Interim Management Statement

RNS Number : 2938B

Volex Group PLC

16 February 2011

 



For immediate release                                                                              16 February 2011

VOLEX GROUP plc

Interim Management Statement for the 19 weeks ended 16 February 2011

Volex Group plc ('Volex' or the 'Group'), the global provider of electrical, digital and optical connections, today releases its second Interim Management Statement for the FY2011 financial year, covering the 19 weeks ended 16 February 2011.

Trading activity in the third quarter of FY2011 continued to be strong with revenue significantly ahead of the same period last year. This robust performance has continued to translate into year-on-year improvements in operating profit, despite rising commodity prices, particularly copper.

Highlights for the third quarter of FY2011 (three months to 2 January 2011) are as follows:

·     Revenue of £79.1m, up 37% on Q3 FY2010 (34% on constant currency basis)

·     Adjusted operating profit⁽ⁱ⁾ of £4.0m, up 30% on Q3 FY2010 (26% on constant currency basis)

·     Cash generated by operations of £5.5m, up £3.9m (246%) on Q3 FY2010, with the improvement primarily driven by working capital efficiencies

·     Net debt of £6.0m at end of Q3 FY2011, a £1.6m (21%) reduction since the end of the last financial year and £5.3m (47%) lower than at the end of Q3 FY2010

(i) After non-recurring items but before share based payments charge

The year-on-year growth in revenue continues to be broad based with all four of our sectors (Telecom/Datacom, Healthcare, Consumer and Industrial) reporting substantial growth. Organic sales and new product development initiatives have enhanced penetration of existing accounts and are starting to generate new account wins.

Consumer sector revenue of £46.9m in Q3 was 28% up on the corresponding quarter of last year in constant currency terms. Customer demand remains high while our industry leading environmentally-friendly products (including halogen free) have continued to reinforce our strategic partnerships with key consumer electronics customers.

Revenue in the Telecom/Datacom sector of £19.1m in the third quarter represented an improvement of 28% over Q3 FY2010 in constant currency terms. Disappointingly, we have yet to see recovery in our Indian Telecom/Datacom business, however the region remains an opportunity for growth in FY2012.

Momentum in the Healthcare sector continued in Q3 FY2011, with revenue of £7.8m being 84% ahead of Q3 FY2010 on a constant currency basis. Finally, Industrial sector revenue was also strong at £5.3m in Q3 FY2011, 61% up over the same period last year on a constant currency basis.

Well-publicised increases in raw materials prices, particularly copper but also to a lesser extent oil and oil-based products, which started to impact margins and profitability in the second quarter, have had a more significant effect in Q3. In addition to rising input prices, double-digit labour rate increases have also been a factor. Management continues to be active in mitigating these rising costs, including programmes to pass through these increases to customers through price rises. However, the time lag between bearing higher input prices and selling on our products at higher prices has reduced gross margin in Q3 to 18.0%, compared to 19.6% in Q2 and 20.2% for the full year FY2010.  

Adjusted operating profit of £4.0m for the quarter was 30% up on Q3 FY2010 (26% in constant currency terms).

The Group has maintained its focus on cash generation, with working capital as a % of sales in Q3 decreasing to 14.9% from 15.1% in Q2 FY2011 (and from 16.9% in Q3 FY2010). This focus has resulted in net debt reducing to £6.0m at the end of Q3 FY2011, from £10.1m at the end of Q2 FY2011 and £7.6m at the end of FY2010. This represents a significant improvement when compared to net debt at the end of Q3 FY2010 of £11.3m.  

The Board is encouraged with the Group's evident resilience in the third quarter in the face of significant macro-economic challenges. The transformation we embarked on in 2008 is now paying significant dividends. Our current focus remains on addressing unprecedented cost pressures and on continuing to drive revenue and margins through enhanced customer solutions and increased Volex designed content. The Board remains confident that trading will be in line with current market expectations for the twelve months to 3 April 2011.

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Volex Group plc

Ray Walsh                      Group Chief Executive                         [phone]

Andrew Cherry                Group Finance Director                        [phone]

Buchanan Communications

Charles Ryland / Jeremy Garcia / Helen Chan                             [phone]

 

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