RNS Number:6779R
Volex Group PLC
05 November 2003
Embargoed until 7.00am Wednesday 5 November 2003
VOLEX GROUP p.l.c.
Interim results for the half-year to 30 September 2003
Volex Group p.l.c., the international electrical and
electronic cable assemblies group, today announces its
interim results for the half-year to 30 September 2003.
Financial Highlights:
* Turnover comparison against successive half-years
has seen sales increase by 3%
* Operating result before goodwill amortisation and
exceptionals was a loss of #(0.7)m
* Exceptional operating item of #3.0m associated with
cessation of manufacturing in Ireland
* Net borrowings of #40.6m
The Chairman of Volex, Dom Molloy, commented:
"I am pleased that the results for the half-year to 30
September 2003 confirm our expectations that activity
levels and the financial health of the Company have been
stabilised. Compared to the second half of last year we
experienced a modest growth in sales up 3% to #113m.
Profits were adversely impacted as a result of short-term
inefficiencies as we reduced our manufacturing base and
transferred products to lower cost facilities. We are
confident however that these initiatives will reduce our
breakeven point further and the benefit of these on-going
cost reductions should contribute toward operating
profits in the second half.
As a result all banking covenants have been met and we
anticipate that this position will continue through the
balance of the year.
Recent advances in our customers' fortunes, reflected in
the strengthening of our order books, bode well for the
future of the Group."
Ends
For further information please contact:
Volex Group p.l.c. Today: 020 7067 0700
Thereafter: 01925 830101
Dom Molloy, Chairman
John Corcoran, Group Chief Executive
David Hudson, Group Finance Director
Weber Shandwick Square Mile 020 7067 0700
Chris Lynch / Peter Corbin
CHAIRMAN'S STATEMENT
I am pleased that the results for the half-year to 30
September 2003 confirm our expectations that activity
levels and the financial health of the Company have been
stabilised. Compared to the second half of last year we
experienced a modest growth in sales up 3% to #113m.
Profits were adversely impacted as a result of short-term
inefficiencies as we reduced our manufacturing base and
transferred products to lower cost facilities. We are
confident however that these initiatives will reduce our
breakeven point further and the benefit of these on-going
cost reductions should contribute toward operating
profits in the second half.
The Group revenue performance somewhat masks inherent
regional improvements in Asia and Europe offset by a fall
in North America. A significant factor in North America
has been the migration of business to Volex Asia as
multinational companies (MNCs) move their operations to
this lower cost region.
Very tight control continues to be exercised over capital
expenditure and cash, even while we continue to invest in
the business' future. As a result all banking covenants
have been met and we anticipate that this position will
continue through the balance of the year.
We are cautiously optimistic that the recent advances in
our customers' fortunes, reflected in the strengthening
of our order book, bode well for the future.
Operations
The cable assembly business is closely allied to the
finished product assembly and therefore generally lags
recovery in areas such as the semiconductor industry,
which is typically a lead indicator of market dynamics.
Therefore the market demand increases being experienced
by our customers is now translating into an improved
order book profile for Volex. However, the performance
in the first half is characterised less by a global macro
economic dynamic and more by region specific factors.
The sales performance in Asia is up on the same period
last year and on the preceding six months. The
strengthening of the powercord element of our business
has been largely driven by regional improvements in
consumer spending and the migration of MNC's to that
region. The months immediately preceding the end of the
half-year demonstrated an increasing order book,
particularly on the powercord/consumer product business,
and we believe that this is sustainable in the short to
medium term. The data/telecommunications business
remained flat during the period although again the order
book for this segment is strengthening. As the MNC's
continue the migration of their facilities to South East
Asia we continue to be very well positioned, by virtue of
our presence there for the past 11 years, to capitalise
both on the transfer of business from other Volex units
and the inherent growth potential offered by the
relocation of these organisations into this region.
In Europe, the data and telecommunications market has
seen evidence of sustained improvement over the last
several months reflecting an improving capital spend
environment as operators and businesses maximise the
potential, not only of increased subscriber revenues, but
also of business effectiveness. The rapid deployment of
broadband in Europe, exceeded in scale only by Japan and
Korea, has provided a platform on which Volex Europe has
increased its revenue half-year on half-year and
compensated for a weak powercord market environment.
Through this period we have also initiated the cessation
of all manufacturing operations in Ireland transferring
the production to our low-cost Central European
locations. This exercise will be completed by the
calendar year-end.
However, the Group performance has been impacted by the
poor rate of recovery in the North American market, which
has seen a level of reduction in the demand for both
consumer products and for data/telecommunications. On a
year on year basis revenues for North America are down
but an improving order book, combined with general
optimism in enterprise, carrier and consumer spending,
point to a better second half performance. Since the
start of the year the North American team have focussed
heavily on the migration of volume manufacturing capacity
out of North America and into our Mexican and Asian
facilities.
Our harness business continues to experience the effects
of the difficult aerospace environment and the special
vehicle harness markets. These trends are unlikely to be
reversed in the second half although we are expecting a
marginally improving year on year performance in the
special vehicle harness business. In any event these
trends will not impact significantly on overall Group
performance.
In summary, our efforts remain focussed on strengthening
our business through strong cash management, debt
reduction and profitability. The efforts deployed in the
second half of the last financial year and the first half
of this year are beginning to reap benefits for the
organisation.
Financial Review
Turnover of #113.1m for the first half of the 2004
financial year was down 6% over the comparative period
last year. However, given the market dynamics over the
last 12-18 months the more relevant comparison of sales
is against successive half-years - on this basis sales
increased by almost 3% over sales in the second half of
last year. This reverses the trend of previous periods.
Comparison of sequential half-years by destination shows
that sales increased to our Asian customers by 14% and to
our European customers by 1% but declined some 4% to
customers in the Americas. A geographical analysis of
where the Group manufactures its total output shows gross
sales improving by 15% in Asia reflecting both the
Group's on-going drive to locate production in lower cost
areas and the business dynamics of our MNC customers
already referred to above. Total output in Europe also
increased by 4%, driven by increasing telecommunications
activity in the region supported by our newly established
Eastern European facilities.
An analysis of sales by product category and market
sector is given in Note 2 to the results.
The operating result before goodwill amortisation and
exceptionals was a loss of #0.7m compared with an
operating profit of #0.2m in the first half of last year.
Despite sales being ahead of last year's exit break-even
level, excessive ramp-up costs to meet customer delivery
requirements whilst restructuring manufacturing to low
cost territories, have had a negative effect on first
half profitability. The anticipated closure costs of
#3.0m associated with manufacturing activity in Ireland,
is a one-off charge separately identified as an
exceptional operating item; whilst a proportion of the
annualised cost savings estimated at #2.0m will benefit
the second half.
The charge in the period in respect of goodwill
amortisation was #0.2m, down on the comparative period
last year.
Finance costs in the half-year consisted of interest
costs of #1.6m (2002 - #1.4m) and #0.3m (2002 - #0.2m) of
amortisation costs relating to the 2002 refinancing.
The first half-year result before tax, goodwill and
refinancing cost amortisation, was a loss of #5.3m (2002
- #1.2m loss) - after amortisation of these items the
result was a loss before tax of #5.8m (2002 - #1.8m
loss). The Group's effective tax charge pre-goodwill
amortisation is 20% as compared with an effective rate of
23.6% before goodwill amortisation and impairment for the
last full year.
The impact in the half-year of changes in foreign
currency translation rates, compared with the average
rates applicable during the first half of last year, was
a reduction in sales of #1.8m. Overall there was a
negligible impact on profits.
Net borrowings at the half-year were #40.6m as against
#38.8m at the end of last year, a net increase of #1.8m.
Gearing increased to 101% from 86% at the end of last
year. Details of cashflows during the year are given in
the Group cash flow statement and in Note 6. As stated
earlier, the Group continues to meet its banking
covenants at the end of the half-year. The Group has
adequate bank facility headroom for the foreseeable
future.
Dividend
The Board has not declared an interim dividend.
The Future
Our strategy is clear and consistent. We will continue
our drive to be the leading provider of global cable
assembly solutions in our chosen markets. As a total
solution provider the Group has a global reach, an
extensive product portfolio and a reputation for flexible
and responsive service. Therefore, as the market
recovery materialises, and we continue to benefit from
the consolidation of our customers' supply base, the
Group will capitalise on the reduced breakeven point,
strong customer relationships, and global footprint to
service our customer base wherever they trade.
GROUP PROFIT AND LOSS ACCOUNT
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Turnover
Continuing operations (see note 2) 113,086 120,122 230,066
======= ======= =======
------------------------------------
Operating (loss)/profit pre
goodwill amortisation,
impairment and exceptional items (689) 162 573
Exceptional operating item (see note 3) (2,991) - -
Goodwill amortisation (162) (430) (933)
Impairment of goodwill - - (8,652)
------------------------------------
-------- -------- --------
Operating loss on continuing operations (3,842) (268) (9,012)
------------------------------------
Finance charges - interest (net) (1,632) (1,409) (3,084)
- refinancing costs - - (1,000)
- amortisation of debt
issue costs (341) (168) (509)
------------------------------------
(1,973) (1,577) (4,593)
-------- -------- --------
Loss on ordinary activities before taxation (5,815) (1,845) (13,605)
Tax on loss on ordinary activities 1,131 462 948
-------- -------- --------
Loss on ordinary activities after taxation (4,684) (1,383) (12,657)
Dividends paid on non-equity shares - (3) (6)
Other finance costs of non-equity shares (3) - -
-------- -------- --------
Loss for the period transferred from reserves (4,687) (1,386) (12,663)
======= ======= =======
Basic loss per ordinary share (16.4)p (4.8)p (44.3)p
Headline loss per ordinary share* (15.8)p (3.3)p (7.3)p
Diluted loss per ordinary share (16.4)p (4.8)p (44.3)p
* pre goodwill amortisation, impairment and refinancing costs
INTERIM DIVIDEND
The Directors have not declared an interim dividend in respect
of the year ending 31 March 2004 (2003 - nil p net per
ordinary share).
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Loss for the period (4,684) (1,383) (12,657)
Unrealised deficit on revalued
freehold andleasehold buildings - - (1,419)
Currency variations (372) (1,724) (100)
-------- -------- --------
Total recognised losses for the period (5,056) (3,107) (14,176)
====== ====== ======
GROUP BALANCE SHEET
(abridged)
As at As at As at
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Fixed assets
Intangible 4,212 13,664 4,374
Tangible 30,711 36,810 33,844
----------- ----------- -----------
34,923 50,474 38,218
----------- ----------- -----------
Current assets
Stocks 29,160 30,690 29,219
Debtors 54,285 52,493 52,938
Current asset investments 1,482 1,482 1,482
Cash at bank and in hand 8,455 7,662 13,728
----------- ----------- -----------
93,382 92,327 97,367
----------- ----------- -----------
Creditors:
- Amounts falling due within one year:
Borrowings and finance liabilities (3,550) (5,430) (3,815)
Trade creditors and provisions (39,717) (32,195) (38,792)
----------- ----------- -----------
(43,267) (37,625) (42,607)
----------- ----------- -----------
Net current assets 50,115 54,702 54,760
----------- ----------- -----------
Total assets less current liabilities 85,038 105,176 92,978
Creditors:
- Amounts falling due after one year:
Borrowings and finance liabilities (44,961) (48,837) (47,845)
Other liabilities - (134) -
----------- ----------- -----------
Net assets 40,077 56,205 45,133
====== ====== ======
Represented by:
Share capital 7,231 7,231 7,231
Reserves 32,846 48,974 37,902
----------- ----------- -----------
Total capital employed 40,077 56,205 45,133
====== ====== ======
Gearing 101% 83% 86%
MOVEMENTS IN SHAREHOLDERS' FUNDS
As at As at As at
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Loss for the period (4,684) (1,383) (12,657)
Dividends - (3) (6)
----------- ----------- -----------
(4,684) (1,386) (12,663)
Currency variations (372) (1,724) (100)
Unrealised deficit on revalued freehold
and leasehold buildings - - (1,419)
----------- ----------- -----------
Net decrease (5,056) (3,110) (14,182)
Opening shareholders' funds 45,133 59,315 59,315
----------- ----------- -----------
Closing shareholders' funds 40,077 56,205 45,133
====== ====== ======
GROUP CASH FLOW STATEMENT
(abridged)
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Net cash (outflow)/inflow from
operating activities (see note 6) (2,122) 3,426 13,059
======= ======= =======
Returns on investments and
servicing of finance
Interest paid (net) (420) (1,677) (2,549)
Refinancing costs (785) (3,253) (3,294)
Interest element of finance lease rentals (6) (9) (15)
Preference dividends paid - (3) (6)
----------- ----------- -----------
Net cash outflow from returns
on investments and servicing of finance (1,211) (4,942) (5,864)
======= ======= =======
Taxation recovered 234 2,613 2,379
======= ======= =======
Capital expenditure
Purchase of tangible fixed assets (947) (1,277) (2,255)
Sale of tangible fixed assets 222 - 301
----------- ----------- -----------
Net cash outflow from capital expenditure (725) (1,277) (1,954)
======= ======= =======
Acquisitions
Purchase of subsidiary undertakings - - (279)
----------- ----------- -----------
Net cash outflow from acquisitions - - (279)
======= ======= =======
Cash (outflow)/inflow before financing (3,824) (180) 7,341
======= ======= =======
Financing
Repayment of loans (1,175) (7,247) (6,039)
Capital element of finance lease rentals (22) (28) (43)
----------- ----------- -----------
Net cash outflow from financing (1,197) (7,275) (6,082)
======= ======= =======
(Decrease)/increase in cash in the period (5,021) (7,455) 1,259
======= ======= =======
NOTES TO GROUP RESULTS
1. The summarised results for the six months to 30 September
2003 have been prepared under the historical cost convention
modified to include, where considered appropriate, the
revaluation of land and buildings and in accordance with the
accounting policies adopted in the accounts for the year to 31
March 2003. These and the comparative results for the half year
to 30 September 2002 are non-statutory accounts within the
meaning of Section 240 of the Companies Act 1985 and have not
been reported upon by the auditors under Section 235 of the
Companies Act 1985 or reviewed in accordance with APB Bulletin
1999/4 "Review of interim financial information".
The figures for the year ended 31 March 2003 are an abridged
version of the Group's full accounts and, together with
other financial information contained in these results, do
not constitute statutory accounts of the Group within the
meaning of Section 240 of the Companies Act 1985.
Statutory accounts for the period ended 31 March 2003 have
been filed with the Registrar of Companies for England and
Wales and have been reported on by the Group's auditors.
The Report of the Auditors was not qualified and did not
contain a statement under Section 237 (2) and (3) of the
Companies Act 1985.
2. SEGMENTAL INFORMATION
Turnover by Geographical Area
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
By destination:
United Kingdom 19,994 22,399 42,230
Europe 24,197 18,974 42,689
---------- ---------- ----------
Total Europe 44,191 41,373 84,919
Americas 37,283 48,502 87,182
Asia 31,612 30,247 57,965
---------- ---------- ----------
Total 113,086 120,122 230,066
====== ====== ======
By source:
United Kingdom 14,149 15,499 34,411
Europe 30,315 25,783 49,724
---------- ---------- ----------
Total Europe 44,464 41,282 84,135
Americas 40,255 51,986 93,475
Asia 38,936 38,420 72,368
---------- ---------- ----------
123,655 131,688 249,978
Less: Intra Group (10,569) (11,566) (19,912)
---------- ---------- ----------
Total 113,086 120,122 230,066
====== ====== ======
Turnover by product category
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Data/telecommunications 49,735 50,976 96,142
Powercords 49,042 53,512 101,860
Harnesses 14,309 15,634 32,064
---------- ---------- ----------
113,086 120,122 230,066
====== ====== ======
Turnover by market sector Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Data/telecommunications 63,776 60,549 111,661
Consumer appliances 21,212 25,479 48,914
Consumer electronics 13,960 18,641 38,094
Vehicle and aerospace 14,138 15,453 31,397
---------- ---------- ----------
113,086 120,122 230,066
====== ====== ======
Operating profit, profit before tax and net assets by
geographical area and by type of business are not given as
such disclosure is considered by the directors to be
seriously prejudicial to the interests of the Group. All
activity has arisen from continuing operations.
3. Exceptional operating item
In the period costs of a restructuring of the continuing
operations of the Group's European manufacturing activities
amounted to #2,991,000.
The taxation effect of this exceptional item was #299,000.
4. The Group tax charge for the period is based on anticipated
tax rates for the year as a whole and has been influenced by
the differing tax rates in the UK and in the various
overseas countries in which the Group operates and in
respect of provisions in previous periods which are no
longer required.
5. The calculation of earnings per share are based on the
following profits and numbers of shares:
Basic, diluted and headline
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Loss for the financial period (4,684) (1,383) (12,657)
Preference Dividends - (3) (6)
Other finance costs of
non-equity shares (3) - -
---------- ---------- ----------
Basic loss (4,687) (1,386) (12,663)
Goodwill amortisation and
impairment 162 430 9,585
Refinancing costs - - 1,000
---------- ---------- ----------
Headline loss (4,525) (956) (2,078)
======== ======== ========
No. of shares No. of shares No.of shares
For basic, diluted and
headline loss per share 28,602,637 28,602,637 28,602,637
=========== =========== ===========
Basic loss per share (16.4)p (4.8)p (44.3)p
Headline loss per share (15.8)p (3.3)p (7.3)p
Diluted loss per share (16.4)p (4.8)p (44.3)p
6. CASH FLOW
(i) Reconciliation of operating profit to net cash inflow from
operating activities
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
Operating loss (3,842) (268) (9,012)
Depreciation 2,985 3,521 6,758
Goodwill amortised and impaired 162 430 9,585
Government grants - - (128)
Loss on sale of tangible
fixed assets - - 5
(Increase)/decrease in stocks (254) 3,056 5,793
Increase in debtors (1,861) (2,399) (2,664)
Increase in creditors 1,072 623 5,058
Cash impact of exceptional item (384) (1,435) (2,336)
Other items - (102) -
---------- ---------- ----------
(2,122) 3,426 13,059
======== ======== ========
NOTES TO GROUP RESULTS
(ii) Analyses of net debt
1 April Cash flow Exchange 30 September
2003 movement 2003
#'000 #'000 #'000 #'000
--------
Cash at bank and in hand 13,728 (5,097) (176) 8,455
Overdraft (2,756) 76 37 (2,643)
--------
(5,021)
--------
Debt due after one year (48,716) 1,097 2,127 (45,492)
Debt due within one year (1,035) 78 53 (904)
Finance leases (25) 22 - (3)
--------
1,197
-------- -------- -------- --------
Net debt (38,804) (3,824) 2,041 (40,587)
====== ====== ====== ======
Net debt is stated before the offset of debt issue costs of
#531,000 (2003 - #872,000).
(iii)Reconciliation of net cash flow to movement in net debt
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
(Decrease)/increase in cash
in the period (5,021) (7,455) 1,259
Cash outflow from decrease 1,197 7,275 6,082
in debt and lease financing
---------- ---------- ----------
Change in net debt resulting
from cash flows (3,824) (180) 7,341
Translation difference 2,041 3,984 4,264
---------- ---------- ----------
Movement in net debt in
the period (1,783) 3,804 11,605
Net debt at beginning
of period (38,804) (50,409) (50,409)
---------- ---------- ----------
Net debt at the end of
the period (40,587) (46,605) (38,804)
======= ======= =======
Note:
Copies of this interim report are being sent to all
shareholders. Copies can also be obtained from the Company
Secretary, Volex Group p.l.c., Dornoch House, Kelvin Close,
Birchwood Science Park, Warrington WA3 7JX.
The presentation being made to stockbroking analysts on
Wednesday 5 November 2003 will be on the Company's web site
www.volex.com from 11.00 a.m. that day.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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