Preliminary Results

RNS Number : 5965H

Volex Group PLC

01 June 2011

 



For immediate release                                                                                                                                     1 June 2011

VOLEX GROUP PLC

Preliminary Announcement of the Group Results

for the Financial Year ended 3 April 2011

Volex Group plc ("Volex"), the global provider of customised electrical and optical interconnect solutions, today announces its preliminary results for the financial year ended 3 April 2011.

Financial Highlights

·   Revenue up 38% (35% at constant currency) to £316.0m (FY2010: £229.0m)

·   Normalised operating profit⁽ⁱ⁾ up 64% on prior year, at £16.8m (FY2010: £10.3m)

·   Profit before tax up 89% to £13.1m (FY2010: £6.9m)

·   Normalised diluted earnings per share⁽ⁱⁱ⁾ (EPS) up 130% to 20.9p (FY2010: 9.1p). Basic EPS of 18.9p (FY2010: 9.3p)

·   Working capital as a % of sales improved to 14.5% from 15.6% in FY2010

·   Net debt reduced to £4.6m at 3 April 2011 (4 April 2010: £7.6m)

·   Resumption of dividend - dividend of 2p per ordinary share proposed

·   Debt refinancing completed, securing a new 4 year US$75m committed facility with a further US$150m pre-negotiated for potential acquisitions

(i)               Normalised operating profit is defined as operating profit before share-based payments

(ii)             Normalised earnings per share is defined as earnings per share before share-based payments

Operational Highlights

·   Strong growth achieved across all sectors, generating ten year high revenue and operating profit

·   New product development in high-speed interconnects for the datacoms markets and interconnect solutions for next generation X-Ray and MRI machines

·   New business wins and increased allocations in existing accounts through improved engagement with customers

·   Increased investment in our engineering and design capability bringing benefits to customers

·   Achieved productivity gains through improved utilisation of plant and equipment

·   Significant progress made in our IT systems and infrastructure development programme

Outlook

The Chairman of Volex, Mike McTighe, commented:

"The Group has continued to make significant progress in FY2011, generating sustainable revenue growth and improving the quality of its earnings, following another year of transformation in FY2010. Your company now has a solid basis from which it can grow further.  The Board and Executive are exploring all opportunities, both organic and otherwise, to further accelerate the development of the business.  We face exciting times in the global markets that we serve and we intend to take full advantage of the opportunities out there!

As a result of our growing confidence in the business, I am delighted to report that the Board will be recommending to its shareholders a return to paying a dividend"

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 limitation, 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 strategic plan 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.

For further information please contact:

Volex Group plc                                                                                 [phone]

Ray Walsh, Group Chief Executive

Andrew Cherry, Group Finance Director

Buchanan Communications                                                           [phone]

Charles Ryland

Helen Chan

Chairman's Statement

Following significant restructuring of the Group in FY2010, Volex has been successful in restoring growth to the business, producing a set of results which demonstrates the progress made in delivering on our operational strategy. Revenue and operating profit in FY2011 were the highest they have been for ten years and we are confident that this growth will continue as the benefits from our investments in people, processes and systems flow fully into increasing revenue, improving margins and greater profitability.

Significant growth

The Group's new sector focus and unified, global structure has achieved pleasing results. Revenue of £316m was 38% ahead of last year (FY2010: £229m) and normalised operating profit* increased 64%, to £16.8m (FY2010:£10.3m), despite significant raw material price pressure. Importantly, second half operating profit was in line with the first half despite these substantial increases in input costs, underlining the increased consistency and resilience of the business and reflective of management's focus on improving the quality of earnings. Normalised diluted earnings per share* increased by 130% to 20.9p (FY2010:9.1p).

Dividend

As a result of our confidence in the Group's prospects, I am pleased to report that the Board is recommending a dividend of 2p per ordinary share, to be paid following shareholder approval at the AGM on 25 July 2011.

People

After several years of rebuilding, the executive team is fully established and working well together to deliver consistent, co-ordinated performance and increased value for our customers.  The executive team's mandate is consistent with previous years: to deliver further growth and improving margins by focusing on increasing Volex design content, closer customer focus and efficient manufacturing processes.

Refinancing an indicator of improved market confidence

On 31 May 2011 the Group completed a refinancing exercise to replace our existing banking facilities that had been due to expire in 2012. This new facility is more flexible than the previous lending arrangements and is more consistent with our strategic objectives and operational needs. The addition of HSBC and Clydesdale to our banking group alongside Lloyds and the agreement of improved terms reflect increased confidence in the Group. This new facility will support the Group's next stage of organic and inorganic growth.

Outlook

The Board is pleased with trading performance in FY2011 but is aware of the challenges we face in building on this success, particularly given current commodity price volatility. We recognise the need to maintain our focus on continually improving the core performance of our business, in selling highly valued connection solutions, in building greater engineering expertise and in striving for excellence in our manufacturing and supply chain, all underpinned by an ongoing programme of internal improvements to people, systems and processes.

As a result of this focus, the Group is positioned to achieve higher quality single digit percentage revenue growth in FY2012 and improved gross margins, with the latter expected to exit next year at around 20%.

Across the business it has been a challenging but rewarding and successful year, delivering sales growth while building profitability.  I would like to thank all our employees in every location for their hard work in achieving our results in FY2011 and in positioning the business for sustainable profitable growth.

*           Before share based payments (see note 10 to the accompanying summarised Financial Statements)

CEO Review

Volex has delivered a robust performance in the FY2011 and we are already seeing the results of our "Return to Growth" theme set out in our annual report last year.  The business has generated significant revenue growth across all major geographies and market sectors in the last 12 months, driven by further penetration into existing strategic accounts and successful conversion of new accounts across the business. Alongside this revenue improvement we have generated increased operating profits and a healthy cash flow.

We have strengthened our position in the market relative to our competitors, as a result of the stability and scale brought to the business in the last two years.  Investment in new products and capabilities will begin to deliver not only growth in revenues in the coming year, but also improvements in margins.

To support our growth plans we have invested in the fundamentals of our business; processes, systems and factories.  Introducing 'LEAN' manufacturing processes across Volex has enabled us to maintain a consistent level of labour content per unit of revenue, improving our on-time performance and production quality through the year; and we have equally ambitious goals for the future.  The upgrade and consolidation of software and IT platforms is providing the data we need for informed decision making to keep us on course.  Furthermore, these initiatives are helping us build strategic relationships with existing customers and providing opportunities to expand our reach into adjacent business segments and product families.  

Developing a clear strategy

Having stabilised the business in FY2009 and positioned the business for significant growth in FY2010, we have refreshed our strategy for the next phase of our development. The cornerstone of our business model is deeper 'customer engagement'.  We are strengthening relationships with many of our most important customers to position ourselves as their key partner for interconnect solutions, working closely with them to ensure that the interconnect and power products we supply meet their specific business requirements including lower total cost, improved technical performance and shorter development times.  In particular, our sales teams are developing stronger knowledge of our customers' businesses whilst our engineering teams are engaging earlier in customers' product development cycles.

The second key component of our approach is driving Operational Excellence, addressing our manufacturing capabilities and management of our supply chain.  We are delivering an operational transformation programme aimed at enhancing the value we deliver for customers and eliminating waste from all aspects of our manufacturing operations.

One Volex

We have completed our first full year under our global 'one-Volex' organisation which introduced market-sector facing sales teams, global functional teams for Engineering and Operations and lean corporate functions.  Throughout FY2011 and going forward, we are executing on strategies that cut across geographic boundaries to optimise global performance.

We have made several significant appointments during the year, bringing in a new General Manager for India to lead our strategy for growth in that market; strengthening the senior team leading our transformation programmes in manufacturing operations; appointing a new Information Technology Director to lead the IT infrastructure and ERP system improvement programmes; creating a HR director role for our Asia region, with responsibility for employment strategy and practice across six of our manufacturing sites; and hiring a new General Counsel and Head of Corporate Development to improve contracting discipline around the Group and lead our efforts to identify opportunities for acquisitive growth and improved technical competencies.

Driving our Performance

	Revenue			Gross Profit			Gross Margin
	2011	2010		2011	2010		2011	2010
	£m	£m	% Var	£m	£m	% Var	%	%
Consumer	196,336	139,350	41	34,579	30,738	12	17.6	22.1
Telecoms / Data	70,883	59,384	19	13,334	8,769	52	18.8	14.8
Healthcare	26,733	19,281	39	6,281	4,166	51	23.5	21.6
Industrial	22,027	10,980	101	5,215	2,488	110	23.7	22.7
Total	315,979	228,995	38	59,409	46,161	29	18.8	20.2

We achieved a strong sales performance in FY2011. Total revenue was up by 38%, reaching £316m, with all four of our key market sectors, Telecoms/Datacoms, Healthcare, Consumer Products and Industrial, achieving growth. We have identified the top-tier customer accounts in each sector for particular sales growth potential so we can deploy Volex resources to take advantage fully of these opportunities and this approach is yielding positive results.

Sales in our Telecoms/Datacoms sector rose by 19% to £71m, underpinned by our partnerships with two of the world's top-3 telecommunications manufacturers where we provide customised connection solutions. Europe performed strongly and we have built momentum in North America. Our growth in China and the South-East Asia markets has been challenged by keen local price competition and we have responded with continued improvements in our supply chain and stronger emphasis on our design expertise. Excluding India, Telecoms/Datacoms year-on-year revenue growth was 54%.

The North American region was an important contributor to our 39% increase in Healthcare sector sales.  This region accounted for 64% of sector revenues, primarily due to significant growth from sales of our Magnetic Resonance Imaging (MRI) coil cables. Working with our customers at the early stages of design and development allowed us to apply our expertise across a wide portfolio of products including high-performance cable assemblies, high-volume power cords, and complex hybrid cable harnesses.  This has enabled us to achieve critical benefits for customers such as shorter product design cycles and lower total cost of ownership.

The fast growing demand for Internet-connected TVs, living-room gaming consoles, tablet computers and smart phones was a key driver for the 41% increase in revenues in our Consumer Products sector, where turnover was £196m in the year.  We also succeeded in sustaining our market shares in the LCD/LED TVs, computing peripherals and vacuum cleaner segments by focusing on production cost to stay competitive. We retained our leading position in the development of environmentally friendly halogen-free (HF) products, seeing rising demand from manufacturers in the PC / laptop segment for HF power cords for the launch of their new high-end models.

Our Industrial sector continued its strong performance with revenues up 101% to £22m.  In trucking-telematics, our increased activity led to a revenue increase of 144%, while manufacturing automation grew 63%, fuelled by the introduction of further refinements to industry-standard assemblies to aid in the production and design of complex harness assemblies.  In FY2011 we introduced our own products for solar-energy customers, including customer-specific photovoltaic harnesses and a Volex-designed junction box.

Gross profit also increased across all four sectors, although gross margin (gross profit as a percentage of sales) decreased in the year to 18.8% as a result of significant raw material cost increases. As the largest user of copper and oil-based products, the Consumer sector was most affected by these cost pressures, while gross margin in each of the three other sectors all increased year-on-year, reflecting the benefits of improved customer engagement, increased design content, manufacturing efficiencies and operating leverage. 

Operations Performance

We have continued to deploy our 'LEAN' manufacturing approach across our global footprint. This initiative is allowing us to deliver significantly increased volumes from our existing infrastructure through improved productivity. Of equal importance, we have maintained a focus on continually improving quality performance, resulting, for example, in three key sites across Europe and Asia gaining accreditation to the medical standard ISO13485.

During FY2011 we created a new global approach to managing our suppliers and materials costs, reducing our supplier base by over 400 suppliers and we successfully transitioned more customer spend to Volex supply-sources. We were impacted by significant raw-materials cost increases, and we took action to counter these by accelerating operating efficiency programmes, focusing on greater supply-chain optimisation and renegotiating prices with our customer base.

Engineering

In line with our strategy, we have delivered more Volex-engineered solutions for our customers across all our market sectors. These Volex-designed solutions include connectors on the printed circuit board as well as the cable assemblies we supply. Throughout the year we have introduced a new structure, organising our engineering teams to provide local support to each business sector in each region. 

Product innovation is vital for Volex to develop a trusted-partner status with customers.  In FY2011 our product developments have included high-speed interconnects for the datacoms server, storage and switch markets supporting  120 Gb/s (CXP) products and 48 Gb/s (HD SAS) products; in Healthcare we have developed interconnect solutions for next generation X-Ray and MRI machines; and in Consumer Products we have been engaged in developing high data rate video cables for laptop computers.

In Conclusion

We are well along the path we have set to transform our company. The business has been stabilised, growth reinvigorated and our culture and values revitalized. All of these provide a secure foundation for sustained growth and improvement in earnings.

Our revenue growth performance during FY2011 was a considerable achievement and an important step towards delivering our strategy.  Looking forward to the coming year, we are confident our continued focus on key market sectors, product strategies and sales initiatives will maintain sales growth and deliver strong profitability and high quality of earnings.

We enter the new financial year determined to execute our strategies of customer engagement and operational excellence. Underpinning this agenda we continue to invest in enhanced business platforms to allow Volex to run as a single, coherent global company. Critically, we remain focused on having the right team to deliver the results we plan for.  It is our talented and dedicated people across the globe who are the cornerstone for the Group's achievements this year and for realising our potential in the coming years.

Financial Review

The Group has performed well during the year to 3 April 2011, producing a strong set of results which demonstrate the progress made in delivering our operational strategy. 

Revenues in FY2011 were significantly up on the prior year (FY2010) and are the highest they have been for ten years. Encouragingly, while the industry as a whole benefited from improved economic conditions, our improvement was ahead of that of our major competitors. Also importantly, revenue was consistent quarter-on-quarter and we expect this consistency to continue and produce further year-on-year growth next year (FY2012), albeit at a lower rate than enjoyed this year.

Profits were similarly well ahead of last year, principally as a result of strong revenue. Although the Group was adversely impacted by raw material and labour cost increases, particularly in the second half of the year, gross profit, normalised operating profit, normalised profit before tax and normalised earnings per share (adjusting for share-based payments) were all significantly ahead of the previous year - up 29%, 64%, 113% and 134% respectively. Pricing and supply chain initiatives to address these cost pressures have already been implemented and are expected to generate margin improvements in FY2012.

Sharp focus on cash and cash generation has been maintained, enabling us to successfully manage our working capital requirements during this period of increased trading activity. Working capital as a percentage of sales continued to improve during FY2011, allowing us to reduce net debt at year-end, despite significantly increased revenue.

Revenue

Revenue increased to £316m in FY2011, an increase of 38% over FY2010. This increase in revenue was broad based with each of our four sectors reporting significant growth, as we reaped the benefits of our sector-focused strategy. This focus has ensured we work more closely with customers to understand more fully their needs and how these translate into opportunities for Volex. In addition to this further development of our customer engagement model, incremental revenue from new products and further penetration of existing accounts through increased and new allocations of our customer spend, also contributed to the strong revenue performance. Although an element of global economic uncertainty remains, Volex has benefited from a recovery in the economic climate following the financial crisis that impacted FY2010. Currency movements had only a modest positive impact on the year-on-year comparison; on a constant currency basis revenue was up 35% over last year. Constant currency comparisons are derived by translating both years at FY2011 exchange rates.

Revenue in our Telecoms / Datacoms sector increased 19% from £59m last year to £71m in FY2011 (54% excluding India). This was principally as a result of 73% growth in the Europe region, which accounts for more than half of sector revenue. While the Asian and North American markets also recorded good growth, India continued to be a challenging market, with revenue decreasing 57% compared to FY2010. Part of this decline in year-on-year revenue is due to management's decision to not participate in some lower margin feeder cable business, which helped improve sector margins, while external factors, namely the Indian Government's ongoing restrictions on mobile-telecoms operators and equipment suppliers continued to adversely impact business volumes.

Increasing data transmission speeds and bandwidth requirements continued to be a feature of the market and created opportunities for Volex's high-speed copper capabilities in the areas of higher speed 3 and 4G networks and the deployment of high speed internet connections for the home. These high-speed copper capabilities were endorsed by a leading global supplier of connectivity solutions to the Cloud Computing and High Performance Computing segments, when it selected Volex as its preferred partner.

Revenue from our Consumer Products sector increased 41% from £139m last year to £196m in FY2011. Although all regions recorded double digit revenue growth, the Asia region (which accounts for 77% of total sector revenue) was the most significant growth driver, generating a 49% increase in revenue compared to FY2010.

Increased revenue was recorded across the product range. Our partnership with a leading US technology provider in the personal computer and desktop market was particularly successful, where our design expertise and strong customer relationship enabled us to grow revenue in that account significantly. Our industry leading position in halogen-free (HF) products continued to be a source of competitive advantage and we saw the continued migration from traditional PVC-based products to HF amongst OEMs in the computing segment, particularly for their high-end models.

Revenue from our Healthcare sector increased 39% over FY2010, amounting to £27m in FY2011 compared to £19m last year. Much of the growth came from the core North American region, where revenue increased by 53%, following strong sales of increased MRI (Magnetic Resonance Imaging) system coil cables. In this sector particularly, proven production quality, reliability and strong collaborative partnerships with customers, are key to continued success in terms of revenue and margins. Our ongoing collaboration with a major global customer involved in the design and manufacture of patient coils used in MRI systems is evidence of our strengths in the healthcare sector. In this case, a Design Engineer worked on-site, supporting the customer's product development group and providing early-stage design input to improve product performance and reliability. This collaboration is a good example of how Volex is executing on two of its central operational strategies - increased customer engagement and greater Volex designed content. Partly as a result of initiatives such as this, Healthcare gross margins increased from 21.6% in FY2010 to 23.5% in FY2011.

Revenue in our Industrial sector doubled from £11m last year to £22m in FY2011. The sector experienced increased demand in all targeted markets, with the largest segment, trucking telematics, recording year-on-year revenue growth of 144%. Cable assemblies used in the agricultural and manufacturing automation segments also performed strongly, experiencing revenue growth of 121% and 63% respectively. Business in the renewable energy segment, although up 26% year-on-year, was slower than anticipated. Whilst Industrial is the Group's smallest sector and is starting from a low base, the strategy of getting closer to customers and solution selling is proving successful and is expected to generate further growth.

Profits

Gross profit increased to £59.4m in FY2011 from £46.2m in FY2010, an increase of 29%, primarily as a result of the growth in revenue. Increases in raw materials prices, particularly copper, but also to a lesser extent oil and oil-based products, started to adversely impact gross profit as a percentage of sales in the second quarter of FY2011. The impact became more pronounced in the second half of the year, as input prices continued to rise. Although Volex passes on the majority of these cost increases to customers through price rises, the time lag between incurring higher input prices and raising selling prices was the principal driver behind gross margin decreasing to 18.8% from 20.2% in FY2010.

The average copper price in FY2011 was around a third higher than it had been during FY2010. Of particular significance was the unprecedented increase in copper price from the beginning of June 2010 until the end of the financial year, during which period London Metal Exchange copper spot prices increased 54%. In addition to copper, PVC and plasticizer prices also increased significantly. Combined with oil and other component costs, this created a very challenging cost environment for the Group. We remain focused on our strategic objective to increase gross margins and anticipate a recovery in gross margin percentage in FY2011, as full benefits from pricing and supply chain initiatives start to accrue. Furthermore, we are encouraged by the longer-term gross margin trend which is positive.

As the largest user of copper and oil-based products, the Consumer sector was the sector most affected by these cost pressures. Gross margin in the sector decreased to 17.6% in FY2011 from 22.1% in FY2010, with the positive impacts of increased higher margin products and improved operating leverage (amortising fixed factory overheads over an increased revenue base) more than offset by the adverse raw materials cost effects. Reported gross margins in the Telecoms/Datacoms, Healthcare and Industrial sectors all increased year-on-year.

While pricing and supply chain initiatives will continue to be key components in our strategy to improve margins, the continuing focus on designed-in engineering solutions to secure earlier product life-cycle business, where margins are higher and revenue streams longer, will also be significant. In addition, further roll out of 'LEAN' manufacturing methodologies and upgraded manufacturing systems is also expected to contribute to higher gross margins. Importantly, despite the 38% increase in revenue, Volex retains the capacity and flexibility to accommodate further increased activity without the need for significant investment in new plant and machinery.

On a normalised basis, operating profit increased £6.5m (64%) from £10.3m last year to £16.8m in FY2011, while normalised profit before tax increased by £7.9m (113%) from £6.9m in FY2010 to £14.8m in FY2011. Operating expenses (before share-based payments) in FY2011 rose by £6.7m (19%) over FY2010 principally as a result of increased sales revenue, in addition to targeted strategic investments in people, processes and systems in the sales, engineering, IT and supply chain functions. Despite these targeted investments, operating expenses as a percentage of sales improved from 15.7% in FY2010 to 13.5% this year.

Non-recurring items and share based payment charges

The Group incurred £1.0m (FY2010:£3.1m) of non-recurring charges in the year relating to modest restructuring programmes in a number of our facilities. These have been expensed as part of the statutory operating profit of £15.1m. The only reconciling item between statutory operating profit and normalised operating profit is a charge of £1.7m related to share-based payments, in accordance with the requirements of IFRS 2. This charge is in respect of long term incentive plan awards granted to directors and senior management under the Group's various long term incentive programmes. The significant increase in share-based payments costs compared to last year is due to awards made during FY2011 to Executive Directors and senior management to fully align their interests with those of the shareholders, and an IFRS 2 charge now being required for the Non-Executive Long Term Incentive Scheme (LTIS). This follows the amendments to the terms of the LTIS approved in General Meeting on 1 October 2010.

Cash flows, net debt and gearing

The Group has maintained its focus on cash generation and in particular working capital management during FY2011, a year which saw a substantial increase in trading activity and the associated working capital requirements that accompany such increases. Average working capital (defined as inventory plus trade debtors minus trade creditors) as a percentage of sales improved in FY2011 to 14.5% from 15.6% in FY2010. Cash generated by operations of £13.1m in FY2011 compared to £15.9m in FY2010, with the reduction a result of increased working capital associated with the 38% increase in revenue. After aggregate outflows for tax, interest and capital expenditures, net cash flow was £3.5m (FY2010 £8.2m) and generated a reduction in net debt at 3 April 2011 to £4.6m, from £7.6m at the end of FY2010.

Shareholders' funds increased during the year from £12.7m to £23.8m mainly due to retained profit for the year of £10.7m. Also impacting shareholders' funds during the period was a foreign exchange loss of £1.8m and a credit of £0.9m in respect of the IAS 19 actuarial gain on the Group's defined benefit pension scheme.

As a result of these movements, headline gearing (defined as net debt divided by shareholders' funds) at year end decreased to 19% (2010: 60%).

Total interest costs in the year decreased 35% to £2.2m from £3.4m in FY2010. Interest on bank borrowings was £0.7m less than the previous year, with lower average borrowings complemented by reduced margins over LIBOR payable on the Lloyds facility, as we de-leveraged. Net interest costs also benefited from a £0.4m year-on-year gain on the mark-to-market value of the Group's interest rate swap contracts.

Banking facilities

During the year the Group's principal funding was provided by a multi-currency revolving credit facility (RCF) with Lloyds Banking Group plc which, after amortisation, had an available limit of US$42.1m as at 3 April 2011, comprising both a US Dollar and a Euro component. At the year-end, amounts drawn under this facility were US$7.3m and €13.5m and average combined utilisation during the year was US$33.9m. In addition, Volex has a separate £6.0m invoice discounting facility with Lloyds Banking Group plc, which does not reduce until maturity, in March 2012. At 3 April 2011 the Group had undrawn committed borrowing facilities of £12.9m (2010: £14.0m).

While the existing facilities have served the Group well during our transformation phase, now that we have returned to growth the terms, structure and tenor of the current facilities are no longer consistent with the Group's strategic and operational objectives. Accordingly, on 31 May 2011, the Group signed and entered into a new multi-currency revolving credit facility (RCF) agreement with Lloyds, HSBC and Clydesdale, which replaces the existing RCF and provides greater financial flexibility and improved terms. The principal terms of this new financing facility are as follows;

-    US$75m committed combined RCF, overdraft and guarantee facility, held equally by Lloyds Banking Group plc, HSBC Bank plc and Clydesdale Bank plc

-    four year facility, available until June 2015

-    no scheduled facility amortisation

-    improved pricing, with margin over LIBOR payable linked to a net debt:EBITDA leverage ratio. Initial margin of 2.00% over LIBOR

-    interest cover and net debt:EBITDA leverage covenants

-    further US$150m pre-negotiated facility agreed to fund future, as yet unidentified, acquisitions

Based on the Group's projected financial performance the Board is confident that this new facility provides adequate liquidity and covenant headroom for the Group's operations and the successful execution of its organic growth and acquisition strategy.

Tax

The Group incurred a tax charge of £2.4m (FY2010: £1.6m) representing an effective tax rate (ETR) of 18% (FY2010: 24%). The principal reason for the reduction in the ETR in FY2011 is the release of £1.6m of tax provisions previously held in respect of tax exposures associated with local tax authority compliance. Following successful finalisation of tax computation filings in a number of regions and across a number of tax years, these provisions are no longer required and have been released back to the income statement.

In addition, we have recognised £1.1m (FY2010 £0.1m) of deferred tax asset related to unused tax losses, following the successful implementation of a global supply chain optimisation project, initiated last year and improved trading performance. Although the Group has increased the size of the deferred tax asset recognised at 3 April 2011 related to tax losses, on account of the implementation of this programme, the deferred tax asset recognised remains only in respect of a small proportion of our losses. As in FY2011, we expect to continue increasing the recognition of deferred tax assets relating to tax losses over the next few years, as the benefits anticipated from the global supply chain project accrue with greater certainty. Total losses at 3 April 2011 were £58m (FY2010: £54m). On a full recognition basis this represents a potential deferred tax asset of £15.2m (FY2010: 14.6m). We expect that the above optimisation project will continue to result in a similarly low ETR in future years.

Earnings per share

Basic earnings per share for the year was 18.9p, significantly ahead of the 9.3p reported last year on account of the substantial improvement in profit after tax. Normalised diluted earnings per share increased 130%, to 20.9p from 9.1p last year.

Research and development costs

Group expenditure on research and development, of which the most significant component is employment costs in respect of design engineers, increased 49% to £2.5m from £1.7m in FY2010. The year-on-year increase is due to increased investment in people to further enhance our product design and development capability and is consistent with the Group's strategy of increased focus on designed-in engineering solutions.

Dividends

Following approval by shareholders at a General Meeting held on 1 October 2010, the Company applied for and was granted a court order releasing it from its undertaking to maintain a special reserve created in connection with the capital reduction carried out by the Company on 18 October 2005. The effect of the court-sanctioned release of this special reserve is to credit the Company's distributable reserves by the value of the special reserve, £18.1m. After adding the Company's retained profit for the year of £27.3m, the Company is pleased to report it now has distributable reserves, from which it can declare and pay a dividend.

Through this exercise, and recognising the improved financial strength of the Company, the Board will propose a dividend of 2p per share out of FY2011 earnings and a resolution for approval of this proposal will be put to the shareholders at the Company's AGM on 25 July 2011.

Prior to the AGM, the Company will pay to the holders of the Company's non-equity preference shares an aggregate dividend of £47,500, which represents the aggregate cumulative unpaid dividends the holders of these shares are entitled to prior to payment of any dividends on the ordinary shares.  At the AGM, the Board will also recommend approval of a special resolution to cancel the preference shares, subject to which approval, the Company would initiate a court proceeding to pay the aggregate of £80,000 to the holders of the preference shares in cancellation of their shareholding.

Defined benefit pension scheme

The Group's net pension deficit under IAS 19 at 3 April 2011 decreased to £1.3m from £2.4m at 4 April 2010, primarily as a result of the change to the future pension increases assumption, which now references the Consumer Price Index (CPI) rather than the Retail Price Index (RPI). This change to the assumption has been made following the Government's recent announcement of its intention to adopt CPI as the measure for statutory pension increases rather than the existing RPI based measure, for the purpose of revaluing pension benefits in line with inflation.

Change in Presentation Currency

Over recent years and in particular following the disposal of the UK based Wiring Harness division in FY2009, the proportion of Sterling denominated business activity carried out by Volex has been decreasing, with the Group's revenues and profits increasingly being generated in US dollars. Accordingly, the Board has resolved to change the Group and Company presentation currency to US Dollars.

An announcement will be made during the first half of FY2012 restating audited FY2011 and FY2010 figures, reported in Sterling in this Annual Report, to US Dollars, together with a "Special Purpose Audit Report" from the Group's auditors, verifying the re-statement into US Dollars. The Interim (FY2012 half year) release and subsequent financial statements will then be presented in US Dollars.

Operating Review

Volex is a global provider of electrical and optical interconnect solutions to manufacturers of telecommunications and datacentre infrastructure equipment, healthcare equipment, industrial equipment and consumer electronics products and domestic appliances. Our interconnect solutions include high-bandwidth data cabling, industry standard input/output cabling, and electrical power cords.

Sales Performance

In the financial year 2011 (FY2011) we have delivered revenue growth across all four of our market sectors, with Group revenue of £316m representing growth of 38% over FY2010.

Working in partnership with our key customers across the globe, we have successfully aligned ourselves with significant new technologies that are driving demand for our customers products and services, including for example 4G/LTE mobile telecoms, high-speed data-transfer technologies for datacentres, photovoltaic (solar) power generation, tablet PCs, next-generation games consoles and high-resolution medical imaging systems.

Our sector-focused strategy - and within sectors, our focus on key customers - has enabled Volex to achieve strong alignment internally between sales, engineering, manufacturing, and supply-chain teams.

Telecommunications/Data communications sector

Volex delivers customised interconnect solutions for global equipment manufacturers in the telecommunications and data communications (Telecoms/Datacoms) 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.

The main drivers of demand in the telecoms equipment market include firstly, the ongoing roll-out of higher-speed networks - for example 3G networks in developing countries, and 4G (LTE) networks in Europe and North America -and secondly, the continuing deployment of high-speed internet connections for the home.

In the datacoms market, our customers are experiencing strong demand for datacentre equipment, driven by continued growth both in consumer internet traffic (for example, increasing volume of searches and internet video delivery) and in 'cloud computing' where applications and data are hosted remotely in the network.

In FY2011 Volex sales to the telecoms/datacoms sector reached £71m, 19% ahead of last year (54% excluding India). The Europe region continues to be our strongest revenue generator and we have seen momentum building in North America during the financial year. We have however, been operating in some tough market conditions. Our growth in China and the South-East Asia markets has been challenged by keen local price competition.  Our performance in India has been disappointing, with our sales to a major manufacturer having decreased due to cautious Telecoms-operator investments in the lead up to 3G auctions and the ongoing government-initiated security clearance process. The Group also elected not to participate in low margin feeder cable opportunities, which have historically been a significant piece of the Indian business, in line with the Group's strategy of focusing on designed-in solutions and manufacturing value-add.

We have invested considerable time and energy in building deeper relationships with key customers. Examples include increasing our engineering resource to engage with customers earlier in their product development cycles; providing local manufacturing support for our customers' key locations and delivering continued improvement in our supply chain to enhance the flexibility of our service to customers while maintaining our margins. We aim to maximise the value our customers realise from Volex, meeting our customers' challenging expectations for cost reduction, speedy delivery and forecast accuracy to increase their own competitive success.

We continue to provide proactive support to two of the world's top three telecom manufacturers by providing customised interconnect solutions, offering cost savings and supply chain security to these customers. In our partnership with a major Asian telecoms manufacturer, our ability to align our manufacturing footprint with its global business development locations significantly reduced this customer's total cost of ownership as well as improving its time to market  - positioning Volex as a strategic partner for all its interconnect requirements. 

Over three-quarters of our Telecoms/Datacoms revenue in FY2011 has been generated from industry-standard input/output (I/O) and high-speed copper cable assemblies for the manufacturers of mobile-telecoms network infrastructure.  Examples of where our customers use our interconnect solutions include mobile switching centre equipment, local access equipment and radio base station equipment.

Going forward, Volex is well positioned to serve telecoms and datacoms equipment manufacturers. Our portfolio of established and new interconnect products including fibre-optic and high-speed copper solutions for high data-speed equipment, and our capabilities in engineering and manufacturing/logistics enable us to tailor our service to customers' specific technical and commercial requirements.

Healthcare sector

Volex has a strong track record in the medical equipment field, particularly in the imaging technologies segment where we supply complex cable assembly and connector solutions. Other areas where we are well represented include patient monitoring systems, clinical diagnostics equipment, and patient therapy systems.  The healthcare equipment sector is generally more stable than other high-tech sectors, with both long product development cycles and long product lifecycles.  This is underpinned by long-term relationships between equipment manufacturers and their suppliers.

We see strong demand, across all regions, for investment in healthcare equipment that in turn drives demand for our products and services.  In emerging nations, access to modern healthcare services is required for rapidly expanding 'middle classes'.  In developed countries, where ageing populations are placing higher demand on healthcare services, technology is increasingly used to enable preventative actions such as remote monitoring, to facilitate affordable home treatments and also to reduce the costs incurred in treating patients in hospitals and clinics.  Original Equipment Manufacturers (OEMs) for healthcare equipment are competing aggressively on innovation in their product ranges and shortening development lifecycles, placing tough demands on interconnect suppliers to improve their own products' performance while reducing costs.

Our global sales in FY2011 to the healthcare sector were £27m, up 39% on the previous year.  64% of the revenues came from the North American region where we experienced significant growth from sales of our Magnetic Resonance Imaging (MRI) coil cables: these are used by all the major global OEM players in this market segment.  Our European healthcare sales grew by 12% over the previous year and represented 25% of the global healthcare revenues for the Group.  Revenue from the Asia region grew by 34%, to £2.7m and now represents 10% of Group healthcare revenues. 

Cable assemblies, harnesses, and connectors for imaging equipment such as MRI scanners, X-ray machines, computed tomography (CT), nuclear medicine and ultrasound scanners accounted for approximately 70% of our healthcare sales in FY2011, with the balance spread across a wide range of medical equipment including patient monitoring, medical therapy and clinical diagnostic equipment.

Working with our customers at the early stages of design and development allows us to exploit our expertise across a wide portfolio of products including high-performance cable assemblies, high-volume power cords and complex hybrid cable harnesses.  In many cases our engineers operate on customer sites and this depth of engagement has enabled Volex to achieve critical benefits for customers such as shorter product design cycles and lower total cost of ownership.  Through this deeper engineering support we have been engaged in supplying application-specific solutions, across both connector and cable harnesses. 

Currently we are collaborating with one of our major global customers involved in the design and manufacture of patient coils used in MRI systems to produce detailed images of various body parts e.g. knee, shoulder, ankle and breast.  We assigned an on-site Design Engineer to provide support to the customer's Product Development group.  In this case Volex provided valuable design input on coaxial/Direct Current (DC) cable bundles to improve product performance and reliability.  The initial support phase included working with the customer's development team at concept stage to provide solutions for ease of assembly, commonality of materials, test coverage etc.  In this case we demonstrated that Volex has the necessary engineering competence to be a collaborative solutions partner from design through to production and improve product performance.  This initiative also shows how Volex is integrated with our strategic customers through early engagement in the design process, which, in turn enables Volex to deploy its full expertise to provide high-value solutions that solve our customers' interconnect challenges.

In another case, Volex helped a customer to successfully migrate its European in-house production of MRI products to China.  To achieve this, Volex assigned a strong project team to manage the transfer that included establishing new-product-introduction and production capabilities for non-magnetic interconnect coil cables at Volex's Suzhou plant.   By pro-actively supporting this transfer, Volex secured a good share of new business with the customer.

Delivering this increased customer value has enabled Volex to achieve higher margins in the Healthcare sector; in FY2011 we achieved gross margins of 23.5%, compared to 21.6% in the previous year.

During the coming financial year one of the major challenges we face is managing the development of emerging healthcare markets, including China and India.  During FY2011 we experienced 53% growth in China and South-East Asia and laid the foundations for further growth in FY2012.  India will be an area of special focus as we position the Group to take advantage of the significant growth potential in this region. India is witnessing increasing healthcare expenditure, changing demographic profile with an ageing population and rapidly increasing incidences of lifestyle diseases.

Consumer Products sector

Our customers in the Consumer Products sector are well-known brand-name manufacturers of consumer electronics such as TVs, games consoles, PCs and laptops as well as household appliances such as refrigerators, freezers, rice steamers, floorcare equipment, DIY products and gardening tools. During FY2011 demand for products in these industries grew 13% following a 9% decline in spending in the previous year. This growth was across all global regions; in particular, China was up 24% and Asia grew by 17%.

Volex's consumer sector revenues for FY2011 were £196m, up 41% over the previous year. All our regions delivered growth, most notably Asia, where we saw a growth rate of 49%.  77% of our deliveries during FY2011 were to Asian customers or manufacturers, underpinning our leading position in these growing consumer markets.

In the PC and desktop market, which is driven by both consumers and business customers, the popularity of tablet computers fuelled strong demand for our products. We worked closely with major OEM customers, in particular a leading US technology provider and generated revenue growth of 61% compared to the previous year. Our sales to manufacturers of printers, scanners and IT peripherals rose 14%, largely as a result of capturing market share from competitors while sales of products supplied to support the games console sector grew by 36%. In the domestic appliances sector, we seized the opportunity when a competitor had a major quality issue to become a main supplier to a leading UK vacuum cleaner brand. Consequently, we grew our revenue in this segment by 23% in the last financial year. 

In FY2011, we focused on meeting demand from the growing markets in Internet-connected TVs, living-room gaming consoles, tablet computers and smart phones businesses. We also succeeded in maintaining our market share in the LCD/LED TVs, peripherals and vacuum cleaner segments by focusing on value engineering to stay competitive. Price pressures in mature markets presented some challenges, in particular the printers and desktop computers segment, and in some cases we declined to bid for business that fell below acceptable levels of profitability. We also underperformed in the saturated low-end Audio/DVD business where prices were extremely low, and where we would have needed to invest to redesign our products to maintain volumes and meet the price challenge.

Demand in consumer markets, where end customers were facing difficult economic conditions and uncertain employment prospects, was often difficult to predict accurately. We focused attention on every aspect from sales to operations to supply chain to meet customers' delivery dates requirements. We continued to be flexible in meeting their extremely short lead times for orders and, in return, maintained our preferred vendor status. We retained our leading position in the development of environmentally friendly halogen-free (HF) products, seeing more demand from OEMs in the PC and Computer segment for HF power cords for their new high-end models.

We achieved a major milestone with the leading UK vacuum brand by participating in all its new programmes for vacuum cleaners. We also made another breakthrough to design the fuse plug power cord for its air multiplier products and have been supplying its US market since September 2010. These successes led to further business and we have now started to supply harnesses and looms. Similarly, when a leading US consumer brand launched its new touch-screen entertainment product and new laptop and netbook, we provided customised power cords and accessories.     

Going forward, we will add more HF product offerings in both customised and generic designs and DC cords to serve increasing numbers of customers who are seeking to improve their environmental credentials. We will expand our custom-design duck-head adaptor product range to deliver the innovation demanded by market-leading customers. We will also focus on developing USB duck-head adaptor/chargers to satisfy smaller handheld device applications. In addition we have successfully developed and added high-speed data I/O cable assembly product to our portfolio.  With our exciting product range and these new developments, we are well placed to support the demanding consumer-products markets.

Industrial sector

The Industrial sector for Volex comprises a diverse set of markets, which offer some exciting growth prospects. These markets include test and measurement equipment, manufacturing automation, refrigeration, trucking telematics, agricultural machinery, and renewable energy.

The Industrial market in FY2011 saw strong growth throughout.  In the automation segment, companies continued to invest in order to update current capabilities and increase capacity. Telematics saw the further implementation of hardware upgrades to improve efficiency. Renewable energy markets continued to see increased development and government subsidies fuelling demand and activities.

As a result of both new business wins and improved market conditions, revenue in the Industrial sector grew to £22m, an increase of 101% over FY2010.  In trucking-telematics, our increased activity led to a revenue increase of 144% over FY2010, while manufacturing automation grew 63%.  

During the past two years, a great deal of emphasis has been placed on improving our relationships with market leading customers.  We have undertaken specific actions to increase the value we provide to key customers -  including inventory programmes to mitigate demand fluctuations and new product design initiatives - and our results in FY2011 have reflected this deeper level of engagement.  By partnering with the market leaders, Volex is now in a strong position to capitalise on the further strengthening of the North American economy.

However, as demand increased significantly, so did the level of competition for our customers' business.   Our strategy is to compete on customised solutions, incorporating elements such as redundant manufacturing locations, dedicated customer-service teams with manufacturing representation and good knowledge of the customer's own product range. This has enabled us to demonstrate the value of our relationship beyond the basic product price.  In the automation segment, Volex was able to provide increased value to a market-leading customer by demonstrating the advantages of consolidating from three vendors to just one, with Volex as the single-source, achieving cost-savings and greater flexibility in supply lead times and locations.

In FY2011 we introduced our own products for solar-energy customers, including customer-specific photovoltaic (PV) harnesses and a Volex-designed junction box.   In the telematics and automation segments of the market further refinements of industry-standard assemblies were introduced to aid in the production and design of complex harness assemblies.

Results in the renewable energy market did not meet expectations in FY2011.   Although growth of 26% was achieved, our expectation for the year was significantly greater given the international focus on renewable energy and the relationships we had established with well-positioned solar-power providers.  Delays in product launches and approval, followed by intense market competition among solar power players were the main contributing factors.  With market prices eroding throughout the year, a number of customer opportunities failed to meet our profitability targets.

We expect to see further success in FY2012 from the strategy we have implemented in FY2011.   We anticipate increased penetration and revenues in our three main target markets: automation, telematics and renewable energy.  We will continue with the development of products for the solar-power market, for example bringing new, approved, junction-box products to market in India, North America, and Europe. In telematics and automation, we set out to increase our customer base for our established products and technical-support expertise.

Manufacturing Operations and Supply Chain

Volex has nine manufacturing locations - six in Asia, two in the Americas and one in Europe - supported by local hubs to ensure we can achieve fast response times and minimise our customers' inventories. During FY2011 we conducted a significant review of the priorities and goals for our operations to ensure we were in line with Volex's overall strategy and meeting end-to-end delivery commitments to our customers. By adopting data-driven management processes we have been effective in prioritising and executing improvement opportunities.  For example, a team composed of experts from our Bydgoszcz and Singapore locations spent time in China supporting the Suzhou site, to improve quality and delivery performance through a structured work programme.

We have continued to deploy our 'LEAN' manufacturing strategy across our footprint. This effort is yielding improvements in our performance and has allowed us to achieve FY2011 volume increases within our existing manufacturing infrastructure through improved productivity. We reviewed our logistics strategy in FY2011, which will result in improvements to our supply chain and sourcing approaches.

Volex's Operations team works very closely with each of our sales sectors to ensure that we have the technologies, capabilities, and capacity to deliver our customers' current and future needs. We maintain and improve our supply flexibility to react quickly to changing customer requirements or socio-economic conditions in each of our markets.

Manufacturing Operations

We have continued to deliver an operational transformation programme aimed at eliminating waste from all aspects of our operations, reducing our lead times, and improving our production predictability and quality in order to deliver increased value to our customers.  We continue to make investments in new process technology aimed at improving our product quality and cost.  

To give some examples, our application of 'LEAN' manufacturing techniques in our South China and Batam, Indonesia, facilities has materially improved asset utilisation and productivity; a cross-site team developed a new line design that resulted in a 17% improvement in productivity and reduction of manufacturing lead-time by more than 50%. These techniques are now being deployed group-wide. Secondly our focus on continually improving quality performance resulted in three key sites across Europe and Asia gaining accreditation to the medical standard ISO13485. In addition, our Suzhou facility has created the infrastructure to deliver solutions for customers who require high-speed data interconnect solutions.

Whilst we are proud of these successes and improvements made in FY2011, we recognise that continued focus on transformation is required throughout our operations in order to optimise our production and logistics capabilities.  FY2012 will benefit from a combination of recent successes being extended across the group, and the execution of new initiatives to accelerate our transformation.  Better understanding of customer needs is allowing us to focus on new initiatives to deliver against specific sector and customer requirements. 

Managing our supply chain

During FY2011 we created a new global approach to managing our suppliers and materials costs across the Group.  This organisation was established under a component structure recognising the distinct requirements of our different products and solutions.  In addition to this we consolidated our supplier contract-management activity into two centres of excellence under the supply chain organisation.

We have been impacted by unprecedented raw-material cost increases, which drove up our input costs particularly in our Consumer sector.   These commodity costs, particularly for copper, PVC and oil, translate into cable and connector costs for the Group.

We countered these raw material cost increases by accelerating operating efficiency programmes, focusing on greater supply-chain optimisation, and through increasing prices to our own customer base. We successfully reduced our supplier base by just over 400 suppliers in FY2011, in line with our plan, and throughout the year we also successfully transitioned more customer spend to Volex supply-sources.  Inventory days improved from 57 at the start of FY2011 down to 48 at the close of the year, representing an improvement of 16%.

We remained focused on inventory and cash management making significant process changes in our Consumer sector business. These changes yielded improved management of our customer hub inventories across the globe. In addition we installed a global sales/order process to further improve planning and inventory processes and continued tight management of supplier payment terms through FY2011 resulted in a more balanced overall cash cycle for the Group.

Technology

In FY2011 we increased our focus on delivering Volex-engineered solutions for our customers, in line with our strategy.  Across all our market sectors we delivered more Volex design ('Volex content') in our connectors, both the cable-plug and the board-side connector, and the cable or cable assemblies that we supply. By participating earlier in our customers' new product development cycles, Volex has been able to exert more influence on the bills of material (BOMs) for the products we supply, resulting in improved margins in several sectors and securing supply contracts earlier in customers' product life cycles.

Enhancing Engineering Strength

FY2011 was the first full year for the deployment of our new structure where Engineering provides local support to each business sector in each region, deploying both field applications engineering (FAE) and new product development (NPD) resources. In the new structure, the sector-based sales teams are assured of engineering support in the field. This means expertise is on hand for the discussions with customers about specific applications as well as more extensive design support in the back office. This has proved critical to the sales effort, helping expand each sector's businesses beyond those regions where Volex was already comfortably positioned; for example the healthcare and industrial business in both China and India as well as the high speed datacoms business in Europe.

In FY2012 Volex plans to drive further enhancements in rapidly emerging technologies such as Active Optical Cable (AOC) products displacing copper cables where customers need higher data capacity over longer distances.

New Product Development

Innovation in our products and services is vital for Volex to maintain and develop its trusted-partner status with key customers.  Our NPD activity in FY2011 has been very significant. In each of our market sectors our R&D activity has kept us engaged with the critical interconnect design issues our customers need to address.  High speed interconnects for the datacoms server, storage, and switch markets were rolled out this past year supporting 12-channel 120 Gb/s (CXP) products and 4-channel 48 Gb/s (HD SAS) products. These products included both the cable plug and the corresponding connector receptacles on the printed circuit board, known as the 'board-side' connectors.

Telecoms NPD activity focused heavily on optical interconnect products for outdoor environments. These are used in base station applications for the mobile telecoms infrastructure market. For healthcare and industrial applications, Volex engaged with key customers in development activity to support interconnect needs on several next generation X-Ray and MRI models, as well as applications for both factory and field installed harnesses for solar panel grid arrays.  Our Consumer Products sector extended beyond its core power cords, adapters and power distribution units into cord reel and USB products.  Additionally this group saw cable assembly opportunities in the market for high data rate video cables connecting laptop computers to external monitors, developing DisplayPort and Mini DisplayPort cable assemblies.

Contributing to Industry standards

Volex continues to provide active support for industry standards committees that determine performance specifications for products to support future interconnect needs. We maintain a strong presence in the Video Electronics Standards Association, T10 SAS, SFF (small form factor), Infiniband, IEEE and Ethernet Alliance committees.  Volex recently joined the Optoelectronics Industry Development Association (OIDA) and Optical Society of America (OSA), extending our reach deeper into emerging trends in optical product development.

Our consumer products engineering team is closely engaged with the standards and approvals requirements for environmentally friendly products, maintaining our focus on meeting environmental requirements and legislation in 36 countries.  We have achieved formal approvals for compliance to the ecology and environmental requirements of TCO '03 (Sweden), Blue Angel (Germany), Nordic Swan (Scandinavia), EuP (EU) and Energy Star (International).

People, Processes, Platforms

The Group recognises that its profitable and sustainable growth requires ongoing investment in and development of its workforce to ensure that it has appropriate, function-specific skill-sets throughout all levels of the organisation. Having substantially reshaped the executive leadership team in FY2010, the focus this year has been to make targeted human capital investments to cover identified capability gaps, in order to enable execution of the Group's operational strategies. Key hires were made during the year in the engineering, supply chain, legal, IT and sales organisations, while an increased investment in training was made in selected areas throughout the Group.

The programme of work to upgrade the Group-wide ERP system started last year, has progressed well with a phased implementation during FY2011, and will result in the whole Group operating a common chart of accounts and consistent standard costing methodology in FY2012. Next year will see further activities to align and consolidate the ERP environments to one single global instance, rationalising data structures and refining supporting business processes to a consistent methodology.

Further investments have been made in our business intelligence and performance management systems, in particular to deliver increased management and customer data analytics, to support improved business decision making, and to enhance financial reporting, forecasting and budgeting capabilities.

The IT infrastructure supporting our businesses has continued to see investment during the past year, in particular to the core ERP systems hardware delivering enhanced stability and improved disaster recovery capability. We have also undertaken a review of the global IT infrastructure, identifying sub-optimal architectures and other limitations to our future businesses requirements. Next year will see increased investment in this area to build and establish a consistent single global IT infrastructure platform through a structured transformation programme over an eighteen-month period.

Continued progress has been made during the year in improving and standardising business processes across all functions and territories of the Group. Operations planning and production scheduling solutions are in development to increase plant productivity and improve efficiency, with additional benefits flowing from reductions in inventory levels. Lot traceability is also being evaluated to improve customer service and further increase quality control. In the sales area, a Group-wide review of all major sales contracts has been completed to ensure we are both commercially competitive and protected as far as possible from unwarranted litigation claims. An exercise to include raw materials price clauses in our sales contracts, where they do not already exist, has also been initiated, to guard the Group from volatility in raw material prices, while training in best practice sales techniques is ongoing. Efficient transaction processing has also been targeted with a project underway to develop optimised bid-to-cash and procure-to-pay cycles. These can then be rolled out across the Group, easing the path towards concentrated shared service centres of excellence. In addition, the functional structure, now in its second year, has continued to generate benefits by promoting a global rather than regional culture.

Managing Group Risk

Our approach to risk management

Volex's risk management has improved significantly over the past year, with a risk governance framework embedded in operational management processes and good progress made in better understanding and managing the group's most significant risks.

Our comprehensive approach to identifying and managing our business risks is two fold;

·   a bottom-up approach focussed on business risks identified by line management and a complementary top-down approach focussed on strategic and financial risks, as identified by senior executives and the board; and

·   evaluating the business risks and challenging the adequacy of processes to address such risks. 

The output from this two-step process is a detailed Risk Register, explaining the key risks faced by the Group, their potential impacts and how these risks are being managed. This enterprise-wide risk management and reporting process helps management to identify, assess and mitigate risk and is kept up to date through an ongoing programme facilitated by the Group Business Assurance function. 

The Board reviews the Group's Risk Register annually.  Executive management report every month on the progress against agreed actions to keep a close watch on how we are managing our key risks.  The Executives also provide regular reports to the Group Board and the Audit Committee which ensure a more focused approach.

The group's approach to internal control is business risk driven, with emphasis given to both business and financial risks. 

Our principal risks:

The table below gives examples of what we do to manage these risks.  The Board considers these to be the most significant risks that could materially affect the group's financial condition, performance, strategies and prospects.  The risks listed do not comprise all risks faced by the Group and are not set out in any order of priority.  Additional risks not presently known to management, or currently deemed to be less material, may also have an adverse effect on the business.

Risk	Impact and description	Examples of mitigating actions
Non-compliance with legislation and regulation	The Group operates in diverse markets and therefore is exposed to a wide range of legal and regulatory frameworks.  We must understand and comply with all applicable legislation.  Any breach could have a financial impact and damage our reputation.	§  External consultants have been engaged to perform a number of corporate health checks in high risk markets to identify any compliance gaps and assist in the development of appropriate solutions §  We maintain a number of general compliance policies to ensure compliance with local laws, regulations and standards and any other laws with international reach, such as the UK Bribery Bill, where relevant.  These policies are reinforced through our ongoing training to employees §  Code of Business Conduct communicated to the Group and third parties to make sure business is carried out in line with our policies and procedures

Failure to attract, develop and retain key personnel	Performance, knowledge and skills of employees are central to success.  We must attract, develop and retain the talent required to fulfil our ambitions. Inability to retain key knowledge and adequately plan for succession could have a negative impact on Company performance.	§  During FY2011, the group commissioned external consultants to undertake a thorough review of senior management remuneration and incentives, in order to ensure better alignment between rewards and achievements §  Remuneration policies designed to attract, retain and reward employees with ability and experience to execute Group strategy §  Talent strategy to provide opportunities for employees to develop careers §  Formalised objective setting in place for all employees §  Bonus scheme in place for all relevant employees based on business and individual objectives
Failure to maintain an effective system of internal control	Without effective internal controls, we could be exposed to financial irregularities and losses which may have a significant impact on the ability of the business to operate.  We must safeguard business assets and ensure accuracy and reliability of records and financial reporting.	§  Adoption of detailed authorisation matrices to ensure appropriate segregation of duties §  Minimum Internal Control Standards are in place with which all business units are expected to be 100% compliant §  Detailed General, Finance, Operational, Sales and HR Policy Statements set out the required policies and procedures §  Rolling internal audit plan whereby all business units are reviewed by Group Business Assurance in collaboration with external audit firms §  Group financial performance monitored with monthly Board reports and regular forecasting §  Chief Executive and Group Finance Director undertake detailed monthly business and financial reviews
Exchange rate fluctuations	The Group operates in many different countries and is subject to currency fluctuations arising on transactional foreign currency exposures and the translation of overseas subsidiaries' results which could create earnings and balance sheet volatility. For example, a weakening of the US dollar and the euro against sterling would have a negative impact on earnings and net assets reported in sterling.	§  Group Treasury Policy Statement sets out procedures on exchange rate risk management policies §  Revenues and costs in each of the Group's entities are broadly denominated in the same currency §  The impact of foreign exchange movements on the Consolidated Statement of Financial Position is mitigated by a natural hedge arising as a result of the Group's US Dollar and Euro denominated borrowings §  Group adopting US Dollars as its presentation currency in FY2012

Customer Concentration	A significant proportion of the Group's trading activity is with a relatively small number of large global accounts. Approximately three-quarters of total Group revenue is generated by the Group's top 25 customers, mostly prestigious global OEMs. Three of the Group's customers individually account for more than 10% of total Group revenue, with the Group's largest customer, operating in the Consumer sector, accounting for 12% of total Group revenue.	§  The Group continues to mitigate the risk of fluctuations in revenues from these customers through closer trading relationships with individual customers while diversifying into other customers and market segments §  New initiatives in place to align capabilities and resources to customer's needs and to improve quality systems and customer service §  Global key account managers in place for major customers §  In practice these key global customers operate across a number of different business sectors and regions with somewhat independent customer relationships in each of the sectors and geographies. The loss of business in one particular geography or sector would not necessarily result in the loss of all of that customer's business.
Rising Commodity Prices	Many of the Group's products, in particular power cords used in the Consumer sector, are manufactured from components that contain significant proportions of copper and, to a lesser extent, other metals and oil-based products such as PVC.  Increases in the prices of these commodities are reflected in the prices charged to our customers but delays in passing through these costs can cause short-term volatility in the Group's gross margins . Copper price volatility is the single largest commodity price exposure facing the Group.	§  The Board regularly reviews the prices of these commodities and effects a number of measures to mitigate the impact of excessive volatility  §  With specific respect to copper , prices are fixed quarterly with major suppliers based on average LME rate over prior quarter §  For customer contracts for significant periods, we attempt to negotiate the inclusion of an appropriate copper clause §  Where possible, we try to arrange back-to-back arrangements to match customer demand with cable supplier arrangements §  Strategic relationships established with key suppliers §  Appropriate commodity hedging strategies

Increased Competition	The Group's markets are highly competitive and we expect this competition will continue in the future.  Our overall competitive position depends on a number of factors including the price, quality and performance of our products, the level of customer service, the development of new technology and our ability to participate in emerging markets.  Competition may intensify from various international competitors and new market entrants and our markets have become increasingly concentrated and global.  Increased competition may result in price reductions, reduced margins or loss of market share, any of which could materially and adversely affect our business and trading performance.	§  Strategic relationships with customers §  Investing in new technology and developing new products to maintain the Group's competitive position §  Close monitoring of market trends and industry developments (eg by participating in Standards Committees) to shape, or at least gain early sight of, future product requirements
Adverse trading conditions	The Group's business and trading performance have been, and will continue to be, affected by global economic conditions.  As global economic conditions deteriorate or economic uncertainty increases, our customers and potential customers may experience deterioration of their businesses, which may result in the delay or cancellation of plans to purchase our products.  This may have a material adverse effect on the Group's trading results.	§  Regular review of pricing, promotion and marketing strategies §  Ongoing close working relationships with suppliers and customers to monitor performance §  Adapting product ranges to meet changing customer needs §  Early communication of adverse trading conditions through functional and regional lines.  Where these can be managed, we will address these with appropriate action plans/strategies to mitigate them where possible (and to the extent deemed appropriate after assessing the costs and benefits).
Failure to set out a clear strategic vision as well as provide accurate and timely information to the market	The share price is based on the expectations of a wide variety of market participants such as analysts, brokers, investment funds and other investors. Media stories or rumours can influence these expectations. We must ensure our communications are clear and timely to enable the investment community to efficiently assess the Company's value, and reduce the risk of uncertainty and volatility in the share price.	§  Procedures to monitor Group financial performance and communicate with the market via regular trading updates §  Investor relations department, supported by external advisors, ensures all communications are timely, clear and consistent and comply with regulatory and legislative requirements §  Ongoing communication with rating agencies and brokers §  The Group Chief Executive and Group Finance Director regularly meet with analysts, fund managers and the sales desks of equity brokerage houses to keep them informed of the Group's financial and operational progress. §  In February 2011 the Group's senior management hosted an Investor Seminar in the City of London that was attended by around 60 analysts and fund managers.

Consolidated Income Statement
For the 52 weeks ended 3 April 2011 (52 weeks ended 4 April 2010)
		Group
	Notes	2011 £'000	2010 £'000
Revenue	2	315,979	228,995
Cost of sales		(256,570)	(182,834)
Gross profit	2	59,409	46,161
Operating expenses		(44,268)	(35,912)
Operating profit	2	15,141	10,249
Analysed as:
Operating profit before non-recurring items and share-based payments		16,818	13,353
Non-recurring items		-	(3,095)
Operating profit before share-based payments		16,818	10,258
Share-based payments charge		(1,677)	(9)
Operating profit		15,141	10,249
Finance income		149	71
Finance costs		(2,205)	(3,410)
Profit on ordinary activities before taxation		13,085	6,910
Taxation	3	(2,373)	(1,631)
Profit for the period attributable to owners of the parent		10,712	5,279
Earnings per share (pence)
Basic	4	18.9	9.3
Diluted	4	18.2	9.1

Consolidated Statement of Comprehensive Income
For the 52 weeks ended 3 April 2011 (52 weeks ended 4 April 2010)
		Group
		2011 £'000	2010 £'000
Profit for the year		10,712	5,279
Other comprehensive income:
Gain on hedge of net investment taken to equity		575	532
Exchange difference on translation of foreign operations		(2,373)	1,073
Actuarial gains / (losses) on defined benefit pension schemes		933	(516)
Other comprehensive (loss) / income for the year		(865)	1,089
Total comprehensive income for the year attributable to the owners of the parent		9,847	6,368

Consolidated Statement of Financial Position
As at 3 April 2011 (4 April 2010)
	Notes	2011 £'000	2010 £'000
Non-current assets
Goodwill		1,930	1,930
Other intangible assets		1,316	658
Property, plant and equipment		7,737	7,501
Trade and other receivables		200	213
Deferred tax asset		1,338	268
		12,521	10,570
Current assets
Inventories		32,207	27,502
Trade and other receivables		73,321	60,146
Current tax assets		448	385
Cash and bank balances		12,660	18,220
		118,636	106,253
Total assets		131,157	116,823
Current liabilities
Borrowings		17,095	282
Obligations under finance leases		121	64
Trade and other payables		78,924	61,949
Current tax liabilities		2,727	5,402
Retirement benefit obligation		156	155
Provisions	9	1,825	4,055
Derivative financial instruments		183	371
		101,031	72,278
Net current assets		17,605	33,975
Non-current liabilities
Borrowings	6	-	25,356
Obligations under finance leases		67	89
Deferred tax liabilities		1,433	65
Retirement benefit obligation		1,169	2,231
Provisions	9	3,565	4,064
Non-equity preference shares		128	80
		6,362	31,885
Total liabilities		107,393	104,163
Net assets		23,764	12,660
Equity attributable to owners of the parent
Share capital		15,623	14,205
Share premium account		1,357	1,357
Hedging and translation reserve		1,340	3,138
Own shares		(1,418)	-
Accumulated gains / (losses)		6,862	(6,040)
Total equity		23,764	12,660

Consolidated Statement of Cash Flows
For the 52 weeks ended 3 April 2011 (52 weeks ended 4 April 2010)
	Notes		2011 £'000	2010 £'000
Net cash generated from operating activities	7		7,000	11,868
Cash flow used in investing activities
Interest received			149	71
Proceeds on disposal of intangible assets, property, plant & equipment			66	73
Purchases of property, plant & equipment			(2,810)	(1,619)
Purchases of intangible assets			(774)	(237)
Net cash outflow arising on disposal of operations			(159)	(1,979)
Net cash used in investing activities			(3,528)	(3,691)
Cash flows before financing activities			3,472	8,177
Cash generated before non-recurring items			3,631	12,811
Net cash outflow arising on disposal of operations			(159)	(1,979)
Cash utilised in respect of non-recurring items			-	(2,655)
Cash flows from financing activities
Repayments of borrowings	8		(9,190)	(5,994)
Refinancing costs paid			(16)	(1,512)
Repayments of obligations under finance leases			(93)	(2)
Net cash used in financing activities			(9,299)	(7,508)
Net (decrease) / increase in cash and cash equivalents			(5,827)	669
Cash and cash equivalents at beginning of year	8		17,938	16,877
Net (decrease) / increase in cash and cash equivalents	8		(5,827)	669
Effect of foreign exchange rate changes	8		(613)	392
Cash and cash equivalents at end of year	8		11,498	17,938

Consolidated Statement of Changes in Equity
For the 52 weeks ended 3 April 2011 (52 weeks ended 4 April 2010)
	Share capital	Share premium account	Hedging and translation reserve	Own shares	Accumulated gains /  (losses)	Total equity
	£'000's	£'000's	£'000's	£'000's	£'000's	£'000's
Balance at 5 April 2009	14,205	1,357	1,533	-	(10,826)	6,269
Profit for the period attributable to the owners of the parent	-	-	-	-	5,279	5,279
Other comprehensive income / (loss) for the period	-	-	1,605	-	(516)	1,089
Total comprehensive income for the period	-	-	1,605	-	4,763	6,368
Reserve entry for share option charge	-	-	-	-	23	23
Balance at 4 April 2010	14,205	1,357	3,138	-	(6,040)	12,660
Profit for the period attributable to the owners of the parent	-	-	-	-	10,712	10,712
Other comprehensive income / (loss) for the period	-	-	(1,798)	-	933	(865)
Total comprehensive income for the period	-	-	(1,798)	-	11,645	9,847
Issue of share capital	1,418	-	-	-	-	1,418
Own shares acquired in the period	-	-	-	(1,418)	-	(1,418)
Reserve entry for share option charge	-	-	-	-	1,257	1,257
Balance at 3 April 2011	15,623	1,357	1,340	(1,418)	6,862	23,764

1.       Basis of preparation

The preliminary announcement for the 52 weeks ended 3 April 2011 has been prepared in accordance with the accounting policies as disclosed in Volex Group plc's Annual Report and Accounts 2010, as updated to take effect of any new accounting standards applicable for the year as set out in Volex Group plc's Interim Statement 2010.

The annual financial information presented in this preliminary announcement for the 52 weeks ended 3 April 2011 is based on, and is consistent with, that in the Group's audited financial statements for the 52 weeks ended 3 April 2011, and those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The independent auditors' report on those financial statements is unqualified and does not contain any statement under section 498 (2) or 498 (3) of the Companies Act 2006.

Information in this preliminary announcement does not constitute statutory accounts of the Group within the meaning of section 434 of the Companies Act 2006. The full financial statements for the Group for the 52 weeks ended 4 April 2010 have been delivered to the Registrar of Companies. The independent auditor's report on those financial statements was unqualified and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006.

Going concern

As highlighted in note 6, on 31 May 2011 the Group signed a new committed revolving credit facility through which it will meet its day to day working capital requirements. This new facility is available until June 2015.

The Group's forecasts and projections, taking reasonable account of possible changes in trading performance, show that the group should be able to operate within the level of this new facility. The Group has access to additional undrawn committed facilities together with long established contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the ongoing uncertain economic outlook.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

This preliminary announcement was approved by the Board of Directors on 1 June 2011.

2.       Business and geographical segments

Operating segments

Revenue	2011 £'000	2010 £'000
Consumer	196,336	139,350
Telecoms / Datacoms	70,883	59,384
Healthcare	26,733	19,281
Industrial	22,027	10,980
	315,979	228,995

2.         Business and geographical segment (cont)

Gross profit	2011 £'000	2010 £'000
Consumer	34,579	30,738
Telecoms / Datacoms	13,334	8,769
Healthcare	6,281	4,166
Industrial	5,215	2,488
	59,409	46,161
Unallocated overhead costs	(42,591)	(32,808)
Non-recurring items	-	(3,095)
Operating profit before share-based payments	16,818	10,258
Share-based payments	(1,677)	(9)
Operating profit	15,141	10,249
Finance Income	149	71
Finance costs	(2,205)	(3,410)
Profit before tax	13,085	6,910
Tax	(2,373)	(1,631)
Profit	10,712	5,279

Overhead costs and charges for non-recurring items and share-based payments have not been allocated to sectors as management report and analyse sector profitability at the gross profit level and there is no meaningful basis for any such allocation.

Geographical segments
The Group's revenue from external customers and information about its non-current assets (excluding deferred tax assets) by geographical location are provided below:
	External revenue by source		Non Current Assets
	2011 £'000	2010 £'000	2011 £'000	2010 £'000
Continuing operations
Asia (excluding India)	165,392	113,003	6,573	5,952
North America	68,281	45,367	411	636
Europe (excluding UK)	60,557	42,484	151	211
India	12,657	22,222	446	569
South America	9,092	5,919	229	256
UK	-	-	3,373	2,678
	315,979	228,995	11,183	10,302

3.       Taxation

	2011	2010
	£'000	£'000
Current tax - charge for the period	3,725	2,972
Current tax - adjustment in respect of previous periods	(1,616)	(1,801)
Total current tax	2,109	1,171
Deferred tax	264	460
Income tax expense	2,373	1,631

4.       Earnings per share

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

Earnings		2011	2010
	Notes	£'000	£'000
Profit for the purpose of basic and diluted earnings per share being net profit attributable to equity holders of the Parent		10,712	5,279
Adjustments for:
Share-based payments charge		1,677	9
Tax effect of above adjustments		(82)	-
Normalised earnings		12,307	5,288
Adjustments for:
Non-recurring items		-	3,095
Adjusted earnings		12,307	8,383
		No.shares	No.shares
Weighted average number of ordinary shares for the purpose of basic earnings per share		56,821,563	56,821,563
Effect of dilutive potential ordinary shares - share options		2,141,432	958,703
Weighted average number of ordinary shares for the purpose of diluted earnings per share		58,962,995	57,780,266
		2011	2010
Basic earnings per share		pence	pence
Basic earnings per share		18.9	9.3
Adjustments for:
Share-based payments charge		3.0	-
Tax effect of above adjustments		(0.1)	-
Normalised basic earnings per share		21.8	9.3
Adjustments for:
Non-recurring items		-	5.5
Adjusted basic earnings per share		21.8	14.8
Diluted earnings per share
Diluted earnings per share		18.2	9.1
Adjustments for:
Share-based payments charge		2.8	-
Tax effect of above adjustments		(0.1)	-
Normalised diluted earnings per share		20.9	9.1
Adjustments for:
Non-recurring items		-	5.4
Adjusted diluted earnings per share		20.9	14.5

Normalised earnings per share has been calculated on the basis of profit before share-based payments, net of tax. The Directors consider that the normalised diluted earnings per share calculation gives the best understanding of the Group's earnings per share in the current and prior period.

5.       Dividends

	2011	2010
	£'000	£'000
Proposed dividend for the year ended 3 April 2011 of 2p per share (2010: nil)	1,136	-

No amounts have been recognised as distributions to equity holders in the period.

The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

6.       Bank facilities and refinancing

During the year the Group's principal funding was provided via a multi-currency revolving credit facility with Lloyds Banking Group, which, after amortisation, had an available limit of US$42.1m as at 3 April 2011 (2010: $57.7m), comprising both a US Dollar and a Euro component. At the year end, amounts drawn under this facility were US$7.3m and €13.5m and average combined utilisation during the year was US$32.8m. In addition, Volex has a separate €6.8m invoice discounting facility with Lloyds Banking Group plc, which does not reduce until maturity, in March 2012. At 3 April 2011 the Group had undrawn committed borrowing facilities of £12.9m (2010: £14.0m). This facility was secured by fixed and floating charges over the assets of certain Group companies. At 3 April 2011, the facility incurred interest at a margin of 2.75% (2010: 3.25%) above LIBOR.

On 31 May 2011 the Group signed and entered into a new multi-currency revolving credit facility (RCF) agreement with a syndicate of three banks, which replaces the existing RCF and provides greater flexibility and improved terms. The principal terms of this new financing facility are as follows:

·      US$75m committed combined RCF, overdraft and guarantee facility, held equally by Lloyds Banking Group plc, HSBC Bank plc and Clydesdale Bank plc

·      four year facility, available until June 2015

·      no scheduled facility amortisation

·      improved pricing, with margin over LIBOR payable linked to a net debt:EBITDA leverage ratio. Initial margin of 2.00% above LIBOR

·      Interest cover and net debt:EBITDA leverage covenants

·      further US$150m pre-negotiated facility agreed to fund future, as yet unidentified, acquisitions

7.       Notes to cash flow statement

	2011 £'000	2010 £'000
Profit for the period	10,712	5,279
Adjustments for:
Finance income	(149)	(71)
Finance costs	2,205	3,410
Income tax expense	2,373	1,631
Depreciation on property, plant and equipment	1,972	2,200
Amortisation of intangible assets	242	92
Loss on disposal of property, plant and equipment	17	6
Share option charge	1,677	9
Decrease in provisions	(2,798)	(1,301)
Operating cash flow before movement in working capital	16,251	11,255
Increase in inventories	(6,354)	(3,354)
Increase in receivables	(17,601)	(523)
Increase in payables	20,838	8,528
Movement in working capital	(3,117)	4,651
Cash generated from operations	13,134	15,906
Cash generated by operations before non-recurring items	13,134	18,561
Cash utilised by non-recurring items	-	(2,655)
Taxation paid	(4,349)	(1,840)
Interest paid	(1,785)	(2,198)
Net cash generated from operating activities	7,000	11,868

8.       Analysis of net debt

	4 April 2010 £'000	Cash flow  £'000	Exchange movement  £'000	Other non-cash changes £'000	3 April 2011 £'000
Cash & cash equivalents	17,938	(5,827)	(613)	-	11,498
Bank loans	(26,347)	9,190	719	-	(16,438)
Finance leases	(153)	93	-	(128)	(188)
Debt issue costs	991	16	-	(502)	505
Net debt	(7,571)	3,472	106	(630)	(4,623)

Debt issue costs relate to Bank facility arrangement fees. Amortisation of debt issue costs in the year amounted to £502,000 (2010: £622,000)

Analysis of cash and cash equivalents:			2011	2010
			£'000	£'000
Cash and bank balances			12,660	18,220
Bank overdrafts			(1,162)	(282)
Cash and cash equivalents			11,498	17,938

9.       Provisions

	Property	Corporate restructuring	Other	Total
	£'000	£'000	£'000	£'000
At 4 April 2010	6,804	611	704	8,119
Charge / (credit) in the year	156	-	(214)	(58)
Utilisation of provision	(1,953)	(550)	(295)	(2,798)
Unwinding of discount	203	32	-	235
Exchange differences	(108)	(2)	2	(108)
At 3 April 2011	5,102	91	197	5,390
Less: included in current liabilities				(1,825)
Non-current liabilities				3,565

Property provisions

Property provisions represent the anticipated net costs of onerous leases. The provisions have been recorded taking into account management's best estimate, following appropriate advice, of the anticipated net cost of the lease over the remaining lease term and the level of sub-lease rental income, if any, that can be obtained from sub-tenants. This provision will be utilised as the rental payments, net of any sub-lease income, fall due through to 2020.

Corporate restructuring

The provision at 4 April 2010 of £611,000 included an amount relating to compensation for loss of office payable to the former CEO of the Group, who left the Group on 9 March 2009. During the year full and final settlement was made and the provision fully utilised.

Other

Other provisions include the Directors' best estimate, based upon past experience, of the Group's liability under specific product warranties and legal claims. The timing of the cash out-flow with respect to these claims is uncertain.

10.    Reconciliation of operating profit to adjusted EBITDA (earnings before interest, tax, depreciation, amortisation, non-recurring items and share-based payment charge):

	2011	2010
	£'000	£'000
Operating profit	15,141	10,249
Add back:
Share-based payment charge	1,677	9
Normalised operating profit	16,818	10,258
Add back:
Non-recurring items	-	3,095
Adjusted operating profit	16,818	13,353
Depreciation of property, plant and equipment	1,972	2,200
Amortisation of acquired intangible assets	242	92
Adjusted EBITDA	19,032	15,645

 

END

 

 

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