TIDMVLX
RNS Number : 8732P
Volex PLC
23 June 2022
23 June 2022
Volex plc
Preliminary Group Results
for the 52 weeks ended 3 April 2022
Record performance and significant growth alongside new,
ambitious five-year plan
Volex plc ('Volex'), a global provider of integrated
manufacturing services and power products, today announces its
preliminary results for the 52 weeks ended 3 April 2022
("FY2022").
52 weeks 52 weeks Year on
to to year change
Financial Highlights 3 April 2022 4 April 2021
------------------------------------- -------------- -------------- -------------
Revenue $614.6m $443.3m 38.6%
Underlying(1) operating
profit $56.2m $42.9m 31.0%
Statutory operating profit $41.0m $30.7m 33.6%
Underlying(1) profit before
tax $51.4m $41.6m 23.6%
Statutory profit before
tax $36.2m $29.4m 23.1%
Underlying(1) diluted earnings
per share(2) 25.2c 30.0c (16.0%)
Final dividend (per share) 2.4p 2.2p 9.1%
Net debt (before lease liabilities) $74.4m $7.3m
Net debt $95.3m $27.3m
(1) Before adjusting items and share-based payments charge (see
note 3 for more details)
(2) FY2021 earnings per share includes the impact of deferred
tax credits of $12.9 million (FY2022: $2.9 million). Excluding
deferred tax asset recognition underlying diluted earnings per
share increased by 6.3%
Financial and Operational Highlights
-- Group revenue increased by 38.6% to $614.6 million (FY2021:
$443.3 million) through strong organic growth and acquisitions
-- Underlying operating margin remained solid at 9.1% (FY2021:
9.7%) despite inflationary headwinds, demonstrating our ability to
pass through cost increases
-- Targeted investment, focused on delivering efficiencies and
vertical integration in growth sectors, is driving revenue
momentum
-- Strengthened engineering and sales teams that will continue to support further organic growth
-- Four acquisitions completed, further enhancing our
capabilities, expanding customer relationships and driving
growth
Market highlights
-- Electric Vehicles - sales almost doubled as we added new
customers and new products, growing our total sector revenue to
over $100 million
-- Consumer Electricals - revenue grew significantly due to the
full year effect of DE-KA in addition to organic growth of 14%
-- Medical - there was a strong return of demand from Medical
customers to above pre-Covid levels, with a 14% increase in
revenue
-- Complex Industrial Technology - revenue growth of 6% with
good demand for complex assemblies and box builds, despite some
delays in the take up of next generation data centre products, due
to semiconductor shortages
New five-year plan
-- With our financial performance significantly ahead of our
existing strategic plan, we are launching a new five-year plan
-- Our ambition is to deliver revenue of $1.2 billion by the end of FY2027
-- We aim to achieve this with underlying operating profit margin in the range of 9-10%
Outlook
-- The year has started strongly with high levels of customer
demand and orders, particularly for more complex products with
longer lead times
-- Inflationary pressures and variable lead times are expected to continue but are manageable
-- Our global footprint is a beneficiary of the recent trend towards "near-shoring" production
-- We have an exciting pipeline of acquisition opportunities and financial flexibility
Dividend
Subject to approval by shareholders at the upcoming AGM on 19
August 2022, the proposed final dividend of 2.4p per ordinary share
will be paid on 26 August 2022 to shareholders on the register on
22 July 2022. The ex-dividend date will be the 21 July 2022.
Nat Rothschild, Volex's Executive Chairman said:
"Our intention, when we set about the transformation of Volex,
was to create a resilient and dynamic business capable of
delivering strong margins and revenue growth. Our record
performance and revenue progression, demonstrated against the
backdrop of a challenging manufacturing environment, is testament
to what we have achieved.
We continue to see significant opportunities across our market.
The infrastructure and acquisition investments we have made in
FY2022 are focused on our pursuit of further growth, capitalising
on the leading position we have in attractive sectors. With an
exciting acquisition pipeline and access to funding, we will
continue this successful strategy.
With our financial performance significantly ahead of our
existing strategic plan, we are today setting out a new, ambitious
plan to increase our revenues to $1.2 billion by the end of FY2027,
with underlying operating margins in the range of 9-10%. This
underlines the confidence we have in the clear growth opportunities
created by our combination of excellent customer relationships,
exceptional assets and an agile operating model."
Presentation
A live presentation for analysts will be held online at 8.30
a.m. BST on 23 June 2022. 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.
A live presentation will be held online at 10.00 a.m. BST on 23
June 2022 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
Jon Boaden, Chief Financial Officer
Julian Wais, Head of Investor Relations
Singer Capital Markets - Nominated Adviser & Joint Broker +44 20 7496 3000
Shaun Dobson
George Tzimas
James Fischer
HSBC Bank Plc - Joint Broker +44 20 7991 8888
Simon Alexander
Joe Weaving
Powerscourt - Media Enquiries +44 20 7250 1446
James White
Nicholas Johnson
Maxim Hibbs
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 lease liabilities) represents cash and cash
equivalents, less bank loans and debt issue costs, but excluding
lease liabilities.
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
Volex is a global leader in integrated manufacturing for
performance-critical applications and a supplier of power 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.
In a challenging year for all manufacturing businesses, our
strong performance throughout the year and delivery of results that
are ahead of consensus market expectations, demonstrates that our
strategy is working. Revenue and underlying operating profit are
significantly higher for FY2022 as a result of strong organic
revenue growth and acquisitions.
Our business is robust and resilient, with a range of
complementary capabilities, well suited to the dynamic needs of our
global customer base. We operate within a fragmented market where
our reputation for innovation and quality is a key differentiator.
Customers recognise our ability to deliver increasingly complex
manufacturing services successfully, and the significant value that
we can add to their processes. In particular, our design skills
significantly enhance the customer relationship, demonstrating
innovative solutions to address the real-life challenges that our
customers face.
Market demand remains strong, with continued momentum from our
Electric Vehicles and Consumer Electricals customers, as well as a
robust recovery within the Medical and Complex Industrial
Technology sectors following the impact of Covid-19. We are well
attuned to the trends in our markets and how our customers'
requirements are evolving. These factors are critical inputs to our
strategic plans, giving us confidence that we are pursuing the
right path.
New five-year plan
Having delivered revenue and underlying profit growth
significantly ahead of the ambitious five- year plan we set out in
2019, we have developed a new, stretching plan. Our ambition is to
deliver revenue of $1.2 billion by the end of FY2027, including at
least $200 million of revenue from new acquisitions. We aim to
achieve this while maintaining our current underlying operating
profit margin within a range of 9-10%.
Overall approach
We identify areas of manufacturing need where our capabilities,
intellectual property and manufacturing methodology enable us to be
cost competitive, while generating attractive commercial
returns.
We understand how to operate in a competitive environment and
have invested in vertical integration to generate suitable margins.
We have significant expertise in high-mix production, allowing us
to be competitive through a range of lower-volume order quantities.
Our manufacturing facilities are led by experienced general
managers, focused on optimising throughput and mix. Each of these
facilities are underpinned with a regional leadership team,
providing the managers with expert local support.
The majority of our larger customers are global companies who
are looking for a reliable international manufacturing partner.
This is becoming increasingly important as customers look to
address supply chain complexity by identifying suppliers who can
provide solutions closer to their end markets. With customer-facing
teams around the world, we use our knowledge of our end markets to
develop compelling customer solutions.
Our significant experience in our chosen markets enables us to
develop our own designs, locking in intellectual property that we
protect with patents, where appropriate.
We have accelerated organic investment in the business during
the year and will build on this momentum moving forward. Our
investment is directed at areas where we have the capability to
grow significantly and where we can optimise our manufacturing
process. The majority of projects we identify pay for themselves
within two years, making this investment very attractive. This is
complemented by our established continuous improvement activity,
which generates efficiency benefits across our organisation.
Market trends
The world is currently a complicated place and to support
customer delivery during a period of extended lead times, we have
invested in additional inventories to ensure we have availability
of components when required. This has increased levels of working
capital but has, importantly, also protected revenue and deepened
customer relationships.
Inflation across raw materials has been a feature of the
manufacturing environment over the last year. However, the
arrangements established with our customers allow us to pass
through higher input costs, although there is often a time delay
between the impact of higher input costs on us and re-pricing. We
have followed an efficient and transparent process to support this
activity, allowing us to minimise the impact on margins.
Investing in growth
Our track record of acquiring strong businesses at attractive
valuations has continued this year with four further transactions
completed, for a total consideration of $47.1 million. We acquired
Irvine Electronics ("Irvine") in California, USA, and Terminal
& Cable ("TC") in Canada, both specialist integrated
manufacturing businesses, with a strong presence in the North
American defence market. Irvine specialises in printed circuit
board assemblies for deployment in specialist, mission-critical
applications. TC is a specialist in complex cable assemblies for
military vehicles.
The acquisition of Prodamex in Mexico, a manufacturer of wire
harnesses for domestic appliances, advances our strategy to provide
a unified solution for global white-goods manufacturers. We will
combine its North American capability together with the significant
strength and experience we already have in Europe and Asia, to
drive economies of scale and maximise cross sales
opportunities.
We also purchased a majority equity stake in inYantra in India,
together with 13.5 acres of industrial land with potential for
future site expansion, harnessing its expertise in printed circuit
board assembly and box build integrated solutions. This transaction
offers an excellent strategic opportunity to expand our global
footprint, bringing new and strengthened capabilities in the key
Indian market.
The success of our strategy and the organic growth we have
delivered, combined with attractive acquisition opportunities to
deliver further growth, has given us the confidence to deploy
further investment. With a strong track record of delivering
compelling returns, we have successfully completed a number of
transformational projects this year. In particular, we have
vertically integrated our Electric Vehicles power cable production
and created an efficient production capability for the next
generation of high-speed data centre cables.
People and organisation structure
Successfully combining the skills and expertise of our talented
workforce has allowed us to deliver transformational change,
continuous improvement and exceed customer expectations. Effective
collaboration, encouraging change and an entrepreneurial spirit,
creates an environment in which innovation can flourish. With
talented local management in our manufacturing facilities, we are
able to respond quickly to changing customer requirements and
disruptions in the supply chain.
To enhance the delivery of growth and integration, we have
formalised a regional leadership structure, enhancing our ability
to lead change programmes and identify cross-selling
opportunities.
On behalf of the Board, I thank all our employees for achieving
so much in what has been a very challenging manufacturing
environment.
Environmental, Social and Governance ("ESG")
Many of our products are aligned to key ESG objectives,
including manufacturing for electric vehicle charging, medical
purposes and for greater efficiency including robotics and
automation.
However, focusing on our own performance, as well as what we
sell to customers, is also important. This year we have implemented
a sustainability reporting system to help define and measure
progress towards ESG objectives. Going forward, this will be an
increasing area of focus for our business as we look to embed a
culture of improvement in these areas.
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.
Dividend
Reflecting our confidence and the Group's robust financial
position, the Board is pleased to announce it is recommending a
final dividend of 2.4 pence per share. Together with the interim
payment of 1.2 pence, this gives a total dividend for the year of
3.6 pence, an increase of 9.1% on the prior year.
Outlook
We have seen a strong start to the new financial year, with high
levels of customer demand. This includes strong orders for more
complex products with longer lead times.
We have adapted to the significant supply chain and inflationary
challenges which have developed during FY2022 and continue to
monitor developments closely, taking a proactive approach to
addressing issues as they emerge. We run our operations flexibly
and will respond quickly to changing supply and demand
environments.
Having built a dynamic, resilient business with diverse
capabilities and excellent customer relationships in attractive
markets, we are well positioned to deliver on the tremendous
potential of Volex's business and capitalise on the growth
opportunities in our markets.
With a clear strategy, strong demand and an ambitious and
talented team, we are excited about the opportunity in FY2023 and
beyond.
Review of FY2022 Performance
2022 2021
-------------------------- ----------------------------------- -----------------------------------
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 272.1 - 272.1 203.1 - 203.1
Asia 142.7 - 142.7 133.7 - 133.7
Europe 199.8 - 199.8 106.5 - 106.5
-------------------------- ------------ ------------ ------- ------------ ------------ -------
614.6 - 614.6 443.3 - 443.3
Cost of sales (488.8) - (488.8) (339.4) - (339.4)
-------------------------- ------------ ------------ ------- ------------ ------------ -------
Gross profit 125.8 - 125.8 103.9 - 103.9
Operating expenses (69.6) (15.2) (84.8) (61.0) (12.2) (73.2)
-------------------------- ------------ ------------ ------- ------------ ------------ -------
Operating profit/(loss) 56.2 (15.2) 41.0 42.9 (12.2) 30.7
-------------------------- ------------ ------------ ------- ------------ ------------ -------
Share of net profit
from associates and
joint ventures 0.4 - 0.4 0.8 - 0.8
Finance income 0.3 - 0.3 0.3 - 0.3
Finance costs (5.5) - (5.5) (2.4) - (2.4)
-------------------------- ------------ ------------ ------- ------------ ------------ -------
Profit/(loss) on ordinary
activities before
taxation 51.4 (15.2) 36.2 41.6 (12.2) 29.4
Taxation (9.1) 3.3 (5.8) 7.2 2.3 9.5
-------------------------- ------------ ------------ ------- ------------ ------------ -------
Profit after tax 42.3 (11.9) 30.4 48.8 (9.9) 38.9
-------------------------- ------------ ------------ ------- ------------ ------------ -------
Volex delivered strong revenue growth and record underlying
operating profits in FY2022, in a challenging year for
manufacturing businesses worldwide, demonstrating we have
established a diverse and resilient business able to perform well
within a complex and changing environment. Whilst the impact of
government restrictions and lockdowns related to Covid-19 reduced
in the year, market dislocation has caused additional supply chain
issues, including increasing prices and lengthening lead times
across multiple components and products.
Demand from customers across the Group was strong throughout the
year. We continued to experience rapid growth from Electric
Vehicles customers as we consolidated our position as market leader
for grid cords, whilst bringing new products to market and winning
several new customers.
Our Consumer Electricals business was able to pass-on price
inflation to customers as the mechanisms within the majority of our
contracts stipulate the pass-through of increased copper
prices.
Our Medical customers saw access to hospitals steadily improve,
leading to increased demand for medical products, after a slight
decline caused by Covid-19 access-related restrictions.
Demand reduced for our data centre products due to a very strong
comparator period as customers increased their inventory levels to
mitigate potential supply chain challenges. The unwind of inventory
positions this year as conditions normalised impacted our revenue.
For other Complex Industrial Technology customers, order books
remained strong through the year.
Overall, we were proactive and maintained high factory
utilisation, despite supply chain complexities.
We have increased investment in our business in FY2022, with a
number of important capital expenditure projects. This was focused
on our key high-growth areas, as well as vertical integration and
the first phase of our new global ERP system. We have recruited
specialist research and development roles in the year to drive
product development programmes, which will deliver future
growth.
As we have continued to grow, our working capital requirements
have increased to support our expansion. Additional inventory
investment has been required to meet customer requirements, in the
face of extended lead times and supply chain shortages. Although
this ties up cash, holding key components has allowed us to meet
customer commitments, with particular relevance for our more
complex products.
It has been a busy year in relation to acquisitions with four
businesses joining the Group. Three of these businesses are based
in North America - Irvine, Prodamex and TC - strengthening our
manufacturing footprint for domestic appliances, integrated
manufacturing services and defence in this critical region.
The acquisition of inYantra positions us in the high-growth
Indian market, where it is involved in the manufacture of printed
circuit board assemblies and box builds. Growth through
acquisitions remains a high priority, and a key strategic
pillar.
Our business is built on the talent and hard work of our
employees. The Group now has a global workforce of over 7,800
employees. During the year we have implemented a regional
structure, with senior operational management aligned to each
region to optimise our future performance. We continue to invest in
developing talent within the organisation and supporting the growth
and development of our colleagues at all levels.
Trading performance overview
The Group generated revenue of $614.6 million (FY2021: $443.3
million). This included organic revenue growth of 19% and the
contribution from our FY2022 acquisitions and the remainder of the
first 12 months of our FY2021 acquisitions. Organic revenue growth
included 96% growth in our Electric Vehicles sector, as well as 14%
organic growth from our Consumer Electricals and 13% from our
Medical sectors.
Our Complex Industrial Technology sector also increased revenue,
although organic sales were down 2% on the prior year primarily due
to the transition to the new 400Gb cables in our data centre
market. This market is expected to show growth later in FY2023.
Underlying operating profit increased by 31% to $56.2 million
(FY2021: $42.9 million), driven by organic revenue growth and
acquisitions. Statutory operating profit was $41.0 million (FY2021:
$30.7 million), including adjusting items and share-based payments
of $15.2 million (FY2021: $12.2 million).
The underlying operating margin was 9.1%, slightly down from
9.7% in the prior year, and broadly flat on H1 FY2022. The margin
reflects the benefits of higher volumes in the year - albeit with
an adverse impact from a higher sales mix of power products -
strong cost controls and vertical integration benefits. It was
achieved despite the macro-headwinds, most notably freight and
commodity price inflation. The prior year also included a
favourable impact from the temporary lowering of employment taxes
in some Asian countries, relating to the Covid-19 outbreak.
After acquisitions, and partially offset by cash generated, net
debt was $74.4 million at 3 April 2022 (4 April 2021: $7.3
million), excluding $20.9 million (4 April 2021: $20.0 million) of
lease liabilities. The covenant net debt/adjusted EBITDA ratio was
1.3 times (FY2021: 0.3 times).
Impact of the macroeconomic backdrop
Volex is 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, despite
the on-going disruption to global supply chains, the challenges
posed by Covid-19 and, more recently, the Russian invasion of
Ukraine.
Copper, freight and other material prices are going through a
period of high inflation. Our contracts with power cord customers,
where copper is a significant percentage of our costs, allow us to
pass increases through to the customer, although there can be a
short delay in the implementation of pricing changes.
Other price inflation is passed onto 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, as well
as investment in higher levels of inventory to maintain our
position as a reliable partner to customers in an environment with
extended supplier lead times. Our freight costs have also increased
due to demand for global shipping capacity exceeding supply.
Government restrictions relating to the Covid-19 pandemic have
eased in FY2022, although there have been instances of local and
national lockdowns which have had some limited and temporary
impacts on trade. We did not experience any significant downtime at
our sites in FY2022 and we continue to adhere to stringent health
and safety measures across the business.
Our direct operational exposure to Russia and Ukraine is low. We
have no facilities or employees in either country. In the financial
year ended 3 April 2022, sales to Russia represented less than 0.5%
of Group revenue, with revenue into Ukraine being negligible. We
have no significant dependency on direct supplies of components or
materials from either Russia or Ukraine.
Revenue by customer sector
Electric Vehicles
The rapid expansion of the electric vehicle industry is expected
to continue as the technology enters the mainstream, in part driven
by legislation. 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 electric vehicle charging, we are expanding
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 will be important as competition
increases.
Organic revenue from our Electric Vehicles customers increased
year-on-year by 96% to $104.2 million (FY2021: $53.1 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 also successfully onboarded
three new customers as we diversify our customer base.
Consumer Electricals
Consumer Electricals revenue increased in FY2022 by 60% to
$262.4 million (FY2021: $164.0 million) with demand for consumer
electrical products remaining robust through the year. Our revenue
benefited from a full-year of revenues from our Turkish DE-KA
business, which was acquired in FY2021, and three-months of trading
from Prodamex. On an organic basis, revenue for this sector
increased by 14%, with approximately 4% of this relating to the
pass-through of copper and other price increases.
Higher freight costs and longer shipping times 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, following the
acquisition of DE-KA, which has traded strongly. We will continue
to pursue cross-sales opportunities, using our global domestic
appliance presence, following the acquisition of Prodamex.
Medical
The sector has recovered well from the Covid-19-related
softening in demand we saw in the prior year, as access to
hospitals has now improved, allowing installation of larger medical
equipment. Consequently, Medical revenues were up 13% on an organic
basis at $128.3 million (FY2021: $112.7 million), and these are now
back above pre-pandemic levels.
There remains a global backlog in healthcare procedures
following the pressures on the healthcare system created by
Covid-19, which should mean that medium-term demand is sustainable.
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 6% to
$119.8 million (FY2021: $113.5 million), 2% lower on an organic
basis. This includes five-months of revenue from Irvine and
three-months from TC following acquisition. Excluding Data Centre
customers, revenues were 12% 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. The longer lead times and component availability have
served to constrain growth in the year.
Data Centre customers are reported within Complex Industrial
Technology and made up 26.2% (FY2021: 36.9%) of revenue in this
sector. This sub-sector declined year-on-year due to a number of
contributory factors. There was some stocking up in data centres in
the prior year, with destocking this year in preparation for the
transition to the new 400Gb cables. There were also shortages of
the new network equipment needed to support the adoption of 400Gb
architecture in data centres. However, we have qualified 400Gb
products with our key customers and expect strong sales when demand
increases later in FY2023.
Revenue by reportable segment
Volex has developed over the years to be a geographically
interconnected business. Customers want 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 we analyse our customer revenue geographically
to reflect this. 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 44.3% of Group revenue (FY2021: 45.8%).
Revenue grew by 34.0% to $272.1 million (FY2021: $203.1 million).
This reflects some of the strong organic growth we experienced with
our Electric Vehicles customers, as well as the acquisitions of
Irvine, Prodamex and TC.
Asia
Asia makes up 23.2% of Group revenue (FY2021: 30.2%). Asia
revenue increased by 6.7% to $142.7 million (FY2021: $133.7
million) with the majority of revenue in the Consumer Electricals
sector. Demand was strong throughout the year due to our
competitive pricing and ability to respond quickly to customer
requirements.
Europe
Europe makes up 32.5% of Group revenue (FY2021: 24.0%). Revenue
in Europe increased by 87.6% to $199.8 million (FY2021: $106.5
million) driven by an increased demand for Electric Vehicles and an
increase in European domestic appliances sales led by the
acquisition of DE-KA at the end of FY2021.
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.
We put the customer at the heart of what we do, through regular
and transparent communication. 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. We have invested in vertical integration,
giving us greater control over the supply chain and protecting
margins.
Delivering excellent customer service and improving processes
requires great people. We have strengthened the organisation by
bringing in outside expertise, 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.
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 ready for
sale.
Creating value through organic investment
We have increased organic investment in the business, building
on our track record of creating value, as we focus on growth areas,
while employing stringent financial criteria, with payback on the
investment 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. This investment is enabling our future growth.
Total capital investment increased to $15.0 million (FY2021:
$7.8 million), amounting to 2.4% of revenue (FY2021: 1.8% of
revenue). Capital investment in the year was slightly lower than
planned, as extended lead times meant that some investment was
deferred into FY2023. In the year, investment was focused on
high-growth areas, including EV and data centre capabilities, as
well as vertical integration into our cable production, consistent
with our strategy, and the first phase of the new global ERP
system. Importantly, we now have the capability to produce our own
cable in two more of our facilities in Asia. We expect our
investment to increase in FY2023, 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 enhance our research and development teams through FY2023.
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 businesses that are not on the market, as well as those
already in a process. All opportunities are qualified and discussed
by an investment committee before we progress to negotiation. In an
environment where Covid-19 has 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 10 businesses in four 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 are actively pursuing
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 FY2022 we successfully completed the acquisitions of four
businesses for a combined cash consideration of $47.1 million,
paying an average Enterprise Value/EBITDA multiple of 5.5 times,
which demonstrates our ability to acquire quality businesses at
reasonable valuations. These acquisitions contributed revenues of
$12.5 million to the Group in FY2022.
-- Irvine Electronics, LLC is based in California, USA and was
acquired in October 2021 for total cash consideration of $15.1
million.
Irvine is a manufacturer of electronic solutions, including
printed circuit board assemblies, with over 30 years' experience
and deep relationships across a wide variety of blue-chip
customers, particularly in the defence, military aerospace and
medical markets. The acquisition will strengthen our profile in
North America, adding further capabilities and capacity to the
Group's existing operations in Washington State and Mexico,
creating a compelling value proposition for customers in the
region. Expanding on our integrated manufacturing services
strategy, the acquisition will further strengthen Volex's ability
to provide customers with vertically integrated solutions through
enhanced printed circuit board assembly capabilities.
-- Prodamex SA de CV and Terminal & Cable TC Inc. were acquired in January 2022 for a total cash consideration of $18.9 million.
Prodamex provides an advanced manufacturing facility in Central
Mexico serving North American customers with higher volume
requirements. It complements our plants in Tijuana and Juarez,
Mexico, creating additional local flexibility for customers. The
business has long-standing expertise in wire harnesses for domestic
appliances. It provides cross-selling opportunities with our DE-KA
business in Turkey and the recently expanded facility in Batam,
Indonesia. It gives us a global low-cost presence in the white
goods and commercial markets.
TC is one of the largest wire harness manufacturers in Canada
with over 50 years' experience, establishing a strong Canadian
market presence for Volex as a leading defence supplier. It
complements our Irvine acquisition and broadens our defence market
capabilities into ground vehicles on long-term customer programmes.
TC has ruggedised wire harness capabilities, allowing expansion
into the attractive "off-highway" market sector supporting
industrial, agricultural and construction machinery
manufacturers.
-- An investment of $13.1 million, in March 2022, for 51% of the
equity and 100% of the land and buildings of inYantra Technologies
Pvt Ltd. In the first quarter of FY2023, $5.0 million of this
transaction price was paid.
inYantra is an electronic manufacturing services provider based
in Pune, India delivering PCB assemblies and box build to
automotive, consumer electrical and industrial automation
customers. This acquisition allows Volex to enter an important new
geography, which benefits from strong macroeconomic trends, with
the Indian Government seeing high-technology electronics
manufacturing businesses as a key growth sector. The acquisition of
the land enables us to scale this operation over time.
Chief Financial Officer's Review
52 weeks to 3 52 weeks to 4 April
April 2022 2021
-------------------------------------- ---------------------- ----------------------
Revenue Profit/(loss) Revenue Profit/(loss)
$'000 $'000 $'000 $'000
-------------------------------------- ------- ------------- ------- -------------
North America 272.1 21.4 203.1 19.8
Asia 142.7 11.6 133.7 14.1
Europe 199.8 32.1 106.5 15.4
Unallocated Central costs - (8.9) - (6.4)
-------------------------------------- ------- ------------- ------- -------------
Divisional results before share-based
payments
and adjusting items 614.6 56.2 443.3 42.9
Adjusting operating items (10.8) (5.6)
Share-based payment charge (4.4) (6.6)
-------------------------------------- ------- ------------- ------- -------------
Operating profit 41.0 30.7
-------------------------------------- ------- ------------- ------- -------------
Share of net profit from associates
and joint ventures 0.4 0.8
Finance income 0.3 0.3
Finance costs (5.5) (2.4)
-------------------------------------- ------- ------------- ------- -------------
Profit before taxation 36.2 29.4
Taxation (5.8) 9.5
-------------------------------------- ------- ------------- ------- -------------
Profit after taxation 30.4 38.9
-------------------------------------- ------- ------------- ------- -------------
Basic Earnings per share:
Statutory 19.3 cents 25.5 cents
Underlying* 26.9 cents 32.1 cents
* Before adjusting items and share-based payments charge.
Statutory results
Revenue grew 38.6% to $614.6 million (FY2021: $443.3 million).
Statutory operating profit increased by $10.3 million to $41.0
million (FY2021: $30.7 million) which is an increase of 33.6%
compared to the prior year. Net finance costs were $5.2 million
(FY2021: $2.1 million), resulting in a profit before tax of $36.2
million (FY2021: $29.4 million) which increased 23.1%. There was a
tax charge for the year of $5.8 million, compared to a tax credit
in FY2021 of $9.5 million due to the recognition of deferred tax
assets. Basic earnings per share were 19.3 cents (FY2021: 25.5
cents), a decrease of 24.3%. Before tax, basic earnings per share
increased, but due to the recognition of a significant deferred tax
asset in FY2021 basic earnings per share after tax decreased in
FY2022.
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 38.6% to $614.6 million (FY2021:
$443.3 million) driven by strong organic growth from customer
demand and the contribution from acquisitions. Group organic
revenue growth was 19%, of which approximately 4% was driven by
inflation-related price increases, with the remaining 15% from
volumetric growth.
Organic revenue from the fast-growing Electric Vehicles sector
was particularly strong, increasing 96% to $104.2 million (FY2021:
$53.1 million), as we expanded our product set. There was robust
demand in the Consumer Electricals sector with organic growth of
14%. Overall our Consumer Electricals revenue increased 60% to
$262.4 million (FY2021: $164.0 million), as it benefited from a
full year contribution from DE-KA and the FY2022 acquisition of
Prodamex. Our Medical revenue was also strong, following delays in
the installation of large medical equipment in the prior year due
to Covid-19-related access issues. Medical revenues increased 13%
on an organic basis to $128.3 million (FY2021: $112.7 million), and
are now above pre-Covid-19 levels. Revenue from Complex Industrial
Technology increased 6% to $119.8 million (FY2021: $113.5 million),
2% lower on an organic basis. Excluding data centre customers
revenues were 12% higher on an organic basis. Data Centre revenue,
is an important sub-sector of this market and declined due to
customer destocking in preparation for the transition to the new
400Gb cables, as well as a slower increase in demand due to
shortages of the new network equipment needed to support the
adoption of 400Gb architecture in data centres.
Gross margin
The Group's gross margin was 20.5% (FY2021: 23.4%). This was due
in part to product mix with a higher volume of lower margin
Electric Vehicles and Consumer Electricals products as well as an
adverse impact from global commodity price inflation. Our contracts
with power cord customers, where copper is a significant cost
component, have allowed us to pass increases in the cost of copper
to customers, maintaining absolute gross profit levels, although
there is a short delay to allow implementation of price changes. In
passing through higher raw material costs, absolute profit is
preserved, but cost of sales as a percentage of revenue increases,
which reduces the gross margin percentage.
Operating profit
Underlying operating profit increased 31.0% to $56.2 million
(FY2021: $42.9 million). This was favourably impacted by the strong
organic growth and the contribution from acquisitions. In addition,
the ratio of underlying operating expenses to revenue improved to
11.3%, from 13.8% in the prior year, demonstrating tight cost
control and continuous improvement activities. This was despite our
increased, targeted investment in the business. Statutory operating
profit also increased by 33.6% to $41.0 million (FY2021: $30.7
million), also reflecting the factors above.
The Group's underlying operating margin of 9.1% reduced slightly
from 9.7% in FY2021. The margin benefited from higher volumes in
the year, continued strong control over our cost base and vertical
integration activities in our Chinese and Batam, Indonesia sites.
There were a number of headwinds which brought down margins in the
year, with the adverse product mix and commodity price inflation
set out in the 'gross margin' section above. In addition, the prior
year benefited from the temporary lowering of employment taxes in
some Asian countries, related to the Covid-19 outbreak.
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 $2.5 million (FY2021: $0.4 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.
Partially offsetting these items was a gain of $2.6 million
(FY2021: $nil) recognised on the forgiveness of the US Paycheck
Protection Program loans provided to parts of the Group's North
America operations.
Amortisation of acquired intangibles increased to $10.3 million
(FY2021: $5.2 million) largely as a result of the full year impact
of amortisation of DE-KA intangibles. The Group has recognised two
classes of separately identifiable intangible assets, which are
customer relationships and the acquired open order book. The open
order book is amortised over a period of less than three years, so
amortisation is higher in the first few years following acquisition
in comparison to subsequent years. Customer relationship intangible
assets are generally amortised over a longer period, reflecting the
long-term relationships we gain through our acquisitions.
The charge recognised through the income statement for
share-based payment awards comprises $3.8 million (FY2021: $2.4
million) in respect of senior management, $0.6 million (FY2021:
$2.6 million) in respect of acquisitions and $nil (FY2021: $1.6
million) 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 in an
acquisition situation. 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 $5.2 million (FY2021: $2.1
million) mainly due to the increased utilisation of the revolving
credit facility following the acquisition of DE-KA in the prior
year and the subsequent acquisitions of Irvine, TC, Prodamex and
inYantra during FY2022. The financing element for leases for the
year was $1.0 million (FY2021: $0.7 million). The Group recognises
interest income of $0.2 million (FY2021: $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 $5.8m (FY2021:
credit of $9.5m), representing an effective tax rate ("ETR") of
16.0% (FY2021: -32.4%). 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 the prior year are principally due to
the recognition of historical operating losses, unclaimed capital
allowances and other temporary timing 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.
In FY2021, management made an assessment of the probability of
future operating profits in a key location, recognising a
corresponding deferred tax asset resulting in a credit to
underlying profit after tax of $12.9 million. For FY2022, having
performed the same assessment, the credit to underlying profit
after tax was $2.9 million. 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 Group has $64.1 million (FY2021: $80.1 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 ETR.
The underlying ETR (representing the income tax expense on
profit before tax, adjusting items and share-based payments) was
17.7% (FY2021: -17.5%). This difference is, as set out above,
mainly due to lower deferred tax asset recognition. The ETR was
also 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 4.7% adverse (FY2021: 1.9%
favourable), mainly arising in Turkey. There was also a $1.7
million underlying tax credit from changes to tax rates,
particularly due to the effect on deferred tax assets of the
increase in the UK tax rate to 25% from 1 April 2023, which had a
3.3% favourable impact on the underlying ETR (FY2021: 0.2%
adverse).
Cash tax paid during the period was $6.5 million (FY2021: $3.1
million), representing an underlying cash ETR of 12.6% (FY2021:
7.5%). The increase to the underlying cash ETR is due to the
above-mentioned foreign exchange volatility whereby a depreciating
local currency increases tax payable, and the effect of
acquisitions in higher-tax jurisdictions where the Group does not
have historical tax losses.
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 3 April 2022, the Group
has net current tax liabilities of $8.2 million (FY2021: $6.7
million) which include $7.2 million (FY2021: $7.9 million) of
provisions for tax uncertainties.
Earnings per share
Underlying diluted earnings per share decreased 16.0% to 25.2
cents (FY2021: 30.0 cents) reflecting the deferred tax asset
recognised lower than the prior year partially offset by increased
underlying operating profits. Excluding deferred tax asset
recognition underlying diluted earnings per share increased by
6.3%. Basic earnings per share decreased to 19.3 cents (FY2021:
25.5 cents).
The weighted average number of shares in the year was 157.2
million (FY2021: 152.2 million).
Foreign exchange
The majority of the Group's revenue is in US dollars, with
limited sales in other currencies including euros 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 losses recognised in the income statement for the
period were $0.6 million (FY2021: $1.3 million).
Cash flow
Operating cash flow before movements in working capital was
$60.9 million (FY2021: $50.0 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 $34.4 million, which compares
to a $7.6 million outflow in FY2021. The reasons for this working
capital movement are set out below:
-- An increase in inventory leading to a cash outflow of $28.1
million (FY2021: $12.2 million). Extended supply chain lead times
have resulted in approximately two additional weeks of inventory
being held as shipments of finished goods to customers take longer,
and therefore goods-in-transit increase. Extended supplier lead
times have also increased inventory levels. This was in addition to
the increase in inventories required due to growth in our
operations and new customer projects;
-- An increase in receivables leading to a cash outflow of $14.2
million (FY2021: $17.0 million) with the increase reflecting growth
of the business; and
-- An inflow related to payables of $7.9 million (FY2021: $21.6
million). This was also due to the growth of the business.
Capital expenditure increased to $15.0 million from $7.8 million
in FY2021. During the year, the Group has continued to invest in
automation to deliver further production efficiencies in our higher
volume factories. We have also increased our investment in vertical
integration and in our higher-growth sectors.
Free cash flow was $4.1 million (FY2021: $31.3 million). Free
cash flow represents net cash flows before financing activities
excluding the net outflow from the acquisition of subsidiaries.
Net financing inflows were $40.4 million (FY2021: inflows $14.5
million). This included dividend payments of $7.2 million (FY2021:
$6.0 million) and the drawing of the revolving credit facility
("RCF") to fund acquisitions. As part of the extension and
enhancement of the Group's RCF, legal costs and arrangement fees of
$2.5 million (FY2021: $1.1 million) were incurred during the year,
and these will be amortised over the life of the facility.
Total cash expenditure on acquisitions (net of cash acquired)
was $54.9 million (FY2021: $42.2 million), including $19.2 million
(FY2021: $1.3 million) in respect of contingent consideration.
The Group is expecting to make payments of $17.8 million in
FY2023 in relation to contingent consideration for acquisitions
made in FY2022 and previous years. This includes $5.0 million of
inYantra consideration relating to land, which was paid in the
first quarter of FY2023.
The cash outflow associated with the settlement of awards under
share-based payment arrangements was $5.1 million (FY2021: $9.1
million).
Net debt and gearing
At 3 April 2022, the Group's net debt was $74.4 million before
lease liabilities and $95.3 million including lease liabilities. At
4 April 2021, net debt before lease liabilities was $7.3 million
and $27.3 million including lease liabilities.
At 3 April 2022 the Group's covenant basis net debt/underlying
EBITDA ratio was 1.3 times (4 April 2021: 0.3 times).
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 2.4 pence per share (FY2021: 2.2 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 $5.0 million.
Together with an interim dividend of 1.2 pence per share paid in
December 2021, this equates to a full year dividend of 3.6 pence
per share (FY2021: 3.3 pence per share), an increase of 9.1%. If
approved, the final dividend will be paid on 26 August 2022 to all
shareholders on the register at 22 July 2022. The ex-dividend date
will be 21 July 2022.
Banking facilities
In February 2022 the Group completed a refinancing of its
banking facilities, with a syndicate of five banks. An enlarged
$300 million facility replaced the Group's existing $100 million
multi-currency revolving credit facility. The new facility has an
initial three-year term, with two one-year extension options. It
comprises a $125 million revolving credit facility, a $75 million
term loan and an additional $100 million uncommitted accordion.
The new facility has an improved net debt to underlying EBITDA
covenant facility, providing additional headroom in comparison to
the previous facility, affording greater flexibility to undertake
organic and inorganic investment to support growth.
Defined benefit pension schemes
The Group's net pension deficit under IAS 19 as at 3 April 2022
was $3.1 million (FY2021: $5.2 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 3 April 2022 (52 weeks ended 4 April
2021)
2022 2021
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 2 614.6 - 614.6 443.3 - 443.3
Cost of sales (488.8) - (488.8) (339.4) - (339.4)
------------------------------------- ----- ------------ ------------ ------- ------------ ------------ -------
Gross profit 125.8 - 125.8 103.9 - 103.9
Operating expenses (69.6) (15.2) (84.8) (61.0) (12.2) (73.2)
------------------------------------- ----- ------------ ------------ ------- ------------ ------------ -------
Operating profit 2 56.2 (15.2) 41.0 42.9 (12.2) 30.7
Share of net profit from associates 0.4 - 0.4 0.8 - 0.8
Finance income 0.3 - 0.3 0.3 - 0.3
Finance costs (5.5) - (5.5) (2.4) - (2.4)
------------------------------------- ----- ------------ ------------ ------- ------------ ------------ -------
Profit on ordinary activities
before taxation 51.4 (15.2) 36.2 41.6 (12.2) 29.4
Taxation 4 (9.1) 3.3 (5.8) 7.2 2.3 9.5
------------------------------------- ----- ------------ ------------ ------- ------------ ------------ -------
Profit for the period attributable
to the owners of the parent 42.3 (11.9) 30.4 48.8 (9.9) 38.9
------------------------------------- ----- ------------ ------------ ------- ------------ ------------ -------
Earnings per share (cents)
Basic 5 26.9 19.3 32.1 25.5
Diluted 5 25.2 18.1 30.0 23.9
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 3 April 2022 (52 weeks ended 4 April 2021)
2022 2021
$'m $'m
Profit for the period 30.4 38.9
Items that will not be reclassified
subsequently to profit or loss
Actuarial gain/(loss) on defined benefit
pension schemes 0.7 (1.1)
Tax relating to items that will not be
reclassified (0.1) 0.5
0.6 (0.6)
Items that may be reclassified subsequently
to profit or loss
Gain arising on cash flow hedges during
the period 0.1 1.9
Exchange (loss)/gain on translation of
foreign operations (5.9) 3.2
Tax relating to items that may be reclassified 0.1 0.3
(5.7) 5.4
Other comprehensive (expense)/income
for the period (5.1) 4.8
---------------------------------------------------------- ------ ------
Total comprehensive income for the period
attributable to the owners of the parent 25.3 43.7
Consolidated Statement of Financial Position
2021
2022 RESTATED
As at 3 April 2022 (4 April 2021) Notes $'m $'m
----------------------------------- ------ --- --------- ------------
Non-current assets
Goodwill 82.9 68.0
Other intangible assets 47.0 39.6
Property, plant and equipment 43.4 32.4
Right-of-use asset 19.4 18.0
Interests in associates and joint
ventures 1.5 0.9
Other receivables 2.1 4.4
Deferred tax asset 20.6 22.0
----------------------------------- ------ --- --------- ------------
216.9 185.3
----------------------------------- ------ --- --------- ------------
Current assets
Inventories 119.3 76.9
Trade receivables 119.0 100.3
Other receivables 16.7 10.3
Current tax assets 1.9 2.8
Derivative financial instruments 0.4 0.4
Cash and bank balances 8 29.1 36.5
----------------------------------- ------ --- --------- ------------
286.4 227.2
----------------------------------- ------ --- --------- ------------
Total assets 503.3 412.5
----------------------------------- ------ --- --------- ------------
Current liabilities
Borrowings 8 5.0 9.6
Lease liabilities 8 4.3 4.6
Trade payables 84.7 72.1
Other payables 61.9 58.9
Current tax liabilities 10.1 9.5
Retirement benefit obligation 1.1 1.1
Provisions 9 2.3 1.8
Derivative financial instruments 0.1 -
169.5 157.6
----------------------------------- ------ --- --------- ------------
Net current assets 116.9 69.6
----------------------------------- ------ --- --------- ------------
Non-current liabilities
Borrowings 8 98.5 34.2
Lease liabilities 8 16.6 15.4
Other payables 1.0 9.1
Deferred tax liabilities 7.0 7.8
Retirement benefit obligation 2.0 4.1
Provisions 9 0.2 0.3
125.3 70.9
----------------------------------- ------ --- --------- ------------
Total liabilities 294.8 228.5
----------------------------------- ------ --- --------- ------------
Net assets 208.5 184.0
----------------------------------- ------ --- --------- ------------
Equity
Share capital 11 62.5 62.0
Share premium account 11 60.9 60.9
Non-distributable reserves 12 2.5 2.5
Hedging and translation reserve (9.8) (4.1)
Own shares 12 (0.2) (3.3)
Retained earnings 85.2 66.0
----------------------------------- ------ --- --------- ------------
Total attributable to owners of
the parent 201.1 184.0
----------------------------------- ------ --- --------- ------------
Non-controlling interests 7.4 -
----------------------------------- ------ --- --------- ------------
Total equity 208.5 184.0
RESTATED: In accordance with IFRS 3 the Group has amended
provisional fair value associated with an acquisition completed in
the prior period. This has led to an increase in Goodwill and
contingent consideration which is included in other payables. See
note 13 for further information.
Consolidated Statement of Changes in Equity
For the 52 weeks ended 3 April 2022 (52 weeks ended 4 April 2021)
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 5
April 2020 60.3 46.5 2.5 (9.5) (1.0) 32.0 130.8 - 130.8
Profit for the
period
attributable to
the owners
of the parent - - - - - 38.9 38.9 - 38.9
Other
comprehensive
income/(expense)
for the period - - - 5.4 - (0.6) 4.8 - 4.8
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Total
comprehensive
income
for the period - - - 5.4 - 38.3 43.7 - 43.7
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
Share issue 1.6 14.4 - - - - 16.0 - 16.0
Exercise of
deferred
bonus shares 0.1 - - - - (0.1) - - -
Own shares
sold/(utilised)
in the period - - - - 1.7 (3.1) (1.4) - (1.4)
Own shares
purchased
in the period - - - - (4.0) - (4.0) - (4.0)
Dividend - - - - - (6.0) (6.0) - (6.0)
Credit to equity
for
equity-settled
share-based
payments - - - - - 0.1 0.1 - 0.1
Tax effect of
share options - - - - - 4.8 4.8 - 4.8
----------------- ------- ------- ----------------- ----------- ------ -------- ------------ --------------- -------
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
attributable to
the owners
of the parent - - - - - 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
(see note 13) - - - - - - - 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 - - - - - (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
Consolidated Statement of Cash Flows
----------------------------------------------------------------------
For the 52 weeks ended 3 April 2022 (52 weeks ended 4 April
2021)
Notes 2022 2021
$'m $'m
---------------------------------------------- ------ ------ ------
Net cash generated from operating activities 7 18.5 38.7
Cash flow used in investing activities
Interest received 0.1 -
Acquisition of businesses, net of cash
acquired 13 (35.7) (40.9)
Contingent consideration for businesses
acquired 13 (19.2) (1.3)
Proceeds on disposal of intangible assets,
property, plant and equipment 0.5 0.4
Purchases of property, plant and equipment (10.8) (7.7)
Purchases of intangible assets (4.2) (0.1)
Proceeds from the repayment of preference - -
shares
Net cash used in investing activities (69.3) (49.6)
Cash flows before financing activities (50.8) (10.9)
------ ------
Cash used before adjusting items (48.8) (10.5)
Cash utilised in respect of adjusting
items (2.0) (0.4)
------ ------
Cash flow generated from financing activities
Dividend paid (7.2) (6.0)
Net purchase of shares for share schemes (5.1) (9.1)
Refinancing costs paid 8 (2.5) (1.1)
New bank loans raised 8 69.3 37.2
Repayment of borrowings 8 (3.4) (3.1)
(Outflow)/inflow from factoring 8 (6.0) 0.5
Interest element of lease payments 8 (1.0) (0.7)
Receipt from lease debtor 0.5 0.5
Capital element of lease payments 8 (4.2) (3.7)
---------------------------------------------- ------ ------ ------
Net cash generated from financing activities 40.4 14.5
Net (decrease)/increase in cash and cash
equivalents (10.4) 3.6
Cash and cash equivalents at beginning
of period 36.5 31.7
Effect of foreign exchange rate changes (0.2) 1.2
---------------------------------------------- ------ ------ ------
Cash and cash equivalents at end of period 8 25.9 36.5
1 Basis of preparation
The preliminary announcement for the 52 weeks ended 3 April 2022
has been prepared in accordance with the accounting policies as
disclosed in Volex plc's Annual Report and Accounts 2021, as
updated to take effect of any new accounting standards applicable
for the period as set out in Volex plc's Interim Statement
2022.
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 3 April
2022, 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 4 April 2021 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 and 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 the end of September 2023, which is based on the FY2023
Board-approved budget. The Directors have sensitised the cash flow
forecast using a base case and downside scenario that take into
account the principal risks and uncertainties of the Group and the
potential future impact from Covid-19. The sensitivity analysis
includes a severe but plausible downside scenario which models a
15% reduction in year-on-year revenue, equivalent to the worst
result in recent history, which still provides significant covenant
headroom.
Based on their assessment and these sensitivity scenarios, the
Directors are satisfied that that there are no material
uncertainties that cast doubt on 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 23 June 2022.
2 Business and geographical segments
Operating segments
Segment information is based on the information provided to the
chief operating decision maker, 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 3 April 2022.
The Group evaluates segmental information on the basis of profit
or loss from operations before adjusting items, 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
the products are delivered to. 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 3 52 weeks to 4 April
April 2022 2021
-------------------------------------- ---------------------- ----------------------
Revenue Profit/(loss) Revenue Profit/(loss)
$'m $'m $'m $'m
-------------------------------------- ------- ------------- ------- -------------
North America 272.1 21.4 203.1 19.8
Asia 142.7 11.6 133.7 14.1
Europe 199.8 32.1 106.5 15.4
Unallocated Central costs - (8.9) - (6.4)
-------------------------------------- ------- ------------- ------- -------------
Divisional results before share-based
payments
and adjusting items 614.6 56.2 443.3 42.9
Adjusting operating items (10.8) (5.6)
Share-based payment charge (4.4) (6.6)
-------------------------------------- ------- ------------- ------- -------------
Operating profit 41.0 30.7
-------------------------------------- ------- ------------- ------- -------------
Share of net profit from associates
and joint ventures 0.4 0.8
Finance income 0.3 0.3
Finance costs (5.5) (2.4)
-------------------------------------- ------- ------------- ------- -------------
Profit before taxation 36.2 29.4
Taxation (5.8) 9.5
-------------------------------------- ------- ------------- ------- -------------
Profit after taxation 30.4 38.9
-------------------------------------- ------- ------------- ------- -------------
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
RESTATED
2022 2021 2022 2021
$'m $'m $'m $'m
-------------- ----- ----- ------- -----------
North America 272.1 203.1 49.3 23.1
Asia 142.7 133.7 47.2 25.7
Europe 199.8 106.5 99.8 114.5
614.6 443.3 196.3 163.3
-------------- ----- ----- ------- -----------
The restatement relates to amendment of the provisional value of
Goodwill associated with the
DE-KA acquisition (see note 13).
3 Adjusting items and share-based payments
2022 2021
$'m $'m
----------------------------------------------------- -------------------- --------------------
Acquisition-related costs 2.5 0.4
Adjustment to fair value of contingent consideration (0.2) (0.1)
Restructuring costs 0.8 -
Amortisation of acquired intangibles 10.3 5.2
Paycheck Protection Program ('PPP') loan (2.6) -
forgiveness
Pension past service costs - 0.1
Total adjusting operating items 10.8 5.6
----------------------------------------------------- -------------------- --------------------
Share-based payments 4.4 6.6
----------------------------------------------------- -------------------- --------------------
Total adjusting items and share-based payments
before tax 15.2 12.2
----------------------------------------------------- -------------------- --------------------
Tax effect of adjusting items and share-based
payments (note 4) (3.3) (2.3)
----------------------------------------------------- -------------------- --------------------
Total adjusting items and share-based payments
after tax 11.9 9.9
----------------------------------------------------- -------------------- --------------------
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 $2.5m (2021: $0.4m) consist of
legal and professional fees relating to potential and completed
acquisitions. The acquisition-related costs associated with
acquisitions completed during the year are 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 Irvine acquisition costs also
include consultancy fees agreed with the previous owners as part of
the acquisition to support the transition of certain activities.
The inYantra acquisition costs included the associated costs of
acquiring the land and building. The remaining acquisition costs
relate to other acquisitions that have or are being pursued. During
the prior year the $0.4m of acquisition-related costs consisted of
legal and professional fees associated with the acquisition of
De-Ka Elektroteknik Sanayi ve Ticaret Anonim irketi ('DE-KA').
The adjustment to the fair value of contingent consideration
primarily relates to the acquisition of Ta Hsing Industries Ltd in
July 2019. As the lease was not extended a final contingent payment
associated with a lease extension was not required. During March
2022 the Group commenced the closure of this site in China with
production being transferred to other sites within the Group. The
associated restructuring costs of $0.8m comprises of $0.5m of
redundancy costs and $0.3m of other closure-related costs.
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 $10.3m (2021: $5.2m) for the period. The
increase from prior year relates to the three acquisitions
completed during the current period, Irvine, Prodamex and TC, and
the annualised impact of DE-KA which was acquired in February
2021.
During the period the Group's North American operations received
notification that $2.6m of Payroll Protection Program loans
provided during the pandemic were forgiven.
In 2019, the Group recognised a pension past service cost of
$0.5m in adjusting items as a result of Guaranteed Minimum Pension
(GMP) equalisation following a legal judgement requiring all
pension schemes to conduct an equalisation of male and female
members' benefits for the effect of unequal GMPs. The additional
cost of $0.1m in 2021 arose as a result of a further legal
judgement which confirmed there was also an obligation to pay
additional amounts where certain past transfer payments had not
been equalised for the effects of GMPs.
4 Taxation
2022 2021
---------------------------- ------------------------------------ -----------------------------------
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 (10.1) 0.2 (9.9) (3.9) 0.1 (3.8)
Current tax - adjustment
in respect of previous
periods (0.1) - (0.1) 0.2 - 0.2
Total current tax
expense (10.2) 0.2 (10.0) (3.7) 0.1 (3.6)
---------------------------- ---------- ---------------- ------ ---------- ---------------- -----
Deferred tax - credit
for the period 0.8 3.1 3.9 10.8 2.1 12.9
Deferred tax - adjustment
in respect of previous
periods 0.3 - 0.3 0.1 0.1 0.2
---------------------------- ---------- ---------------- ------ ---------- ---------------- -----
Total deferred tax
credits 1.1 3.1 4.2 10.9 2.2 13.1
---------------------------- ---------- ---------------- ------ ---------- ---------------- -----
Income tax (expense)/credit (9.1) 3.3 (5.8) 7.2 2.3 9.5
---------------------------- ---------- ---------------- ------ ---------- ---------------- -----
UK corporation tax is calculated at the standard rate of 19%
(2021: 19%) of the estimated assessable profit for the period.
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
2022 2021
---------------------------- ----------------------------------- -----------------------------------
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 51.4 (15.2) 36.2 41.6 (12.2) 29.4
---------------------------- ---------- ---------------- ----- ---------- ---------------- -----
Tax at the UK corporation
tax rate (9.8) 2.9 (6.9) (7.9) 2.3 (5.6)
Tax effect of:
Expenses that are
not deductible and
income that is not
taxable in determining
taxable profit 0.1 0.4 0.5 1.6 (0.9) 0.7
Foreign exchange on
entities with different
tax and functional
currencies (2.4) - (2.4) 0.8 - 0.8
Adjustment in respect
of previous periods 0.2 - 0.2 0.3 0.1 0.4
Changes to tax rates 1.7 0.1 1.8 (0.1) - (0.1)
Overseas tax rate
differences (1.1) 0.3 (0.8) (0.3) 0.1 (0.2)
Current year tax losses
and other items not
recognised (0.1) (0.1) (0.2) (0.1) - (0.1)
Recognition of previously
unrecognised deferred
tax assets 2.9 - 2.9 12.9 0.7 13.6
Derecognition of previously
recognised deferred
tax assets (0.6) (0.3) (0.9) - - -
---------------------------- ---------- ---------------- ----- ---------- ---------------- -----
Income tax (expense)/credit (9.1) 3.3 (5.8) 7.2 2.3 9.5
---------------------------- ---------- ---------------- ----- ---------- ---------------- -----
The tax (expense)/credit for the period is lower (2021: 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 an increase to
uncertain tax provisions of $0.4m (2021: $0.4m). The Group
recognises provisions for uncertain tax positions when the Group
has a present obligation as a result of a past event and management
judges that it is probable that there will be a future outflow
within the Group to settle the obligation. Uncertain tax positions
are assessed and measured within the jurisdictions that we operate
in using the best estimate of the most likely outcome. It is
inevitable that the Group will be subject to routine tax audits or
be in ongoing disputes with tax authorities in the multiple
jurisdictions it operates within.
The income tax expense reported directly in equity of $0.8m
(2021: credit of $4.8m) relates to share-based payments and
consists of a current tax credit of $1.6m (2021: $0.8m) and a
deferred tax expense of $2.4m (2021: credit of $4.0m).
5 Earnings per ordinary share
The calculations of the earnings per share are based on the
following data:
Earnings 2022 2021
$'m $'m
---------------------------------------------------- --- ----------- -----------
Profit for the purpose of basic and diluted
earnings per share being net profit attributable
to owners of the parent 30.4 38.9
Adjustments for:
Adjusting items 10.8 5.6
Share-based payments charge 4.4 6.6
Tax effect of adjusting items and share-based
payments (3.3) (2.3)
--------------------------------------------------------- ----------- -----------
Underlying earnings 42.3 48.8
No. shares No. shares
---------------------------------------------------- --- ----------- -----------
Weighted average number of ordinary shares
for the purpose of basic earnings per share 157,245,284 152,230,980
Effect of dilutive potential ordinary shares
/ share options 10,309,105 10,288,152
--------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purpose of diluted earnings per
share 167,554,389 162,519,132
--------------------------------------------------------- ----------- -----------
2022 2021
Basic earnings per share Cents Cents
---------------------------------------------------- --- ----------- -----------
Basic earnings per share 19.3 25.5
Adjustments for:
Adjusting items 6.9 3.7
Share-based payments charge 2.8 4.4
Tax effect of adjusting items and share-based
payments (2.1) (1.5)
--------------------------------------------------------- ----------- -----------
Underlying basic earnings per share 26.9 32.1
--------------------------------------------------------- ----------- -----------
5 Earnings per ordinary share (continued)
2022 2021
Diluted earnings per share Cents Cents
---------------------------------------------------- ----- -----
Diluted earnings per share 18.1 23.9
Adjustments for:
Adjusting items 6.5 3.4
Share-based payments charge 2.6 4.1
Tax effect of adjusting items and share-based
payments (2.0) (1.4)
----------------------------------------------------- ----- -----
Underlying diluted earnings per share 25.2 30.0
----------------------------------------------------- ----- -----
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 started the period with a $70.0m multi-currency
combined revolving overdraft and guarantee facility. The syndicate
comprised HSBC UK Bank plc, J.P. Morgan Securities PLC and
Citibank, N.A. London branch. The facility included an additional
$30.0m uncommitted 'accordion' feature to provide further capacity
for potential future acquisitions. The facility was secured by
fixed and floating charges over the assets of certain Group
companies.
In September 2021 the Group activated the $30.0m accordion
feature on the facility. In February 2022 the Group completed a
refinancing with a syndicate of five banks, replacing its existing
$100 million revolving credit facility with a new $200 million
committed facility (the "Facility") together with an additional
$100 million uncommitted accordion (the "Accordion"). As a number
of the terms changed as a result of the refinancing the facility
the $0.8m debt issue costs associated with the previous facility
were written off during the current period.
The new syndicate comprised 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 new banking facility there are floating charges over
certain subsidiaries and their assets. As at the year end these
totalled $217.8m (2021: $192.3m).
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). 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
2022 2021
$'m $'m
------------------------------------------------- ------ ------
Profit for the period 30.4 38.9
Adjustments for:
Finance income (0.3) (0.3)
Finance costs 5.5 2.4
Income tax expense/(credit) (note 4) 5.8 (9.5)
Share of net profit from associates (0.4) (0.8)
Depreciation of property, plant and equipment
(note 10) 6.4 4.6
Depreciation of right-of-use assets 3.4 3.2
Amortisation of intangible assets 10.4 5.3
(Profit)/loss on disposal of property, plant
and equipment (0.2) 0.1
Share-based payment charge 4.4 6.6
Fair value adjustment to derivatives - (0.2)
PPP loan forgiveness (note 3) (2.6) -
Contingent consideration adjustments (note
3) (0.2) -
Decrease in provisions (1.7) (0.3)
Operating cash flow before movement in working
capital 60.9 50.0
Increase in inventories (28.1) (12.2)
Increase in receivables (14.2) (17.0)
Increase in payables 7.9 21.6
------------------------------------------------- ------ ------
Movement in working capital (34.4) (7.6)
Cash generated from operations 26.5 42.4
------ ------
Cash generated from operations before adjusting
items 28.5 42.8
Cash utilised by adjusting operating items (2.0) (0.4)
------ ------
Taxation paid (6.5) (3.1)
Interest paid (1.5) (0.6)
Net cash generated from operating activities 18.5 38.7
------------------------------------------------- ------ ------
8 Analysis of net (debt)/funds
Cash and Bank Lease Debt issue
cash equivalents loans Factoring liabilities costs Total
$'m $'m $'m $'m $'m $'m
---------------------- ----------------- ------- --------- ------------ ---------- ------
At 5 April 2020 31.7 (0.1) - (10.9) 0.5 21.2
Business combination 6.4 (4.4) (6.5) (9.2) - (13.7)
Cash flow (2.8) (34.1) (0.5) 4.4 1.1 (31.9)
New leases entered
into during the year - - - (3.5) - (3.5)
Lease interest - - - (0.7) - (0.7)
Exchange differences 1.2 0.5 0.2 (0.1) 0.2 2.0
Amortisation of debt
issue costs - - - - (0.7) (0.7)
---------------------- ----------------- ------- --------- ------------ ---------- ------
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)
---------------------- ----------------- ------- --------- ------------ ---------- ------
Debt issue costs relate to bank facility arrangement fees.
During the year, $2.5m of professional fees were capitalised, $2.3m
related to the new banking facility entered into during February
2022 and $0.2m associated with executing the accordion on the
previous facility. During the prior year, $1.1m was capitalised
related to the extension of the previous facility. The refinancing
resulted in a write-off of $0.8m (2021: $0.4m) during the current
period.
Analysis of cash and cash 2022 2021
equivalents:
$'m $'m
--------------------------- ---- ---- ------ -----
Cash and bank balances 29.1 36.5
Bank overdrafts (3.2) -
--------------------------- ---- ---- ------ -----
25.9 36.5
------------------------------------- ------ -----
9 Provisions
Property Restructuring Other Total
$'m $'m $'m $'m
------------------------------ --------- -------------- ------ ------
At 5 April 2020 0.3 0.1 1.0 1.4
Charge in the period (0.1) - 0.8 0.7
Utilisation of provision - - (0.1) (0.1)
Exchange differences - - 0.1 0.1
------------------------------ --------- -------------- ------ ------
At 4 April 2021 0.2 0.1 1.8 2.1
Charge 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
------------------------------ --------- -------------- ------ ------
Current liabilities 0.1 0.6 1.6 2.3
Non-current liabilities 0.2 - - 0.2
------------------------------ --------- -------------- ------ ------
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 made to cover the
redundancy and other associated exit costs.
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 (2021: $0.7m) 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.
The Group has $0.3m (2021: $0.3m) provided for legal costs
associated with a pending legal case in Canada. The case is on
going and based on the evidence available, in the view of the
Directors it is not probable that the case will result in the
material outflow of economic benefits for the Group, therefore no
further provision has been recognised beyond the legal costs.
During the year the Group made the second payment related to a
legacy legal claim at MC Electronics LLC. The case was identified
as part of the acquisition with an indemnity obtained from the
sellers. The Group holds a provision of $0.1m to cover the final
payment and associated costs which will be payable during
FY2023.
10 Reconciliation of operating profit to underlying EBITDA
(earnings before interest, tax, depreciation, amortisation,
adjusting items and share-based payments)
2022 2021
$'m $'m
----------------------------------------------- ---- ----
Operating profit 41.0 30.7
Add back:
Adjusting operating items 10.8 5.6
Share-based payment charge 4.4 6.6
----------------------------------------------- ---- ----
Underlying operating profit 56.2 42.9
Depreciation of property, plant and equipment 6.4 4.6
Depreciation of right-of-use assets 3.4 3.2
Amortisation of intangible assets not acquired
in a business combination 0.1 0.1
----------------------------------------------- ---- ----
Underlying EBITDA 66.1 50.8
----------------------------------------------- ---- ----
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 5 April 2020 151,818,762 60.3 46.5 106.8
Issue of deferred bonus shares 432,040 0.1 - 0.1
Acquisition of DE-KA 3,320,000 1.1 14.4 15.5
Acquisition of Servatron - contingent
consideration 1,481,239 0.5 - 0.5
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
------------------------------------------------- --------------------------------------- ------- --------- ------
During the current and prior year the Group issued shares to
satisfy the requirement of share awards, deferred bonus awards and
fund acquisitions. The current year movements were as follows:
-- 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.
The prior year movements were:
-- Issued 432,040 shares under the 2019 deferred share bonus plan.
-- Issued 3,320,000 shares as part of the initial consideration for the acquisition of DE-KA.
-- Issued 1,481,239 shares to the former owners of Servatron as
the business met the required operating profit targets set out in
the acquisition agreement.
12 Own shares and non-distributable reserves
2022 2021
Own shares $'m $'m
-------------------------------- ------ ------
At the beginning of the period 3.3 1.0
Sale of shares (7.5) (1.7)
Purchase of shares 4.4 4.0
-------------------------------- ------ ------
At end of the period 0.2 3.3
-------------------------------- ------ ------
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 Employee 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
Employee Share Trust at 3 April 2022 was 53,205 (2021: 931,577).
The market value of the shares as at 3 April 2022 was $0.2m (2021:
$4.4m).
Unless and until the Company notifies a trustee of the Volex
Group plc Employee 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 3,645,040 (2021: 625,000) shares were utilised
on the exercise of share awards. During the year, the Company
purchased 1,100,000 shares (2021: 1,100,001) at a cost of $4.4m
(2021: $4.0m) and issued 1,666,668 new shares (2021: nil).
In December 2013, the Volex Group plc Employee 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
Irvine Electronics LLC
On 29 October 2021 the Group completed the acquisition of 100%
of the membership interests in Irvine Electronics LLC ('Irvine'), a
US-based manufacturer of electronic solutions, including printed
circuit board assemblies, across a wide variety of blue-chip
customers, particularly in the defence, military aerospace and
medical markets.
Irvine was acquired for cash consideration of $15.1m funded from
the Group's existing debt facilities. Cash paid includes the
initial consideration and the working capital adjustment. There is
no deferred or contingent consideration.
Fair Value
$'m
-------------------------------- -----------
Identifiable intangible assets 7.0
Property, plant and equipment 0.1
Right-of-use asset 1.6
Inventories 5.2
Trade receivables 3.2
Trade payables (1.1)
Other debtors and creditors (0.3)
Customer deposits (3.6)
Provisions (0.1)
Cash 0.9
Lease liabilities (1.6)
Total identifiable assets 11.3
-------------------------------- -----------
Goodwill 3.8
-------------------------------- -----------
Consideration 15.1
-------------------------------- -----------
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:
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. The
goodwill recognised is expected to be deductible for income tax
purposes over a 15-year period.
In FY2022, Irvine contributed $6.8m to Group revenue and $40,000
to adjusted operating profit. Associated acquisition costs of $0.7m
and intangible asset amortisation of $0.5m have both been expensed
as adjusting items in the period.
If Irvine had been acquired at the beginning of the year, it
would have contributed revenues of $21.7m and operating profit of
$4.4m to the results of the Group.
13 Business combinations (continued)
Terminal & Cable TC Inc and Prodamex SA de CV
On 4 January 2022 the Group completed the acquisitions of
Terminal and Cable TC Inc ('TC') and Prodamex SA de CV
('Prodamex'). TC provides ruggedised wire harness manufacturing
capabilities focusing in the "off-highway" market sector,
supporting defence, industrial, agricultural and construction
machinery. Prodamex is a business focused on wire harnesses for
domestic appliances from its manufacturing facility in Central
Mexico.
TC and Prodamex were acquired for a combined cash consideration
of $18.9m funded from the Group's existing debt facilities.
Included within this amount is the estimated working capital
adjustment of $1.2m which will be paid during FY2023. There is no
deferred or contingent consideration.
The provisional fair value amounts recognised in respect of the
identifiable assets acquired and liabilities assumed are set out in
the table below:
TC Prodamex Total
$'m $'m $'m
-------------------------------- ------ --------- ------
Identifiable intangible assets 3.0 3.0 6.0
Property, plant and equipment 0.3 0.7 1.0
Right-of-use asset 2.8 0.7 3.5
Inventories 3.7 3.6 7.3
Trade receivables 2.1 1.2 3.3
Trade payables (1.0) (1.6) (2.6)
Other debtors and creditors (0.5) (0.5) (1.0)
Cash 1.8 - 1.8
Deferred taxes (0.8) (0.6) (1.4)
Retirement benefit obligation - (0.1) (0.1)
Lease liabilities (2.8) (0.7) (3.5)
Total identifiable assets 8.6 5.7 14.3
-------------------------------- ------ --------- ------
Goodwill 1.7 2.9 4.6
-------------------------------- ------ --------- ------
Consideration 18.9
-------------------------------- ------ --------- ------
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 businesses, 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.
13 Business combinations (continued)
In FY2022, TC contributed $2.4m to Group revenue and a loss of
$0.1m to the Group adjusted operating profit. Associated
acquisition costs of $0.4m and intangible asset amortisation of
$0.1m have both been expensed as adjusting items in the period. If
TC had been acquired at the beginning of the year, it would have
contributed revenues of $11.6m and operating profit of $0.9m to the
results of the Group.
In FY2022, Prodamex contributed $3.3m to Group revenue and $0.2m
to adjusted operating profit. Associated acquisition costs of $0.4m
and intangible asset amortisation of $0.2m have both been expensed
as adjusting items in the period. If Prodamex had been acquired at
the beginning of the year, it would have contributed revenues of
$14.9m and operating profit of $1.0m to the results of the
Group.
inYantra Technologies Pvt Ltd
On 30 March 2022 the Group completed the acquisition of 51% of
the share capital in inYantra Technologies Pvt Ltd ('inYantra') and
100% of the industrial land and operational buildings. The company
operates from a site in Pune, India, with expertise in printed
circuit board assembly and box build integrated solutions.
The inYantra business was acquired for a total cash
consideration of $13.1m with $8.1m paid initially with $5.0m paid
in April 2022 upon completion of the transfer of the building.
There is no other deferred or contingent consideration.
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 2.3
Property, plant and equipment 6.0
Inventories 3.6
Trade receivables 3.9
Trade payables (4.5)
Other debtors and creditors (1.4)
Cash 2.5
Deferred taxes (0.7)
Bank loan (1.1)
-------------------------------- -----------
Total identifiable assets 10.6
-------------------------------- -----------
Less non-controlling interest (7.4)
Goodwill 9.9
-------------------------------- -----------
Consideration 13.1
-------------------------------- -----------
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
property and property, plant and equipment were subject to an
external valuation.
13 Business combinations (continued)
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 interest of the non-controlling interest has
been initially measured at fair value.
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.
Due to the timing of the acquisition no trading activity has
been consolidated into the FY2022 income statement. Associated
acquisition costs of $0.6m have been expensed as adjusting items in
the period. If inYantra had been acquired at the beginning of the
year, it would have contributed revenues of $21.9m and operating
profit of $1.2m to the results of the Group.
Net cash outflow on acquisitions $'m
-------------------------------------------------- -----
Cash consideration
- Irvine 15.1
- TC and Prodamex 17.7
- inYantra 8.1
Total cash consideration 40.9
Less: cash and cash equivalents acquired
- Irvine 0.9
- TC and Prodamex 1.8
- inYantra 2.5
Net cash outflow 35.7
-------------------------------------------------- -----
Payment of deferred and contingent consideration
- DE-KA 17.2
- Servatron 1.7
- Ta Hsing 0.3
-------------------------------------------------- -----
Net cash outflow 19.2
-------------------------------------------------- -----
DE-KA
On 18 February 2021 Volex plc completed the acquisition of
DE-KA. In accordance with IFRS 3 'Business Combinations' the group
has updated the provisional fair value of the contingent
consideration used in calculating Goodwill. The change in estimate
reflects improved understanding associated with a potential working
capital payment to/from the former owners of the business measured
over the July - December 2022 period. The impact of this change was
to increase Goodwill by $2.5m and record contingent consideration
of $2.5m.
14 Events after balance sheet date
There are no disclosable events after the balance sheet
date.
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END
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June 23, 2022 02:00 ET (06:00 GMT)
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