Half Yearly Report

RNS Number : 8133B

Volex Group PLC

03 November 2009

 



3 November 2009

VOLEX GROUP plc

Half-yearly results for the 26 weeks ended 4 October 2009

Volex Group plc, the global electrical and electronic cable assemblies group, today announces its unaudited half-yearly results for the 26 weeks ended 4 October 2009.

First half highlights:

• Strong year on year adjusted operating profit(i) growth of 48% (14% at constant currency), despite a decline in revenue

• 40% improvement in gross margin percentage to 20.1% (2008 : 14.4%)

• £7.9m of cash generated by operations in the first half (2008 : £7.0m)

• Sector focused strategy in the sales, marketing and product organisation being rolled out - Healthcare sector already formed and operating globally

• Further progress made in developing our industry leading high speed copper cable offerings

• Benefits from rationalising facilities starting to accrue, with operating leverage expected to drive further profit growth as general economic conditions improve

• Relocation of the Group's corporate headquarters from Warrington to London completed in July 2009

Financial summary:

• Revenue down 18% on prior year (29% down at constant currency) in line with general economic conditions, although Q2 revenue was 4% up on Q1

• Adjusted operating profit(i) of £6.1m (2008 : £4.1m)

• Adjusted profit before tax(ii) of £4.4m (2008 : £2.7m)

• Profit before tax of £1.7m (2008 : £2.8m)

• Adjusted earnings per share from continuing operations of 6.3p (2008 : 3.0p). Basic earnings per share from continuing operations of 1.6p (2008 : 3.2p)

• Net debt at 4 October 2009 of £11.2m (5 April 2009 : £14.8m; 5 October 2008 : £18.6m)

(i)    Adjusted operating profit is defined as operating profit before non-recurring items and share based payments

(ii)   Adjusted profit before tax is defined as profit before tax, non-recurring items and share based payments

The Chairman of Volex, Mike McTighe, commented: "We are pleased to report that good progress has been made during the six months on rebuilding the fundamentals of the Group and laying a solid foundation for future growth. Against a backdrop of such challenging market conditions it is also pleasing to report that this focus has not been at the expense of trading performance. Our concentration on core profitability and cash generation has delivered good results and improved our financial stability"

Ends

For further information please contact:

Volex Group plc	[phone]
Ray Walsh, Group Chief Executive
Andrew Cherry, Group Finance Director
Weber Shandwick Financial	[phone]
Terry Garrett
Nick Dibden
Katie Matthews

Forward looking statements

Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events to differ materially from any expected future events or results referred to in these forward looking statements.

INTERIM RESULTS

26 Weeks ended 4 October 2009

When Volex started the new financial year under a new and extended banking facility and having divested the loss making and cash consumptive wiring harness division, we set forth a clear and measurable strategy to drive revenues and improve margins. This is to be achieved through i) a market sector focused Global Sales and Marketing organisation, ii) implementing efficiency through improved information technology and processes and delivering savings from a streamlined supply-chain process and iii) attracting world-class talent to the management ranks to fully deliver on these initiatives. Despite difficult trading conditions and an unstable macro-economic environment, we are pleased to report progress on all fronts, much of which is evidenced in the half-year financial results.

Revenues in the first half are down as compared to the same period of 2008 by 18%. However, second quarter turnover improved by 4.1% over the first quarter signalling improving market conditions and increasing effectiveness of our global sales teams. The year on year contraction in revenues is attributable to a significant decrease in consumer and business spending in the current economic climate, yet the decrease is significantly less than that experienced by our peer group because of our reduced exposure to the aerospace and automotive sectors.

Our Sales, Marketing and Product organisation is now implementing a sector focused strategy that will see Volex increasingly deliver product to market faster with improved margin and overall better client focus. Our Healthcare segment is already formed and executing under a single, global organisation supported by dedicated product teams, sales teams and tools. We are already seeing the benefits of this strategy in penetration of new accounts, with increasing focus outside of our traditional European and North American client territories. We will continue to implement these changes to our Telecom/Datacom, Industrial and Consumer segments in the second half of the year. We are pleased that Jeff Bierman has joined the group to lead our Sales and Marketing teams and the Group will benefit from his more than 20 years of wireless, cable assembly and connector experience as we drive forward with our implementation plans.

Gross margins in continuing operations have improved by 40%, going from 14.4% a year ago to 20.1% in the half year on the back of favourable commodity prices and product mix. We continue to act with caution and discipline in our approach to commodity price fluctuations by reducing inventory holding and working to get closer matching of customer pricing and commodity price movements. With increasing focus internally on optimal product mix and margins and close attention to commodity pricing, we believe we will continue to outperform prior year results at the gross margin level. The closure and consolidation of certain manufacturing sites, such as our Jakarta facility, have also contributed to reduced direct overhead costs; furthermore, a more efficient use of space leaves Volex in the position of being able to increase revenues significantly in most existing facilities, when economic conditions improve, without having to take on any additional manufacturing floor space.

Over the last six months we have put strong focus on our working capital position and have delivered a 40% reduction in net debt as compared to a year ago and a 24% reduction since the beginning of the financial year. We will continue to drive efficiencies not only through management of payables and receivables but through reduced inventory holding and in supply chain efficiencies. Also in the last six months, we have eliminated more than 130 suppliers from our supply chain by consolidating spend with fewer suppliers, enabling us to negotiate significant discounts. We are on target to deliver a 30% reduction in the number of our suppliers by the end of the current financial year.

The efficiency and product gains are clearly evidenced in the operating profit of the group which, despite the reduction in revenues, is in line with previous guidance of delivering a similar level of profitability as achieved last year. Adjusted operating profit, being operating profit before non-recurring items and share based payment charges, for the half year is £6.1m which is 5.6% of revenues as compared to the 2008 half year result of £4.1m and 3.1% of revenues. We will continue to focus on the cost base and the fixed/variable cost structure, benefiting from operating leverage as and when a broader economic recovery occurs.

Volex Power Products

Volex Power Products saw a 17% contraction in turnover going from £80.3m to £66.5m, as compared to the first half last year. The decline in revenue is rooted in dramatic reductions in consumer and business spending on computers, consumer electronics and peripherals. Volex has not lost any major accounts and has, in fact, seen a recovery in demand from our core world-class brand customers for our power cord products between Q1 and Q2 this year, growing the top-line by more than 10%, quarter on quarter at reported rates and 17% in local currency. Favourable commodity prices, our industry leading halogen-free and environmentally responsible products and more focus on power cord peripheral and accessory products have all played their part in driving gross margins in this division from 14% in the first half of last year to 20% in the six months to 4 October 2009. We closely monitor movements in commodity prices, particularly in relation to copper and crude oil, and adjust our policy and strategy accordingly. Factory efficiencies and reductions in direct overhead costs have further contributed to the gains in gross margin.

Adjusted operating profit for the division grew as compared to the first half of last year from £3.5m to £4.4m, an increase of 28% and, more importantly, increased as a percentage of revenues from 4.3% to 6.7%.

Interconnect 

Given the broad, global reduction in spend on Information Technology and Telecommunication related products in the current recessionary environment, our Interconnect products business experienced a contraction in turnover from £53.6m in the first half of last year to £43.7m, driven largely by reductions in Europe where Volex experienced, like our peers, a 50% reduction in revenues, at constant currency. Our Indian operations, by contrast, grew in the economic recession by 46% at constant currency.

We continue to focus and invest capital in new high-speed products that deliver attractive, early product life-cycle gross margins and on custom cable assemblies and connector technologies that not only build profitability, but long-term, valuable relationships with our clients across the Datacom/Telecom, Healthcare and Industrial sectors. We will continue to be judicious in our capital expenditure and focus these investments towards interconnect opportunities that deliver rapid returns and enhance long term client relationships.

Despite difficult trading conditions, adjusted operating profit for the division grew as compared to the first half of last year from £0.7m to £1.7m, an increase of 156% and significantly increased as a percentage of revenues from 1.2% to 3.8%. 

Financial Review

Revenue from continuing operations was down by 18% on the first half of last year with reduced consumer and business spending associated with current economic conditions adversely impacting turnover in the first half. Currency movements, in particular the weakening of sterling against the US dollar and the Euro, benefited Group revenue by £15.5m. On a constant currency basis revenue was down by 29%.

Adjusted operating profit from continuing operations was £6.1m, 48% up on £4.1m last year. This increase in adjusted operating profit, despite the decline in revenue, was achieved due to a 40% improvement in the Group's gross margin percentage, which increased from 14.4% to 20.1% due to favourable commodity prices, supply chain efficiencies and, to a lesser extent, product mix. On a constant currency basis, adjusted operating profit increased by 14%.

A non-recurring item charge of £2.6m was recognised in the period, £0.9m of which related to a facilities rationalisation programme and £1.7m in respect of the corporate restructuring programme initiated last year. This corporate restructuring programme charge primarily covers the costs associated with the relocation of the Group's corporate headquarters from Warrington to London, which was completed in July 2009. The non-recurring charges taken in the first half account for the majority of costs associated with the facilities rationalisation and corporate restructuring programmes. The Board does not expect significant additional charges in the second half.

The net interest charge increased by £0.2m to £1.8m on account of increased amortisation of facility fees and pension deficit interest. Interest charged on bank debt was in line with last year, with the benefit of lower average borrowings being offset by mark to market losses on the Group's floating to fixed USD and Euro interest rate swaps.

Profit before tax for the first six months amounted to £1.7m (2008: £2.8m) with the year on year reduction caused by non-recurring items more than offsetting the increase in adjusted operating profit. Adjusted profit before tax was £4.4m (2008: £2.7m). The tax charge for the Group decreased to £0.8m from £1.0m in the first half of last year, in line with the decrease in profit before tax.

Adjusted earnings per share from continuing operations for the period was 6.3p, up 110% from 3.0p last year. Basic earnings per share was 1.6p (2008 - 3.2p).

The Group continued its strong focus on cash generation in the first half of the year with cash generated by operations amounting to £7.9m, after a net reduction in working capital of £3.7m. After excluding cash spend on non-recurring items of £1.1m, cash generated by operations was £9.0m, up 10% from £8.1m last year.

Net debt at 4 October 2009 was £11.2m, a significant improvement over £18.6m at 5 October 2008 and £14.8m at 5 April 2009. Included in the improvement in net debt during the first half is a £0.7m favourable exchange impact, associated with retranslation of the Group's USD and Euro denominated borrowings.

The half year results include an increase in the Group's net pension deficit under IAS19 from £1.8m at 5 April 2009 to £3.4m at 4 October 2009. While the fair value of assets increased during the period from £9.2m to £11.0m, the present value of the defined benefit obligations increased from £11.0m to £14.4m, primarily due to a decrease in discount rate used to value the pension scheme's obligations. As required by IAS 19, the discount rate used by the Group is determined with reference to yields on corporate bonds and these yields decreased significantly between 5 April 2009 and the balance sheet date.

The Group continues to have a US$76.0m revolving credit facility with Lloyds Banking Group plc which, after amortisation, had an available limit of US$62.7m at 4 October 2009, comprising both a US dollar and a Euro component. At the balance sheet date amounts drawn under the facility were US$26.7m and €13.5m and the average combined utilisation during the half year was US$45.5m.

The Board has again not declared an interim dividend.

Current Trading and Prospects

The trading environment continues to be challenging both for Volex and for our key customers. Visibility into future orders is limited and our exposure to significant and rapid changes in exchange rates and commodity prices remain. Despite theses factors, we believe that Volex has demonstrated that it is able to move quickly to compensate and adjust to these dynamic variables.

We are pleased with the results that have been achieved so early in our efforts to transform Volex into a more efficient, competitive organisation focused on delivering consistent, sustainable growth and profitability; becoming a global force in the electronic, electrical and data cable assembly and manufacturing market.

Although the Board continues to take a prudent view of short term trading prospects it expects revenue and adjusted operating profit in the second half of the year to be slightly higher than the first half and that full year adjusted operating profit therefore will be modestly above market expectations.

Risks and uncertainties

Risks to Volex are anticipated and regularly assessed and internal controls are enhanced where necessary to ensure that such risks are appropriately mitigated. The principal risks and uncertainties facing the Group in the second half of the year remain those detailed in the annual report and audited financial statements for the year ended 5 April 2009, a copy of which is available on the website at www.volex.com.

Ray Walsh	Andrew Cherry
Group Chief Executive	Group Finance Director
3 November 2009	3 November 2009

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge:

a) the set of financial statements has been prepared in accordance with IAS 34;

b) the interim management report includes a fair review of the information required in DTR 4.2.7R (indication of important events that have occurred during the first six months of the financial year and description of the principal risks and uncertainties for the remaining six months of the year); and

c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By Order of the Board

Ray Walsh	Andrew Cherry
Group Chief Executive	Group Finance Director
3 November 2009	3 November 2009

Unaudited Consolidated Income Statement

For the 26 weeks ended 4 October 2009 (27 weeks ended 5 October 2008)

	Note	26 weeks to  4 October  2009 £'000	27 weeks to    October 2008  £'000	(Audited) 53 weeks to 5 April 2009 £'000
Continuing Operations
Revenue	2	110,193	133,863	265,116
Operating profit	2	3,469	4,220	6,567
Analysed as:
Operating profit before non-recurring items and share based payments		6,127	4,130	11,175
Non-recurring items	3	(2,657)	-	(4,740)
Share based payments (charge) / credit		(1)	90	132
Operating profit		3,469	4,220	6,567
Investment income		39	171	226
Finance costs
- interest on bank debt and other liabilities		(1,238)	(1,253)	(2,468)
- interest on retirement benefit obligations and provisions		(224)	(88)	(222)
- amortisation of debt issue costs		(347)	(260)	(520)
		(1,809)	(1,601)	(3,210)
Profit on ordinary activities before taxation		1,699	2,790	3,583
Taxation	4	(778)	(988)	(1,991)
Profit for the period from continuing operations		921	1,802	1,592
Discontinued operations
Loss for the period from discontinued operations		-	(1,684)	(20,976)
Profit/(loss) for the period, being the retained profit/(loss) for the year attributable to the equity holders as parent		921	118	(19,384)
Earnings/(loss) per share (pence)
From continuing operations
Basic and diluted	5	1.6	3.2	2.8
Adjusted, basic and diluted*	5	6.3	3.0	10.9
From continuing and discontinued operations
Basic and diluted	5	1.6	0.2	(34.1)
Adjusted, basic and diluted*	5	6.3	-	3.9

* Adjusted earnings per share has been calculated by excluding non-recurring items and share based payment charges / (credits) from earnings (see note 5).

Unaudited Consolidated Statement of Comprehensive Income 

For the 26 weeks ended 4 October 2009 (27 weeks ended 5 October 2008)

	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008  £'000	(Audited) 53 weeks to 5 April 2009  £'000
Gain / (loss) on hedge of net investment taken to equity	1,418	(1,910)	(5,554)
Exchange differences on translation of foreign operations	(2,124)	3,684	8,948
Actuarial (loss) / gain on defined benefit pension schemes	(1,656)	354	(285)
Net (expense) / income recognised directly in equity	(2,362)	2,128	3,109
Profit / (loss) for the period	921	118	(19,384)
Total recognised net (expense) / income for the period	(1,441)	2,246	(16,275)

Unaudited Consolidated Statement of Changes in Equity

For the 26 weeks ended 4 October 2009 (27 weeks ended 5 October 2008)

	Share Capital £'000	Share Premium £'000	Translation Reserve £'000	Retained Earnings £'000	Total Equity £'000
Balance at 31 March 2008	14,205	1,357	(1,861)	8,935	22,636
Net profit for the period	-	-	-	118	118
Reserves entry for share option charges	-	-	-	(40)	(40)
Actuarial gain on defined benefit  pension schemes	-	-	-	354	354
Exchange differences on translation of foreign operations	-	-	3,684	-	3,684
Loss recognised on net investment hedge	-	-	(1,910)	-	(1,910)
Balance at 5 October 2008	14,205	1,357	(87)	9,367	24,842
Balance at 6 April 2009	14,205	1,357	1,533	(10,826)	6,269
Net profit for the period	-	-	-	921	921
Reserves entry for share option charges	-	-	-	15	15
Actuarial loss on defined benefit  pension schemes	-	-	-	(1,656)	(1,656)
Exchange differences on translation of foreign operations	-	-	(2,124)	-	(2,124)
Gain recognised on net investment hedge	-	-	1,418	-	1,418
Balance at 4 October 2009	14,205	1,357	827	(11,546)	4,843

Unaudited Consolidated Balance Sheet

4 October 2009 (5 October 2008)

	Note	4 October  2009 £'000	5 October 2008 £'000	(Audited) 5 April 2009 £'000
Non-current assets
Goodwill		1,930	1,930	1,930
Other intangible assets		471	263	566
Property, plant and equipment		7,220	8,431	8,040
Deferred tax asset		687	437	692
		10,308	11,061	11,228
Current assets
Inventories		23,198	39,005	24,135
Trade and other receivables		58,836	74,338	59,751
Current tax assets		-	84	56
Cash and cash equivalents	6	16,634	8,207	16,877
		98,668	121,634	100,819
Total assets		108,976	132,695	112,047
Current liabilities
Obligations under finance leases		-	15	2
Trade and other payables		57,693	69,166	56,332
Current tax liabilities		5,946	5,447	5,842
Retirement benefit obligation		286	43	153
Provisions		3,856	1,973	3,735
Liability for share based payments		-	-	14
Derivative financial instruments		479	-	248
		68,260	76,644	66,326
Net current assets		30,408	44,990	34,493
Non-current liabilities
Bank loans	6	27,855	26,811	31,662
Trade and other payables		-	-	631
Deferred tax liabilities		-	100	-
Retirement benefit obligation		3,149	1,120	1,683
Long-term provisions		4,789	3,098	5,396
Non-equity preference shares		80	80	80
		35,873	31,209	39,452
Total liabilities		104,133	107,853	105,778
Net assets		4,843	24,842	6,269
Equity attributable to equity holders of the parent
Share capital		14,205	14,205	14,205
Share premium account		1,357	1,357	1,357
Hedging and translation reserve		827	(87)	1,533
Retained earnings		(11,546)	9,367	(10,826)
Total equity		4,843	24,842	6,269

Unaudited Consolidated Cash Flow Statement

For the 26 weeks ended 4 October 2009 (27 weeks ended 5 October 2008)

	Note	26 Weeks to 4 October 2009 £'000	27 weeks to 5 October 2008  £'000	(Audited) 53 Weeks to 5 April 2009  £'000
Operating profit from continuing operations		3,469	4,220	6,567
Adjustments for:
Depreciation of property, plant and equipment		1,081	1,333	2,825
Amortisation of intangible assets		46	47	42
Operating loss from discontinued operations		-	(1,684)	(6,704)
Loss on disposal of property, plant and equipment		52	-	18
Share option expense / (credit)		1	(40)	(92)
(Decrease) / increase in provisions		(477)	(2,020)	929
Operating cash flow before movements in working capital		4,172	1,856	3,585
(Increase) / decrease in inventories		(522)	(815)	12,660
(Increase) / decrease in receivables		(2,455)	(4,855)	10,709
Increase / (decrease) in payables		6,713	10,787	(9,702)
Decrease in working capital		3,736	5,117	13,667
Cash generated by operations		7,908	6,973	17,252
Analysed as:
Cash generated before non-recurring items		8,954	8,125	21,784
Cash utilised by non-recurring items		(1,046)	(1,152)	(4,532)
Cash generated by operations		7,908	6,973	17,252
Income taxes paid		(271)	(288)	(1,622)
Interest paid		(1,316)	(591)	(2,271)
Net cash inflow from operating activities		6,321	6,094	13,359
Cash flow from investing activities
Interest received		39	171	226
Proceeds on disposal of property, plant and equipment		3	38	283
Purchases of property, plant and equipment		(819)	(1,181)	(2,016)
Purchases of intangible assets		(17)	(35)	(418)
Net cash outflow arising on disposal of operations		(1,619)	-	(762)
Net cash used in investing activities		(2,413)	(1,007)	(2,687)
Cash flow before financing activities		3,908	5,087	10,672
Analysed as:
Cash generated before non-recurring items		6,573	6,239	15,966
Cash utilised by non-recurring items		(1,046)	(1,152)	(4,532)
Cash utilised on disposal of operations		(1,619)	-	(762)
Cash flow before financing activities		3,908	5,087	10,672
Cash flow from financing activities
Repayment of borrowings	6	(2,633)	(4,406)	(49,038)
Advances of borrowings	6	-	3,502	49,038
Refinancing costs paid	6	(826)	-	-
Repayments of obligations under finance leases	6	-	(29)	(42)
Net cash used in financing activities		(3,459)	(933)	(42)
Net increase in cash and cash equivalents		449	4,154	10,630
Cash and cash equivalents at beginning of period	6	16,877	4,317	4,317
Effect of foreign exchange rate changes		(692)	(264)	1,930
Cash and cash equivalents at end of period	6	16,634	8,207	16,877

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 year ended 5th April 2009, 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 4 October 2009 and 27 weeks ended 5 October 2008 has not been reviewed by the auditors. The financial information for the 53 weeks ended 5 April 2009 is extracted and abridged from the Group's full accounts for that year. The statutory accounts for the 53 weeks ended 5 April 2009 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 2 November 2009. 

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 5 April 2009 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 financial statements have 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 5 April 2009, except as described below. 

Comparative balances for the 27 weeks ended 5th October 2008 have been restated in the statements and the related notes where applicable to reflect the presentation of discontinued operations in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.  

The Group has adopted revised IAS 1 'Presentation of Financial Statements' mandatory for reporting periods beginning on or after 1 January 2009. The effect of this has been the introduction of a new primary statement, the 'Statement of changes in equity', which was previously a note to the accounts, and to rename the primary statements. The revised standard has had no impact on the reported results or financial position of the group.

The group has also adopted IFRS 8 'Operating Segments', mandatory for reporting periods beginning on or after 1 January 2009. The new standard replaced IAS 14 'Segment reporting'. The standard has had no impact on the presentation of segmental information.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning on 1 January 2009, but are not currently relevant to the Group or have not had a material impact on the Group:

• IFRS 1 (Revised), 'First-time adoption of IFRSs'

• IAS 23 (Revised), 'Borrowing costs'

• Amendments to IFRS 1 and IAS 27, 'Cost of an investment in a subsidiary, jointly controlled entity or an associate'

• Amendment to IFRS 2, 'Vesting conditions and cancellations'

• Amendment to IFRS 7, 'Improving disclosures about financial instruments'

• Amendments to IAS 32 and IAS 1, 'Puttable financial instruments and obligations arising on liquidation'

• Amendment to IAS 39, 'Eligible hedged items'

• Annual improvements to IFRS

• IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction'

• IFRIC 15, 'Agreements for the construction of real estate'

• IFRIC 16, 'Hedge of a net investment in a foreign operation'

The following new standards, amendments to standards or interpretations have been issued, but are not effective for the financial year beginning 1 January 2009 and have not been early adopted:

• IFRS 3 (Revised), 'Business combinations'

• IAS 27 (Revised), 'Consolidated and separate financial statements'

• Amendment to IFRS 5, 'Non-current assets held for sale and discontinued operations'

• IFRIC 17, 'Distributions of non-cash assets to owners'

• IFRIC 18, 'Transfers of assets from customers'

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

Following the disposal of the Wiring Harness division on 3 April 2009, the Group is organised for management purposes as two operating divisions - Power Products and Interconnect. These classifications are based on the nature of products that they supply. These divisions are the basis on which the group reports its segment information.

	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008 £'000	(Audited) 53 weeks to 5 April 2009  £'000
Revenue
Continuing Operations
Power Products	66,536	80,307	150,680
Interconnect	43,657	53,556	114,436
	110,193	133,863	265,116
Discontinued Operations
Wiring Harness	-	21,241	37,704
	110,193	155,104	302,820

	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008  £'000	(Audited) 53 weeks to 5 April 2009  £'000
Operating profit before non-recurring items and share based payments
Continuing operations
Power Products	4,449	3,474	6,014
Interconnect	1,678	656	5,161
	6,127	4,130	11,175
Non-recurring items and share based payments (i)
Power Products	(1,598)	54	(2,619)
Interconnect	(1,060)	36	(1,989)
	(2,658)	90	(4,608)
Operating profit
Power Products	2,851	3,528	3,395
Interconnect	618	692	3,172
	3,469	4,220	6,567
Investment income	39	171	226
Finance costs	(1,809)	(1,601)	(3,210)
Profit before tax from continuing operations	1,699	2,790	3,583
Tax	(778)	(988)	(1,991)
Profit from continuing operations	921	1,802	1,592
Loss from discontinued operations	-	(1,684)	(20,976)
Profit / (loss) after tax and discontinued operations	921	118	(19,384)

(i)  allocated based on turnover

2. Business and geographical segments (continued)

Other segmental information

	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008 £'000	(Audited) 53 weeks to 5 April 2009 £'000
External revenue by product market sector
Continuing operations
Consumer Products	63,031	83,670	150,207
Data, Telecommunications and Medical	44,862	48,989	109,862
Industrial, Vehicle and Aerospace	2,300	1,204	5,047
	110,193	133,863	265,116
Discontinued operations
Industrial, Vehicle and Aerospace	-	21,241	37,704
	110,193	155,104	302,820

	External revenue by source			External revenue by destination
	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008 £'000	(Audited) 53 weeks to 5 April 2009 £'000	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008 £'000	(Audited) 53 weeks to 5 April 2009 £'000
Geographical segments
Continuing operations
Asia	79,014	86,790	174,317	66,476	67,883	137,598
Americas	20,162	25,764	52,454	23,407	28,039	57,338
UK	-	-	-	3,198	3,050	6,496
Europe	11,017	21,309	38,345	17,112	34,891	63,684
	110,193	133,863	265,116	110,193	133,863	265,116
Discontinued operations
Asia	-	3,020	8,334	-	107	46
Americas	-	-	-	-	-	7
UK	-	5,194	9,392	-	14,098	26,581
Europe	-	13,027	19,978	-	7,036	11,070
	-	21,241	37,704	-	21,241	37,704
	110,193	155,104	302,820	110,193	155,104	302,820

3. Non-recurring items 

	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008 £'000	(Audited) 53 weeks to 5 April 2009 £'000
Continuing operations
Facilities rationalisation	(941)	-	-
Corporate restructuring	(1,716)	-	(720)
Provision for onerous lease arising on disposal of discontinued operations	-	-	(3,000)
Aborted disposal costs	-	-	(1,020)
	(2,657)	-	(4,740)

Facilities rationalisation

In response to a strategic review of business operations the Board initiated a rationalisation programme to align the Group's manufacturing capacity and support facilities more closely with its customer base and market environment. Costs associated with this rationalisation programme relate primarily to redundancy and severance costs.

Corporate restructuring

As part of the corporate restructuring programme commenced in the year to 5 April 2009, the Group relocated its corporate headquarters from Warrington to London. Costs associated with this HQ relocation include redundancy costs, recruitment costs and £905,000 relating to an onerous lease provision assumed on exiting the Warrington premises. The provision represents management's best estimate, following appropriate advice, of the anticipated net cost of the lease taking into account how long the property will remain vacant and the level of rental income that may be obtained from sub-tenants.

4. Tax charge 

The Group tax charge for the period is based on the forecast tax charge for the year as a whole and has been influenced by the differing tax rates in the UK and the various overseas countries in which the Group operates.

5. Earnings / (loss) per ordinary share 

Earnings / (loss) per share from continuing operations

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

Earnings / (loss)	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008 £'000	(Audited) 53 weeks to 5 April 2009 £'000
Earnings / (loss)	921	118	(19,384)
Adjustment to exclude loss for the period from discontinued operations	-	1,684	20,976
Earnings from continuing operations	921	1,802	1,592
Adjustments for:
Non-recurring items	2,657	-	4,740
Share based payments charge / (credit)	1	(90)	(132)
Adjusted earnings from continuing operations	3,579	1,712	6,200
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	56,821,563	56,780,292	56,821,563
Effect of potential share option dilution	129,962	-	45,579
Weighted average number of ordinary shares for the purpose of diluted earnings per share	56,951,525	56,780,292	56,867,142
Basic and diluted earnings per share	Pence	Pence	Pence
Basic and diluted earnings per share from continuing operations	1.6	3.2	2.8
Adjustments for:
Non-recurring items	4.7	-	8.3
Share based payments (credit) / charge	-	(0.2)	(0.2)
Adjusted basic and diluted earnings per share from continuing operations	6.3	3.0	10.9

Basic earnings represent net profit / (loss) attributable to equity holders of the Company. The adjusted earnings per share has been calculated on the basis of continuing activities before non-recurring items and share based payment charges / (credit) 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 periods presented.

Earnings / (loss) per share from continuing and discontinued operations

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

Earnings / (loss)	26 weeks to  4 October 2009 £'000	27 weeks to  5 October 2008 £'000	(Audited) 53 weeks to 5 April 2009 £'000
Earnings / (loss)	921	118	(19,384)
Adjustments for:
Non-recurring items	2,657	-	7,368
Share based payments charge / (credit)	1	(90)	(132)
Loss on disposal of discontinued operations	-	-	14,373
Adjusted earnings from continuing and discontinued operations	3,579	28	2,225
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	56,821,563	56,780,292	56,821,563
Effect of potential share option dilution	129,962	-	45,579
Weighted average number of ordinary shares for the purpose of diluted earnings per share	56,951,525	56,780,292	56,867,142
Basic and diluted earnings per share	Pence	Pence	Pence
Basic and diluted earnings / (loss) per share from continuing and discontinued operations	1.6	0.2	(34.1)
Adjustments for:
Non-recurring items	4.7	-	13.0
Share based payments (credit) / charge	-	(0.2)	(0.2)
Loss on disposal of discontinued operations	-	-	25.2
Adjusted basic and diluted earnings per share from continuing and discontinued operations	6.3	-	3.9

6. Analysis of net debt

	5 April 2009 £'000	Cash flow £'000	Exchange Movement £'000	Other non-cash changes £'000	4 October 2009 £'000
Cash at bank and in hand	16,877	449	(692)	-	16,634
Debt due after one year	(33,144)	2,633	1,441	-	(29,070)
Debt issue costs	1,482	80	-	(347)	1,215
Net debt	(14,785)	3,162	749	(347)	(11,221)

Non-cash changes relate to amortisation of debt issue costs.

7. 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 5 April 2009. 

8. Contingent Liabilities 

The annual report for the year ended 5 April 2009 disclosed a contingent liability with the Mexican Government for 22 million pesos in relation to alleged misstatement of customs returns for the fiscal years 2000 and 2001. A final ruling has been issued by the Federal Tax Court (Mexico) in favour of Volex which found the claim to be null and void and released the company from any liability.

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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