their procurement strategies through localisation.
The underlying operating margin for the first half of the year
was 9.0% and the Group has maintained underlying operating margins
between 9% and 10% for the previous two financial years. This
demonstrates the consistency of the operating model and the ability
to manage inflationary pressures in a dynamic market.
A new five-year plan was announced in June 2022, targeting Group
revenues of $1.2 billion by the end of FY2027, including revenues
from acquisitions of circa $200 million.
Trading performance overview
The half year to 2 October 2022 has seen the Group continue to
deliver robust organic growth and profitability. We are winning new
projects across our business with both new and existing customers.
Although some challenges around the availability of selected
components and variability in lead times remain, the situation
continues to improve.
$m 26 weeks ended 26 weeks ended
2 October 3 October
2022 2021
Total Total
Revenue 357.5 292.7
Cost of Sales (283.9) (230.3)
---------------- ---------------
Underlying gross profit* 73.6 62.4
Underlying gross margin 20.6% 21.3%
Underlying operating
costs* (41.5) (35.1)
---------------- ---------------
Underlying operating
profit* 32.1 27.3
================ ===============
Underlying operating
margin 9.0% 9.3%
================ ===============
Underlying EBITDA* 38.1 31.8
---------------- ---------------
* Before adjusting items and share-based payment charges
Revenue for the first half of the year increased by 22.1% in
total, organic growth was 14.3%, compared to H1 FY2022. Customer
demand has been strong across our markets throughout the period,
supported by new contract wins. Gross margin is slightly lower than
the first half of the previous year, but consistent with FY2022 as
a whole. The small reduction in gross margin is primarily due to a
change in sales mix during the period from customer growth and the
impact of acquisitions, with net inflation offset by cost
optimisation.
The underlying operating margin of 9.0% is broadly in line with
the full year operating margin for FY2022 of 9.1%. Underlying
profit before tax is $29.1 million, an increase of 14.1% on the
previous period. Underlying basic earnings per share of 14.4 cents
is 4.3% higher than the comparative period. Statutory profit before
tax, which includes the impact of adjusting items and share-based
payment expenses, was $21.5 million, an increase of 10.8% on the
prior period. The underlying effective tax rate for the period was
20.6% (H1 FY2022: 14.7%), with the increase due to the impact of
foreign exchange rate movements and the impact that changes in the
UK tax rate had on deferred tax assets in the prior period.
Underlying free cash flow for the first half of the year was
$0.1 million which includes investment in capital equipment as well
as working capital to support business growth and reduce the impact
of supply chain related disruption on customer projects. Net debt
increased by $21.7 million from the year end, which includes $7.5
million in respect of acquisitions completed in prior years.
Leverage, expressed as the ratio of net debt excluding operating
leases to underlying EBITDA, was 1.4x (YE FY2022: 1.1x). This
provides headroom for future investment and acquisition.
Acquisition of Review Display Systems
Volex completed the acquisition of the Review Display Systems
Group ("RDS"), incorporated in the United Kingdom, at the end of
October 2022. RDS offers a complete turnkey service for the design
and manufacture of industrial electronic display, embedded and
Internet of Things ("IoT") enabled systems. Alongside this, the
business is focused on the design-in and specialist technical
distribution of electronic displays, touchscreens, embedded
intelligence and wireless mesh networking solutions and IoT system
solutions. RDS provide a comprehensive service, covering all
aspects of the product development process including electronic
design for both hardware and firmware, optimum component selection,
mechanical design and final assembly and manufacture.
RDS will combine with and complement GTK, our successful and
growing UK-based subsidiary. GTK specialises in the manufacture and
provision of customised electronic solutions, producing complex
cable assemblies and integrated solutions for global blue-chip
customers. The two businesses will be managed under a single
leadership structure to identify and deliver synergy
opportunities.
RDS reported revenue of GBP9.5 million and EBITDA of GBP1.0
million for the year ended 31 March 2022. RDS is being acquired for
initial consideration of GBP5.4 million on a cash and debt-free
basis. There are potential earn-out payments of up to GBP2.9
million over two years, subject to the business achieving
stretching earn-out targets. To achieve the full earn-out payment,
RDS will need to generate EBITDA of GBP1.8m in the second year of
ownership. The acquisition is being funded from existing debt
facilities.
Interim dividend
The Board have declared an interim dividend of 1.3 pence, an
increase of 8.3% on the previous year. Since the dividend was
reintroduced in FY2020, it has increased every year and is now 30%
higher. We are committed to a progressive dividend policy, striking
a balance between delivering growth through investment and
returning cash to shareholders.
The interim dividend will be paid on 16 December 2022 to those
shareholders on the register on 18 November 2022, the ex-dividend
date will be 17 November 2022. Shareholders may elect to receive
the interim dividend as shares in Volex, in lieu of cash, under the
Volex plc Scrip Dividend Scheme. The reference price for the Scrip
Dividend will be announced on 24 November 2022. Shareholders who
wish to elect to receive the 2022 interim dividend in shares must
(i) complete a Scrip Dividend Mandate Form and return it to Link
Group, (ii) make a Scrip election online via www.signalshares.com
or, (iii) submit a Dividend Election Input Message in CREST, in
each case by no later than 5.00 p.m. on 2 December 2022. Those
shareholders who have opted in to a permanent scrip election by
completing (and not cancelling) a Scrip Dividend Mandate Form
either in hard copy or via www.signalshares.com do not need to
complete a new mandate form for the interim dividend. However,
shareholders holding their shares in CREST need to make an election
for each dividend and would need to submit a Dividend Election
Input Message in respect of the interim dividend. A copy of the
terms and conditions for the Volex plc Scrip Dividend Scheme are
available on the Company's website
https://www.volex.com/wp-content/uploads/2022/07/Volex-Plc-Scrip-Dividend-Scheme-Terms-Conditions-Final.pdf.
Strategy
Having set out an ambitious five-year plan in June, we continue
to invest in our existing operations to support high-growth areas
of the business and to further optimise our manufacturing
processes. This includes introducing printed circuit board assembly
("PCBA") capability to our advanced manufacturing centre in
Tijuana, Mexico, supporting customers looking to relocate key
aspects of production to North America and de-risk supply chains.
This investment, in conjunction with our two existing PCBA
factories in the US, as well as our factory in India, positions us
well to support customer requirements.
We are actively managing and developing our pipeline of
potential acquisition opportunities. This is a key element of our
growth plans, and we apply strict criteria and a set methodology to
identify businesses that can enhance our capabilities, broaden
customer relationships and access attractive markets. We are
mindful of the macroeconomic environment, and we are using a robust
approach to assess valuations for target companies.
These initiatives form part of our strategy to grow our revenues
to $1.2 billion by the end of FY2027, including circa $200 million
of revenue generated by acquisitions. The investments that we are
making in this financial year in infrastructure and product
development, combined with the demand we are seeing from customers,
put us in a strong position to achieve our strategic goals.
Revenue by customer sector
Electric Vehicles
The strong momentum in Electric Vehicles has continued, with an
organic revenue increase of 52.5% year-on-year. This saw revenue
increase to $69.1 million (H1 FY2022: $45.3 million). Compared to
the second half of FY2022, EV revenues have grown organically by
17.4% in the first half of the year.
Consumer demand for electric vehicles continues to accelerate as
the technology becomes widely adopted and the range of vehicles and
manufacturers expands. Our engineering specialists have been
successfully developing a range of solutions to address different
requirements in the market. In addition to our market leading
position in connectivity for universal home charging solutions, we
provide solutions to support faster modes of charging in a domestic
context and out of the home.
Consumer Electricals
Consumer Electricals delivered organic growth of 3.6%. Revenue
for the first half of the year was $138.2 million (H1 FY2022:
$127.4 million).
The improvements we have delivered in vertical integration and
automation in our Consumer Electricals business have created a
market-leading, highly competitive proposition, allowing us to gain
market share through winning new customer projects.
Our world-class production facilities and continuous improvement
activities mean that, even after passing through input cost
increases to customers, our competitive pricing allows us to win
new business. Copper costs have increased by approximately 7%
compared with the same period a year ago. We expect to pass through
lower copper costs to customers in the second half resulting in a
slight reduction in revenue but with limited effect on profit .
Medical
There was a strong return of demand in the Medical sector post
Covid-19 in FY2022 and these demand levels have continued in the
first half, with major customers reporting significant order books.
Revenue increased to $66.8 million (H1 FY2022: $62.0 million), with
organic growth of 12.0%. Higher demand levels are expected to be
sustained over an extended period as the complex nature of large
medical equipment means that it will take some time for the
elevated demand to be satisfied.
Growth in the Medical sector is underpinned by advances in
medical technology, an ageing population and initiatives to reduce
patient waiting times. Our advanced facilities allow us to support
the latest technical requirements in the sector and we have
extensive experience of surpassing stringent quality standards.
Complex Industrial Technology
With improvements in the availability of components, we have
seen solid growth from our Complex Industrial Technology customers,
delivering organic growth of 9.3%, as well as the benefit from
acquisitions made in the previous year, with revenue of $83.4
million (H1 FY2022: $58.0 million). Demand from our data centre
customers was flat year-on-year, with a step up in our customers'
requirements expected at the end of the year.
In Complex Industrial Technology, we have a range of solutions,
deploying the latest technology in an industrial context, helping
our customers grow and deliver operating efficiencies. With a
customer-centric approach and experienced production engineers who
maintain rigorous quality standards, Volex is a manufacturing
partner for some of the biggest technology names.
For data centre customers, we are continuing to supply a range
of high-speed cables, including the new generation of cables with
transmission rates of 400 Gbps. We are continuing to win new
technology projects. Some of these are currently at the prototype
stage and we expect to experience significant additional demand
when volumes increase to full production levels. Our investment in
design and product development is resulting in a number of new and
innovative products to support our long-term growth in this
area.
Revenue by market
We are a global, interconnected and integrated business. Our
global footprint with manufacturing capabilities in multiple
locations allows us to ensure continuity of supply. This is a
significant differentiator for our blue-chip customers with
international operations.
Many customers are looking to simplify their supply chain
processes and source products closer to their manufacturing
locations. In particular, we are seeing demand for cost efficient
alternatives to China. With significant experience in onboarding
complex requirements, we are expanding our capacity in key
locations to meet this demand. This includes new space in Mexico,
Poland, Indonesia and India.
North America is our largest customer region and we work with
major technology companies and global innovators. North America is
46.9% of overall revenue (H1 FY2022: 41.4%). Revenue in this market
grew by 38.3% in the period to $167.5 million (H1 FY2022: $121.1
million). This includes some of the strong growth that we
experienced from electric vehicle customers and the impact of the
acquisitions completed in the second half of FY2022.
Revenues in Europe reduced by 3.5% to $97.4 million (H1 FY2022:
$100.9 million). With much of this business priced in Euro, there
was an adverse impact of $10.5 million from changes in foreign
exchange rates. Offsetting this, the Group has seen growth across
its key customer markets in this region including medical,
industrial and electric vehicles.
Asia revenue was $92.6 million (H1 FY2022 $70.7 million). The
majority of revenue in this region is in Consumer Electricals.
Demand in the first half remained strong due to new customer
projects and strong demand from key customers.
Gross margin
Our integration into customer processes and our ability to add
value through our advanced manufacturing capabilities, allows us to
build strong relationships with our customers. Given the critical
nature of many of the projects we support, we take our
responsibility as a supplier extremely seriously. We have secured
incremental price increases on a fair and transparent basis,
maintaining cost competitiveness while also protecting our
margins.
We have seen extended lead times and increased costs for some
raw materials. We are able to pass through component cost increases
to our customers, being an established practice for our industry.
We are working closely with our customers to manage lead times and
meet their expectations. Indeed, we believe that our customer
relationships have strengthened due to our support in navigating
the current supply chain complexities.
With inflation being managed effectively and proactively, gross
margins have remained consistent. The gross margin in the first
half of the year was 20.6% which compares with a gross margin of
20.5% achieved over the full year in FY2022 and a gross margin of
21.3% for the first half of FY2022. Inflation resulted in adverse
movement of 0.8% year-on-year, which was offset by a favourable
cost optimisation impact of 0.9%. Acquisitions and mix had an
adverse impact of 1.2% in total. There was also a benefit from
foreign exchange due to the strength of the dollar which improved
gross margin by 0.4%. This demonstrates that we have been effective
in passing through higher input costs to customers and identifying
efficiency savings.
Underlying operating profit
Underlying operating costs increased by $6.4 million to $41.5
million (H1 FY2022: $35.1 million). $3.2 million of the increase
was attributable to the four acquisitions that were made in the
second half of FY2022. The remaining increase reflects business
growth, inflation and investment in engineering and sales
capability. There was also a benefit from the strength in the US
dollar. Underlying operating costs as a percentage of revenue have
reduced in the period from 12.0% in H1 FY2022 to 11.6% reflecting
management's continued tight control over operating expenditure and
the efficiencies delivered to offset the impact of inflation on
salary costs.
Underlying operating profit increased 17.6% to $32.1 million (H1
FY2022: $27.3 million). This includes the benefit from the organic
growth as well as the acquisitions that were completed in the
second half of FY2022. The underlying operating margin for the
first half of the year was 9.0% which is in line with the operating
margin for the previous full year which was 9.1%.
Adjusting items and share-based payments
The Group presents some significant items separately to provide
clarity on the underlying performance of the business. This
includes significant one-off costs such as restructuring and
acquisition related costs, the non-cash amortisation of intangible
assets acquired as part of business combinations, and share based
payments, as well as associated tax.
Adjusting items and share-based payments totalled $7.6 million
in the period (H1 FY2022: $6.1 million). These costs are made up of
$4.3 million (H1 FY2022: $5.0 million) of amortisation of
acquisition-related intangible assets, $2.6 million (H1 FY2022:
$2.6 million) of share-based payments expense and $0.7 million (H1
FY2022: $1.1 million) of acquisition costs mainly related to
on-going activities to develop our acquisition pipeline. In the
previous year, we recognised a gain of $2.6 million on the
forgiveness of Paycheck Protection Program (PPP) loans provided to
parts of the Group's North America operations.
Net finance costs
Net finance costs increased to $3.7 million (H1 FY2022: $1.9
million) mainly due to the increased utilisation of the revolving
credit facility following the acquisitions made in FY2022 and
higher interest rates. The financing element for leases for the
year was $0.5 million (H1 FY2022: $0.3 million).
During the period, the Group entered into an interest rate swap
in respect of $50 million of drawn debt. This fixes the interest on
this element of the debt to provide stability should there be
variability in interest rates in the next four years.
Taxation
The Group's income tax expense for the period was $4.9 million
(H1 FY2022: $2.2 million), representing an effective tax rate of
22.8% (H1 FY2022: 11.2%). The underlying tax charge of $6.0 million
(H1 FY2022: $3.8 million) represents an effective tax rate of 20.6%
(H1 FY2022: 14.7%). The tax expense and the effective tax rate are
affected by the recognition of deferred tax assets, as required by
International Financial Reporting Standards. The assets recognised
in the period are principally due to the recognition of historical
operating losses and unclaimed capital allowances.
The underlying current tax charge is calculated by reference to
the taxable profits in each individual entity and the local
statutory tax rates. An underlying deferred tax credit of $1.8
million (H1 FY2022: tax credit of $1.4 million) arose due to an
increase in the net deferred tax asset recognised. In a number of
jurisdictions, the taxable profits are calculated in local currency
which can give rise to taxable profits when the local currency
depreciates. During the first half of the year, this has resulted
in an additional $1.0 million of tax expense (H1 FY2022: $0.2
million).
The Group operates in a number of different tax jurisdictions
and is subject to periodic tax audits by local authorities in the
normal course of business on a range of tax matters in relation to
corporate tax. As at 2 October 2022, the Group has net current tax
liabilities of $9.5 million (FY2022: $8.2 million) which include
$6.7 million (FY2022: $7.2 million) of provisions for tax
uncertainties.
The carrying amount of deferred tax assets is reviewed at each
reporting date and recognised to the extent that it is probable
that there are sufficient taxable profits to allow all or part to
be recovered. Deferred tax assets have been recognised based on
future forecast taxable profits. As at the reporting date the Group
has recognised deferred tax assets of $20.3 million (FY2022: $20.6
million) and deferred tax liabilities of $6.1 million (FY2022: $7.0
million).
Net debt and cash flows
During the first half of the year, inventory has increased to
support the growth of the business and also to secure critical
components in a market where there are regular issues with variable
lead times and part shortages. Securing sufficient inventory to
support customer requirements is an important way to ensure that
customer commitments are met which protects revenue. Inventory is
kept under close review at both a factory level and a regional
level to optimise holding levels. As the supply chain situation
improves, there will be an opportunity to reduce inventory.
Underlying EBITDA increased by 19.8% to $38.1 million (H1
FY2022: $31.8 million). The Group generated underlying free cash
flow of $0.1 million (H1 FY2022: $3.0 million). This included a
working capital outflow of $21.2 million (two-thirds of which
supported the growth of the business), as well as net capital
expenditure of $10.0 million and tax and net interest paid of $5.9
million. The adverse working capital movement is due to the
significant growth in the business and includes longer inventory
holding periods resulting from complexities in global supply
chains. Compared with H1 FY2022 there were an extra 4 days of
inventory held by the business at the end of the period. Inventory
levels are expected to normalise, but this may not occur in the
second half of the year. Accounts receivable and accounts payable
balances also increased as a result of the growth in the business .
Net debt (before operating lease liabilities) increased from the
year end to $98.8 million ($74.7 million at 3 April 2022). The
Group also had operating lease liabilities of $18.2 million ($20.6
million at 3 April 2022). This produces a statutory net debt
position of $117.0 million (YE FY2022: $95.3 million).
Acquisition strategy
Acquiring quality businesses and successfully integrating them
is a significant part of our strategy. We identify highly
performing businesses in sectors where we have deep understanding
and experience. We are attracted to businesses with blue-chip,
long-term customers and proven capabilities. Our acquisition
pipeline is focused on businesses which will allow the Group to add
additional value and deliver further access to existing or adjacent
markets. The geographic location of the target is also a strategic
consideration, particularly given the way in which global supply
chains are reconfiguring. Targets that require significant
integration or restructuring effort are only considered where we
can identify the management resources to lead this activity.
We look to optimise the value created from each acquisition, and
only progress opportunities that meet strict criteria which are
tailored to each transaction based on the specific characteristics
of the target. In general, acquisitions should enhance the Group's
margin profile.
We identify potential acquisitions through a variety of methods,
seeking out businesses that are not on the market as well as those
already in an active process. All these opportunities are qualified
and approved by an investment committee before we progress to
negotiation. We only proceed to due diligence where there is
alignment on the commercial terms.
Having completed 10 acquisitions in four years from investment
of some $200 million, we have a well-developed approach and a
significant track record in execution. The integration and
transition activities for Irvine, Prodamex, TC and inYantra, which
were all acquired in FY2022, are well underway.
We have an interesting acquisition pipeline containing highly
attractive targets that we are pursuing, all of which fit within
the core competency of our senior operations team. We qualify every
acquisition extensively using our deep industry knowledge to find
the best opportunities. We firmly believe that our strength in this
area will be a significant value driver.
Investing in our business
We are investing in our business to deliver our five-year plan.
Our astute investment decisions have allowed the Group to achieve a
return on capital employed of 20.2% (H1 FY2022: 25.7%). Given the
rapid growth and continuing customer project wins, we are
increasing our production space in key locations. This includes our
sites in India, Mexico, Indonesia and Poland.
Our investment in development activities and new products has
allowed us to secure incremental customer projects and has
contributed to our revenue growth. We will continue these
investment programmes in a targeted way, focusing on activities
that add the most value.
Total capital expenditure for the first half of the year was
$15.7 million which included $5.7 million for new printed circuit
board assembly equipment that was obtained under a finance lease
arrangement. 90% of capital expenditure approved in the first half
of the year related to projects that will drive business growth.
The average cash payback period for these projects is 20
months.
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. There are a number of potential
risks that could have a material impact on the Group's financial
performance. The principal risks and uncertainties include
competitive threats, legal and regulatory issues, dependency on key
suppliers or customers, movements in commodity prices or exchange
rates, and quality issues. These risks and the relevant
risk-mitigation activities are set out in the FY2022 Annual Report
and Accounts on pages 38 to 43, a copy of which is available on the
website at www.volex.com .
Outlook
Volex is a dynamic and resilient business, with compelling
positions in profitable markets with structural growth drivers,
creating confidence in our ability to deliver our strategic
objectives. By maintaining a flexible approach, the business is
well placed to manage growth and profitability.
The Group is heading into the second half of the year with a
clear strategy, a strong pipeline of customer project opportunities
and significant momentum from the growth experienced in the first
half. We are mindful of broader macroeconomic developments but
remain comfortable that our diversified end market exposure stands
us in good stead. These factors support the confidence of the Board
in delivering on long-term objectives as well as meeting the full
year consensus market expectations.
Nat Rothschild Jon Boaden
Group Executive Chairman Group Chief Financial Officer
9 November 2022 9 November 2022
Unaudited consolidated income statement
For the 26 weeks ended 2 October 2022 (26 weeks ended 3 October
2021)
26 weeks ended 2 October 26 weeks ended 3 October
2022 2021
Adjusting
Before Adjusting Before items
Adjusting items and Adjusting and share-based
items and share-based items and payments
share based payments share based (note
payments (note 3) Total payments 3) Total
Notes $'m $'m $'m $'m $'m $'m
---------------------------- ----- ------------ ------------ ------- ------------ ---------------- -------
Revenue 2 357.5 - 357.5 292.7 - 292.7
Cost of sales (283.9) - (283.9) (230.3) - (230.3)
---------------------------- ----- ------------ ------------ ------- ------------ ---------------- -------
Gross profit 73.6 - 73.6 62.4 - 62.4
Operating expenses (41.5) (7.6) (49.1) (35.1) (6.1) (41.2)
Operating profit 2 32.1 (7.6) 24.5 27.3 (6.1) 21.2
Share of net profit
from associates 0.7 - 0.7 0.1 - 0.1
Finance income 0.1 - 0.1 0.2 - 0.2
Finance costs (3.8) - (3.8) (2.1) - (2.1)
Profit on ordinary
activities before taxation 29.1 (7.6) 21.5 25. 5 (6.1) 19.4
Taxation 4 ( 6.0 ) 1.1 ( 4.9 ) ( 3.8 ) 1.6 ( 2.2 )
---------------------------- ----- ------------ ------------ ------- ------------ ---------------- -------
Profit for the period 23.1 (6.5) 16.6 21.7 (4.5) 17.2
---------------------------- ----- ------------ ------------ ------- ------------ ---------------- -------
Profit is attributable
to:
Owners of the parent 22.8 (6.5) 16.3 21.7 (4.5) 17.2
Non-controlling interests 0.3 - 0.3 - - -
---------------------------- ----- ------------ ------------ ------- ------------ ---------------- -------
23.1 (6.5) 16.6 21.7 (4.5) 17.2
---------------------------- ----- ------------ ------------ ------- ------------ ---------------- -------
Earnings per share
(cents)
Basic 5 14.4 10.3 13. 8 11.0
Diluted 5 13.7 9.8 13.0 10.3
---------------------------- ----- ------------ ------------ ------- ------------ ---------------- -------
Audited consolidated income statement
For the 26 weeks ended 2 October 2022 (26 weeks ended 3 October
2021)
52 weeks ended 3 April
2022
Before Adjusting
Adjusting items and
items and share-based
share based payments
payments (note 3) Total
Notes $'m $'m $'m
------------------------------ ----- ------------ ------------ -------
Revenue 2 614.6 - 614.6
Cost of sales (488.8) - (488.8)
------------------------------ ----- ------------ ------------ -------
Gross profit 125.8 - 125.8
Operating expenses (69.6) (15.2) (84.8)
Operating profit 2 56.2 (15.2) 41.0
Share of net profit from
associates 0.4 - 0.4
Finance income 0.3 - 0.3
Finance costs (5.5) - (5.5)
------------------------------ ----- ------------ ------------ -------
Profit on ordinary activities
before taxation 51.4 (15.2) 36.2
Taxation (9.1) 3.3 (5.8)
------------------------------ ----- ------------ ------------ -------
Profit for the period
attributable to the owners
of the parent 42.3 (11.9) 30.4
------------------------------ ----- ------------ ------------ -------
Earnings per share (cents)
Basic 5 26.9 19.3
Diluted 5 25.2 18.1
------------------------------ ----- ------------ ------------ -------
Unaudited consolidated statement of comprehensive income
For the 26 weeks ended 2 October 2022 (26 weeks ended 3 October
2021)
(Audited)
26 weeks 52 weeks
to to
26 weeks
2 October to 3 April
3 October
2022 2021 2022
$'m $'m $'m
-------------------------------------------------- ------------- ------------- ----------
Profit for the period 16.6 17.2 30.4
Items that will not be reclassified subsequently
to profit or loss :
Actuarial gain on defined benefit pension
schemes 0.5 0.4 0.7
Tax relating to items that will not be
reclassified (0.1) - (0.1)
-------------------------------------------------- ------------- ------------- ----------
0.4 0.4 0.6
Items that may be reclassified subsequently
to profit or loss :
(Loss)/gain arising on cash flow hedges
during the period (1.3) (0.1) 0.1
Exchange loss on translation of foreign
operations (19.4) (1.7) (5.9)
Tax relating to items that may be reclassified 1.8 - 0.1
-------------------------------------------------- ------------- ------------- ----------
(18.9) (1.8) (5.7)
Other comprehensive expense for the period (18.5) (1.4) (5.1)
Total comprehensive (expense)/income
for the period (1.9) 15.8 25.3
-------------------------------------------------- ------------- ------------- ----------
Total comprehensive (expense)/income
for the period is attributable to:
Owners of the parent (1.7) 15.8 25.3
Non-controlling interests (0.2) - -
-------------------------------------------------- ------------- ------------- ----------
(1.9) 15.8 25.3
-------------------------------------------------- ------------- ------------- ----------
Unaudited consolidated statement of financial position
As at 2 October 2022 (3 October (Audited)
2021)
2 October 3 October 3 April
2021
Note 2022 $'m 2022
$'m $'m
---------------------------------- ------ ------------ ----------- ----------
Non-current assets
Goodwill 75.3 64.6 82.9
Other intangible assets 41.2 35.1 47.0
Property, plant and equipment 45.6 33.5 43.4
Right of use assets 23.0 16.5 19.4
Investments in associates 2.2 1.0 1.5
Other receivables 1.2 1.2 2.1
Derivative financial instruments 1.3 - -
Deferred tax assets 20.3 23.7 20.6
---------------------------------- ------ ------------ ----------- ----------
210.1 175.6 216.9
---------------------------------- ------ ------------ ----------- ----------
Current assets
Inventories 127.0 96.9 119.3
Trade receivables 142.2 111.3 119.0
Other receivables 13.5 13.8 16.7
Current tax assets 1.1 2.2 1.9
Derivative financial instruments 0.2 0.5 0.4
Cash and bank balances 8 23.0 21.7 29.1
---------------------------------- ------ ------------ ----------- ----------
307.0 246.4 286.4
---------------------------------- ------ ------------ ----------- ----------
Total assets 517.1 422.0 503.3
---------------------------------- ------ ------------ ----------- ----------
Current liabilities
Borrowings 8 - 4.4 5.0
Lease liabilities 5.0 3.8 4.3
Trade payables 93.8 87.1 84.7
Other payables 58.5 49.5 61.9
Current tax liabilities 10.6 9.8 10.1
Retirement benefit obligation 0.3 1.1 1.1
Provisions 1.7 1.8 2.3
Derivative financial instruments 2.5 0.2 0.1
172.4 157.7 169.5
---------------------------------- ------ ------------ ----------- ----------
Net current assets 134.6 88.7 116.9
---------------------------------- ------ ------------ ----------- ----------
Non-current liabilities
Borrowings 8 115.9 39.1 98.5
Non-current lease liabilities 19.1 14.5 16.6
Other payables 0.9 3.7 1.0
Deferred tax liabilities 6.1 7.5 7.0
Retirement benefit obligation 1.7 3.0 2.0
Provisions 0.1 0.2 0.2
143.8 68.0 125.3
---------------------------------- ------ ------------ ----------- ----------
Total liabilities 316.2 225.7 294.8
---------------------------------- ------ ------------ ----------- ----------
Net assets 200.9 196.3 208.5
---------------------------------- ------ ------------ ----------- ----------
Equity attributable to owners
of the parent
Share capital 6 62.7 62.5 62.5
Share premium account 60.7 60.9 60.9
Non-distributable reserve 2.5 2.5 2.5
Hedging and translation reserve (28.2) (5 .9 ) (9.8)
Own shares 7 (2.2) (1.8) (0.2)
Retained earnings 98.2 78.1 85.2
---------------------------------- ------ ------------ ----------- ----------
Total attributable to owners of
the parent 193.7 196.3 201.1
---------------------------------- ------ ------------ ----------- ----------
Non-controlling interests 7.2 - 7.4
---------------------------------- ------ ------------ ----------- ----------
Total equity 200.9 196.3 208.5
---------------------------------- ------ ------------ ----------- ----------
Unaudited Consolidated Statement of Changes in Equity
For the 26 weeks ended 2 October 2022 (26 weeks ended 3 October
2021)
Share Non-distribut-able Hedging and Equity Non-Controlling
Share premium reserves translation Own Retained attributable interests Total
capital account reserve shares earnings to owners equity
$'m $'m $'m $'m $'m $'m $'m $'m $'m
---------------- ------- ------- ------------------- ----------- ------- -------- ------- ---------------- ----------------
Balance 4 April
2021 62.0 60.9 2.5 (4.1) (3.3) 66.0 184.0 - 184.0
Profit for the
period
attributable to
the owners of
the parent - - - - - 17.2 17.2 - 17.2
Other
comprehensive
income for the
period - - - (1.8) - 0.4 (1.4) - (1.4)
---------------- ------- ------- ------------------- ----------- ------- -------- -------------- ------------------ -----------
Total
comprehensive
income for the
period - - - (1.8) - 17.6 15.8 - 15.8
Shares issued 0.5 - - - - - 0.5 - 0.5
Own shares
sold/(utilised)
in the period - - - - 3.4 ( 3.4 ) - - -
Own shares
purchased in
the period - - - - (1.9) - (1.9) - (1.9)
Dividend - - - - - (4.7) (4.7) - (4.7)
Reserve entry
for share
option charges - - - - - 2.2 2.2 - 2.2
Tax effect of
share options - - - - - 0.4 0.4 - 0.4
Balance at 3
October 2021 62.5 60.9 2.5 (5.9) (1.8) 78.1 196.3 - 196.3
---------------- ------- ------- ------------------- ----------- ------- -------- -------------- ------------------ -----------
Unaudited Consolidated Statement of Changes in Equity
(continued)
For the 26 weeks ended 2 October 2022 (26 weeks ended 3 October
2021)
Non-distribut-able
Share reserves Hedging and Equity Non-Controlling
Share premium translation Own Retained attributable interests Total
capital account reserve shares earnings to owners equity
$'m $'m $'m $'m $'m $'m $'m $'m $'m
---------------- --------- ---------- -------------------- ------------- --------- ----------- ------------ ---------------- --------
Balance 3 April
2022 62.5 60.9 2.5 (9.8) (0.2) 85.2 201.1 7.4 208.5
Profit for the
period - - - - - 16.3 16.3 0.3 16.6
Other
comprehensive
(expense)/
income for the
period - - - (18.4) - 0.4 (18.0) (0.5) (18.5)
---------------- --------- ---------- -------------------- ------------- --------- ----------- ------------ ---------------- --------
Total
comprehensive
(expense)/
income for the
period - - - (18.4) - 16.7 (1.7) (0.2) (1.9)
Own shares
sold/(utilised)
in the period - - - - 1.7 (1.7) - - -
Own shares
purchased in
the period - - - - (3.7) - (3.7) - (3.7)
Dividend - - - - - (4.6) (4.6) - (4.6)
Shares issued 0.2 (0.2) - - - 1.3 1.3 - 1.3
Reserve entry
for share
option charges - - - - - 1.2 1.2 - 1.2
Tax effect of
share options - - - - - 0.1 0.1 - 0.1
Balance at 2
October 2022 62.7 60.7 2.5 ( 28.2 ) (2.2) 98.2 193.7 7.2 200.9
---------------- --------- ---------- -------------------- ------------- --------- ----------- ------------ ---------------- --------
Unaudited consolidated statement of cash flows
For the 26 weeks ended 2 October 2022 (26 weeks ended 3 October
2021)
(Audited)
26 weeks 52 weeks
to to
26 weeks
2 October to 3 April
Notes 3 October
2022 2021 2022
$'m $'m $'m
------------------------------------------- ------- ------------- ------------- ----------
Profit for the period 16.6 17.2 30.4
Adjustments for:
Finance income ( 0.1 ) ( 0.2 ) (0.3)
Finance costs 3.8 2.1 5.5
Income tax expense 4.9 2.2 5.8
Share of net profit from associates ( 0.7 ) (0.1) (0.4)
Depreciation of property, plant and
equipment 3.8 3.0 6.4
Depreciation of right-of-use asset 1.8 1.5 3.4
Amortisation of intangible assets 4.7 5.1 10.4
Loss on disposal of property, plant
and equipment - - (0.2)
Share option charge 2.6 2.6 4.4
Forgiveness of PPP loan 3 - (2.6) (2.6)
Contingent consideration adjustment - - (0.2)
Decrease in provisions ( 1.0 ) ( 0.9 ) (1.7)
------------------------------------------- ------- ------------- ------------- ----------
Operating cash flow before movements
in working capital 36.4 29.9 60.9
( 12.5
Increase in inventories ) ( 20.4 ) (28.1)
Increase in receivables (27.4) (13.4) (14.2)
Increase in payables 17.7 15.1 7.9
( 22.2
Movement in working capital ) ( 18.7 ) (34.4)
Cash generated by operations 14.2 11.2 26.5
------------- ------------- ----------
Cash generated by operations before
adjusting items 15.8 11.8 28.5
Cash utilised by adjusting items ( 1.6 ) ( 0.6 ) (2.0)
------------- ------------- ----------
Taxation paid ( 3.6 ) ( 3.0 ) (6.5)
Interest paid ( 2.4 ) ( 0.9 ) (1.5)
------------------------------------------- ------- ------------- ------------- ----------
Net cash generated from operating
activities 8.2 7.3 18.5
------------------------------------------- ------- ------------- ------------- ----------
Cash flow from investing activities
Interest received 0.1 - 0.1
Acquisition of businesses, net of
cash acquired - - (35.7)
Contingent consideration for businesses
acquired ( 7.5 ) ( 10.8 ) (19.2)
Proceeds on disposal of property,
plant and equipment 0.1 - 0.5
Purchases of property, plant and
equipment ( 8.1 ) ( 3.9 ) (10.8)
Purchases of intangible assets ( 2.0 ) ( 1.0 ) (4.2)
Proceeds from the repayment of preference 0.2 - -
shares
( 17.2
Net cash used in investing activities ) ( 15.7 ) (69.3)
------------------------------------------- ------- ------------- ------------- ----------
Cash flow before financing activities (9.0) (8.4) (50.8)
------------- ------------- ----------
Cash used before adjusting items ( 7.4 ) ( 7.8 ) (48.8)
Cash utilised in respect of adjusting
items ( 1.6 ) ( 0.6 ) (2.0)
------------- ------------- ----------
Unaudited consolidated statement of cash flows (continued)
For the 26 weeks ended 2 October 2022 (26 weeks ended 3 October
2021)
(Audited)
26 weeks 52 weeks
to to
2 October 26 weeks to 3 April
Notes 3 October
2022 2021 2022
$'m $'m $'m
Cash flow before financing activities (9.0) (8.4) (50.8)
Cash flow from financing activities
Dividend paid ( 3.3 ) ( 4.7 ) (7.2)
Net purchase of shares for share
schemes ( 3.5 ) ( 2.0 ) (5.1)
Refinancing costs paid - (0.1) (2.5)
New bank loan raised 19.0 8.2 69.3
Repayment of borrowings ( 2.3 ) ( 2.9 ) (3.4)
Outflow from factoring (0.7) (2.9) (6.0)
Interest element of lease payments ( 0.5 ) ( 0.3 ) (1.0)
Receipt from lease debtor 0.2 0.3 0.5
Capital element of lease payments (2.1) (1.9) (4.2)
Net cash generated from/(used in)
financing activities 6.8 ( 6.3 ) 40.4
------------------------------------------- -------- ------------- ------------- ----------
Net decrease in cash and cash equivalents 8 (2.2) (14.7) (10.4)
Cash and cash equivalents at beginning
of period 8 25.9 36.5 36.5
Effect of foreign exchange rate
changes 8 (0.7) (0.1) (0.2)
------------------------------------------- -------- ------------- ------------- ----------
Cash and cash equivalents at end
of period 8 23.0 21.7 25.9
------------------------------------------- -------- ------------- ------------- ----------
Notes to the Interim Statements
1. Basis of preparation
These interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the AIM Rules for Companies'. The
condensed consolidated interim financial information should be read
in conjunction with the annual financial statements for the 52
weeks ended 3 April 2022, which were prepared in accordance with
UK-adopted international accounting standards and the requirements
of the Companies Act 2006.
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 2 October 2022 ('H1 FY2023') and the 26 weeks
ended 3 October 2021 ('H1 FY2022') has not been reviewed by the
auditors. The financial information for the 52 weeks ended 3 April
2022 ('FY 2022' ) is extracted and abridged from the Group's full
accounts for that year. The statutory accounts for FY2022 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 Directors confirm that, to the best of their knowledge, the
interim financial statements have been prepared in accordance with
UK adopted International Accounting Standard 34 'Interim Financial
Reporting' and the AIM Rules for Companies, and that the interim
report includes a fair review of the information required. The
interim report was approved by the Board of Directors on 9 November
2022.
This interim report can be downloaded or viewed via the Group's
website at www.volex.com . Copies of the annual report for the 52
weeks ended 3 April 2022 are available at the Company's registered
office at Unit C1 Antura, Bond Close, Basingstoke, Hampshire,
England, RG24 8PZ, and can also be downloaded or viewed via the
Group's website.
These condensed financial statements have also been prepared
using accounting policies consistent with those disclosed in the
annual report and accounts for the year ended 3 April 2022, which
were prepared in accordance with UK-adopted international
accounting standards and the requirements of the Companies Act
2006.
Going Concern
As at 2 October 2022 the Group had net debt of $117.0m with
undrawn committed borrowing available under its revolving credit
facility of $82.3m (FY2022: $96.0m).
The Group's forecast and projections, taking reasonable account
of possible changes in trading performance and the cash outflow
associated with the recently announced acquisition of Review
Display Systems Group ("RDS") (see note 11) show that the Group
should continue to operate with sufficient headroom under the
revolving credit facility for the foreseeable future. The Directors
believe that the Group is well placed to manage its business within
the available facilities. Accordingly, they continue to adopt the
going concern basis in preparing these condensed financial
statements.
Impact of standards issued but not yet applied by the Group
There are no new standards, amendments to standards or
interpretations that are expected to have a material impact on the
Group's results.
2. Business and geographical segments
Business segments
The internal reporting provided to the Executive members of the
Company's Board and the Chief Operating Officer for the purpose of
resource allocation and assessment of Group performance is based
upon the regional performance of where the customer is based and
the products are delivered to. In addition to the operating
divisions, a Central division exists to capture all of the
corporate costs incurred in supporting the operations.
Unallocated central costs represent 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 following is an analysis of the Group's revenues and results
by reportable segment.
26 weeks to 2 October 26 weeks to 3 October
2022 2021
----------------------------------- -------------------------- ------------------------
Revenue Profit/(loss) Revenue Profit/(loss)
$'m $'m $'m $'m
----------------------------------- --------- --------------- -------- --------------
North America 167.5 16.1 121.1 9.9
Asia 92.6 5.1 70.7 5.2
Europe 97.4 14.2 100.9 15.2
Unallocated central costs
(excluding share-based payments) ( 3.3 ) ( 3.0 )
----------------------------------- --------- --------------- -------- --------------
Divisional results before
share-based payments and
adjusting items 357.5 32.1 292.7 27.3
Adjusting items ( 5.0 ) ( 3.5 )
Share-based payments ( 2.6 ) ( 2.6 )
----------------------------------- --------- --------------- -------- --------------
Operating profit 24.5 21.2
Share of net profit from
associates 0.7 0.1
Finance income 0.1 0.2
Finance costs (3.8) ( 2.1 )
----------------------------------- --------- --------------- -------- --------------
Profit before tax 21.5 19.4
Tax (4.9) (2.2)
----------------------------------- --------- --------------- -------- --------------
Profit after tax 16.6 17.2
----------------------------------- --------- --------------- -------- --------------
2. Business and geographical segments (continued)
52 weeks to 3 April
2022
-------------------------------------------- ---------- ------------------------
Revenue Profit/(loss)
$'m $'m
-------------------------------------------- ---- ---- -------- --------------
North America 272.1 21.4
Asia 142.7 11.6
Europe 199.8 32.1
Unallocated central costs (excluding share-based
payments) - (8.9)
-------------------------------------------------------- -------- --------------
Divisional results before
share-based payments and
Adjusting items 614.6 56.2
Adjusting items (10.8)
Share-based payments (4.4)
-------------------------------------------------------- -------- --------------
Operating profit 41.0
Share of profit result from
associates 0.4
Finance income 0.3
Finance costs (5.5)
-------------------------------------------------------- -------- --------------
Profit before tax 36.2
Tax (5.8)
-------------------------------------------------------- -------- --------------
Profit after tax 30.4
-------------------------------------------------------- -------- --------------
The accounting policies of the reportable segments are in
accordance with the Group's accounting policies.
The adjusting items charge within operating profit for the
period of $ 5.0m (H1 FY2022: $ 3.5m, FY2022 : $10.8m) was split
$2.4m (H1 FY2022: credit $0.4m, FY2022: $2.0m ) to North America,
$2.2m (H1 FY2022: $3.9m, FY2022: $7.2m ) to Europe, $0.4m (H1
FY2022: $nil, FY2022: $1.1m) to Asia and $nil to central (H1
FY2022: $nil, FY2022: $0.5m ).
Other segmental information
The Group's revenue from external customers and information
about its non-current assets (excluding deferred tax assets) by
geographical location are provided below:
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
2 October 3 October 3 April 2 October 3 October 3 April
2022 2021 2022 2022 2021 2022
$'m $'m $'m $'m $'m $'m
---------- ------------- ------------- ----------- ------------- ------------- -----------
Geographical segments
North
America 167.5 121.1 272.1 52.2 20.7 49.3
Asia 92.6 70.7 142.7 49.7 26.4 47.2
Europe 97.4 100.9 199.8 87.9 104.8 99.8
357.5 292.7 614.6 189.8 151.9 196.3
---------- ------------- ------------- ----------- ------------- ------------- -----------
Revenue is attributed to countries on the basis of the
geographical location of the customer and delivery of the
product.
3. Adjusting items and share-based payments
(Audited)
26 weeks to 26 weeks to 52 weeks to
2 October 3 October 3 April
2022 2021 2022
$'m $'m $'m
----------------------------------------------------------- -------------- ------------- -------------
Amortisation of acquired intangibles 4.3 5.0 10.3
Acquisition costs 0.7 1.0 2.5
Adjustments to fair value of contingent consideration - 0.1 (0.2)
Restructuring costs - - 0.8
PPP loan forgiveness - (2.6) (2.6)
Total adjusting items 5.0 3.5 10.8
Share-based payments charge 2.6 2.6 4.4
----------------------------------------------------------- -------------- ------------- -------------
Total adjusting items and share-based payments before tax 7.6 6.1 15.2
----------------------------------------------------------- -------------- ------------- -------------
Adjusting items tax credit (1.1) (1.6) (3.3)
----------------------------------------------------------- -------------- ------------- -------------
Adjusting items and share-based payments after tax 6.5 4.5 11.9
----------------------------------------------------------- -------------- ------------- -------------
Adjusting items include costs and income that are one-off in
nature and significant (such as significant restructuring costs,
impairment charges or acquisition related costs) and the non-cash
amortisation of intangible assets recognised on acquisition.
The adjusting items and share-based payments 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 underlying financial performance of the
Group.
Associated with the acquisitions, the Group has recognised
certain intangible assets related to customer relationships and
order backlogs. During H1 FY2023, the amortisation charge on these
intangible assets totalled $4.3m (FY2022 H1: $5.0m, FY2022:
$10.3m).
Acquisition-related costs of $0.7m (FY2022 H1: $1.0m, FY2022:
$2.5m) are mainly related to acquisitions that have or are being
pursued. These costs represented legal and professional fees
associated with the transactions. In the prior year, the Group's
acquisition related costs of $2.5m primarily related to the four
acquisitions which were completed.
There was no remeasurement of contingent consideration during
the period (FY2022 H1: $0.1m, FY2022: gain of $0.2m).
During the prior year a gain of $2.6m was recognised on the
forgiveness of PPP loans provided to parts of the Group's North
America's operations. These loans were provided at the start of the
pandemic and were previously recognised as a financial liability
within current borrowings in the FY2021 balance sheet. Upon receipt
of notification of forgiveness of the debts during the current
period, a gain on extinguishment of the debt was recognised as an
adjusting item.
4. Tax charge
The Group's income tax expense for the period was $4.9 million
(H1 FY2022: $2.2 million), representing an effective tax rate of
22.8% (H1 FY2022: 11.2%). The underlying tax charge of $6.0 million
(H1 FY2022: $3.8 million) represents an effective tax rate of 20.6%
(H1 FY2022: 14.7%). The tax expense and the effective tax rate are
affected by the recognition of deferred tax assets, as required by
International Financial Reporting Standards. The assets recognised
in the period are principally due to the recognition of historical
operating losses and unclaimed capital allowances.
The underlying current tax charge is calculated by reference to
the taxable profits in each individual entity and the local
statutory tax rates. An underlying deferred tax credit of $1.8
million (H1 FY2022: tax credit of $1.4 million) arose due to an
increase in the net deferred tax asset recognised. In a number of
jurisdictions, the taxable profits are calculated in local currency
which can give rise to taxable profits when the local currency
depreciates. During the first half of the year, this has resulted
in an additional $1.0 million of tax expense (H1 FY2022: $0.2
million).
The Group operates in a number of different tax jurisdictions
and is subject to periodic tax audits by local authorities in the
normal course of business on a range of tax matters in relation to
corporate tax. As at 2 October 2022, the Group has net current tax
liabilities of $9.5 million (FY2022: $8.2 million) which include
$6.7 million (FY2022: $7.2 million) of provisions for tax
uncertainties.
The carrying amount of deferred tax assets is reviewed at each
reporting date and recognised to the extent that it is probable
that there are sufficient taxable profits to allow all or part to
be recovered. Deferred tax assets have been recognised based on
future forecast taxable profits. As at the reporting date the Group
has recognised deferred tax assets of $20.3 million (FY2022: $20.6
million) and deferred tax liabilities of $6.1 million (FY2022: $7.0
million).
5. Earnings per ordinary share
The calculations of the earnings per share are based on the
following data:
(Audited)
26 weeks to 26 weeks 52 weeks
to to
Earnings 2 October 3 October 3 April
2022 2021 2022
$'m $'m $'m
-------------------------------------------- -------------------- -------------------- --------------------
Earnings attributable to the ordinary
equity holders of the company for the
purpose of basic earnings per share 16.3 17.2 30.4
Adjustments for:
Adjusting items 5.0 3.5 10.8
Share-based payments charge 2.6 2.6 4.4
Tax effect of above adjustments and
other adjusting item tax movements (1.1) (1.6) (3.3)
-------------------------------------------- -------------------- -------------------- --------------------
Underlying earnings 22.8 21.7 42.3
-------------------------------------------- -------------------- -------------------- --------------------
Weighted average number of ordinary No. shares No. shares No. shares
shares
-------------------------------------------- -------------------- -------------------- --------------------
Weighted average number of ordinary
shares for the purpose of basic earnings
per share 158,522,434 156,562,086 157,245,284
Effect of dilutive potential ordinary
shares - share options 8,243,213 9,649,535 10,309,105
-------------------------------------------- -------------------- -------------------- --------------------
Weighted average number of ordinary
shares for the purpose of diluted earnings
per share 166,765,647 166,211,621 167,554,389
-------------------------------------------- -------------------- -------------------- --------------------
Basic earnings per share Cents Cents Cents
------------------------------------------ ------ ------ ------
Basic earnings per share from continuing
operations 10.3 11.0 19.3
Adjustments for:
Adjusting items 3.2 2.2 6.9
Share-based payments charge 1.6 1.6 2.8
Tax effect of above adjustments and
other adjusting items tax movements (0.7) (1.0) (2.1)
------------------------------------------ ------ ------ ------
Underlying basic earnings per share 14.4 13. 8 26.9
------------------------------------------ ------ ------ ------
Diluted earnings per share Cents Cents Cents
--------------------------------------- ------ ------ ------
Diluted earnings per share 9.8 10.3 18.1
Adjustments for:
Adjusting items 3.0 2.1 6.5
Share-based payments charge 1.6 1.5 2.6
Tax effect of above adjustments and
other adjusting items tax movements (0.7) (0.9) (2.0)
--------------------------------------- ------ ------ ------
Underlying diluted earnings per share 13.7 13.0 25.2
--------------------------------------- ------ ------ ------
The underlying earnings per share has been calculated on the
basis of continuing activities before adjusting 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. Share capital
(Audited)
26 weeks 26 weeks to 52 weeks
to to
2 October 3 October 3 April
2022 2021
$'m $'m 2022
$'m
------------------------------------ ------------- ------------- ----------
Issued and fully paid:
159,096,324 (FY2022: 158,718,709)
Ordinary shares of 25p each 62.7 62.5 62.5
------------------------------------ ------------- ------------- ----------
Shareholders were able to elect to receive ordinary shares in
place of the final dividend for the year to 3 April 2022. This
resulted in the issue of 377,615 (H1 FY2022: nil, FY2022: nil) new
fully paid ordinary shares.
7. Own shares
(Audited)
26 weeks 26 weeks to 52 weeks
to to
2 October 3 October 3 April
2022
$'m 2021 2022
$'m $'m
--------------------------------------- ------------- ------------- ----------
At the start of the period 0.2 3.3 3.3
--------------------------------------- ------------- ------------- ----------
Disposed of in the period on exercise
of options ( 1.7 ) ( 3.4 ) (7.5 )
Purchase of shares 3.7 1.9 4.4
--------------------------------------- ------------- ------------- ----------
At end of the period 2.2 1.8 0.2
--------------------------------------- ------------- ------------- ----------
The own shares reserve represents the cost of shares in the
Company held by the Volex Group plc Employee Share Trust ('EBT') to
satisfy future share option exercises under the Group's share
option schemes.
During H1 FY2023 the EBT purchased 1,006,166 shares at a cost of
$3.7m. During the period 502,011 shares were utilised on the
exercise of share awards. The number of ordinary shares held by the
Volex Group plc Employee Share Trust at 2 October 2022 was 557,360
(H1 FY2022: 1,000,838, FY2022: 53,205).
8. Analysis of net debt
Other
3 April New Cash Exchange movement $'m non-cash changes 2 October
2022 leases flow $'m 2022
$'m $'m $'m $'m
------------------------- --------- --------- ------- ----------------------- ------------------ ------------
Cash & cash equivalents 25.9 - (2.2) (0.7) - 23.0
Bank loans (101.8) - (16.7) 1.1 - (117.4)
Factoring (0.7) - 0.7 - - -
Debt issue costs 2.2 - - (0.3) (0.4) 1.5
Lease liability (20.9) ( 6.7 ) 2.6 1.4 (0.5) (24.1)
------------------------- --------- --------- ------- ----------------------- ------------------ ------------
Net debt (95.3) ( 6.7 ) (15.6) 1.5 (0.9) (117.0)
------------------------- --------- --------- ------- ----------------------- ------------------ ------------
2 October 2022 3 October 2021 3 April
$'m $'m 2022
$'m
--------------------------- ---------------- --------------- --------
Cash and bank balances 23.0 21.7 29.1
Overdrafts - - (3.2)
Cash and cash equivalents 23.0 21.7 25.9
--------------------------- ---------------- --------------- --------
The carrying amount of the Group's financial assets and
liabilities is considered to be equivalent to their fair value.
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.
The Group has a 27.4% interest in Kepler SignalTek Limited,
which is accounted for as an associate. During the period the Group
accrued financial income of $0.1m on the preference shares (H1
FY2021: $0.1m, FY2022: $0.2m). The balance due from the associate
as at the period end date was $1.8m (H1 FY2022: $2.2m, FY2022:
$2.0m).
The Group also has a 43% interest in Volex-Jem Co. Ltd. During
the current and prior period, no transactions have occurred between
the Group and Volex-Jem Co. Ltd or Volex - Jem Cable Precision
(Dongguan) Co. Limited, an entity controlled by Volex-Jem Co. Ltd.
The balance due to the associates as at the period end was $0.1m
(H1 FY2022: $0.1m, FY2022: $0.1m).
A number of share transactions with Directors have occurred
during the period in line with share awards outstanding at the
prior year end and as disclosed in the annual accounts for FY2022
and in line with the Director shareholding notices disclosed on the
Volex website ( www.volex.com ).
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 advisers,
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 holds a provision to cover
potential costs of recall or warranty claims for products which are
in the field but where a specific issue has not been reported.
11. Events after the balance sheet date
On 28 October 2022 the Group completed the acquisition of the
entire issued share capital of Review Display Systems Group for an
initial consideration of $6.0m, on a debt-free basis. Contingent
consideration of $3.0m is linked to EBITDA performance over a 2
year period.
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END
IR EANFPELSAFFA
(END) Dow Jones Newswires
November 09, 2022 02:00 ET (07:00 GMT)
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