Volex Regulatory News (VLX)

12 Nov 2007 07:00

Volex Group PLC12 November 2007 12 November 2007 VOLEX GROUP plc Half-yearly results for the 26 weeks ended 30 September 2007 Volex Group plc, the global electrical and electronic cable assembly group,today announces its unaudited half-yearly results for the 26 weeks ended 30September 2007. First Half Highlights: • Restructuring programme on track and nearing conclusion. • Cost reductions from restructuring will benefit second half by £2.1m (annualised £4.2m). • Acceleration of revenue growth during first half; sequential growth from second half last year of 4.4% (8.7% in local currency terms). • Progress and outlook is in line with the Board's expectations. • Power Products - continued strong growth in revenues and profit further extending market leadership against small competitors. • Interconnect - focus on technologies yielding strong new business pipeline of Radio Frequency and High Speed opportunities; conversion to revenue expected in second half. • Wiring Harness - restructuring reaching conclusion; cost reductions mostly completed and expected to emerge profitably during second half. Financial Summary: • Revenue was £126.3m (2006: £127.7m); in local currency terms, revenue increased 4.4%. • Operating profit of £4.6m (2006: £5.0m)(1) after incurring additional restructuring related operating costs of £1.6m. • Adjusted(1) pre tax profit of £3.3m (2006: £3.4m); reported pre tax profit of £2.8m (2006: £4.5m). • Adjusted earnings per share of 4.1p (2006: 3.9p). • Basic earnings per share of 3.3p (2006: 5.9p). • Cash utilised by operations: Before major restructuring programme was £4.2m (2006: generated £2.2m) After major restructuring programme was £6.3m (2006: generated £0.8m) Temporary inventory for restructuring (£3.5m) and accelerating growth in the first half drove increases in working capital • Net borrowings at 30 September 2007 were £17.5m (2006: £13.7m) and gearing was 63.4% (2006: 50.4%). (1) Operating profit after share based payment charge of £0.5m (2006: £nil) and major restructuring credit of £nil (2006: £1.1m) was £4.1m (2006: £6.1m). The Chairman of Volex, Richard Arkle, commented: "We are pleased with theprogress made in the first half which is in line with the Board's expectations. We are reaching the conclusion of the restructuring programme and are lookingforward to realising the strategic benefits and performance improvements inthe years ahead." Ends For further information please contact: Volex Group plc Today: 020 7067 0700 Thereafter: 01925 830101Richard Arkle, ChairmanHeejae Chae, Group Chief ExecutiveIan Degnan, Group Finance Director Weber Shandwick Financial 020 7067 0700Terry GarrettNick DibdenJames White INTERIM MANAGEMENT REPORT26 Weeks ended 30 September 2007 Revenue for the first six months of the year decreased 1.1% to £126.3m (2006:£127.7m), although in local currency terms, sales grew by 4.4%. On a sequentialbasis, relative to the second half of last year, revenues increased 4.4% (8.7%in local currency terms). The operating profit of £4.6m for the first half was in line with the Board'sexpectations and was after incurring additional restructuring related operatingcosts of £1.6m. Operating profit, compared with the first half of 2006, was£0.4m lower reflecting the increased operating costs associated with therestructuring of the Wiring Harness division and increase in new productdevelopment costs in the Interconnect division. Power Products The Power Products division's performance was strong in terms of both revenueand profit. Revenue grew 2.8% (11.2% in local currency terms) from the firsthalf of last year further extending our market leadership. We have experiencedgrowth across all segments of the business, in particular personal computers andperipherals. We are positive on prospects for further growth and are seeing firmopportunities from Apple (iPhone) and Dell. We are seeing that many smallercompetitors are struggling to cope with rising costs and working capitalrequirements. Return on sales improved from 5.5% last year to 7.3%, despitedifficult competitive and commodity environments. The volume increase andpurchasing leverage, along with pass through to customers of copper priceincreases, contributed to the improvement in margin. Interconnect The Interconnect division reported an 8.4% decline in sales compared with thefirst half of last year. This was, as previously reported, primarily due to therationalisation of the customer base. We achieved growth of 4.0% relative to thesecond half of last year in local currency terms reflecting the benefit of thebuild-up of the new business pipeline. The strength of the pipeline we havedeveloped and the depth and quality of this new business, reflect the success ofour strategy. We are focused on technology specific opportunities with existingkey customers to achieve higher margin at lower acquisition cost. Ourdevelopments within Radio Frequency and High Speed technologies have expandedour ability to engage our customers across their entire business and technologyroadmap. We have further cemented our position with key customers by extendingour Preferred Supplier status to eight of our top ten customers. The PreferredSupplier status allows us to participate in new programmes and technologies. Ournew technical competencies and, in turn, new Preferred status, enable us tobuild the pipeline of new business further. The operating margin for thedivision was impacted by the increase in new product development costs includingadditional engineering resources. Additionally, we incurred £0.7m in one-offoperating costs for the transfer of production from Croatia to Poland. Thistransfer is now complete and we expect operating costs to reduce during thesecond half. Wiring Harness The Wiring Harness division achieved sales growth of 4.3% whilst undertaking itsrestructuring programme. During the first half of the year, it transferred asignificant proportion of its UK operations to Croatia. The Group took a £3.0mrestructuring charge last year related to redundancies and other costs. Thedivision also incurred £0.9m in additional operating costs during the first halfto ensure continuity of high customer service levels during the restructuring.We expect to achieve £2.8m in annualised cost savings as a result of therestructuring and expect to emerge profitably during the second half of thisfinancial year. We also expect to see the benefit of increasing revenues fromnew business wins, in particular from Rolls Royce. Financial Review Operating profit for the period was £4.6m, £0.4m lower than in the first half of2006 (excluding the major restructuring credit in 2006 and share based paymentcharges). There were no charges or credits for major restructuring items in thefirst half of this financial year. The existing share incentive programmes,previously reported, impacted the results by £0.5m. The net interest charge reduced by £0.4m to £1.3m, mainly as a result of £0.3mlower amortisation of debt issue costs following the refinancing that wascarried out in the second half of 2006. Adjusted pre-tax profits were £3.3m (2006: £3.4m) after adjusting for sharebased payment charges and the 2006 major restructuring credit. Reported pre-taxprofits were £2.8m (2006: £4.5m). The tax charge reduced by £0.2m to £1.0m. Adjusted earnings per share for the period were 5% higher than last year at4.1p, (2006: 3.9p) and basic earnings per share were 3.3p (2006: 5.9p). Capital expenditure at £0.7m was £0.9m lower than 2006. Last year capitalexpenditure was high due to the expansion of a facility in China. Net debt was £17.5m compared with £13.7m at 1 October 2006 and £9.6m at 1 April2007. Gearing was 63.4%, compared with 50.4% at 1 October 2006. Cash utilised byoperations in the first half of 2007 was £6.3m after a net outflow on workingcapital of £9.6m and £2.1m spend on the major restructuring programme that wasprovided for in 2006. £3.5m of the working capital increase is due to temporaryincreases arising from the restructuring, the remainder is due to acceleratingrevenue growth during the first half. The impact of changes in exchange rates compared to 2006 is that operatingprofit would have been £0.2m higher. The main exchange rate movement that hasaffected the results is the US Dollar to £ Sterling with an average rate of$2.00 in the first half of this year compared to an average of $1.85 in thefirst half of last year. If the US Dollar remains at its current levels then wemight expect a similar profit impact in the second half of this financial year. The Board has not declared an interim dividend. Current Trading and Prospects With the conclusion of the restructuring programme we outlined two years ago, weare now fully devoting our energy and resources to executing our strategy forgrowth and profitability. We have already begun to see positive results and areconfident that we can deliver the Board's expectations for the current financialyear. We expect that the Power Products division will continue its strong performancefor the remainder of the year albeit we remain cautious of the current economicuncertainties and rising commodity prices, in particular copper which forms asignificant part of Power Products' materials in the form of cable. In the Interconnect division, we are pleased that the pipeline of new businessis driven by our focus on Radio Frequency and High Speed technologies. We arecurrently working on an increased volume of new product introductions as thefirst stage of converting the strong new business pipeline to revenue. The levelof revenue growth will partially depend on the strength of our customers in thetelecom sector who are currently facing a challenging environment. The Wiring Harness division should emerge profitably as the expected benefits ofthe lower cost base are achieved during the second half. Heejae Chae Ian DegnanGroup Chief Executive Group Finance Director12 November 2007 12 November 2007 STATEMENT OF DIRECTORS' RESPONSIBILITIES The Directors confirm that to the best of their knowledge: a) the set of financial statements has been prepared in accordance with IAS 34;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); andc) 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 Heejae Chae Ian DegnanGroup Chief Executive Group Finance Director12 November 2007 12 November 2007 Unaudited consolidated income statementFor the 26 weeks ended 30 September 2007 (1 October 2006) 26 weeks to 26 weeks to 52 weeks to 30 September 1 October 1 April 2007 2006 2007Continuing operations Note £'000 £'000 £'000_____________________________________________________________________________Revenue 2 126,303 127,739 248,725_____________________________________________________________________________ Operating profit 2 4,140 6,142 7,269 Analysed as: __________________________________Operating profit before share based payment and major restructuring programme charge/(credit) 4,611 5,046 9,642Share based payments charge (471) (21) (379)Major restructuring programme credit/(charge) 3 - 1,117 (1,994) __________________________________Operating profit 4,140 6,142 7,269 Investment income 153 97 193 Finance costs __________________________________- interest on bank debt and other liabilities (983) (1,006) (2,004)- interest on retirement benefit obligations and provisions (211) (221) (283)- amortisation of debt issue costs (260) (538) (896)- write-off of unamortised debt issue costs - - (1,463) __________________________________ (1,454) (1,765) (4,646)_____________________________________________________________________________Profit on ordinary activities before taxation 2,839 4,474 2,816 Taxation 4 (975) (1,175) (1,950)_____________________________________________________________________________Profit on ordinary activities after taxation, being retained profit for the period 1,864 3,299 866_____________________________________________________________________________ Earnings per share*Basic and diluted 5 3.3p 5.9p 1.5p_____________________________________________________________________________ * The earnings per share before the major restructuring programme and share based payment charges/(credit) and the write-off of unamortised debt issue costs for each period is shown in note 5. Unaudited consolidated statement of recognised income and expenseFor the 26 weeks ended 30 September 2007 (1 October 2006) 26 weeks to 26 weeks to 52 weeks to 30 September 1 October 1 April 2007 2006 2007 £'000 £'000 £'000 Exchange differences on translation of foreign operations (741) (2,213) (2,841) Actuarial gains on defined benefit pension schemes - - 335_____________________________________________________________________________Net expense recognised directly in equity (741) (2,213) (2,506) Profit for the period 1,864 3,299 866_____________________________________________________________________________Total recognised net income/(expense) for the period 1,123 1,086 (1,640)_____________________________________________________________________________ Unaudited consolidated balance sheet30 September 2007 (1 October 2006) 30 September 1 October 1 April 2007 2006 2007 Note £'000 £'000 £'000_____________________________________________________________________________Non-current assetsGoodwill 1,930 1,930 1,930Other intangible assets 180 138 82Property, plant and equipment 8,380 10,263 9,191Deferred tax asset 190 236 347_____________________________________________________________________________ 10,680 12,567 11,550_____________________________________________________________________________ Current assetsInventories 39,118 34,572 32,107Trade and other receivables 57,806 56,314 50,866Current tax assets 431 702 968Cash and cash equivalents 7 5,710 8,414 12,235_____________________________________________________________________________ 103,065 100,002 96,176_____________________________________________________________________________Total assets 113,745 112,569 107,726_____________________________________________________________________________ Current liabilitiesObligations under finance leases 7 52 86 56Trade and other payables 49,896 49,093 44,593Current tax liabilities 3,753 2,765 3,817Retirement benefit obligation 395 380 378Provisions 2,428 2,962 3,914Liability for share based payment 336 83 129_____________________________________________________________________________ 56,860 55,369 52,887_____________________________________________________________________________Net current assets 46,205 44,633 43,289_____________________________________________________________________________ Non-current liabilitiesBank overdrafts and loans 7 23,162 21,975 21,722Obligations under finance leases 7 10 67 40Retirement benefit obligation 2,158 2,845 2,458Deferred tax liabilities 262 501 209Long-term provisions 3,550 4,360 4,013Non-equity preference shares 80 80 80Liability for share based payment 44 148 258_____________________________________________________________________________ 29,266 29,976 28,780_____________________________________________________________________________Total liabilities 86,126 85,345 81,667_____________________________________________________________________________ Net assets 27,619 27,224 26,059_____________________________________________________________________________ Equity attributable to equity holders of the parentShare capital 6 14,205 13,888 14,158Share premium account 6 1,357 168 1,219Translation reserve 6 (1,761) (392) (1,020)Retained earnings 6 13,818 13,560 11,702_____________________________________________________________________________Total equity 6 27,619 27,224 26,059_____________________________________________________________________________ Unaudited consolidated cash flow statementFor the 26 weeks ended 30 September 2007 (1 October 2006) 26 weeks to 26 weeks to 52 weeks to 30 September 1 October 1 April 2007 2006 2007 Note £'000 £'000 £'000_____________________________________________________________________________Operating profit from continuing operations 4,140 6,142 7,269Adjustments for:Depreciation and impairment of property, plant and equipment 1,325 1,681 2,822Amortisation of intangible assets 41 63 122Loss/(gain) on disposal of property, plant and equipment 30 (1,087) (1,198)Share option expense 299 43 283Decrease in provisions (2,481) (1,717) (1,130)_____________________________________________________________________________Operating cash flows before movements in working capital 3,354 5,125 8,168 __________________________________Increase in inventories (7,502) (6,194) (4,431)Increase in receivables (7,712) (6,643) (2,318)Increase in payables 5,572 8,529 5,219 __________________________________Increase in working capital (9,642) (4,308) (1,530)_____________________________________________________________________________Cash (utilised)/generated by operations (6,288) 817 6,638 Analysed as: __________________________________(Utilised)/generated before major restructuring programme (4,168) 2,169 10,715Utilised by major restructuring programme (2,120) (1,352) (4,077) __________________________________Cash (utilised)/generated by operations (6,288) 817 6,638Income taxes paid (236) (486) (797)Interest received 153 97 193Interest paid (622) (989) (1,984)_____________________________________________________________________________ Net cash (outflow)/inflow from operating activities (6,993) (561) 4,050 Cash flows from investing activities __________________________________Proceeds on disposal of property, plant and equipment 10 1,491 1,933Purchases of property, plant and equipment (705) (1,555) (2,198)Purchases of intangible assets (101) (62) (70) __________________________________Net cash used in investing activities (796) (126) (335)_____________________________________________________________________________Cash flows before financing activities (7,789) (687) 3,715 Analysed as: __________________________________(Utilised)/generated before major restructuring programme (5,669) (821) 5,893(Utilised)/generated by major restructuring programme (2,120) 134 (2,178) __________________________________Cash flows before financing activities (7,789) (687) 3,715 Cash flows from financing activities __________________________________Proceeds on issue of shares 6 138 - 1,321Repayment of borrowings 7 (3,852) (1,689) (25,519)Advances of borrowings 7 4,978 - 23,322Refinancing costs paid 7 (63) (208) (1,399)(Decrease)/increase in bank overdrafts 7 (30) 35 30Repayments of obligations under finance leases 7 (30) (77) (114) __________________________________Net cash from/(used in) financing activities 1,141 (1,939) (2,359)_____________________________________________________________________________ Net (decrease)/increase in cash (6,648) (2,626) 1,356and cash equivalents Cash and cash equivalents at beginning of period 7 12,235 11,646 11,646Effect of foreign exchange rate changes 123 (606) (767)_____________________________________________________________________________Cash and cash equivalents at end of period 7 5,710 8,414 12,235_____________________________________________________________________________ Notes to the interim statements 1. Basis of preparation These interim financial statements have been prepared in accordance with IAS 34,'Interim Financial Reporting' as adopted by the EU. The financial statements have been prepared using accounting policies consistentwith International Financial Reporting Standards as adopted for use in theEuropean Union ('IFRS') and which are consistent with those disclosed in theannual report and accounts for the 52 weeks ended 1 April 2007. In the current financial year, the Group will adopt IFRS 7, 'FinancialInstruments: Disclosures' for the first time. This is a disclosure standard andas such there is no impact on the adoption of this standard on the accountingpolicies applied in these interim financial statements. The financial information presented for the 26 weeks ended 1 October 2006 and 30September 2007 has not been reviewed by the auditors. The financial informationfor the 52 weeks ended 1 April 2007 is extracted and abridged from the Group'sfull accounts for that year. The statutory accounts for the 52 weeks ended 1April 2007 have been filed with the Registrar of Companies for England and Walesand have been reported on by the Group's auditors. The Report of the Auditorswas not qualified and did not contain a statement under Section 237 (2) and (3)of the Companies Act 1985 (as amended). The interim report was approved by the Board of Directors on 9 November 2007. The announcement is being sent to shareholders. Copies of this report and theannual report for the financial year ended 1 April 2007 are available at theCompany's registered office at Dornoch House, Birchwood Science Park, KelvinClose, Warrington, WA3 7JX and can also be downloaded or viewed via the Group'swebsite at www.volex.com. 2. Business and geographical segments Business segmentsFor management purposes, the Group is organised into three operating divisions -Power Products, Interconnect and Wiring Harness. These classifications are basedupon the nature of the products which they supply. These divisions are the basison which the Group reports its primary segment information. 26 weeks to 26 weeks to 52 weeks to 30 September 1 October 1 April 2007 2006 2007Revenue £'000 £'000 £'000_____________________________________________________________________________Power Products 65,932 64,125 123,299Interconnect 43,272 47,218 91,285Wiring Harness 17,099 16,396 34,141_____________________________________________________________________________ 126,303 127,739 248,725_____________________________________________________________________________ Operating profitPower Products 4,815 3,513 6,157Interconnect 497 2,508 4,642Wiring Harness (1,172) 121 (3,530)_____________________________________________________________________________ 4,140 6,142 7,269Finance costs, net (1,301) (1,668) (4,453)_____________________________________________________________________________Profit before tax 2,839 4,474 2,816Tax (975) (1,175) (1,950)_____________________________________________________________________________Profit from continuing operations 1,864 3,299 866_____________________________________________________________________________ 26 weeks to 26 weeks to 52 weeks to 30 September 1 October 1 April 2007 2006 2007External revenue by market sector £'000 £'000 £'000_____________________________________________________________________________Consumer Products 63,533 57,708 112,745Data, Telecommunications and Medical 41,603 45,633 86,138Industrial, Aerospace and Vehicle 21,167 24,398 49,842_____________________________________________________________________________ 126,303 127,739 248,725_____________________________________________________________________________ Geographical segments External revenue by source External revenue by destination 26 weeks 26 weeks 52 weeks 26 weeks 26 weeks 52 weeks to to to to to to 30 September 1 October 1 April 30 September 1 October 1 April 2007 2006 2007 2007 2006 2007 £'000 £'000 £'000 £'000 £'000 £'000___________________________________________________________________________________________________Asia and South America 75,292 55,485 122,772 51,734 47,242 91,417North America 17,003 34,097 49,234 25,870 32,550 59,853United Kingdom 4,017 16,396 34,141 16,968 16,937 33,690Other Europe 29,991 21,761 42,578 31,731 31,010 63,765___________________________________________________________________________________________________ 126,303 127,739 248,725 126,303 127,739 248,725___________________________________________________________________________________________________ 3. Major restructuring programme (credit)/charge 26 weeks to 26 weeks to 52 weeks to 30 September 1 October 1 April 2007 2006 2007 £'000 £'000 £'000_____________________________________________________________________________Property provisions - - 202Closure of manufacturing facilities - - 3,007Profit on sale of properties - (1,117) (1,215)_____________________________________________________________________________ - (1,117) 1,994_____________________________________________________________________________ 4. Tax charge The Group tax charge for the period is based on the forecast tax charge for theyear as a whole and has been influenced by the differing tax rates in the UK andthe various overseas countries in which the Group operates. 5. Earnings per share The calculations of the earnings per share are based on the following data: 26 weeks to 26 weeks to 52 weeks to 30 September 1 October 1 April 2007 2006 2007Earnings £'000 £'000 £'000_____________________________________________________________________________Basic earnings 1,864 3,299 866Adjustments for:Share based payments charge 471 21 379Major restructuring programme (credit)/ charge - (1,117) 1,994Write-off of unamortised debt issue costs - - 1,463_____________________________________________________________________________Adjusted earnings 2,335 2,203 4,702_____________________________________________________________________________ Weighted average number of ordinary shares No. shares No. shares No. shares_____________________________________________________________________________For the purpose of basic EPS 56,739,021 55,551,699 55,941,189Effect of dilutive potential ordinary shares - share options - 41,373 96,093_____________________________________________________________________________For the purpose of diluted EPS 56,739,021 55,593,072 56,037,282_____________________________________________________________________________ Basic earnings per share Pence Pence Pence_____________________________________________________________________________Basic earnings per share 3.3 5.9 1.5Adjustments for:Share based payments charge 0.8 - 0.7Major restructuring programme (credit)/charge - (2.0) 3.6Write-off of unamortised debt issue costs - - 2.6_____________________________________________________________________________Adjusted basic earnings per share 4.1 3.9 8.4_____________________________________________________________________________ Diluted earnings per share_____________________________________________________________________________Diluted earnings per share 3.3 5.9 1.5Adjustments for:Share based payments charge 0.8 - 0.7Major restructuring programme (credit)/charge - (2.0) 3.6Write-off of unamortised debt issue costs - - 2.6_____________________________________________________________________________Adjusted diluted earnings per share 4.1 3.9 8.4_____________________________________________________________________________ Basic earnings represent net profit attributable to equity holders of theCompany. The adjusted earnings per share has been calculated on the basis of continuingactivities before major restructuring programme and share based payment charges/(credit) and write-off of unamortised debt issue costs, net of tax. TheDirectors consider that this earnings per share calculation gives a betterunderstanding of the Group's earnings per share in the periods presented. 6. Statement of changes in shareholders' equity Share Share Translation Retained Total capital premium reserve earnings equity £'000 £'000 £'000 £'000 £'000_____________________________________________________________________________Balance at 1 April 2007 14,158 1,219 (1,020) 11,702 26,059Net profit for the period - - - 1,864 1,864Net proceeds from issue of equity shares 47 91 - - 138Reserve transfer on exercise of warrants - 47 - (47) -Reserves entry for share option charges - - - 299 299Exchange differences on translation of foreignoperations - - (741) - (741)_____________________________________________________________________________Balance at 30 September 2007 14,205 1,357 (1,761) 13,818 27,619_____________________________________________________________________________ During the period 187,782 shares were issued on the exercise of the remainingoutstanding warrants for proceeds of £138,000. 7. Analysis of net debt Other non 1 April Exchange cash 30 September 2007 Cash flow movement changes 2007 £'000 £'000 £'000 £'000 £'000_____________________________________________________________________________Cash at bank and in hand 12,235 (6,648) 123 - 5,710Overdraft (30) 30 - - -Debt due after one year (22,819) (1,126) (83) - (24,028)Finance leases (96) 30 4 - (62)Debt issue costs 1,127 63 - (324) 866_____________________________________________________________________________Net debt (9,583) (7,651) 44 (324) (17,514)_____________________________________________________________________________ Non-cash changes include amortisation of debt issue costs of £260,000 and amovement in debt issue costs accrual of £64,000. This information is provided by RNS The company news service from the London Stock Exchange