REG - Volex PLC - Preliminary Announcement of Volex plc <Origin Href="QuoteRef">VLX.L</Origin> - Part 2
08/06/2017 07:06
- Part 2: For the preceding part double click ID:nRSH4870Ha
8 29,565 30,738
127,641 136,342
Total assets 152,546 175,769
Current liabilities
Borrowings 8 - 5,164
Trade payables 51,156 53,814
Other payables 24,993 20,784
Current tax liabilities 5,346 6,183
Retirement benefit obligation 719 763
Provisions 9 358 1,771
Derivative financial instruments - 76
82,572 88,555
Net current assets / (liabilities) 45,069 47,787
Non-current liabilities
Borrowings 8 18,230 28,823
Other payables 432 393
Deferred tax liabilities 1,239 2,133
Retirement benefit obligation 3,682 2,567
Provisions 9 84 1,946
23,667 35,862
Total liabilities 106,239 124,417
Net assets 46,307 51,352
Equity attributable to owners of the parent
Share capital 39,755 39,755
Share premium account 7,122 7,122
Non-distributable reserves 2,455 2,455
Hedging and translation reserve (4,254) (7,964)
Own shares (867) (867)
Retained earnings 2,096 10,851
Total equity 46,307 51,352
Consolidated Statement of Changes in Equity
For the 52 weeks ended 2 April 2017 (52 weeks ended 3 April 2016)
Share capital Share premium account Non-distributable reserves Hedging and translation reserve Own shares Retained earnings Total equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 5 April 2015 39,755 7,122 2,455 (8,566) (867) 14,609 54,508
Profit / (loss) for the period attributable to the owners of the parent - - - - - (2,312) (2,312)
Other comprehensive income / (loss) for the period - - - 602 - (405) 197
Total comprehensive income / (loss) for the period - - - 602 - (2,717) (2,115)
Reserve entry for share option charge / (credit) - - - - - (1,041) (1,041)
Balance at 3 April 2016 39,755 7,122 2,455 (7,964) (867) 10,851 51,352
Profit / (loss) for the period attributable to the owners of the parent - - - - - (7,048) (7,048)
Other comprehensive income / (loss) for the period - - - 3,710 - (2,143) 1,567
Total comprehensive income / (loss) for the period - - - 3,710 - (9,191) (5,481)
Reserve entry for share option charge / (credit) - - - - - 436 436
Balance at 2 April 2017 39,755 7,122 2,455 (4,254) (867) 2,096 46,307
Consolidated Statement of Cash Flows
For the 52 weeks ended 2 April 2017 (52 weeks ended 3 April 2016)
Notes 2017 $'000 2016 $'000
Net cash generated from / (used in) operating activities 7 15,897 1,798
Cash flow generated from / (used in) investing activities
Interest received 19 18
Proceeds on disposal of intangible assets, property, plant & equipment 201 22
Purchases of property, plant & equipment (2,464) (5,961)
Purchases of intangible assets (68) (626)
Net cash generated / (used in) investing activities (2,312) (6,547)
Cash flows before financing activities 13,585 (4,749)
Cash generated / (used) before non-recurring items 19,326 (281)
Cash utilised in respect of non-recurring items (5,741) (4,468)
Cash flow generated from / (used in) financing activities
Refinancing costs paid (582) -
Repayment of borrowings 8 (9,240) (3,500)
New bank loans raised 8 - 6,872
Net cash generated from / (used) in financing activities (9,822) 3,372
Net increase / (decrease) in cash and cash equivalents 3,763 (1,377)
Cash and cash equivalents at beginning of period 8 25,574 26,203
Effect of foreign exchange rate changes 8 228 748
Cash and cash equivalents at end of period 8 29,565 25,574
1. Basis of preparation
The preliminary announcement for the 52 weeks ended 2 April 2017 has been
prepared in accordance with the accounting policies as disclosed in Volex
plc's Annual Report and Accounts 2016, as updated to take effect of any new
accounting standards applicable for the period as set out in Volex plc's
Interim Statement 2017.
The annual financial information presented in this preliminary announcement is
based on, and is consistent with, that in the Group's audited financial
statements for the 52 weeks ended 2 April 2017, and those financial statements
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting. The independent auditors' report on those financial
statements is unqualified and does not contain any statement under section 498
(2) or 498 (3) of the Companies Act 2006.
Information in this preliminary announcement does not constitute statutory
accounts of the Group within the meaning of section 434 of the Companies Act
2006. The full financial statements for the Group for the 52 weeks ended 3
April 2016 have been delivered to the Registrar of Companies. The independent
auditor's report on those financial statements was unqualified and did not
contain a statement under section 498 (2) or 498 (3) of the Companies Act
2006.
Going concern
The key terms of the Group's revolving credit facility, through which it will
meet its day to day working capital requirements, are shown in Note 6.
Following a post year end amendment and extension to the facility, the
facility has reduced to $30 million but is available until June 2019. The
facility requires quarterly covenant tests to be performed in relation to
leverage and interest cover.
The Group's forecast and projections, taking reasonable account of possible
changes in trading performance, show that the Group should operate within the
level of the proposed facility for at least 12 months from the date of this
announcement and should comply with covenants over this period. The Group also
has access to and uses additional uncommitted facilities. Further the Group
has a number of mitigating actions available to it should actual performance
fall below the current financial forecasts. The Directors have the financial
controls and monitoring available to them to put in place those mitigating
actions in a timely fashion if they see the need to do so. The Directors
therefore believe that the Group is well placed to manage its business within
its covenants.
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for at least 12 months from the date of
these accounts. Accordingly, they continue to adopt the going concern basis
in preparing the Annual Report and financial statements.
This preliminary announcement was approved by the Board of Directors on 8 June
2017.
2. Business and geographical segments
Operating segments
The internal reporting provided to the Group's Board for the purpose of
resource allocation and assessment of Group performance is based upon the
nature of the products supplied. In addition to the operating divisions, a
Central division exists to capture all of the corporate costs incurred in
supporting the operations.
Power Cords The sale and manufacture of electrical power products to manufacturers of electrical / electronic devices and appliances. These include laptop / desktop computers, printers, televisions, power tools and floor cleaning equipment.
Cable Assemblies The sale and manufacture of cables permitting the transfer of electronic, radio-frequency and optical data. These cables can range from simple USB cables to complex high speed cable assemblies. Data cables are used in numerous devices including medical equipment, data centres, telecoms networks and the automotive industry.
Central 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 Board believes that the segmentation of the Group based upon product
characteristics allows it to best understand the Group's performance and
profitability.
52 weeks to 2 April 2017 52 weeks to 3 April 2016
Revenue Profit / (loss) Revenue Profit / (loss)
$'000 $'000 $'000 $'000
Power Cords 188,256 3,228 230,205 2,293
Cable Assemblies 131,328 10,528 137,329 9,842
Unallocated central costs - (4,677) - (4,963)
Divisional results before share-based payments and non-recurring items 319,584 9,079 367,534 7,172
Non-recurring operating items (15,232) (4,742)
Share-based payment credit / (expense) (468) 1,009
Operating profit / (loss) (6,621) 3,439
Finance income 19 18
Finance costs (1,898) (1,915)
Profit / (loss) before taxation (8,500) 1,542
Taxation 1,452 (3,854)
Profit / (loss) after taxation (7,048) (2,312)
Credits / charges for share-based payments and non-recurring items have not
been allocated to divisions as management report and analyse division
profitability at the level shown above.
Geographical segments
The Group's revenue from external customers and information about its
non-current assets (excluding deferred tax assets) by geographical location
are provided below:
Revenue Non-Current Assets
2017$'000 2016$'000 2017$'000 2016$'000
Asia (excluding India) 182,079 225,053 16,914 32,068
North America 78,084 80,802 1,090 1,532
Europe 52,752 50,305 3,179 3,614
India 4,929 6,878 774 897
South America 1,740 4,496 - 493
319,584 367,534 21,957 38,604
3. Non-recurring items
2017$'000 2016$'000
Impairment / product portfolio realignment 12,491 1,498
Restructuring costs 1,656 2,693
Manufacturing optimisation consultancy 815 -
Movement in onerous lease provisions 270 1,151
Provision for historic sales tax claims - (600)
Total non-recurring items 15,232 4,742
Following a further downturn in Power Cords revenue (particularly with the
Group's largest customer) resulting in significant surplus capacity at our
Power factories, a full review of the Group's cost base was performed. As a
result of this, the largest Power factory was downsized with one of the three
available buildings returned to the landlord. This resulted in impairment of
the associated fit-out costs. Further the number of production lines running
in the remaining two buildings was reduced resulting in the impairment of the
redundant plant, machinery and tooling. Finally, given the reduced sales from
the largest customer and the already thin margins, the forecast profitability
from the continuing lines was assessed and deemed insufficient to support the
associated fixed asset cost base. As a consequence of the above factors, an
impairment charge of $11,987,000 was recorded in the Power Cords division. In
the Cable Assemblies division, $491,000 of impairment charge has been recorded
following the closure of Volex Do Brasil Ltda.
During the current year, the Group has incurred $1,656,000 (2016: $2,693,000)
of restructuring spend in response to the reduced revenues of the Group. The
non-recurring cost can be split into several distinct elements:
• An operational element of $1,604,000 (2016: $1,372,000) which included
reductions to the direct and indirect manufacturing headcount in a number of
our factories following the downturn in volumes, the removal of certain
middle-management roles and redundancies associated with the closure of our
Brazil, Ireland, Austin and Jakarta operations.
• An executive and senior management change element of $52,000 (2016:
$1,321,000). The current year charge relates to the departure of the Head of
Engineering. The prior period charge relates to the departure of the Group
Chief Executive Officer, the removal of the divisional management structure
and the removal of certain other executive management positions (e.g. Chief
Information Officer).
Following his appointment in November 2016, the Executive Chairman sought to
address the production issues facing our factories across the globe in order
to make them more cost competitive. To support the management function, an
external manufacturing consultancy was employed on a fixed term contract of 9
months, to advise on manufacturing best practice and implementation. This
contract expired in December 2016 and has therefore been classified as
non-recurring. Costs associated with this contract totalled $815,000.
The Group has incurred an onerous lease charge in the period of $270,000
primarily in relation to the sub-let of a property in North America. The
sub-lease is for the full head lease term and mirrors the head lease clauses
with the exception of an initial quarter rent free period. The prior year
charge of $1,151,000 followed a revision to underlying assumptions included in
the provision calculation of a UK onerous property. The lease on this UK
property was exited in the current year with a $50,000 credit arising from the
release of surplus provision.
4. Taxation
2017 2016
$'000 $'000
Current tax - charge for the period 1,328 3,376
Current tax - adjustment in respect of previous periods (58) 452
Total current tax 1,270 3,828
Deferred tax (2,722) 26
Income tax (credit) / expense (1,452) 3,854
5. Earnings / (loss) per ordinary share
The calculations of the earnings / (loss) per share are based on the following
data:
Earnings / (loss) 2017 2016
$'000 $'000
Profit / (loss) for the purpose of basic and diluted earnings / (loss) per share being net profit attributable to equity holders of the parent (7,048) (2,312)
Adjustments for:
Non-recurring items 15,232 4,742
Share-based payments charge / (credit) 468 (1,009)
Tax effect of above adjustments (214) (88)
Underlying earnings / (loss) 8,438 1,333
No. shares No. shares
Weighted average number of ordinary shares for the purpose of basic earnings per share 88,956,532 88,956,532
Effect of dilutive potential ordinary shares / share options 281,330 27,370
Weighted average number of ordinary shares for the purpose of diluted earnings per share 89,237,862 88,983,902
2017 2016
Basic earnings / (loss) per share Cents Cents
Basic earnings / (loss) per share (7.9) (2.6)
Adjustments for:
Non-recurring items 17.1 5.3
Share-based payments charge / (credit) 0.5 (1.1)
Tax effect of above adjustments (0.2) (0.1)
Underlying basic earnings / (loss) per share 9.5 1.5
5. Earnings / (loss) per ordinary share (continued)
Diluted earnings per share
Diluted earnings / (loss) per share (7.9) (2.6)
Adjustments for:
Non-recurring items 17.1 5.3
Share-based payments charge / (credit) 0.5 (1.1)
Tax effect of above adjustments (0.2) (0.1)
Underlying diluted earnings / (loss) per share 9.5 1.5
The underlying earnings / (loss) per share has been calculated on the basis of
profit / (loss) before non-recurring items and share-based payments, net of
tax. The Directors consider that this calculation gives a better understanding
of the Group's performance in the current and prior period.
6. Bank facilities
The Group had a $45.0 million multi-currency combined revolving overdraft and
guarantee facility with a syndicate of three banks (Lloyds Banking Group plc,
HSBC Bank plc and Clydesdale Bank plc - together 'the Syndicate'). This
facility was available until 15 June 2018.
The amount available under the facility at 2 April 2017 was $45.0 million
(2016: $45.0 million). The facility was secured by fixed and floating charges
over the assets of certain Group companies.
The terms of the facility required the Group to perform quarterly financial
covenant calculations with respect to leverage (adjusted net debt to adjusted
rolling 12-month EBITDA) and interest cover (adjusted rolling 12-month EBITDA
to adjusted rolling 12-month interest). Breach of these covenants could have
resulted in cancellation of the facility.
Post year end the facility has been extended to 30 June 2019. As part of the
extension, Clydesdale Bank plc exited the syndicate with the total facility
reducing from $45.0 million to $30.0 million. The leverage covenant has been
amended to calculate using total debt rather than net debt with the ratios
adjusted accordingly.
In the current year, professional fees of $582,000 were incurred in relation
to the extension of the facility to June 2018. Of this $150,000 was paid to
the Syndicate to agree to the amendment. The $582,000 was capitalised and is
charged to the income statement on a straight line basis over the remaining
period to facility expiry.
7. Notes to cash flow statement
2017 $'000 2016 $'000
Profit / (loss) for the period (7,048) (2,312)
Adjustments for:
Finance income (19) (18)
Finance costs 1,898 1,915
Income tax expense (1,452) 3,854
Depreciation on property, plant and equipment 4,927 6,162
Amortisation of intangible assets 441 1,018
Impairment loss 12,491 1,498
(Gain) / Loss on disposal of property, plant and equipment 61 25
Share option payment (credit) / charge 468 (1,009)
Decrease / (increase) in provisions (3,837) (1,203)
Effects of foreign exchange rate changes 407 126
Operating cash flow before movement in working capital 8,337 10,056
Decrease / (increase) in inventories 5,382 1,897
Decrease / (increase) in receivables 2,376 10,609
(Decrease) / increase in payables 3,070 (14,433)
Movement in working capital 10,828 (1,927)
Cash generated from / (used in) operations 19,165 8,129
Cash generated from / (used in) operations before non-recurring items 24,906 12,597
Cash utilised by operating non-recurring items (5,741) (4,468)
Taxation paid (2,102) (4,489)
Interest paid (1,166) (1,842)
Net cash generated from / (used in) operating activities 15,897 1,798
8. Analysis of net debt
Cash and cash equivalents $'000 Bank loans Debt issue costs$'000 Total
$'000 $'000
At 5 April 2015 26,203 (25,159) 836 1,880
Cash flow (1,377) (3,372) - (4,749)
Exchange differences 748 (734) (19) (5)
Other non-cash changes - - (375) (375)
At 3 April 2016 25,574 (29,265) 442 (3,249)
Cash flow 3,763 9,240 582 13,585
Exchange differences 228 1,305 (113) 1,420
Other non-cash changes - - (421) (421)
At 2 April 2017 29,565 (18,720) 490 11,335
8. Analysis of net debt (continued)
Debt issue costs relate to bank facility arrangement fees. Amortisation of
debt issue costs in the period amounted to $421,000 (FY2016: $375,000).
Analysis of cash and cash equivalents: 2017$'000 2016$'000
Cash and bank balances 29,565 30,738
Bank overdrafts - (5,164)
Cash and cash equivalents 29,565 25,574
9. Provisions
Property$'000 Corporate restructuring$'000 Other$'000 Total$'000
At 5 April 2015 3,826 259 584 4,669
Charge / (credit) in the period 1,151 (6) 142 1,287
Utilisation of provision (1,652) (181) (343) (2,176)
Unwinding of discount 52 - - 52
Exchange differences (83) (5) (27) (115)
At 3 April 2016 3,294 67 356 3,717
Charge / (credit) in the period (39) - 18 (21)
Utilisation of provision (3,014) - (20) (3,034)
Unwinding of discount 79 - - 79
Exchange differences (268) (3) (28) (299)
At 2 April 2017 52 64 326 442
Less: included in current liabilities 32 - 326 358
Non-current liabilities 20 64 - 84
Property provisions
During the 52 weeks ended 2 April 2017, the Group negotiated the early release
from its contractual commitments under the lease on Greenfold Way ('GFW'), the
old UK headquarters and factory based in Leigh. In return for the early
release, the Group paid a surrender premium of $2,481,000. At prior year end,
an onerous lease provision was held against GFW and following this payment,
surplus provision of $50,000 was released through the non-recurring items
charge. The remaining provision of $32,000 has been retained to cover any
incidental costs associated with this property.
In the prior year, following revisions to assumptions in the onerous lease
provision calculations, a further $1,151,000 onerous lease charge was booked
as a non-recurring item.
Other
Other provisions include the Directors' best estimate, based upon past
experience, of the Group's liability under specific product warranties,
purchase commitments and legal claims. The timing of the cash outflow with
respect to these claims is uncertain.
10. Reconciliation of operating profit to underlying EBITDA (earnings
before interest, tax, depreciation, amortisation, non-recurring items and
share-based payment charge)
2017 2016
$'000 $'000
Operating profit (6,621) 3,439
Add back:
Non-recurring items 15,232 4,742
Share-based payment (credit) / charge 468 (1,009)
Underlying operating profit 9,079 7,172
Depreciation of property, plant and equipment 4,927 6,162
Amortisation of acquired intangible assets 441 1,018
Underlying EBITDA 14,447 14,352
11. Events after balance sheet date
The Group has successfully completed an extension of its senior credit
facility to June 2019 (previously due to expire in June 2018). As part of
this extension, Clydesdale Bank plc exited the syndicate. Lloyds Banking
Group plc and HSBC Bank plc have both retained their positions and credit
offering with the size of the facility duly reducing from $45.0 million to
$30.0 million. Given the cash generation in the year, management is confident
that the Group can operate within this facility level.
On 12 April 2017, the Group entered into a shareholder agreement with Kepler
Signaltek Limited to establish a new joint venture and acquired 26.09% of the
voting shares of the company for consideration of $300,000. This amount was
paid on 19 April 2017. A commitment to subscribe for $1,700,000 of preference
shares which accrue interest at 10% per annum was also made with $700,000 due
to be paid on 1 August 2017 and $1,000,000 on 1 April 2018. The preference
shares are redeemable at any point after April 2019 and before April 2022.
Kepler Signaltek Limited will manufacture both power cords and high speed data
cables exclusively for the healthcare sector and provides Volex with access to
an enhanced healthcare product offering.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Volex
See all newsREG - Volex PLC - Full Year Trading Update
AnnouncementREG - Volex PLC - Director/PDMR Shareholding
AnnouncementREG - Volex PLC - Director/PDMR Shareholding
AnnouncementREG - Volex PLC - Director/PDMR Shareholding
AnnouncementREG - AIM - AIM Notice - 12/01/2024
Announcement