TIDMVLX
RNS Number : 5170D
Volex PLC
22 June 2023
22 June 2023
Volex plc
("Volex", the "Company", or the "Group")
Preliminary Group Results
for the 52 weeks ended 2 April 2023
On track with five-year plan with strong growth and margin
progression
Volex plc (AIM: VLX), the specialist integrated manufacturer of
critical power and data transmission products, announces its
preliminary results for the 52 weeks ended 2 April 2023
("FY2023").
52 weeks 52 weeks Year on
to to year change
2 April 3 April 2022
Financial Highlights 2023
-------------------------------- --------- -------------- -------------
Revenue $722.8m $614.6m 17.6%
Underlying(1) operating profit $67.3m $56.2m 19.8%
Statutory operating profit $53.8m $41.0m 31.2%
Underlying(1) profit before
tax $59.3m $51.4m 15.4%
Statutory profit before tax $45.8m $36.2m 26.5%
Underlying(1) basic earnings
per share 30.2c 26.9c 12.3%
Final dividend (per share) 2.6p 2.4p 8.3%
Net debt (before operating
lease liabilities)(2) $76.4m $74.4m 2.7%
Net debt $103.7m $95.3m 8.8%
(1) Before adjusting items and share-based payments charge (see
note 3 for more details)
(2) Represents cash and cash equivalents, less bank loans, debt
issue costs and finance leases, but excluding operating lease
liabilities (see definitions section for more details)
Financial and strategic highlights
-- Group revenue increased by 17.6% to $722.8m (FY2022: $614.6m)
driven by strong organic growth and acquisitions
-- Organic constant-currency revenue growth of 11.4% delivering
total revenue for FY2023 of $722.8m
-- Further improvement in underlying operating margin to 9.3%
(FY2022: 9.1%) demonstrating effective management of inflation and
cost control
-- Final dividend increased by 8.3% to 2.6 pence per share
-- Year-end net debt covenant leverage decreased to 1.0x from
1.2x in FY2022 driven by our cash generative model and working
capital unwind
-- Excellent progress made towards five-year growth plan
supported by continued customer-led investment programme
-- Further investment in increasing capacity across India, Mexico, Poland and Indonesia
-- Review Display Systems Group ("RDS") acquired for initial
consideration of $5.5m to enhance our capabilities and accelerate
growth in the UK
Market highlights
-- Electric Vehicles - strong demand continues with sales up 33%
organically over last year with an increasingly diverse customer
base and expanding product set
-- Consumer Electricals - slightly higher volumes were more than
offset by lower input cost pass-through on copper and PVC which
resulted in a small organic revenue reduction of 3%
-- Medical - continued strong demand for medical products as
healthcare providers look to accelerate the rollout of new
technology driving an organic revenue increase of 16%
-- Complex Industrial Technology - strong growth reflecting
improving supply chain and the delivery of new customer projects
resulting in an organic revenue increase of 19%
Outlook
-- Entered the new financial year with good momentum and high levels of customer demand
-- Supply chains much improved, enabling step-up in production
-- Confident in making continued excellent progress towards five-year plan
Dividend
Subject to approval by shareholders at the upcoming AGM on 27
July 2023, the proposed final dividend of 2.6p per ordinary share
will be paid on 25 August 2023 to shareholders on the register on
21 July 2023. The ex-dividend date will be 20 July 2023.
Shareholders may elect to receive the final dividend as shares
in the Company, in lieu of cash, under the Volex plc Scrip Dividend
Scheme. The reference price for the Scrip Dividend will be
announced on 27 July 2023. Shareholders who wish to elect to
receive the final dividend in shares must (i) complete a Scrip
Dividend Mandate Form (available on the Company's website) and
return it to Link Group, (ii) make a Scrip election online via
www.signalshares.com or (iii) submit a Dividend Election Input
Message in CREST, in each case by no later than 5.00 p.m. on 4
August 2023. Those shareholders who have opted into a permanent
scrip election by completing (and not cancelling) a Scrip Dividend
Mandate Form either in hard copy or via www.signalshares.com do not
need to complete a new mandate form for the final dividend.
However, shareholders holding their shares in CREST need to make an
election for each dividend and would need to submit a Dividend
Election Input Message in respect of the final dividend. A copy of
the terms and conditions for the Volex plc Scrip Dividend Scheme
are available on the Company's website
https://www.volex.com/wp-content/uploads/2022/07/Volex-Plc-Scrip-Dividend-Scheme-Terms-Conditions-Final.pdf.
Nat Rothschild, Volex's Executive Chairman said:
"Our dynamic and diverse business has continued to demonstrate
strong growth, whilst delivering excellent operating margins of
9.3% in a high inflationary environment, highlighting our ability
to successfully manage inflation.
"With strong cash generation, a healthy balance sheet and access
to funding we are well placed to capitalise on the significant
opportunities across our markets. The investments we have made in
FY2023 are focused on our pursuit of further growth, benefitting
from the leading position we have in attractive sectors. With an
exciting acquisition pipeline and further organic projects we will
continue to deliver against this strategy.
"With our track record over the past five years, we are
confident that our strategy and operating model continues to
provide us with the opportunity to deliver long-term organic growth
alongside complementary, earnings-enhancing acquisitions.
"We have seen a strong start to the new financial year with high
levels of customer demand. We remain confident of achieving our
five-year plan target of revenues of $1.2 billion by the end of
FY2027."
Analyst Presentation
A live presentation for analysts will be held online at 10.30
a.m. BST on 22 June 2023. If you are an analyst and would like to
join for this briefing, please send an email to
Volex@powerscourt-group.com . Log in details for the meeting will
be communicated to attendees.
Investor Presentation
A live presentation will be held online at 10.30 a.m. BST on 23
June 2023 on the Investor Meet Company ("IMC") platform. This
online presentation is open to all existing and potential
shareholders. Questions can be submitted during the live
presentation.
Investors can sign up to IMC and add to meet Volex via:
https://www.investormeetcompany.com/volex-plc/register-investor
For further information please contact:
Volex plc +44 7747 488785
Nat Rothschild, Executive Chairman
investor.relations@volex.com
Jon Boaden, Chief Financial Officer
Peel Hunt LLP - Nominated Adviser & Joint Broker +44 20 7418 8900
Ed Allsopp
Tom Ballard
Ben Harrington
HSBC Bank plc - Joint Broker +44 20 7991 8888
Simon Alexander
Keith Welch
Joe Weaving
Powerscourt - Media Enquiries +44 20 7250 1446
James White
Nicholas Johnson
Maxim Hibbs
About Volex plc
Volex plc (AIM: VLX) is a leading specialist integrated
manufacturer of critical power and data transmission products. We
serve a diverse range of markets and customers, with particular
expertise in cable assemblies, higher-level assemblies, data centre
power and connectivity, electric vehicles and consumer electricals
power products. With sales teams located around the globe, combined
with authorised distribution partners, we have the ability to
service our customers' needs and deliver our products to Original
Equipment Manufacturers ('OEMs') and Electronic Manufacturing
Services ('EMS') companies worldwide. The critical products and
services that we offer are integral to the increasingly complex
digital world in which we live, providing power and connectivity
from the most common household items to the most complex medical
equipment. We are headquartered in the UK and operate from 19
manufacturing locations with a global workforce of over 8,000
employees across 22 countries.
Important notices:
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated
in the United Kingdom by the FCA, is acting as Corporate Broker to
Volex and no one else in connection with the matters described in
this Announcement and will not be responsible to anyone other than
Volex for providing the protections afforded to clients of Peel
Hunt, or for providing advice in connection with the matters
referred to herein. Neither Peel Hunt nor any of its group
undertakings or affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is
not a client of Peel Hunt in connection with this Announcement or
any matter referred to herein.
HSBC Bank plc ("HSBC"), which is authorised by the PRA and
regulated in the United Kingdom by the FCA and the PRA, is acting
as Corporate Broker to Volex and no one else in connection with the
matters described in this Announcement and will not be responsible
to anyone other than Volex for providing the protections afforded
to clients of HSBC, or for providing advice in connection with the
matters referred to herein. Neither HSBC nor any of its group
undertakings or affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is
not a client of HSBC in connection with this Announcement or any
matter referred to herein.
Definitions
The Group presents some significant items separately to provide
clarity on the underlying performance of the business. This
includes significant one-off costs such as acquisition related
costs, the non-cash amortisation of intangible assets acquired as
part of business combinations, and share-based payments. Further
detail on adjusting items is provided in note 3.
Underlying operating profit is operating profit before adjusting
items and share-based payment expense.
Underlying free cash flow is net cash flow before financing
activities excluding cash flows associated with the acquisitions of
businesses and cash utilised in respect of adjusting items.
Net debt (before operating lease liabilities) represents cash
and cash equivalents, less bank loans, debt issue costs and finance
leases, but excluding operating lease liabilities. The lease
liabilities include $27.3 million of operating lease liabilities
(FY2022: $20.9 million).
Net debt covenant leverage is net debt (before operating lease
liabilities) divided by underlying EBITDA adjusted for depreciation
of right-of-use assets.
Organic revenue growth is calculated using constant exchange
rates ("CER") by taking the total reported revenue (excluding the
impact of acquisitions and disposals) divided by the preceding
financial year's revenue at the current year's exchange rates.
Return on capital employed is calculated as the last twelve
months underlying operating profit as a percentage of average net
assets excluding net cash/debt.
Forward looking statements
This announcement contains certain forward-looking statements
which have been made by the Directors in good faith using
information available up until the date they approved the
announcement. Forward-looking statements should be regarded with
caution as by their nature such statements involve risk and
uncertainties relating to events and circumstances that may occur
in the future. Actual results may differ from those expressed in
such statements, depending on the outcome of these uncertain future
events.
Executive Chairman's Statement
The Group has delivered another year of excellent progress,
sustaining double-digit organic revenue growth and further
improving underlying operating margins.
Our success is a combination of targeted investment into the
business and a strategic focus on key market sectors which have and
will continue to deliver significant growth. It is also a clear
indication of our teams' abilities to harness the structural growth
drivers in our chosen markets.
The last three years have been challenging for global
manufacturing, and yet with margins sustainably within our target
range, we have proven that we have a robust business, capable of
navigating logistical challenges and exceeding customer
expectations.
Our focus on building a business based on innovation, service
and quality continues to be the key differentiator in our market.
Price is a factor, but it is not the only consideration. Whilst we
remain committed to providing exceptional value to our customers
and supporting their growth through our unrivalled global
footprint, we are equally focused on providing our shareholders
with an attractive investment opportunity.
We continued to invest in our business as we delivered revenue
growth of 17.6% in FY2023 and an increase in underlying operating
profit of 19.8%. We also achieved significant constant currency
organic revenue growth of 11.4%, giving us a three-year average
constant currency organic annual rate of 12.9%. Operating margins
rose to 9.3% (FY2022: 9.1%), reflecting the strength and
consistency of our commercial proposition. Our covenant leverage
has improved ahead of expectations to 1.0x in the past year and is
now 0.2x lower than it was at the beginning of FY2023. It is these
strong performance metrics that make us believe we are well
positioned for future growth as we continue to innovate and expand
globally.
Our renewed competitiveness fuelled by our investment in
vertical integration, manufacturing efficiency and continuous
improvement initiatives, is accelerating new contract wins and
increasing market share. These awards have been secured by our
ability to offer best-in-class products and services, underpinned
by a global supply chain that is lean and responsive.
Strategic focus
We are benefitting from very significant structural changes in
the manufacturing landscape as our customers reconfigure their
supply chains. For a combination of logistical and geopolitical
reasons, there is a marked increase in initiatives to reduce
complexity and bring the source of critical components nearer to
the point of final assembly. This plays to our strengths given our
expertise in delivering reliable, resilient and flexible
manufacturing solutions.
Our investments in new capacity are helping to meet the demand
for localisation. In particular, we are expanding our sites in
India, Mexico, Poland and Indonesia following positive feedback
from existing and potential customers.
We are already seeing the benefits arising from this strategy
having announced a major Electric Vehicles ("EV") power products
contract win for our site in Tijuana, Mexico in May. We have a
detailed plan to successfully onboard EV products into Mexico, and
the opportunity to grow this business while still maintaining
attractive margins is significant.
Success in markets with significant structural growth
drivers
There are significant growth drivers that support our expansion
plans in key markets. Electrification is transforming the
automotive industry and contributing to carbon reduction targets
around the globe.
Adoption of Electric Vehicles is accelerating as consumers
recognise the advantages. As the market grows, we are broadening
our product suite, utilising our specialist manufacturing expertise
to encompass on-car assemblies as well as a variety of charging
infrastructure products.
The growth we have seen in the Medical sector is underpinned by
continued innovation, with healthcare providers improving patient
outcomes through cutting-edge imaging and diagnostic technology.
Customers in our diverse Complex Industrial Technology sector are
also experts in delivering transformational technology through
advanced engineering. Our specialist manufacturing locations
support this progress by delivering mission critical
assemblies.
We continued to win market share as the Consumer Electricals
market experienced a period of normalisation off the back of higher
demand in the previous two years. This was achieved because we have
highly competitive operations with an unparalleled global
footprint.
People and culture
Volex has made tremendous progress since I joined the business
in 2015, having first become a Volex shareholder in 2008.
We have grown into an ambitious, successful organisation with a
clear strategic focus and this has been achieved through the
creation of an exceptional team who understand every aspect of our
operations and work tirelessly to deliver exceptional results to
our customers.
We operate with agility, empowering our people to make decisions
and think entrepreneurially, allowing us to demonstrate leadership
in our chosen markets.
We are an international business with a global perspective and a
solution focused mindset. We believe that our people are at the
heart of everything we do, so we aim to provide them with the
opportunity to be successful in every aspect of their career.
By being open and collaborative, we create an environment where
everyone can thrive and contribute. Our performance culture is
designed to allow a group of remarkably talented people to work
together, contributing to alignment and accountability within a
decentralised operating model. This is supported by a leadership
team who nurture talent and encourage development, creating an
environment where collaboration can flourish.
Delivering our strategic ambitions
A year ago, we set out an ambitious five-year plan, to double
our revenues to $1.2 billion by the end of FY2027, through a
combination of acquisitions and organic growth.
Our compelling performance this financial year further supports
our confidence in achieving these objectives while our key
positioning in attractive markets with structural growth drivers is
a major element of this strategy.
At the same time, we need to scale our operations to ensure
continued efficiency in our business. We are enhancing our
capabilities to deliver more to our customers and support their
increasing requirements.
Our manufacturing sites are well-invested, with key processes
vertically integrated and well-defined quality assurance
procedures. This allows us to sustain high levels of customer
satisfaction while maintaining price competitiveness.
It is difficult to replicate these capabilities which supports
the long-term profitable relationships we maintain with our
customers. We believe that our business model is a competitive
advantage, which will allow us to continue growing and providing
value to all stakeholders.
Acquisitions
The execution of our acquisition strategy has significantly
enhanced our business, bringing diversification, value-add
capabilities and significant new global customer relationships.
We maintain a disciplined acquisition strategy by concentrating
on businesses that provide access to compelling markets, connect us
to new customers, enhance our geographic footprint or enable us to
consolidate within fragmented sectors. During the year, we acquired
RDS, a specialist designer and manufacturer of digital display
solutions, enhancing our capabilities in the European market.
Sustainability
As a responsible business, we recognise the impact that we have
on the world around us. We take sustainability seriously and we are
focused on reducing our environmental impact. This has seen us
reduce our carbon intensity by 31% over the last three years.
We have launched an ambitious new plan to achieve net zero on
scope 1 and 2 emissions by 2035. This is creating a framework for
action at every level of the organisation as we identify and
implement meaningful changes to be cleaner and greener.
We are improving our energy efficiency and reducing the amount
of waste we create by increasing recycling, reusing materials and
finding alternative uses for waste. We are also actively working to
reduce our water consumption by increasing water recycling and
optimising the use of grey water in our facilities.
Dividend
Having delivered another year of strong growth, and with a
robust balance sheet, the Board is pleased to propose a final
dividend of 2.6 pence per share. Together with the interim dividend
payment of 1.3 pence, this gives rise to a total dividend for the
year of 3.9 pence, an increase of 8.3% on the prior year. The Board
considers this to be an appropriate and sustainable level of
dividend that reflects our confidence in the Company's ability to
deliver sustained growth.
Outlook
We entered the new financial year with good momentum, with high
levels of customer demand. Our supply chains are now much improved
and are therefore enabling us to step up production, particularly
for high value-add complex products.
With a diverse offering, proven success in attracting and
retaining customers, and extensive experience operating in our
highly attractive markets, we believe that Volex has the potential
to grow significantly.
We are confident that with a strong strategy, clear demand for
our products and solutions, and ambitious team members, we will
continue to make excellent progress towards our five-year plan
financial targets.
Review of FY2023 Performance
2023 2022
-------------------- ----------------------------------- -----------------------------------
Before
adjusting Adjusting Before
items items adjusting Adjusting
and and items and items and
share-based share-based share-based share-based
payments payments Total payments payments Total
$m $m $m $m $m $m
-------------------- ------------ ------------ ------- ------------ ------------ -------
Revenue
North America 339.8 - 339.8 272.1 - 272.1
Asia 171.4 - 171.4 142.7 - 142.7
Europe 211.6 - 211.6 199.8 - 199.8
-------------------- ------------ ------------ ------- ------------ ------------ -------
722.8 - 722.8 614.6 - 614.6
Cost of sales (565.8) - (565.8) (488.8) - (488.8)
-------------------- ------------ ------------ ------- ------------ ------------ -------
Gross profit 157.0 - 157.0 125.8 - 125.8
Operating expenses (89.7) (13.5) (103.2) (69.6) (15.2) (84.8)
-------------------- ------------ ------------ ------- ------------ ------------ -------
Operating profit 67.3 (13.5) 53.8 56.2 (15.2) 41.0
-------------------- ------------ ------------ ------- ------------ ------------ -------
Share of net profit
from associates 1.1 - 1.1 0.4 - 0.4
Finance income 0.4 - 0.4 0.3 - 0.3
Finance costs (9.5) - (9.5) (5.5) - (5.5)
-------------------- ------------ ------------ ------- ------------ ------------ -------
Profit on ordinary
activities before
taxation 59.3 (13.5) 45.8 51.4 (15.2) 36.2
Taxation (10.7) 2.3 (8.4) (9.1) 3.3 (5.8)
-------------------- ------------ ------------ ------- ------------ ------------ -------
Profit after tax 48.6 (11.2) 37.4 42.3 (11.9) 30.4
-------------------- ------------ ------------ ------- ------------ ------------ -------
The Group has delivered strong revenue growth and excellent
profitability, in line with the five-year plan. In a high-inflation
environment the diverse and resilient business performed strongly,
managing operational complexity while improving profitability.
Though the impact of government restrictions and lockdowns related
to Covid-19 remained at relatively low levels throughout the year,
market dislocation complicated supply chains, resulting in
increased prices and longer lead times across multiple components.
Lead times are stabilising and incidences of component shortages
have decreased compared to FY2022.
Demand from customers across the Group remained strong
throughout the year. We continued to experience rapid growth in the
Electric Vehicles sector as we consolidated our position as market
leader for grid cords, while bringing new products to market and
winning several new customers.
Despite gaining market share, organic revenue in our Consumer
Electricals business was marginally lower year-on-year, principally
as a result of reduced prices for copper and PVC, the costs of
which are passed through to customers.
Trading performance overview
The Group generated revenue of $722.8 million (FY2022: $614.6
million). This included organic revenue growth of 11.4%, the
contribution from the newly-acquired RDS business and the full year
effect of our FY2022 acquisitions. Organic revenue growth included
33% in Electric Vehicles, as well as 16% in Medical and 19% in
Complex Industrial Technology.
Consumer Electricals volumes were broadly flat with PVC and
copper price deflation resulting in a small organic revenue
reduction of 3%.
Underlying operating profit increased by 20% to $67.3 million
(FY2022: $56.2 million), driven by organic revenue growth and
acquisitions. Statutory operating profit was $53.8 million (FY2022:
$41.0 million), including adjusting items and share-based payments
of $13.5 million (FY2022: $15.2 million).
The underlying operating margin was 9.3%, an improvement on the
9.1% achieved in the prior year. The margin benefited from higher
volumes, increased pricing, strong cost controls and vertical
integration efficiencies, partially offset by the impact of the
sales mix. Achieving this improvement despite the macro-headwinds
and inflationary pressures in the second half of the year
demonstrates the resilience of the business.
With strong free cash flow generation, after capital investment,
dividend payments and acquisitions spend of approximately $45
million, net debt was $76.4 million at 2 April 2023 (3 April 2022:
$74.4 million), excluding $27.3 million (3 April 2022: $20.9
million) of operating lease liabilities. The covenant net
debt/adjusted EBITDA ratio was 1.0 times (FY2022: 1.2 times) well
below the covenant limit of 2.75 times.
Impact of the macroeconomic backdrop
Volex continues to be well positioned to navigate the challenges
of a dynamic macro-environment. This is underpinned by our diverse
markets, capabilities and global manufacturing footprint. These
strengths have been central to the continued strong progress made,
overcoming disruption to global supply chains, the challenges posed
by Covid-19 and the war in Ukraine.
It has been a year of volatile inflation, with large cost
increases over several components, while PVC and copper, the
principal constituents of power cords, have experienced significant
deflation. Contracts with power cord customers, where copper is a
significant percentage of our bill of materials, allow for the
pass-through of changes in cost to the customer, although there can
be a short lag in the implementation of pricing changes. Lower
levels of cost pass-through, compared to the high levels
experienced in the prior year, resulted in reduced revenue in our
Consumer Electricals sector.
Other price inflation is passed on to customers through regular
price discussions, which either happen on a regular basis such as
quarterly, or on an ad hoc basis where required by changes in the
costs.
Working capital has increased due to our sales growth, although
inventory levels have eased slightly as the supply chain disruption
has shown signs of improvement, but lead times remain higher than
historical levels.
Government restrictions relating to the Covid-19 pandemic have
remained at low levels in FY2023, although there have been
instances of local and national lockdowns in Asia which have had
some limited and temporary impacts on trade. We did not experience
any significant downtime at our sites in FY2023 and we continue to
adhere to stringent health and safety measures across the
business.
Our direct operational exposure to Russia and Ukraine is
minimal. We have no facilities or employees in either country and
have no significant dependency on direct supplies of components or
materials from either Russia or Ukraine.
Revenue by customer sector
Electric Vehicles
The electric vehicle industry is expected to continue its rapid
expansion as consumer uptake increases, assisted by legislation
encouraging adoption. Volex has achieved continued strong growth
due to our market leading position and strong reputation as a grid
cord manufacturer. Building on our significant experience with
technology related to EV charging, we have expanded our product set
to support faster AC charging and out-of-home charging solutions.
This will help us to further broaden our customer base. We are
continuing to invest in new products and in our manufacturing
processes to retain our place as one of the lowest cost producers.
This is important as competition increases.
Organic revenue from our Electric Vehicles customers increased
year-on-year by 33% to $138.3 million (FY2022: $104.2 million),
with demand remaining strong. This growth is being driven by
Volex's continuing position as a low-cost manufacturer following
our vertical integration activity. We have successfully continued
to expand our product offerings and customer base in line with our
strategy in this space.
Consumer Electricals
Consumer Electricals revenue was marginally lower in FY2023 at
$261.8 million (FY2022: $262.4 million). Our revenue benefited from
a full year of revenues from Prodamex, which was acquired in
FY2022, as well as the consumer portion of inYantra revenue. On an
organic basis, revenue for this sector declined by 3%, with the war
in Ukraine adversely impacting the consumer electricals market in
Europe, along with the impact of high inflation in the Western
world reducing consumer spend. Two of the most significant
components in our power cords, copper and PVC, have reduced in
price during the year, allowing us to pass on lower costs to
customers and reducing revenue. Volumes are broadly flat
year-on-year.
Trends towards increased localisation favour our global
manufacturing footprint, which give us the flexibility to
manufacture for customers from locations close to where they are.
We are also delivering cross-selling success, using our global
domestic appliance presence.
Medical
The demand levels in the Medical sector remained strong
throughout the year, driven by backlogs which had built up through
the Covid-19 pandemic. Consequently, Medical revenues were up 16%
on an organic basis at $145.0 million (FY2022: $128.3 million).
This sector also benefited from the acquisition of RDS at the end
of October and the remainder of the first 12 months revenue from
our acquisition of Irvine in FY2022.
There remains a global backlog in medical procedures following
the pressures on healthcare systems that arose during the pandemic,
which should mean that medium-term demand for medical technology
continues to be elevated. The medical products we manufacture are
complex, with specified bills-of-materials. Extended lead times can
delay individual projects but the high mix of products we
manufacture allows us to maintain efficient production through
dynamic planning.
Complex Industrial Technology
Revenue from Complex Industrial Technology increased organically
by 19% to $177.7 million (FY2022: $119.7 million). Total revenue
includes five months of post-acquisition revenue from RDS and the
full year effect from the FY2022 acquisitions. Excluding Data
Centre customers, revenues were 18% higher than last year on an
organic basis. Order books are strong with key customers placing
demand well in advance of production, due to longer lead times for
certain components. Component availability has begun to improve in
FY2023 as supply chain pressures decrease.
Data Centre customers are reported within Complex Industrial
Technology and represented 21.2% (FY2022: 26.2%) of revenue in this
sector. The revenue in this sub-sector grew by 20% year-on-year,
partly as a result of destocking in the prior year in preparation
for the transition to the new 400 gigabit-per-second cables. There
continued to be shortages of the new network equipment needed to
support the adoption of 400 gigabit-per-second architecture in data
centres, which impacted sales in the first half of the year.
However, demand increased in the second half of the year as the
network equipment situation improved.
Revenue by reportable segment
Volex is a diverse and resilient business with a global
footprint. There is an increasing and accelerating requirement from
customers to have manufacturing in multiple locations, reducing the
risk of supply chain disruption from any particular country. We
operate with a regional focus to meet this need and therefore
analyse our customer revenue geographically on this basis. We
allocate geographic revenue based on where the customer
relationship is, reflecting our customer-centric nature.
North America
North America is our largest customer segment, and we work with
some of its largest technology companies and global innovators.
North America comprises 47.0% of Group revenue (FY2022: 44.3%).
Revenue grew by 24.9% to $339.8 million (FY2022: $272.1 million).
This reflects some of the strong organic growth we experienced with
our Electric Vehicles customers, as well as the annualised impact
from the acquisitions of Irvine, Prodamex and TC part-way through
FY2022.
Asia
Asia makes up 23.7% of Group revenue (FY2022: 23.2%). Asia
revenue increased by 20.1% to $171.4 million (FY2022: $142.7
million) with the majority of revenue in the Consumer Electricals
sector. The increase is largely as a result of the acquisition of
inYantra at the end of FY2022, which has been partially offset by
lower copper prices.
Europe
Europe makes up 29.3% of Group revenue (FY2022: 32.5%). Revenue
in Europe increased by 5.9% to $211.6 million (FY2022: $199.8
million) driven by an increased demand for Electric Vehicles offset
by a moderate decrease in European domestic appliances sales as a
result of the impact of the war in Ukraine on energy prices and
consumer spending appetite.
Realising our strategy
Our strategy is built around five key pillars: product
development; revenue growth; operational excellence; investment and
acquisition; and people.
We aim to develop the right products and capabilities to be the
manufacturing partner of choice for our customers. We have invested
in product development through research and development, working
with our customers to understand their product requirements.
Customers are at the heart of what we do and we pride ourselves
on our regular and transparent communication with them. We deliver
customer value, alongside exceptional quality and customer service.
To meet these high standards, we closely monitor our manufacturing
facilities and processes, identifying ways to improve which will
increase efficiency and quality. Our continued investment in
vertical integration gives us greater control over the supply chain
and protecting margins. The customer service we provide drives
organic revenue growth as customers are onboarded and increase our
allocation of their products.
Delivering excellent customer service and improving processes
requires great people. We have strengthened the organisation by
bringing in talented leaders, in addition to creating development
opportunities for existing employees. Effective communication is
important and we use a variety of channels to drive employee
engagement. We have continued with our site excellence awards as a
way of recognising exceptional performance and teamwork.
Acquisitions are another key pillar of our strategic plan and we
are constantly assessing businesses that are going through a sales
process, or building relationships with potential acquisition
targets that show strategic alignment, but are not yet available
for sale. We have successfully deployed over $210 million on 11
strategic acquisitions over the last five years, which has
contributed to expanding our product offering, improving our
international manufacturing footprint, and are accretive to
earnings and margin.
Creating value through organic investment
Over the past few years, we have increased the focus on organic
investment in the business. Building on our track record of
creating value, we focus on growth areas, while employing stringent
financial criteria. Payback on these investments is typically
achieved within two years. Our investment in the business not only
maintains and enhances our assets, but also meets identified
increased customer demand and develops new products to enable our
future growth.
Total gross capital investment increased to $27.0 million
(FY2022: $15.0 million), amounting to 3.7% of revenue (FY2022: 2.4%
of revenue). This spend includes $8.7m of assets which were
purchased under lease agreements. Capital investment in the year
was slightly lower than planned, as extended lead times meant that
some investment was deferred into FY2024. In the year, investment
was focused on high-growth areas, including EV and data centre
capabilities, as well as surface mount technology, consistent with
our strategy, and the first phase of the new global ERP system. We
have expanded our capabilities in printed circuit board assembly
and are now able to deliver this from our site in Tijuana. We
expect our investment to increase in FY2024, as we pursue growth
opportunities in our markets.
We have also continued to invest in expanding our research and
development activities. This includes the recruitment of additional
specialists to drive our product development programmes. We expect
to continue to enhance our research and development teams through
FY2024.
Creating value through acquisitions
The successful acquisition and integration of quality businesses
continues to be a major part of our strategy. Our typical
acquisition target is a strong, well-managed business in a sector
where we have a deep understanding. We are attracted to businesses
with blue chip, long-term customers and good capabilities, enabling
us to benefit from cross-selling opportunities. Targets requiring
significant integration or restructuring effort are only
contemplated when we can identify the right management resources to
lead this activity.
We identify potential acquisitions through a variety of methods,
seeking out off-market transactions, as well as those being run in
a process. All opportunities are qualified and discussed by an
investment committee before we progress to negotiation. In an
environment where factors outside of managements control (such as
Covid-19) impacted profitability at potential targets, both
positively and negatively, valuation can be complex, and we have
taken a prudent approach in this regard. We proceed to due
diligence only when we have an alignment on commercial terms and we
only pursue opportunities that meet the strict value criteria that
we tailor for each transaction, based on its specific
characteristics.
Having acquired 11 businesses in the last five years, we have
become skilled at integrating new operations into our organisation.
We tailor the integration programme to the requirements of the
individual transaction, focusing on cost synergies and
opportunities to cross-sell.
Acquisitions remain a high priority and we will continue to
actively pursue a number of opportunities, at different stages of
qualification. We have good access to funding, with significant
undrawn facilities. The completion of any acquisition is dependent
on the business meeting our stringent requirements following
appropriate due diligence and negotiations.
During FY2023 we successfully completed the acquisition of
Review Display Systems Limited ("RDS") for cash consideration of
$5.5 million, paying an Enterprise Value/EBITDA multiple of 5.7
times, which demonstrates our continued ability to acquire quality
businesses at attractive valuations. RDS contributed revenues of
$5.7 million to the Group in FY2023.
RDS offers a complete turnkey service for the design and
manufacture of industrial electronic display, embedded and Internet
of Things ("IoT") enabled systems. Alongside this, the business is
focused on the design-in and specialist technical distribution of
electronic displays, touchscreens, embedded intelligence and
wireless mesh networking solutions and IoT system solutions. RDS
will combine with and complement GTK, our successful and growing
UK-based subsidiary.
Sustainability
We have continued to develop our approach to conducting business
in a sustainable way. It is vitally important to our business,
customers, employees, the communities we operate in and our
shareholders. During the year we have designed standardised
sustainability performance metrics and implemented a Group-wide
sustainability reporting platform. We have also developed a
kaizen-based framework to drive sustainability-related improvement
activities at all our factories. This programme, once implemented,
will ensure that every factory identifies and then reports on key
improvement initiatives within the sustainability framework.
Our enhanced focus on sustainability will lead to a significant
number of improvement activities happening in all of our sites and
it will be exciting to see the cumulative impact of these
improvements on our Group's overall performance.
Chief Financial Officer's Review
52 weeks to 2 52 weeks to 3 April
April 2023 2022
-------------------------------------- ---------------------- ----------------------
Revenue Profit/(loss) Revenue Profit/(loss)
$'000 $'000 $'000 $'000
-------------------------------------- ------- ------------- ------- -------------
North America 339.8 30.9 272.1 21.4
Asia 171.4 12.5 142.7 11.6
Europe 211.6 31.5 199.8 32.1
Unallocated Central costs - (7.6) - (8.9)
-------------------------------------- ------- ------------- ------- -------------
Divisional results before share-based
payments
and adjusting items 722.8 67.3 614.6 56.2
Adjusting operating items (9.8) (10.8)
Share-based payment charge (3.7) (4.4)
-------------------------------------- ------- ------------- ------- -------------
Operating profit 53.8 41.0
-------------------------------------- ------- ------------- ------- -------------
Share of net profit from associates 1.1 0.4
Finance income 0.4 0.3
Finance costs (9.5) (5.5)
-------------------------------------- ------- ------------- ------- -------------
Profit before taxation 45.8 36.2
Taxation (8.4) (5.8)
-------------------------------------- ------- ------------- ------- -------------
Profit after taxation 37.4 30.4
-------------------------------------- ------- ------------- ------- -------------
Basic Earnings per share:
Statutory 23.2 cents 19.3 cents
Underlying* 30.2 cents 26.9 cents
* Before adjusting items and share-based payments charge, net of
tax.
Statutory results
Revenue grew 17.6% to $722.8 million (FY2022: $614.6 million).
Statutory operating profit increased by $12.8 million to $53.8
million (FY2022: $41.0 million) which is an increase of 31.2%
compared to the prior year. Net finance costs were $9.1 million
(FY2022: $5.2 million), resulting in a profit before tax of $45.8
million (FY2022: $36.2 million) which is an increase of 26.5%.
There was a tax charge for the year of $8.4 million (FY2022: $5.8
million). Basic earnings per share were 23.2 cents (FY2022: 19.3
cents), an increase of 20.2%.
Alternative performance measures
The Group makes use of underlying and other alternative
performance measures in addition to the measures set out in
International Financial Reporting Standards ('IFRS'). Underlying
earnings measures exclude the impact of adjusting items and
share-based payments, with further detail regarding the adjustments
shown in note 3. The Board and management team make use of
alternative performance measures because they believe they provide
additional information on the underlying performance of the
business and help to make meaningful year-on-year comparisons.
Group revenue
Group revenue increased by 17.6% to $722.8 million (FY2022:
$614.6 million) driven by strong organic growth from customer
demand, project wins with both new and existing customers and the
contribution from acquisitions. With the US dollar strengthening
during FY2023, sales in currencies other than US dollars resulted
in a foreign exchange loss of approximately 3.4%. Group organic
revenue growth was 11.4%, of which the majority was driven by
volumetric growth of approximately 8.1%, and approximately 2.6%
from inflation-related price increases.
Organic revenue from the fast-growing Electric Vehicles sector
was particularly strong, increasing 32.9% to $138.3 million
(FY2022: $104.2 million), as we diversified our product offering.
Demand in the Consumer Electricals sector fell in FY23 with organic
decline of 3.2%, the main cause of which was the deflation in the
cost of the key commodities copper and PVC where price decreases
were passed on to customers. Additionally, there was a fall in
demand in the second half of FY2023 for consumer product power
cords due to moderation in global consumer spending power driven by
macroeconomic factors. Overall Consumer Electricals revenue was
broadly flat at $261.8 million (FY2022: $262.4 million). Our
Medical revenue saw growth in FY2023 driven by the continued
backlogs built up during the Covid-19 pandemic and the acquisition
of RDS during the year. Medical revenues increased 16.1% on an
organic basis to $145.0 million (FY2022: $128.3 million). Revenue
from Complex Industrial Technology increased to $177.7 million
(FY2021: $119.7 million), 18.7% higher on an organic basis.
Excluding data centre customers, revenues were 17.7% higher on an
organic basis. Data Centre revenues were $37.7 million, (FY2022:
$31.4 million). Demand for Data Centres products grew by 20.3%
during the year.
Gross margin
The Group's gross margin was 21.7% (FY2022: 20.5%). This was due
in part to deflation in the cost of core components of PVC and
copper. Where our contracts with power cord customers allow us to
pass on the cost of raw materials to customers, the cost of sales
as a percentage of revenue decreases, which increases the gross
margin percentage. Most raw materials purchases are also
denominated in US dollars but other costs, such as labour costs,
are paid in local currencies. With a strong dollar versus other
currencies, this had a small beneficial impact.
Operating profit
Underlying operating profit increased 19.8% to $67.3 million
(FY2022: $56.2 million). This was favourably impacted by the strong
organic growth and a full year of contribution from acquisitions
acquired in FY2022. The ratio of underlying operating expenses to
revenue marginally increased to 12.4%, from 11.3% in the prior year
and there continues to be a strong focus on cost control and
continuous improvement activities. Statutory operating profit
increased by 31.2% to $53.8 million (FY2022: $41.0 million), also
reflecting the factors above.
The Group's underlying operating margin of 9.3% was better than
the 9.1% achieved in FY2022. Despite headwinds from inflation in a
number of areas, including materials and utilities, operating
margin benefited from better gross margins, continued cost control
improvements over our cost base and vertical integration activities
across our sites. The stronger dollar also helped in relation to
costs such as rent, utilities and salaries paid in local
currencies.
Adjusting items and share-based payments
The Group presents some significant items separately to provide
clarity on the underlying performance of the business. This
includes significant one-off costs such as restructuring and
acquisition related costs, the non-cash amortisation of intangible
assets acquired as part of business combinations, and share-based
payments, as well as associated tax.
Acquisition costs of $1.3 million (FY2022: $2.5 million) were
incurred in the year. As well as undertaking third-party due
diligence, the Group uses its own experts and in-depth
understanding of the sector to conduct a robust assessment of all
acquisition targets.
Amortisation of acquired intangibles decreased to $8.9 million
(FY2022: $10.3million) due to the DE- KA open order book being
fully amortised in the prior year.
The charge recognised through the income statement for
share-based payment awards comprises $4.6 million (FY2022: $3.8
million) in respect of senior management, credit of $0.9 million
(FY2022: $0.6 million charge) in respect of acquisitions where
awards lapsed in the year and $nil (FY2022: $nil) for associated
payroll taxes.
Share-based payments include awards made to incentivise senior
management as well as awards granted to the senior management of
acquired companies. The awards made to acquired company management
form an important part of the negotiation of consideration for an
acquisition. They are used to reduce the cash consideration, and as
an incentivisation and retention tool. In accordance with IFRS,
where these awards include ongoing performance features, they are
recognised in the income statement rather than as part of the cost
of acquisition.
Net finance costs
Net finance costs increased to $9.1 million (FY2022: $5.2
million) mainly due to the working capital requirements for the
supply chain disruption experienced in FY2023 and the utilisation
of the revolving credit facility following the acquisitions of
Irvine, TC, Prodamex and inYantra during FY2022 and RDS in FY2023.
The financing element for leases for the year was $1.7 million
(FY2022: $1.0 million). The Group recognises interest income of
$0.2 million (FY2022: $0.2 million) in relation to accrued interest
receivable on the 10% preference shares issued by our associate,
Kepler SignalTek.
Taxation
The Group's income tax expense for the period was $8.4m (FY2022:
$5.8m), representing an effective tax rate ("ETR") of 18.3%
(FY2022: 16.0%). The tax expense and the effective tax rate is
affected by the recognition of deferred tax assets, as required by
International Financial Reporting Standards. The assets recognised
this year and in previous years are principally due to the
recognition of historical operating losses, unclaimed capital
allowances and other temporary differences. The decision to
recognise these assets is based on an assessment, in the relevant
jurisdiction, of the probability of future taxable profits which
will be reduced by the historical losses and allowances. As the
profitability of the Group's operations has increased in recent
years, this threshold has been met in certain countries.
Tax credits and charges relating to the underlying operations of
the Group, including losses that have arisen through underlying
activities, are reported in underlying profit after tax. The
recognised deferred tax assets are expected to be recovered from
profits arising from our underlying operations. Tax charges and
credits arising from transactions reported as adjusting items and
share-based payments are reported outside of underlying profit
after tax. The deferred tax assets are recovered in future periods
by reducing cash tax payable and recognising a deferred tax expense
in the income statement.
The impact of deferred tax asset recognition on underlying
profit after tax was $5.8 million (FY2022: $2.9 million). During
FY2023 management considered all available evidence, including the
continued growth in the Group's profitability, and determined that
all the remaining unrecognised tax losses in a key jurisdiction
should be recognised as a deferred tax asset. The Group has $28.8
million (FY2022: $64.1 million) of tax losses for which no deferred
tax asset is currently recognised due to uncertainty over forecast
future profitability in the respective jurisdictions where the tax
losses arose. Depending on the Group's future growth and
performance in those jurisdictions it is possible that some of the
unrecognised tax losses may become recoverable, leading to
additional deferred tax assets being recognised in future periods
and reducing the effective tax rate.
The underlying ETR (representing the income tax expense on
profit before tax, adjusting items and share-based payments) was
18.0% (FY2022: 17.7%). The ETR was again affected by changes in
foreign exchange rates where local entities calculate tax in local
currency rather than the functional currency for Group reporting.
The impact of foreign exchange volatility on the underlying ETR was
3.2% adverse (FY2022: 4.7%), mainly arising in Turkey.
The net favourable impact on the underlying ETR from judgements
over deferred tax asset recognition across multiple territories was
7.1% (FY2022: 4.3%). Deferred tax assets arising from historical
tax losses are now fully recognised in a major jurisdiction and
therefore the impact of deferred tax asset recognition on the ETR
is expected to be reduced going forwards.
Cash tax paid during the period was $7.9 million (FY2022: $6.5
million), representing an underlying cash ETR of 13.3% (FY2022:
12.6%). The underlying cash ETR continues to be below the reported
underlying ETR due to the utilisation of tax losses and the timing
of cash tax payments.
The Group operates in a number of different tax jurisdictions
and is subject to periodic tax audits by local authorities in the
normal course of business on a range of tax matters in relation to
corporate tax and transfer pricing. As at 2 April 2023, the Group
has net current tax liabilities of $13.7 million (FY2022: $8.2
million) which include $10.4 million (FY2022: $7.2 million) of
provisions for tax uncertainties.
Earnings per share
Underlying diluted earnings per share increased 14.3% to 28.8
cents (FY2022: 25.2 cents). Basic earnings per share increased to
23.2 cents (FY2022: 19.3 cents).
The weighted average number of shares in the year was 158.7
million (FY2022: 157.2 million).
Foreign exchange
The majority of the Group's revenue is in US dollars, with sales
in other currencies including euro and British pounds sterling.
Most raw materials purchases are also denominated in US dollars but
other costs such as rent, utilities and salaries are paid in local
currencies. This creates a small operating profit exposure to
movements in foreign exchange, some of which is hedged. Foreign
exchange gains recognised in the income statement for the period
were $0.6 million (FY2022: $0.6 million loss).
Cash flow
Operating cash flow before movements in working capital was
$78.4 million (FY2022: $60.9 million). While benefiting from the
strong operating performance, operating cash flow reflects the
increased investment in the business. In addition, there was an
adverse working capital movement of $8.6 million, which compares to
a $34.4 million adverse movement in FY2022. The reasons for this
working capital movement are set out below:
-- An increase in inventory leading to a cash outflow of $0.2
million (FY2022: $28.1 million cash outflow). Supply chain lead
times have stabilised and incidences of component shortages have
decreased compared to FY2022, which have resulted in the level of
inventory being held having stabilised. Inventories have increased
where required due to growth in our operations and new customer
projects;
-- The acquisition of more working capital heavy complex
projects over this period has also contributed to the higher
working capital days.
-- An increase in receivables leading to a cash outflow of $15.4
million (FY2022: $14.2 million cash outflow) with the increase
reflecting growth of the business; and
-- An inflow related to payables of $7.0 million (FY2022: $7.9
million cash inflow). This was also due to the growth of the
business.
Total gross capital expenditure increased to $27.0 million from
$15.0 million in FY2022. Of the $27.0 million, $18.3 million
related to cash spend and the remaining $8.7 million related to new
finance leases accounted for as right-of-use assets under IFRS16.
During the year, the Group has invested in expanding facilities in
Batam, Indonesia and Pune, India in order to increase capacity and
capabilities as the Group continues to grow. We have continued with
our investment in automation, vertical integration and in our
higher-growth sectors.
Free cash flow was $38.1 million (FY2022: $4.1 million). Free
cash flow represents net cash flows before financing activities
excluding the net outflow from the acquisition of subsidiaries.
Net financing outflows were $31.4 million (FY2022: inflows $40.4
million). This included dividend payments of $5.7 million (FY2022:
$7.2 million) which were lower than the prior year due to the
take-up of the scrip dividend in FY2023. In FY2022, net financing
inflows included legal costs and arrangement fees of $2.5 million
relating to the drawing of the revolving credit facility ("RCF") to
fund acquisitions.
Total cash expenditure on acquisitions (net of cash acquired)
was $12.2 million (FY2022: $54.9 million), including $7.1 million
(FY2022: $19.2 million) in respect of contingent consideration.
The Group is expecting to make payments of $3.5 million in
FY2024 in relation to contingent consideration for acquisitions
made in FY2023 and previous years.
The cash outflow associated with the settlement of awards under
share-based payment arrangements was $7.2 million (FY2022: $5.1
million).
Net debt and gearing
At 2 April 2023, the Group's net debt was $76.4 million before
operating lease liabilities and $103.7 million including operating
lease liabilities. At 3 April 2022, net debt before operating lease
liabilities was $74.4 million and $95.3 million including operating
lease liabilities.
At 2 April 2023 the Group's covenant basis net debt/underlying
EBITDA ratio was 1.0 times (3 April 2022: 1.2 times). For further
details on the Group's covenants, see the section on 'Banking
facilities, covenants and going concern'.
Dividend
The Board's dividend policy, while taking into account earnings
cover, also takes into account other factors such as the expected
underlying growth of the business, its capital and other investment
requirements. The strength of the Group's balance sheet and its
ability to generate cash are also considered.
A final dividend of 2.6 pence per share (FY2022: 2.4 pence) will
be recommended to shareholders at the Annual General Meeting,
reflecting the Board's confidence and the Group's robust financial
position. The cash cost of this dividend is expected to be
approximately $5.1 million.
Together with an interim dividend of 1.3 pence per share paid in
December 2022, this equates to a full year dividend of 3.9 pence
per share (FY2022: 3.6 pence per share), an increase of 8.3%. If
approved, the final dividend will be paid on 25 August 2023 to all
shareholders on the register at 21 July 2023. The ex-dividend date
will be 20 July 2023.
Banking facilities, covenants and going concern
As at the FY2023 year end, the Group banking facilities remained
at $300 million, which are due to expire in February 2026. The
facility comprises a $125 million revolving credit facility, a $75
million term loan and an additional $100 million uncommitted
accordion. During FY2023, the first of two options to extend for an
additional year was taken.
As at 2 April 2023, drawings under the facility were $91.5
million (FY2022: $103.8 million) with $1.7 million drawn under the
cash pool (FY2022: $3.2 million).
At the year end the net debt to underlying EBITDA ratio was 1.0x
and interest cover was 11.0 times, well within the covenant
terms.
The Group's financial statements have been prepared on the going
concern basis, which contemplates the continuity of normal business
activity with the realisation of assets and the settlement of
liabilities in the normal course of business. When assessing the
going concern status of the Group, the Directors have considered in
particular its financial position, including its significant
balance of cash and cash equivalents and the borrowing facility in
place, including its terms, remaining duration and covenants.
The Directors have prepared a cash flow forecast for the period
to end of September 2024, which is based on the FY2024
Board-approved budget. The Directors have performed sensitivity
analysis on the cash flow forecast using a base case and downside
scenario that take into account the principal risks and
uncertainties identified by the Directors. The Directors have
considered the potential impact of climate change on the going
concern assessment and do not believe there to be a significant
impact in the going concern period. The severe but plausible
downside scenario models a 15% reduction in year-on-year revenue,
equivalent to the worst result in recent history, and still
provides significant covenant and liquidity headroom. The Directors
have considered the impact of potential acquisitions in both the
base case and severe but plausible downside scenarios, where
appropriate.
Based on their assessment and these sensitivity scenarios, the
Directors are satisfied that there are no material uncertainties
regarding the Group's going concern status and that there is a
reasonable expectation that the Group has adequate resources to
continue in operational existence for at least twelve months from
the date of approval of the financial statements. The Directors
therefore consider it appropriate to adopt the going concern basis
of accounting in preparing the financial statements.
Financial instruments and cash flow hedge accounting
In September 2022 an interest rate swap was entered into
following market evaluation, which has enabled the Group to fix the
interest rate paid on a notional value of $50 million.
For most products we sell to Consumer Electricals customers, the
price of copper has an impact on the cost of key raw materials.
This risk is minimised by passing the variability in cost through
to the end customer in the majority of cases. Where the customer
contract does not provide for the pass-through of risk, the Group
enters into forward contracts to mitigate the Group's exposure to
copper price volatility.
The forward contracts act as an economic hedge against the
impact of copper price movements. They meet the hedge accounting
requirements of IFRS 9 and therefore are accounted for as cash flow
hedges of forecast future purchases of copper. As at 2 April 2023,
a financial asset of $nil (FY2022:$nil) has been recognised in
respect of the fair value of open copper contracts. This credit is
retained in reserves until such time as the forecast copper
consumption takes place, at which point it will be recycled through
the income statement.
A charge of $0.3 million has been recognised in cost of sales
for FY2023 (FY2022: credit of $0.1 million) in respect of copper
hedging contracts that closed out during the period. This charge
has arisen since the average London Metal Exchange copper price in
the period has been below the contracted price.
The Group also has certain foreign operations whose net assets
are exposed to foreign currency translation risk. The Group's
policy is to hedge this exposure through designating certain
amounts of foreign currency denominated debt as a hedging
instrument.
Defined benefit pension schemes
The Group's net pension deficit under IAS 19 as at 2 April 2023
was $2.6 million (FY2022: $3.1 million). The largest element of the
pension obligation relates to a defined benefit scheme in the
United Kingdom which has been closed to new entrants for some
years. The scheme's assets and liabilities are recorded in British
pounds sterling with a small part of the decrease due to the
movement in exchange rates.
Consolidated Income Statement
-----------------------------------------------------------------------------------------------
For the 52 weeks ended 2 April 2023 (52 weeks ended 3 April
2022)
2023 2022
Adjusting
Before items and Before Adjusting
adjusting share-based adjusting items and
items and payments items and share-based
share-based (Note share-based payments
payments 3) Total payments (Note 3) Total
Notes $'m $'m $'m $'m $'m $'m
------------------ ----- ----------- ----------- ------- ----------- ----------- -------
Revenue 2 722.8 - 722.8 614.6 - 614.6
Cost of sales (565.8) - (565.8) (488.8) - (488.8)
------------------ ----- ----------- ----------- ------- ----------- ----------- -------
Gross profit 157.0 - 157.0 125.8 - 125.8
Operating
expenses (89.7) (13.5) (103.2) (69.6) (15.2) (84.8)
------------------ ----- ----------- ----------- ------- ----------- ----------- -------
Operating profit 2 67.3 (13.5) 53.8 56.2 (15.2) 41.0
Share of net
profit
from associates 1.1 - 1.1 0.4 - 0.4
Finance income 0.4 - 0.4 0.3 - 0.3
Finance costs (9.5) - (9.5) (5.5) - (5.5)
------------------ ----- ----------- ----------- ------- ----------- ----------- -------
Profit on
ordinary
activities
before
taxation 59.3 (13.5) 45.8 51.4 (15.2) 36.2
Taxation 4 (10.7) 2.3 (8.4) (9.1) 3.3 (5.8)
------------------ ----- ----------- ----------- ------- ----------- ----------- -------
Profit for the
period 48.6 (11.2) 37.4 42.3 (11.9) 30.4
------------------ ----- ----------- ----------- ------- ----------- ----------- -------
Profit is
attributable
to:
Owners of the
parent 48.0 (11.2) 36.8 42.3 (11.9) 30.4
Non-controlling
interests 0.6 - 0.6 - - -
48.6 (11.2) 37.4 42.3 (11.9) 30.4
Earnings per share
(cents)
Basic 5 30.2 23.2 26.9 19.3
Diluted 5 28.8 22.1 25.2 18.1
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 2 April 2023 (52 weeks ended 3 April 2022)
2023 2022
$'m $'m
Profit for the period 37.4 30.4
Items that will not be reclassified
subsequently to profit or loss
Actuarial (loss)/gain on defined benefit
pension schemes (0.5) 0.7
Tax relating to items that will not be
reclassified 0.1 (0.1)
(0.4) 0.6
Items that may be reclassified subsequently
to profit or loss
Gain arising on cash flow hedges during
the period 1.4 0.1
Exchange loss on translation of foreign
operations (7.0) (5.9)
Tax relating to items that may be reclassified 0.2 0.1
(5.4) (5.7)
Other comprehensive expense for the
period (5.8) (5.1)
---------------------------------------------------------- ------ ------
Total comprehensive income for the period
attributable to the owners of the parent 31.6 25.3
Non-controlling interests - -
Consolidated Statement of Financial Position
2023 2022
As at 2 April 2023 (3 April 2022) Notes $'m $'m
----------------------------------- ------ --- --------- --------
Non-current assets
Goodwill 82.3 82.9
Other intangible assets 41.8 47.0
Property, plant and equipment 50.1 43.4
Right-of-use asset 34.5 19.4
Interests in associates 2.6 1.5
Other receivables 1.8 2.1
Derivative financial instruments 0.9 -
Deferred tax asset 24.6 20.6
----------------------------------- ------ --- --------- --------
238.6 216.9
----------------------------------- ------ --- --------- --------
Current assets
Inventories 120.5 119.3
Trade receivables 136.2 119.0
Other receivables 15.7 16.7
Current tax assets 0.8 1.9
Derivative financial instruments 0.9 0.4
Cash and bank balances 8 22.5 29.1
----------------------------------- ------ --- --------- --------
296.6 286.4
----------------------------------- ------ --- --------- --------
Total assets 535.2 503.3
----------------------------------- ------ --- --------- --------
Current liabilities
Borrowings 8 1.8 5.0
Lease liabilities 8 15.6 4.3
Trade payables 84.4 84.7
Other payables 65.2 61.9
Current tax liabilities 14.5 10.1
Retirement benefit obligation 0.3 1.1
Provisions 9 0.9 2.3
Derivative financial instruments - 0.1
182.7 169.5
----------------------------------- ------ --- --------- --------
Net current assets 113.9 116.9
----------------------------------- ------ --- --------- --------
Non-current liabilities
Borrowings 8 89.6 98.5
Lease liabilities 8 19.2 16.6
Other payables 1.4 1.0
Deferred tax liabilities 6.9 7.0
Retirement benefit obligation 2.3 2.0
Provisions 9 0.4 0.2
119.8 125.3
----------------------------------- ------ --- --------- --------
Total liabilities 302.5 294.8
----------------------------------- ------ --- --------- --------
Net assets 232.7 208.5
----------------------------------- ------ --- --------- --------
Equity
Share capital 11 62.7 62.5
Share premium account 11 60.7 60.9
Non-distributable reserves 12 2.5 2.5
Hedging and translation reserve (14.6) (9.8)
Own shares 12 (1.0) (0.2)
Retained earnings 115.0 85.2
----------------------------------- ------ --- --------- --------
Total attributable to owners of
the parent 225.3 201.1
----------------------------------- ------ --- --------- --------
Non-controlling interests 7.4 7.4
----------------------------------- ------ --- --------- --------
Total equity 232.7 208.5
Consolidated Statement of Changes in Equity
For the 52 weeks ended 2 April 2023 (52 weeks ended 3 April 2022)
Hedging
Share and Equity
Share premium Non-distributable translation Own Retained attributable Non-controlling Total
capital account reserves reserve shares earnings to owners interests equity
$'m $'m $'m $'m $'m $'m $'m $'m $'m
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Balance at 4
April 2021 62.0 60.9 2.5 (4.1) (3.3) 66.0 184.0 - 184.0
Profit for the
period - - - - - 30.4 30.4 - 30.4
Other
comprehensive
(expense)/income
for the period - - - (5.7) - 0.6 (5.1) - (5.1)
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Total
comprehensive
income
for the period - - - (5.7) - 31.0 25.3 - 25.3
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Share issue 0.5 - - - - (0.5) - - -
Business
combination - - - - - - - 7.4 7.4
Own shares
sold/(utilised)
in the period - - - - 7.5 (7.5) - - -
Own shares
purchased
in the period - - - - (4.4) - (4.4) - (4.4)
Dividend paid - - - - - (7.2) (7.2) - (7.2)
Credit to equity
for
equity-settled
share-based
payments - - - - - 4.2 4.2 - 4.2
Tax effect of
share options - - - - - (0.8) (0.8) - (0.8)
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Balance at 3
April 2022 62.5 60.9 2.5 (9.8) (0.2) 85.2 201.1 7.4 208.5
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Profit for the
period - - - - - 36.8 36.8 0.6 37.4
Other
comprehensive
expense
for the period - - - (4.8) - (0.4) (5.2) (0.6) (5.8)
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Total
comprehensive
income
for the period - - - (4.8) - 36.4 31.6 - 31.6
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Own shares
sold/(utilised)
in the period - - - - 4.2 (4.2) - - -
Own shares
purchased
in the period - - - - (5.0) - (5.0) - (5.0)
Dividend paid - - - - - (7.1) (7.1) - (7.1)
Scrip dividend
related
share issue 0.2 (0.2) - - - 1.4 1.4 - 1.4
Credit to equity
for
equity-settled
share-based
payments - - - - - 3.7 3.7 - 3.7
Tax effect of
share options - - - - - (0.4) (0.4) - (0.4)
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Balance at 2
April 2023 62.7 60.7 2.5 (14.6) (1.0) 115.0 225.3 7.4 232.7
Consolidated Statement of Cash Flows
For the 52 weeks ended 2 April 2023 (52 weeks ended 3 April
2022)
Notes 2023 2022
$'m $'m
---------------------------------------------- ------ ------ ------
Net cash generated from operating activities 7 55.7 18.5
Cash flow used in investing activities
Interest received 0.2 0.1
Acquisition of businesses, net of cash
acquired 13 (5.1) (35.7)
Deferred and contingent consideration
for businesses acquired 13 (7.1) (19.2)
Proceeds on disposal of intangible assets,
property, plant and equipment 0.1 0.5
Purchases of property, plant and equipment (14.6) (10.8)
Purchases of intangible assets (3.7) (4.2)
Proceeds from the repayment of preference
shares 0.4 -
Net cash used in investing activities (29.8) (69.3)
Cash flows before financing activities 25.9 (50.8)
------ ------
Cash generated/(used) before adjusting
items 28.1 (48.8)
Cash used in respect of adjusting items (2.2) (2.0)
------ ------
Cash flow generated from financing activities
Dividend paid (5.7) (7.2)
Net purchase of shares for share schemes (7.2) (5.1)
Refinancing costs paid 8 (0.5) (2.5)
New bank loans raised 8 25.0 69.3
Repayment of borrowings 8 (35.3) (3.4)
Outflow from factoring 8 (0.7) (6.0)
Interest element of lease payments 8 (1.7) (1.0)
Receipt from lease debtor 0.5 0.5
Capital element of lease payments 8 (5.8) (4.2)
---------------------------------------------- ------ ------ ------
Net cash (used in)/generated from financing
activities (31.4) 40.4
Net decrease in cash and cash equivalents (5.5) (10.4)
Cash and cash equivalents at beginning
of period 25.9 36.5
Effect of foreign exchange rate changes 0.3 (0.2)
---------------------------------------------- ------ ------ ------
Cash and cash equivalents at end of period 8 20.7 25.9
1 Basis of preparation
The preliminary announcement for the 52 weeks ended 2 April 2023
has been prepared in accordance with the accounting policies as
disclosed in Volex plc's Annual Report and Accounts 2022, as
updated to take effect of any new accounting standards applicable
for the period as set out in Volex plc's Interim Statement
2023.
The annual financial information presented in this preliminary
announcement is based on, and is consistent with, that in the
Group's audited financial statements for the 52 weeks ended 2 April
2023, and those financial statements will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting. The independent auditors' report on those financial
statements is unqualified and does not contain any statement under
section 498 (2) or 498 (3) of the Companies Act 2006.
Information in this preliminary announcement does not constitute
statutory accounts of the Group within the meaning of section 434
of the Companies Act 2006. The full financial statements for the
Group for the 52 weeks ended 3 April 2022 have been delivered to
the Registrar of Companies. The independent auditors' report on
those financial statements was unqualified and did not contain a
statement under section 498 (2) or 498 (3) of the Companies Act
2006.
Going concern
The Group's financial statements have been prepared on the going
concern basis, which contemplates the continuity of normal business
activity with the realisation of assets and the settlement of
liabilities in the normal course of business. When assessing the
going concern status of the Group, the Directors have considered in
particular its financial position, including its significant
balance of cash and cash equivalents and the borrowing facility in
place, including its terms, remaining duration and covenants.
The Directors have prepared a cash flow forecast for the period
to end of September 2024, which is based on the FY2024
Board-approved budget. The Directors have performed sensitivity
analysis on the cash flow forecast using a base case and downside
scenario that take into account the principal risks and
uncertainties identified by the Directors. The Directors have
considered the potential impact of climate change on the going
concern assessment and do not believe there to be a significant
impact in the going concern period. The severe but plausible
downside scenario models a 15% reduction in year-on-year revenue,
equivalent to the worst result in recent history, and still
provides significant covenant and liquidity headroom. The Directors
have considered the impact of potential acquisitions in both the
base case and severe but plausible downside scenarios, where
appropriate.
Based on their assessment and these sensitivity scenarios, the
Directors are satisfied that there are no material uncertainties
regarding the Group's going concern status and that there is a
reasonable expectation that the Group has adequate resources to
continue in operational existence for at least twelve months from
the date of approval of the financial statements. The Directors
therefore consider it appropriate to adopt the going concern basis
of accounting in preparing the financial statements.
This preliminary announcement was approved by the Board of
Directors on 21 June 2023.
2 Business and geographical segments
Operating segments
Segment information is based on the information provided to the
chief operating decision maker, being the Executive members of the
Company's Board and the Chief Operating Officer. This is the basis
on which the Group reports its primary segmental information for
the period ended 2 April 2023.
The Group evaluates segmental information on the basis of profit
or loss from operations before adjusting items, share-based
payments, interest and income tax expense. The segmental results
that are reported to the Executive members of the Company's Board
and Chief Operating Officer include items directly attributable to
a segment, as well as those that can be allocated on a reasonable
basis.
The internal reporting provided to the Executive members of the
Company's Board and the Chief Operating Officer for the purpose of
resource allocation and assessment of Group performance is based
upon the regional performance of where the customer is based and
where the products are delivered. In addition to the operating
divisions, a Central division exists to capture all of the
corporate costs incurred in supporting the operations.
Unallocated central costs represent corporate costs that are not
directly attributable to the manufacture and sale of the Group's
products but which support the Group in its operations. Included
within this division are the costs incurred by the executive
management team and the corporate head office.
The following is an analysis of the Group's revenues and results
by reportable segment:
52 weeks to 2 52 weeks to 3 April
April 2023 2022
-------------------------------------- ------------------------ ----------------------
Revenue Profit/(loss) Revenue Profit/(loss)
$'m $'m $'m $'m
-------------------------------------- -------- -------------- ------- -------------
North America 339.8 30.9 272.1 21.4
Asia 171.4 12.5 142.7 11.6
Europe 211.6 31.5 199.8 32.1
Unallocated Central costs - (7.6) - (8.9)
-------------------------------------- -------- -------------- ------- -------------
Divisional results before share-based
payments
and adjusting items 722.8 67.3 614.6 56.2
Adjusting operating items (9.8) (10.8)
Share-based payment charge (3.7) (4.4)
-------------------------------------- -------- -------------- ------- -------------
Operating profit 53.8 41.0
-------------------------------------- -------- -------------- ------- -------------
Share of net profit from associates 1.1 0.4
Finance income 0.4 0.3
Finance costs (9.5) (5.5)
-------------------------------------- -------- -------------- ------- -------------
Profit before taxation 45.8 36.2
Taxation (8.4) (5.8)
-------------------------------------- -------- -------------- ------- -------------
Profit after taxation 37.4 30.4
-------------------------------------- -------- -------------- ------- -------------
Charges for share-based payments and adjusting items have not
been allocated to regions as management report and analyse division
profitability at the level shown above. The accounting policies of
the reportable segments are in accordance with the Group's
accounting policies.
2 Business and geographical segments (continued)
Geographical information
The Group's revenue from external customers and information
about its non-current assets (excluding deferred tax assets) by
geographical location are provided below:
Revenue Non-Current Assets
2023 2022 2023 2022
$'m $'m $'m $'m
-------------- ----- ----- --------- ---------
North America 339.8 272.1 51.4 49.3
Asia 171.4 142.7 59.0 47.2
Europe 211.6 199.8 103.6 99.8
722.8 614.6 214.0 196.3
-------------- ----- ----- --------- ---------
3 Adjusting items and share-based payments
2023 2022
$'m $'m
----------------------------------------------------- -------------------- --------------------
Acquisition-related costs 1.3 2.5
Acquisition-related remuneration (see note 0.9 -
13)
Adjustment to fair value of contingent consideration (1.3) (0.2)
Restructuring costs - 0.8
Amortisation of acquired intangibles 8.9 10.3
Paycheck Protection Program ('PPP') loan
forgiveness - (2.6)
Total adjusting items 9.8 10.8
----------------------------------------------------- -------------------- --------------------
Share-based payments 3.7 4.4
----------------------------------------------------- -------------------- --------------------
Total adjusting items and share-based payments
before tax 13.5 15.2
----------------------------------------------------- -------------------- --------------------
Tax effect of adjusting items and share-based
payments (note 4) (2.3) (3.3)
----------------------------------------------------- -------------------- --------------------
Total adjusting items and share-based payments
after tax 11.2 11.9
----------------------------------------------------- -------------------- --------------------
Adjusting items include costs that are one-off in nature and
significant as well as the non-cash amortisation of acquired
intangible assets. The adjusting items and share-based payments are
included under the statutory classification appropriate to their
nature but are separately disclosed on the face of the income
statement to assist in understanding the underlying financial
performance of the Group.
3 Adjusting items and share-based payments (continued)
Acquisition-related costs of $1.3m (2022: $2.5m) consist of
legal and professional fees relating to potential and completed
acquisitions. The acquisition-related costs associated with
acquisitions completed during the year relate to the acquisition of
Review Display Systems ('RDS') ($0.2m). The remaining acquisition
costs relate to other acquisitions that have been or are being
pursued. During the prior year the $2.5m of acquisition-related
costs consisted of legal and professional fees associated primarily
with the acquisitions of Irvine Electronics LLC ('Irvine') ($0.7m),
Terminal & Cable TC Inc ('TC') ($0.4m), Prodamex SA de CV
('Prodamex') ($0.4m) and inYantra Technologies Pvt Ltd ('inYantra')
($0.6m).
The adjustment to the fair value of contingent consideration
relates to a remeasurement of contingent consideration on the
acquisition of De-Ka Elektroteknik Sanayi ve Ticaret Anonim irketi
('DE-KA').
Associated with the acquisitions, the Group has recognised
certain intangible assets, including customer relationships and
customer order backlogs. The amortisation of these intangibles is
non-cash and totals $8.9m (2022: $10.3m) for the period. The
reduction from the prior year primarily reflects the completion of
acquired order books being fully amortised during the period. This
was partially offset due to the annualised impact of acquisitions
from the prior year, being Irvine, Prodamex, TC and inYantra, and
the new acquisition, RDS, in the current year.
During the prior period the Group's North American operations
received notification that $2.6m of Payroll Protection Program
loans provided during the pandemic were forgiven.
4 Taxation
2023 2022
-------------------------- ------------------------------------ ------------------------------------
Adjusting Adjusting
Before items Before items
adjusting and share-based adjusting and share-based
items payments Total items payments Total
$'m $'m $'m $'m $'m $'m
-------------------------- ---------- ---------------- ------ ---------- ---------------- ------
Current tax - expense
for the period (14.7) 0.2 (14.5) (10.1) 0.2 (9.9)
Current tax - adjustment
in respect of previous
periods 0.1 - 0.1 (0.1) - (0.1)
Total current tax
expense (14.6) 0.2 (14.4) (10.2) 0.2 (10.0)
-------------------------- ---------- ---------------- ------ ---------- ---------------- ------
Deferred tax - credit
for the period 4.5 2.1 6.6 0.8 3.1 3.9
Deferred tax - adjustment
in respect of previous
periods (0.6) - (0.6) 0.3 - 0.3
-------------------------- ---------- ---------------- ------ ---------- ---------------- ------
Total deferred tax
credit 3.9 2.1 6.0 1.1 3.1 4.2
-------------------------- ---------- ---------------- ------ ---------- ---------------- ------
Income tax expense (10.7) 2.3 (8.4) (9.1) 3.3 (5.8)
-------------------------- ---------- ---------------- ------ ---------- ---------------- ------
UK corporation tax is calculated at the standard rate of 19%
(2022: 19%) of the estimated assessable profit for the period.
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
2023 2022
---------------------------- ----------------------------------- -----------------------------------
Adjusting Adjusting
Before items Before items
adjusting and share-based adjusting and share-based
items payments Total items payments Total
$'m $'m $'m $'m $'m $'m
---------------------------- ---------- ---------------- ----- ---------- ---------------- -----
Profit before tax 59.3 (13.5) 45.8 51.4 (15.2) 36.2
---------------------------- ---------- ---------------- ----- ---------- ---------------- -----
Tax at the UK corporation
tax rate (11.3) 2.6 (8.7) (9.8) 2.9 (6.9)
Tax effect of:
Expenses that are
not deductible and
income that is not
taxable in determining
taxable profit (0.1) (0.8) (0.9) 0.1 0.4 0.5
Foreign exchange on
entities with different
tax and functional
currencies (1.9) - (1.9) (2.4) - (2.4)
Adjustment in respect
of previous periods (0.5) - (0.5) 0.2 - 0.2
Changes to tax rates (0.4) 0.1 (0.3) 1.7 0.1 1.8
Overseas tax rate
differences (0.7) 0.2 (0.5) (1.1) 0.3 (0.8)
Current year tax losses
and other items not
recognised (1.5) - (1.5) (0.1) (0.1) (0.2)
Recognition of previously
unrecognised deferred
tax assets 5.8 0.2 6.0 2.9 - 2.9
Derecognition of previously
recognised deferred
tax assets (0.1) - (0.1) (0.6) (0.3) (0.9)
---------------------------- ---------- ---------------- ----- ---------- ---------------- -----
Income tax expense (10.7) 2.3 (8.4) (9.1) 3.3 (5.8)
---------------------------- ---------- ---------------- ----- ---------- ---------------- -----
The tax expense for the period is lower (2022: lower) than the
standard rate of corporation tax in the UK and can be reconciled to
the profit before tax per the income statement as follows:
4 Taxation (continued)
Included in the non-deductible tax items is a net decrease to
the Group's estimated exposure arising from uncertain tax positions
of $0.6m (2022: increase of $0.4m).
A deferred tax credit of $6.0m (2022: $2.9m) arose due to the
recognition of additional deferred tax assets, primarily relating
to historical tax losses, following management's updated assessment
of the probability of future taxable profits arising in certain
jurisdictions.
The main rate of corporation tax in the UK increased from 19% to
25% on 1 April 2023 and will therefore be applicable to the Group's
UK profits from the next financial year. This is expected to
increase the Group's effective tax rate going forwards as it will
increase the weighted average statutory tax rate applicable to the
Group's pre-tax profits.
The income tax expense reported directly in equity of $0.4m
(2022: $0.8m) relates to share-based payments and consists of a
current tax credit of $0.7m (2022: $1.6m) and a deferred tax
expense of $1.1m (2022: $2.4m).
5 Earnings per ordinary share
The calculations of the earnings per share are based on the
following data:
Earnings 2023 2022
$'m $'m
---------------------------------------------------- --- ----------- -----------
Profit for the purpose of basic and diluted
earnings per share being net profit attributable
to owners of the parent 36.8 30.4
Adjustments for:
Adjusting items 9.8 10.8
Share-based payments charge 3.7 4.4
Tax effect of adjusting items and share-based
payments (2.3) (3.3)
--------------------------------------------------------- ----------- -----------
Underlying earnings 48.0 42.3
No. shares No. shares
---------------------------------------------------- --- ----------- -----------
Weighted average number of ordinary shares
for the purpose of basic earnings per share 158,681,078 157,245,284
Effect of dilutive potential ordinary shares/share
options 7,896,423 10,309,105
--------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purpose of diluted earnings per
share 166,577,501 167,554,389
--------------------------------------------------------- ----------- -----------
2023 2022
Basic earnings per share Cents Cents
---------------------------------------------------- --- ----------- -----------
Basic earnings per share 23.2 19.3
Adjustments for:
Adjusting items 6.1 6.9
Share-based payments charge 2.3 2.8
Tax effect of adjusting items and share-based
payments (1.4) (2.1)
--------------------------------------------------------- ----------- -----------
Underlying basic earnings per share 30.2 26.9
--------------------------------------------------------- ----------- -----------
5 Earnings per ordinary share (continued)
2023 2022
Diluted earnings per share Cents Cents
---------------------------------------------------- ----- -----
Diluted earnings per share 22.1 18.1
Adjustments for:
Adjusting items 5.9 6.5
Share-based payments charge 2.2 2.6
Tax effect of adjusting items and share-based
payments (1.4) (2.0)
----------------------------------------------------- ----- -----
Underlying diluted earnings per share 28.8 25.2
----------------------------------------------------- ----- -----
The underlying earnings per share has been calculated on the
basis of profit before adjusting items and share-based payments,
net of tax. The Directors consider that this calculation gives a
better understanding of the Group's earnings per share in the
current and prior period.
6 Bank facilities
The Group has a $200m committed facility (the 'facility')
together with an additional $100m uncommitted accordion (the
'accordion'). The syndicate comprises of HSBC UK Bank plc,
Citibank, N.A. London branch, Barclays Bank PLC, Fifth Third Bank,
National Association and UniCredit Bank AG, London branch. As part
of the Group's banking facility there are floating charges over
certain subsidiaries and their assets. The accordion feature
provides further capacity for potential future acquisitions. This
facility comprises a $125m revolving credit facility and a $75m
term loan. The facility is secured by fixed and floating charges
over the assets of certain Group companies. As at the year end
these totalled $226.5m (2022: $217.8m).
The terms of the facility require the Group to perform quarterly
financial covenant calculations with respect to leverage (adjusted
total debt to adjusted rolling 12-month EBITDA) and interest cover
(adjusted rolling 12-month EBITDA to adjusted rolling 12-month
interest). A breach of these covenants could result in cancellation
of the facility. The Group was compliant with these covenants
during the period and remains compliant in the period subsequent to
the period end.
7 Notes to statement of cash flows
2023 2022
$'m $'m
------------------------------------------------- ------ ------
Profit for the period 37.4 30.4
Adjustments for:
Finance income (0.4) (0.3)
Finance costs 9.5 5.5
Income tax expense (note 4) 8.4 5.8
Share of net profit from associates (1.1) (0.4)
Depreciation of property, plant and equipment
(note 10) 8.2 6.4
Depreciation of right-of-use assets 4.8 3.4
Amortisation of intangible assets 10.2 10.4
Loss/(profit) on disposal of property, plant
and equipment 0.1 (0.2)
Share-based payment charge 3.7 4.4
PPP loan forgiveness (note 3) - (2.6)
Contingent consideration adjustments (note
3) (1.3) (0.2)
Decrease in provisions (1.1) (1.7)
Operating cash flow before movement in working
capital 78.4 60.9
Increase in inventories (0.2) (28.1)
Increase in receivables (15.4) (14.2)
Increase in payables 7.0 7.9
------------------------------------------------- ------ ------
Movement in working capital (8.6) (34.4)
Cash generated from operations 69.8 26.5
------ ------
Cash generated from operations before adjusting
items 72.0 28.5
Cash used by adjusting operating items (2.2) (2.0)
------ ------
Taxation paid (7.9) (6.5)
Interest paid (6.2) (1.5)
Net cash generated from operating activities 55.7 18.5
------------------------------------------------- ------ ------
8 Analysis of net debt
Cash and Bank Lease Debt issue
cash equivalents loans Factoring liabilities costs Total
$'m $'m $'m $'m $'m $'m
---------------------- ----------------- ------- --------- ------------ ---------- -------
At 4 April 2021 36.5 (38.1) (6.8) (20.0) 1.1 (27.3)
Business combination 5.3 (1.1) - (5.2) - (1.0)
Cash flow (15.7) (65.9) 6.0 5.2 2.5 (67.9)
New leases entered
into during the year - - - (0.5) - (0.5)
Lease interest - - - (1.0) - (1.0)
PPP loan forgiveness - 2.6 - - - 2.6
Exchange differences (0.2) 0.7 0.1 0.6 (0.1) 1.1
Amortisation of debt
issue costs - - - - (1.3) (1.3)
---------------------- ----------------- ------- --------- ------------ ---------- -------
At 3 April 2022 25.9 (101.8) (0.7) (20.9) 2.2 (95.3)
Business combination 0.4 (0.7) - (2.1) - (2.4)
Cash flow (5.9) 10.3 0.7 7.5 0.5 13.1
New leases entered
into during the year - - - (17.8) - (17.8)
Lease interest - - - (1.7) - (1.7)
Exchange differences 0.3 0.7 - 0.2 (0.1) 1.1
Amortisation of debt
issue costs - - - - (0.7) (0.7)
---------------------- ----------------- ------- --------- ------------ ---------- -------
At 2 April 2023 20.7 (91.5) - (34.8) 1.9 (103.7)
---------------------- ----------------- ------- --------- ------------ ---------- -------
Debt issue costs relate to bank facility arrangement fees. In
February 2023 the Group extended the facility by exercising the
first of its two one-year extension options, thereby extending the
termination date to 10 February 2026. The $0.5m of costs associated
with the extension request were capitalised.
Analysis of cash and cash 2023 2022
equivalents:
$'m $'m
--------------------------- ---- ---- ------ ------
Cash and bank balances 22.5 29.1
Bank overdrafts (1.8) (3.2)
--------------------------------------- ------ ------
20.7 25.9
------------------------------------- ------ ------
9 Provisions
Property Restructuring Other Total
$'m $'m $'m $'m
------------------------------- --------- -------------- ------ ------
At 4 April 2021 0.2 0.1 1.8 2.1
Charge/(credit) in the period - 0.5 (0.1) 0.4
Utilisation of provision - - (0.1) (0.1)
Amounts acquired on business
combination 0.1 - - 0.1
Exchange differences - - - -
------------------------------- --------- -------------- ------ ------
At 3 April 2022 0.3 0.6 1.6 2.5
Credit in the period - - (0.6) (0.6)
Utilisation of provision - (0.6) (0.1) (0.7)
Amounts acquired on business
combination 0.1 - - 0.1
Exchange differences - - - -
------------------------------- --------- -------------- ------ ------
At 2 April 2023 0.4 - 0.9 1.3
------------------------------- --------- -------------- ------ ------
Current liabilities - - 0.9 0.9
Non-current liabilities 0.4 - - 0.4
------------------------------- --------- -------------- ------ ------
Restructuring
During March 2022 the Group commenced the closure of its Ta
Hsing factory in China with production being transferred to other
sites within the Group. Following the communication to all those
involved a restructuring provision of $0.5m was made to cover the
redundancy and other associated exit costs. The closure was
completed in the year and the provision was fully utilised.
Other
Other provisions include the Directors' best estimate, based
upon past experience, of the Group's liability under specific
product warranties and legal claims. The timing of the cash
outflows with respect to these claims is uncertain. The Group has a
provision of $0.9m (2022: $0.9m) to cover potential costs of recall
or warranty claims for products which are in the field but where a
specific issue has not been reported.
During the year the Group made additional office dilapidation
provisions. These provisions relate to the RDS offices acquired
during the year and a new office being utilised by the Group
located in Japan.
10 Reconciliation of operating profit to underlying EBITDA
(earnings before interest, tax, depreciation, amortisation,
adjusting items and share-based payments)
2023 2022
$'m $'m
----------------------------------------------- ---- ----
Operating profit 53.8 41.0
Add back:
Adjusting operating items 9.8 10.8
Share-based payment charge 3.7 4.4
----------------------------------------------- ---- ----
Underlying operating profit 67.3 56.2
Depreciation of property, plant and equipment 8.2 6.4
Depreciation of right-of-use assets 4.8 3.4
Amortisation of intangible assets not acquired
in a business combination 1.3 0.1
----------------------------------------------- ---- ----
Underlying EBITDA 81.6 66.1
----------------------------------------------- ---- ----
11 Share capital
Par Share
Value Premium Total
Ordinary shares of GBP0.25 each Number $'m $'m $'m
------------------------------------- --------------------------------------- ------- --------- ------
Allotted, called up and fully paid:
At 4 April 2021 157,052,041 62.0 60.9 122.9
Issue of new shares 1,666,668 0.5 - 0.5
At 3 April 2022 158,718,709 62.5 60.9 123.4
Issue of new shares 388,376 0.2 (0.2) -
At 2 April 2023 159,107,085 62.7 60.7 123.4
------------------------------------- --------------------------------------- ------- --------- ------
During the current year there was an issue of new ordinary
shares. Shareholders were able to elect to receive ordinary shares
in place of the final dividend of 2.4p per ordinary share (in
relation to year ended 3 April 2022) and the interim dividend of
1.3p (in relation to the current year) under the terms of the
Company's scrip dividend scheme. This resulted in the issue of
377,615 and 10,761 new fully paid ordinary shares respectively
(2022: nil).
During the prior period the Company issued 1,666,668 ordinary
shares to satisfy the vesting of the share awards granted to the
senior employees and/or former owners of Servatron and GTK as the
businesses met the required operating profit targets set out in the
acquisition agreements.
12 Own shares and non-distributable reserves
2023 2022
Own shares $'m $'m
-------------------------------- ------ ------
At the beginning of the period 0.2 3.3
Sale of shares (4.2) (7.5)
Purchase of shares 5.0 4.4
-------------------------------- ------ ------
At end of the period 1.0 0.2
-------------------------------- ------ ------
The own shares reserve represents both the cost of shares in the
Company purchased in the market and the nominal share capital of
shares in the Company issued to The Volex Group PLC Employees'
Share Trust to satisfy future share option exercises under the
Group's share option schemes.
The number of ordinary shares held by The Volex Group PLC
Employees' Share Trust at 2 April 2023 was 233,978 (2022: 53,205).
The market value of the shares as at 2 April 2023 was $0.6m (2022:
$0.2m).
Unless and until the Company notifies a trustee of The Volex
Group PLC Employees' Share Trust, in respect to shares held in the
Trust in which a beneficial interest has not vested, rights to
dividends in respect to the shares held in the Trust are
waived.
During the year 1,242,155 (2022: 3,645,040) shares were utilised
on the exercise of share awards. During the year, the Company
purchased 1,422,928 shares (2022: 1,100,000) at a cost of $5.0m
(2022: $4.4m) and issued zero new shares to the Trust (2022:
1,666,668).
In December 2013, The Volex Group PLC Employees' Share Trust
sold 3,378,582 shares at GBP1.16 per share to the open market. The
average price of shares held by the Trust at the time was GBP0.70
with a number of the shares having been issued by Volex plc to the
Trust at nominal value. In accordance with the Accounting
Standards, the difference between the sales price of GBP1.16 and
the average share price of GBP0.70 was recorded as a
non-distributable reserve, giving rise to the $2.5m
non-distributable reserve balance.
13 Business combinations
Review Display Systems
On 28 October 2022 the Group completed the acquisition of 100%
of the shareholding of GSRG Holdings Limited ('GSRG'), the holding
company for Review Display Systems Limited ('RDS') and two other
subsidiaries. RDS is a UK-based specialist distribution company
focused on the design and manufacture of electronic touchscreen
displays, embedded solutions and IoT solutions.
RDS and the other entities in the group were acquired for
initial cash consideration of $5.5m funded from the Group's
existing debt facilities. As part of the acquisition, additional
payments of up to $3.4m are payable depending upon the EBITDA
performance of the business over the two years post-acquisition. In
accordance with IFRS 3, this is accounted for as remuneration
rather than deferred or contingent consideration due to the
on-going service conditions. An expense of $0.9m has been recorded
in adjusting items related to this post-acquisition
performance.
13 Business combinations (continued)
The provisional fair value amounts recognised in respect of the
identifiable assets acquired and liabilities assumed are set out in
the table below:
Fair Value
$'m
-------------------------------- -----------
Identifiable intangible assets 1.8
Property, plant and equipment 0.1
Right-of-use asset 2.1
Inventories 2.0
Trade receivables 2.4
Trade payables (0.5)
Other debtors and creditors (1.0)
Loans (0.7)
Provisions (0.1)
Cash 0.4
Deferred taxes (0.4)
Lease liabilities (2.1)
Total identifiable assets 4.0
-------------------------------- -----------
Goodwill 1.5
-------------------------------- -----------
Consideration 5.5
-------------------------------- -----------
An exercise has been conducted to assess the provisional fair
value of assets and liabilities assumed. This exercise identified
customer relationships and order backlog intangible assets.
The fair value adjustments are provisional and will be finalised
within 12 months of the acquisition date. Any resulting changes in
the fair values will have an impact on the acquisition accounting
and will result in a reallocation between the assets and goodwill
and a possible adjustment to the amortisation charge shown in the
income statement.
The provisional goodwill balance recognised above includes
certain intangible assets that cannot be separately identified and
measured due to their nature. This includes control over the
acquired business, the skills and experience of the assembled
workforce and the anticipated synergies arising on integration.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
In FY2023, the entities acquired contributed $5.7m to Group
revenue and $0.6m to adjusted operating profit. Associated
acquisition costs of $0.2m and intangible asset amortisation of
$0.4m have both been expensed as adjusting items in the period.
If these entities had been acquired at the beginning of the
year, they would have contributed revenues of $14.5m and operating
profit of $1.9m to the results of the Group.
Net cash outflow on acquisitions $'m
-------------------------------------------------- ----
Cash consideration
- RDS 5.5
Total cash consideration 5.5
Less: cash and cash equivalents acquired
- RDS 0.4
Net cash outflow 5.1
-------------------------------------------------- ----
Payment of deferred and contingent consideration
- DE-KA 1.0
- TC 1.1
- inYantra 5.0
-------------------------------------------------- ----
Net cash outflow 7.1
-------------------------------------------------- ----
13 Business combinations (continued)
14 Events after balance sheet date
There are no disclosable events after the balance sheet
date.
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END
FR UASAROWUNUUR
(END) Dow Jones Newswires
June 22, 2023 02:00 ET (06:00 GMT)
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