Good morning, it's Jack here with the placeholder for Thursday's SCVR.

Many thanks for the >200 thumbs ups for Paul yesterday, and such an interesting & vigorous reader discussion. We shouldn't shy away from interesting discussions, everyone wants to express themselves, within reasonable bounds, good thing too!

A brief but eye-catching update from Volex today, so that's the first stop - as always, the early comments are greatly appreciated.


Volex (LON:VLX)

Share price: 209.4p (8.5%)

Shares in issue: 152,250,802

Market cap: £318.8m

(I hold)

Volex (LON:VLX) is a supplier of integrated manufacturing services and power products to companies around the world. These are wiring solutions of varying complexity that can be found in hospitals, data centres, and many other locations.

A few years ago the company was loss-making, focusing on cheap commodity-like products where others had the economic edge. Since then it has been revitalised by a renewed focus on higher margin activities. It’s an old, respected company with a lot of history so this is good to see.

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Helmed by CFO Darren Morris, COO John Molloy, and executive chairman and Nat Rothschild (who also owns 25% of the company’s stock), VLX is a few years into an established and increasingly successful turnaround.

Management is focusing on more vertical integration and higher margin markets and it looks to be working, with shares up nearly 8% so far on today’s brief ‘ahead of expectations’ update.

Thing is, even after recent share price strength the stock looks cheap on some measures, with a PEG of 0.5 and trading at less than 1x revenue. It also qualifies for the Charles Kirkpatrick Bargain Screen.

Trading update

VLX says that performance has continued to improve since the last update at the AGM on 30 July, and the board now expects revenue and profitability to be above current market expectations for both the half and full year.

Some detail:

  • H1 revenue is expected to be at least $200m, which represents a 2.2% increase on the same period last year,
  • Underlying operating profit is expected to be at least $20m, which is up 25.8% year-on-year, and
  • Net cash excluding lease liabilities is around $31m, and
  • The forward order book is strong.

Nat Rothschild, the 25% owner, comments:

Our geographic and customer diversification continues to provide the…

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