REG - Volex PLC - Half-year Report of Volex plc
11/11/2021 07:00
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RNS Number : 0148S Volex PLC 11 November 2021
11 November 2021
VOLEX plc
Half year results for the 26 weeks ended 3 October 2021
Strong trading and strategic progress with investment in growth
Volex plc ("Volex"), the global supplier of integrated manufacturing services
and power products, today announces its half year results for the 26 weeks
ended 3 October 2021 ("H1 FY2022").
Financial Summary 26 weeks to 26 weeks to
3 October 4 October %
2021 2020 Change
Revenue $292.7m $202.5m 44.5%
Underlying* operating profit $27.3m $20.8m 31.3%
Statutory operating profit $21.2m $14.3m 48.3%
Underlying* profit before tax $25.4m $20.9m 21.5%
Statutory profit before tax $19.4m $14.4m 34.7%
Basic earnings per share 11.0c 10.2c 7.8%
Interim dividend per share 1.2p 1.1p 9.1%
Net debt / (cash) (before lease liabilities) ** $21.8m ($32.0m)
* Before adjusting items (non-recurring items and amortisation of acquired
intangibles) and share-based payments
** Net debt / (cash) is presented before lease liabilities of $18.3m (4
October 2020: $11.7m)
Financial and Operational Highlights
· Strong reported revenue growth of 44.5% to $292.7m reflecting
high levels of customer demand in all sectors
· Underlying operating profit increased by 31.3% to $27.3m
supported by robust management of inflationary cost pressures and a proactive
approach to successfully manage extended lead times in global supply chains
· Announced three North American acquisitions, two of which were
announced post period-end, focused on defence, military aerospace, off-highway
automotive and consumer electricals
· Delivered further investment with vertical integration in the
high-growth and strategically significant markets of electric vehicles and
high-speed data centre cables
· Interim dividend increased by 9.1% to 1.2 pence per share
reflecting confidence in ongoing prospects of the business
Market Highlights
· Electric Vehicles - continued excellent sales growth of 210%
year-on-year in electric vehicles market reflecting strong position in
grid-cords as well as expansion into other products
· Consumer Electricals - demand for consumer electricals buoyant
with sales up 74% year-on-year, including positive impact from the acquisition
of DE-KA
· Medical - sales to medical customers increased 15% as sector
begins its recovery from Covid-19 with access to hospitals starting to improve
· Complex Industrial Technology - demand for complex assemblies
returned, although slight reduction in year-on-year revenue following high
levels of demand for data centre products in the first half of FY2021
Outlook
· Robust first half of the year coupled with a strong forward order
book, means Volex is on course to deliver on its full-year consensus market
expectations
· Mindful of potential for disruptions caused by global component
shortages and shipping issues however, at present, continuing to successfully
manage these risks
· The acquisition of Irvine completed on 29 October 2021 and the
acquisitions of Prodamex and TC are expected to complete in quarter three of
FY2022 with a growing pipeline of opportunities and a track record of
acquiring and integrating businesses which support strategic objectives
· The longer-term prospects for the business are excellent and
investment continued to increase capacity and strengthen capabilities with a
focus on growth markets
Nat Rothschild, Volex's Executive Chairman said:
"By delivering on our strategy to create a diverse, resilient and flexible
global manufacturing business, we have successfully managed the
well-documented global supply chain challenges and Covid-19 restrictions and
continue to achieve high rates of utilisation across all of our facilities.
We continue to invest in new capacity and capability in our manufacturing
facilities to support expanding customer demand and deliver on our long-term
growth prospects while executing against our M&A plans. The agreed
acquisitions of Irvine and TC are in line with our strategy to diversify into
defence markets whilst Prodamex complements the recent DE-KA acquisition and
expands our domestic appliances presence into North America.
With excellent long-term prospects from organic growth and acquisitions, we
are confident in our strategy, our operating model and our ability to create
further shareholder value. Therefore, while we remain mindful of the
challenges faced by all manufacturing businesses from continued extended lead
times in the global supply chain, we are today reaffirming our outlook for the
remainder of the year."
For further information please contact:
Volex plc +44 (0)7747 488 785
Nat Rothschild, Executive Chairman
Jon Boaden, Chief Financial Officer
Julian Wais, Head of Investor Relations
Singer Capital Markets (Nominated Adviser and Joint Broker) +44 (0)20 7496 3000
Shaun Dobson / George Tzimas
HSBC Bank plc (Joint Broker) +44 (0)20 7991 8888
Simon Alexander / Joe Weaving
Powerscourt +44 (0)20 7250 1446
James White / Ollie Head
About Volex plc
Volex plc (AIM:VLX) is a global leader in integrated manufacturing for
performance-critical applications and a designer and manufacturer of power
products. We serve a diverse range of markets and customers, with particular
expertise in cable assemblies, higher-level assemblies, data centre power and
connectivity, electric vehicles, medical applications, consumer electricals
and complex industrial technology. We are headquartered in the UK and operate
from 18 manufacturing locations with a global workforce of over 6,400
employees across 21 countries. Our products are sold through our own locally
based sales teams and through authorised distributor partners to Original
Equipment Manufacturers ('OEMs') and Electronic Manufacturing Services ('EMS')
companies worldwide.
All of the products and services that we offer are integral to the
increasingly complex digital world in which we live, providing power and
connectivity from the most common household items to the most complex medical
equipment. For more information, please visit www.volex.com
(http://www.volex.com/)
Definitions
The Group presents some significant items separately to provide clarity on the
underlying performance of the business. This includes significant one-off
costs and income such as acquisition related costs, the non-cash amortisation
of intangible assets acquired as part of business combinations, and
share-based payments. Further detail on adjusting items is provided in Note 3.
Underlying operating profit is operating profit before adjusting items and
share-based payments. Underlying free cash flow is net cash flow before
financing activities excluding cash flows associated with the acquisitions of
businesses and cash utilised in respect of adjusting items. Net debt (before
lease liabilities) represents cash and cash equivalents, less bank loans and
debt issue costs, but excluding lease liabilities.
Forward looking statements
This announcement contains certain forward-looking statements which have been
made by the Directors in good faith using information available up until the
date they approved the announcement. Forward-looking statements should be
regarded with caution as by their nature such statements involve risk and
uncertainties relating to events and circumstances that may occur in the
future. Actual results may differ from those expressed in such statements,
depending on the outcome of these uncertain future events.
RESULTS FOR THE 26 WEEKS ENDED 3 OCTOBER 2021
Group overview
Volex is a global leader in integrated manufacturing for performance-critical
applications and a designer and manufacturer of power products. We serve a
diverse range of markets and customers, with particular expertise in cable
assemblies, higher-level assemblies, data centre power and connectivity,
electric vehicles and consumer electricals.
Although some of our customers have been affected by extended component lead
times, we continue to experience robust demand across all markets. Our diverse
customer base and niche positions in high-mix, low-volume manufacturing
reduces our reliance on any particular individual component.
We have seen extended lead times and increased costs for some raw materials.
We are able to pass through component cost increases to our customers, being
an established practice for our organisation. We are working closely with our
customers to manage lead times and meet their expectations. Indeed, we believe
that our customer relationships have strengthened due to our support in
navigating the current supply chain complexities.
We continue to invest in our existing operations to support high growth areas
of the business and to further optimise our manufacturing processes.
During the period, we have once again demonstrated our ability to identify
attractive acquisition opportunities that align with our strategy and
complement our existing offering. These acquisitions provide us with the
capability to manufacture complete electro-mechanical and electronic
sub-assemblies, and advanced niche printed circuit board (PCB) assembly
products, to provide additional value for our customers.
We continue to have an exciting pipeline of potential acquisitions as part of
our strategy for growth. We have strict criteria and set methodology to
identify businesses that can enhance our capabilities, broaden customer
relationships and access attractive markets consistent with our operating
model.
We have announced an interim dividend of 1.2 pence per share which will be
paid on 14 December 2021 to those shareholders on the register on 19 November
2021. The Ex-dividend date will be 18 November 2021.
Trading performance overview
The half year to 3 October 2021 has seen the Group continue to grow, with
revenues and underlying operating profit well ahead of last year, despite
multiple market-related challenges such as supply chain disruption, commodity
inflation and the US dollar remaining weak against the Renminbi. This provides
us with confidence in our business model and our ability to continue to manage
future headwinds.
$'000 26 weeks ended 26 weeks ended
3 October
4 October
2021 2020
Total Total
Revenue 292,748 202,465
Cost of Sales (230,339) (151,706)
Underlying gross profit* 62,409 50,759
Underlying gross margin 21.3% 25.1%
Underlying operating costs* (35,159) (29,951)
Underlying operating profit* 27,250 20,808
Underlying operating margin 9.3% 10.3%
Underlying EBITDA* 31,785 24,258
* Before adjusting items and share-based payment charges
Revenue for the first half of the year increased by 44.5% compared to H1
FY2021, including the impact of the acquisition of DE-KA. Customer demand has
been strong across our markets throughout the period.
The demand from Electric Vehicles customers was particularly strong with
revenues more than trebling year-on-year.
Consumer Electricals demand was positive with revenue growing 74% from H1
FY2021 aided by higher copper prices and the acquisition of DE-KA.
There has been a strong return of demand in the period within the Medical
sector for assemblies used in large medical devices, with major customers
reporting increased order books.
The demand from Complex Industrial Technologies customers also held up well,
although overall revenue is slightly lower than the first half of FY2021. Last
year, there was increased demand from some data centre customers as they
sought to reduce the potential impact of Covid-19 related disruption on their
supply of high-speed cables. The demand for these cables has normalised.
We look to pass on higher component and commodity costs to our customers
through contractual mechanisms and regular repricing. We have experienced
increased freight and copper costs during the period. These have been passed
on to customers, increasing revenue but not the absolute margins on individual
products. This results in slightly lower gross margins as a percentage of
revenue. There is also a small time lag in passing through such cost
increases, which has an adverse impact on margins when prices are rising. This
becomes a positive impact when prices are falling. There was an adverse impact
on gross margin from these effects of 1.5%.
There is an adverse impact of 0.8% on gross margin from a higher mix of more
simple products, including 0.4% from our acquisition of DE-KA. In addition,
margins were reduced by 0.8% due to foreign exchange movements and 0.7% due to
employment tax savings that were available in the prior year that did not
repeat in H1 FY2022. In addition to these movements, at an operating profit
level, there was a 1.2% improvement in margins from careful cost control and a
1.6% benefit following the acquisition of DE-KA.
Underlying operating costs increased by $5.2 million to $35.2 million (H1
FY2021: $30.0 million), as the business has grown, partly attributable to the
acquisition of DE-KA. However, underlying operating costs as a percentage of
revenue have reduced in the period from 14.8% in H1 FY2021 to 12.0% reflecting
management's continued tight control over operating expenditure. The increased
costs reflect the investment costs in strengthening our capabilities and
capacity across the Group in addition to the impact of incremental expenditure
within our sales and marketing team. We also increased our spending on
research and development, focusing on areas where we believe there is a strong
opportunity to deliver revenue growth in future periods. Our investment in
development activities in previous years has resulted in patents which are
delivering incremental sales opportunities.
This has been a dynamic period, including the integration of a new
acquisition, a return of customer demand in the Medical and Complex Industrial
Technology markets and challenges due to extended lead times in global supply
chains. We also announced the acquisition of Irvine during the period and the
acquisitions of Prodamex and TC after the period end. Volex has a diverse and
resilient operating model, with a focus on agile decision making and achieving
continued operational efficiencies. This has resulted in revenue growth and
strong operating profits with margins in line with our long-term objectives.
Revenue by customer sector
Electric Vehicles
The automotive industry is experiencing a period of rapid change. The launch
of new models, government incentives and stricter emissions legislation are
driving growth in the sales of electric vehicles. As leaders in the
development and manufacture of power cords, Volex is able to bring significant
and relevant technology to electric vehicle charging. Our customers are
looking for a robust product, designed with reliability and having safety as
the priority. Our expertise has enabled us to broaden our customer base and
expand the range of products we sell to individual customers. As sales of
electric vehicles increase, we expect the sector to become more competitive.
We are therefore investing in our manufacturing capabilities to ensure we
remain one of the lowest cost producers.
Revenue from our electric vehicle customers grew to $45.3 million (H1 FY2021:
$14.6 million), a year-on-year increase of 210%. Demand in the first quarter
of the year was very strong, slightly tapering in the second quarter as
component shortages impacted our customers' production.
Consumer Electricals
Volex designs and manufactures power cords and related products that are sold
to the manufacturers of a broad range of electrical and electronic devices and
appliances. Our products are used in home entertainment and home computing
devices, domestic and personal healthcare appliances and power tools. Many of
our customers are global household names operating in premium segments of the
market.
With many consumers spending more time at home during the Covid-19 pandemic,
demand for entertainment, home-office equipment and home renovation products
were elevated. The consumer electricals market has remained buoyant throughout
the period, with continued high levels of demand. Revenue grew to $127.4
million (H1 FY2021: $73.2 million), also benefitting from the acquisition of
DE-KA at the end of the last financial year. DE-KA has traded very strongly
since acquisition, beating our stretching acquisition targets. We have passed
on higher copper costs to our customers which has increased revenue by
approximately $8 million. We anticipate normalisation in this sector in the
second half of the year.
Medical
We are very proud of our capabilities in the medical devices supply chain. We
operate across multiple segments within medical markets, with our complex
assemblies utilised in smaller medical devices for patient treatment and
monitoring, as well as larger medical devices.
Covid-19 placed a tremendous amount of pressure on healthcare systems around
the world in the prior year, resulting in changes in the profile of spend on
medical technology as access to hospitals was restricted and spending focused
on Covid-19 treatment. We have seen a strong return of demand for assemblies
used in large, non-Covid related medical devices, such as patient imaging and
robotic surgery devices. Medical revenue increased to $62.0 million (H1
FY2021: $54.0 million), reflecting this recovery during H1 FY2022. Production
levels in the period were above our expectations, although we have seen some
increased lead times for certain components.
We believe that the outlook for large medical equipment is positive as the
impact of Covid-19 on healthcare systems continues to diminish. Governments
and healthcare providers will need to prioritise investment in technologies to
support screening procedures and routine operations that have been delayed. In
addition, spending on screening and treatment around the world is expected to
grow, as is the provision of universal healthcare in some significant markets.
Volex is well positioned, with established production facilities in the major
healthcare markets, to take advantage of moves to simplify and de-risk the
supply chain for the production of medical devices. This supports our view
that there is significant pent-up demand for medical equipment to accelerate
patient screening and therapy following the deferment of treatment during the
pandemic.
Complex Industrial Technology
Our Complex Industrial Technology customers produce a wide range of equipment
and customer solutions, including building control, smart metering, laser
technology, vehicle telematics, telecommunications, industrial automation and
robotics. With a customer-centric approach and experienced production
engineers who maintain rigorous quality standards, Volex is a manufacturing
partner for some of the biggest technology names.
Revenue for Complex Industrial Technology customers was slightly lower at
$58.1 million (H1 FY2021: $60.7 million) as the prior period included
particularly strong demand for high-speed data centre products as customers
built up inventory to mitigate against potential disruption in the supply
chain. Despite this, there has been strong demand from customers requiring
complex assemblies for industrial technology applications throughout the
period.
We have successfully developed a 400Gbps product for the high speed data
centre sector for which we anticipate strong demand in FY2023. In the second
half of the year, we expect to see a transitional period with a reduction in
demand for 100Gbps cables before the industry begins the rollout and adoption
of 400Gbps cables. We have a customer qualified 400Gbps product and expect
revenues to increase in FY2023.
Revenue by market
We operate a global, interconnected and integrated business. This allows us to
serve blue-chip customers around the world. Customers often require
manufacturing in multiple locations to reduce risk in their supply chains. We
respond by developing flexibility at our sites so we can meet a variety of
customer requirements within one facility. We also have a regional focus in
our business to ensure that we offer exceptional customer service. We analyse
our revenue geographically by region, with the regional allocation based on
where the customer relationship is held. This reflects the fact that we are a
customer-centric organisation.
North America
North America is our largest customer region and we work with some of the
largest technology companies and global innovators. North America is 41.4% of
overall revenue (H1 FY2021: 45.9%). Revenue grew by 30.5% in the period to
$121.2 million (H1 FY2021: $92.9 million). This includes some of the strong
growth that we experienced from electric vehicle customers.
Europe
Revenues in Europe grew by 124.7% to $100.9 million (H1 FY2021: $44.9 million)
primarily due to the impact of DE-KA which was acquired in February 2021. The
Group has also seen growth across its key customer markets in this region
including medical, industrial and electric vehicles.
Asia
Asia revenue was $70.7 million (H1 FY2021 $64.6 million). The majority of
revenue in this region is in consumer electricals. Demand in the first half
remained strong.
Group adjusting items and share-based payments
Adjusting items and share-based payments totalled $6.1 million in the period
(H1 FY2021: $6.5 million). These costs are made up of $5.0 million (H1 FY2021:
$2.3 million) of amortisation of acquisition-related intangible assets, $2.5
million (H1 FY2021: $4.0 million) of share-based payments expense and $1.1
million (H1 FY2021: $0.2 million) of acquisition costs mainly related to the
acquisitions of Irvine, Prodamex and TC. Partially offsetting these items was
a gain of $2.6 million recognised on the forgiveness of Paycheck Protection
Program (PPP) loans provided to parts of the Group's North America operations.
Share-based payments include awards made to incentivise senior management, as
well as awards granted to the management teams within acquired companies.
Group taxation
The Group incurred a tax charge of $2.2 million (H1 FY2021: tax credit of $1.1
million), representing an effective tax rate of 11.2% (H1 FY2021: -7.4%). The
underlying tax charge of $3.7 million (H1 FY2021: $nil) represents an
effective tax rate of 14.7% (H1 FY2021: 0.2%). The underlying current tax
charge is calculated by reference to the taxable profits in each individual
entity and the local statutory tax rates. An underlying deferred tax credit of
$1.4 million (H1 FY2021: tax credit of $2.9 million) arose due to an increase
in the net deferred tax asset recognised.
The Group operates in a number of different tax jurisdictions and is subject
to periodic tax audits by local authorities in the normal course of business
on a range of tax matters in relation to corporate tax. As at 3 October 2021,
the Group has net current tax liabilities of $7.6 million (FY2021: $6.7
million) which include $7.3 million (FY2021: $7.9 million) of provisions for
tax uncertainties.
The carrying amount of deferred tax assets is reviewed at each reporting date
and recognised to the extent that it is probable that there are sufficient
taxable profits to allow all or part to be recovered. Deferred tax assets have
been recognised based on future forecast taxable profits. As at the reporting
date the Group has recognised deferred tax assets of $23.7 million (FY2021:
$22.0 million) and deferred tax liabilities of $7.5 million (FY2021: $7.8
million).
Group net debt and cash flows
During the first half of the year, inventory has increased significantly to
support the growth of the business and as a direct result of increases in lead
times in the global supply chain, as well as longer shipping times between
production facilities and customers. This has partially offset cash generated
by our underlying business operations.
Net debt (before lease liabilities) increased from the year end to $21.8
million ($7.2 million at 4 April 2021) largely due to the inventory increase
described above. The Group generated underlying free cash flow after capital
expenditure and tax, but before the cost of acquisitions, of $3.0 million.
This included an operating cash inflow of $30.0 million and an adverse working
capital movement of $18.7 million, as well as capital expenditure of $4.9
million and tax paid of $3.0 million. The adverse working capital movement is
due to the significant growth in the business along with extended shipping
times for sea freight and increased lead times on components leading to an
increase in inventory levels. Compared with H1 FY2021 there were an extra 6
days of inventory held by the business at the end of the period. Inventory
levels are expected to normalise, but this may not occur in the second half of
the year. Accounts receivable and accounts payable balances also increased as
a result of the growth in the business. The Group also had lease liabilities
of $18.3 million ($20.0 million at 4 April 2021). This produces a statutory
net debt position of $40.1 million.
When the Irvine, Prodamex and TC acquisitions are completed, net debt is
expected to increase by approximately $35 million.
Acquisition strategy
The successful acquisition and integration of quality businesses is a
significant part of our strategy. Our typical acquisition target is a well
performing business in a sector where we already have deep understanding and
experience. We are attracted to businesses with excellent customer lists and
good capabilities which drive long-term customer relationships. Our
acquisition pipeline is focused on businesses which have additional value-add
capabilities and access to existing or adjacent markets. The geographic
location of the target is also a strategic consideration, including low-cost
markets in which our current customers operate.
Targets that require significant integration or restructuring effort are only
considered where we can identify the management resources to lead this
activity. We look to optimise the value created from each acquisition, and
only progress opportunities that meet strict value criteria which are tailored
to each transaction based on the specific characteristics of the target. Our
aim is to grow the Group's run-rate revenue by approximately ten percent each
year by acquiring attractive, cash generative businesses.
To select the right opportunities, we identify potential acquisitions through
a variety of methods, seeking out businesses that are not on the market as
well as those already in an active process. All these opportunities are
qualified and approved by an investment committee before we progress to
negotiation. We only proceed to due diligence where there is alignment on the
commercial terms.
Having completed six acquisitions in three years from investment of some $140
million, we have a well-developed approach and a significant track record in
execution. With the announcement of three further acquisitions, Irvine,
Prodamex and TC, since the beginning of the year, we have again demonstrated
our proven ability to identify quality businesses in attractive markets.
We have a growing acquisition pipeline containing highly attractive targets
that we are actively pursuing, all of which fit within the core competency of
our senior operations team. In a buoyant M&A market, discipline in
negotiations is critical and we qualify every acquisition extensively using
our deep industry knowledge to find the best opportunities. We firmly believe
that our strength in this area will be a significant value driver.
Investing in our business
Over the past eighteen months we have invested significantly in our business
with a factory extension in Batam, Indonesia and a facility relocation in
Suzhou, China completed in FY2021.
During the period we have increased our research and development activities in
Suzhou and recruited additional specialists to drive our product development
programmes. We have also begun to expand our capabilities through investment
in vertical integration, which will accelerate through the second half of the
year. Our investment programmes are focused on high-growth markets, with the
successful development of a 400Gbps product for our high-speed data centre
customers a prime example. There are further investment opportunities within
our operations that will deliver good cash returns.
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. There are a number of potential risks that could have a material
impact on the Group's financial performance. The principal risks and
uncertainties include competitive threats, legal and regulatory issues,
dependency on key suppliers or customers, movements in commodity prices or
exchange rates, and quality issues. These risks and the relevant
risk-mitigation activities are set out in the FY2021 Annual Report and
Accounts on pages 36 to 40, a copy of which is available on the website at
www.volex.com (http://www.volex.com) .
Outlook
Having delivered a robust performance in the first half of the year, coupled
with a strong forward order book, the Board remains confident in delivering on
full-year consensus market expectations, absent any material disruptions to
our business from the extended lead times that are impacting on global supply
chains.
The acquisition of Irvine completed on 29 October 2021 and the acquisitions of
Prodamex and TC are expected to complete in quarter three of FY2022. We have a
growing pipeline of acquisition opportunities and a track record of
identifying and integrating businesses that support our strategic objectives.
The longer-term prospects for our business are excellent and we continue to
invest in increasing capacity and strengthening our capabilities in our key
facilities to meet customer demand with a particular focus on growth areas.
Nat
Rothschild
Jon Boaden
Group Executive
Chairman Group
Chief Financial Officer
11 November 2021
11 November 2021
Unaudited consolidated income
statement
For the 26 weeks ended 3 October 2021 (26 weeks ended 4 October 2020)
26 weeks ended 3 October 2021 26 weeks ended 4 October 2020
Before Adjusting Total Before Adjusting Total
Adjusting items items and share-based payments Adjusting items items and share-based payments
Notes $'000 $'000 $'000 $'000 $'000 $'000
Revenue 2 292,748 - 292,748 202,465 - 202,465
Cost of sales (230,339) - (230,339) (151,706) - (151,706)
Gross profit 62,409 - 62,409 50,759 - 50,759
Operating expenses (35,159) (8,646) (43,805) (29,951) (6,502) (36,453)
Other income 3 - 2,584 2,584 - - -
Operating profit 2 27,250 (6,062) 21,188 20,808 (6,502) 14,306
Share of net profit from associates 84 - 84 637 - 637
Finance income 153 - 153 155 - 155
Finance costs (2,069) - (2,069) (720) - (720)
Profit on ordinary activities before taxation 25,418 (6,062) 19,356 20,880 (6,502) 14,378
Taxation 4 (3,749) 1,579 (2,170) (37) 1,096 1,059
Profit for the period attributable to the owners of the parent 21,669 (4,483) 17,186 20,843 (5,406) 15,437
Earnings per share (cents)
Basic 5 13.8 11.0 13.7 10.2
Diluted 5 13.0 10.3 12.9 9.5
52 weeks ended 4 April 2021
Before Adjusting Total
Adjusting items Items and share-based payments
Notes $'000 $'000 $'000
Revenue 2 443,313 - 443,313
Cost of sales (339,437) - (339,437)
Gross profit 103,876 - 103,876
Operating expenses (60,980) (12,179) (73,159)
Operating profit 2 42,896 (12,179) 30,717
Share of net profit from associates 827 - 827
Finance income 310 - 310
Finance costs (2,485) - (2,485)
Profit on ordinary activities before taxation 41,548 (12,179) 29,369
Taxation 7,267 2,251 9,518
Profit/(loss) for the period attributable to the owners of the parent 48,815 (9,928) 38,887
Earnings per share (cents)
Basic 5 32.1 25.5
Diluted 5 30.0 23.9
Unaudited consolidated statement of comprehensive income
For the 26 weeks ended 3 October 2021 (26 weeks ended 4 October 2020)
(Audited)
26 weeks to 26 weeks to 52 weeks to
3 October 4 October 2020 4 April
2021 2021
$'000 $'000 $'000
Profit for the period 17,186 15,437 38,887
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit pension schemes 456 (148) (1,121)
Tax relating to items that will not be reclassified (33) 359 544
423 211 (577)
Items that may be reclassified subsequently to profit or loss:
(Loss)/gain arising on cash flow hedges during the period (106) 2,067 1,895
Share of other comprehensive income of associates and joint ventures accounted 8 - 37
for using the equity method
Exchange (loss)/gain on translation of foreign operations (1,681) 2,705 3,128
Tax relating to items that may be reclassified 25 (65) 316
(1,754) 4,707 5,376
Other comprehensive (expense)/income for the period (1,331) 4,918 4,799
15,855 20,355 43,686
Total comprehensive income for the period
Unaudited consolidated statement of financial
position
As at 3 October 2021 (4 October 2020) (Audited)
3 October 4 October 2020 4 April
Note 2021 $'000 2021
$'000 $'000
Non-current assets
Goodwill 64,560 26,767 65,558
Other intangible assets 35,122 13,842 39,570
Property, plant and equipment 33,547 22,577 32,394
Right of use assets 16,461 9,381 17,961
Investments in associates 959 637 866
Other receivables 1,201 4,590 4,451
Deferred tax assets 23,684 12,158 21,967
175,534 89,952 182,767
Current assets
Inventories 96,883 66,878 76,886
Trade receivables 111,312 70,655 100,305
Other receivables 13,803 9,158 10,313
Current tax assets 2,233 1,908 2,817
Derivative financial instruments 480 379 411
Cash and bank balances 8 21,698 34,229 36,551
246,409 183,207 227,283
Total assets 421,943 273,159 410,050
Current liabilities
Borrowings 8 4,374 2,198 9,556
Lease liabilities 3,796 3,648 4,567
Trade payables 87,179 47,914 72,137
Other payables 49,465 42,211 56,393
Current tax liabilities 9,813 9,193 9,520
Retirement benefit obligation 1,090 1,038 1,110
Provisions 1,761 929 1,801
Derivative financial instruments 205 170 38
157,683 107,301 155,122
Net current assets 88,726 75,906 72,161
Non-current liabilities
Borrowings 8 39,114 - 34,238
Non-current lease liabilities 14,479 8,040 15,454
Other payables 3,666 1,435 9,084
Deferred tax liabilities 7,473 3,032 7,845
Retirement benefit obligation 3,030 2,323 4,099
Provisions 154 293 288
67,916 15,123 71,008
Total liabilities 225,599 122,424 226,130
Net assets 196,344 150,735 183,920
Equity attributable to owners of the parent
Share capital 6 62,544 60,322 61,969
Share premium account 60,856 46,414 60,856
Non-distributable reserve 2,455 2,455 2,455
Hedging and translation reserve (5,884) (4,799) (4,130)
Own shares 7 (1,836) (590) (3,257)
Retained earnings 78,209 46,933 66,027
Total equity 196,344 150,735 183,920
Unaudited Consolidated Statement of Changes in Equity
For the 26 weeks ended 3 October 2021 (26 weeks ended 4 October 2020)
Share capital Share premium account Non-distribut-able reserves Hedging and Own shares Retained earnings/ (losses) Total
translation reserve
equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance 5 April 2020 60,189 46,414 2,455 (9,506) (1,024) 32,004 130,532
Profit for the period attributable to the owners of the parent - - - - - 15,437 15,437
Other comprehensive income for the period - - - 4,707 - 211 4,918
Total comprehensive income for the period - - - 4,707 - 15,648 20,355
Exercise of deferred bonus shares 133 - - - - (133) -
Own shares sold/(utilised) in the period - - - - 434 (1,912) (1,478)
Dividend - - - - - (3,791) (3,791)
Reserve entry for share option charges - - - - - 2,911 2,911
Tax effect of share options - - - - - 2,206 2,206
Balance at 4 October 2020 60,322 46,414 2,455 (4,799) (590) 46,933 150,735
Balance 4 April 2021 61,969 60,856 2,455 (4,130) (3,257) 66,027 183,920
Profit for the period attributable to the owners of the parent - - - - - 17,186 17,186
Other comprehensive (expense)/income for the period - - - (1,754) - 423 (1,331)
Total comprehensive (expense)/income for the period - - - (1,754) - 17,609 15,855
Shares issued 575 - - - - - 575
Own shares sold/(utilised) in the period - - - - 3,381 (3,381) -
Own shares purchased in the period - - - - (1,960) - (1,960)
Dividend - - - - - (4,728) (4,728)
Reserve entry for share option charges - - - - - 2,245 2,245
Tax effect of share options - - - - - 437 437
Balance at 3 October 2021 62,544 60,856 2,455 (5,884) (1,836) 78,209 196,344
Unaudited consolidated statement of cash flows
For the 26 weeks ended 3 October 2021 (26 weeks ended 4 October 2020)
(Audited)
26 weeks to 26 weeks to 52 weeks to
3 October 4 October 2020 4 April
Notes 2021 2021
$'000 $'000 $'000
Profit for the period 17,186 15,437 38,887
Adjustments for:
Finance income (153) (155) (310)
Finance costs 2,069 720 2,485
Income tax expense/(credit) 2,170 (1,059) (9,518)
Share of net profit from associates (84) (637) (827)
Depreciation of property, plant and equipment 2,976 1,863 4,613
Depreciation of right-of-use asset 1,507 1,540 3,172
Amortisation of intangible assets 5,059 2,311 5,304
Loss on disposal of property, plant and equipment 25 47 135
Share option charge 2,544 4,048 6,629
Forgiveness of PPP loan 3 (2,584) - -
Fair value adjustment to derivatives - - (225)
Decrease in provisions (752) (643) (293)
Operating cash flow before movements in working capital 29,963 23,472 50,052
Increase in inventories (20,440) (7,506) (12,240)
Increase in receivables (13,421) (13,720) (16,996)
Increase in payables 15,121 10,178 21,626
Movement in working capital (18,740) (11,048) (7,610)
Cash generated by operations 11,223 12,424 42,442
Cash generated by operations before adjusting items 11,812 12,614 42,809
Cash utilised by adjusting items (589) (190) (367)
Taxation paid (3,039) (1,796) (3,116)
Interest paid (873) (191) (631)
Net cash generated from operating activities 7,311 10,437 38,695
Cash flow from investing activities
Interest received 18 12 30
Acquisition of businesses, net of cash acquired - - (40,927)
Contingent consideration for businesses acquired (10,777) (1,142) (1,281)
Proceeds on disposal of property, plant and equipment 28 108 378
Purchases of property, plant and equipment (3,918) (2,518) (7,685)
Purchases of intangible assets (1,005) (76) (132)
Proceeds from the repayment of preference shares 20 25 50
Net cash used in investing activities (15,634) (3,591) (49,567)
Cash flow before financing activities (8,323) 6,846 (10,872)
Cash (used)/generated before adjusting items (7,734) 7,036 (10,505)
Cash utilised in respect of adjusting items (589) (190) (367)
Unaudited consolidated statement of cash flows (continued)
For the 26 weeks ended 3 October 2021 (26 weeks ended 4 October 2020)
(Audited)
26 weeks to 26 weeks to 52 weeks to
3 October 4 October 2020 4 April
Notes 2021 2021
$'000 $'000 $'000
Cash flow before financing activities (8,323) 6,846 (10,872)
Cash flow from financing activities
Dividend paid (4,728) (3,791) (6,016)
Net purchase of shares for share schemes (2,039) (1,552) (9,046)
New bank loan raised 8,185 - 37,219
Other loans - 2,584 -
Repayment of borrowings (2,867) (43) (3,143)
(Outflow)/inflow from factoring (2,929) - 469
Refinancing costs paid (142) - (1,143)
Interest element of lease payments (286) (315) (684)
Payment of lease liabilities (1,853) (1,948) (3,681)
Receipt from lease debtor 264 267 538
Net cash (used in)/generated from financing activities 8 (6,395) (4,798) 14,513
Net (decrease)/increase in cash and cash equivalents (14,718) 2,048 3,641
Cash and cash equivalents at beginning of period 8 36,551 31,649 31,649
Effect of foreign exchange rate changes (135) 532 1,261
Cash and cash equivalents at end of period 8 21,698 34,229 36,551
Notes to the Interim Statements
1. Basis of preparation
These interim financial statements have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the AIM Rules for Companies'. The condensed consolidated
interim financial information should be read in conjunction with the annual
financial statements for the 52 weeks ended 4 April 2021, which were prepared
in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006.
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 3 October
2021 ('H1 FY2022') and the 26 weeks ended 4 October 2020 ('H1 FY2021') has not
been reviewed by the auditors. The financial information for the 52 weeks
ended 4 April 2021 ('FY 2021') is extracted and abridged from the Group's full
accounts for that year. The statutory accounts for FY2021 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 Directors confirm that, to the best of their knowledge, the interim
financial statements have been prepared in accordance with UK adopted IAS 34
'Interim Financial Reporting' and the AIM Rules for Companies, and that the
interim report includes a fair review of the information required. The interim
report was approved by the Board of Directors on 10 November 2021.
This interim report can be downloaded or viewed via the Group's website at
www.volex.com (http://www.volex.com) . Copies of the annual report for the 52
weeks ended 4 April 2021 are available at the Company's registered office at
Unit C1 Antura, Bond Close, Basingstoke, Hampshire, England, RG24 8PZ, and can
also be downloaded or viewed via the Group's website.
As at 3 October 2021 the Group had net debt of $40.1 million with undrawn
committed borrowing available under its revolving credit facility of $59.9m
(FY2021: $37.3m). In September 2021 the Group activated the $30m accordion
feature on the facility.
The Group's forecast and projections, taking reasonable account of possible
changes in trading performance and the cash outflow associated with the
acquisitions of Irvine Electronics, Inc, Prodamex SA de CV and Terminal &
Cable TC Inc show that the Group should continue to operate with sufficient
headroom under the revolving credit facility for the foreseeable future. The
Directors believe that the Group is well placed to manage its business within
the available facilities. Accordingly, they continue to adopt the going
concern basis in preparing these condensed financial statements.
These condensed financial statements have also been prepared using accounting
policies consistent with those disclosed in the annual report and accounts
for the year ended 4 April 2021, which were prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006.
Impact of standards issued but not yet applied by the Group
There are no new standards, amendments to standards or interpretations that
are expected to have a material impact on the Group's results.
2. Business and geographical segments
Business segments
The internal reporting provided to the Executive members of the Company's
Board and the Chief Operating Officer for the purpose of resource allocation
and assessment of Group performance is based upon the regional performance of
where the customer is based and the products are delivered to. In addition to
the operating divisions, a Central division exists to capture all of the
corporate costs incurred in supporting the operations.
Unallocated central costs represent corporate costs that are not directly
attributable to the manufacture and sale of the Group's products but which
support the Group in its operations. Included within this division are the
costs incurred by the executive management team and the corporate head office.
The following is an analysis of the Group's revenues and results by reportable
segment.
26 weeks to 3 October 2021 RESTATED(1)
26 weeks to 4 October 2020
Revenue Profit/(loss) Revenue Profit/(loss)
$'000 $'000 $'000 $'000
North America 121,150 9,893 92,929 9,804
Asia 70,687 5,145 64,627 7,066
Europe 100,911 15,240 44,909 6,826
Unallocated central costs (excluding share-based payments) (3,028) (2,888)
Divisional results before share-based payments and adjusting items 292,748 27,250 202,465 20,808
Adjusting items (3,518) (2,454)
Share-based payments (2,544) (4,048)
Operating profit 21,188 14,306
Share of net profit from associates 84 637
Finance income 153 155
Finance costs (2,069) (720)
Profit before tax 19,356 14,378
Tax (2,170) 1,059
Profit after tax 17,186 15,437
(1) Restatement: the prior year amounts have been restated to be consistent
with the current year presentation and segments which were used in the FY2021
Annual report.
2. Business and geographical segments (continued)
52 weeks to 4 April 2021
Revenue Profit/(loss)
$'000 $'000
North America 203,102 19,808
Asia 133,750 14,128
Europe 106,461 15,432
Unallocated central costs (excluding share-based payments) - (6,472)
Divisional results before share-based payments and Adjusting items 443,313 42,896
Adjusting items (5,550)
Share-based payments (6,629)
Operating profit 30,717
Share of profit result from associates 827
Finance income 310
Finance costs (2,485)
Profit before tax 29,369
Tax 9,518
Profit after tax 38,887
The accounting policies of the reportable segments are in accordance with the
Group's accounting policies.
The adjusting items charge within operating profit for the period of
$3,518,000 (H1 FY2021: $2,454,000, FY2021: $5,550,000) was split credit
$391,000 (H1 FY2021: $1,179,000, FY2021: $2,277,000) to North America,
$3,909,000 (H1 FY2021: $1,275,000, FY2021: $3,431,000) to Europe, $nil (H1
FY2021: $nil, FY2021: credit $158,000) to Asia. No adjusting items were
allocated to central.
Other segmental information
The Group's revenue from external customers and information about its
non-current assets (excluding deferred tax assets) by geographical location
are provided below:
External revenue Non-current assets
(excluding deferred tax assets)
26 weeks RESTATED(1) (Audited) 26 weeks to 26 weeks to (Audited)
to 26 weeks to 52 weeks to 3 October 4 October 52 weeks to
3 October 4 October 4 April 2021 2020 4 April
2021 2020 2021 $'000 $'000 2021
$'000 $'000 $'000 $'000
Geographical segments
North America 121,150 92,929 203,102 20,719 24,715 23,130
Asia 70,687 64,627 133,750 26,412 22,869 25,710
Europe 100,911 44,909 106,461 104,719 30,210 111,960
292,748 202,465 443,313 151,850 77,794 160,800
Revenue is attributed to countries on the basis of the geographical location
of the customer and delivery of the product.
(1) Restatement: the prior year amounts have been restated to be consistent
with the current year presentation and segments which were used in the FY2021
Annual report.
3. Adjusting items and share-based payments
(Audited)
26 weeks to 26 weeks to 52 weeks to
3 October 4 October 4 April
2021 2020 2021
$'000 $'000 $'000
Amortisation of acquired intangibles 5,007 2,264 5,204
Acquisition costs 1,005 190 367
Adjustments to fair value of contingent consideration 90 - (158)
Pension past service costs - - 137
PPP loan forgiveness (2,584) - -
Total adjusting items 3,518 2,454 5,550
Share-based payments charge 2,544 4,048 6,629
Total adjusting items and share-based payments before tax 6,062 6,502 12,179
Adjusting items tax credit (1,579) (1,096) (2,251)
Adjusting items and share-based payments after tax 4,483 5,406 9,928
Adjusting items include costs and income that are one-off in nature and
significant (such as significant restructuring costs, impairment charges or
acquisition related costs) and the non-cash amortisation of intangible assets
recognised on acquisition.
The adjusting items and share-based payments are included under the statutory
classification appropriate to their nature but are separately disclosed on the
face of the income statement to assist in understanding the underlying
financial performance of the Group.
Associated with the acquisitions, the Group has recognised certain intangible
assets related to customer relationships and order backlogs. During H1 FY2022,
the amortisation charge on these intangible assets totalled $5,007,000 (FY2021
H1: $2,264,000, FY2021: $5,204,000). The amortisation of these intangibles is
non-cash and split between DE-KA ($2,743,000), Servatron ($1,070,000), GTK
($587,000), Silcotec ($579,000) and MC Electronics ($28,000).
Acquisition-related costs of $1,005,000 (FY2021 H1: $190,000, FY2021:
$367,000) are mainly related to the recently announced acquisitions of Irvine
Electronics, Inc., Prodamex SA de CV and Terminal & Cable TC Inc. These
costs cover legal and professional fees associated with the transactions. In
the prior year, the Group incurred acquisition related costs of $367,000
relating to the acquisition of De-Ka Elektroteknik Sanayi ve Ticaret Anonim
Şirketi. These costs represented legal and professional fees associated with
the transaction.
A loss of $90,000 (FY2021 H1: $nil, FY2021: gain of $158,000) was recognised
on the remeasurement of contingent consideration relating to completed
acquisitions.
A gain of $2,584,000 was recognised on the forgiveness of PPP loans provided
to parts of the Group's North America's operations. These loans were provided
at the start of the pandemic and were previously recognised as a financial
liability within current borrowings in the FY2021 balance sheet. Upon receipt
of notification of forgiveness of the debts during the current period, a gain
on extinguishment of the debt has been recognised as an adjusting item within
other income in accordance with applicable accounting standards.
In 2019, the Group recognised a pension past service cost of $480,000 in
adjusting items as a result of Guaranteed Minimum Pension (GMP) equalisation
following a legal judgement requiring all pension schemes to conduct an
equalisation of male and female members' benefits for the effect of unequal
GMPs. The additional cost of $137,000 in FY2021 arose as a result of a further
legal judgement which confirmed there was also an obligation to pay additional
amounts where certain past transfer payments had not been equalised for the
effects of GMPs.
4. Tax charge
The Group incurred a tax charge of $2,170,000 (H1 FY2021: tax credit of
$1,059,000), representing an effective tax rate of 11.2% (H1 FY2021: -7.4%).
The underlying tax charge of $3,749,000 (H1 FY2021: $37,000) represents an
effective tax rate of 14.7% (H1 FY2021: 0.2%). The underlying current tax
charge is calculated by reference to the taxable profits in each individual
entity and the local statutory tax rates. An underlying deferred tax credit of
$1,411,000 (H1 FY2021: $2,866,000) arose due to an increase in the net
deferred tax asset recognised.
The Group operates in a number of different tax jurisdictions and is subject
to periodic tax audits by local authorities in the normal course of business
on a range of tax matters in relation to corporate tax and transfer pricing.
As at 3 October 2021, the Group has net current tax liabilities of $7,580,000
(FY2021: $6,703,000) which include $7,250,000 (FY2021: $7,855,000) of
provisions for tax uncertainties.
The carrying amount of deferred tax assets is reviewed at each reporting date
and recognised to the extent that it is probable that there are sufficient
taxable profits to allow all or part to be recovered. Deferred tax assets have
been recognised based on future forecast taxable profits. As at the reporting
date the Group has recognised deferred tax assets of $23,684,000 (FY2021:
$21,967,000) and deferred tax liabilities of $7,473,000 (FY2021: $7,845,000).
Before offset for financial reporting purposes, a deferred tax asset of
$10,574,000 (FY2021: $8,604,000) is in relation to tax losses, $8,094,000
(FY2021: $7,806,000) to short term timing differences, $658,000 to accelerated
tax depreciation (FY2021: $601,000) and $4,664,000 (FY2021: $5,565,000)
relates to share-based payments. A deferred tax liability of $1,328,000
(FY2021: $1,125,000) relates to the unremitted earnings of overseas
subsidiaries and $6,451,000 (FY2021: $7,329,000) relates to intangible assets.
5. Earnings per ordinary share
The calculations of the earnings per share are based on the following data:
(Audited)
26 weeks to 26 weeks to 52 weeks to
3 October 4 October 4 April
Earnings 2021 2020 2021
$'000 $'000 $'000
Earnings for the purpose of basic earnings per share 17,186 15,437 38,887
Adjustments for:
Adjusting items 3,518 2,454 5,550
Share-based payments charge 2,544 4,048 6,629
Tax effect of above adjustments and other adjusting item tax movements (1,579) (1,096) (2,251)
Underlying earnings 21,669 20,843 48,815
Weighted average number of ordinary shares No. shares No. shares No. shares
Weighted average number of ordinary shares for the purpose of basic earnings 156,562,086 151,816,604 152,230,980
per share
Effect of dilutive potential ordinary shares - share options 9,649,535 10,370,884 10,288,152
Weighted average number of ordinary shares for the purpose of diluted earnings 166,211,621 162,187,488 162,519,132
per share
Basic earnings per share Cents Cents Cents
Basic earnings per share from continuing operations 11.0 10.2 25.5
Adjustments for:
Adjusting items 2.2 1.6 3.7
Share-based payments charge 1.6 2.6 4.4
Tax effect of above adjustments and other adjusting items tax movements (1.0) (0.7) (1.5)
Underlying basic earnings per share 13.8 13.7 32.1
Diluted earnings per share Cents Cents Cents
Diluted earnings per share 10.3 9.5 23.9
Adjustments for:
Adjusting items 2.1 1.5 3.4
Share-based payments charge 1.5 2.6 4.1
Tax effect of above adjustments and other adjusting items tax movements (0.9) (0.7) (1.4)
Underlying diluted earnings per share 13.0 12.9 30.0
The underlying earnings per share has been calculated on the basis of
continuing activities before adjusting items and 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.
6. Share capital
(Audited)
26 weeks to 26 weeks to 52 weeks to
3 October 2021 4 October 2020 4 April
$'000 $'000 2021
$'000
Issued and fully paid:
158,718,709 (FY2021: 157,052,041) Ordinary shares of 25p each 62,544 60,322 61,969
On 16 July 2021, the Group issued 1,666,668 shares to satisfy the vesting of
the share awards granted to the senior employees and/or former owners of
Servatron and GTK.
7. Own shares
(Audited)
26 weeks to 52 weeks to
3 October 2021 26 weeks to 4 April
$'000 4 October 2020 2021
$'000 $'000
At the start of the period 3,257 1,024 1,024
Disposed of in the period on exercise of options (3,381) (434) (1,726)
Purchase of shares 1,960 - 3,959
At end of the period 1,836 590 3,257
The own shares reserve represents the cost of shares in the Company held by
the Volex Group plc Employee Share Trust ('EBT') to satisfy future share
option exercises under the Group's share option schemes.
During H1 FY2022 the EBT purchased 300,000 shares at a cost of $1,350,000 and
subscribed to 1,666,668 ordinary shares. During the period 1,897,407 shares
were utilised on the exercise of share awards. The number of ordinary shares
held by the Volex Group plc Employee Share Trust at 3 October 2021 was
1,000,838 (H1 FY2021: 206,576, FY2021: 931,577).
8. Analysis of net debt
Other
4 April New Cash Exchange movement $'000 non-cash changes 3 October
2021 leases flow $'000 2021
$'000 $'000 $'000 $'000
Cash & cash equivalents 36,551 - (14,718) (135) - 21,698
Bank loans (38,131) - (5,318) 180 2,584 (40,685)
Factoring (6,736) - 2,929 21 - (3,786)
Debt issue costs 1,073 - 142 (18) (214) 983
Lease liability (20,021) (270) 2,139 163 (286) (18,275)
Net debt (27,264) (270) (14,826) 211 2,084 (40,065)
3 October 2021 4 October 2020 4 April
$'000 $'000 2021
$'000
Cash and bank balances 21,698 34,229 36,551
Overdrafts - - -
Cash and cash equivalents 21,698 34,229 36,551
The carrying amount of the Group's financial assets and liabilities is
considered to be equivalent to their fair value.
9. Related parties
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
The Group has a 26.09% interest in Kepler SignalTek Limited, which is
accounted for as an associate. During the period the Group accrued financial
income of $103,000 on the preference shares (H1 FY2021: $97,000, FY2021:
$195,000). The balance due from the associate as at the period end date was
$2,197,000 (H1 FY2021: $2,055,000, FY2021: $2,121,000).
The Group also has a 43% interest in Volex-Jem Co. Ltd. During the current and
prior period, no transactions have occurred between the Group and Volex-Jem
Co. Ltd or Volex - Jem Cable Precision (Dongguan) Co. Limited, an entity
controlled by Volex-Jem Co. Ltd. The balance due to the associates as at the
period end was $81,000 (H1 FY2021: $81,000, FY2021: $81,000).
A number of share transactions with Directors have occurred during the period
in line with share awards outstanding at the prior year end and as disclosed
in the annual accounts for FY2021 and in line with the Director shareholding
notices disclosed on the Volex website (www.volex.com (http://www.volex.com)
).
10. Contingent Liabilities
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
advisers, full compliance with all customs, duty and sales tax regulations
cannot be guaranteed.
Through the normal course of business, the Group provides manufacturing
warranties to its customers and assurances that its products meet the required
safety and testing standards. When the Group is notified that there is a fault
with one of its products, the Group will provide a rigorous review of the
defective product and its associated manufacturing process and, if found at
fault and contractually liable, will provide for costs associated with recall
and repair as well as rectify the manufacturing process or seek recompense
from its supplier. The Group holds a provision to cover potential costs of
recall or warranty claims for products which are in the field but where a
specific issue has not been reported.
11. Events after the balance sheet date
On 26 August 2021 the Company announced the proposed acquisition of the entire
issued share capital of Irvine Electronics, Inc. ("Irvine") for a total
consideration of $16.4 million, on a debt-free basis. The acquisition
completed on 29 October 2021 subsequent to the period end.
On 8 October 2021 the Company announced the proposed acquisition of the entire
issued share capital of Prodamex SA de CV ("Prodamex") and Terminal &
Cable TC Inc. ("TC") for a total consideration of CAD$22.5 million, on a
debt-free basis. The acquisition is expected to complete in Q3 FY2022 subject
to customary closing conditions including regulatory approvals in Canada.
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