REG - Volex PLC - Half-year Report
15/11/2024 07:00
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RNS Number : 3414M Volex PLC 15 November 2024
15 November 2024
Volex plc
Half year results for the 26 weeks ended 29 September 2024
Continued strong organic growth, with margins maintained,
full year expectations unchanged
Volex plc ("Volex", the "Company", or the "Group"), the specialist integrated
manufacturer of critical power and data transmission products, today announces
its half year results for the 26 weeks ended 29 September 2024 ("H1 FY2025").
Financial Summary 26 weeks to 26 weeks to % Change
29 September 2024 1 October 2023
Revenue $518.2m $397.5m 30.4%
Underlying(1) operating profit $47.6m $37.4m 27.3%
Statutory operating profit $36.6m $25.8m 41.9%
Underlying(1) profit before tax $37.5m $33.6m 11.6%
Statutory profit before tax $26.5m $22.0m 20.5%
Underlying(1) basic earnings per share 15.2c 14.9c 2.0%
Statutory basic earnings per share 10.4c 8.8c 18.2%
Interim dividend (per share) 1.5p 1.4p 7.1%
Net debt(2) $204.5m $173.7m 17.7%
Net debt (before operating lease liabilities)(3) $154.3m $140.6m 9.7%
(1) Before adjusting items and share-based payment charge (see note 3 for more
details)
(2) Represents cash and cash equivalents, less bank loans, debt issue costs
and lease liabilities
(3) Represents net debt including finance leases, but excluding pre-IFRS16
operating lease liabilities (see note 14 for more details)
Financial and strategic highlights
· Group revenue increased by 30.4% to $518.2m (H1 FY2024: $397.5m)
including strong organic growth of 9.7% with notable increases in Electric
Vehicles and Consumer Electricals sales
· Continued to invest in incremental capacity and delivering major
new customer programmes in key locations to support future growth, in line
with the plans set out at the full year presentation
· Underlying operating margin maintained comfortably within the
target range
· Period-end net debt covenant leverage in line with last year
following growth investments in H1 FY2025
· Considerable integration activity continuing in Türkiye,
delivering productivity improvements as well as price increases being rolled
out to offset inflationary employment cost
· Interim dividend increased by 7.1% to 1.5 pence per share
· Continued progress towards the five-year plan, supported by a
strategic investment programme expanding capacity and capabilities
Market highlights
· Electric Vehicles - very strong organic growth of 39.5%, which
includes the production of complex high voltage connectors in Mexico for a
major customer
· Consumer Electricals - return to growth following a period of
destocking, delivering organic growth of 7.5%
· Medical - organic revenues declined by 4.2% as anticipated
against a strong comparative period that included one-off catch-up
· Complex Industrial Technology - overall organic growth of 4.1%,
with significant positive momentum in data centre products offsetting softer
demand from other industrial customers
· Off-Highway - organic revenue growth of 6.8% in Türkiye and
41.4% in the rest of the world, demonstrating our ability to grow and take
share in this market. This sector included a full six months of revenue from
Murat Ticaret, which was acquired in the prior year
Outlook
· Trading in early H2 is encouraging, continuing H1's momentum,
while recognising that second half comparatives are tougher
· Exposure to diverse, specialist and structurally growing end
markets supports confidence in ability to grow
· Targeted investment programme continues which will support
delivery of long-term growth opportunities
· Board reiterates confidence in the Group's ability to meet
full-year expectations as well as achieve our five-year plan targets
Nat Rothschild, Volex's Executive Chairman said:
"The strong performance during the period demonstrates once again that our
strategy is working. We play a vital role for our customers, providing
advanced manufacturing expertise in specialist, complex areas. Our unique
capabilities, combined with a commitment to service and quality, ensure we
meet the highest standards across all projects.
"By targeting five core markets, we have strategically deepened our reach and
enhanced our sectoral diversification. This, alongside our diverse customer
base, has enabled us to secure major global projects and drive our business
forward.
"Our investment approach is measured and purposeful, aligned with our focus on
generating market-leading returns. We have a talented team, a resilient
business, and a clear strategy, all of which position us well for sustained,
profitable growth and solid performance.
"Our delivery to date, at the halfway point in our five-year plan, gives us
increased conviction in our ability to achieve our goal of securing revenues
of $1.2 billion by the end of FY2027 at an underlying operating margin of
9-10%.
"The progress we have made in the first half, combined with our ongoing growth
investment, gives us confidence in our ability to meet full year
expectations."
Analyst Presentation
A live presentation for analysts will be held via conference call and in
person at Vintry & Mercer, 19-20 Garlick Hill, London EC4V 2AU, at 9.00 am
GMT today, 15 November 2024. If you are an analyst and would like to join for
this briefing, please send an email to Volex@sodali.com. Log in details for
the meeting will be communicated to attendees.
Investor Presentation
A live presentation will be held online at 3.30 pm GMT on 15 November 2024 on
the Investor Meet Company ("IMC") platform. This online presentation is open
to all existing and potential shareholders. Questions can be submitted during
the live presentation.
Investors can sign up to IMC and add to meet Volex via:
https://www.investormeetcompany.com/volex-plc/register-investor
(https://www.investormeetcompany.com/volex-plc/register-investor)
For further information please contact:
Volex plc +44 1256 442570
Nat Rothschild, Executive Chairman investor.relations@volex.com
Jon Boaden, Chief Financial Officer
Peel Hunt LLP - Nominated Adviser and Joint Broker +44 20 7418 8900
Ed Allsopp
Dom Convey
Tom Graham
HSBC Bank plc - Joint Broker +44 20 7991 8888
Simon Alexander
Joe Weaving
Stephanie Cornish
Sodali & Co. - Media +44 20 7250 1446
enquiries
James White
Nicholas Johnson
About Volex plc
Volex plc (AIM:VLX) is a driving force in integrated manufacturing for
mission-critical applications and a global leader in power and data
connectivity solutions. Our diverse operations support international blue-chip
customers in five key sectors: Electric Vehicles, Consumer Electricals,
Medical, Complex Industrial Technology and Off-Highway. Headquartered in the
UK, we orchestrate operations across 28 advanced manufacturing facilities,
uniting 14,000 dynamic individuals from 25 different nations. Our
extraordinary products find their way to market through our localised sales
teams and authorised distributor partners, supporting Original Equipment
Manufacturers and Electronic Manufacturing Services companies across the
globe. In a world that grows more digitally complex by the day, customers
trust us to deliver power and connectivity that drives everything from
household essentials to life-saving medical equipment. Learn more at
www.volex.com (http://www.volex.com) .
Definitions
The Board of Volex considers that the current consensus market expectation for
revenue is $1,026.9 million (with a range of $1,019 million to $1,034 million)
and for underlying operating profit of $96.8 million (with a range of $95.7
million to $97.6 million).
The Group presents some significant items separately to provide clarity on the
underlying performance of the business. This includes significant one-off
costs 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 payment expense.
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 operating lease liabilities) represents cash and cash
equivalents, less bank loans, debt issue costs and finance leases, but
excluding operating lease liabilities. The lease liabilities include $50.2
million of operating lease liabilities ($33.1 million at 1 October 2023).
Covenant leverage is net debt (before operating lease liabilities) divided by
underlying EBITDA adjusted for depreciation of right-of-use assets and
pro-rated for acquisitions.
Organic revenue growth is calculated using constant exchange rates by taking
the total reported revenue (excluding the impact of acquisitions and
disposals) divided by the preceding financial year's revenue at the current
year's exchange rates.
Return on capital employed is calculated as the last twelve months underlying
operating profit as a percentage of average net assets excluding net
cash/debt.
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 29 September 2024
Overview
The continuing positive momentum for the Group reflects its role as a critical
manufacturing partner for its global blue-chip customers, providing complex
and safety-critical solutions. The Group continues to perform well across
multiple sectors, serving a diverse range of customers, achieving strong
organic growth and attractive returns.
During the period, total revenue, including acquisitions, grew 30.4% compared
to the prior period. At constant exchange rates, organic revenue growth was
9.7%.
Demand for our power products amongst Electric Vehicles and Consumer
Electricals customers has recovered strongly, rebounding from the destocking
seen in the prior year. In Medical and Complex Industrial Technology, improved
component availability resulted in some one-off catch up in the previous year
with revenue from certain customer accounts down year-on-year. The performance
in Data Centres has remained strong given continued demand for high-speed
cables to support data-intensive artificial intelligence applications.
Volex's diverse end-market exposure is a fundamental strength, significantly
reducing dependency on individual sectors or customers. In recent years, we
have extended this diversity, establishing leading positions in critical
markets characterised by long-term structural drivers, such as Electric
Vehicles, Medical, Complex Industrial Technology and Off-Highway.
The company's ability to serve a broad customer base and add value to vital
production processes has resulted in strong overall growth, even in a
challenging manufacturing environment. Despite some short-term shifts in
demand, profitability has been maintained through careful cost control and
agile resource management. This is supported by strong procurement practices
and an active, continuous improvement programme across all sites.
The underlying operating margin for the first half of the year was 9.2%. This
is the fifth consecutive year in which margins have been maintained within the
9% to 10% target range, demonstrating the consistency and flexibility of the
operating model and the Group's ability to manage and pass through
inflationary cost challenges in a dynamic market, whilst continuing to invest
in future growth.
Trading performance overview
The half year to 29 September 2024 has seen the Group continue to grow whilst
maintaining margins within the target range and investing in growth.
$m 26 weeks ended 26 weeks ended
29 September 1 October
2024 2023
Total Total
Revenue 518.2 397.5
Cost of Sales (405.1) (306.3)
Gross profit* 113.1 91.2
Gross margin 21.8% 22.9%
Underlying operating costs* (65.5) (53.8)
Underlying operating profit* 47.6 37.4
Underlying operating margin 9.2% 9.4%
Underlying EBITDA* 61.3 46.8
* Before adjusting items and share-based payment charges
Revenue for the first half of the year rose by 30.4% including six months
revenue from Murat Ticaret, with organic growth of 9.7%. Organic growth
includes some new customer projects in addition to improved demand from
customers who were destocking during the prior year. Gross margins declined
year-on-year due to the product mix effect of the Murat Ticaret acquisition,
though overall gross margin aligns with the second half of FY2024.
The underlying operating margin was 9.2%, slightly below the 9.4% reported for
the same period last year and includes the costs of strategic capacity and
capability enhancement to support growth. Underlying profit before tax
increased by 11.6% to $37.5 million, and underlying basic earnings per share
rose by 2.0% to 15.2 cents. Statutory profit before tax, which includes the
impact of adjusting items and share-based payment expenses, was $26.5 million,
an increase of 20.5% on the prior period. The underlying effective tax rate
for the period was 23.7% (H1 FY2024: 22.9%), with the increase primarily
attributable to the recognition of deferred tax assets in the comparative
period that did not repeat in H1 FY2025, an increase in non-deductible
expenses, and a lower impact from investment tax incentives.
Underlying free cash flow for the first half of the year was an outflow of
$11.5 million (H1 FY2024: $11.9 million inflow) which includes capital
investments and working capital increases to support future growth and
interest and tax payments. Net debt excluding operating leases increased by
$33.2 million from the year end, predominantly due to both the operational and
capital investment to support the long-term growth of the Group. Covenant
leverage, expressed as the ratio of net debt excluding operating leases to
covenant EBITDA, was 1.3x (H1 FY2024: 1.3x). This provides headroom for future
investment and acquisitions.
Interim dividend
The Board has declared an interim dividend of 1.5 pence, an increase of 7.1%
on the previous year, and remains committed to a progressive dividend policy,
striking a balance between delivering growth through investment and returning
cash to shareholders.
The interim dividend will be paid on 9 January 2025 to those shareholders on
the register on 29 November 2024. The ex-dividend date will be 28 November
2024.
Realising our strategy
The Group has a clear strategy to capitalise on its strong position within
specialised manufacturing markets where it supplies critical power and data
connectivity solutions to its customers. The strategy is achieved through a
clear focus on core capabilities, key markets, operational excellence,
investment in growth and talent.
Through exceptional quality, production engineering and state of the art
manufacturing facilities, we have become a trusted manufacturing partner to
our global customers. Investment in key facilities and our global footprint
enables us to support customers navigating the challenges of global trade
tariffs. Specifically, we offer several cost-effective manufacturing solutions
for those seeking to relocate production from China.
Research and development activity has allowed us to broaden our product range,
working closely with customers to understand their specific needs while making
strategic investments to expand our capacity and capabilities in order to
better support them. We are particularly focused on continuing to develop a
range of innovative products for Electric Vehicle and Data Centre customers.
These products are designed and marketed to address the specific technical
challenges our customers face.
We are always guided by customer needs when making these investments, which
typically have a two-year payback period. We also assess potential acquisition
opportunities and identify a pipeline of future acquisition targets. Although
we have not made any acquisitions in the period, we have made good progress
integrating Murat Ticaret, the off-highway harness business we acquired last
year.
Our success relies on exceptional people. We continue to strengthen our team
by hiring talented leaders and fostering development opportunities for
employees. Effective communication is essential, and we leverage various
channels to enhance employee engagement.
By continuing to focus on our strategy, our markets and our customers, we are
delivering strong growth. This momentum underpins our confidence in delivering
the five-year plan of securing revenues of $1.2 billion by the end of FY2027
at an underlying operating margin of 9-10%.
Revenue by reportable segment
Volex is a global, interconnected, and integrated business. There is an
increasing and accelerating requirement from customers to have manufacturing
in multiple locations, reducing the risk of supply chain disruption from any
single country. Our global footprint, with manufacturing capabilities in
multiple locations, is a significant differentiator in supporting the
objectives of our blue-chip customers.
We operate with a regional focus to meet this need and therefore analyse our
customer revenue geographically on this basis, with classification depending
on where the customer relationship is held, reflecting our customer-centric
nature.
North America is our largest customer region at 42.4% of overall revenue (H1
FY2024: 44.6%), where we collaborate with some of the world's major technology
companies. Revenue in this market grew by 24.1% to $219.8 million (H1 FY2024:
$177.1 million). This reflects the strong growth that we experienced from
Electric Vehicle and Data Centre customers in the period and the impact of the
prior year acquisition of Murat Ticaret.
Asia revenue increased by 14.4% to $96.9 million (H1 FY2024 $84.7 million) and
comprises 18.7% of Group revenue (H1 FY2024: 21.3%). The growth was largely
due to inYantra, which benefits from exposure to the rapidly expanding Indian
market, whilst the end of the destocking cycle in Consumer Electricals was a
positive factor.
Revenues in Europe grew by 48.5% to $201.5 million (H1 FY2024: $135.7 million)
and now make up 38.9% of Group revenue (H1 FY2024: 34.1%). The majority of
this increase results from the impact of the acquisition of Murat Ticaret,
which completed last year. In Europe, the markets experienced variable demand
as the destocking cycle had a positive impact on Consumer Electricals
products, but year-on-year demand was lower for some Medical and Complex
Industrial Technology customers.
Revenue by customer sector
Electric Vehicles
Electric Vehicles revenues increased to $79.5 million (H1 FY2024: $57.4
million), representing organic growth of 39.5% against a weaker comparative
period in which customers were undergoing destocking. Revenue in the first
half also benefited from a major new programme with a leading global North
American automotive manufacturer. This involves the supply of complex
high-voltage connectors from our newly expanded, highly automated production
facility in Mexico. Annualised revenues are expected to exceed $30 million as
this project scales up.
Following the announcement in the prior period that Volex had become a
licensed partner of Tesla for the North American Charging Standard ("NACS") EV
Charging system, several new projects have been secured utilising our
expertise in this field. This underlines Volex's position as a trusted
manufacturing partner to the world's leading EV manufacturing companies and
suppliers.
Medium-term demand for electric vehicles is expected to continue to experience
growth, with legislative support in key markets encouraging continued adoption
of this technology. The Group is positioned to grow, not only due to higher
vehicle volumes, but also by identifying additional specialist manufacturing
opportunities within the EV supply chain.
Consumer Electricals
Consumer Electricals revenues increased to $131.7 million (H1 FY2024: $122.8
million), representing organic growth of 7.5%. The majority of this growth was
due to higher volumes, with a lesser element due to pass through of higher raw
material costs, such as copper.
Last year, Consumer Electricals demand declined to reflect a normalisation in
consumer spending patterns and customer destocking. Demand picked up in the
final quarter of FY2024 and continued to increase through the first half of
the year, demonstrating that destocking, in this segment, is largely over.
Volex's competitive manufacturing base, achieved through a strategic mix of
geographic reach, automation, continuous improvement and vertical integration,
provides significant value to customers. This combination ensures competitive
pricing and effective support across diverse markets. As a result, we are
securing new customer projects and are well-positioned for sustained growth as
customer inventory levels have stabilised.
Medical
As anticipated, Medical demand was down slightly in the period, against a
strong comparative period, when improved component availability allowed
customers to address significant backlogs. In addition, some customers are
currently focusing on inventory management to align production schedules with
end consumer demand, resulting in revenue decreasing to $82.3 million (H1
FY2024: $86.1 million), reflecting an organic decline of 4.2%.
Longer term, growth levels are expected to normalise once customer inventories
have stabilised. For some customers, this stabilisation is likely to occur in
the next financial year. The Group supports numerous advanced medical
technology customers and has recently onboarded some significant global names.
With its extensive global footprint and medical-grade manufacturing
facilities, Volex is well-positioned to support its customers and capitalise
on developing market trends.
Complex Industrial Technology
Sales to Complex Industrial Technology customers grew organically by 4.1% to
$104.7 million (H1 FY2024: $100.6 million). Sales to Data Centre customers
were up significantly, driven by growing global investment in artificial
intelligence, and now represents 46% of revenues in this sector.
Demand was lower for other industrial customers, with some programmes running
down as customer technology platforms went end of life. On the positive side,
new projects, particularly with HVAC customers, were secured and either began
production in the first half or are expected to commence in the second half,
which will help offset this decline as they ramp up.
This sector benefits from significant diversification, both in terms of
customer end-markets and capabilities. A wide range of solutions, combined
with a presence in key strategic locations, provides a strong competitive
edge. This breadth not only enhances the company's ability to win new customer
projects but also creates valuable cross-selling opportunities across
different markets.
Off-Highway
Total Off-Highway revenue was $120.0 million (H1 FY2024: $30.6million) with
organic growth of 20.5%. The acquisition of Murat Ticaret at the end of August
last year contributed an additional $84.8 million revenue in the first five
months of H1 FY2025. Organic growth for the Murat Ticaret business was 6.8%.
Off-Highway focuses on supplying complex wire harnesses, power connectivity
components and connectors to manufacturers serving specialised vehicle
markets. These markets include agricultural machinery, passenger transport
vehicles such as coaches, construction equipment, material handling vehicles,
such as forklifts, and specialised defence vehicles.
We continue to invest in and focus on the significant cross-selling
opportunities within this market that were opened up through the acquisition
of Murat Ticaret, particularly in the large, highly fragmented North American
market.
Gross margin
The gross margin in the first half of the year was 21.8% (H1 FY2024: 22.9%),
consistent with the 21.8% achieved in the second half of FY2024. There are a
number of factors which affect gross margin. There was an adverse impact due
to labour inflation in Türkiye which is not currently being offset by a
devaluation of the local currency. For our domestic Türkiye-based customers
we have contractual rights to pass on the cost impact of inflation. For export
customers, negotiations are underway regarding price increases. We are also
accelerating our planned productivity and efficiency initiatives in Murat
Ticaret, as well as hedging foreign exchange movements to manage the impact.
Gross margin improvements due to product mix (including strong demand for Data
Centre products) and productivity improvements broadly offset the adverse
impacts on margin from labour inflation in Türkiye.
Underlying operating profit
Underlying operating costs increased by $11.7 million to $65.5 million (H1
FY2024: $53.8 million). $4.8 million of the increase was attributable to the
acquisition of Murat Ticaret at the end of August last year. Foreign exchange
rate changes had a negative impact of $1.2 million, and inflationary pressures
also contributed to increased labour costs year-on-year. The remaining
increase reflects business growth and investments in expanding capabilities
and capacity. Underlying operating costs as a percentage of revenue improved
to 12.6% (H1 FY2024: 13.5%), due to the lower cost base of Murat Ticaret.
Underlying operating profit rose by 27.3% to $47.6 million (H1 FY2024: $37.4
million), benefiting from both organic growth and the acquisition of Murat
Ticaret. The underlying operating margin for the first half was 9.2%, slightly
below the 9.4% reported in H1 FY2024. Productivity and cost optimisation
improved operating margins by 0.9%, while improvements in product mix
contributed a further 0.4%. Offsetting this were adverse impacts from
inflation of 0.1%, foreign exchange rates of 0.3% and the impact of investment
in capacity and growth of 1.2% which arose from additional facility and people
costs required to deliver growth.
Adjusting items and share-based payments
The Group presents some significant items separately to provide clarity on the
underlying performance of the business. This includes significant one-off
costs such as restructuring and acquisition-related costs, the non-cash
amortisation of intangible assets acquired as part of business combinations,
and share-based payments, as well as associated tax.
Adjusting items and share-based payments totalled $11.0 million in the period
(H1 FY2024: $11.6 million). These costs are made up of $6.7 million (H1
FY2024: $5.8 million) of amortisation of acquired intangible assets, $2.6
million (H1 FY2024: $3.0 million) of share-based payments expense, $1.5
million (H1 FY2024: $2.8 million) of acquisition related costs and $0.2
million related to the prior year cyber-security incident.
Net finance costs
Net finance costs increased to $12.0 million (H1 FY2024: $5.4 million).
Average net debt over the period was higher than in the previous year due to
the acquisition of Murat Ticaret in August 2023, resulting in higher net
interest on bank loans, overdrafts and deposits of $6.1 million (H1 FY2024:
$3.6 million). The financing element for leases for the period was $2.1
million (H1 FY2024: $1.2 million), which increased due to the acquisition of
Murat Ticaret in the prior year and the site expansion in Mexico.
Finance costs also included $1.2 million for the unwinding of the discount on
deferred consideration for the Murat Ticaret acquisition (H1 FY2024: $0.2
million). Following the refinancing of the Group's banking facilities in June
2024, debt issuance costs from the previous facility were written off,
resulting in a $1.3 million charge.
In September 2022, the Group entered into an interest rate swap in respect of
$50 million of drawn debt. This fixes the interest on this element of the debt
to provide stability should there be variability in interest rates over a
three-year period.
Taxation
The underlying tax charge of $8.9 million (H1 FY2024: $7.7 million) represents
an underlying ETR of 23.7% (H1 FY2024: 22.9%). The increase in underlying ETR
is primarily attributable to the recognition of deferred tax assets in H1
FY2024 that did not repeat in H1 FY2025, an increase in non-deductible
expenses including the unwinding of the discount on acquisition contingent
consideration, and a lower impact from investment tax incentives. This was
partially offset by the net favourable effect of foreign exchange and
inflation adjustments for tax purposes in entities where the tax and
functional currencies are different, primarily in Türkiye.
Cash tax paid during the period was $8.4m (H1 FY2024: $6.6m), representing an
underlying cash ETR of 22.4% (H1 FY2024: 19.6%). The increase is mainly driven
by Murat Ticaret which was only part of the Group for 1 month of H1 FY2024.
Net debt and cash flows
Underlying EBITDA increased by 31.0% to $61.3 million (H1 FY2024: $46.8
million). Underlying free cash flow was an outflow of $11.5 million (H1
FY2024: inflow of $11.9 million). This included a working capital outflow of
$32.2 million, as well as net capital expenditure of $26.4 million and tax and
net interest paid of $14.2 million. In previous periods, the Group has been
more cash generative in the second half of the year.
The working capital outflow was driven by several factors, including a $6.9
million investment in working capital to support normal business growth in H1
FY2025. An additional $7.4 million was allocated to inventory in the Murat
Ticaret business to address supply chain bottlenecks following the
acquisition. A further $8.4 million was used to increase buffer stock to
support production relocation and prepare for new projects launching in the
second half of the year.
The remainder of the outflow was linked to normal seasonality including
certain significant payments that are made annually. Working capital is
closely monitored at both the factory and regional levels, with ongoing
initiatives to ensure it is optimised effectively. Total working capital is
expected to remain broadly at these levels in the remainder of the year
supporting an improvement in cash generation in the second half.
Interest payments increased compared to H1 FY2024 due to higher debt levels,
and following particularly low levels of net debt from June to August last
year supported when the proceeds of the equity raise were held on deposit
prior to the completion of the Murat Ticaret acquisition. There was also an
increase in cash tax payments, mainly due to taxes related to Murat Ticaret,
acquired at the end of the corresponding period.
Net debt (before operating lease liabilities) increased to $154.3 million
(from $121.1 million at 31 March 2024), primarily due to investment in capital
expenditure and working capital. Operating lease liabilities stood at $50.2
million ($32.9 million at 31 March 2024), resulting in a statutory net debt
position of $204.5 million (FY2024: $154.0 million).
Acquisition strategy
Acquiring high-quality businesses at compelling valuations remains central to
our strategic approach. Our focus is on identifying acquisition targets in
sectors where we have extensive expertise, particularly those with strong
customer relationships and established capabilities.
Our acquisition pipeline is rigorously managed to prioritise opportunities
that enhance the Group's value proposition and expand our reach in existing or
related markets. Given evolving global supply chain dynamics, we also consider
the strategic geographic locations of potential acquisitions. We only pursue
acquisitions requiring significant integration or restructuring where we are
confident we have the managerial resources needed.
Since restarting acquisitions in FY2019, we have successfully completed
twelve, representing a total investment of approximately $400 million,
refining a structured approach and demonstrating a strong track record in
execution.
The integration of our largest acquisition to date, Murat Ticaret, is
progressing well. The business has a robust operating culture focused on
delivering high-quality production on time to a diverse customer base with
complex needs and we have identified several areas for improvement in
back-office functions. Further targeted investments and support from our team
will ensure that Murat Ticaret is well-positioned to adopt best-in-class
manufacturing and reporting practices already implemented across our Group.
Investing in our business
With a focus on delivering profitable organic growth, we continue to make
strategic operational and capital investments that enhance our capabilities.
Investment decisions are made with careful consideration, placing customer
demand and project payback at the centre of the approval process. During the
first half of the year, our global manufacturing footprint increased by 15%
due to facility expansions in Indonesia, India and Mexico. These investments
were delivered in good time to support the requirements of customers who are
localising production. Further expansions are due for completion in Türkiye
in the second half of the year and in Mexico in FY2026.
Net capital expenditure for the first half of the year was $26.4 million (H1
FY2024: $16.0 million), approximately 5% of revenue (H1 FY2024: 4%). In H1
FY2025, we made $5.0 million of incremental operational investment, which
encompasses additional facility costs, increased deprecation from incremental
capital investment and costs associated with scaling our operations, such as
recruiting additional sales and engineering employees. These essential and
targeted expenditures position us for sustainable long-term success. We also
expanded our research and development activities, allowing us to deliver new
and innovative products aimed at the Electric Vehicles and Data Centre
markets. The investments we make in our business continue to deliver strong
returns with return on capital employed of 19.6% (H1 FY2024: 20.5%) in the
twelve months to 29 September 2024.
Risks and uncertainties
Volex proactively anticipates and assesses risks, enhancing internal controls
where necessary to mitigate them. Key risks that could materially impact the
Group's financial performance include competitive threats, legal and
regulatory issues, dependency on key suppliers or customers, fluctuations in
commodity prices or exchange rates, and quality issues. These risks and the
relevant risk-mitigation activities are set out in the FY2024 Annual Report
and Accounts on pages 49 to 55, a copy of which is available on the website at
www.volex.com (http://www.volex.com) .
Outlook
Volex is well-positioned to maintain positive momentum and seize new
opportunities. Our success in securing new projects highlights the strength of
our global capabilities and extensive manufacturing footprint, reinforcing our
competitive edge across diverse markets. Broad market exposure not only
enhances operational resilience but also enables us to drive growth through
different economic cycles.
Early trading in the first month of the second half of FY2025 has been
encouraging, continuing the momentum seen in the first half, while being
mindful of strong second half comparatives.
Our ongoing investment program, set to continue through the remainder of the
year, underlines our commitment to long-term growth by enhancing operational
capabilities and supporting future expansion.
The Board remains confident in the Group's ability to meet full-year
expectations, driven by our strategic direction and operational strength. With
these solid foundations, we are also on track to achieve our ambitious
five-year plan, positioning Volex for sustained success and value creation.
Nat
Rothschild
Jon Boaden
Executive
Chairman
Chief Financial Officer
14 November 2024
14 November 2024
Unaudited Consolidated Income
Statement
For the 26 weeks ended 29 September 2024 (26 weeks ended 1 October 2023)
26 weeks ended 29 September 2024 26 weeks ended 1 October 2023
Before Adjusting Total Before Adjusting Total
adjusting items and share based payments items and share-based payments adjusting items and share based payments items and share-based payments
(note 3) (note 3)
Notes $'m $'m $'m $'m $'m $'m
Revenue 2 518.2 - 518.2 397.5 - 397.5
Cost of sales (405.1) - (405.1) (306.3) - (306.3)
Gross profit 113.1 - 113.1 91.2 - 91.2
Operating expenses (65.5) (11.0) (76.5) (53.8) (11.6) (65.4)
Operating profit 2 47.6 (11.0) 36.6 37.4 (11.6) 25.8
Share of net profit from associates 1.9 - 1.9 1.6 - 1.6
Finance income 0.5 - 0.5 0.3 - 0.3
Finance costs 4 (12.5) - (12.5) (5.7) - (5.7)
Profit on ordinary activities before taxation 37.5 (11.0) 26.5 33.6 (11.6) 22.0
Taxation 5 (8.9) 2.2 (6.7) (7.7) 1.2 (6.5)
Profit for the period 28.6 (8.8) 19.8 25.9 (10.4) 15.5
Profit is attributable to:
Owners of the parent 28.1 (8.8) 19.3 25.4 (10.3) 15.1
Non-controlling interests 0.5 - 0.5 0.5 (0.1) 0.4
28.6 (8.8) 19.8 25.9 (10.4) 15.5
Earnings per share (cents)
Basic 6 15.2 10.4 14.9 8.8
Diluted 6 15.1 10.4 14.2 8.4
( )
(
)
( )
Audited Consolidated Income
Statement
For the 52 weeks ended 31 March 2024
52 weeks ended 31 March 2024
Before Adjusting Total
Adjusting items and share based payments items and share-based payments
(note 3)
Notes $'m $'m $'m
Revenue 2 912.8 - 912.8
Cost of sales (710.0) - (710.0)
Gross profit 202.8 - 202.8
Operating expenses (113.1) (25.8) (138.9)
Operating profit 2 89.7 (25.8) 63.9
Share of net profit from associates 3.2 - 3.2
Finance income 1.3 - 1.3
Finance costs 4 (16.8) - (16.8)
Profit on ordinary activities before taxation 77.4 (25.8) 51.6
Taxation 5 (15.9) 4.5 (11.4)
Profit is attributable to:
Owners of the parent 60.5 (21.2) 39.3
Non-controlling interests 1.0 (0.1) 0.9
61.5 (21.3) 40.2
Earnings per share (cents)
Basic 6 33.7 21.8
Diluted 6 33.0 21.4
Unaudited Consolidated Statement of Comprehensive Income
For the 26 weeks ended 29 September 2024 (26 weeks ended 1 October 2023)
(Audited)
26 weeks to 26 weeks to 52 weeks to
29 September 2024 1 October 2023 31 March 2024
$'m $'m $'m
Profit for the period 19.8 15.5 40.2
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension schemes (0.6) (0.2) (0.2)
Tax relating to items that will not be reclassified 0.2 - 0.1
(0.4) (0.2) (0.1)
Items that may be reclassified subsequently to profit or loss:
(Loss)/gain arising on cash flow hedges during the period (1.6) (1.7) 0.1
Exchange gain/(loss) on translation of foreign operations 7.8 (5.4) 0.7
Tax relating to items that may be reclassified - 1.0 (0.2)
6.2 (6.1) 0.6
Other comprehensive income/(expense) for the period 5.8 (6.3) 0.5
Total comprehensive income for the period is attributable to:
Owners of the parent 25.2 8.9 39.9
Non-controlling interests 0.4 0.3 0.8
25.6 9.2 40.7
Unaudited Consolidated Statement of Financial
Position
As at 29 September 2024 (1 October 2023) RESTATED(1) (Audited)
29 September 2024 1 October 31 March
Note $'m 2023 2024
$'m $'m
Non-current assets
Goodwill 125.0 119.2 121.4
Other intangible assets 129.5 136.2 131.7
Property, plant and equipment 110.5 85.1 91.8
Right of use assets 52.1 39.4 38.4
Interests in associates 10.0 6.5 8.1
Other receivables 1.5 1.4 2.0
Derivative financial instruments 0.3 2.1 1.5
Retirement benefit assets 1.3 - 0.4
Deferred tax assets 26.5 25.5 25.9
Long term financial assets 1.0 - -
457.7 415.4 421.2
Current assets
Inventories 209.4 182.5 174.3
Trade receivables 205.0 182.7 187.6
Other receivables 25.0 14.6 23.4
Current tax assets 1.3 0.5 1.8
Derivative financial instruments 0.8 0.3 1.0
Cash and bank balances 9 18.4 47.2 29.8
459.9 427.8 417.9
Total assets 917.6 843.2 839.1
Current liabilities
Borrowings 9 4.0 0.5 3.3
Lease liabilities 22.7 17.5 21.3
Trade payables 137.3 118.6 133.1
Other payables 114.8 125.2 101.4
Current tax liabilities 16.8 17.3 18.3
Retirement benefit obligation - 0.4 -
Provisions 3.6 3.2 2.9
Derivative financial instruments 1.3 2.2 0.4
300.5 284.9 280.7
Net current assets 159.4 142.9 137.2
Non-current liabilities
Borrowings 9 165.6 181.4 143.1
Non-current lease liabilities 30.6 21.5 16.1
Other payables 29.7 1.5 26.9
Deferred tax liabilities 28.4 31.8 28.2
Retirement benefit obligation 9.7 9.8 7.5
Provisions 0.5 0.4 1.0
264.5 246.4 222.8
Total liabilities 565.0 531.3 503.5
Net assets 352.6 311.9 335.6
Equity attributable to owners of the parent
Share capital 7 69.6 69.5 69.6
Share premium account 62.0 62.1 62.0
Non-distributable reserve 2.5 2.5 2.5
Hedging and translation reserve (7.6) (20.6) (13.9)
Own shares 8 (3.2) (1.0) (4.3)
Retained earnings 220.5 191.5 211.3
Total attributable to owners of the parent 343.8 304.0 327.2
Non-controlling interests 8.8 7.9 8.4
Total equity 352.6 311.9 335.6
(1) The interim results for the 26 weeks ended 1 October 2023 have been
restated to incorporate measurement period adjustments arising under IFRS 3
Business Combinations following the acquisition of Murat Ticaret in August
2023. See note 11 for further details.
Unaudited Consolidated Statement of Changes in Equity
For the 26 weeks ended 29 September 2024 (26 weeks ended 1 October 2023)
Share capital Share premium account Hedging and Own shares Retained earnings Equity attribut-able to owners
trans-lation reserve
Non-distribut-able reserves Non-cont-rolling interests
Total equity
$'m $'m $'m $'m $'m $'m $'m $'m $'m
Balance 31 March 2024 69.6 62.0 2.5 (13.9) (4.3) 211.3 327.2 8.4 335.6
Profit for the period - - - - - 19.3 19.3 0.5 19.8
Other comprehensive income/(expense) for the period - - - 6.3 - (0.4) 5.9 (0.1) 5.8
Total comprehensive income for the period - - - 6.3 - 18.9 25.2 0.4 25.6
Own shares sold/(utilised) in the period - - - - 5.6 (5.6) - - -
Own shares purchased in the period - - - - (4.5) - (4.5) - (4.5)
Dividend - - - - - (6.5) (6.5) - (6.5)
Scrip dividend related share issue - - - - - 0.2 0.2 - 0.2
Reserve entry for share option charges - - - - - 1.8 1.8 - 1.8
Tax effect of share options - - - - - 0.4 0.4 - 0.4
Balance at 29 September 2024 69.6 62.0 2.5 (7.6) (3.2) 220.5 343.8 8.8 352.6
Unaudited Consolidated Statement of Changes in Equity (continued)
For the 26 weeks ended 29 September 2024 (26 weeks ended 1 October 2023)
Share capital Share premium account Hedging and Own shares Retained earnings Equity attribut-able to owners
trans-lation reserve
Non-controll-ing interests
Non-distribut-able reserves
Total equity
$'m $'m $'m $'m $'m $'m $'m $'m $'m
Balance 2 April 2023 62.7 60.7 2.5 (14.6) (1.0) 115.0 225.3 7.4 232.7
Profit for the period - - - - - 15.1 15.1 0.4 15.5
Other comprehensive (expense)/income for the period - - - (6.0) - (0.2) (6.2) (0.1) (6.3)
Total comprehensive (expense)/income for the period - - - (6.0) - 14.9 8.9 0.3 9.2
Business combination - - - - - - - 0.2 0.2
Own shares sold/(utilised) in the period - - - - 1.2 (1.2) - - -
Own shares purchased in the period - - - - (1.2) - (1.2) - (1.2)
Dividend - - - - - (6.1) (6.1) - (6.1)
Scrip dividend related share issue 0.1 (0.1) - - - 1.8 1.8 - 1.8
Shares issued 6.7 1.5 - - - 64.1 72.3 - 72.3
Reserve entry for share option charges - - - - - 2.5 2.5 - 2.5
Tax effect of share options - - - - - 0.5 0.5 - 0.5
Balance at 1 October 2023 69.5 62.1 2.5 (20.6) (1.0) 191.5 304.0 7.9 311.9
Unaudited Consolidated Statement of Cash Flows
For the 26 weeks ended 29 September 2024 (26 weeks ended 1 October 2023)
(Audited)
26 weeks to 26 weeks to 52 weeks to
29 September 2024 1 October 2023 31 March 2024
Notes
$'m $'m $'m
Profit for the period 19.8 15.5 40.2
Adjustments for:
Finance income (0.5) (0.3) (1.3)
Finance costs 12.5 5.7 16.8
Income tax expense 6.7 6.5 11.4
Share of net profit from associates (1.9) (1.6) (3.2)
Depreciation of property, plant and equipment 7.3 5.0 12.3
Depreciation of right-of-use asset 4.8 3.4 7.4
Amortisation of intangible assets 8.3 6.8 15.6
Share option charge 2.6 3.0 6.3
Contingent consideration adjustment - (1.3) (1.3)
Decrease in provisions - (0.9) (1.5)
Operating cash flow before movements in working capital 59.6 41.8 102.7
Increase in inventories (31.9) (16.3) (5.6)
Increase in receivables (15.7) (5.4) (17.4)
Increase in payables 15.5 16.1 24.9
Movement in working capital (32.1) (5.6) 1.9
Cash generated by operations 27.5 36.2 104.6
Cash generated by operations before adjusting items 29.1 38.0 111.6
Cash utilised by adjusting items (1.6) (1.8) (7.0)
Taxation paid (8.4) (6.6) (14.9)
Interest paid (6.3) (4.0) (11.4)
Net cash generated from operating activities 12.8 25.6 78.3
Cash flow from investing activities
Interest received 0.5 0.3 1.8
Acquisition of businesses, net of cash acquired - (131.4) (134.3)
Contingent consideration for businesses acquired (0.5) (2.2) (2.2)
Proceeds on disposal of property, plant and equipment 0.1 0.3 0.4
Purchases of property, plant and equipment (24.3) (14.3) (27.5)
Purchases of intangible assets (2.2) (2.0) (4.1)
Purchase of long term financial assets (1.0) - -
Purchase of shares in associate - (2.3) (2.3)
Proceeds from the repayment of preference shares - 0.2 0.9
Net cash used in investing activities (27.4) (151.4) (167.3)
Cash flow before financing activities (14.6) (125.8) (89.0)
Cash generated before adjusting items (13.0) (124.0) (82.0)
Cash utilised in respect of adjusting items (1.6) (1.8) (7.0)
Unaudited Consolidated Statement of Cash Flows (continued)
For the 26 weeks ended 29 September 2024 (26 weeks ended 1 October 2023)
(Audited)
26 weeks to 26 weeks to 52 weeks to
29 September 2024 1 October 2023 31 March 2024
Notes
$'m $'m $'m
Cash flow before financing activities (14.6) (125.8) (89.0)
Cash flow from financing activities
Dividend paid (6.3) (4.3) (6.7)
Net purchase of shares for share schemes (4.6) (1.2) (9.3)
Refinancing costs paid (3.1) (0.3) (0.3)
New bank loan raised 34.5 105.6 72.3
Repayment of borrowings (9.6) (15.2) 129.9
Proceeds on issue of shares - 72.3 (79.0)
Interest element of lease payments (2.1) (1.2) (2.7)
Receipt from lease debtor - 0.1 0.2
Capital element of lease payments (4.8) (4.1) (8.9)
Net cash generated from financing activities 4.0 151.7 95.5
Net (decrease)/increase in cash and cash equivalents 9 (10.6) 25.9 6.5
Cash and cash equivalents at beginning of period 9 28.8 20.7 20.7
Effect of foreign exchange rate changes 9 0.2 0.6 1.6
Cash and cash equivalents at end of period 9 18.4 47.2 28.8
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 31 March 2024, which were prepared
in accordance with UK-adopted international accounting standards and 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 29 September
2024 ('H1 FY2025') and the 26 weeks ended 1 October 2023 ('H1 FY2024') has not
been reviewed by the auditors. The financial information for the 52 weeks
ended 31 March 2024 ('FY2024') is extracted and abridged from the Group's full
accounts for that year. The statutory accounts for FY2024 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
International Accounting Standard 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 14 November 2024.
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 31 March 2024 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.
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 31 March 2024, which were prepared in accordance with
UK-adopted international accounting standards and the requirements of the
Companies Act 2006.
Going Concern
The Group's financial statements have been prepared on the going concern
basis, which contemplates the continuity of normal business activity with the
realisation of assets and the settlement of liabilities in the normal course
of business. When assessing the going concern status of the Group, the
Directors have considered in particular its financial position, including its
significant balance of cash and cash equivalents and the borrowing facility in
place, including its terms, remaining duration and covenants.
The Directors have prepared a cash flow forecast for the period to end of
March 2026, which is based on the latest FY2025 forecast. The Directors have
performed sensitivity analysis on the cash flow forecast using a base case and
downside scenario that take into account the principal risks and uncertainties
of the Group. The Directors have considered the potential impact of climate
related physical and transition risks as part of the going concern assessment
and do not believe there to be a significant impact in the going concern
period. The severe but plausible downside scenario models a 15% reduction in
year-on-year revenue, equivalent to the worst result in the last 20 years, and
still provides significant covenant and liquidity headroom.
Based on their assessment and these sensitivity scenarios, the Directors are
satisfied that there are no material uncertainties regarding the Group's going
concern status and that there is a reasonable expectation that the Group has
adequate resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements. The Directors
therefore consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements.
1. Basis of preparation (continued)
Impact of standards issued but not yet applied by the Group
The following standards, with an effective date of 1 January 2024, have been
adopted without any significant impact on the amounts reported in these
financial statements:
- Lease Liability in a Sale and Leaseback - Amendments to IFRS 16
- Classification of Liabilities as Current or Non-current and Non-current
Liabilities with Covenants - Amendments to IAS 1
- Amendments to IAS 7 Statement of Cashflows and IFRS 7 Financial Instruments:
Disclosures - Supplier Finance Arrangements
The Group has not early adopted any standard, interpretation or amendment that
was issued but is not yet effective. The Group is assessing any potential
implication, but currently do not expect a material impact on the Group.
2. Segment information
The internal reporting provided to the Executive members of the Group'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 to where products are delivered. In addition
to the operating divisions, a Central division exists to capture all 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 29 September 2024 26 weeks to 1 October 2023
Revenue Profit/(loss) Revenue Profit/(loss)
$'m $'m $'m $'m
North America 219.8 20.4 177.1 17.0
Asia 96.9 10.6 84.7 4.7
Europe 201.5 22.4 135.7 19.5
Unallocated central costs (5.8) (3.8)
Divisional results before share-based payments and adjusting items 518.2 47.6 397.5 37.4
Adjusting items (8.4) (8.6)
Share-based payment charge (2.6) (3.0)
Operating profit 36.6 25.8
Share of net profit from associates 1.9 1.6
Finance income 0.5 0.3
Finance costs (12.5) (5.7)
Profit before tax 26.5 22.0
Tax (6.7) (6.5)
Profit after tax 19.8 15.5
2. Segment information (continued)
52 weeks to 31 March 2024
Revenue Profit/(loss)
$'m $'m
North America 372.3 32.8
Asia 185.1 13.9
Europe 355.4 52.9
Unallocated central costs (9.9)
Divisional results before share-based payments and Adjusting items 912.8 89.7
Adjusting items (19.5)
Share-based payment charge (6.3)
Operating profit 63.9
Share of net profit from associates 3.2
Finance income 1.3
Finance costs (16.8)
Profit before tax 51.6
Tax (11.4)
Profit after tax 40.2
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 $8.4m (H1
FY2024: $8.6m, FY2024: $19.5m) was split $1.8m (H1 FY2024: $1.9m, FY2024:
$2.8m) to North America, $6.3m (H1 FY2024: $6.5m, FY2024: $14.5m) to Europe,
$0.1m (H1 FY2024: $0.2m, FY2024: $0.2m) to Asia and $0.2m to central (H1
FY2024: $nil, FY2024: $2.0m).
Geographical 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:
Revenue Non-current assets
(Audited) RESTATED (Audited)
26 weeks to 26 weeks to 52 weeks to 26 weeks to 26 weeks to 52 weeks to
29 September 1 October 31 March 29 September 1 October 31 March
2024 2023 2024 2024 2023 2024
$'m $'m $'m $'m $'m $'m
Geographical segments
North America 372.3 74.2 53.2 53.0
219.8 177.1
Asia 96.9 84.7 185.1 77.2 64.8 72.3
Europe 201.5 135.7 355.4 279.8 271.9 270.0
518.2 397.5 912.8 431.2 389.9 395.3
Revenue is attributed to countries on the basis of the geographical location
of the customer and delivery of the product.
3. Adjusting items and share-based payments
(Audited)
52 weeks to
26 weeks to 26 weeks to 31 March 2024
29 September 2024 1 October $'m
$'m 2023
$'m
Amortisation of acquired intangibles 6.7 5.8 13.4
Acquisition-related costs 0.6 3.2 3.8
Acquisition-related remuneration 0.9 0.9 1.6
Adjustments to fair value of contingent consideration - (1.3) (1.3)
Cyber incident costs 0.2 - 2.0
Total adjusting items 8.4 8.6 19.5
Share-based payments charge 2.6 3.0 6.3
Total adjusting items and share-based payments before tax 11.0 11.6 25.8
Adjusting items tax credit (2.2) (1.2) (4.5)
Adjusting items and share-based payments after tax 8.8 10.4 21.3
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 FY2025,
the amortisation charge on these intangible assets totalled $6.7m (H1 FY2024:
$5.8m, FY2024: $13.4m).
Acquisition-related costs of $0.6m (H1 FY2024: $3.2m, FY2024: $3.8m) consist
of legal and professional fees relating to potential and completed
acquisitions. In the prior year, the Group's acquisition-related costs of
$3.8m consisted of costs mainly related to the acquisition of Murat Ticaret
($3.7m).
Acquisition-related remuneration relates to payments due in relation to
post-acquisition performance, with costs of $0.9m in H1 FY2025 (H1 FY2024:
$0.9m, FY2024: $1.6m).
There were no adjustments to the fair value of contingent consideration in H1
FY2025 (H1 FY2024: $1.3m, FY2024: $1.3m).
The Group experienced a cyber incident in October 2023. Costs associated with
the recovery and remediation of systems in H1 FY2025 were $0.2m (H1 FY2024:
$nil, FY2024: $2.0m).
4. Finance costs
(Audited)
26 weeks to 26 weeks to 52 weeks to
29 September 2024 1 October 31 March 2024
$'m 2023 $'m
$'m
Interest on bank overdrafts and loans 6.6 3.9 11.2
Lease interest payable 2.1 1.2 2.7
Net interest expense on defined benefit obligations 0.6 - 0.7
Unwinding of deferred consideration 1.2 0.2 1.4
Other finance costs 0.3 - 0.1
Total interest costs 10.8 5.3 16.1
Amortisation of debt issue costs 1.7 0.4 0.7
Total finance costs 12.5 5.7 16.8
In June 2024 the Group entered into a new enlarged debt facility. Included
within the amortisation of debt issue costs is a $1.3m write-off of
capitalised costs related to the previous facility.
5. Tax charge
The Group's income tax expense for the period was $6.7 million (H1 FY2024:
$6.5 million), representing an effective tax rate ("ETR") of 25.3% (H1 FY2024:
29.5%). The decrease in statutory ETR was mainly caused by adjusting items,
with a lower adverse impact from non-deductible acquisition costs and tax rate
changes in H1 FY2025.
The underlying tax charge of $8.9 million (H1 FY2024: $7.7 million) represents
an underlying ETR of 23.7% (H1 FY2024: 22.9%). The increase in underlying ETR
is primarily attributable to the recognition of deferred tax assets in H1
FY2024 that did not repeat in H1 FY2025, an increase in non-deductible
expenses including the unwinding of the discount on acquisition contingent
consideration, and a lower impact from investment tax incentives. This was
partially offset by the net favourable effect of foreign exchange and
inflation adjustments for tax purposes in entities where the tax and
functional currencies are different, primarily in Türkiye.
Cash tax paid during the period was $8.4m (H1 FY2024: $6.6m), representing an
underlying cash ETR of 22.4% (H1 FY2024: 19.6%). The increase is mainly driven
by Murat Ticaret which was only part of the Group for 1 month of H1 FY2024.
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 29 September 2024, the Group has net current tax liabilities of $15.5
million (FY2024: $16.5 million) which include $12.2 million (FY2024: $10.8
million) of provisions for tax uncertainties. There is a further $1.5 million
(FY2024: $1.1 million) of accrued interest relating to these amounts
recognised in other payables.
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 $26.5 million (FY2024:
$25.9 million) and deferred tax liabilities of $28.4 million (FY2024: $28.2
million).
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
implementing the OECD's Pillar Two model rules and introducing a global
minimum effective tax rate of 15% for large groups for financial years
beginning on or after 31 December 2023. The Group is in the scope of this
legislation for the period ending 30 March 2025.
Based on an analysis of the previous year financial data and modelling using
current year forecasts, most territories in which the Group operates are
expected to qualify for one of the safe harbour exemptions such that top-up
taxes should not apply. In territories where this is not the case there is the
potential for Pillar Two taxes to apply, but these are not expected to be
material. The Group continues to refine this assessment and analyse the future
consequences of these rules.
6. Earnings per ordinary share
The calculations of the earnings per share are based on the following data:
26 weeks to
1 October
26 weeks to 2023 (Audited)
Earnings 29 September $'m 52 weeks to
2024 31 March 2024
$'m $'m
Earnings attributable to the ordinary equity holders of the company for the 19.3 15.1 39.3
purpose of basic earnings per share
Adjustments for:
Adjusting items 8.4 8.5 19.5
Share-based payments charge 2.6 3.0 6.3
Tax effect of adjusting items and share-based payments (2.2) (1.2) (4.5)
Underlying earnings 28.1 25.4 60.6
Weighted average number of ordinary shares No. shares No. shares No. shares
Weighted average number of ordinary shares for the purpose of basic earnings 184,741,666 170,546,699 179,909,482
per share
Effect of dilutive potential ordinary shares - share options 1,614,493 8,024,110 3,421,442
Weighted average number of ordinary shares for the purpose of diluted earnings 186,356,159 178,570,809 183,330,924
per share
Basic earnings per share Cents Cents Cents
Basic earnings per share from continuing operations 10.4 8.8 21.8
Adjustments for:
Adjusting items 4.6 5.0 10.9
Share-based payments charge 1.4 1.8 3.5
Tax effect of adjusting items and share-based payments (1.2) (0.7) (2.5)
Underlying basic earnings per share 15.2 14.9 33.7
Diluted earnings per share Cents Cents Cents
Diluted earnings per share 10.4 8.4 21.4
Adjustments for:
Adjusting items 4.5 4.8 10.6
Share-based payments charge 1.4 1.7 3.4
Tax effect of adjusting items and share-based payments (1.2) (0.6) (2.4)
Underlying diluted earnings per share 15.1 14.2 33.0
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.
7. Share capital
26 weeks to (Audited)
29 September 2024 26 weeks to 52 weeks to
$'m 1 October 2023 31 March 2024
$'m $'m
Issued and fully paid:
181,651,108 (FY2024: 181,617,533) 69.6 69.5 69.6
Ordinary shares of 25p each
Shareholders were able to elect to receive ordinary shares in place of the
final dividend for the 52 weeks to 31 March 2024. This resulted in the issue
of 33,575 (H1 FY2024: 478,471, FY2024: 692,267) new fully paid ordinary
shares.
During the prior period on 22 June 2023, the Group completed an equity raise
to raise finances for the completion of the acquisition of Murat Ticaret. The
Group issued 21,818,181 new ordinary shares of 25 pence each, comprising the
'Placing Shares' and the 'Retail Offer Shares' (together, the 'equity raise').
The shares were issued at a price of 275 pence per share, representing a
discount of 3.8% to the closing share price of 286 pence per share on 21 June
2023. In aggregate, the equity raise represented gross proceeds of £60.0m
($74.0m) and net proceeds of £58.6m ($72.3m).
8. Own shares
26 weeks to 26 weeks to (Audited)
29 September 2024 1 October 52 weeks to
$'m 2023 31 March 2024
$'m $'m
At the beginning of the period 4.3 1.0 1.0
Purchase of shares 4.5 1.2 9.1
Sale of shares (5.6) (1.2) (5.8)
At end of the period 3.2 1.0 4.3
The own shares reserve represents the cost of shares in the Company held by
the Volex Group PLC Employees' Share Trust ('EBT') to satisfy future share
option exercises under the Group's share option schemes.
During H1 FY2025 the EBT purchased 988,266 shares at a cost of $4.5m. During
the period, 1,322,813 shares were utilised on the exercise of share awards.
The number of ordinary shares held by the EBT at 29 September 2024 was 712,982
(H1 FY2024: 247,231, FY2024: 1,047,529).
9. Analysis of net debt
Cash & cash equivalents Bank Lease Debt issue
$'m loans liability costs Total
$'m $'m $'m $'m
At 31 March 2024 28.8 (146.9) (37.4) 1.5 (154.0)
Cash flow (10.6) (24.9) 6.9 3.1 (25.5)
New leases and remeasurement - - (19.3) - (19.3)
Interest - (0.3) (2.1) - (2.4)
Exchange differences 0.2 (0.6) (1.4) 0.2 (1.6)
Amortisation of debt issue costs - - - (1.7) (1.7)
At 29 September 2024 18.4 (172.7) (53.3) 3.1 (204.5)
29 September 2024 1 October 31 March
$'m 2023 2023
$'m $'m
Cash and bank balances 18.4 47.2 29.8
Overdrafts - - (1.0)
Cash and cash equivalents 18.4 47.2 28.8
The carrying amount of the Group's financial assets and liabilities is
considered to be equivalent to their fair value.
10. 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 35.7% interest in Kepler SignalTek Limited, which is accounted
for as an associate. The balance due from the associate as at the period end
date was $0.3m (H1 FY2024: $1.5m, FY2024: $0.3m).
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 $0.1m (H1 FY2024: $0.1m, FY2024: $0.1m).
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 FY2024 and in line with the Director shareholding
notices disclosed on the Volex website (www.volex.com (http://www.volex.com)
).
11. Restatement - IFRS 3 measurement period adjustment
Consolidated Statement of Financial Position Original Restated
1 October 1 October
2023 2023 Movement
$'m $'m $'m
Goodwill 153.7 119.2 (34.5)
Intangibles 100.2 136.2 36.0
Property, plant and equipment 82.5 85.1 2.6
Inventory 180.4 182.5 2.1
Trade receivables 183.5 182.7 (0.8)
Other receivables (current) 16.0 14.6 (1.4)
Other payables (current) (134.4) (125.2) 9.2
Retirement benefit obligation (non-current) (5.1) (9.8) (4.7)
Deferred tax liabilities (23.3) (31.8) (8.5)
-
On 31 August 2023 the Group completed the acquisition of 100% of the share
capital of Murat Ticaret Kablo A.Ş., a leading manufacturer of complex wire
harnesses, headquartered in Türkiye. The interim results for the 26 weeks
ended 1 October 2023 included provisional fair values for the assets and
liabilities acquired. These have been restated to incorporate measurement
period adjustments arising under IFRS 3 Business Combinations which were
previously updated and reflected in the 31 March 2024 Annual Report.
12. 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.
13. Events after the balance sheet date
There are no disclosable events after the balance sheet date.
14. Alternative performance measures
The Group makes use of underlying and other alternative performance measures
in addition to the measures set out in International Financial Reporting
Standards.
Underlying operating profit and Underlying EBITDA
Underlying operating profit is defined as operating profit excluding adjusting
items and share-based payments. Underlying EBITDA is defined as underlying
operating profit adjusted for depreciation and amortisation. The Group uses
underlying operating profit and underlying EBITDA to present meaningful
year-on-year comparisons. The reconciliation between operating profit and
underlying operating profit and underlying EBITDA is presented below.
29 September 1 October 31 March
2024 2023 2024
$'m $'m $'m
Operating profit 36.6 25.8 63.9
Add back:
Adjusting operating items 8.4 8.6 19.5
Share-based payments charge 2.6 3.0 6.3
Underlying operating profit 47.6 37.4 89.7
Depreciation of property, plant and equipment 7.3 5.0 12.3
Depreciation of right-of-use assets 4.8 3.4 7.4
Amortisation of intangible assets not acquired in business combination 1.6 1.0 2.2
Underlying EBITDA 61.3 46.8 111.6
Underlying basic earnings per share and underlying diluted earnings per share
Underlying basic earnings per share is defined by the profit attributable to
the owners of the parent company, excluding adjusting items and share-based
payments, net of tax, divided by the weighted average number of shares in
issue during the year. Underlying diluted earnings per share adjusts the basic
earnings per share by the effect of dilutive potential share options as at the
period end date. Both metrics are reconciled to statutory measures in note 6.
Organic growth
As the group has undertaken twelve acquisitions in the past six years,
management uses organic revenue growth so that meaningful year-on-year
comparisons can be made.
Organic revenue growth is calculated using constant exchange rates by taking
the total reported revenue (excluding the impact of acquisitions and
disposals) divided by the preceding financial year's revenue at the current
year's exchange rates.
Electric Vehicles Consumer Electricals Medical Complex Industrial Technology Off-Highway Total
$'m $'m $'m $'m $'m $'m
Revenue
26 weeks to 1 October 2023 57.4 122.8 86.1 100.6 30.6 397.5
FX impact (0.4) (0.3) (0.2) - (1.4) (2.3)
57.0 122.5 85.9 100.6 29.2 395.2
Organic growth 22.5 9.2 (3.6) 4.1 6.0 38.2
Organic growth % 39.5% 7.5% (4.2)% 4.1% 20.5% 9.7%
Acquisitions - - - - 84.8 84.8
26 weeks to 29 September 2024 79.5 131.7 82.3 104.7 120.0 518.2
Leverage covenant
The Group has a $400 million committed facility together with an additional
$200 million uncommitted accordion.
The terms of the RCF require the Group to perform quarterly financial covenant
calculations with respect to leverage (net debt (before operating leases) to
covenant EBITDA) and interest cover (covenant EBITDA to covenant interest).
Breach of these covenants could result in cancellation of the facility. Net
debt (before operating leases) in the financial statements is defined as net
debt excluding lease liabilities but including pre-IFRS 16 finance leases.
Covenant EBITDA is defined as underlying EBITDA adjusted for depreciation of
right-of-use assets and the last twelve months prorated EBITDA from
acquisitions.
Note 29 September 2024 1 October 31 March
$'m 2023 2024
$'m $'m
Net debt 9 (204.5) (173.7) (154.0)
Lease liabilities 9 53.3 39.0 37.4
Finance leases (3.1) (5.9) (4.5)
Net debt (before operating lease liabilities) (154.3) (140.6) (121.1)
Underlying EBITDA 126.0 90.4 111.6
Depreciation of right-of-use assets (8.8) (6.4) (7.4)
Prorated acquired EBITDA - 27.6 15.5
Covenant EBITDA 117.2 111.6 119.7
Covenant leverage 1.3x 1.3x 1.0x
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