Interim Management Statement

RNS Number : 9331K

Volex Group PLC

25 July 2011

 



Immediate Release                                                                                                     25 July 2011

VOLEX GROUP plc

Interim Management Statement for the 16 weeks ended 25 July 2011

Volex Group plc ('Volex' or the 'Group'), the global provider of electrical, digital and optical connections, today releases its first Interim Management Statement for the FY2012 financial year, covering the 16 weeks ended 25 July 2011.

Trading in the first quarter of FY2012 continued to be buoyant with revenue well ahead of the same period last year at constant currency. This strong revenue performance, coupled with an increase in gross margin, has generated significant year-on-year improvements in operating profit. Management expect trading levels to continue to be positive for the remainder of the financial year with the Group set to achieve higher quality single digit percentage revenue growth in FY2012.

Highlights for the first quarter of FY2012 (three months to 3 July 2011) are as follows:

·     Revenue of £77.0m, up 10% on Q1 FY2011 at constant currency (up 2% on reported basis)

·     Gross margin of 19.0%, 0.7% down on Q1 FY2011 but 1.0% ahead of the previous 2 quarters

·     Normalised operating profit⁽ⁱ⁾ of £4.1m, up 21% on Q1 FY2011 at constant currency (3% up on reported basis)

·     Net debt of £4.6m at end of Q1 FY2012, unchanged from the end of FY2011 and £0.4m (8%) lower than at the end of Q1 FY2011

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

The growth in year-on-year revenue was broad based, with all four of our sectors (Consumer, Telecom/Datacom, Healthcare, and Industrial) reporting growth on a constant currency basis. Equally important, gross margin improved over Q4 FY2011 in each of the four sectors, demonstrating good progress towards our stated target of exiting the year with gross margins of around 20%. As anticipated, the Japanese tsunami has not had a significant effect on results in the first quarter; revenue would have been up 12% on Q1 FY2011 at constant currency excluding this impact and the group does not expect these events to have any material impact on trading during the rest of the year.

Revenue in our Consumer Products sector was £47.5m in Q1, up 7% up on the corresponding quarter of last year in constant currency terms. The sector is well positioned to grow this year as we see continued strong demand from most of our key global electronics customers and we expect significant growth in sales of our industry leading environmentally-friendly products.

Revenue in the Telecom/Datacom sector of £16.8m in the first quarter represented growth of 5% over Q1 FY2011 in constant currency terms. Sector growth would have been significantly higher but for continued delays in the recovery of the Indian Telecom/Datacom business and Q1 sector revenue growth excluding India amounted to 12% over last year, with European demand particularly strong.

The trading momentum established in our Healthcare and Industrial sectors over the last two years has been maintained in Q1 FY2012. First quarter revenues of £6.7m in Healthcare and £6.0m in Industrial were 21% and 37% ahead of last year respectively at constant currency.

The improvement in gross margin in Q1 FY2012 to 19.0% from the 18.0% recorded in both Q3 and Q4 FY2011 was achieved despite continued cost pressures. Production efficiencies and success in increasing prices have helped drive this margin recovery, as has a favourable mix impact arising from the Group's ongoing programme to increase design content and focus on higher margin product lines. Although significantly improved over the previous two quarters, gross margin in Q1 FY2012 was below the 19.7% reported in the first quarter of FY2011, before raw material costs, particularly copper, had begun to rise significantly. Good progress was made in the quarter managing this price risk, through improved alignment of copper costs in customer and supplier agreements, complemented by targeted hedging of the remaining exposure. As a result the Group has mitigated the majority of the copper price risk for the remainder of FY2012. The Group retains a sharp focus on further improving the sales mix, new product introductions and production related opportunities to drive additional margin recovery in the remainder of the year.

Normalised operating profit of £4.1m for the quarter was 21% up on Q1 FY2011 at constant currency (up 3% on reported basis), reflecting the operating leverage effect of increased constant currency sales.

The Group has continued to manage cash closely after the refinancing of its bank facilities, completed on 31 May 2011. The improved flexibility and terms give the Group the ability to pursue selected investment opportunities as they arise, to provide sustainable growth in the future. Working capital as a percentage of sales in Q1 FY2012 was 14.9%, slightly improved from 15.0% reported in Q1 FY2011, with this focus on working capital resulting in net debt being unchanged from the end of FY2011 and £0.4m better than at the end of Q1 FY2011.

As previously communicated the Group will be changing its presentation currency to US Dollars in the second quarter of FY2012. During Q2, the Company will release an announcement restating its audited FY2011 and FY2010 figures, reported previously in Sterling, to US Dollars, together with a report from the Group's auditors, verifying this restatement. The interim (FY2012 half year) release and subsequent financial statements will then be presented in US Dollars.

The Board is pleased with the Group's strong trading performance in the first quarter. The Group's focus continues to be on driving high quality revenue growth and delivering improved gross margins, through further application of its core customer engagement, increased design content and manufacturing excellence strategies. The Board remains confident that trading will be in line with current market expectations for the twelve months to 1 April 2012.

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Volex Group plc

Ray Walsh                              Group Chief Executive                                             [phone]

Andrew Cherry                        Group Finance Director                                           [phone]

Buchanan Communications

Charles Ryland / Helen Chan                                                                                  [phone]

 

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