Half-year results

RNS Number : 9048P

Volex PLC

31 October 2012

 



31 October 2012

VOLEX plc

Half-year results for the 26 weeks ended 30 September 2012

Volex plc ('Volex' or the 'Group'), the global provider of customised electrical and optical interconnect solutions, today announces its unaudited half-year results for the 26 weeks ended 30 September 2012 ('H1 FY2013').

 

First half financial summary:

·     Revenue in H1 FY2013 of $249.3m (H1 FY2012: $270.7m);

·     Gross margin of 17.8% for H1 FY2013 (H1 FY2012: 19.2%);

·     Normalised^* operating profit of $5.3m (H1 FY2012: $14.9m);

·     Normalised^* diluted earnings per share for H1 FY2013 of 5.8 cents (H1 FY2012: 17.6 cents). Basic earnings per share of 3.1 cents (H1 FY2012: 15.0 cents);

·     Capex of $14.2m (H1 FY2012: $4.8m), to drive future production efficiencies and revenue opportunities;

·     Return on capital employed ('ROCE') of 17% in H1 FY2013 (H1 FY2012: 46%);

·     Free cash outflow of $6.3m in the first half (H1 FY2012: $1.3m inflow) primarily as a result of the increased capex;

·     Net debt of $4.6m at end of H1 FY2013 (H1 FY2012 : $11.9m); and

·     Interim dividend of 2.0 cents per share declared (H1 FY2012: 1.5 cents).

*          Before exceptional restructuring costs and share based payments charge

 

First half operating highlights:

·     Restructuring programme initiated targeting annualised savings of circa $10m;

·     Increased allocations generating 60% increase in revenue from the Group's largest customer;

·     Continued growth in non-Consumer gross margin;

·     Greater sales pipeline than at any time in the past 4 years; and

·     Highly experienced Chief Operating Officer appointed to drive production efficiency. 

The Chairman of Volex, Mike McTighe, commented:

The Board recognises that trading in the first half of FY2013 has been challenging, which coupled with our investment in production capacity and capabilities, has led to the disappointing H1 FY2013 financial results.  Whilst we believe that the significant revenue growth seen with our largest customer supports our strategy, the Board has initiated a number of revenue and productivity initiatives as well as a group wide restructuring programme aimed at returning Group profitability to its long-term forecast levels. 

As a result, the Board expects revenue growth across all sectors in the second of half of FY2013 and is confident that profits for the full year FY2013 will be in line with new market expectations, following the 18 September 2012 trading update.  Furthermore, the Board is optimistic on the outlook for FY2014.

The Company will be presenting its half year results at 09.00 am on Wednesday 31 October 2012.  A live audio webcast facility with the option to ask questions will be available at the following link:

http://www.media-server.com/m/p/389ykipn 

END

For further information please contact:

Volex Group plc
Ray Walsh, Group Chief Executive	[phone]
Andrew Cherry, Group Finance Director	[phone]
Buchanan
Charles Ryland / Louise Hadcocks	[phone]

Forward looking statements

Certain statements in this announcement are forward-looking statements which are based on Volex's expectations, intentions and projections regarding its future operating performance and objectives, anticipated events or trends and other matters that are not historical facts. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal' or 'estimates'.  By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, by way of example only and not limited to, general economic conditions, currency fluctuations, competitive factors, the loss or failure of one or more major customers, changes in raw materials or labour costs, and issues associated with implementing our restructuring programmes among other risks. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, Volex undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

HALF YEAR RESULTS

26 Weeks ended 30 September 2012

As previously announced the first half of FY2013 has been challenging, with the Group's significant investment in its production capacity and capabilities failing to deliver the forecast financial returns as quickly as had been anticipated. Adverse market conditions have hampered growth across all sectors while customer specific growth programmes have been slower to deliver than projected. In response, management has initiated a programme of cost reductions across the Group in order to underpin the FY2014 performance targets.

	Revenue			Norm. gross profit			Norm. gross margin
	H1 13 Y112011	H1 12		H1 13	H1 12		H1 13	H1 12 122010	H2 12
	$'000	$'000	% Var	$'000	$'000	% Var	%	%	%
Consumer	164,6630	169,8906	(3)	24,439	29,261	(16)	14.8	17.2	17.7
Telecoms / Data	45,192	56,246	(20)	10,412	11,528	(10)	23.0	20.5	22.0
Healthcare	22,024	24,193	(9)	5,939	6,143	(3)	27.0	25.4	29.3
Industrial	17,372	20,325	(15)	3,553	4,926	(34)	20.5	24.2	20.5
Total	249,251	270,6544	(8)	44,343	51,858	(15)	17.8	19.2	19.9

Group revenue in H1 FY2013 decreased by 8% to $249.3m, from $270.7m in H1 FY2012.  Whilst revenue in the Consumer sector as a whole decreased year-on-year, sales to the Group's largest customer increased by 60%, with the Group enjoying increased allocations as a result of its competitive advantage in production capabilities, particularly in the halogen free cable and duckhead markets. Growth in this account, together with new business wins with several customers, was more than offset by a decline across the majority of other accounts, as a result of weakened demand due to macro-economic pressures.

Telecoms/datacoms revenue in the first half of FY2013 was 20% down on last year, primarily due to reduced investment by telecoms operators as a result of general economic uncertainty. Encouragingly, however, Q2 FY2013 revenue was 9% ahead of Q1 FY2013 with revenue in a key telecoms account increasing towards more historic levels, following three quarters of slower activity. Furthermore Q2 FY2013 saw a significant improvement in Telecoms trading performance in our Indian business, which had been particularly affected by curtailed network operator spend.

Revenue in the Healthcare sector was down 9% on last year as a result of weaker demand from our key account due to a contraction of their own business and customer design release delays on new products in the imaging systems space. These new imaging systems products are expected to drive revenue growth in the second half, as legacy products start to be phased out. Significantly, Q2 FY2013 revenue was 14% ahead of Q1 FY2013 revenue driven by a new cabling solution programme that came on stream during the second quarter.

Industrial revenue was down 15% in H1 FY2013 compared to last year. Whilst there have been notable smaller business wins in the first half, the weaker demand previously reported in the second half of FY2012 from our principal customer in this sector has continued. Reduced orders after a period of de-stocking last year and continued delays in the anticipated regulatory changes that will drive market adoption of new telematics products have combined to arrest revenue growth in H1. Revenue growth is expected to return in the second half as the effects of these temporary drags on growth decrease.

Group normalised gross margin in Q2 FY2013 was 18.0%, an improvement over the 17.6% recorded in the first quarter, and resulted in an H1 FY2013 normalised gross margin of 17.8%, a reduction of 1.4 percentage points over last year. This decrease is principally due to the previously communicated advance investment in production capacity and capability which commenced in Q1 FY2013 and continued to a lesser extent in Q2, in anticipation of significant revenue growth in our largest customer in the Consumer sector. This adverse leverage effect, due to lower than forecast revenue, held gross margin back, offsetting the positive mix effects of increased revenue from higher margin products, particularly in the Healthcare and Telecoms/Datacoms sectors.

Normalised operating profit (operating profit before non-recurring items and share based payment charge) in H1 FY2013 decreased to $5.3m (H1 FY2013: $14.9m). This disappointing operating profit performance in the first half is due to a combination of three factors; i) reduced revenue across all sectors, ii) reduced gross margin in our Consumer sector as a result of the advance production ramp-up costs and production inefficiencies relating to new product launches with our largest customer mentioned above and iii) increased operating expenses caused by investments in our sales, engineering and operations functions ahead of significant anticipated revenue growth. Management has already initiated programmes in each of these three areas to bring revenue, margins and profitability back to a level commensurate with its objectives for the business. In addition the Board has re-iterated its confidence in the longer term growth prospects for the Group and declared an increased interim dividend of 2.0 cents per share (H1 FY2012: 1.5 cents).

Focus for H2 FY2013

Revenue growth

The first half of FY2013 has seen significant revenue growth of 60% with our largest customer but has also produced an aggregate contraction of 21% in revenue from the remainder of the Group's business. Although challenging macro-economic conditions are expected to continue, a key strategic focus in H2 FY2013 is to drive revenue growth across all sectors whilst also growing gross margin. Encouragingly we are seeing a greater sales pipeline than at any time during the last four years with several new customers set to contribute significant revenues across all sectors over the next 12-36 months.

In the Consumer sector we currently expect revenue from our largest customer to be broadly flat in H2 compared to H1 and accordingly we have focussed our efforts on diversifying our customer base, including securing substantial new Duckhead business from alternative customers.

In the Telecoms/Datacoms, Healthcare and Industrial sectors, delayed product introductions which have contributed to revenue in H1 FY2013 being lower than last year are expected to benefit revenue in the second half. Imaging systems products in the European Healthcare market and new telematics products in Industrial are set to drive revenue growth in H2 FY2013. Furthermore, in Telecoms/Datacoms we expect to be able to announce a significant initiative in the high speed optical arena during H2.

As a result we expect that all four sectors will see half-over-half and year-on-year growth in H2 FY2013.

Gross margin improvement plan

Production improvements and operational efficiencies have also been identified as a critical focus for H2 FY2013, in order to restore overall Consumer margins to their long run average of 18% by the end of FY2013. Under the guidance of our new Chief Operating Officer significant initiatives have already commenced, including:

·     the introduction of a New Product Introduction process;

·     the redesign of our Shenzhen facility including the piloting of robotic automation;

·     establishing focussed quality and engineering teams; and

·     reviewing targeted core processes with a view to bringing certain of these in house (eg. printed circuit board assembly "PCBa" and precision tooling).

In addition to driving immediate improvements in production yields and labour productivity which will positively impact gross margin in H2 FY2013, these new programmes will provide the processes and foundation for efficient manufacturing of new products, avoiding the significant start-up costs that have hindered recent financial performance.

Allied to these new initiatives, we have a number of on-going programmes which will be important in restoring Consumer margins.  These include:

·     the continued rolling out of new precision moulding and tooling equipment;

·     the continued application of core lean manufacturing techniques; and

·     completing the upgrade of our production capabilities at our Batam facility

The FY2013 Group-wide restructuring initiative, covered in more detail below, will also be effective in improving gross margin in H2 FY2013. While there will be some direct labour savings, the more significant gross margin benefits will accrue from reductions in indirect labour in the factories, which is expected to decrease by approximately 15%.    

Whilst these new programmes will address Consumer margins, the Group is encouraged that non-Consumer margins have continued on their upward trend of the last three years. Aggregate gross margin in the Interconnect sectors in H1 FY2013 was 23.5%, an increase of 1.1 percentage pts over H1 FY2012, which was itself higher than that recorded in H1 FY2011. Our stated strategy of increasing Volex content through greater collaboration and engagement with customers at an early stage of their product development cycles has continued to be successful and will remain a focus in the second half of FY2013 and beyond.

FY2013 Group-wide restructuring initiative

As reported in the trading update of 18 September 2012, management has initiated a restructuring programme across all functions and regions that aligns the Group's manufacturing and support facilities more closely with its revised revenue and operating profit expectations.

Following a comprehensive review of its cost base, management has identified potential savings in both indirect labour/fixed production overheads and in operating expenditures ('Opex'). We have identified approximately $10m of combined savings across these two cost categories with Opex in particular likely to be around $70m in FY2014, $13m below the analyst consensus prior to the recent Trading Update and $5m below the consensus immediately prior to this announcement.

This programme will give rise to non-recurring restructuring charges of approximately $5m for the full year FY2013, $0.7m of which has already been incurred in Q2 FY2013.  The Opex reduction programme primarily involves the downsizing of supporting back-office functions and will reduce headcount by approximately 150, driving a c.15% reduction in non-factory staff costs. Importantly vital business and customer facing functions will be relatively unaffected and the savings will be achieved by delayering, the relocation of some functions to lower cost locations and the elimination of less value-add activities.

In addition we are also investigating further structural cost reductions beyond those already identified.  These second phase opex savings will reduce FY2014 opex further below $70m but may also increase H2 FY2013 restructuring charges. 

Consumer sector

Our Consumer sector continues as a world leader in power cords for a large range of consumer and computing products.  Our customers in the Consumer sector are well-known brand-name manufacturers of consumer electronics (including TVs and games consoles), personal computing devices (PCs, laptops, tablets, printers) and household appliances (refrigerators, freezers, rice cookers, floor care equipment, DIY products). 

Traditionally our business has been the supply of AC power cords taking AC high voltage from the wall socket to the customer's AC:DC low voltage transformer.  This power cord would in the most simplistic of terms have comprised of a cable and an engineered plug at either end.  This is referred to as "in-line" power supply as opposed to "wall-plug" in which the appliance's power adaptor plugs directly into the wall socket, thereby dispensing with the need for a separate power cord.  The in-line market is forecast to grow at 10%¹ per annum out to 2016 and therefore continues to provide substantial opportunity for growth.  Alongside our in-line offerings, however, we have also developed a number of new wall-plug products and this gives us access to a market that is forecast to grow at 14%¹ per annum out to 2016.

In recent years, due to both our customers' desire for distinctive design and also greater adaptability we have developed our duckhead connector offering.  The duckhead connects to a customer's transformer and then may either plug directly into a wall socket or be attached to a cable with a traditional wall plug.  We have seen significant demand for the duckhead connector and expect this to continue into the foreseeable future.

A recent trend that we have identified in the lower power range market is the move to the USB plug (which includes an in-built transformer) with a number of mobile phone manufacturers favouring this option.  Due to limitations on the level of power that can be transformed through the USB plug, the applicability of this offering is currently restricted to lower power devices such as smartphones. However, we believe Volex is well positioned to take advantage of this emerging trend.

The Consumer revenue for H1 FY2013 of $164.7m was 3% down on H1 FY2012, however, encouragingly 3% up on H2 FY2012.  Business with our largest customer continued to show significant growth, up 60% on H1 FY2012 and 20% on H2 FY2012, on the back of demand for our duckhead connector offering and our halogen free cables, the majority of which are new products introduced during the last 18 months.  Business away from our largest customer has proved to be challenging.  The impact of the uncertain macro-economic environment on consumer electronics has been well documented and we have been impacted by the resultant reduced spend.  In the second quarter of FY2013 we achieved several new significant project wins, primarily with existing customers, which have enabled us to arrest the quarterly revenue decline observed in the past three quarters.

Consumer gross profit for H1 FY2013 of $24.4m (H1 FY2012: $29.3m) represented a 14.8% gross margin (H1 FY2012: 17.2%).  As previously reported, in Q1 FY2013 we incurred approximately $2.1m of production capacity enhancement costs including the recruitment and training of more than 1,000 new production employees together with additional tooling and site expansion costs.  This level of spend was predicated on certain forecast revenue levels from our largest customer.  Whilst the 60% increase in sales noted above was encouraging and demonstrated the demand for our power offerings, it fell below that forecast.  As a consequence of this, the Consumer gross margin for the half year has fallen.  In response, management has initiated a programme of substantial cost reductions in order to realign the cost base to the revised forecasts and to return the Consumer gross margin to its long run average of 18% by the end of FY2013.  

In addition to the production capacity enhancement costs, temporary production inefficiencies arising on our new product range (including scrap rates above the historic average and labour productivity rates below the historic average) have held back the sector gross margin in the period.  A number of new initiatives have been enacted in the period, alongside the on-going lean manufacturing programme, designed to return the sector to its expected efficiency levels. 

1 Source: External AC-DC Power Supplies: Worldwide Forecasts, Tenth Edition, published April 2011 by Darnell Group Inc

Telecoms / Datacoms sector

Volex delivers customised interconnect solutions for global equipment manufacturers in the telecommunications and data communications industries.  Our interconnect solutions are used in mobile telecoms networks, both at the cell-site and for the core network, fixed-line telecoms equipment and high-performance computing (HPC) and data-centre environments.

Telecoms/datacoms revenue of $45.2m in H1 FY2013 was 20% down on H1 FY2012, primarily due to reduced investment by telecoms operators as a result of the on-going economic uncertainty. Encouragingly however, Q2 FY2013 revenue was 9% ahead of Q1 FY2013 with revenue in a key telecoms account increasing towards more historic levels, following three quarters of slower activity. Furthermore Q2 FY2013 saw a significant improvement in Telecoms trading performance in our Indian business, which had been particularly affected by curtailed network operator spend.  Along with new account wins in H1 FY2013 which are beginning to yield significant revenues, we are optimistic that the modest growth in this sector can continue for the remainder of the year.

Telecoms/datacoms gross profit of $10.4m in H1 FY2013 (H1 FY2012: $11.5m) represented a 23% gross margin, up 3% on H1 FY2012.  This improved gross margin is due to several factors including better pricing on new products brought to market particularly in our Asia and India regions and tight cost control especially with respect to freight.

Healthcare sector

Volex provides interconnect cabling solutions to the healthcare sector, traditionally for imaging systems such as MRI and ultrasound machines.  Whilst imaging systems contribute approximately 70% to Healthcare revenue we have seen recent growth in other fields, including clinical diagnostics, surgical systems and patient monitoring equipment.  The Healthcare customer engagement model is typified by long term, deep collaboration and early design involvement which historically have yielded the highest gross margins observed in any of our sectors. 

Healthcare revenue of $22.0m in H1 FY2013 was 9% down on H1 FY2012 due to reduced demand in the nuclear medicine imaging field and delayed orders from the sector's largest customer as they postponed their roll out of new imaging systems.  Encouragingly, however, the Q2 FY2013 revenue was 14% ahead of Q1 FY2013 with a new MRI cabling solution programme generating significant sales in Europe and North America.

Gross profit of $5.9m in H1 FY2013 (H1 FY2012: $6.1m) represented a 27% gross margin, up 2% on H1 FY2012.  This continues the high levels of margins achieved for the sector during FY2012 and supports the strategy of extensive customer engagement and increasing Volex design content in our products.    

Industrial sector

The Industrial sector for Volex comprises a diverse set of markets including test and measurement equipment, manufacturing automation, refrigeration, trucking telematics, agricultural and renewable energy. 

Industrial revenue of $17.4m in H1 FY2013 was 15% down on H1 FY2012 due in part to reduced orders from the sector's largest customer and also on-going delays in the approval of regulatory changes that will drive market adoption of new telematics products.  Once these changes are ratified, we believe we are well placed to take advantage of the new market requirements. 

Gross profit of $3.5m in H1 FY2013 (H1 FY2012: $4.9m) represented a 20% gross margin, down 4% on H1 FY2012.  This reduction was primarily due to the leverage effect with fixed production costs shared over a lower revenue base.  In addition the transfer of business from our North America region to Asia did incur some write downs.

Financial Review

Revenue and normalised gross profit

Revenue in the 26 weeks ending 30 September 2012 ('H1 FY2013') was $249.3m, down 8% on the same period in the prior year ('H1 FY2012'). 

Normalised gross profit decreased 15% from $51.9m in H1 FY2012 to $44.3m in H1 FY2013, in part due to the reduced revenue but also due to the ramp up costs incurred within the Consumer sector.  This resulted in a normalised gross margin of 17.8% in H1 FY2013 versus a H1 FY2012 gross margin of 19.2%.

Normalised Operating Profit

Normalised operating profit in H1 FY2013 was $5.3m, down $9.5m on the same period in the prior year.

The normalised operating profit was arrived at after deducting normalised operating expenditure of $39.0m in H1 FY2013, up $2.0m on H1 FY2012.  The majority of this increase was targeted at the support functions at the manufacturing facilities, including sales, engineering, purchasing and logistics.  This level of spend was predicated on high forecast sales from the Consumer sector's largest customer, however, whilst significant sales growth was achieved it was insufficient to support this on-going spend.  As a result, a cost reduction programme has been initiated seeking to realign the future operating expenditure to the revised revenue and operating profit expectations.       

Non-recurring items and share-based payments

During H1 FY2013, $0.7m of redundancy costs were incurred as part of the restructuring programme.  This programme is expected to continue on into the second half of the year with full year restructuring charges forecast to be approximately $5m.

The share based payment charge of $1.2m in H1 FY2013 has decreased by $0.9m from $2.1m in H1 FY2012.

Net finance costs

Total net finance costs in H1 FY2013 decreased by 52% to $1.2m from $2.5m in H1 FY2012.  The principal reason for this was the write-off in H1 FY2012 of $0.8m of capitalised debt issue costs associated with the old financing facility which was replaced in May 2011. 

Tax

The Group incurred a tax charge of $0.5m (H1 FY2012: $1.9m), representing an effective tax rate (ETR) of 21% (H1 FY2012: 18%), consistent with our expectation of the ETR for the full FY2013 financial year.

Earnings per share

Basic earnings per share for H1 FY2013 was 3.1 cents compared with 15.0 cents in H1 FY2012.  Normalised fully diluted earnings per share (adjusted for non-recurring items and share based payments charge) in H1 FY2013 was 5.8 cents versus 17.6 cents in H1 FY2012.

Dividends

At the Volex plc Annual General Meeting held on 26 July 2012, the shareholders approved the proposed final dividend for FY2012 of 3 cents per share.  The dividend was paid out on the 56,621,763 shares on the share register as at 27 July 2012, resulting in a dividend cash outflow of $1.7m. 

The Board has recommended an interim dividend of 2.0 cents per share to be paid on 15 February 2013 to shareholders on the register as at 11 January 2013 (the 'record date').  Shareholders will have the option to receive this dividend in either USD or GBP with the Company's Registrars providing a currency election facility.  Shareholders who prefer to receive their dividend in USD must make their election to receive their dividend in USD by 17:00 on 25 January 2013.  If no election is made, the dividend will be paid in GBP, the default currency for the dividend, with the GBP amount payable calculated by reference to the GBP:USD exchange rate prevailing at the record date.  If you hold your ordinary shares in certificated form, you may only elect to receive your dividend in US dollars by signing and returning a currency election form, available from Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.  If you hold your ordinary shares in uncertificated form, to elect to receive your dividend in US dollars you must input a valid Dividend Election Input Message, in accordance with the CREST procedures described in the CREST manual.  Partial elections will not be permitted. 

Return on Capital Employed ('ROCE')

ROCE for H1 FY2013 was 17% versus 46% for H1 FY2012.  The reduction in ROCE is primarily due to the reduced normalised operating profit which fell from $14.9m in H1 FY2012 to $5.3m in H1 FY2013.  The capital base on which the ratio is calculated has remained relatively flat (H1 FY2013 of $62.8m versus $64.6m in H1 FY2012) with the higher current asset balances as at 2 October 2011 replaced with higher fixed asset balances as at 30 September 2012.

Cash flow, free cash flow and net debt

Operating cash flow before movements in working capital in H1 FY2013 was $6.6m (H1 FY2012: $15.9m) with the $9.3m reduction attributed primarily to reduced operating profit.

The impact of working capital movements on the cash flow in H1 FY2013 was an outflow of $1.2m (H1 FY2012: outflow of $6.4m).  This is primarily due to a $10.3m build-up of stock to service customers in the second half of the year and a $4.0m increase in debtors arising from the higher level of sales in the second quarter of FY2013 versus the fourth quarter of FY2012.  Off-setting these outflows was a $13.0m inflow (H1 FY2012: $7.6m) through management of supplier payments.  

After aggregate outflows for tax and interest of $2.8m (H1 FY2012: $3.4m), net cash generated from operating activities was $2.6m (H1 FY2012: $6.1m).

Capital expenditure has increased to $9.0m in H1 FY2013 from $4.8m in H1 FY2012. This expenditure has largely been targeted at enhancing our manufacturing facilities in Asia with significant site expansion at two of our factories with accompanying investment in new tooling and machinery.  In addition to the $9.0m of cash spend, a further $5.2m of capital assets have been acquired for which payment will be made in H2 FY2013.

The above has resulted in a free cash outflow for H1 FY2013 of $6.3m (H1 FY2012: inflow of $1.3m).

In the prior year, the Group, through its employee share trust, acquired 769,800 shares in Volex plc at a cost of $3.3m.  These shares are held for the benefit of Volex employees and directors to facilitate participation in the Company's share option schemes.  130,000 such options were exercised in H1 FY2012 yielding a cash inflow of $0.1m.  In H1 FY2013, 55,000 further options have been exercised.

The full year dividend for FY2012 of 3 cents per share was paid out in the period, generating a cash outflow of $1.7m (H1 FY2012: $1.9m).

In the prior year, Volex entered into its current financing facility.  As a result of this $26.4m was paid out by the Group to close out the pre-existing facility and $39.5m was drawn down under the current arrangement.  In securing the new facility, the Company incurred $1.4m in arrangement and professional fees.  In H1 FY2013, $14.0m of the loan facility has been repaid.

In the prior period, 80,000 cumulative preference shares of £1 each were cancelled at a cost of $0.1m.  The interest that had accrued on these shares was also paid and has been included in the interest paid cash outflow category.

As a result of the above cash flows, net debt at 30 September 2012 amounted to $4.6m (H1 FY2012: $11.9m).

Financial instruments and cash flow hedge accounting

In accordance with the Group's policy to minimise exposure to copper price volatility observed in cost of sales, the Group has continued to utilise contracts with financial institutions which are linked to the average copper price as published by the London Metal Exchange ('LME'). 

These contracts are accounted for as cash flow hedges of forecast future purchases of copper under IAS 39.  As at 30 September 2012, an asset of $0.3m has been recognised (1 April 2012: $1.5m) with a corresponding credit recognised in reserves.  This credit will be retained in reserves until such time as the forecast copper purchase takes place. 

A charge of $0.2m has been recognised in cost of sales in H1 FY2013 (H1 FY2012: $nil) in respect of closed out contracts.  This charge has arisen since the average LME copper price in the period has been below the contracted price.

Defined benefit pension schemes

The Group's net pension deficit under IAS 19 decreased by $0.3m from $3.6m at 1 April 2012 to $3.3m at 30 September 2012.  This decrease is in line with the current funding plan.

Current Trading and Prospects

The Board recognises that the first half of FY2013 has been tough and that lower than anticipated growth with the largest customer in the Consumer sector and a challenging economic environment have combined to produce a disappointing set of H1 results.  Although this uncertain economic environment is expected to continue, the Board is confident that the revenue and gross margin improvement initiatives and cost saving plans already initiated by management will return consumer profitability to expected levels.  In addition, the Board is encouraged by the healthy sales pipeline in all sectors. 

As a result, the Board expects growth across all sectors in the second of half of FY2013 and is confident that profits for the full year FY2013 will be in line with new market expectations, following the 18 September 2012 trading update.  Furthermore, the Board is optimistic on the outlook for FY2014.

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 FY2012 Annual Report and Accounts on pages 41 to 44, a copy of which is available on the website at www.volex.com.

The principal risks and uncertainties are summarised as:

·     Non-compliance with legislation and regulation;

·     Loss of or reduced trade with key customers;

·     Failure to maintain an effective system of internal control;

·     Exchange rate fluctuations;

·     Increased competition;

·     Failure to attract, develop and retain key personnel;

·     Rising commodity prices;

·     Adverse trading conditions; and

·     Production challenges and risks.

Ray Walsh                                                                          Andrew Cherry

Group Chief Executive                                                 Group Finance Director

31 October 2012                                                              31 October 2012

Unaudited consolidated income statement                                        

For the 26 weeks ended 30 September 2012 (26 weeks ended 2 October 2011)

		26 weeks ended 30 September 2012			26 weeks ended 2 October 2011
		Before non-recurring items and share based payments	Non-recurring items and share based payments	Total	Before non-recurring items and share based payments	Non- recurring items and share based payments	Total
	Notes	$'000	$'000	$'000	$'000	$'000	$'000
Revenue	2	249,251	-	249,251	270,654	-	270,654
Cost of sales		(204,908)	(63)	(204,971)	(218,796)	-	(218,796)
Gross profit		44,343	(63)	44,280	51,858	-	51,858
Operating expenses		(39,011)	(1,859)	(40,870)	(36,973)	(2,059)	(39,032)
Operating profit/(loss)	2	5,332	(1,922)	3,410	14,885	(2,059)	12,826
Finance income		85	-	85	27	-	27
Finance costs		(1,256)	-	(1,256)	(2,488)	-	(2,488)
Profit/(loss) on ordinary activities before taxation		4,161	(1,922)	2,239	12,424	(2,059)	10,365
Taxation	5	(796)	322	(474)	(2,031)	160	(1,871)
Profit/(loss) for the period attributable to the owners of the parent		3,365	(1,600)	1,765	10,393	(1,899)	8,494
Earnings per share (cents)
Basic	6	5.9		3.1	18.3		15.0
Diluted	6	5.8		3.0	17.6		14.4

					52 weeks ended 1 April 2012
					Before non-recurring items and share based payments	Non- recurring items and share based payments	Total
	Notes				$'000	$'000	$'000
Revenue	2				517,769	-	517,769
Cost of sales					(415,250)	(4,990)	(420,240)
Gross profit					102,519	(4,990)	97,529
Operating expenses					(70,515)	(3,976)	(74,491)
Operating profit/(loss)	2				32,004	(8,966)	23,038
Finance income					73	-	73
Finance costs					(3,900)	-	(3,900)
Profit/(loss) on ordinary activities before taxation					28,177	(8,966)	19,211
Taxation	5				(3,445)	1,416	(2,029)
Profit/(loss) for the period attributable to the owners of the parent					24,732	(7,550)	17,182
Earnings per share (cents)
Basic	6				43.7		30.4
Diluted	6				42.4		29.4

Unaudited consolidated statement of comprehensive income  

For the 26 weeks ended 30 September 2012 (26 weeks ended 2 October 2011)

	26 weeks to  30 September 2012	26 weeks to  2 October 2011	(Audited) 52 weeks to  1 April 2012
	$'000	$'000	$'000
Profit for the period	1,765	8,494	17,182
Other comprehensive income:
Gain/(loss) on hedge of net investment taken to equity	(70)	(1,061)	(479)
Cash flow hedges:
Gain/(loss) arising during the period	(1,204)	(2,131)	1,295
Exchange gain/(loss) on translation of foreign operations	(553)	(35)	(886)
Actuarial gain/(loss) on defined benefit pension schemes	77	(2,868)	(1,828)
Other comprehensive income/(loss)	(1,750)	(6,095)	(1,898)
Tax relating to components of other comprehensive income/(loss)	-	-	-
Other comprehensive income/(loss) for the period	(1,750)	(6,095)	(1,898)
Total comprehensive income/(loss) for the period	15	2,399	15,284

Unaudited consolidated statement of financial position                              

As at 30 September 2012 (2 October 2011)

	Note	30 September  2012 $'000	2 October  2011 $'000	(Audited) 1 April 2012 $'000
Non-current assets
Goodwill		3,116	3,006	3,085
Other intangible assets		2,398	3,228	2,897
Property, plant and equipment		31,849	13,763	20,022
Other receivables		546	311	543
Deferred tax asset		5,515	2,550	5,098
		43,424	22,858	31,645
Current assets
Inventories		59,714	52,852	49,790
Trade receivables		91,436	115,433	90,612
Other receivables		17,207	11,782	15,092
Current tax assets		413	680	703
Derivative financial instruments		254	-	1,453
Cash and bank balances	8	21,142	25,777	43,578
		190,166	206,524	201,228
Total assets		233,590	229,382	232,873
Current liabilities
Borrowings	8	2,646	-	2,398
Obligations under finance leases	8	52	179	117
Trade payables		101,358	91,584	88,551
Other payables		39,023	41,208	34,574
Current tax liabilities		4,744	4,083	5,938
Retirement benefit obligation		602	573	596
Provisions		1,059	2,773	1,078
Derivative financial instruments		-	2,374	54
		149,484	142,774	133,306
Net current assets		40,682	63,750	67,922
Non-current liabilities
Borrowings	8	23,060	37,497	37,420
Obligations under finance leases		-	45	-
Trade and other payables		709	-	706
Deferred tax liabilities		2,428	2,556	2,563
Retirement benefit obligation		2,651	4,211	2,976
Provisions		4,230	4,921	4,590
		33,078	49,230	48,255
Total liabilities		182,562	192,004	181,561
Net assets		51,028	37,378	51,312
Equity attributable to owners of the parent
Share capital		28,180	28,180	28,180
Share premium account		2,586	2,586	2,586
Hedging and translation reserve		(6,079)	(7,409)	(4,252)
Own shares		(5,249)	(5,442)	(5,271)
Retained gains/(losses)		31,590	19,463	30,069
Total equity		51,028	37,378	51,312

Unaudited Consolidated Statement of Changes in Equity

For the 26 weeks ended 30 September 2012 (26 weeks ended 2 October 2011)

	Share capital	Share premium account	Hedging and translation reserve	Treasury share reserve	Accumulated profits	Total equity
	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 3 April 2011	28,180	2,586	(4,182)	(2,240)	13,942	38,286
Profit for the period attributable to the owners of the parent	-	-	-	-	8,494	8,494
Other comprehensive income / (loss) for the period	-	-	(3,227)	-	(2,868)	(6,095)
Total comprehensive income / (loss) for the period	-	-	(3,227)	-	5,626	2,399
Dividends	-	-	-	-	(1,850)	(1,850)
Own shares acquired in the period	-	-	-	(3,202)	-	(3,202)
Reserve entry for share option charges	-	-	-	-	1,745	1,745
Balance at 2 October 2011	28,180	2,586	(7,409)	(5,442)	19,463	37,378
Balance at 1 April 2012	28,180	2,586	(4,252)	(5,271)	30,069	51,312
Profit for the period attributable to the owners of the parent	-	-	-	-	1,765	1,765
Other comprehensive income / (loss) for the period	-	-	(1,827)	-	77	(1,750)
Total comprehensive income / (loss) for the period	-	-	(1,827)	-	1,842	15
Dividends	-	-	-	-	(1,690)	(1,690)
Own shares utilised in the period	-	-	-	22	-	22
Reserve entry for share option charges	-	-	-	-	1,369	1,369
Balance at 30 September 2012	28,180	2,586	(6,079)	(5,249)	31,590	51,028

 

Unaudited consolidated statement of cash flows

For the 26 weeks ended 30 September 2012 (26 weeks ended 2 October 2011)

	Notes	26 weeks to  30 September 2012	26 weeks to  2 October 2011	(Audited) 52 weeks to  1 April 2012
		$'000	$'000	$'000
Profit for the period		1,765	8,494	17,182
Adjustments for:
Finance income		(85)	(27)	(73)
Finance costs		1,256	2,488	3,900
Income tax expense		474	1,871	2,029
Depreciation of property, plant and equipment		2,253	1,737	2,448
Amortisation of intangible assets		532	347	1,155
Loss on disposal of property, plant and equipment		74	18	48
Share option charge		1,195	2,059	3,976
Decrease in provisions		(868)	(1,058)	(3,122)
Operating cash flow before movements in working capital		6,596	15,929	27,543
(Increase) / decrease in inventories		(10,278)	(1,902)	968
(Increase) / decrease in receivables		(3,970)	(12,102)	9,161
Increase / (decrease) in payables		13,013	7,591	(1,340)
Movement in working capital		(1,235)	(6,413)	8,789
Cash generated by operations		5,361	9,516	36,332
Taxation paid		(1,928)	(2,190)	(3,199)
Interest paid		(868)	(1,227)	(2,780)
Net cash generated from / (used in) operating activities		2,565	6,099	30,353
Cash flow from investing activities
Interest received		85	27	73
Proceeds on disposal of intangible assets, property, plant and equipment		8	29	79
Purchases of property, plant and equipment		(8,945)	(3,152)	(10,263)
Purchases of intangible assets		(33)	(1,650)	(1,986)
Acquisition / Utilisation of own shares (net of funds received on option exercise)		22	(3,202)	(3,031)
Net cash generated from / (used in) investing activities		(8,863)	(7,948)	(15,128)
Cash flow before financing activities		(6,298)	(1,849)	15,225
Cash generated / (used) before non-recurring items		(5,571)	(1,849)	19,932
Cash utilised in respect of non-recurring items		(727)	-	(4,707)
Cash flow from financing activities
Dividends paid		(1,690)	(1,850)	(2,712)
Repayment of borrowings	8	(14,000)	(26,377)	(26,377)
Repayment of preference shares		-	(130)	(130)
Refinancing costs paid	8	(5)	(1,386)	(1,655)
New bank loans raised	8	-	39,544	39,544
Repayments of obligations under finance leases	8	(66)	(73)	(181)
Net cash generated from / (used in) financing activities		(15,761)	9,728	8,489
Net increase / (decrease) in cash and cash equivalents		(22,059)	7,879	23,714
Cash and cash equivalents at beginning of period	8	41,180	18,525	18,525
Effect of foreign exchange rate changes		(625)	(627)	(1,059)
Cash and cash equivalents at end of period	8	18,496	25,777	41,180

 

 

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 1 April 2012, 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 30 September 2012 and the 26 weeks ended 2 October 2011 has not been reviewed by the auditors. The financial information for the 52 weeks ended 1 April 2012 is extracted and abridged from the Group's full accounts for that year. The statutory accounts for the 52 weeks ended 1 April 2012 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 31 October 2012.

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 1 April 2012 are available at the Company's registered office at 10 Eastbourne Terrace, London, W2 6LG, UK and can also be downloaded or viewed via the Group's website.

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report.  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.  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 52 weeks ended 1 April 2012, except as described below.

Adoption of new and revised International Financial Reporting Standards (IFRSs)

The following new and revised standards and interpretations have been adopted in the current period.

New and amended standards adopted by the Group

·     IFRS 7 (amendment) 'Financial Instruments'

Standards and interpretations adopted with no effect on the financial statements

·     IAS 12 (amendment) 'Income Taxes'

Standards and interpretations that are not yet effective and have not been early adopted by the Group

·     IAS 1 (amendment) 'Financial Statement Presentation' - effective for year ended 30 March 2014;

·     IAS 27 (amendment) 'Separate Financial Statements' - effective for year ended 30 March 2014;

·     IAS 28 (amendment) ' Associates and Joint Ventures' effective for year ended 30 March 2014;

·     IAS 19 (amendment) 'Employee Benefits' - effective for year ended 30 March 2014;

·     IFRS 7 (amendment) 'Financial Instruments' (off-setting financial assets and liabilities) - effective for year ended 30 March 2014;

·     IFRS 10 'Consolidated Financial Statements' - effective for year ended 30 March 2014;

·     IFRS 11 ' Joint Arrangements' - effective for year ended 30 March 2014;

·     IFRS 12 ' Disclosure of Interests in Other Entities' - effective for year ended 30 March 2014;

·     IFRS 13 'Fair Value Measurement' - effective for year ended 30 March 2014;

1.  Basis of preparation (continued)

Standards and interpretations that are not yet effective and have not been early adopted by the Group (continued)

·     IAS 32 (amendment) 'Financial Instruments: Presentation' - effective for year ended 29 March 2015; and

·     IFRS 9 'Financial Instruments' - effective for year ended 3 April 2016

The directors anticipate that the future adoption of those standards, interpretations and amendments listed above will not have a material impact on the Group's financial statements.

2.  Business and geographical segments

Business segments

The market sectors below are the basis on which the group reports its segment information and are based on the end markets that the group's products are supplied into.

	26 weeks to 30 September 2012 $'000	26 weeks to  2 October 2011 $'000	(Audited) 52 weeks to 1 April 2012 $'000
Revenue
Consumer	164,663	169,890	330,372
Telecoms/Datacoms	45,192	56,246	99,440
Healthcare	22,024	24,193	51,663
Industrial	17,372	20,325	36,294
	249,251	270,654	517,769

	Before non-recurring items $'000	Non-recurring items and share-based payments $'000	26 weeks to 30 September 2012 $'000	26 weeks to  2 October 2011 $'000
Gross profit
Consumer	24,439	-	24,439	29,261
Telecoms/Datacoms	10,412	(10)	10,402	11,528
Healthcare	5,939	(23)	5,916	6,143
Industrial	3,553	(30)	3,523	4,926
	44,343	(63)	44,280	51,858
Unallocated operating expenses (excluding share-based payments)	(39,011)	(664)	(39,675)	(36,973)
Operating profit before share-based payments	5,332	(727)	4,605	14,885
Share-based payments	-	(1,195)	(1,195)	(2,059)
Operating profit	5,332	(1,922)	3,410	12,826
Finance income			85	27
Finance costs			(1,256)	(2,488)
Profit before tax			2,239	10,365
Tax			(474)	(1,871)
Profit after tax			1,765	8,494

 

2.  Business and geographical segments (continued)

		Before non-recurring items $'000	Non-recurring items and share-based payments $'000	(Audited) 52 weeks to 1 April 2012 $'000
Gross profit
Consumer		59,113	(4,990)	54,123
Telecoms/Datacoms		21,034	-	21,034
Healthcare		14,186	-	14,186
Industrial		8,186	-	8,186
		102,519	(4,990)	97,529
Unallocated operating expenses (excluding share-based payments)		(70,515)	-	(70,515)
Operating profit before share-based payments		32,004	(4,990)	27,014
Share-based payments		-	(3,976)	(3,976)
Operating profit		32,004	(8,966)	23,038
Finance income				73
Finance costs				(3,900)
Profit before tax				19,211
Tax				(2,029)
Profit after tax				17,182

Other segmental information

	External revenue			Non-current assets (excluding deferred tax assets)
	26 weeks to  30 September 2012 $'000	26 weeks to  2 October 2011 $'000	(Audited) 52 weeks to 1 April 2012 $'000	26 weeks to  30 September 2012 $'000	26 weeks to  2 October 2011 $'000	(Audited) 52 weeks to 1 April 2012 $'000
Geographical segments
Asia (excluding India)	156,957	149,830	299,205	30,370	12,510	18,594
North America	43,293	53,849	100,446	697	689	742
Europe (excluding UK)	36,848	49,628	89,723	432	246	420
India	4,292	6,318	11,371	502	684	574
South America	7,861	11,029	17,024	443	286	430
UK	-	-	-	5,465	5,893	5,787
	249,251	270,654	517,769	37,909	20,308	26,547

 

3.  Non-recurring items

	26 weeks to  30 September 2012 $'000	26 weeks to  2 October 2011 $'000	(Audited) 52 weeks to 1 April 2012 $'000
New product start-up costs	-	-	4,990
Restructuring charge	727	-	-
	727	-	4,990

 

In the 26 weeks to 30 September 2012, the Group initiated a restructuring programme to realign the Group's resources to its latest forecasts.  The $727,000 represents redundancy costs incurred.  We expect further restructuring charges to be incurred in the second half of the year to 31 March 2013. Of the $727,000, $63,000 was charged to cost of sales and $664,000 to operating expenses.

In the 52 weeks to 1 April 2012, exceptional start-up costs of $4,990,000 were incurred in relation to new product introductions; specifically the migration from PVC to Halogen Free power cords.  These new products necessitated wide ranging improvements to our manufacturing processes and investments in higher grade tooling and precision moulding technologies.  The exceptional costs include the materials scrap costs and labour inefficiencies associated with the new product lines.

4.  Dividends

Amounts recognised as distributions to equity holders in the period:	26 weeks to  30 September 2012 $'000	26 weeks to  2 October 2011 $'000	(Audited) 52 weeks to 1 April 2012 $'000
Final dividend for the year ended 1 April 2012 of 3.0 cents per share (2011: 2 pence per share)	1,690	1,850	1,850
Interim dividend for the year ended 31 March 2013 of 2.0 cents per share (2012: 1.5 cents per share)	-	-	862
	1,690	1,850	2,712
Proposed interim dividend for the 26 weeks to 30 September 2012 of 2.0 cents per share (2011: 1.5 cents per share)	1,134	851	-
Proposed final dividend for the year ended 1 April 2012 of 3.0 cents per share (2011: 2 pence per share)	-	-	1,699

The final dividend of 3.0 cents per share in respect of the year ended 1 April 2012 (2011: 2 pence per share) was paid to shareholders on 24 August 2012.

The interim dividend of 2.0 cents per share was announced on 31 October 2012 in USD.  Shareholders will have the option to receive this dividend in either USD or GBP.  The total amount payable in USD may vary, depending on movements in exchange rates between October 2012 and February 2013, when the dividend will be paid.

5.  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.

6.  Earnings per ordinary share

The calculations of the earnings per share are based on the following data:

Earnings	26 weeks to  30 September 2012 $'000	26 weeks to  2 October 2011 $'000	(Audited) 52 weeks to 1 April 2012 $'000
Earnings for the purpose of basic earnings per share	1,765	8,494	17,182
Adjustments for:
Non-recurring items	727	-	4,990
Share based payments charge	1,195	2,059	3,976
Tax effect of above adjustments	(322)	(160)	(1,416)
Normalised earnings	3,365	10,393	24,732
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	56,623,144	56,736,404	56,582,380
Effect of dilutive potential ordinary shares - share options	1,653,245	2,302,547	1,777,754
Weighted average number of ordinary shares for the purpose of diluted earnings per share	58,276,389	59,038,951	58,360,134

Basic earnings per share	Cents	Cents	Cents
Basic earnings per share from continuing operations	3.1	15.0	30.4
Adjustments for:
Non-recurring items	1.3	-	8.8
Share based payments charge	2.1	3.6	7.0
Tax effect of above adjustments	(0.6)	(0.3)	(2.5)
Normalised basic earnings per share	5.9	18.3	43.7
Diluted earnings per share
Diluted earnings per share	3.0	14.4	29.4
Adjustments for:
Non-recurring items	1.3	-	8.6
Share based payments charge	2.1	3.5	6.8
Tax effect of above adjustments	(0.6)	(0.3)	(2.4)
Normalised diluted earnings per share	5.8	17.6	42.4

The normalised 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.

7. Own shares

	26 weeks to  30 September 2012 $'000	26 weeks to  2 October 2011 $'000	(Audited) 52 weeks to 1 April 2012 $'000
At the start of the period	5,271	2,240	2,240
Acquired in the period	-	3,256	3,256
Disposed of in the period on exercise of options	(22)	(54)	(225)
At the end of the period	5,249	5,442	5,271

 

The own shares reserve represents the cost of shares in the Company held by the Volex Group plc Employee Share Trust and the Volex Group Guernsey Purpose 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 30 September 2012 was 4,811,815 (1 April 2012: 4,866,815; 2 October 2011: 5,306,815) and the Volex Group Guernsey Purpose Trust was 1,005,000 (1 April 2012: 1,005,000; 2 October 2011: 230,000). 

8.  Analysis of net debt

	1 April 2012 $'000	Cash flow $'000	Exchange movement $'000	Other non-cash changes $'000	30 September 2012 $'000
Cash and cash equivalents	41,180	(22,059)	(625)	-	18,496
Bank loans	(38,663)	14,000	540	-	(24,123)
Finance leases	(117)	66	(1)	-	(52)
Debt issue costs	1,243	5	9	(194)	1,063
Net debt	3,643	(7,988)	(77)	(194)	(4,616)

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.

Key management compensation is in line with the amounts disclosed in the annual report for the year ended 1 April 2012.

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.

Volex plc (the 'Company') enters into financial guarantee contracts to guarantee the indebtedness of other group companies. The Company considers these to be insurance arrangements and treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.

 

END

 

 

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