Interim Results

Volex Group PLC 8 November 2000 Volex Group p.l.c. Unaudited interim results for the half year ended 30 September 2000 Volex Group p.l.c., the world's leading independent producer of electronic cable assemblies and electrical power cords, announces its unaudited results for the half-year ended 30 September 2000: Highlights Six months ended 30 September 2000 1999 Turnover £217.2m £143.8m + 51% Operating profit* £18.1m £10.4m + 74% Pre-tax profit* £16.1m £9.2m + 76% Earnings per share ( headline) 40.7p 21.0p + 94% Dividend per share 9.4p 8.7p + 8% Strong sales growth in the Americas, Asia and Europe Data/telecommunication markets now account for 71% of Group sales First half activities reflected strong order books at end of last year Pre-tax profits up 76% and earnings nearly doubled * pre goodwill amortisation Commenting on results and prospects, Mr Bill Goodall, Chairman of Volex, said: 'This half year saw a significant increase in business, with sales up 51% over the same period last year. This has resulted in profit before tax rising by 76% and earnings have nearly doubled - our best half year ever.' 'We envisage average annual growth of sales and operating profit of 15% to 20% and have set a target of achieving £1 billion in sales within five years. Subject to no unforeseen major downturn in our markets, we anticipate a strong result for the year as a whole.' For further information, please contact: Volex Group p.l.c. Today: 020 7601 1000 Thereafter: 01925 830101 Bill Goodall, Chairman Dom Molloy, Group Chief Executive Ken Hooper, Group Finance Director Square Mile Communications Ltd 020 7601 1000 Chris Lynch / Graham Herring REPORT OF THE DIRECTORS on the results for the half year to 30 September 2000 The results for the half year to 30 September 2000 were very strong and built on the high activity levels and order books with which the Group closed the previous year. The Group saw a major increase in its global activities and confirmation of its successful strategy of a focussed yet global approach to market opportunities. The first half produced a 51% increase in world-wide sales revenues to £217.2m, which in turn enabled the Group to increase its operating profit by 74% to £18.1m, before goodwill amortisation of £0.4m. With interest charges of £2.0m, the pre- tax profits rose 76% to £16.1m on the same basis. The Group's composite tax rate fell to 29% due to the mix of profits in the various parts of the world. The net effect was to increase headline earnings per share by 94% to 40.7p for this half year over the comparative period. OPERATIONS The Group has achieved significant growth in activities during the first half. The established strategy of bringing a focussed targeted approach to global market opportunities, keeping ahead of technology developments and increasing our world-wide presence and product range, has proved successful. The culture of continuous improvement has now positioned the Group as an innovative service and solutions provider for interconnect devices on a global scale and this is driving our current and future growth prospects. Our focus is centred on market areas where a global presence is required. Annual projections for the data/telecommunications industry are exciting and the Group believes that these business areas will provide strong growth opportunities over the longer term. Key contributors to our success have been the constant drive to reduce time to market and time to customer and the development of capabilities in newer technologies, particularly fibre optic and radio frequency (RF) products. This has been made possible by the expansion of the Group's engineering resources, both in terms of our design capability and in the newer technology areas,where we have expanded fibre optic and RF capabilities in facilities in the Americas, Asia and Europe. The Group has continued to develop its partnership with a number of the leading telecommunication, data and electrical/electronic consumer product customers. At the same time, a targeted approach to new business opportunities has led to further success in opening new accounts, both at original equipment manufacturers (OEM) and major electronic manufacturing services providers (EMS). The emergence of these subcontractors is symptomatic of the drive to outsource non core activities by the large multinational companies. The Group has built on its successful track record of working in partnership with the OEM and EMS industries to manage these outsourced activities. Whilst sales of power cords have dropped as a percentage of Group sales, we have increased sales and remain the world's No.1 power cord producer. Further strengthening of the Group's regional network of sales engineers, coupled with improving levels of global co-ordination on the Group's multinational accounts, have been and will continue to be major drivers of growth. The Group has invested heavily in manufacturing capacity throughout the world to meet increased demand and, with a target capacity utilisation of 75% to 80%, will continue to invest sufficient resources so as to take full advantage of all market opportunities. In the Americas growth was particularly impressive in the data/telecommunications area and the customer base has been broadened. We continue to expand our capacities in Canada, USA, Mexico and Brazil and have consolidated our position in the power cords market following last year's major acquisition. A significant investment has been made in the establishment of the RF centre of excellence in Wilmington, Massachusetts. This centre will assist all facilities world-wide with the development of state of the art process controls and will provide increased technical support for global customers. During the last six months Volex Asia has experienced significant growth in the demand for products both from customers in the region and also from across the Group. In addition to expanding capacity considerably for its traditional power cord products, it has also developed a significant data/telco manufacturing capability, centred on its Suzhou facility near Shanghai, China: here the Group has invested in fibre optic, RF and high speed miniature coax technologies to meet future market demand in this region. The Group has relocated one of its two plants in southern China to a new plant established at Zhongshan in Guangdong Province to support the exciting growth in the telecommunications markets in that area as well as its traditional products. Further capacity has been put in place elsewhere in the region for power cords production and this has boosted the region's ability to support both its own growing customer base and other parts of the Group. In Europe the Group has now established itself as a leading producer of data/telcoecommunications cable assemblies. The expansion of our engineering resources and the time to market capability, already referred to, have been particularly evident in this region. These features and a flexible approach to manufacturing have enabled excellent growth levels to be achieved, particularly in telecommunication products. The power cord division is well advanced with its restructuring programme and market share is being maintained. The wiring harness divisions progressed well and recorded a satisfactory result. The Group's web site www.volex.com continues to be developed and is regularly updated with news items on the Group's achievements. FINANCIAL REVIEW Turnover for the half year increased by 51% to £217.2m. The strongest sales growth was achieved in Asia where sales increased by approximately 80%: sales to European customers increased by 55% with sales to customers in the Americas being up by some 40% over the comparative period last year. Increases in the Group's output by region using selling values, including transfers of product between operating units, rose by almost 55% over the same period last year with Asia achieving a 76% increase and Europe 57%, due to considerable expansion in Ireland and its feeder factories in mainland Europe. Trading between divisions increased by 90%. The data/telecommunications side of the business grew at a higher rate than the remaining parts. Analysing sales by product category, data/telco products (including medical assemblies) doubled in sales value over the comparative period resulting in a shift in the balance of the business. Data/telco products represented 61% of the business (up from 46% in 1999/00), power cord products 32% (down from 45%) and harnesses 7% (down from 9%). As a result, sales into the data/telecommunications market (including power cords) rose 3% to 71% of Group sales with sales into the appliance markets accounting for 22% (last year - 243%). Sales into the vehicle and aerospace markets, whilst growing satisfactorily, accounted for 7% of the total. The Group operating profit, before goodwill amortisation of £0.4m, rose by 74% to £18.1m, giving a margin on sales of 8.3 % as compared with 7.3% in the first half of last year net of acquisitions: this increase in margin was largely volume driven. After goodwill amortisation, the operating profit increased by 73%. Interest payable in the half year of £2m (last year - £1.2m) was 8.8 times covered, the increased charge reflecting both higher average borrowings and also interest rate rises. The Group's pre-tax profit for this half year (before goodwill amortisation) was £16.1m, an increase of 76% over the comparative period. With the composite tax charge falling 3% compared to last year's first half to 29% due to the geographic mix of profits and to the tax rates applying to acquisitions made at the end of last year, total earnings were up by 95% to £11.2m with headline earnings per share increasing to 40.7p. The impacts of changes in currency translation rates were not material, with sales and profits benefiting by 2% and 3% respectively whilst the net interest charge was adversely impacted by £0.1m. During the half year, net borrowings increased by £12.7m to £56.6m, so increasing the gearing to 83% from 74% at the end of last year. Capital expenditure totalled £6.7m, up £0.5m over the same period last year: this represents a multiple over depreciation of 1.7 times and reflects investment in additional capacity and technology. Working capital increased by £18m to support the higher activities in the first half year. INTERIM DIVIDEND The Board has declared an interim dividend of 9.4p per ordinary share, an increase of 8%. This will be paid on 22 January 2001 to shareholders on the register on 22 December 2000. THE FUTURE The Group strategy remains unchanged. We remain focussed on those market opportunities world-wide where our global operations can provide full support to the Group's multinational customer base. The markets we serve, particularly in data and telecommunications, continue to provide exciting opportunities as new market entrants emerge as our customers and global rationalisation and consolidation progresses. We are concentrating particularly on expansion in the areas of fibre optic and RF technology. We envisage average annual growth of sales and operating profit of 15% to 20% and have set a target of achieving £1 billion in sales within five years. Subject to no unforeseen major downturn in our markets, we anticipate a strong result for the year as a whole R.W. Goodall Chairman 8th November 2000 GROUP PROFIT AND LOSS ACCOUNT (unaudited) Six months to Six months to Year to 30 September 30 September 31 March 2000 1999 2000 £'000 £'000 £'000 Turnover Continuing operations 217,189 143,784 319,807 ======= ======= ======= Operating profit Continuing operations 18,121 10,431 26,395 Goodwill amortisation (409) (197) (419) ------------------------------------ Operating profit on continuing operations after goodwill 17,712 10,234 25,976 Costs of a fundamental restructuring ofcontinuing operations (see note 3) - - (1,900) Profit on sale of tangible fixed asset ofcontinuing operations (see note 3) - - 1,920 ------------ ----------- ----------- Profit on ordinary activities before finance charges 17,712 10,234 25,996 Interest payable (net) (2,003) (1,249) (2,872) ------------ ------------ ---------- Profit on ordinary activities before taxation 15,709 8,985 23,124 Tax on profit on ordinary activities (4,555) (2,875) (7,010) ------------ ------------- --------- Profit on ordinary activities after taxation 11,154 6,110 16,114 Minority Interests - (380) (819) ------------ ---------------------- Profit attributable to shareholders 11,154 5,730 15,295 Dividends paid and proposed (2,710) (2,471) (7,299) ----------- ------------ ---------- Retained profit for the period 8,444 3,259 7,996 ======= ======= ======= Basic earnings per ordinary share (pence) 39.2p 20.3p 54.0p Headline earnings per ordinary share* (pence) 40.7p 21.0p 55.5p Diluted earnings per ordinary share (pence) 38.8p 20.1p 53.5p Dividend per ordinary share (pence) 9.4p 8.7p 25.7p * pre goodwill amortisation INTERIM DIVIDEND The Directors have declared an interim dividend in respect of the year ending 31 March 2001 of 9.4p (2000 - 8.7p) net per ordinary share. This dividend will be paid on 22 January 2001 to shareholders on the register on 22 December 2000 and will absorb £2,681,047 (2000 - £2,466,223). STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months to Six months to Year to 30 September 30 September 31 March 1999 2000 2000 £'000 £'000 £'000 Profit for the period 11,154 5,730 15,295 Currency variations 106 (808) (1,590) ----------- ---------------------- Total recognised gains for the period 11,260 4,922 13,705 ====== ====== ====== GROUP BALANCE SHEET (abridged and unaudited) As at As at As at 30 September 30 September 31 March 2000 1999 2000 £'000 £'000 £'000 Fixed assets Intangible 14,409 7,789 14,817 Tangible 46,369 44,783 42,731 ----------- ---------------------- 60,778 52,572 57,548 ======= ======= ======= Current assets Stocks 58,537 37,946 48,201 Debtors 79,194 55,677 67,645 Current asset investments 445 504 445 Cash at bank and in hand 11,432 9,206 12,691 ----------- ---------------------- 149,608 103,333 128,982 ----------- ---------------------- Creditors: Amounts falling due within one year: Borrowings and finance liabilities (8,252) (6,641) (15,310) Trade creditors and provisions (71,634) (52,436) (68,523) ----------- ---------------------- (79,886) (59,077) (83,833) ----------- ---------------------- Net current assets 69,722 44,256 45,149 ----------- ---------------------- Total assets less current liabilities 130,500 96,828 102,697 Creditors: Amounts falling due after one year: Borrowings and finance liabilities (59,725) (40,018) (41,185) Other liabilities (2,339) (824) (2,238) ----------- ----------- ----------- Net assets 68,436 55,986 59,274 ====== ====== ====== Represented by: Share capital 7,210 7,156 7,170 Reserves 61,226 47,809 52,104 ----------- ---------------------- Shareholders' funds 68,436 54,965 59,274 Minority Interest - 1,021 - ----------- ---------------------- Total capital employed 68,436 55,986 59,274 ====== ====== ====== Gearing 82.6% 68.1% 73.9% MOVEMENTS IN SHAREHOLDERS' FUNDS As at As at As at 30 September 30 September 31 March 2000 1999 2000 £'000 £'000 £'000 Profit for the period 11,154 5,730 15,295 Dividends (2,710) (2,471) (7,299) ----------- ---------------------- 8,444 3,259 7,996 Currency variations 106 (808) (1,590) New share capital subscribed 612 162 516 ----------- ---------------------- Net increase 9,162 2,613 6,922 Opening shareholders' funds 59,274 52,352 52,352 ----------- ---------------------- Closing shareholders' funds 68,436 54,965 59,274 ====== ====== ====== GROUP CASH FLOW STATEMENT (abridged and unaudited) Six months to Six months to Year to 30 September 30 September 31 March 2000 1999 2000 £'000 £'000 £'000 Net cash inflow from operating activities Operating profit 17,712 10,234 25,976 Depreciation 3,828 3,376 7,102 Goodwill amortised 409 197 419 Other items - working capital and movements in provisions (17,474) (5,494) (18,058) ----------- ---------------------- 4,475 8,313 15,439 ======= ======= ======= Returns on investments and servicing of finance Interest received/(paid) (1,887) (461) (2,180) Preference dividends paid - (3) (6) ----------- ---------------------- Net cash outflow from returns on investments and servicing of finance (1,887) (464) (2,186) ======= ======= ======= Taxation paid (3,518) (4,037) (6,225) ======= ======= ======= Capital expenditure Purchase of tangible fixed assets (6,645) (6,162) (10,467) Sale of tangible fixed assets and current asset investments 256 91 7,210 ----------- -------------------- Net cash outflow from capital expenditure (6,389) (6,071) (3,257) ====== ====== ====== Acquisitions Purchase of businesses - (17,048) (23,018) Deferred consideration paid (1,726) (636) (802) Net cash balances on acquisition - 10 1,095 ----------- ---------------------- Net cash outflow from acquisitions (1,726) (17,674) (22,725) ====== ====== ====== Equity dividends paid - (2,316) (9,253) ====== ====== ====== Cash outflow before use of liquid resources and financing (9,045) (22,249) (28,207) ====== ====== ====== Net cash inflow from management of liquid resources - 2,000 2,000 ====== ====== ====== Financing Issue of ordinary share capital 612 162 516 Increase in short term borrowings 15,355 15,337 14,936 ----------- ---------------------- Net cash inflow from financing 15,967 15,499 15,452 ====== ====== ====== Increase/(Decrease) in cash in period 6,922 (4,750) (10,755) ====== ====== ====== NOTES TO GROUP RESULTS 1. The summarised results for the half year to 30 September 2000 have been prepared under the historical cost convention modified to include, where considered appropriate, the revaluation of land and buildings and in accordance with the accounting policies adopted in the accounts for the year to 31 March 2000. These and the comparative results for the half year to 30 September 1999 are non-statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have not been reported upon by the auditors under Section 235 of the Companies Act 1985. 2. SEGMENTAL INFORMATION Turnover by Geographical Area Six months to Six months to Year to 30 September 30 September 31 March 2000 1999 2000 £'000 £'000 £'000 By destination: United Kingdom 32,780 30,212 60,405 Republic of Ireland 1,624 1,903 3,783 Other Europe 51,391 23,371 64,782 ---------- -------------------- Total Europe 85,795 55,486 128,970 Americas 94,160 67,783 148,183 Asia 37,234 20,515 42,654 ---------- -------------------- Total 217,189 143,784 319,807 ======== ======== ======= By source: United Kingdom 36,556 34,098 73,383 Republic of Ireland 43,260 22,572 57,614 Other Europe 11,198 1,430 4,644 ---------- -------------------- Total Europe 91,014 58,100 135,641 Americas 98,543 69,090 150,037 Asia 51,135 28,982 65,485 ---------- -------------------- 240,692 156,172 351,163 Less: Intra Group (23,503) (12,388) (31,356) ---------- -------------------- Total 217,189 143,784 319,807 ====== ======== ======= Operating profit, profit before tax and net assets by geographical area and by type of business are not given as such disclosure is considered by the directors to be seriously prejudicial to the interests of the Group. All activity has arisen from continuing operations. 3. (i)Costs of a fundamental restructuring of continuing operations The costs of a fundamental restructuring of the continuing operations of the Group's UK power cord manufacturing activities amounted to £1,900,000 in 1999/2000. The taxation treatment of these costs resulted in a reduction of £511,000. (ii)Profit on sale of a tangible fixed asset of continuing operations The profit on the sale of a factory in the UK during 1999/2000 amounted to £1,920,000. The tax effect of this exceptional item was an increased charge of £220,000. 4. The figures for the year ended 31 March 2000 have been extracted from the statutory accounts which have been filed with the Registrar of Companies. The audit report was unqualified and did not contain any statement under section 237(2) and (3) of the Companies Act 1985. 5. The Group tax charge for the period is based on anticipated tax rates for the year as a whole and has been influenced by the differing tax rates in the UK and in the various overseas countries in which the Group operates. 6. The calculation of earnings per share are based on the following profits and numbers of shares: Basic and diluted Six months to Six months to Year to 30 September 30 September 31 March 2000 1999 2000 Pre-tax profit (before goodwill amortisation) 16,118 9,182 23,543 Taxation (4,555) (2,875) (7,010) --------- -------------------- Profit for the period (before goodwill amortisation) 11,563 6,307 16,533 Preference dividends (3) (3) (6) Minority interests - (380) (819) -------- -------- -------- Headline earnings 11,560 5,924 15,708 Goodwill amortisation (409) (197) (419) -------- -------- -------- Net profit for the financial year 11,151 5,727 15,289 ===== ===== ===== No. of shares No. of shares No. of shares For basic earnings per share 28,430,964 28,274,245 28,307,204 Exercise of share options 313,277 197,710 288,640 ----------------------------------------- For diluted earnings per share 28,744,241 28,471,955 28,595,844 =========== ========== ========== Basic earnings per share (full) 39.2p 20.3p 54.0p Headline earnings per share (full) 40.7p 21.0p 55.5p Diluted earnings per share (full) 38.8p 20.1p 53.5p 7.CASH FLOW (i) Analyses of net debt 1 April Cash flow Exchange 30 September 2000 movement 2000 £'000 £'000 £'000 £'000 Cash at bank and in hand 12,691 (1,327) 68 11,432 Overdraft (15,310) 8,249 (1,191) (8,252) 6,922 Loans (41,185) (15,355) (3,185) (59,725) -------- -------- -------- -------- Net debt (43,804) (8,433) (4,308) (56,545) -------- -------- -------- -------- (ii) Reconciliation of net cash flow to movement in net debt Six months to Six months to Year to 30 September 30 September 31 March 2000 1999 2000 £'000 £'000 £'000 Increase/(Decrease) in cash in the period 6,922 (4,750) (10,755) Cash inflow from increase in debt and lease financing (15,355) (15,337) (14,936) Cash inflow from decrease in liquid resources - (2,000) (2,000) ---------- ----------- --------- Change in net debt resulting from cash flows (8,433) (22,087) (27,691) Translation difference (4,308) 986 239 ------------ ---------- -------- Movement in net debt in the period (12,741) (21,101) (27,452) Net debt at beginning of year (43,804) (16,352) (16,352) ----------- ---------- --------- Net debt at the end of the period (56,545) (37,453) (43,804) ====== ====== ====== Note: Copies of this interim report are being sent to all shareholders. Copies can also be obtained from the Company Secretary, Volex Group p.l.c., Dornoch House, Kelvin Close, Birchwood Science Park, Warrington WA3 7JX.

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