Interim Results

Volex Group PLC 7 November 2001 Volex Group p.l.c. Unaudited interim results for the half-year ended 30 September 2001 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 2001: Highlights Six months ended 30 September 2001 2000 Turnover £159.9m £217.2m Operating profit* £2.9m £18.1m Pre-tax profit* £1.1m £16.1m Earnings per share (headline) 3.2p 40.7p Dividend per share 5.5p 9.4p - First half sales down 26%, broadly as anticipated - Operating profit of £2.9m despite large drop in volume - £9m p.a. reduction in cost base - Strong cash flow - borrowings reduced by £10.4m * pre goodwill amortisation Commenting on results and prospects, Mr. Bill Goodall, Chairman of Volex, said: 'The results for the half-year to 30 September 2001 were broadly as anticipated following the downturn in business experienced from the final quarter of last year. The Group worked hard to optimise all business opportunities, in particular by broadening its base with existing and target global customers. In addition the Group concentrated on two basic business objectives, these being to generate cash, and so reduce its borrowings, and to reduce and where possible eliminate costs.' 'A combination of reductions in the cost base and anticipated sales revenue increases should enable the Group steadily to improve its margin levels in the future.' 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 Weber Shandwick Square Mile 020 7601 1000 Chris Lynch / Graham Herring REPORT OF THE DIRECTORS On the results for the half-year to 30 September 2001 The results for the half-year to 30 September 2001 were broadly as anticipated following the downturn in business experienced from the final quarter of last year. The Group worked hard to optimise all business opportunities, in particular by broadening its base with existing and target global customers. In addition the Group concentrated on two basic business objectives - to generate cash, and so reduce its borrowings, and to reduce and where possible eliminate costs. Sales in the first half-year of £159.9m were 26% down on the same period last year. The operating profit for the period, before goodwill amortisation of £0.4m, was £2.9m. Profit before tax and goodwill amortisation was £1.1m and headline earnings per share were 3.2p. The Group's borrowings were reduced by £10.4m to £48m. OPERATIONS The Group has focussed on broadening the customer base and adapting to the major changes in its market place. Consolidation within our markets has accelerated, both at the level of the original equipment manufacturer (OEM) and of the contract electrical manufacturer (CEM). At the same time the outsourcing programmes of our OEM customers to the major CEMs have continued apace. Part of the strategy of many of the CEMs involves the development of a global cable assembly supply base with the capability of providing new product design and development services. This is leading to a significant consolidation in the CEM current supply base and these changes are playing to the strengths of Volex. Our positioning as a flexible, responsive global supplier providing a total supply chain management solution, from early involvement in product design to full line production and logistical support, is proving just as attractive to the CEM market as it has to the OEMs. Through these developing relationships Volex is gaining exposure to a wider range of opportunities, both in terms of product and customer base. We have, therefore, pro-actively targeted certain additional OEMs and CEMs during the first half year and successfully established Volex as one of their key global suppliers of cable assemblies. These actions have also been supported by continued investment in new product development across the whole range of our technologies, including copper, RF (radio frequency), fibre optic and power cable assemblies. Markets generally have been very difficult across all regions and sectors of our business, with our industry experiencing the worst conditions in recent memory. Against this background, sales were significantly down in the first half-year. Indications are, however, that activity rates have stabilised at current levels. The hardest hit of our markets have been the infocom businesses in Europe and the Americas. More stable conditions have been experienced in the Chinese infocom market, where we see upside potential. The consumer appliance markets have also been adversely affected during this period. The number of employees throughout the Group has reduced from a peak of 13,500 last November to less than 9,000 today. The flexible nature of our workforce has enabled this action to be taken with minimal cost impact. In addition, other management actions taken and announced to date to restructure operations will reduce the Group's fixed overhead expenses by around £9m on an annualised basis. This will be augmented by further management action as required to align the cost base of the Group to developing market conditions and to ensure satisfactory returns. The Group could currently increase output by 50% with only minimal additional fixed overhead and capital expenditure and, despite the depressed state of markets overall, we continue to see opportunities for growth. For example, this year we have established facilities in Jakarta, Indonesia and Hanoi, Vietnam in support of Japanese companies moving offshore to lower cost manufacturing locations. FINANCIAL REVIEW Turnover for the half-year at £159.9m showed a 26% decline compared with last year, with sales stabilising at about 80% of the average levels for the second half of last year. The largest downturn in first half sales was recorded in Europe which were 38% down, with sales to customers in the Americas being down by 28%. By contrast, sales in the period to customers in Asia increased by 5%. A geographical analysis of where the Group manufactures its total output in sales values, including inter-unit trading, now shows the Americas at 40% of the Group total, Europe at 34% and a 5% increase in Asia to 26%. A review of turnover by market shows that the infocom market accounted for 71% of Group sales with the value of sales into this market declining by 30%. Sales into the appliance markets represented 19% of Group sales with the sales value down by 27%. Sales into the harnesses markets grew by 10% overall over the same period last year and represented 10% of Group sales. The Group operating profit before goodwill amortisation of £0.4m was £2.9m, giving a margin on sales of 1.8% as compared with 8.3% last year. The sales reduction of 26% had a major adverse effect on the recovery of fixed overhead expenses which have progressively reduced throughout this first half year. Trading conditions resulted in a higher than usual incidence of bad debts amounting to some £0.5m beyond the norm. A comparison of the Group's fixed overhead expenses anticipated for the fourth quarter of this year with the level of costs prevailing during the record third quarter of last year indicates a saving in the region of £9m p.a. This includes the benefits anticipated from the closure of a USA east coast plant, announced shortly after the end of the half-year: the anticipated closure costs of £1.1m will be a one-off charge in the second half of this year whilst a proportion of the annualised cost savings estimated at £1.4m will benefit the final quarter. Also included are savings which will be realised from the reorganisation of the UK power cord operations, the costs of which were charged as exceptional items in prior years, and which in a full year give savings of £1.5m, and from other management actions elsewhere in the Group. Interest payable in the first half-year was £1.9m, slightly down on the comparative period last year. Given the lower net borrowings position and lower interest rates, in particular for US$, the Group anticipates the second half interest charge will show a further reduction. The Group pre-tax profit for the half-year, before goodwill amortisation, was £1.1m. As anticipated the Group's tax charge has fallen to 25% as compared with 29% for the last full year. Headline earnings per share for this half-year were 3.2p (last year - 40.7p). The interim dividend of 5.5p per share will absorb £1.6m and will be funded in part by a transfer of £1.1m from reserves. The impacts of changes in currency translation rates on sales were not material - 1.5% favourable - with no impact being recorded on operating profit. During the half-year, net borrowings fell by £10.4m of which £1.8m relates to currency translation differences. Consequently, gearing fell to 69% from 82% at the end of last year. Including currency translation differences, net current assets employed in the business (excluding cash) fell by £9.6m. Working capital fell by £9.8m net of which stock accounted for £13.3m. Capital additions were restricted to high priority projects and totalled £3.2m: this represented a multiple of depreciation of 0.8 and compared with a multiple of 1.8 for last year as a whole. INTERIM DIVIDEND In the light of current conditions the Board has declared a reduced interim dividend of 5.5p per share. The Board will consider the final dividend in the light of the results for the full-year. THE FUTURE Despite the deep downturn in trade, the Group's strategy is to remain focussed upon global market opportunities in support of our existing and potential multinational customers. We believe our current sales and marketing activities have positioned us well for an upturn when it occurs in our major markets and that we will benefit from the increasing pace of consolidation of our customers' supply base. We consider the most likely scenario is that we will achieve similar or slightly increased sales in the second half of this year to those reported for the first half and that this level of trading is likely to continue through to the mid-point of our 2002/3 financial year. Thereafter there appear to be prospects for an upturn in business arising from the broadening of our customer base, further rationalisation in our industry and the start of a recovery in the infocom market. In particular we expect to benefit by increasing our market share with many of the CEMs. We anticipate that the second half of the current year should benefit from realising about a third of the £9m annualised reductions in the cost base referred to earlier. A combination of these reductions in the cost base and anticipated sales revenue increases should enable the Group steadily to improve its margin levels in the future. R.W. Goodall Chairman 7 November 2001 GROUP PROFIT AND LOSS ACCOUNT (unaudited) Six months to Six months to Year to 30 September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 Turnover Continuing operations (see note 2) 159,908 217,189 418,299 ======= ======= ======= Operating profit Continuing operations 2,919 18,121 35,219 Goodwill amortisation (435) (409) (899) ------- ------- ------- Operating profit on continuing operations after goodwill 2,484 17,712 34,320 Costs of a fundamental restructuring of continuing operations (see note 3) - - (3,344) ------- ------- ------- Profit on ordinary activities before finance charges 2,484 17,712 30,976 Interest payable (net) (1,851) (2,003) (4,448) ------- ------- ------- Profit on ordinary activities before taxation 633 15,709 26,528 Tax on profit on ordinary activities (158) (4,555) (7,690) ------- ------- ------- Profit on ordinary activities after taxation 475 11,154 18,838 Dividends paid and proposed (1,582) (2,710) (8,028) ------- ------- ------- (Loss)/profit for the period transferred to reserves (1,107) 8,444 10,810 ======= ======= ======= Basic earnings per ordinary share (pence) 1.7p 39.2p 66.1p Headline earnings per ordinary share* (pence) 3.2p 40.7p 79.9p Diluted earnings per ordinary share (pence) 1.6p 38.8p 65.4p Dividend per ordinary share (pence) 5.5p 9.4p 28.0p * pre goodwill amortisation INTERIM DIVIDEND The Directors have declared an interim dividend in respect of the year ending 31 March 2002 of 5.5p (2001 - 9.4p) net per ordinary share. This dividend will be paid on 22 January 2002 to shareholders on the register on 21 December 2001 and will absorb £1,573,145 (2001 - £2,682,368). STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months to Six months to Year to 30 September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 Profit for the period 475 11,154 18,838 Currency variations (809) 106 732 ------- ------- ------- Total recognised (losses)/gains for the period (334) 11,260 19,570 ====== ====== ====== GROUP BALANCE SHEET (abridged and unaudited) As at As at As at 30 September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 Fixed assets Intangible 14,409 14,409 14,844 Tangible 47,161 46,369 49,335 ------- ------- ------- 61,570 60,778 64,179 ======= ======= ======= Current assets Stocks 45,139 58,537 58,982 Debtors 58,002 79,194 70,704 Current asset investments - 445 - Cash at bank and in hand 19,888 11,432 18,632 ------- ------- ------- 123,029 149,608 148,318 ------- ------- ------- Creditors: - Amounts falling due within one year: Borrowings and finance liabilities (8,141) (8,252) (15,454) Trade creditors and provisions (46,822) (71,634) (63,814) ------- ------- ------- (54,963) (79,886) (79,268) ------- ------- ------- Net current assets 68,066 69,722 69,050 ------- ------- ------- Total assets less current liabilities 129,636 130,500 133,229 Creditors: - Amounts falling due after one year: Borrowings and finance liabilities (59,793) (59,725) (61,591) Other liabilities (21) (2,339) (21) ------- ------- ------- Net assets 69,822 68,436 71,617 ====== ====== ====== Represented by: Share capital 7,231 7,210 7,223 Reserves 62,591 61,226 64,394 ------- ------- ------- Total capital employed 69,822 68,436 71,617 ====== ====== ====== Gearing 68.8% 82.6% 81.6% MOVEMENTS IN SHAREHOLDERS' FUNDS As at As at As at 30 September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 Profit for the period 475 11,154 18,838 Dividends (1,582) (2,710) (8,028) ------- ------- ------- (1,107) 8,444 10,810 Currency variations (809) 106 732 New share capital subscribed 121 612 801 ------- ------- ------- Net increase (1,795) 9,162 12,343 Opening shareholders' funds 71,617 59,274 59,274 ------- ------- ------- Closing shareholders' funds 69,822 68,436 71,617 ====== ====== ====== GROUP CASH FLOW STATEMENT (abridged and unaudited) Six months to Six months to Year to 30 September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 Net cash inflow from operating activities (see note 7) 16,863 4,475 24,506 ======= ======= ======= Returns on investments and servicing of finance Interest paid (net) (1,466) (1,887) (3,949) Preference dividends paid (3) - (3) ------- ------- ------- Net cash outflow from returns on investments and servicing of finance (1,469) (1,887) (3,952) ======= ======= ======= Taxation paid (2,157) (3,518) (6,520) ======= ======= ======= Capital expenditure Purchase of tangible fixed assets (3,453) (6,645) (14,419) Sale of tangible fixed assets and current asset investments 425 256 870 Capital element of finance leases 121 - - ------- ------- ------- Net cash outflow from capital expenditure (2,907) (6,389) (13,549) ====== ====== ====== Acquisitions Deferred consideration for subsidiary undertakings (1,774) (1,726) (2,155) ------- ------- ------- Net cash outflow from acquisitions (1,774) (1,726) (2,155) ====== ====== ====== Equity dividends paid - - (7,529) ====== ====== ====== Cash inflow/(outflow) before use of liquid resources and financing 8,556 (9,045) (9,199) ====== ====== ====== Net cash inflow from management of liquid resources - - - ====== ====== ====== Financing Issue of ordinary share capital 121 612 801 Increase in short term borrowings - 15,355 15,381 ------- ------- ------- Net cash inflow from financing 121 15,967 16,182 ====== ====== ====== Increase in cash in period 8,677 6,922 6,983 ====== ====== ====== NOTES TO GROUP RESULTS 1. The summarised results for the half-year to 30 September 2001 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 2001. These and the comparative results for the half year to 30 September 2000 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 2001 2000 2001 £'000 £'000 £'000 By destination: United Kingdom 26,245 32,780 65,500 Republic of Ireland 1,705 1,624 5,140 Other Europe 25,111 51,391 95,193 ------- ------- ------- Total Europe 53,061 85,795 165,833 Americas 67,758 94,160 188,436 Asia 39,089 37,234 64,030 ------- ------- ------- Total 159,908 217,189 418,299 ====== ====== ====== By source: United Kingdom 32,065 36,556 74,241 Republic of Ireland 20,838 43,260 83,977 Other Europe 5,698 11,198 22,090 ------- ------- ------- Total Europe 58,601 91,014 180,308 Americas 70,456 98,543 194,579 Asia 45,245 51,135 94,884 ------- ------- ------- 174,302 240,692 469,771 Less: Intra Group (14,394) (23,503) (51,472) ------- ------- ------- Total 159,908 217,189 418,299 ====== ====== ====== 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. Costs of a fundamental restructuring of continuing operations In the comparative period costs of a fundamental restructuring of the continuing operations of the Group's UK power cord manufacturing activities amounted to £3,344,000. The taxation treatment of these costs resulted in a reduction of £319,000. 4. The figures for the year ended 31 March 2001 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 2001 2000 2001 £000 £000 £000 Profit for the financial year 475 11,154 18,838 Preference Dividends (3) (3) (6) ------- ------- ------- Basic earnings 472 11,151 18,832 Goodwill amortisation 435 409 899 Exceptional net - - 3,344 Tax on exceptional items - - (319) ------- ------- ------- Headline earnings 907 11,560 22,756 ===== ===== ===== No. of shares No. of shares No.of shares For basic earnings per share 28,581,799 28,430,964 28,487,198 Exercise of share options 80,471 313,277 303,928 ------- ------- ------- For diluted earnings per share 28,662,270 28,744,241 28,791,126 ======== ======== ======== Basic earnings per share 1.7p 39.2p 66.1p Headline earnings per share 3.2p 40.7p 79.9p Diluted earnings per share 1.6p 38.8p 65.4p 7. CASH FLOW (i) Reconciliation of operating profit to net cash inflow from operating activities Six months to Six months to Year to 30 September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 Operating profit 2,484 17,712 34,320 Depreciation 4,155 3,828 7,883 Goodwill amortised 435 409 899 Decrease/(Increase) in stocks 13,266 (9,516) (9,664) Decrease/(Increase) in debtors 11,174 (9,779) (1,903) (Decrease)/Increase in creditors (14,371) 1,867 (6,278) Other items (280) (46) (751) ------- ------- ------- 16,863 4,475 24,506 ===== ====== ===== (ii) Analyses of net debt 1 April Cash flow Exchange 30 September 2001 movement 2001 £'000 £'000 £'000 £'000 ----- Cash at bank and in hand 18,632 1,600 (344) 19,888 Overdraft (15,454) 7,077 295 (8,082) ----- 8,677 Loans (61,591) 0 1,860 (59,731) Finance Leases 0 (121) 0 (121) -------- -------- -------- -------- Net debt (58,413) 8,556 1,811 (48,046) -------- -------- -------- -------- (iii) Reconciliation of net cash flow to movement in net debt Six months to Six months to Year to 30 September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 Increase in cash in the period 8,677 6,922 6,983 Cash inflow from increase in debt and lease financing (121) (15,355) (15,381) -------- -------- -------- Change in net debt resulting from cash flows 8,556 (8,433) (8,398) Translation difference 1,811 (4,308) (6,211) -------- -------- -------- Movement in net debt in the period 10,367 (12,741) (14,609) Net debt at beginning of year (58,413) (43,804) (43,804) -------- -------- -------- Net debt at the end of the period (48,046) (56,545) (58,413) ====== ====== ====== ______________________________________________________________________________ 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. The presentation being made to stockbroking analysts on Wednesday 7 November 2001 will be on the Company's web site www.volex.com from 11.00 a.m. that day.

Companies

Volex (VLX)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today