Volex Regulatory News (VLX)

For immediate release 2 November 2011

VOLEX plc

Half-yearly results for the 26 weeks ended 2 October 2011

Volex plc ('Volex' or the 'Group'), the global provider of customised electrical and optical interconnect solutions, today announces its unaudited half-yearly results for the 26 weeks ended 2 October 2011 ('H1 FY2012'). As communicated in the 'Transition to US Dollar reporting' announcement, released on 15 September 2011, the Group has changed its presentation currency from Pounds Sterling to US Dollars. Accordingly, all financial information in this interim statement is presented in US Dollars.

·; Revenue for the quarter ended 2 October 2011 ('Q2 FY2012') of $144.6 million up 15% on previous quarter to 2 June 2011 ('Q1 FY2012': $126.1 million), setting a record quarterly high;

·; Gross margin of 19.3% for Q2 FY2012 up on prior quarter (Q1 FY2012: 19.0%);

·; Revenue for H1 FY2012 up 14% to $270.7 million (H1 FY2011: $238.4 million);

·; Gross margin of 19.2% for H1 FY2012 (H1 FY2011: 19.7%);

·; Normalised* operating profit for H1 FY2012 up 16% to $14.9 million (H1 FY2011 : $12.8 million);

·; Normalised* diluted earnings per share for H1 FY2012 increased by 22% to 17.6 cents (H1 FY2011 : 14.4 cents). Basic earnings per share of 15.0 cents (H1 FY2011 : 14.7 cents);

·; Net debt of $11.9 million at end of H1 FY2012 (H1 FY2011 : $15.9 million); and

·; Interim dividend of 1.5 cents per share declared.

* Before share based payments charge

·; Year-on-year revenue growth across all market sectors and all major geographies;

·; Further success in embedding engineers at key customers, generating increased account penetration;

·; New high speed products in Telecoms/Datacoms and digital broadband MRI solutions in Healthcare evidencing progress made with our customer engagement and Volex design strategies; and

·; Increased investment in technology design and support capabilities and plans agreed to increase investment in manufacturing facilities.

'The Board is pleased to have delivered significant revenue and operating profit growth in the first half of FY2012 but recognises that further challenges lie ahead, not least as a result of the increasingly uncertain economic environment. The Group has a clear strategy to improve the core performance of the business and consolidate the gains made in the last eighteen months. Despite current market turbulence, the Board is confident that the progress made in generating a platform for sustained profitable growth will deliver trading for the twelve months ending 1 April 2012 in line with current market expectations'.

The Company will be presenting its half year results at 09.30 am on Wednesday 2 November 2011. A live audio webcast facility with the option to ask questions will be available at the following link:

http://mediaserve.buchanan.uk/com/2011/volex021111/registration.asp 

END

For further information please contact:

Ray Walsh, Group Chief Executive +44 20 3370 8830

Andrew Cherry, Group Finance Director +44 20 3370 8830

Charles Ryland / Helen Chan +44 20 7466 5000

Certain statements in this announcement are forward-looking statements which are based on Volex's expectations, intentions and projections regarding its future operating performance and objectives, anticipated events or trends and other matters that are not historical facts. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal' or 'estimates'. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, by way of example only and not limited to, general economic conditions, currency fluctuations, competitive factors, the loss or failure of one or more major customers, changes in raw materials or labour costs, and issues associated with implementing our strategic plan among other risks. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, Volex undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

HALF YEAR RESULTS

26 Weeks ended 3 October 2011

Volex is pleased to report half year results for the financial year 2012 ('FY2012') that show good growth against a backdrop of challenging economic conditions and that demonstrate solid progress against the strategy outlined in our FY2011 Annual Report and Accounts. As a result of the considerable effort of all Volex staff, the Group has successfully grown revenue across all sectors compared to the first half of last year and improved gross margins from the second half of last year, including our Consumer sector where margins were adversely impacted by unprecedented raw material price pressures.

Group revenue in H1 FY2012 increased by 14% to $270.7 million, from $238.4 million in H1 FY2011. This growth was primarily driven by the Consumer sector which experienced significant demand for its market leading halogen free product range as well as benefitting from strong customer demand in advance of their key Christmas trading period. In addition, both the Healthcare and Industrial sector displayed very strong growth in the period. In the Healthcare sector, year on year revenue growth of 30% was achieved primarily due to growing demand for our magnetic resonance imaging (MRI) solutions while the Industrial sector enjoyed success in its telematics segment as key customers increased their infrastructure investment.

Group gross profit in H1 FY2012 increased by 11% to $51.9 million, from $46.8 million in H1 FY2011 as a result of increased sales. Although gross margin declined slightly from 19.7% in H1 FY2011 to 19.2% in H1 FY2012 as a result of production inefficiencies on certain new customised production lines and higher input costs, significant margin recovery from H2 FY2011 was achieved. Improved product mix and benefits arising from management's cost and pricing initiatives enabled gross margin in H1 FY2012 to increase 1.2 percentage points from 18.0% in H2 FY2011 despite these temporary production inefficiencies and the continued challenging cost environment.

Normalised operating profit (operating profit before share based payments charge) in H1 FY2012 rose 16% to $14.9 million (H1 FY2011: $12.8 million). Normalised operating profit margin improved from 5.4% in H1 FY2011 to 5.5% in H1 FY2012 despite the decrease in gross margin, evidencing a positive operating leverage effect as fixed costs are spread over the increased revenue base.

A quarter on quarter comparison for H1 FY2012 shows a significant improvement in business performance in the second quarter of the year. Whilst the second quarter has historically been our strongest quarter for the Consumer sector with customers building stock in advance of the Christmas period, we have been encouraged to see revenue growth in each of the remaining three sectors, particularly Healthcare. Q2 FY2012 revenue at $144.6 million is 15% up on the prior quarter (Q1: $126.4 million) and sets a record high quarter sales figure.

Equally encouragingly the gross profit in the second quarter of FY2012 of $28.0 million has increased by 17% from $23.9 million recorded in the first quarter. This reflects a second quarter gross margin of 19.3%, up from 19.0% in the first quarter. Whilst this second quarter gross margin is down on the 19.6% seen in the second quarter of the prior year (due to the pricing pressure noted above), the FY2012 quarter on quarter improvement reflects the positive impact of the LEAN manufacturing initiatives and the improving product mix.

Our focus in the second half of FY2012 and beyond remains firmly on further execution of our three key strategies, namely:

·; Improved customer engagement;

·; Increased Volex design content; and

·; Pursuit of operational excellence.

While the economic environment is likely to remain challenging in the short term, we will continue to increase investment in our customers and our product design and development capabilities to deliver greater value to our clients. Allied to further improvements in operational efficiency, we are confident that these strategies will enhance our ability to generate sustained organic growth in revenue, gross margin and operating profit.

Consumer sector

Our Consumer sector continued as the world leader in power cords for a large range of consumer and computing products. Our customers in the Consumer sector are well-known brand-name manufacturers of consumer electronics (including TVs and games consoles), personal computing devices (PCs, laptops, tablets), and household appliances (refrigerators, freezers, rice cookers, floor care equipment, DIY products).

The Consumer sector enjoyed a strong first half with revenue in H1 FY2012 at $169.9 million, 12% higher than the H1 FY2011. Strong growth was achieved in the Asia region (22%) which more than balanced out some contraction in our North America and Europe regions. Revenue performance was particularly strong in the second quarter at $92.0 million, seasonally the biggest quarter of the year as customers build stock in advance of the key Christmas trading period, with this quarterly revenue the highest it has been since Volex moved to the sector focus. Key revenue drivers in the second half of the year are expected to continue to be the high end consumer entertainment devices, TVs, PCs and computing-peripherals segments.

We experienced strong demand from a leading technology customer, particularly on duckheads and halogen free ('HF') parts, where the strength of our customer relationship and our industry leading HF position enabled us to win more business. We are continuing to drive HF products and expanding our portfolio to include more countries into which we can supply HF cables. We are exploiting our expertise in duckhead plugs by working with other market-leading customers on new business opportunities.

One of our product strategies is to develop niche non-generic products such as a swivel connector power cord for a hair dryer programme with a Japanese customer, and working with a leading UK appliance manufacturer in the UK to develop new customised plugs for their bladeless fan and heater fan products. To further expand our floor care business, we are working through product samples with a new Europe-based OEM.

New programmes and HF products are driving higher margins, although these benefits are not yet fully evident due to the production inefficiencies typical of the early stages of mass production. The margins in the first half of FY2012 were also suppressed by the residual effects of higher purchase prices during the second half of the last financial year. Encouragingly, the pricing and cost initiatives developed in H2 last year, together with improved mix, have started to have a positive impact on margin, with gross margin in H1 FY2012 up compared to H2 FY2011. At the same time if the recent reductions in commodity prices, most notably copper, are maintained throughout Q3 of FY2012 then this will yield benefits in Q4 and beyond to the extent that we have not hedged our cost position. We expect the margin progression to continue in the second half of FY2012 and beyond as a result of these pricing, cost and mix benefits becoming more significant, as well as additional process efficiencies from LEAN manufacturing and the further implementation of semi-automation on selected production lines.

Telecoms / Datacoms sector

Volex delivers customised interconnect solutions for global equipment manufacturers in the telecommunications and data communications (Telecoms/Datacoms) industries. Our interconnect solutions are used in mobile telecoms networks, both at the cell-site and for the core network, fixed-line telecoms equipment and high-performance computing (HPC) and data-centre environments.

Trading in the Telecoms/Datacoms sector was good, although sector performance was again held back by the Indian market, which is yet to show meaningful signs of recovery. Telecoms/Datacoms sector sales in H1 FY2012 increased by 7% year-on-year, however, revenue excluding India increased by 13%. This growth was driven by ongoing strong demand for network products from our telecoms OEM customers, with products supporting mobile broadband and IP networks experiencing demand growth, as a result of the continued roll-out of 3G and 4G mobile telecoms networks. Our business in supplying Datacoms OEM's is gaining momentum, led by our Volex-designed high speed copper interconnect solutions which serve the market's increasing demand for data-centre and high-performance computing related infrastructure. 

From a regional perspective, revenue in Europe increased 19% compared with the first half of FY2011 due to strong demand for Volex's interconnect products supporting 4G mobile networks, while revenue in Brazil increased significantly year-on-year as a result of national broadband initiatives. Trading conditions remained difficult however, in our China and South-East Asia markets, where keen local price competition continues to present challenges. The Indian market continued to frustrate, remaining slow following the government imposed security clearance requirements and reduced investment by Telecoms operators after the 3G licence auctions.

In terms of new technology, Volex has co-developed with a major customer a CXP belly-to-belly board side connector. With a data rate per port of 120 to 168Gbps, this new design saves space and doubles the density of the current 12-channel copper connector, providing greater port density and overall system cost saving over other solutions. In addition we have launched and are mass producing QSFP and QSFP+ cable assemblies, providing data transfer rates of 40-56Gbps, for super-computer switching interconnects and have recently been qualified by a market leading search engine to supply these QSFP interconnect solutions, with demand expected to ramp up in 2012.

Gross margin improved to 20.5% in H1 FY2012 from 19.8% in the first half of FY2011 primarily as a result of improved mix, with high speed products becoming more significant. The greater design content and solutions-based sales engagement on these products should drive further improvements in gross margins as other applications adopt this interconnect technology.

Healthcare sector

Volex understands the challenges of the healthcare market and our business relationship development model is built around long term, deep collaboration and early design involvement with our key customers. We also understand the stringent requirements for today's medical devices used in the prevention, diagnosis and treatment of illnesses and injuries.

The Healthcare sector performed strongly in the first half of FY2012 with revenues up 30% on the first half of the prior year, driven by growth in Europe and Asia. North America revenues were down 6% compared to the first half of the prior year due to weaker market demand caused by a slow-down in the market and over-stocking by some of our larger customers.

The increase in revenue for the first half is attributable to two main factors. Firstly, Volex has achieved strong growth in Europe across imaging systems applications, in particular magnetic resonance imaging (MRI) systems, where Volex has successfully worked with a major customer to deliver the first-ever digital broadband MRI solution. This outcome is the result of a five-year collaboration with the customer on design and development, resulting in significantly increased business share for Volex.

The second driver of our revenue increase has been the rising demand in Asia for components used in medical imaging devices, and supported by our starting up production of radio frequency (RF) coil cable assemblies at our Suzhou, China facility. These coil cables are used in healthcare equipment such as MRI systems.

During the first half we have been very successful in providing design and manufacturing support for cabling solutions to key new healthcare customers. These included an agreement to provide cabling design and manufacturing services for a leading global medical technology company involved in the supply of products for kidney and liver dialysis systems and a first order for the supply of hospital grade power cords for a global speciality medication delivery company.

To emphasise our commitment to the healthcare sector, in H1 we have achieved certification to the ISO13485 standard for our manufacturing facility in Mexico, joining our sites in Poland, China and India, which earned this certification in FY2011. This standard defines the requirements for quality management systems in the manufacture of medical devices.

Due to extensive customer engagement and high design content in its products, the Healthcare sector generates the highest sector gross margins in the Group, with a gross margin of 25.4% in H1 FY2012.

Industrial sector

The Industrial sector for Volex comprises a diverse set of markets but offers some of the most exciting growth prospects. These markets include test and measurement equipment, manufacturing automation, refrigeration, trucking telematics, agricultural, and renewable energy.

Demand in the Industrial sector continued to grow in the first half of FY2012, as companies continued to invest in infrastructure equipment, both to renew existing equipment and to drive further automation and measurement into their core business activities.

In the first half of FY2012 the sector achieved strong results, with year-on-year revenue growth of 27%. This growth was especially strong in the telematics (37%), agricultural (38%) and renewable energy (31%) markets. From a regional view, we have realised strong growth in North America (24%) and Brazil (34%) as compared to the first half of FY2011, and our Industrial sector has begun to expand its geographic representation in India and Europe. We expect the second half of FY2012 will see the introduction of new customers in all regions.

For two major customers in North America in H1 we have successfully simplified their vendor base and thereby secured 100% allocation of particular lines of business; and we expect further revenue generation, in the second half, by similarly extending our scale and range of services to our existing customer base in North America.

Industrial sector gross margins have continued to show improvement, due primarily to improved product mix, with first-half FY2012 gross margin of 24.2% ahead of the 23.4% recorded in the first half of last year.

Manufacturing Operations and Supply Chain

Following the review of our operations performed in FY2011, the manufacturing and supply chain team have identified three key work streams that have been the focus during H1 FY2012. These strategies are driving transformation throughout the Operations function and are building stronger alignment with other group functions, in particular the sector focussed sales teams, ensuring that we have the technologies, capabilities and capacity to deliver our customers' current and future needs. These key strategies are:

·; Develop our manufacturing footprint to serve our customers more effectively

·; Drive supply chain benefits through strategic supplier relationships

·; Continued pursuit of operational excellence

We are committed to making investments in our manufacturing footprint to consolidate our presence in key locations with a view to improving our service to customers and delivering improved quality and cost. After having completed a detailed review of our initial options, we have initiated two programmes which are already under way. Firstly, we are executing plans to significantly increase the capacity of one of our Asia facilities by constructing a new building on an adjacent site. Secondly, we have started a refurbishment programme at another of our Asian sites to increase capacity and upgrade the manufacturing and working environment.

Cost improvements compared to FY2011 have been secured despite continued volatility in commodity markets through the development of strategic relationships with key suppliers, covering design collaboration, global supply support, closer alignment of business plans and strong executive level engagement, to ensure benefits are delivered for both companies.

The transformation of regional purchasing teams into one global organisation has been accelerated by the introduction of new talent. In addition, the first half of FY2012 has seen further development of, and investment in, product supply teams. These teams manage all aspects of supply chain on a product by product basis, including cost, quality, and support to drive further cost efficiencies and improvements in gross margin.

We are accelerating our LEAN manufacturing program by engaging external partners in both Asia and the Americas, while key value streams in our North American business have been redesigned and significant waste eliminated from customer-facing processes. Working with partners in our Shenzhen facility, we have implemented new manufacturing processes which significantly reduce work-in-process and remove the need for conveyors in volume power cord production. This process is being rolled out across Shenzhen and forms the basis of the re-engineered process for all of our power cord sites.

Technology

The Technology focus during the first half of FY2012 has been on strengthening our resources in the areas of product design and field support. We have made additions in North America and Asia that have enhanced our engineering and design capabilities and given the Group the capacity to support expanding opportunities across all market sectors, such as active optical cables, high-speed copper interconnects, next generation X-ray and MRI equipment and high data-rate video cables.

Consistent with our strategy we have made progress in embedding engineers at more of our key customers, which has led to increased account penetration and greater value to the customer through Volex providing solutions to their connectivity and data/power transmission concerns. We have moved further away from the contract assembly model through the provision of these design and engineering services.

In terms of new product development, we have been active across all sectors:

·; Consumer / Healthcare - several products have gone into development to support the mobile video market. These products provide for high speed data, voice and video transmission from laptop to monitor and we expect these applications to extend to the Healthcare sector in the future.

·; Telecoms / Datacoms - we have started to develop a family of active optical cables (AOC) to support server clusters where data is required to be transmitted at high speed over long distances.

·; Industrial - in the alternative energy market, we have engaged with providers of Combiner and Inverter products to design customised interconnects for use in solar farms.

Financial Review

As communicated in our annual financial statements for the year to 3 April 2011 and our 'Transition to US Dollar Reporting' press release dated 15 September 2011, the Group has changed its presentational currency from Pounds Sterling ('GBP') to US Dollars ('USD'). In accordance with relevant accounting standards, comparative information has been provided in USD. We refer you to the 'Transition to US Dollar Reporting' press release for further information with regards to this change.

Revenue in the 26 weeks ending 2 October 2011 ('H1 FY2012') was $270.7 million, up 14% on the same period in the prior year ('H1 FY2011') and with growth observed in all four sectors. In particular, the Healthcare and Industrial sectors demonstrated significant growth, up 30% and 27% respectively over the prior year. With the exception of India, which continues to experience challenging trading conditions, this growth has also been spread across all of the geographic regions in which we operate.

This continued growth supports our sector focussed engagement strategy in which we work more closely with our customers to better understand their needs and provide targeted Volex solutions.

Gross profit increased 11% from $46.8 million in H1 FY11 to $51.9 million in H1 FY2012, primarily as a result of the revenue growth. Gross profit as a percentage of sales fell back slightly in H1 FY2012 to 19.2% from 19.7% in H1 FY2011. This reduction in margin is in part due to production inefficiencies associated with new customised production lines and also due to higher input costs, after the unprecedented cost increases experienced in the second half of last year.

Increased raw material prices and labour costs have continued to present a challenging cost environment in H1 FY2012. Copper, a key raw material input has seen an increase in average price from $7,141 per metric tonne in H1 FY11 to $9,054 per metric tonne in H1 FY2012, a 26.8% increase, whilst labour rates in South China have also experienced significant inflationary pressure.

Although these cost pressures have reduced margins compared to H1 FY2011, this impact has been partially mitigated by a change in the product mix and also the benefits of LEAN manufacturing. Furthermore the pricing and cost initiatives developed in H2 FY2011, together with the improved mix, have started to have a positive impact on margin, with gross margin in H1 FY2012 up compared to H2 FY2011 (18.0%).

Operating profit before share based expenses in H1 FY2012 was $14.9 million, up 16% on $12.8 million last year. This represents a return on sales of 5.5%, up from 5.4% in H1 FY2011.

Operating cash flow before movements in working capital in H1 FY2012 was $15.9 million (H1 FY2011: $11.2 million).

The Group continues its focus on working capital management and the subsequent impact upon cash generation. Through initiatives such as our LEAN manufacturing program and closer relationships with both customers and suppliers, we have reduced our net working capital days (equal to inventory days plus debtor days less creditor days) to a two year low. As a result we have restricted the working capital cash outflow in the period arising from increased trading to $6.4 million.

After aggregate outflows for tax and interest of $3.4 million (H1 FY2011: $5.0 million), net cash generated from operating activities was $6.1 million (H1 FY2011: outflow of $1.9 million).

Capital expenditure has increased to $4.8 million in H1 FY2012 from $2.5 million in H1 FY2011, representing a 92% increase. This expenditure is targeted at upgrading both the manufacturing and information technology systems infrastructure of the Group, consistent with our strategic emphasis on operational excellence.

During H1 FY2012 the Group, through its employee share trust, acquired 769,800 shares in Volex plc at a cost of $3.3 million. These shares are held for the benefit of Volex employees and directors to facilitate participation in the Company's share option schemes. 130,000 such options were exercised in the period yielding a cash inflow of $0.1 million.

The full year dividend for FY2011 of 2 pence per share was paid out in the period, generating a cash outflow of $1.9 million.

As discussed further below, during the period Volex entered into a new financing facility. As a result of this $26.4 million was paid out by the Group to close out the pre-existing facility and $39.5 million was drawn down under the new arrangement. In securing the new facility, the Company incurred $1.4 million in arrangement and professional fees.

In the period, 80,000 cumulative preference shares of £1 each were cancelled at a cost of $0.1 million. The interest that had accrued on these shares was also paid and has been included in the interest paid cash outflow category.

As a result of the above cash flows, net debt at 2 October 2011 amounted to $11.9 million (H1 FY2011: $7.4 million).

Total net finance costs in H1 FY2012 increased by 34% to $2.5 million from $1.8 million in H1 FY2011. The principal reason for this was the write off of $0.8 million of capitalised debt issue costs associated with the financing facility replaced in the period.

As disclosed in our FY2011 Annual Report and Accounts, during H1 FY2012 the Group entered into a new US$75 million multi-currency revolving credit facility ('RCF') with a syndicate of three banks which replaced the pre-existing facility. The new facility provides greater flexibility and improved terms with the principal terms being as follows;

·; US$75 million committed combined RCF, overdraft and guarantee facility, held equally by Lloyds Banking Group plc, HSBC Bank plc and Clydesdale Bank plc;

·; four year facility, available until June 2015;

·; no scheduled facility amortisation;

·; improved pricing, with margin over LIBOR payable linked to a net debt:EBITDA leverage ratio. Initial margin of 2.00% over LIBOR;

·; interest cover and net debt:EBITDA leverage covenants; and

·; further US$150 million pre-negotiated facility agreed to fund future, as yet unidentified, acquisitions

At 2 October 2011, amounts drawn under this facility were $24.0 million and €11.0 million ($14.8 million). The Group also had undrawn committed borrowing facilities of $38.1 million, which includes $1.3 million of available headroom under our invoice discounting facility.

The Group incurred a tax charge of $1.9 million (H1 FY2011: $2.3 million), representing an effective tax rate (ETR) of 18% (H1 FY2011: 21%), consistent with our expectation of the ETR for the full FY2012 financial year.

Basic earnings per share for H1 FY2012 was 15.0 cents, slightly ahead of the 14.7 cents reported in H1 FY2011. Normalised basic earnings per share (adjusted for share based payments charge) in H1 FY2012 was 18.3 cents, a 20% increase on the 15.3 cents reported in H1 FY2011.

At the Volex plc Annual General Meeting held on 25 July 2011, the shareholders approved the proposed final dividend for FY11 of 2p per share. The dividend was paid out on the 56,821,563 shares on the share register as at 25 August 2011, resulting in a dividend cash outflow of $1.9 million.

The Board has recommended an interim dividend of 1.5 cents per share to be paid on 17 February 2012 to shareholders on the register as at 6 January 2012 (the 'record date'). Shareholders will have the optionto receive this dividend in either USD or GBP with the Company's Registrars providing a currency election facility. Shareholders who prefer to receive their dividend in USD must make their election to receive their dividend in USD by 17:00 on 20 January 2012. If no election is made, the dividend will be paid in GBP, the default currency for the dividend, with the GBP amount payable calculated by reference to the GBP:USD exchange rate prevailing at the record date. If you hold your ordinary shares in certificated form, you may only elect to receive your dividend in US dollars by signing and returning a currency election form, available from Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. If you hold your ordinary shares in uncertificated form, to elect to receive your dividend in US dollars you must input a valid Dividend Election Input Message, in accordance with the CREST procedures described in the CREST manual. Partial elections will not be permitted.

The Company will be communicating with all shareholders separately, to provide more details on this currency election facility.

The Group's net pension deficit under IAS 19 increased by $2.7 million from $2.1 million at 3 April 2011 to $4.8 million at 2 October 2011. The primary reason for this was a decrease of $2.1 million in the fair value of assets within the scheme following the global decline in equity markets. In addition, the present value of the pension liability increased by $0.6 million due to a reduction in the discount rate (linked to corporate bond yields) applied to forecast future cash outflows partially off-set by a reduction in the CPI inflation figure applied to those future forecast cash flows.

Financial instruments and cash flow hedge accounting

During the period, the Group entered into a number of contracts with financial institutions which were linked to the average copper price as published by the London Metal Exchange ('LME'). These contracts have been deemed cash flow hedges of forecast future purchases of cable. Of the $1.9m copper contract fair value as at 2 October 2011, $1.7 million has been recognised in reserves to reflect the effective element of the hedge contract with the balance recognised in finance costs. Provided these contracts remain effective, the $1.7 million shall be retained in reserves until such time as the forecast cable purchase takes place.

In addition, a number of forward exchange contracts have been entered into. These have been deemed cash flow hedges and are 100% effective as at 2 October 2011. The fair value associated with these contracts of $0.4 million has been recognised in reserves.

Current Trading and Prospects

The Board is pleased with the robust trading performance that has been achieved in the first half of FY2012, particularly in light of the economic uncertainty in recent months, and remains focussed on executing our operational plans to position the business for further growth in spite of this uncertainty. We expect the trading environment will continue to be challenging in the second half of the year but remain confident that trading for the twelve months ending 1 April 2012 will be in line with current market expectations.

Risks and uncertainties

Risks to Volex are anticipated and regularly assessed and internal controls are enhanced where necessary to ensure that such risks are appropriately mitigated. The principal risks and uncertainties facing the Group in the second half of the year remain those detailed in the FY2011 Annual Report and Accounts on pages 28 to 31, a copy of which is available on the website at www.volex.com.

The principal risks and uncertainties are summarised as:

·; Rising commodity prices;

·; Customer concentration;

·; Exchange rate fluctuations;

·; Increased competition;

·; Non-compliance with legislation and regulation;

·; Adverse trading conditions;

·; Failure to attract, develop and retain key personnel;

·; Failure to maintain an effective system of internal control; and

·; Failure to set out a clear strategic vision as well as provide accurate and timely information to the market.

Ray Walsh Andrew Cherry

Group Chief Executive Group Finance Director

2 November 2011 2 November 2011

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge:

a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

b) the interim management report includes a fair review of the information required in DTR 4.2.7R (indication of important events that have occurred during the first six months of the financial year and description of the principal risks and uncertainties for the remaining six months of the year); and

c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By Order of the Board

Ray Walsh Andrew Cherry

Group Chief Executive Group Finance Director

2 November 2011 2 November 2011

Unaudited consolidated income statement

For the 26 weeks ended 2 October 2011 (26 weeks ended 3 October 2010)

Unaudited consolidated statement of comprehensive income

For the 26 weeks ended 2 October 2011 (26 weeks ended 3 October 2010)

Unaudited consolidated statement of financial position

As at 2 October 2011 (3 October 2010)

Unaudited Consolidated Statement of Changes in Equity

For the 26 weeks ended 2 October 2011 (26 weeks ended 3 October 2010)

Unaudited consolidated statement of cash flows

For the 26 weeks ended 2 October 2011 (26 weeks ended 3 October 2010)

Notes to the Interim Statements

These interim financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the 52 weeks ended 3 April 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information presented for the 26 weeks ended 2 October 2011 and 26 weeks ended 3 October 2010 has not been reviewed by the auditors. The financial information for the 52 weeks ended 3 April 2011 is extracted and abridged from the Group's full accounts for that year. The statutory accounts for the 52 weeks ended 3 April 2011 have been filed with the Registrar of Companies for England and Wales and have been reported on by the Group's auditors. The Report of the Auditors was not qualified and did not contain a statement under Section 498 of the Companies Act 2006.

The interim report was approved by the Board of Directors on 2 November 2011.

This interim report can be downloaded or viewed via the Group's website at www.volex.com. Copies of the annual report for the financial year ended 3 April 2011 are available at the Company's registered office at 10 Eastbourne Terrace, London, W2 6LG, UK and can also be downloaded or viewed via the Group's website.

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing these condensed financial statements.

The same presentation and methods of computation are followed in these condensed financial statements as applied in the Group's latest annual financial statements. These condensed financial statements have also been prepared using accounting policies consistent with International Financial Reporting Standards as adopted for use in the European Union ('IFRS') and which are consistent with those disclosed in the annual report and accounts for the 52 weeks ended 3 April 2011, except as described below.

The following new and revised standards and interpretations have been adopted in the current period and have affected the amounts reported in these financial statements.

·; IAS 24 (amendment), 'Related party disclosures'; and

·; IFRIC 19 'Extinguishing financial liabilities with equity instruments'

·; IFRIC 14 (amendment), 'Pre-payments of a Minimum Funding Requirement'.

·; IFRS 9 'Financial instruments' - effective from reporting period beginning on or after 1 January 2013; and

·; IFRS 7 (amendment) 'Financial instruments: Disclosures' - effective from reporting period beginning on or after 1 July 2011

The directors anticipate that the future adoption of those standards, interpretations and amendments listed above will not have a material impact on the Group's financial statements.

The market sectors below are the basis on which the group reports its segment information and are based on the end markets that the group's products are supplied into.

The final dividend of 2p per share in respect of the year ended 3 April 2011 was paid to shareholders on 26 August 2011.

The interim dividend of 1.5 cents per share was announced on 2 November 2011 in USD. Shareholders will have the option to receive this dividend in either USD or GBP. The total amount payable in USD may vary, depending on movements in exchange rates between November 2011 and February 2012, when the dividend will be paid.

The Group tax charge for the period is based on the forecast tax charge for the year as a whole and has been influenced by the differing tax rates in the UK and the various overseas countries in which the Group operates.

The calculations of the earnings per share are based on the following data:

The normalised earnings per share has been calculated on the basis of continuing activities before the

share-based payments charge, net of tax. The Directors consider that this earnings per share calculation gives a better understanding of the Group's earnings per share in the current and prior period.

The own shares reserve represents the cost of shares in the Company held by the Volex Group plc Employee Share Trust and the Volex Group Guernsey Purpose 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 2 October 2011 was 5,306,815 (3 April 2011: 4,667,015; 3 October 2010: 4,667,015) and the Volex Group Guernsey Purpose Trust was 1,005,000 (3 April 2011: 1,005,000; 3 October 2010: 230,000).

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Key management compensation is in line with the amounts disclosed in the annual report for the year ended 3 April 2011.

As disclosed in the FY2011 Annual Report and Accounts, on 4 March 2011 Andrew Cherry received an advance of £65,505 from the Volex Group Employee Share Trust that remained outstanding as at 3 April 2011. The Volex Group Employee Share Trust is consolidated into the Group figures and therefore the amount had been included within the year end FY2011 other receivables balance. On 25 August 2011, this balance was repaid in full.

As a global group, subsidiary companies, in the normal course of business, engage in significant levels of cross-border trading. The customs, duties and sales tax regulations associated with these transactions are complex and often subject to interpretation. While the Group places considerable emphasis on compliance with such regulations, including appropriate use of external legal advisors, full compliance with all customs, duty and sales tax regulations cannot be guaranteed.

Customs and excise authorities in India and the USA are currently involved in examining customs and duty declarations made by subsidiary companies, Volex Interconnect (India) Pvt Ltd and Volex de Mexico SA de CV, across a number of years. Although the outcome of these investigations is uncertain and reliable measurement of any potential exposure not possible, the directors are confident that any liability arising from these matters will not be material to the Group.

The company enters into financial guarantee contracts to guarantee the indebtedness of other group companies. The Company considers these to be insurance arrangements and treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.