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Volex Group PLC (VLX)

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Friday 15 February, 2008

Volex Group PLC

Interim Management Statement

Volex Group PLC
15 February 2008



                                15 February 2008

                                Volex Group plc

                          Interim Management Statement

Volex Group plc, the global electrical and electronic cable assemblies company,
is today publishing its second Interim Management Statement relating to the 17
week period from 1 October to 28 January. In light of the trading statement
released on 29 January 2008, we are providing a fuller update and releasing
financial information in respect of this period.

Current Trading

Although we have faced some execution challenges during the period, we have
continued to push ahead with our strategy to drive long term growth and increase
margins. Revenue growth of 8% has been slightly ahead of expectations, while
operating profit has been significantly behind. Revenue growth was driven by our
core Power Products business, which performed strongly and has gained
significant new business with key customers such as Sony and Dell. The profit
shortfall is a result of a much slower and more difficult restructuring of our
Wiring Harness business combined with a significant slowdown in order levels
from Interconnect customers in the Wireless Infrastructure sector.

Power Products
Revenue increased 20% and operating margins were significantly ahead of the same
period last year. The increase in operating margins is partly due to more
effective management of the fluctuations in copper pricing.

Interconnect
Revenue declined 10% compared to the same period last year as weak volumes from
major Wireless Infrastructure customers, which account for 47% of our
Interconnect revenue, masked the underlying growth being achieved from new
business sectors. Our strategy to diversify our Interconnect business remains
valid and we are starting to see the impact of this in rapid growth of the
accounts we have targeted. 27% of our Interconnect business in the period
derived from the Medical and Data sectors, which we have targeted for growth due
to the higher margin potential. Sales for these sectors grew 34% in the period.

Operating margins have declined due to a combination of factors: inability to
reduce costs in line with the sudden fall in Wireless Infrastructure volumes;
initial new business volumes in the Medical and Data sectors are not yet high
enough for efficient production; and, we increased costs in the first half to
develop new business with additional costs for sales, engineering and related
expenses.

Wiring Harness
Revenue is 17% ahead of the same period last year as a result of developing
existing key accounts, particularly in the construction sector. However,
operating margins have deteriorated from the same period last year as we have
struggled to deliver the benefits of the restructuring. Manufacturing efficiency
in the division remains low which has a consequential impact on our cost base
with significant costs being incurred to maintain customer service levels. While
our internal performance indicators are now beginning to show some steady but
slow improvement in efficiency levels, this is likely to be insufficient to
return to profit by the end of the current financial year, as previously
expected.

Net debt has increased to £23.8m compared to £16.6m at the same date last year.
This is a result of the cash utilisation of the Wiring Harness division during
the restructuring, lower profitability and cash generation of the Interconnect
division and working capital requirement of the strong growth in Power Products.
There have been no other significant changes in the financial position of the
Group in the period since the publication of the Interim Report for the 26 weeks
ended 30 September 2007.

The outlook for the remainder of the financial year is in line with the trading
update of 29 January 2008. Our order outlook remains solid and the new business
pipeline is robust. Whilst it is too early to be certain, there are signs that
the Wiring Harness division is beginning to show the expected operational
efficiency improvements, however, growth from the construction sector is likely
to moderate. 

For the Interconnect division we are confident that the growth of the target 
markets will continue, however, we are cautious on the timing of the recovery of 
the Wireless Infrastructure segment. While the outlook for the Power Products 
division currently remains strong, we are aware that a reduction in global demand 
for consumer products would impact us. 

The Board acknowledges that we have faced challenges in the period since our 
half-year announcement, however, we remain confident in our business model and 
the management, who are taking the necessary actions to drive profitability 
towards peer group levels over time, combined with solid top line growth.



Appendix 1
Divisional Trading Performance (Unaudited)

                                           17 weeks to 27       17 weeks to 28
                                             January 2008         January 2007
                                                    £'000                £'000
--------------------------------------------------------------------------------

Revenue
Power Products                                     47,605               39,850
Interconnect                                       26,525               29,501
Wiring Harness                                     12,609               10,805
--------------------------------------------------------------------------------
                                                   86,739               80,156
--------------------------------------------------------------------------------

Operating Profit
Power Products                                      2,506                  465
Interconnect                                         (855)               1,328
Wiring Harness                                     (1,300)                (332)
--------------------------------------------------------------------------------
                                                      351                1,461
--------------------------------------------------------------------------------


Appendix 2
Analysis of Interconnect Revenue

Sector                                         Proportion of       Growth rate
                                                       total         
--------------------------------------------------------------------------------

Wireless Infrastructure                                   47%              -32%
Data and Medical                                          27%              +34%
Other                                                     26%              +14%
--------------------------------------------------------------------------------
                                                         100%              -10%
 --------------------------------------------------------------------------------


                                      END


Volex Group plc                                                     01925 844601
Heejae Chae, Group Chief Executive
Ian Degnan, Group Finance Director

Weber Shandwick Financial                                          020 7067 0700
Terry Garrett
Nick Dibden
James White



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