Volex Regulatory News (VLX)

14 Jun 2006 07:00

Volex Group PLC14 June 2006 Embargoed until 07.00am, 14 June 2006 VOLEX GROUP plc _______________ Preliminary Announcement of the Group Results _____________________________________________ for the Financial Year ended 2 April 2006 _________________________________________ Volex Group plc, the global electrical and electronic cable assemblies group,today announces its preliminary results for the financial year ended 2 April2006. Financial Highlights: • Sales increased by 2.4% to £250.4m (2005: £244.6m) • Operating profit (before £8.6m major restructuring programme charge (2005: £6.8m) increased threefold to £5.3m (2005: £1.8m)(1) • Cash generated by operations: Before cost of major restructuring programme £13.2m (2005: £1.8m) After cost of major restructuring programme £11.7m (2005: £1.6m) • Loss per share before cost of major restructuring programme 1.0p (2005:loss 23.4p) • Basic loss per ordinary share 18.5p (2005: loss 46.2p) • Net borrowings at 2 April 2006 £13.3m (2005: £30.5m) (1) The operating loss after the £8.6m major restructuring programme charge(2005: £6.8m) was £3.3m (2005: loss £5.0m) The Chairman of Volex, Richard Arkle, commented: "In June 2005 we raised £17.6m net of costs by way of an equity placing withexisting and new shareholders in order to provide the financial and strategicstability to allow us to execute a long-term strategy that will result insustainable returns over the forthcoming years. We have made significantprogress in achieving the key elements of the strategic plan set out in theCircular to shareholders on 6 June 2005. We generated cashflows from operationsof £11.7m after the cost of the major restructuring compared with £1.6m lastyear. Our balance sheet is now much stronger. We have now passed the inflexion point of restructuring into a path of growthand profitability but we nevertheless recognise the significant challenges aheadof us. The industry dynamics of customers reducing their vendor base, risingcommodity prices and pricing pressure are issues we face daily. Predicting thefuture in today's uncertain environment is difficult but we are confident thatfollowing the major changes that have been achieved over the last 12 months, weare well placed to make further progress towards bottom line profitability andenhancing shareholder value." Ends Volex will host an analysts' meeting today at 9.00am at the offices of EvolutionSecurities Limited, 100 Wood Street, London, EC2V 7AN. For further information, please contact: Volex Group plc Today: 020 7067 0700 Thereafter: 01925 830101Richard Arkle, ChairmanHeejae Chae, Group Chief ExecutiveDerek Walter, Group Finance Director Weber Shandwick Square Mile 020 7067 0700Chris Lynch / Nick Dibden VOLEX GROUP plc Preliminary Announcement of the Group Results for the Financial Year ended 2April 2006 CHAIRMAN'S STATEMENT____________________ The last year has seen the later stages of the restructuring programme that theCompany embarked on four years ago. In June 2005 we raised £17.6m net of costsby way of an equity placing with existing and new shareholders in order toprovide the financial and strategic stability to allow us to execute a long-termstrategy that will result in sustainable returns over the forthcoming years. Wehave made significant progress in achieving the key elements of the strategicplan set out in the Circular to shareholders on 6 June 2005. Specifically wehave: •Realigned the manufacturing footprint and moved to lower cost locations. By the end of FY2006 we have closed seven facilities and downsized two more and plan to close three further facilities in FY2007 and downsize one more. Over 95% of our direct labour force is now located in the low cost areas of Asia, Mexico and Eastern Europe. •Restructured the organisation into three global product groups to align with the market and better serve our customers. •Strengthened the management team through the addition of key staff in engineering, sales, sourcing and operations. The new team members join us from leading companies both inside and outside the industry. •Enhanced our penetration of high growth and emerging markets such as medical, high speed assemblies and WiMax (Worldwide Interoperability for Microwave Access). •Focused on cost reduction and cash generation to improve profitability and balance sheet. The Group generated cash flows from operations of £11.7m compared with £1.6m in the previous year. •Seen the operating profit before the £8.6m major restructuring programme charge triple to £5.3m from £1.8m. We managed to increase our operating margin despite a significant increase in commodity prices and pricing pressure from our customers. We saw benefits of the cost saving and restructuring programmes during the second half of the year when we generated £3.9m operating profit against £1.4m in the first half of FY2006. •Reduced net borrowings from £30.5m to £13.3m. Results The revenues for the financial year ended 2 April 2006 were up 2.4% at £250.4million and operating profit (before the cost of the major restructuringprogramme) was £5.3m (2005: £1.8m). Net borrowings closed at £13.3m, down from£30.5m a year ago. The Group took a gross £8.9m charge in respect of the accelerated restructuringprogramme but a £0.3m credit in respect of higher fire insurance proceedsreduced the charge to £8.6m. The net loss for the year after this charge was£3.3m (2005: loss £5.0m). The Board is not proposing a dividend in respect of the year. Board and Management Changes As the Group is now transitioning from a restructuring phase to one of growth,changes have been made to the Board and management of the Company. Heejae Chaewas appointed as the Chief Executive Officer of the Group. Heejae has alreadyserved as the Chief Operations Officer and has successfully guided the Groupthrough the restructuring in the past year, particularly in North America.Heejae was previously the worldwide General Manager of the Radio Frequency Groupof Amphenol Corporation. Martin May resigned as Chairman after providingleadership during the restructuring phase. Additionally, Derek Walter, 58, hastendered his resignation as Finance Director but will remain with the Groupuntil a new Finance Director has been appointed and an orderly handover periodhas been completed. This new management team, together with a significant numberof other new team members, will meet the requirements of the next stage of theGroup's development. Dimitri Goulandris has also been appointed a non-executive director of theBoard. Dimitri is a partner of Cycladic Capital LLP, which is a majorshareholder of Volex. Future The Group is well positioned to take advantage of the dynamics of the globalcable assembly and powercord marketplaces. Based on independent research, Volexis the third largest player in the cable assembly market (which includespowercords) and, using internal research material, the largest player in thepowercord assembly market. Despite our leading market positions, our marketshare is single digit providing us the opportunity for significant growth. Weare uniquely positioned to grow by leveraging our global footprint, broadtechnology capabilities and strategic and preferred relationships with customersthat are leaders in the markets they serve. We have now passed the inflexion point of restructuring into a path of growthand profitability but we nevertheless recognise the significant challenges aheadof us. The industry dynamics of customers reducing their vendor base, risingcommodity prices and pricing pressure are issues we face daily. Predicting thefuture in today's uncertain environment is difficult but we are confident thatfollowing the major changes that have been achieved over the last 12 months, weare well placed to make further progress towards bottom line profitability andenhancing shareholder value. In closing, I would like to thank everyone in the organisation. Our people spanthe world and many cultures and the business has over one hundred years ofhistory. We would not have achieved our leadership position if not for thededication, hard work and passion of our people. As we move forward to anexciting future, we recognise that respect, teamwork and collaboration with allour stakeholders must be the cornerstones that will drive the Group forward on aglobal footing and produce the anticipated returns for our shareholders. We willbe asking the shareholders to support a new long term incentive plan for thesenior team and details of the plan will be presented for approval at the AGM. Richard ArkleChairman CHIEF EXECUTIVE'S REVIEW During FY2006, Volex Group went through a significant transformationfinancially, organisationally and culturally. We emerged from the year poised tobuild on our leadership position in the PowerCord, Infocom and Wiring Harnessmarkets we serve. We have: •Restructured the organisation into three global product groups - PowerCord, Infocom and Wiring Harness - to align with the market and better serve the customers. We believe that the global nature of our customers and supply chain require that we operate as a global organisation. Each product group is responsible for all aspects of the business on a global basis. We can respond and service consistently the customers' needs anywhere in the world. We believe that the global structure allows us to leverage the knowledge, technology and scale to achieve greater efficiency and lower cost to better serve all our customers across the world. •Accelerated the global restructuring programme. By the end of FY2006 we have closed seven manufacturing facilities and downsized two more and we plan to close three further facilities and downsize one more in FY2007. As a result, we significantly reduced our costs enabling us to enter FY2007 with a much lower cost base and over 95% of our direct labour is now located in the low cost areas of Asia, Mexico and Eastern Europe. •Streamlined central functions and corporate structure. In order to empower each global product group, the global purchasing and IT functions were merged into each product group. Additionally, we have taken action to benefit from lower costs at headquarters in the coming year. We believe that the responsibility for business decisions should rest with the product groups, not the corporate office. The product groups are closer to the customers and can react much more quickly to the changing marketplace. •Transformed the organisation's cultural mindset to Global from Regional. With the reorganisation into global product groups, our perspective and mindset has become global. We are breaking down the barriers to better share knowledge and competencies across the organisation. This change will allow us to better manage our knowledge and technologies to ensure that we provide the best service consistently to all of our customers throughout the world. •Developed a performance driven organisation. We enter FY2007 with a focus on results and accountability. Everyone in the organisation understands our strategy and goal. We recognise that we must benchmark ourselves against the competition and drive the organisation to outperform, measuring ourselves against quantifiable metrics and performance goals. •Reinforced the organisation with new team members. We believe that people are our most important asset and we continuously look to invest in developing new talent at all levels. During the past year, we added key staff in engineering, sales, sourcing and operations. These individuals bring with them new perspectives that will fuel our growth. •Placed emphasis on a common value system. We recognise that our organisation comprises people from many countries and cultures. Each one of us brings unique skills and perspectives. It is important that we operate under common values yet recognise our diversity. We believe that the following values are universal at Volex: leadership, respect and integrity. We must promote them through communication and teamwork that will lead to knowledge sharing across our diverse people. Markets The cable assembly market, which encompasses PowerCord, Infocom and WiringHarness, is estimated at approximately US$20 billion in annual sales. Volex'srange of technologies and products allow us to participate in a broad variety ofindustries including consumer products, data and telecommunications, industrial,medical, automotive and military. The consumer product market continues to remain strong as result of healthyconsumer spending across the world. New applications and development furtherdrives the growth through the introduction of "must have" products. Volex hasexperienced solid gains in the consumer products sector especially forflat-screen televisions, gaming and music consoles. We anticipate future growththrough continued new product introductions; however, as with other competitivemarkets, we expect significant pricing pressure going forward. Our participationin the sector is primarily through our PowerCord product line, which carriessignificant copper content. This commodity has recently experienced large priceincreases which are continuing through the early half of FY2007, furtherstressing the competitive nature of this business. The Group's second largest segment comprises data and telecommunicationsproducts. We provide an array of products in telecom infrastructure, computers,and Internet equipment (servers, storage systems and datacom equipment) and havepreferred supplier status with customers that are leaders in the markets theyserve. We expect the telecom market to continue to grow: in particular thewireless sector whose indicators remain strong; wireless subscriber growthcontinues with new and improved services and lower tariffs; 3G rollouts continueto gain traction with launches in many geographies; and the convergence of dataand voice is a driver for future growth. As the system requirements increase andproduct cycles shorten, we continue to see growth in the sector; however, withcompetition from existing players and new entrants from low cost regions,pricing pressure remains significant. The medical equipment segment is expected to continue to grow driven by thedemographics of an ever growing and ageing population. The cable assembly supplybase for medical equipment is highly fragmented but evolving: equipmentproviders are aggressively managing their supply chains as they look to generateefficiency and reduce cost. Volex is a major supplier in the sector and now hasestablished a leadership position with leading medical equipment providersthrough leveraging our technology, product offerings, superior service andglobal footprint. In the automotive and military markets we supply niche wiring harness systemsfor off-highway equipment, specialist vehicles and aerospace harness systems.Our sectors have remained steady, unlike the broader automotive markets, andexperienced positive growth trends as a result of the increasing complexity ofharness for specialty vehicles as well as the general growth in defencespending. Product Performance POWERCORDS: Revenue increased 6.7% in sterling terms. The growth in net sales was a resultof volume increases and higher average selling prices due to a shift in the mixtowards higher end products as well as price increases driven by escalatingcopper prices. New sales in consumer game consoles and increased sales to ourJapanese OEM customers were the leading contributors to organic growth. Althoughthe competitive pricing environment dampened the net sales increase, we continueto compete successfully on the basis of performance, quality, reliability, brandreputation, service and support. Competitive pricing pressures and escalating copper costs contributed to anincrease in cost of sales. Copper prices rose from US$3,300/tonne to US$5,400/tonne, compared with a reasonably stable average of approximately US$3,000/tonnein FY2005. The negative impact on the cost of sales was partially offset byaggressive supply chain management and improvements in labour and operatingcosts. During FY2006, we reorganised the PowerCord division into a single globalproduct group, allowing us to rationalise our marketing, manufacturing andtechnology strategy. We have closed three facilities and downsized one andintend to close a further site in FY2007, moving the business to our expandedChina operations. This expanded low-cost capacity will provide labour savings,fixed cost consolidation and supply chain leverage. Additionally, we haveinvested in the engineering resources across all regions to enhance our value tocustomers on a global basis. INFOCOM: The revenue from the Infocom business declined 4.8% as a result of ourrationalising low margin business, increased pricing pressure and a one-timeaward of a contract for telecom infrastructure deployment in India completed inFY2005. However, revenue and profitability improvements were realised in keymarket sectors including medical and telecommunications throughout the year. The Infocom division went through significant changes in FY2006 designed toalign the manufacturing footprint with our customers' requirements and costtargets. As a result, we consolidated our manufacturing locations into threeprincipal manufacturing centres: China, Eastern Europe and Mexico, enteringFY2007 with almost 100% of our direct labour based in low cost regions.Additionally, we undertook significant action to reduce overhead cost byreorganising the general and administrative structure. The sales organisationwas realigned to provide global coverage of our key accounts and focus on newaccount development, enabling us to identify opportunities to leverage ourtechnologies across application specific opportunities. Capitalising on ourpreferred supplier position at market leading customers, we look to leverage ourtechnologies and products to gain new customers in similar applications. Goingforward, technologies and competencies will be shared and leveraged across theentire group to best supply our customers with a broad offering of technologyand capabilities. The Infocom market continues to be highly competitive through the entrance oflow cost suppliers, the need for aggressive year on year cost reductions and thedesire of customers to consolidate their supply bases. Additionally, we facerising commodity prices with limited visibility of customer demand. With theneed to improve our market position and profitability, the actions we took inFY2006 and those we will continue to take in FY2007 will create additionalcompetitive advantage and allow us to achieve our goals. We have begun to seethe benefits of these actions during the second half of the year throughimproved profits and cash flow for the Infocom product group. WIRING HARNESS: The revenue from the Wiring Harness business increased by 11.8%, despite pricereductions and was a result of the positioning in the growing markets ofconstruction equipment and military/aerospace. The automotive market remainshighly competitive with the entrance of new low cost suppliers, as well asaggressive year on year cost reductions. Whilst revenue increased, profitabilitycame under severe pressure being impacted by an unexpected administrationproceeding at one of our larger customers, rising commodity prices, as well assignificant operational challenges. The Wiring Harness business in FY2006 continued its drive to improve itsoperational performance and cost base. We merged the two separate wiring harnessbusinesses into one organisation and announced the closure of one of ourmanufacturing sites in the UK. Throughout the year we transferred projects tolow cost manufacturing locations. The sales and engineering organisations werereorganised and strengthened to continue the business development activitiesalready showing success in FY2006. The drive in FY2007 is to continue thedownsizing in high labour cost areas, whilst improving our operationalperformance, focus on business development and build on our very strongreputation of quality and customer service. The Future As we look to the future, there is much uncertainty regarding rising commodityprices, customer pricing pressures, low cost competition and limited demandvisibility. Challenging as these factors may be, this environment has been thereality of the industry for the past five years. The competitive landscape islittered with those unable to adapt to this new environment. Nevertheless,market leaders have emerged stronger and better and we recognise our challengeis to outperform them. Volex has struggled for the last five years and has nowemerged to compete aggressively in this challenging marketplace. We believe thatour transformation - financially, organisationally and culturally - will bringus to the forefront of the competitive landscape. We have aligned ourmanufacturing footprint and cost basis to support the most demanding customers;we have the technology to satisfy cutting edge customers; and we have the supplychain and logistic competencies to support our global customers. But mostimportantly, we have the people who are able to adapt to these constant changesand continue to provide the best service to our customers. FINANCE DIRECTOR'S REVIEW_________________________ International Financial Reporting Standards ('IFRS') and changes to previousyear's figures FY2006 has been the first year in which Volex Group plc has produced itsfinancial statements in accordance with IFRS and the comparative figures for theprevious year have been restated accordingly. Details of Volex's IFRS accountingpolicies have already been published in the IFRS transition document producedwith the Interim Results for the 26 weeks to 2 October 2005 and published on theCompany's website, and will be included in the Annual Report and Accounts forFY2006. The major restatement in the Accounts has been the inclusion in the balancesheet of the pension fund deficit of two defined benefit schemes, which wereclosed on 31 March 2003 and replaced by defined contribution arrangements. At 2April 2006 the combined deficits on the two defined benefit schemes amounted to£3.5m (2005: £4.1m). Overview The major financial event in FY2006 has been the raising in June 2005 of newequity (£19.0m before expenses), which has funded the implementation of thestrategy set out in the 6 June 2005 Circular, most notably to date therealignment of the manufacturing footprint of the Group. Trading for the year Turnover for the 52 weeks ended 2 April 2006 at £250.4m increased by £5.8m,2.4%, over FY2005, including a £7.3m positive currency effect. Thus Group salesin real terms decreased in the year, due to several factors including thepruning of approximately US$6m of revenue, which derived from low margincustomer accounts in North America. Operating profit, before the £8.6m majorrestructuring programme charge, was £5.3m, giving a return on sales of 2.1%,compared with £1.8m operating profit and a return on sales of 0.7% in FY2005. Year on year the average exchange rate for the US dollar appreciated by 2.2%against sterling and the Singapore dollar by 3.7%, with other less significantcurrencies including the Euro also appreciating against sterling. Sales by destination in Asia and South America increased by 8.1% to £77.0m, inNorth America by 3.2% to £74.0m and in Europe, excluding the UK, by 2.7% to£64.8m. Sales in the UK were down by 10.3% to £34.6m. Sales of PowerCord products grew by £7.4m, 6.7%, to £118.3m but Infocom productsales, reflecting the customer base rationalisation in North America and somepricing pressures particularly in Europe, fell by £5.0m, 4.8%, to £99.4m. WiringHarness sales grew by £3.4m, 11.8%, to £32.7m. Operating profits for eachdivision were impacted by the restructuring programme with most of therestructuring charge in FY2006 affecting the Infocom division, compared withFY2005 where most of the charge related to the PowerCord division. A comparison of Group sales by source or manufacturing location, based on netsales showed a year on year growth in Asia of £8.8m, 9.7%, to £98.8m, accountingfor 39.4% of the Group's output (2005: 36.8%). North America's net outputincreased by £0.8m, 1.1%, in sterling terms to £75.6m over the previous year andrepresented 30.2% of Group's total gross output (2005: 30.6%). Sales sourcedfrom Europe (excluding the UK) fell by £7.6m, 14.8%, to £43.3m and accounted for17.3% of the Group's net output (2005: 20.8%). UK sourced sales increased by£3.8m, 13.0%, to £32.7m, 13.1% of the Group's net output (2005: 11.8%). Gross profit increased by £3.6m to £39.1m and the gross margin to 15.6% comparedwith 14.5% in the previous year. The impact of raw material prices, inparticular copper, continued to affect the Group but the restructuringprogramme, some sales price increases and the ongoing cost reduction programmesincluding procurement and value added engineering programmes contributed to theincrease in margin. The Group recorded an operating profit (before the £8.6m major restructuringprogramme charge) for the year of £5.3m (2005: £1.8m). The translation offoreign currency operating profits into sterling had a positive impact of £0.6m. Major restructuring programme As indicated in the Chairman's Statement in the Interim Report, we haveaccelerated the restructuring programme in the latter part of the year. Thecharge taken at the half year of £1.8m was in respect of the downsizing of theKanata site and some global management reduction. A further charge of £6.8m wastaken in the second half of the year in respect of the closures either alreadyimplemented by the year end (Fremont, Aguascalientes and Thailand), or alreadyannounced and to be implemented in FY2007 (Clinton and Stoke on Trent, theconsolidation of business from Butts Mill, Leigh, onto an adjacent site and thedownsizing of the Hermosillo factory). The £8.6m charge for the year comprised£3.9m in respect of severance and relocation costs spent or to be spent, £3.1min respect of property lease provisions and £1.9m in respect of asset write offsand other non-cash items less a £0.3m credit in respect of the settlement of theinsurance claim in respect of the September 2004 fire at Tijuana. The operating loss after debiting the £8.6m major restructuring programme charge(2005: £6.8m) was a loss of £3.3m (2005: loss £5.0m). Interest Finance charges were £3.5m compared with £4.3m in the previous year, reflectingthe lower debt levels following the equity raising. Higher Libor rates andstronger exchange rates added £0.2m to the charge in FY2006. Refinancing andamortisation of debt interest costs were £0.7m compared with £0.9m and theinterest charge of £2.8m included interest on the pension deficit and intereston the restructuring provisions, which combined totalled £0.3m. Taxation Despite an overall Group loss before tax, there was a tax charge of £2.4m (2005:£4.4m). This charge related to taxes paid in countries where taxable profitswere made and also included a charge of £0.6m in respect of prior years' taxes,mainly comprising withholding tax in Brazil. Earnings and Earnings Per Share The basic loss after tax was £9.1m (2005: loss £13.7m) and the basic loss pershare for FY2006 of 18.5p compares with a loss of 46.2p in the prior year. Theadjusted loss (arrived at after adding back the charge for the majorrestructuring programme) was a loss of £0.5m and in EPS terms shows animprovement from a loss of 23.4p in 2005 to a loss of 1.0p per share. Theearnings figures are distorted by the higher than normal tax charge, as referredto above, and adding back £0.6m in respect of the prior years' tax charge, theadjusted earnings would have been positive in FY2006. Excluding the major restructuring programme Volex made pre-tax profits of £2.2min the second half of the year and 2.3p earnings per share, compared with a£0.2m loss in the first half of the year and 3.3p loss per share. Net assets Net assets increased, as a result of the equity raising, from £15.1m to £26.1mat 2 April 2006. A share premium cancellation exercise was approved by the HighCourt in October 2005 whereby the share premium account was applied to reducethe deficit on distributable reserves. Other significant balance sheet changes Apart from the increase in equity and reduction in debt levels, which togetherwith the funds flow is discussed below, the other significant change in thebalance sheet in the year requiring explanation was the increase in the level ofprovisions. The long term provisions have increased from £3.0m to £5.0m and theshort term provisions have increased from £0.6m to £4.0m. Onerous lease provisions were set up in the previous year in respect of twosites. As a result of the restructuring programme, onerous lease provisions havebeen established in FY2006 for a further four sites. The short term provisionsof £4.0m relate to the severance and other relocation costs that are expected tobe paid in the current fiscal year as well as the current year's lease paymentsin respect of the sites where onerous lease provisions have been accrued. Funds flow and borrowings Cash generated by operations was £11.7m, net of £1.5m restructuring payments,compared with £1.6m in the previous year. The increased inflow arose fromimprovements in working capital of £7.4m - a £4.6m inflow in FY2006 comparedwith a £2.8m outflow in the previous year - as well as from improved profits.Net interest payments fell to £2.5m against £3.8m in the previous year buttaxation payments at £4.4m were £2.2m higher mainly due to £1.9m spent on prioryear tax issues arising in Brazil and Hong Kong. Capital expenditure on fixedassets was £2.5m (including £0.1m of finance leases), compared with £2.2m inFY2005. New equity raised £17.6m net of expenses and with the strengthening ofthe currencies there was an adverse foreign exchange impact of £2.3m in the yearon the net debt. As a result of the above movements, net debt fell by £17.2m from £30.5m at thestart of the year to £13.3m, resulting in a year end gearing level of netborrowings to shareholders' funds of 51% (2005: 202%). The net debt at 2 April2006 included £2.1m (2005: £nil) of unamortised financing costs. Banking facilities In conjunction with the equity raising the Group entered into a new three yearbanking facilities agreement on 30 June 2005 with its principal bankers. Thetotal costs incurred in FY2005 in the renegotiation of the Group's facilitiesamounted to £2.5m and are being amortised over the life of the facilities withinthe finance costs. End of review_____________ Consolidated income statementFor the 52 weeks ended 2 April 2006 (3 April 2005) Note 2006 2005 £'000 £'000_______________________________________________________________________________ Revenue 1 250,378 244,551_______________________________________________________________________________ Operating loss 1 (3,269) (4,978) Analysed as: _________________Operating profit before major restructuring programme 5,329 1,768Major restructuring programme 2 (8,598) (6,746) _________________Operating loss (3,269) (4,978) Investment income 111 59 Finance costs _________________- interest (2,761) (3,385)- refinancing costs and amortisation of debt issuecosts (739) (932) _________________ (3,500) (4,317)_______________________________________________________________________________Loss on ordinary activities before taxation (6,658) (9,236) Taxation 4 (2,448) (4,424)_______________________________________________________________________________Loss on ordinary activities after taxation, beingretained loss for the year 8 (9,106) (13,660)_______________________________________________________________________________ Loss per share (pence)*Basic and diluted 5 (18.5) (46.2)_______________________________________________________________________________ All results wholly relate to continuing operations. * The loss per share before the costs of the major restructuring programme foreach period is shown in note 5. Consolidated statement of recognised income and expenseFor the 52 weeks ended 2 April 2006 (3 April 2005) 2006 2005 £'000 £'000 Exchange differences on translation offoreign operations 1,555 266Actuarial gains/(losses) on definedbenefit pension schemes 379 (487)_______________________________________________________________________________Net income/(expense) recogniseddirectly in equity 1,934 (221)Loss for the year (9,106) (13,660)_______________________________________________________________________________Total recognised net expense for the year (7,172) (13,881)Adjustment on the first time adoptionof IAS 32 & 39 (80) -_______________________________________________________________________________Total recognised net expense since prior yearbalance sheet (7,252) (13,881)_______________________________________________________________________________ Consolidated balance sheetAs at 2 April 2006 (3 April 2005) Note 2006 2005 £'000 £'000Non-current assetsGoodwill 1,930 1,930Other intangible assets 148 117Property, plant and equipment 11,515 13,451Deferred tax asset 244 -_______________________________________________________________________________ 13,837 15,498_______________________________________________________________________________Current assetsInventories 30,274 28,030Trade and other receivables 52,825 50,381Current tax assets 1,087 -Cash and cash equivalents 11,646 14,962_______________________________________________________________________________ 95,832 93,373_______________________________________________________________________________Total assets 109,669 108,871_______________________________________________________________________________Current liabilitiesBank overdrafts and loans - 45,315Obligations under finance leases 124 138Trade and other payables 42,685 37,187Current tax liabilities 2,580 2,993Retirement benefit obligation 357 359Provisions 3,996 619Liability for share based payment 95 -_______________________________________________________________________________ 49,837 86,611_______________________________________________________________________________Net current assets 45,995 6,762_______________________________________________________________________________Non-current liabilitiesBank overdrafts and loans 24,690 -Obligations under finance leases 106 43Trade and other payables - 8Retirement benefit obligation 3,154 3,736Deferred tax liabilities 537 391Long term provisions 4,983 2,957Non-equity preference shares 80 -Liability for share based payment 187 -_______________________________________________________________________________ 33,737 7,135_______________________________________________________________________________Total liabilities 83,574 93,746_______________________________________________________________________________Net assets 26,095 15,125_______________________________________________________________________________Equity attributable to equity holders of theparentShare capital 8 13,888 7,465Share premium account 8 168 20,986Translation reserve 8 1,821 266Retained earnings 8 10,218 (13,592)_______________________________________________________________________________Total equity 8 26,095 15,125_______________________________________________________________________________ Consolidated cash flow statementAs at 2 April 2006 (3 April 2005) Note 2006 2005 £'000 £'000________________________________________________________________________________ Operating loss from continuing operations (3,269) (4,978)Adjustments for:Depreciation of property, plant andequipment 3,842 4,401Impairment of property, plant andequipment 1,523 1,451Amortisation of intangible assets 79 91Impairment of goodwill - 1,868Loss/(gain) on disposal of property,plant and equipment 133 (1,918)Share option expense 350 15Increase in provisions 4,411 3,417________________________________________________________________________________Operating cash flows before movements inworking capital 7,069 4,347 (Increase)/decrease in inventories (46) 1,264Decrease/(increase) in receivables 1,469 (297)Increase/(decrease) in payables 3,216 (3,731)________________________________________________________________________________Cash generated by operations 11,708 1,583 Analysed as: ________________Cash generated before major restructuringprogramme 13,249 1,775Cash utilised by major restructuringprogramme (1,541) (192) ________________Cash generated by operations 11,708 1,583 Income taxes paid (4,359) (2,159)Interest received 111 59Interest paid (2,639) (3,859)________________________________________________________________________________Net cash inflow/(outflow) fromoperating activities 4,821 (4,376) Cash flows from investing activitiesProceeds on disposal of property, plant and equipment 29 7,826Purchases of property, plant andequipment (2,252) (1,999)Purchases of intangible assets (100) (62)________________________________________________________________________________Net cash (used in)/from investingactivities (2,323) 5,765________________________________________________________________________________ Net cash inflow before financingactivities 2,498 1,389 Analysed as: ________________Cash flows before major restructuringprogramme 4,039 (5,587)Cash (utilised)/generated by majorrestructuring programme (1,541) 6,976 ________________Net cash inflow before financingactivities 2,498 1,389 Cash flows from financing activitiesProceeds on issue of shares 8 17,645 -Repayment of borrowings 9 (43,263) -Advances of borrowings 9 25,793 1,536Debt issue and refinancing costs paid 9 (2,486) (743)(Decrease)/increase in bank overdrafts 9 (4,193) 1,050Repayments of obligations underfinance leases 9 (144) (136)________________________________________________________________________________Net cash (used in)/from financingactivities (6,648) 1,707________________________________________________________________________________ Net (decrease)/increase in cash andcash equivalents 9 (4,150) 3,096 Cash and cash equivalents at beginningof year 14,962 11,919 Effect of foreign exchange rate changes 834 (53)________________________________________________________________________________Cash and cash equivalents at end of year 9 11,646 14,962________________________________________________________________________________ 1. Segments Business segmentsFor management purposes, the Group's structure was reorganised during the secondhalf of the year such that the Group is now organised into three operatingdivisions - PowerCord, Infocom and Wiring Harness. These classifications arebased upon the nature of the products which they supply. These divisions are thebasis on which the Group reports its primary segment information. Revenue Operating profit/(loss)_______________________________________________________________________________ 2006 2005 2006 2005 £'000 £'000 £'000 £'000______________________________________________________________________________________________________________________________________________________________PowerCord 118,275 110,882 2,812 (243)Infocom 99,398 104,409 (2,196) (3,822)Wiring Harness 32,705 29,260 (3,885) (913)_______________________________________________________________________________Consolidated 250,378 244,551 (3,269) (4,978)__________________________________________________________Investment income 111 59Finance costs (3,500) (4,317) _________________Loss before tax (6,658) (9,236)Tax (2,448) (4,424) _________________Loss from continuing operations (9,106) (13,660)_______________________________________________________________________________ External revenue by market sector 2006 2005 £'000 £'000_______________________________________________________________________________Consumer Products 100,525 95,614Data and Telecommunications 87,986 94,296Industrial and Medical 27,845 25,588Vehicle and Aerospace 34,022 29,053_______________________________________________________________________________ 250,378 244,551_______________________________________________________________________________ Geographical segmentsThe Group's operations are located mainly in Asia, North America, United Kingdomand Other Europe. The following table provides an analysis of Group's sales bygeographical market, based on both the source and destination of the sale. External External revenue by revenue by source destination 2006 2005 2006 2005 £'000 £'000 £'000 £'000_______________________________________________________________________________ Asia and SouthAmerica 98,761 90,022 77,033 71,243North America 75,591 74,746 73,986 71,691United Kingdom 32,705 28,941 34,560 38,542Other Europe 43,321 50,842 64,799 63,075_______________________________________________________________________________ 250,378 244,551 250,378 244,551_______________________________________________________________________________ 2. Major restructuring programme 2006 2005 £'000 £'000_____________________________________________________________________________ Global management restructuring 1,535 -Property provisions 3,149 3,298Closure of manufacturing facilities 2,720 1,171Impairment of property, plant and equipment 1,523 1,451Impairment of goodwill - 1,868Insurance claim (329) 876Profit on sale of properties - (1,918)_____________________________________________________________________________ 8,598 6,746_____________________________________________________________________________ During the year, as part of the Group's major restructuring programme, theGlobal management team has been restructured. The Group's global manufacturingfootprint has been changed and additional provisions have been recorded againstfour properties. Impairment charges have been recorded against property, plantand equipment at these properties. Settlement of the insurance claim relating to the Tijuana fire was finalised inJanuary 2006 at a higher level than had been expected at the previous year end. 3. Exchange rates The principal exchange rates used in the preparation of the financial statementsare: Average % change Year end % change 2006 2005 vs. £ 2006 2005 vs. £___________________________________________________________________________________ United States dollar 1.80 1.84 2.2 1.75 1.89 8.0Singapore dollar 2.98 3.09 3.7 2.83 3.12 10.2Euro 1.46 1.47 0.7 1.44 1.45 0.7Canadian dollar 2.15 2.36 9.8 2.03 2.29 12.8Brazilian real 4.23 5.28 24.8 3.82 5.02 31.4___________________________________________________________________________________ 4. Taxation 2006 2005 £'000 £'000_____________________________________________________________________________ Current tax - charge for the year 1,865 2,629Current tax - adjustment in respect of previousyears 584 930Deferred tax (1) 865_____________________________________________________________________________ 2,448 4,424_____________________________________________________________________________ 5. Loss per share The calculations of the loss per share are based on the following data: 2006 Per share 2005 Per share £'000 p £'000 p_______________________________________________________________________________ Basic loss (9,106) (18.5) (13,660) (46.2)Major restructuring programmecosts 8,598 17.5 6,746 22.8_______________________________________________________________________________Adjusted loss (508) (1.0) (6,914) (23.4)_______________________________________________________________________________ No. shares No. shares_______________________________________________________________________________ Weighted average number ofshares 49,247,645 29,540,692_______________________________________________________________________________ The adjusted loss per share has been calculated on the basis of continuingactivities before major restructuring costs, net of tax. The Directors considerthat this loss per share calculation gives a better understanding of the Group'sloss per share in the current and prior year. As the Group recorded a loss pershare, the share options are anti-dilutive and therefore there is no differencebetween the basic and diluted loss per share. 6. Dividends The Directors do not recommend a dividend on the ordinary shares for the year(2005: £nil). 7. Bank facilities On 30 June 2005, new three-year bank facilities with the Group's principalBankers became effective. As a consequence of signing these new bank facilitiesthe conditions relating to the existing warrants, 494,945 of which were inissue, have been amended to include a re-pricing to 73.5p and an extension ofthe expiry date to 30 June 2008 (see note 9). 8. Movements in shareholders' equity Share Share Translation Retained Total capital premium reserve earnings equity £'000 £'000 £'000 £'000 £'000____________________________________________________________________________________________ Balance at 3 April 2005 7,465 20,986 266 (13,592) 15,125Adjustment on first-timeadoption of IAS 32 &39 (80) - - - (80)____________________________________________________________________________________________Balance at 4 April 2005 7,385 20,986 266 (13,592) 15,045Net proceeds from issue of equity shares 6,503 11,142 - - 17,645Reserves transfer onexercise and cancellation of options and warrants - 150 - (150) -Net loss for the year - - - (9,106) (9,106)Reserves contra entry for options and warrant charges - - - 577 577Capital reduction - (32,110) - 32,110 -Actuarial gains on defined benefit schemes - - - 379 379Exchange differences ontranslation of foreignoperations - - 1,555 - 1,555____________________________________________________________________________________________Balance at 2 April 2006 13,888 168 1,821 10,218 26,095____________________________________________________________________________________________ On 29 June 2005, an Extraordinary General Meeting approved an increase in theauthorised share capital of the Company to £18,830,000. On 30 June 2005, theCompany issued 25,850,340 ordinary shares for proceeds of £17.6m (net of £1.4mexpenses). On 12 October 2005, the cancellation of the Company's share premium account wasconfirmed by the High Court of Justice, Chancery division. The balance on thataccount at that date was used to eliminate the deficit in the Company's retainedearnings account. Upon the adoption of IAS 32 & IAS 39, the Company's non-equity preference shares(£80,000) have been reclassified as non-current liabilities. 9. Analysis of net debt 4 April 2005 Cash Exchange Other 2 April 2006 flow movement non-cash changes £'000 £'000 £'000 £'000 £'000________________________________________________________________________________ Cash at bankand in hand 14,962 (4,150) 834 - 11,646Overdraft (4,026) 4,193 (167) - -Debt due afterone year - (25,793) (958) - (26,751)Debt due within one year (41,289) 43,263 (1,974) - -Finance leases (181) 144 (11) (182) (230)Debt issue costs - 2,486 - (425) 2,061________________________________________________________________________________Net debt (30,534) 20,143 (2,276) (607) (13,274)________________________________________________________________________________ Non-cash changes within debt issue costs include £227,000 associated with theamendment of warrants (see note 7) and accrued costs of £87,000, lessamortisation of debt issue costs of £739,000. 10. Adoption of International Financial Reporting and Accounting Standards ('IFRS') The financial statements of the Group have been prepared in accordance withInternational Financial Reporting Standards ('IFRS') as adopted for use in theEuropean Union ('EU') and have been prepared on a historical cost basis. TheGroup has made use of the exemption available under IFRS 1 to apply IAS 32,Financial Instruments: Disclosure and Presentation and IAS 39, FinancialInstruments: Recognition and Measurement from 4 April 2005. Whilst the information included in this preliminary announcement has beencompiled in accordance with IFRS, this announcement does not itself containsufficient information to comply with IFRS. Details of Volex's IFRS accountingpolicies have already been published in the IFRS transition document producedwith the Interim Results for the 26 weeks to 2 October 2005 and published on theCompany's website. The Company intends to publish full financial statements thatcomply with IFRS later this month and these will contain reconciliations betweenUK GAAP and IFRS for the 2005 income statement and 2004 and 2005 balance sheetstogether with a summary of the Group's significant accounting policies. Volex Group plc's consolidated financial statements were prepared in accordancewith United Kingdom Generally Accepted Accounting Practices ('UK GAAP') until 4April 2005. UK GAAP differs in some areas from IFRS. The effect of transitionfrom UK GAAP to IFRS on the Group's loss for the year ended 3 April 2005 and itsnet assets at 3 April 2005 is set out below. Loss for Net assets year to as at 3 April 2005 3 April 2005 £'000 £'000_______________________________________________________________________________As previously reported under UK GAAP (13,928) 18,869Reversal of goodwill amortisation 302 302Goodwill impairment charge (132) (132)Defined benefit pension schemes 113 (3,914)Share options (15) -_______________________________________________________________________________As restated under IFRS (13,660) 15,125_______________________________________________________________________________ 11. Non-statutory financial statements The financial information set out above does not constitute the statutoryfinancial statements of the Group within the meaning of Section 240 of theCompanies Act 1985. Statutory financial statements for 2005 were prepared underUK GAAP and have been delivered to the Registrar of Companies for England andWales. Those for 2006 will be delivered in due course. The auditors havereported on these accounts and did not contain a statement under Section 237(2)and (3) of the Companies Act 1985. The preliminary announcement was approved by the Board of Directors on 13 June2006. This information is provided by RNS The company news service from the London Stock Exchange