Interim Results
Volex Group PLC
10 November 2004
Embargoed until 7.00am Wednesday 10 November 2004
VOLEX GROUP plc
Interim results for the half year to 3 October 2004
Volex Group plc, the international electrical and electronic cable assembly
group, today announces its interim results for the half-year to 3 October 2004.
Financial Highlights:
•Turnover £122.9m; 9% increase on first half of last year
•Operating profit pre goodwill amortisation and exceptionals £1.2m
(H103/04: £0.7m loss)
•Profit on disposal of properties £1.3m
•Net debt £33.1m (£31.6m at 4 April 2004)
The Chairman of Volex, Dom Molloy, commented:
'The commercial environment continued to improve during the first half of the
financial year reflected in sales of £123m, up 9% on the equivalent period last
year.
An operating profit (pre goodwill amortisation and exceptionals) of £1.2m
compares favourably with a £0.7m loss in the first half of last year; however,
the effects of consistently high commodity prices and residual operational
issues in North America have impacted performance. In addition, the recent fire
at our facility in Tijuana, Mexico has added significantly to the task facing
our North American management team.
The Group remains cautious about the sustainability of current demand profiles
and the challenges we face. However, we believe that with the successful
recovery of our European and Asian businesses in place, the action we are taking
in North America will bring the Group back to more acceptable levels of
performance in the next financial year.
Ends
For further information please contact:
Volex Group plc Today: 020 7067 0700 Thereafter: 01925 830101
Dom Molloy, Chairman
John Corcoran, Group Chief Executive
Derek Walter, Group Finance Director
Weber Shandwick Square Mile 020 7067 0700
Chris Lynch / Nick Dibden
CHAIRMAN'S STATEMENT
Revenues for the first six months of the year, at £122.9m, were 9% up on the
equivalent period last year. These sales generated an operating profit of £1.2m
(before exceptional items and goodwill amortisation), comparing favourably with
a £0.7m loss in the first half of last year. However, the effects of
consistently high commodity prices (particularly copper and PVC) and residual
operational issues in North America have impacted performance. There is no
indication to suggest that the commodity price pressure will ease and we expect
both these factors to continue to impact performance of the Group through the
balance of the year.
As announced in mid-September the Group suffered the loss of one of its two
manufacturing facilities in Tijuana, Mexico. While thankfully no employees were
injured in this fire, a significant amount of materials and tooling/equipment
was lost. The response of the Group to this disaster was quick and effective as
we acted to protect our customers, diverting production where feasible to sister
locations in North America, Europe and Asia. This facility was insured but it
will take some time to work through the claim process and the Group will have to
bear the cost of professional fees as we resolve the claim.
Also notable in this period was the continuing disposal of surplus properties.
This not only removes these costs from the Group but also contributes to the
further reduction of the Group's debt burden.
Operations
The commercial environment continued to improve during the first half of the
financial year. Consumer spending globally continued to fuel the demand for our
powercord range of products. This was particularly evident in the performance of
Volex Asia that saw 13% growth in sales over the equivalent period in the prior
year. However, not all of the commodity price increases incurred by the business
have been recovered from our customer base and this has affected margins. The
data/telecommunications business in Asia remained relatively flat and the
translation of new business awards into firm orders continues to be at a slower
than expected rate.
In Europe the market for telecommunications related equipment has been improving
consistently since the beginning of the calendar year. The extensive
restructuring conducted in that region over the past 18 months yielded the
expected benefits as the region returned to more acceptable levels of
profitability in the first half. We do, however, remain somewhat cautious as to
the sustainability of the level of demand currently being experienced and
therefore we continue to focus heavily on expanding our market coverage within
the region, particularly in the medical segment.
We are experiencing continuing difficulties in North America with operational
under-performance compounded by the impact of the recent fire at our Tijuana,
Mexico facility. This is particularly disappointing when both Asia and Europe
are recovering their levels of profitability. However, positive action has been
taken and it has been agreed as an interim measure and with immediate effect
that Don Payzant take over the role of President of Volex North America on a
full time executive basis. He will remain as a member of the Board.
Overall, our harness businesses remained flat to slightly positive and we are
now witnessing an improving market demand environment in the aerospace sector.
This trend is likely to continue in the second half and we expect an improved
performance this year from our two business units in this sector.
Financial Review
Turnover for the first six months of the fiscal year at £122.9m was £9.8m (9%)
higher than the first half of the previous year. Whilst exchange rates for the
major currencies affecting the Group (the Singapore and US dollars and the Euro)
have not moved materially since last fiscal year end, they have weakened
compared with the first half of last year such that had exchange rates remained
unchanged, turnover would have been £10m higher than the reported £122.9m.
Sales in Continental Europe (by source) showed a growth of 18% and Asia a growth
of 13%, compared with the first half of last year: at constant exchange rates
both continents would have shown sales growth of over 20%. Similarly the
Americas, which showed sales growing by less than 1% in sterling terms, would
have shown comparable growth over 10%.
Excluding goodwill amortisation and exceptional items, operating profit for the
first half was £1.2m compared with a loss of £0.7m in the first half of last
year, with the main improvement arising in Continental Europe as the benefits
from the restructuring and the product transfers to Croatia and Poland were
realised. North America reduced its operating loss whilst Asia's increase in
turnover was offset by increased costs, in particular increased commodity
prices. In comparing last year's first half results, the foreign exchange
translation impact on this first half's operating profits was not material.
The fire at Tijuana on 17th September affected trading in North America for the
last two weeks of the half-year - the impact attributable to losses that can be
quantified and charged in the half year results was £0.2m. However, a
significant amount of management time was spent in September (and will be needed
in the remaining quarters of the financial year) to remedy the effects of the
damage: the cost of this diversion of management's time and effort cannot be
quantified.
The profit on disposal of tangible fixed assets of £1.3m arose from the sale of
two properties - one in the UK being a vacant freehold and the other in Ireland
arising from the transfer of production last year to Eastern Europe. Interest
charges were £1.6m - unchanged from the first half of last year but refinancing
costs of £0.6m and amortisation of debt issue costs of £0.2m increased the total
finance charges to £2.4m, compared with £2.0m in the first half of last year.
Despite there being a small loss on ordinary activities before taxation, there
was a tax charge of £1.1m in the first half representing the tax burden incurred
by those countries making profits, in particular Asia and Continental Europe,
whereas losses incurred in North America could not be tax relieved.
As a result of the Tijuana fire, £0.4m of plant and machinery and £1.3m of
stocks have been transferred from their respective balance sheet categories to
prepayments, pending payment of the insurance claim. We expect that the
operations will be affected for at least the third quarter of the year and the
Group is seeking an interim payment on account, whilst preparing to file the
claim for full loss.
In reviewing the cash flow for the first six months, debtors increased by £2.3m
and interest and taxation payments totalled £2.9m. These outflows were partially
offset by sales of properties, which realised £3.5m cash proceeds. Overall, net
debt increased by £1.5m to £33.1m over the first half of the year. With the
maturity of our principal borrowings now being less than one year, borrowings
have been reclassified accordingly in the balance sheet.
The Board has not declared an interim dividend.
Future
In summary, the Group remains cautious about the sustainability of current
demand profiles and the challenges we face. However, we believe that with the
successful recovery of our European and Asian businesses in place, the action we
are taking in North America will bring the Group back to more acceptable levels
of performance in the next financial year.
D.J. Molloy
Chairman
GROUP PROFIT AND LOSS ACCOUNT
Six months to Six months to Year to
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Turnover
Continuing operations (see note 2) 122,873 113,086 238,353
======= ======= =======
________________________________________________
Operating profit/(loss) pre goodwill amortisation
and exceptional items 1,156 (689) 2,486
Exceptional operating item (see note 3) - (2,991) (6,680)
Goodwill amortisation (151) (162) (328)
________________________________________________
---------- ---------- ----------
Operating profit/(loss) on continuing operations 1,005 (3,842) (4,522)
Profit on disposal of tangible fixed assets (see note 4) 1,335 - -
---------- ---------- ----------
Profit/(loss) on ordinary activities before finance charges 2,340 (3,842) (4,522)
________________________________________________
Finance charges - interest (net) (1,610) (1,632) (3,140)
- refinancing costs (580) - -
- amortisation of debt issue costs (189) (341) (683)
________________________________________________
(2,379) (1,973) (3,823)
---------- ---------- ----------
Loss on ordinary activities before taxation (39) (5,815) (8,345)
Tax on loss on ordinary activities (see note 5) (1,089) 1,131 (2,861)
---------- ---------- ----------
Loss on ordinary activities after taxation (1,128) (4,684) (11,206)
Other finance costs of non-equity shares (3) (3) (6)
---------- ---------- ----------
Loss for the period transferred to reserves (1,131) (4,687) (11,212)
======= ======= =======
Adjusted loss per ordinary share* (see note 6) (7.8)p (5.4)p (14.7)p
Basic loss per ordinary share (FRS3) (see note 6) (3.8)p (16.4)p (39.1)p
* pre goodwill amortisation, FRS3 exceptional items and operating exceptional
items in each case net of tax
The Directors have not declared an interim dividend in respect of the year
ending 3 April 2005 (2004 - nil pence per ordinary share).
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months to Six months to Year to
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Loss on ordinary activities after taxation (1,128) (4,684) (11,206)
Currency variations 732 (372) (2,335)
---------- ---------- ----------
Total recognised losses for the period (396) (5,056) (13,541)
======= ======= =======
GROUP BALANCE SHEET
(abridged)
As at As at As at
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Fixed assets
Intangible 3,647 4,212 3,798
Tangible 19,808 30,711 23,872
---------- ---------- ----------
23,455 34,923 27,670
======= ======= =======
Current assets
Stocks 29,909 29,160 29,345
Debtors 55,141 54,285 50,358
Current asset investments - 1,482 -
Cash at bank and in hand 16,956 8,455 11,919
---------- ---------- ----------
102,006 93,382 91,622
---------- ---------- ----------
Creditors:
Amounts falling due within one year:
Borrowings and finance liabilities (49,919) (3,550) (3,883)
Trade creditors and provisions (43,258) (39,717) (43,292)
---------- ---------- ----------
(93,177) (43,267) (47,175)
---------- ---------- ----------
Net current assets 8,829 50,115 44,447
---------- ---------- ----------
Total assets less current liabilities 32,284 85,038 72,117
Creditors:
Amounts falling due after one year:
Borrowings and finance liabilities (149) (44,961) (39,586)
---------- ---------- ----------
Net assets 32,135 40,077 32,531
======= ======= =======
Represented by:
Share capital 7,465 7,231 7,465
Reserves 24,670 32,846 25,066
---------- ---------- ----------
Shareholders' funds 32,135 40,077 32,531
======= ======= =======
Gearing 103% 100% 97%
GROUP CASH FLOW STATEMENT
(abridged)
Six months to Six months to Year to
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Net cash (outflow)/inflow from operating activities
(see note 7) (677) (2,122) 5,614
======= ======= =======
Returns on investments and servicing of finance
Interest paid (net) (1,924) (420) (3,120)
Refinancing costs (580) (785) (1,000)
Interest element of finance lease rentals (3) (6) (10)
---------- ---------- ----------
Net cash outflow from returns
on investments and servicing of finance (2,507) (1,211) (4,130)
======= ======= =======
Taxation (paid)/recovered (418) 234 204
======= ======= =======
Capital expenditure
Purchase of tangible fixed assets (668) (947) (2,243)
Sale of tangible fixed assets and assets held for sale 3,525 222 1,659
---------- ---------- ----------
Net cash inflow/(outflow) from capital expenditure 2,857 (725) (584)
======= ======= =======
Cash (outflow)/inflow before financing (745) (3,824) 1,104
======= ======= =======
Financing
Issue of ordinary share capital - - 939
Repayment of loans (619) (1,175) (3,136)
Capital element of finance lease rentals (55) (22) (25)
---------- ---------- ----------
Net cash outflow from financing (674) (1,197) (2,222)
======= ======= =======
Decrease in cash in the period (1,419) (5,021) (1,118)
======= ======= =======
MOVEMENTS IN SHAREHOLDERS' FUNDS
As at As at As at
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Loss on ordinary activities after taxation (1,128) (4,684) (11,206)
Other finance costs of non-equity shares (3) (3) (6)
---------- ---------- ----------
Loss for the year transferred to reserves (1,131) (4,687) (11,212)
Other finance costs of non-equity shares 3 3 6
Currency variations 732 (372) (2,335)
New share capital subscribed - - 939
---------- ---------- ----------
Net decrease (396) (5,056) (12,602)
Opening shareholders' funds 32,531 45,133 45,133
---------- ---------- ----------
Closing shareholders' funds 32,135 40,077 32,531
====== ====== ======
NOTES TO GROUP RESULTS
1. The summarised results for the six months to 3 October 2004 have been
prepared under the historical cost convention modified to include, where
considered appropriate, the revaluation of land and buildings and in
accordance with the accounting policies adopted in the accounts for the year
to 4 April 2004. These and the comparative results for the half year to 30
September 2003 are non-statutory accounts within the meaning of Section 240
of the Companies Act 1985 and have not been reported upon by the auditors
under Section 235 of the Companies Act 1985.
The figures for the year ended 4 April 2004 are an abridged version of the
Group's full accounts and, together with other financial information
contained in these results, do not constitute statutory accounts of the Group
within the meaning of Section 240 of the Companies Act 1985.
Statutory accounts for the period ended 4 April 2004 have been filed with the
Registrar of Companies for England and Wales and have been reported on by the
Group's auditors. The Report of the Auditors was not qualified and did not
contain a statement under Section 237 (2) and (3) of the Companies Act 1985.
2. SEGMENTAL INFORMATION
Turnover by Geographical Area
Six months to Six months to Year to
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
By destination:
United Kingdom 18,573 19,994 41,343
Continental Europe 31,112 24,197 56,457
---------- ---------- ----------
Total Europe 49,685 44,191 97,800
Americas 38,660 37,283 74,695
Asia 34,528 31,612 65,858
---------- ---------- ----------
Total 122,873 113,086 238,353
====== ====== ======
By source:
United Kingdom 14,414 14,149 31,590
Continental Europe 26,229 22,287 48,414
---------- ---------- ----------
Total Europe 40,643 36,436 80,004
Americas 38,761 38,624 78,456
Asia 49,939 44,349 92,917
---------- ---------- ----------
129,343 119,409 251,377
Less: Intra Group (6,470) (6,323) (13,024)
---------- ---------- ----------
Total 122,873 113,086 238,353
====== ====== ======
NOTES TO GROUP RESULTS
Turnover by product category
Six months to Six months to Year to
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Data/telecommunications 53,079 49,735 109,503
Powercords 55,674 49,042 98,056
Harnesses 14,120 14,309 30,794
---------- ---------- ----------
122,873 113,086 238,353
====== ====== ======
Turnover by market sector
Six months to Six months to Year to
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Data/telecommunications 60,644 55,443 123,069
Consumer appliances 24,769 21,212 44,413
Consumer electronics 23,438 22,293 40,392
Vehicle and aerospace 14,022 14,138 30,479
---------- ---------- ----------
122,873 113,086 238,353
====== ====== ======
Operating profit, profit before tax and net assets by geographical area and by
type of business are not given as such disclosure is considered by the directors
to be seriously prejudicial to the interests of the Group. All activity has
arisen from continuing operations.
3. Exceptional operating items
In the six months ended 2003, costs of a restructuring of the continuing
operations of the Group's European manufacturing activities amounted to
£2,991,000.
In the year to 4 April 2004, further costs were incurred in relation to the
write down of the Irish manufacturing facility (£3,396,000) and the loss on
disposal of the US facility in Dartmouth, Massachusetts, US(£293,000).
The taxation effect of these exceptional items was £nil.
4. Profit on disposal of tangible fixed assets
In the six months ended 3 October 2004 the Group disposed of two properties,
Mons Mill, a vacant freehold in the UK, and Breaffy Road, the Irish
manufacturing facility. The tax effect of these disposals was £nil.
5. Tax on loss on ordinary activities
The Group tax charge for the period is based on the forecast tax charge for the
year as a whole and has been influenced by the differing tax rates in the UK and
in the various overseas countries in which the Group operates.
NOTES TO GROUP RESULTS
6. Earnings per share
The calculations of earnings per share are based on the following profits and
numbers of shares:
Six months to Six months to Year to
3 October 30 September 4 April
2004 Per Share 2003 Per Share 2004 Per Share
£'000 p £'000 p £'000 p
___________________________________________________________________________________________________________________
Loss on ordinary activities after taxation (1,128) (3.8) (4,684) (16.4) (11,206) (39.1)
Other finance costs of non-equity shares (3) - (3) - (6) -
___________________________________________________________________________________________________________________
Basic loss (FRS3) (1,131) (3.8) (4,687) (16.4) (11,212) (39.1)
Goodwill amortisation 151 0.5 162 0.6 328 1.1
Profit on disposal of tangible fixed
assets (1,335) (4.5) - - - -
________________________________________________________________________
Exceptional operating items:
Cessation of manufacturing in Ireland - - 2,991 10.4 2,991 10.4
Impairment of Irish manufacturing facility - - - - 3,396 11.9
Loss on disposal of current asset investment - - - - 293 1.0
________________________________________________________________________
- - 2,991 10.4 6,680 23.3
Adjusted loss (2,315) (7.8) (1,534) (5.4) (4,204) (14.7)
___________________________________________________________________________________________________________________
Weighted average number of shares: 29,540,692 28,602,637 28,650,462
Adjusted loss per share * (7.8)p (5.4)p (14.7)p
Basic loss per share (FRS3) (3.8)p (16.4)p (39.1)p
* Adjusted loss per share has been calculated on the basis of continuing
activities before goodwill amortisation, FRS3 exceptional items and operating
exceptional items in each case net of tax.
7. CASH FLOW
(i) Reconciliation of operating profit to net cash inflow from operating
activities
Six months to Six months to Year to
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Operating profit/(loss) 1,005 (3,842) (4,522)
Depreciation charges and impairment 2,549 2,985 9,766
Goodwill amortised 151 162 328
Government grants - - (150)
Loss on sale of tangible fixed assets - - 293
Increase in stocks (1,566) (254) (1,376)
Increase in debtors (2,341) (1,861) (2,788)
(Decrease)/increase in creditors (475) 688 4,063
--------- ---------- ---------
(677) (2,122) 5,614
======= ======= =======
NOTES TO GROUP RESULTS
(ii) Analyses of net debt
5 April Cash flow Exchange Other 3 October
2004 movement non-cash 2004
changes
£'000 £'000 £'000 £'000 £'000
__________
Cash at bank and in hand 11,919 4,856 181 - 16,956
Overdraft (2,971) (6,275) (56) - (9,302)
__________
(1,419)
__________
Debt due after one year (39,652) 619 (656) 39,689 -
Debt due within one year (819) - (10) (39,689) (40,518)
Finance leases (216) 55 (87) (248)
__________
674
Issue costs 189 - - (189) -
--------- --------- --------- --------- ----------
Net debt (31,550) (745) (541) (276) (33,112)
--------- --------- --------- --------- ----------
(iii) Reconciliation of net cash flow to movement in net debt
Six months to Six months to Year to
3 October 30 September 4 April
2004 2003 2004
£'000 £'000 £'000
Decrease in cash in the period (1,419) (5,021) (1,118)
Cash outflow from decrease
in debt and lease financing 674 1,197 3,161
---------- ---------- ----------
Change in net debt resulting
from cash flows (745) (3,824) 2,043
New finance leases (87) - (216)
Amortisation of debt issue costs (189) (341) (683)
Translation difference (541) 2,041 5,238
---------- ---------- ----------
Movement in net debt in the period (1,562) (2,124) 6,382
Net debt at beginning of period (31,550) (37,932) (37,932)
---------- ---------- ----------
Net debt at the end of the period (33,112) (40,056) (31,550)
======= ======= =======
Note:
Copies of this interim report are being sent to all shareholders. Copies can
also be obtained from the Company Secretary, Volex Group plc, Dornoch House,
Kelvin Close, Birchwood Science Park, Warrington WA3 7JX. Tel: 01925 830101
The presentation to stockbroking analysts will be held on Wednesday 10 November
at UBS, 4th Floor, 100 Liverpool Street London EC2 at 9.15am and will be on the
Company's web site www.volex.com from 11.00 a.m. that day.
This information is provided by RNS
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