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What sent analysts into ecstasies was a new five-year plan aiming at doubling revenues by spring 2027 while maintaining profit margins at 9 to 10 per cent. The company expects only $200 million of the $600 million extra revenue to come from add-ons.
In addition to the UK, Volex already operates in the US, Canada, Mexico, Turkey, India and elsewhere, so it will continue to be sensitive to currency movements. However, its position near the technological cutting edge should keep it fairly impervious to macroeconomic headwinds.
Rothschild gives himself about a dozen years to develop Volex to maturity. He sees the shape of the business being roughly maintained, although electric vehicle supply should rise to about a fifth of revenue, helped by innovations, for example in charging cars from home.
The main downsides concern the competition for talented labour, and competition in Volex’s markets from thousands of similar small businesses around the world. Given the size of some of its customers, there is always the prospect of Volex becoming a takeover target for a bigger company that wants a ready-made package in this corner of the commercial landscape. But that should do investors no harm.
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The shares are held by an impressive group of American and British institutions. All being well, they will be joined by others.
HSBC sees the p/e ratio falling from 11.7 now to an attractive 8.8 for the year ending March 2025, which assumes no further per-share earnings setbacks.
Copied from Ijamon post on advfn :-
Times conclusion:
Despite all this promise, the share price has fallen from 493p to 235p since last September, suggesting that there are sceptics lurking in the undergrowth. Nevertheless, on balance that decline looks more than anything like an opportunity to climb aboard at what may prove to be a historically cheap level.
ADVICE Buy
WHY Plenty of potential for an exciting ride under a well-motivated and experienced management
Cable maker Volex is in a position of power
William Kay
Friday June 24 2022, 12.01am, The Times
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Volex is a company of many moving parts, and most are travelling in the right direction. New management, under Nat Rothschild, took over five years ago and is transforming the business into a power cord and cable supplier for computers, printers, games consoles, kitchen appliances, data centres for medical and industrial uses and — most enticingly of all — electric vehicles.
That is a lot to keep an eye on, but it is comforting to have a Rothschild in charge, especially when he owns 24 per cent of the shares.
Revenue for the year to April 3 jumped from $443.3 million to $614.6 million, though that was inflated by four acquisitions. Any investors coming in now will have to get used to that, as takeovers will be a major plank in the strategy for several years. Net debt jumped from $27.3 million to $95.3 million, which is likely to keep growing and require some financial dexterity to manage. Volex has just arranged another $200 million line of credit, which will be by no means the last.
Underlying operating profit rose more slowly than revenue, from $42.9 million to $56.2 million. Thanks to the expansion and a higher tax charge, earnings per share were 16 per cent lower, at 25.2 cents. That suggests the management may need to keep their enthusiasm under control.
Electric vehicle revenue virtually doubled during the year to reach $100 million or nearly a sixth of the total. That proportion is set to keep increasing, and may encourage the top team to unload some of their less exciting activities. “We continue to see significant opportunities,” Rothschild said. “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.”
Cable maker Volex is in a position of power
https://www.thetimes.co.uk/article/f6d3781c-f2fb-11ec-beb3-8cbcdd742a95?shareToken=c2550cc6ca3114bb8f6071898d733782
On ADVFN a poster speculated that it is probably the Wesley/Cloverleaf stake which has changed hands it could be that as Wellesley Finance is/was a 19% shareholder and they have gone into administration.
Their stake would have been an overhang on market so it is good news.
hxxps://*********************/companies/uk/adept-technology-group-plc/research/singer-capital-markets/strong-q4-order-intake-though-headwinds-persist/b133346d-92d3-4384-a12d-dc0363803f8b
Singer Capital Markets has published a new research note on AdEPT Technology Group Plc. This is a snippet from it :-
Strong Q4 order intake, though headwinds persist
AdEPT ended FYMar22 with a “markedly stronger Q4 order intake” and revenues and adj. EBITDA broadly in line with consensus. This suggests Managed Services achieved mid-single digit organic revenue growth despite the pandemic and hardware shortages. FCF was impacted by largely one-off costs of £2m (restructuring, strategic review and inventory build). Supply chain issues are likely to persist in FY23 with additional headwinds such as higher NI contributions and general macro uncertainty. We deem it prudent to trim FY22 and FY23 revs by 1% and EBITDA by 5%. With both the potential and intention to accelerate organic growth, the FCF yield of 12% and P/E of 6x offer extraordinarily deep value as ADT deleverages.
If the deal goes ahead Bricknell will fill the whole in the business (ie give a $100 million to R & Q) and get a business with exciting prospects. Shareholder will get £1.75 a share ie not wonderful, but will avoid a much bigger crash in the share price on a depressed price capital raising.
However, the vote on deal is towards the end of April, and that assumes no other problems real themselves in the meantime.
Yes it is disappointing..
The management discovered a black hole of $90 million in the legacy business as described above. Thus if there was not a takeover they would need a cash raise at depressed prices. See from announcement :-
The new R&Q management team took over in April 2021 and initiated an in-depth review of the Group's Legacy Insurance portfolio in Q4 2021. The review identified a potential c.$90 million2 non-cash, pre-tax charge associated with impairing a structured reinsurance contract that was previously capitalised as an asset on the Group's balance sheet. The impairment is due to the likely commutation of this reinsurance contract by a subsidiary to provide liquidity to meet anticipated claims which have recently accelerated above expectations. This subsidiary was acquired over 15 years ago and management believes it is in the best interest of shareholders to commute the reinsurance policy rather than fund future claims out of Group liquidity. Furthermore, in Q4 2021, the Group used meaningful cash capacity to fund collateral requirements upon certain reserve strengthening. The combined impact of these two items results in a need for c.$100 million of equity capital to de-lever the balance sheet and improve the Group's financial profile. The result of the charge and other non-operating items is an IFRS-based profit after-tax (loss) of c.$(135) million to $(145) million2.
Brickell PC Insurance Holdings LLC are US and thus could be persuaded to move some or all of their holding to a US platform.
US market valuations have been racier that UK ones in the past, but in the current future market. pundits are saying there is another 20% fall to come maybe. However , obviously peoples predictions are very rarely correct so we'll see, but we may not see much buying on US platforms in the short term.
Kestrel have restored their case study page IQGeo which gives an overview of their view of the company :-
HTtps://kestrelpartners.com/case-studies/iqgeo-group-plc/
Jeremy Grantham continues to talk about the US super bubble being burst.
If he is right UK stocks not as expensive as US stocks will take some collateral danage.
https://markets.businessinsider.com/news/stocks/jeremy-grantham-gmo-stocks-housing-bubble-crash-warning-advice-crypto-2022-1
Yes, it's not hugely expensive, but we may see more falls in the pricey US market triggering more falls worldwide especially with inflation/rates falling.
I am holder, but I've trimmed in fear of a market correction.
However, I've been wrong before ...