Final Results

RNS Number : 2334W
Volex Group PLC
09 June 2008
 
VOLEX GROUP plc
 
Preliminary Announcement of the Group Results
for the Financial Year ended 30 March 2008
 
Volex Group plc, the global electrical and electronic cable assemblies group, today announces its preliminary results for the financial year ended 30 March 2008.
 
Highlights:
·         Power Products: Record high revenue with strong new business pipeline; significant market share gains with Sony and Matsushita
·        Interconnect India: Revenue doubled despite delayed ramp in the business; strong growth rate trend is continuing
·        Breakthrough wins on High Speed Products with HP and Huawei; orders booked for 2008/09.
·        Targeted areas of Interconnect delivering industry average margin
·        Closed one small facility in Sweden and commenced the closure of 2 other facilities, in Mexico and Canada
·        Strengthened operational expertise with key new management
 
 
Financial Highlights:
·        Sales of £259.8m (2007: £248.7m), an increase of 4.4% (8.0% at constant exchange rates)
·        Adjusted(1) profit before tax £1.7m (2007: £6.7m)
·        Loss before tax £0.9m (2007: profit of £2.8m)
·        Operating cashflow:
Before major restructuring programme, outflow of £2.2m (2007: generated £10.7m)
After major restructuring programme, outflow of £6.1m (2007: generated £6.6m)
·        Adjusted(1)  loss per share 1.5p (2007: earnings per share 8.4p);basic loss per share 6.0p
      (2007: earnings per share 1.5p)
·        Net borrowings at 30 March 2008 were £21.0m (2007: £9.6m)
(1) Adjusted for major restructuring programme charge £2.7m (2007: £2.0m), share based payment credit £0.1m (2007: charge of £0.4m) and write-off of unamortised debt issue costs of £nil (2007: £1.5m).

 

The Chairman of Volex, Mike McTighe, commented:


'The financial year ended 30 March 2008 was a difficult year for Volex and although significant progress has been made in resolving the underlying issues, it will be some months before we reap the benefits.  


'The Board has recently approved a three year strategic plan that will result in cash generation, improved operating margins and sustained revenue growth. The Board believes that this strategy will build on the foundations now in place, to grow and improve margins and that this will, in turn, lead to long-term growth in shareholder value 

  


Ends

  Volex will host an analysts' meeting today at 9.30 am at the offices of Hoare Govett, 250 Bishopsgate, London, EC2M 4AA.

For further information, please contact:


Volex Group plc                                                              Today:  020 7067 0700      Thereafter:  01925 830101

Mike McTighe, Chairman

Heejae Chae, Group Chief Executive

Ian Degnan, Group Finance Director


Weber Shandwick Financial                                                                                                     020 7067 0700

Terry Garrett / Nick Dibden / James White

  VOLEX GROUP plc


Preliminary Announcement of the Group Results for the Financial Year ended 30 March 2008


CHAIRMAN'S STATEMENT



I was delighted to have been appointed Chairman of Volex in March 2008 and welcome the additional appointments of Chris Geoghegan and Karen Slatford as non-executive directors. Both Chris and Karen have extensive experience in distinct and relevant sectors of our business and will provide a valuable additional dimension to the Board. 


The financial year ended 30 March 2008 was a difficult year for Volex. The Company not only faced challenging market conditions in its telecom product line but was also confronted with delays in implementing the Wiring Harness restructure. Significant progress has been made in resolving the underlying issues but it will be some months before we reap the benefits. Additionally, the Company has taken steps to strengthen its executive team in the area of operations with the recent appointment of Bill Taylor as Vice President of Global Operations. 


Furthermore, the Board has recently approved a three year strategic plan that focuses on: maximising our market leadership in Power Products; restoring acceptable levels of profitability and working capital over the period; achieving operational excellence; and entering new and exciting technology markets. Collectively these objectives will result in cash generation, improved operating margins and sustained revenue growth. The senior executive team is dedicated to delivering on these objectives and indeed some progress on this front has already been achieved, although, we are mindful of the challenge ahead of us in executing the plan.

      

The Board considers that the strategy will build on the foundations now in place, to grow and improve margins and that this will, in turn, lead to long-term growth in shareholder value.


 

Mike McTighe

Chairman

9 June 2008

 

BUSINESS REVIEW


OVERVIEW

 

2008 was a challenging year for the Company.  Whilst the first half of the year was in line with expectation, we were confronted with difficult external and internal circumstances during the second half.  At the time of reporting our first half results, Wiring Harness had completed the transfer of production to Croatia and the UK redundancy programme, eliminating targeted cost as expected.  It was also the expectation that Croatia would reach similar efficiency levels within the same timeframe as we had experienced with other recent plant closures; however, for a number of reasons, we fell significantly short of our expectations.  The consequences of this meant increasing cost of inefficiencies and, in turn, additional costs to meet customers' requirements.

 

Another challenge we faced was the extent of the downturn of the wireless infrastructure market and its impact on our Interconnect customers.  We were challenged with quickly extracting sufficient cost to mitigate the impact of this, but because the facilities were primarily servicing a single customer, the decrease in the business had a significant impact on margin due to fixed cost.  Additionally, the ramp up we were expecting in India in the second half did not materialise until the very end of the year and new business awards in Interconnect arising from new technology products were slower than expected and have been pushed into FY2009. The impact of these delays was significant as the margin contribution from these activities is higher than our traditional business.


Despite the difficulties faced in recovering from those issues during the third quarter, the performance by Power Products was extremely positive. Order levels were at a record high with a strong new business pipeline.  Our third quarter revenue was 19.5% higher than third quarter last year. The business pipeline for the fourth quarter was at a higher growth rate than the third quarter. Accordingly, we believed this growth would help mitigate the deterioration in Wiring Harness and Interconnect.  Unfortunately, the North American market stalled dramatically in the first month of the fourth quarter due to the US credit crisis and this impacted on our growth expectations for Power Products' revenue. This downturn in North America caused us to fall short of our expectations as we finished the financial year, despite a continued strong performance in the Asian and European markets.  


Development strategy

 

We understand the issues that impacted us and have recognised the areas that we need to work on to address the areas of improvement. To this extent we have produced a three year plan to support this, which has been endorsed by the Board. The key focus points of the plan are:


  • Capitalise on our market leading position in Power Products;

  • Reposition Interconnect technology into exciting high growth markets; and 

  • Achieve operational excellence.

We believe that we have a great franchise in Power Products. The Power Products division continues to outperform its competitiors benefiting from its position as the global market leader. We will continue to capitalise on our advantage of scale and scope particularly in the current turbulent environment. As commodity prices continue to rise significantly and given the breadth of our customer base, we have the ability to be selective in our growth in order to maintain margins and manage working capital requirements.  


The Interconnect division continues to reposition its business from traditional telecom to growth technologies and regions. Our entrance into fast growing areas of broadband technologies of high speed, fibre and radio frequencies has yielded significant wins. We are supplying Volex designed products and solutions to market leaders such as HP, Huawei and Idea. Additionally, we are benefiting from our focus on the fast growing emerging economies of India and China. We saw our revenue from India double last year and expect the pace to continue. In China, we have positioned ourselves with local market leaders in Huawei and Datang as China prepares to roll out the 3G network which will ultimately replace 250,000 base stations. Beyond the high growth rates, these new technology products and Asian business opportunities are significant because the margin we can achieve is comparable to the margin of our competitors in the interconnect market. We expect that these businesses will grow from less than 10% to more than 50% of our Interconnect revenue in the next three years.


The Wiring Harness division will continue to strengthen its position in niche markets, in particular the aerospace and military markets, which provide us with many opportunities. In the near term, we are focused on addressing the operational issues. We have identified the areas we need to improve and are tackling them aggressively. We have added new operational leadership both at the division and corporate level to address the issues. We have upgraded the information systems to provide us with better systems and control. We are leveraging the resources we have around the Group to resolve the situation quickly.  


Our three year strategic plan represents further evolution of what has been achieved at Volex in the last two years and not a change in strategy. Our vision is clear and consistent; however, more recently, operational execution has been disappointing. The key to delivering our strategy of solid, sustainable growth is ensuring that we have the right people, structure and processes in place and these issues are kept under constant review. We have significantly reinforced the operational management particularly, with the appointment of Bill Taylor as the Vice President of Global Operations who has 30 years of operational experience at Jabil and Motorola. His key objective will be to deliver an optimal manufacturing footprint and achieve consistent operational excellence. This will involve consolidating our operations and footprint to leverage our scale and reduce our cost base.



Trading Performance

 

Markets

 

Consumer

 

We provide powercords to higher-value consumer products such as flat screen displays, personal computers and related products, vacuum cleaners and irons.  Our customers comprise blue chip brands in the consumer market including Apple, Sony, Matsushita, Cannon, Dell and Philips.  We derive 54% of our revenue from the consumer sector.  Our revenue from the sector grew 9.4% continuing our strong performance despite the slowdown in the global economy and consumer demand.  Our growth was primarily in the flat screen displays and personal computer related products. We continue to work closely with our customers on advancing product designs; for example, we are currently working with Dyson and Philips on retractable cords to be used in domestic appliances. We have also maintained our position as a major supplier to Apple of our Plug Receptacle (Duckhead) used in conjunction with their range of notebooks and devices.


Data, Telecommunications and Medical

 

Data and Telecom cover two distinct and broad areas of data and voice transmission.  Our exposure in the sector has been primarily in the wireless infrastructure of the telecom sector.  Until the past year, we have been insulated from much of the downturn of the wireless infrastructure market due to our focus on market leaders.  Unfortunately, the severity of the downturn finally impacted our customers and in turn, our performance.  During the past two years, we have worked hard to diversify and reposition our business more into the data portion of the sector that is experiencing significant growth due to the increasing bandwidth requirements.  Our focus on high speed, radio frequency and fibre is part of that strategy.  


The Medical sector continues to grow with our key customers who are further consolidating the global market.  Our products are used in a wide range of medical devices including X-ray equipment, patient monitors and cardiac defbrillators.

 

Vehicle and Aerospace

 

This sector accounts for 14% of our revenue. Our participation in this sector is mostly driven by customers in agricultural vehicles and to a lesser extent in construction and other commercial vehicles. The agricultural sector has remained strong and the outlook is for this to continue as high food prices positively impact spending in this sector in developing countries. In the Aerospace sector, Rolls Royce remains one of our key customers. 

 

Emerging Markets

 

Our participation in the emerging economies of Asia has been increasing rapidly.  The revenue from the region grew 19.4% primarily due to the Chinese and Indian operations.  Consumer demand in the regions has continued to be strong despite the slowdown in the rest of the world economy.  As consumer purchasing power increases, Volex's business in these markets will increase to meet rising demand for higher value products.  Additionally, the wireless infrastructure programme in India has finally begun to accelerate significantly and is driving our growth in this region.  We expect that we should see substantial benefits for the next two years as the programme continues.  

 

Divisional Performance

 

Power Products

 

Revenue from Power Products grew 10.6%. Our geographic and market leadership allowed us to manage a challenging environment as we saw strong performance in our Asian and European markets offsetting weakness in North America.  During the year, we made significant progress with major Japanese accounts such as Sony and Matsushita.  We believe that this success attests to our high standards of both quality and innovation. For instance, our joint initiative with Apple to develop halogen free products will put us in the forefront of the 'Green' initiatives that are becoming industry standard. We expect that as the market converts to 'Green' products, we will gain further market share as we leverage our technical leadership. Our continued effort to maintain our market leadership in innovation and quality provide us with a significant advantage in a very competitive market.

 

The focus on custom design products and innovative products allows us to continue to improve our operating margins despite a very challenging commodity market.  During the past year, we saw raw material prices increase considerably, in particular copper and oil.  We have worked hard to pass on the cost increases to the customers and also to further lower our costs.

 

Interconnect 

 

Revenue at Interconnect declined 3.8%.  Interconnect was negatively impacted by a decline of the key accounts in the wireless infrastructure market despite strong performance in targeted areas of data and medical.  Although our revenue in data, telecom and medical declined 4.0% due to our exposure to the wireless infrastructure market, the more attractive data and medical portion grew by 29.6%.


Our focus on growth technologies has yielded significant wins in high speed and radio frequencies that should drive the growth and diversify our revenue base in the Interconnect market.  Additionally, we are beginning to see the full impact of the infrastructure rollout in India. Our revenue in India doubled during the past year and we expect to continue to grow at the same rate in the coming year.  We are also optimistic regarding our penetration of Chinese accounts in the light of the pending deployment of 3G during the next few years.  We are working closely with companies such as Huawei and Datang who are expected to be key players in this deployment.

 

Our operating margins in Interconnect suffered significantly for the following reasons: (i) revenue decline of our largest customer; (ii) increased overhead cost to ramp-up for new business; and (iii) cost associated with consolidation of facilities in Europe.  The impact of the downturn of revenue has been particularly severe, not only because of the speed, but because the facilities were dedicated to this particular customer which made it difficult to mitigate the fixed cost.  As a result, our operational plan will focus on reducing such exposure in the future with a further consolidation of our manufacturing footprint.  We also incurred additional cost as we ramped-up in preparation for an increase of new business.  As we explained in our most recent Interim Report, we incurred cost during the transfer of production into Poland from Croatia and Sweden.

 

We expect our margin to improve as the business mix moves to the targeted areas of high speed products and India where our margin is in line with our competitors in Interconnect.

 

Wiring Harness

 

The revenue in Wiring Harness grew 6.4% driven by growth in industrial customers and the Rolls Royce contract wins.   The operating loss for the division worsened to £3.1m as a result of the restructuring programme falling behind plan.  Whilst cost reductions were achieved from the transfer of production out of the UK, we incurred significant additional costs from lower but improving productivity levels and in meeting customer requirements.  Additionally, the delays resulted in a significant increase in inventory and cash utilisation. Although we are clear about the actions within the recovery plan, there remains some uncertainty as to how quickly these actions will impact the underlying profitability of the Division.   

 

OUTLOOK

 

We face an uncertain market environment and one in which commodity prices continue to increase significantly. These factors necessitate a prudent approach in relation to business growth.  


We expect the Power Products market to remain resilient with increased demand driven by the Asian markets compensating for weak demand in North America. Nevertheless, we remain cautious with our growth expectations given the high commodity prices, especially copper and oil, which continue to pose a significant challenge. Despite this we have been increasingly effective at mitigating these cost increases. As part of our focus on maintaining and increasing operating margins we have commenced the closure of our Powercords manufacturing facility in Hermosillo (Mexico).


For our Interconnect division, we expect demand for high speed and radio frequency products to strengthen.  The markets for these products is expected to continue growing annually at 17% for radio frequency and 118% for high speed driven by the increasing requirement for bandwidth; however, we are more cautious in our short term outlook as we continue to reposition the mix of business away from the struggling wireless infrastructure sector. As part of our on-going efforts to improve operating margins and mitigate the impact of the downturn in the wireless infrastructure sector we have closed a small facility in Sweden during the year and are in the process of closing our facility in Kanata (Canada). 


The Wiring Harness division will continue to service and maintain its existing customers while optimising the manufacturing operations. The rate of losses incurred has stabilised and the benefits of the corrective actions will emerge during the second half of the year.


Our focus will be to improve operating margins and generate cash, whilst managing the ongoing growth plan. We have put in place many actions to ensure these objectives are achieved and our goal for the coming years is to deliver consistent profit and growth. We acknowledge that there are still areas that we need to address and improve; however, we believe that despite the short term problems we have faced this year, we have made significant changes, which have begun to result in a more solid and sustainable operational platform from which we will continue to build and optimise the business. 


FINANCIAL REVIEW


Trading for the year


Revenue for the 52 weeks ended 30 March 2008 was £259.8m, an increase over the previous year of 4.4%. Movements in foreign currency exchange rates, particularly the US Dollar, had a negative impact on revenue of £8.9m. At constant exchange rates, Group revenue increased 8.0%. The strong performance in Power Products was partly offset by a decline in the wireless infrastructure sector of Interconnect.  We saw significant growth in Asia, in particular China and India, and a decline in North America reflecting the current global macro environment. Sales of Power Products increased 10.6% to £136.3m and now represent 52.5% of Group revenue. Interconnect sales declined 4.5% to £87.1m and Wiring Harness sales grew 6.4% to £36.3m.


Sales by destination in Asia and South America grew by 18.6% to £108.4m and in Europe (excluding UK) grew 4.2% to £66.4m. Sales declined in the UK by 2.7% to £32.8m and in North America by 12.9% to £52.1m.


A comparison of Group sales by source of manufacturing shows a further consolidation of our manufacturing output into Asia which now accounts for 56.4% (2007: 49.3%) of manufacturing. There was also a significant shift of manufacturing from the UK to Eastern Europe as a result of the reorganisation of the Wiring Harness division; including this change almost 99% of our direct labour is now located in low cost regions. 


Adjusted operating profit for the year was £4.3m (2007: £9.6m.) The impact of foreign currency movements in the year on the results was limited to an unfavourable variance of £0.6m. Operating profit after the major restructuring charge and share based payments credit was £1.8m (2007: £7.3m).

 

The adjusted return on sales for 2008 was 1.7%, a reduction from 3.9% in 2007. 


Adjusted profit before tax was £1.7m (2007: £6.7m) and after the major restructuring charge and the share based payment credit there was a loss before tax of £0.9m (2007: profit of £2.8m).


Adjusted Items


During the year we incurred a charge for further restructuring of our manufacturing footprint of £2.1m (2007: £1.8m, net of an exceptional property disposal). This charge was incurred due to the closure of three facilities in North America and Europe; the closure of one small facility has been completed and two are currently in progress. There was no charge for restructuring the Wiring Harness division in the year, as this was charged in the previous year. Additional onerous lease provisions of £0.5m (2007: £0.2m) were incurred against properties that had previously been vacated. The credit for share based payments was £0.1m (2007: charge £0.4m). In 2007 only, there was a write off of unamortized debt costs of £1.5m.


Finance and Interest


The Group has a three year Revolving Credit Facility for $76m with Lloyds TSB Bank plc, which continues until December 2009. This enables the Group to borrow at a rate of interest based on LIBOR plus a base margin of 1% rising to a maximum of 2.75%. The margin at the end of 2008 was 2.75%.


Net finance charges for the year were £2.9m (2007: £4.7m). In 2007, the charge was higher because of the write-off of unamortised debt issue costs.  


Tax


The tax charge for the year increased to £2.5m from £2.0m in 2007, despite the loss after tax. This is a result of the charges for the major restructuring programme and the imbalance of taxable profit streams arising in different jurisdictions, especially within the Power Products division. In the future the Group should be well positioned to benefit from lower effective tax rates as profit streams improve in jurisdictions that allow utilisation of historical tax assets.


Earnings per share


There was a basic loss per share of 6.0p (2007: earnings per share 1.5p). Adjusted loss per share was 1.5p (2007: earnings per share 8.4p).


The weighted average number of shares in issue during the year was 56,780,292 (2007: 55,941,189). 


Balance sheet


Net assets declined to £22.6m from £26.1m the previous year, mainly as a result of the loss for the year of £3.4m. Shares issued in the year increased equity by £0.2m. The translation of the Group's foreign operations resulted in a negative exchange difference of £0.9m. 


Trade and other receivables increased by £13.0m. Apart from normal timing differences, the key driver of this increase was the strong revenue growth in the Power Products division in the second half of the year. This Power Products growth was also the main driver of the £2.9m increase in inventory.


Provisions for 2008 reduced by £0.8m to £7.1m. The provisions were increased by the charge for the major restructuring programme of £2.7m (2007: £3.2m) and were reduced by cash payments and exchange movements.


Cash flow 


Cash consumed by operations was £2.2m (2007: cash generated £10.7m) before restructuring payments of £3.9m (2007: £4.1m). The cash consumption was a result of losses incurred in the Wiring Harness division and the high working capital requirement of the growth that was achieved, especially in the Power Products Division.


Net interest payments reduced to £1.5m from £1.8m in the previous year as a result of lower interest rates in the year. 


Capital expenditure on fixed assets was £2.0m (2007: £2.3m). Shares issued in the year raised a further £0.1m compared with £1.3m in 2007. 


During the year there was a total cash outflow before financing activities of £10.2m (2007: cash inflow £3.7m).


The Group's net debt increased to £21.0m from £9.6m at the start of the year. Apart from the cash outflow in the year, there was an unfavourable foreign exchange impact on net debt of £0.8m and a net reduction in debt issue costs held on the balance sheet of £0.5m. 


The year-end gearing of net debt to shareholders' funds was 92.8% (2007: 36.8%). 


A key strategic focus for the coming year is to stabilise growth in working capital and to generate cash from operations. The level of capital expenditure in the business will be at similar levels to previous years with a small increase for capacity expansion. Cash outflows for tax, interest, restructuring programmes and onerous property leases mean that net debt is not expected to reduce in the coming year. 



Defined benefit pension schemes


The Group's net pension liability under IAS 19 at 30 March 2008 reduced to £1.7m (2007: £2.8m) largely as a result of actuarial gains (£0.8m) on the scheme assets and cash contributions (£0.4m) into the schemes.

 


Heejae Chae                              Ian Degnan

Group Chief Executive                Group Finance Director                                            


Consolidated income statement

For the 52 weeks ended 30 March 2008 (1 April 2007)


Continuing operations


Note


2008

£'000

2007

£'000







Revenue


2


259,765

248,725







Operating profit


2


1,794

7,269







Analysed as:






Operating profit before major restructuring programme and share based payments charge



4,338

9,642

Major restructuring programme charge


3


(2,676)

(1,994)

Share based payments credit / (charge)




132

(379)

Operating profit




1,794

7,269







Investment income




205

193







Finance costs






 - interest




(2,167)

(2,004)

 - interest on retirement benefit obligations and provisions



(165)

(283)

 - amortisation of debt issue costs



(520)

(896)

 - write-off of unamortised debt issue costs




-

(1,463)

 




(2,852)

(4,646)







(Loss) / profit on ordinary activities before taxation



(853)

2,816







Taxation


5


(2,530)

(1,950)







(Loss) / profit on ordinary activities after taxation, being (loss) / retained profit for the year

9


(3,383)

866







(Loss) / earnings per share (pence)*






Basic and diluted 


6


(6.0)

1.5







    The (loss) / earnings per share before the costs of the major restructuring programme, share based payments and the write-off of unamortised debt issue costs for each period is shown in note 6.



 

 
Consolidated statement of recognised income and expense
For the 52 weeks ended 30 March 2008 (1 April 2007) 



2008
£'000

2007
£'000






Losses on hedge of net investments taken to equity



(3,354)

(2,855)

Exchange differences on translation of foreign operations



2,513

14

Actuarial gains on defined benefit pension schemes



776

335

Net expense recognised directly in equity 



(65)

(2,506)






(Loss) / profit for the year



(3,383)

866






Total recognised net expense for the year



(3,448)

(1,640)


 

Consolidated balance sheet
As at 30 March 2008 (1 April 2007)



Note


2008
£'000

2007
£'000

Non-current assets






Goodwill




1,930

1,930

Other intangible assets




261

82

Property, plant and equipment




7,784

9,191

Deferred tax asset




312

347





10,287

11,550

Current assets






Inventories




35,050

32,107

Trade and other receivables




63,876

50,866

Current tax assets




353

968

Cash and cash equivalents




4,317

12,235





103,596

96,176

Total assets




113,883

107,726

Current liabilities






Obligations under finance leases




44

56

Trade and other payables




52,367

44,593

Current tax liabilities




4,343

3,817

Retirement benefit obligation




149

378

Provisions




3,359

3,914

Liability for share based payments




214

129





60,476

52,887

Net current assets




43,120

43,289

Non-current liabilities






Bank overdrafts and loans


10


25,283

21,722

Obligations under finance leases




-

40

Deferred tax liabilities




118

209

Retirement benefit obligation




1,513

2,458

Long-term provisions




3,773

4,013

Non-equity preference shares




80

80

Liability for share based payments




4

258





30,771

28,780

Total liabilities




91,247

81,667

Net assets




22,636

26,059

Equity attributable to equity holders of the parent






Share capital


9


14,205

14,158

Share premium account


9


1,357

1,219

Hedging and translation reserve


9


(1,861)

(1,020)

Retained earnings


9


8,935

11,702

Total equity


9


22,636

26,059


Consolidated cash flow statement
As at 30 March 2008 (1 April 2007)


 



Note


2008
£'000

2007
£'000







Operating profit from continuing operations



1,794

7,269

Adjustments for:






Depreciation of property, plant and equipment




2,906

2,822

Amortisation of intangible assets




80

122

Loss / (gain) on disposal of property, plant and equipment



4

(1,198)

Share option (credit) / expense




(113)

283

Decrease in provisions




(1,469)

(1,130)

Operating cash flows before movements in working capital



3,202

8,168







Increase in inventories




(2,791)

(4,431)

Increase in receivables




(12,506)

(2,318)

Increase in payables




5,994

5,219







Increase in working capital




(9,303)

(1,530)

Cash (used in) / generated by operations




(6,101)

6,638







Analysed as:






(Used) / generated before major restructuring programme



(2,214)

10,715

Used by major restructuring programme




(3,887)

(4,077)

Cash (used in) / generated by operations




(6,101)

6,638







Income taxes paid




(887)

(797)

Interest received




205

193

Interest paid




(1,666)

(1,984)

Net cash (outflow) / inflow from operating activities



(8,449)

4,050







Cash flows from investing activities






Proceeds on disposal of property, plant and equipment



242

1,933

Purchases of property, plant and equipment




(1,712)

(2,198)

Purchases of intangible assets




(289)

(70)

Net cash used in investing activities




(1,759)

(335)

Net cash (outflow) / inflow before financing activities




(10,208)

3,715







Analysed as:






(Used) / generated before major restructuring programme



(6,321)

5,893

Used by major restructuring programme



(3,887)

(2,178)

Net cash (outflow) / inflow before financing activities




(10,208)

3,715







Cash flows from financing activities






Proceeds on issue of shares


9


138

1,321

Repayment of borrowings


10


(18,823)

(25,519)

New bank loans


10


20,410

23,322

Debt issue costs paid


10


-

(1,399)

(Decrease) / increase in bank overdrafts


10


(30)

30

Repayments of obligations under finance leases


10


(52)

(114)

Net cash from / (used in) financing activities




1,643

(2,359)

Net (decrease) / increase in cash and cash equivalents

10


(8,565)

1,356







Cash and cash equivalents at beginning of year

10


12,235

11,646

Effect of foreign exchange rate changes




647

(767)

Cash and cash equivalents at end of year


10


4,317

12,235


Notes to the 2008 preliminary announcement

For 52 weeks ended 30 March 2008 (1 April 2007)

 

1.       Basis of preparation
The financial information has been prepared based on the Company’s financial statements which are prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted for use in the EU and in accordance with those accounting policies disclosed in the Group’s last published financial statements for the 52 weeks ended 1 April 2007.
 
The information contained in this preliminary announcement for the 52 weeks ended 30 March 2008 does not constitute the statutory accounts within the meaning of section 240 of the Companies Act 1985 but has been extracted from those accounts. The statutory financial statements for the 52 weeks ended 1 April 2007 have been delivered to the Registrar of Companies for England and Wales and those for the 52 weeks ended 30 March 2008 will be delivered following the Company’s Annual General Meeting. The auditors’ report on those accounts was unqualified and did not contain any statements under Section 237(2) or (3) of the Companies Act 1985.
 
This preliminary announcement was approved by the Board of Directors on 6 June 2008.
 
2.       Segments
Business segments
For management purposes, the Group is organised into three operating divisions – Power Products, Interconnect and Wiring Harness. These classifications are based upon the nature of the products that they supply. These divisions are the basis on which the Group reports its primary segment information.
 

 

 
      
 
 
 
 
2008
£’000
2007
£’000
Revenue
 
 
 
 
Power Products
 
 
136,312
123,299
Interconnect
 
 
87,114
91,285
Wiring Harness
 
 
36,339
34,141
 
 
 
259,765
248,725
Operating profit / (loss) before major restructuring programme charge and share based payments:
 
 
 
Power Products
 
 
8,195
6,197
Interconnect
 
 
(786)
4,795
Wiring Harness
 
 
(3,071)
(1,350)
 
 
 
4,338
9,642
Major restructuring programme charge and share based payments:
 
 
 
 
Power Products
 
 
(1,672)
(40)
Interconnect
 
 
(901)
(153)
Wiring Harness
 
 
29
(2,180)
 
 
 
(2,544)
(2,373)
Operating profit / (loss)
 
 
 
 
Power Products
 
 
6,523
6,157
Interconnect
 
 
(1,687)
4,642
Wiring Harness
 
 
(3,042)
(3,530)
 
 
 
1,794
7,269
Investment income
 
 
205
193
Finance costs
 
 
(2,852)
(4,646)
 (Loss) / profit before tax
 
 
(853)
2,816
Tax
 
 
(2,530)
(1,950)
(Loss) / profit from continuing operations
 
 
(3,383)
866
 
 
 
 
 


2.       Segments (continued)

 

External revenue by product market sector
 
 
2008
£’000
2007
£’000
Consumer Products
 
 
139,705
127,703
Data, Telecommunications and Medical
 
 
82,855
86,138
Vehicle and Aerospace
 
 
37,205
34,884
 
 
 
259,765
248,725


The external revenue by product market sector analysis for 2007 has been restated. The previously reported Medical and Industrial segment has now been recategorised into the three segments above in order to be consistent with how the business is managed.

 

Geographical segments


 

 
 
External revenue by source
External revenue by destination
 
 
2008
£’000
2007
£’000
2008
£’000
2007
£’000
 
 
 
 
 
 
Asia and South America
 
146,608
122,772
108,436
91,417
North America
 
47,972
49,234
52,122
59,853
United Kingdom
 
7,030
34,141
32,784
33,690
Other Europe
 
58,155
42,578
66,423
63,765
 
 
259,765
248,725
259,765
248,725
3.       Major restructuring programme charge
 
 
 
2008
£’000
2007
£’000
 
 
 
 
 
Property provisions
 
 
545
202
Closure of manufacturing facilities
 
 
2,131
3,007
Profit on sale of property, plant and equipment
 
 
-
(1,215)
 
 
 
2,676
1,994


During financial year 2008 the Swedish operation was closed following the relocation of a major customer. A provision was established for the closure of two facilities, one in Mexico and another in Canada.
Additional onerous lease provisions have been recorded against previously vacated properties. The charge in the year is primarily in respect of dilapidation provisions, exchange movements on non-functional currency denominated leases and the reassessment of the sub-lease potential of certain properties.
The taxation effect of the major restructuring programme was £nil (2007: £nil).
4.       Exchange rates
The principal exchange rates used in the preparation of the financial statements are:

 
           Average
% change
          Year end
% change
 
2008
2007
vs. £
2008
2007
vs. £
 
 
 
 
 
 
 
United States dollar
2.01
1.89
(5.9)
2.01
1.96
(2.5)
Euro
1.41
1.48
5.0
1.27
1.47
15.7
Canadian dollar
2.07
2.15
3.9
2.04
2.27
11.2
Brazilian real
3.71
4.07
9.7
3.48
4.04
16.1
Indian Rupee
80.56
85.47
6.1
80.61
85.91
6.6
5.       Taxation

 
 
 
2008
£’000
2007
£’000
 
 
 
 
 
Current tax – charge for the year
 
 
2,749
2,240
Current tax – adjustment in respect of previous years
 
(201)
83
Deferred tax
 
 
(18)
(373)
 
 
 
2,530
1,950
6.       (Loss) / earnings per ordinary share
The calculations of the (loss) / earnings per ordinary share are based on the following data:

(Loss) / earnings
 
2008
£’000
2007
£’000
 
 
 
 
Basic (loss) / earnings
 
(3,383)
866
Adjustments for:
 
 
 
Major restructuring programme charge (note 3)
 
2,676
1,994
Share based payment (credit) / charge
 
(132)
379
Write-off of unamortised debt costs
 
-
1,463
Adjusted (loss) / earnings
 
(839)
4,702
 
 
 
 
Weighted average number of ordinary shares
 
No. shares
No. shares
 
 
 
 
For the purpose of basic EPS
 
56,780,292
55,941,189
 Effect of dilutive potential ordinary shares – share options and warrants
-
96,093
For the purpose of diluted EPS
 
56,780,292
56,037,282
 
 
 
 
Basic (loss) / earnings per share
 
Pence
Pence
 
 
 
 
Basic (loss) / earnings per share
 
(6.0)
1.5
Adjustments for:
 
 
 
Major restructuring programme charge (note 3)
 
4.7
3.6
Share base payment (credit) / charge
 
(0.2)
0.7
Write-off of unamortised debt costs
 
-
2.6
 
 
 
 
Adjusted basic (loss) / earnings per share
 
(1.5)
8.4
 
 
 
 
Diluted (loss) / earnings per share
 
Pence
Pence
 
 
 
 
Diluted (loss) / earnings per share
 
(6.0)
1.5
Adjustments for:
 
 
 
Major restructuring programme charge (note 3)
 
4.7
3.6
Share base payment (credit) / charge
 
(0.2)
0.7
Write-off of unamortised debt costs
 
-
2.6
Adjusted diluted (loss) / earnings per share
 
(1.5)
8.4

 

Basic (loss) / earnings per share represents net (loss) / profit attributable to equity holders of the Company.
 
The adjusted (loss) / earnings per share has been calculated on the basis of continuing activities before major restructuring costs and write-off of unamortised debt issue costs, net of tax. The directors consider that this (loss) / earnings per share calculation gives a better understanding of the Group’s (loss) / earnings per share in the current and prior year. As the Group recorded a loss per share in 2008, the share options were anti-dilutive and accordingly, there was no difference between the basic and diluted loss per share in that period.

7.       Dividends

The directors do not recommend a dividend on the ordinary shares for the year (2007: £nil).
 
8.       Bank facilities
On 8 December 2006, the Group entered into a three-year US$76 million multicurrency combined revolving, overdraft and guarantee facility. The facility commenced on 8 December 2006 and will continue until 8 December 2009.   Per the facility agreement, commencing on 31 March 2007, the amount available is reduced by $1,667,000 for each financial quarter thereafter.
At 30 March 2008, the Group had available £8,135,000 (2007: £13,998,000) of undrawn committed borrowing facilities.
9.       Movements in shareholders’ equity

 
Share capital
Share premium
Hedging &
translation reserve
Retained earnings
Total
 
£’000
£’000
£’000
£’000
£’000
 
 
 
 
 
 
Balance at 3 April 2006
13,888
168
1,821
10,218
26,095
Net proceeds from issue of equity shares
270
1,051
-
-
1,321
Net profit for the year
-
-
-
866
866
Reserve entry for share option charge
-
-
-
283
283
Actuarial gains on defined benefit pension schemes
-
-
-
335
335
Exchange differences on translation of foreign operations
-
-
14
-
14
Loss recognised on net investment hedge
 
 
(2,855)
-
(2,855)
Balance at 2 April 2007
14,158
1,219
(1,020)
11,702
26,059
Net proceeds from issue of equity shares
47
91
-
-
138
Reserve transfer on exercise of warrants
-
47
-
(47)
-
Net loss for the year
-
-
-
(3,383)
(3,383)
Reserve entry for share option charge
 
 
 
(113)
(113)
Actuarial gains on defined benefit pension schemes
-
-
-
776
776
Exchange differences on translation of foreign operations
-
-
2,513
-
2,513
Loss recognised on net investment hedge
-
-
(3,354)
-
(3,354)
Balance at 30 March 2008
14,205
1,357
(1,861)
8,935
22,636

10.     Analysis of net debt

 
 
2 April 2007
Cash flow
Exchange movement
Other non-cash changes
30 March 2008
 
 
£’000
£’000
£’000
£’000
£’000
 
 
 
 
 
 
 
Cash at bank and in hand
 
12,235
(8,565)
647
-
4,317
Overdraft
 
(30)
30
-
-
-
Debt due after one year
 
(22,819)
(1,587)
(1,484)
-
(25,890)
Finance leases
 
(96)
52
-
-
(44)
Debt issue costs
 
1,127
-
-
(520)
607
Net debt
 
(9,583)
(10,070)
(837)
(520)
(21,010)
Non-cash charges include amortisation and write-off of debt issue costs £520,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This information is provided by RNS
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