REG - Volex PLC - Preliminary Group Results FY2022
23/06/2022 07:01
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RNS Number : 8732P Volex PLC 23 June 2022
23 June 2022
Volex plc
Preliminary Group Results
for the 52 weeks ended 3 April 2022
Record performance and significant growth alongside new, ambitious five-year
plan
Volex plc ('Volex'), a global provider of integrated manufacturing services
and power products, today announces its preliminary results for the 52 weeks
ended 3 April 2022 ("FY2022").
Financial Highlights 52 weeks to 52 weeks to Year on year change
3 April 2022 4 April 2021
Revenue $614.6m $443.3m 38.6%
Underlying(1) operating profit $56.2m $42.9m 31.0%
Statutory operating profit $41.0m $30.7m 33.6%
Underlying(1) profit before tax $51.4m $41.6m 23.6%
Statutory profit before tax $36.2m $29.4m 23.1%
Underlying(1) diluted earnings per share(2) 25.2c 30.0c (16.0%)
Final dividend (per share) 2.4p 2.2p 9.1%
Net debt (before lease liabilities) $74.4m $7.3m
Net debt $95.3m $27.3m
(1) Before adjusting items and share-based payments charge (see note 3 for
more details)
(2) FY2021 earnings per share includes the impact of deferred tax credits of
$12.9 million (FY2022: $2.9 million). Excluding deferred tax asset recognition
underlying diluted earnings per share increased by 6.3%
Financial and Operational Highlights
· Group revenue increased by 38.6% to $614.6 million (FY2021: $443.3
million) through strong organic growth and acquisitions
· Underlying operating margin remained solid at 9.1% (FY2021: 9.7%)
despite inflationary headwinds, demonstrating our ability to pass through cost
increases
· Targeted investment, focused on delivering efficiencies and vertical
integration in growth sectors, is driving revenue momentum
· Strengthened engineering and sales teams that will continue to
support further organic growth
· Four acquisitions completed, further enhancing our capabilities,
expanding customer relationships and driving growth
Market highlights
· Electric Vehicles - sales almost doubled as we added new customers
and new products, growing our total sector revenue to over $100 million
· Consumer Electricals - revenue grew significantly due to the full
year effect of DE-KA in addition to organic growth of 14%
· Medical - there was a strong return of demand from Medical customers
to above pre-Covid levels, with a 14% increase in revenue
· Complex Industrial Technology - revenue growth of 6% with good demand
for complex assemblies and box builds, despite some delays in the take up of
next generation data centre products, due to semiconductor shortages
New five-year plan
· With our financial performance significantly ahead of our existing
strategic plan, we are launching a new five-year plan
· Our ambition is to deliver revenue of $1.2 billion by the end of
FY2027
· We aim to achieve this with underlying operating profit margin in the
range of 9-10%
Outlook
· The year has started strongly with high levels of customer demand and
orders, particularly for more complex products with longer lead times
· Inflationary pressures and variable lead times are expected to
continue but are manageable
· Our global footprint is a beneficiary of the recent trend towards
"near-shoring" production
· We have an exciting pipeline of acquisition opportunities and
financial flexibility
Dividend
Subject to approval by shareholders at the upcoming AGM on 19 August 2022, the
proposed final dividend of 2.4p per ordinary share will be paid on 26 August
2022 to shareholders on the register on 22 July 2022. The ex-dividend date
will be the 21 July 2022.
Nat Rothschild, Volex's Executive Chairman said:
"Our intention, when we set about the transformation of Volex, was to create a
resilient and dynamic business capable of delivering strong margins and
revenue growth. Our record performance and revenue progression, demonstrated
against the backdrop of a challenging manufacturing environment, is testament
to what we have achieved.
We continue to see significant opportunities across our market. The
infrastructure and acquisition investments we have made in FY2022 are focused
on our pursuit of further growth, capitalising on the leading position we have
in attractive sectors. With an exciting acquisition pipeline and access to
funding, we will continue this successful strategy.
With our financial performance significantly ahead of our existing strategic
plan, we are today setting out a new, ambitious plan to increase our revenues
to $1.2 billion by the end of FY2027, with underlying operating margins in the
range of 9-10%. This underlines the confidence we have in the clear growth
opportunities created by our combination of excellent customer relationships,
exceptional assets and an agile operating model."
Presentation
A live presentation for analysts will be held online at 8.30 a.m. BST on 23
June 2022. If you are an analyst and would like to join for this briefing,
please send an email to Volex@powerscourt-group.com
(mailto:Volex@powerscourt-group.com) . Log in details for the meeting will be
communicated to attendees.
A live presentation will be held online at 10.00 a.m. BST on 23 June 2022 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
For further information please contact:
Volex plc +44 7747 488785
Nat Rothschild, Executive
Chairman
Jon Boaden, Chief Financial Officer
Julian Wais, Head of Investor Relations
Singer Capital Markets - Nominated Adviser & Joint Broker +44
20 7496 3000
Shaun Dobson
George Tzimas
James Fischer
HSBC Bank Plc - Joint
Broker
+44 20 7991 8888
Simon Alexander
Joe Weaving
Powerscourt - Media
Enquiries
+44 20 7250 1446
James White
Nicholas Johnson
Maxim Hibbs
Definitions
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 lease liabilities) represents cash and cash equivalents, less
bank loans and debt issue costs, but excluding lease liabilities.
Forward looking statements
This announcement contains certain forward-looking statements which have been
made by the Directors in good faith using information available up until the
date they approved the announcement. Forward-looking statements should be
regarded with caution as by their nature such statements involve risk and
uncertainties relating to events and circumstances that may occur in the
future. Actual results may differ from those expressed in such statements,
depending on the outcome of these uncertain future events.
Executive Chairman's Statement
Volex is a global leader in integrated manufacturing for performance-critical
applications and a supplier of power products. We serve a diverse range of
markets and customers, with particular expertise in cable assemblies,
higher-level assemblies, data centre power and connectivity, electric vehicles
and consumer electricals.
In a challenging year for all manufacturing businesses, our strong performance
throughout the year and delivery of results that are ahead of consensus market
expectations, demonstrates that our strategy is working. Revenue and
underlying operating profit are significantly higher for FY2022 as a result of
strong organic revenue growth and acquisitions.
Our business is robust and resilient, with a range of complementary
capabilities, well suited to the dynamic needs of our global customer base. We
operate within a fragmented market where our reputation for innovation and
quality is a key differentiator. Customers recognise our ability to deliver
increasingly complex manufacturing services successfully, and the significant
value that we can add to their processes. In particular, our design skills
significantly enhance the customer relationship, demonstrating innovative
solutions to address the real-life challenges that our customers face.
Market demand remains strong, with continued momentum from our Electric
Vehicles and Consumer Electricals customers, as well as a robust recovery
within the Medical and Complex Industrial Technology sectors following the
impact of Covid-19. We are well attuned to the trends in our markets and how
our customers' requirements are evolving. These factors are critical inputs to
our strategic plans, giving us confidence that we are pursuing the right path.
New five-year plan
Having delivered revenue and underlying profit growth significantly ahead of
the ambitious five- year plan we set out in 2019, we have developed a new,
stretching plan. Our ambition is to deliver revenue of $1.2 billion by the end
of FY2027, including at least $200 million of revenue from new acquisitions.
We aim to achieve this while maintaining our current underlying operating
profit margin within a range of 9-10%.
Overall approach
We identify areas of manufacturing need where our capabilities, intellectual
property and manufacturing methodology enable us to be cost competitive, while
generating attractive commercial returns.
We understand how to operate in a competitive environment and have invested in
vertical integration to generate suitable margins. We have significant
expertise in high-mix production, allowing us to be competitive through a
range of lower-volume order quantities. Our manufacturing facilities are led
by experienced general managers, focused on optimising throughput and mix.
Each of these facilities are underpinned with a regional leadership team,
providing the managers with expert local support.
The majority of our larger customers are global companies who are looking for
a reliable international manufacturing partner. This is becoming increasingly
important as customers look to address supply chain complexity by identifying
suppliers who can provide solutions closer to their end markets. With
customer-facing teams around the world, we use our knowledge of our end
markets to develop compelling customer solutions.
Our significant experience in our chosen markets enables us to develop our own
designs, locking in intellectual property that we protect with patents, where
appropriate.
We have accelerated organic investment in the business during the year and
will build on this momentum moving forward. Our investment is directed at
areas where we have the capability to grow significantly and where we can
optimise our manufacturing process. The majority of projects we identify pay
for themselves within two years, making this investment very attractive. This
is complemented by our established continuous improvement activity, which
generates efficiency benefits across our organisation.
Market trends
The world is currently a complicated place and to support customer delivery
during a period of extended lead times, we have invested in additional
inventories to ensure we have availability of components when required. This
has increased levels of working capital but has, importantly, also protected
revenue and deepened customer relationships.
Inflation across raw materials has been a feature of the manufacturing
environment over the last year. However, the arrangements established with our
customers allow us to pass through higher input costs, although there is often
a time delay between the impact of higher input costs on us and re-pricing. We
have followed an efficient and transparent process to support this activity,
allowing us to minimise the impact on margins.
Investing in growth
Our track record of acquiring strong businesses at attractive valuations has
continued this year with four further transactions completed, for a total
consideration of $47.1 million. We acquired Irvine Electronics ("Irvine") in
California, USA, and Terminal & Cable ("TC") in Canada, both specialist
integrated manufacturing businesses, with a strong presence in the North
American defence market. Irvine specialises in printed circuit board
assemblies for deployment in specialist, mission-critical applications. TC is
a specialist in complex cable assemblies for military vehicles.
The acquisition of Prodamex in Mexico, a manufacturer of wire harnesses for
domestic appliances, advances our strategy to provide a unified solution for
global white-goods manufacturers. We will combine its North American
capability together with the significant strength and experience we already
have in Europe and Asia, to drive economies of scale and maximise cross sales
opportunities.
We also purchased a majority equity stake in inYantra in India, together with
13.5 acres of industrial land with potential for future site expansion,
harnessing its expertise in printed circuit board assembly and box build
integrated solutions. This transaction offers an excellent strategic
opportunity to expand our global footprint, bringing new and strengthened
capabilities in the key Indian market.
The success of our strategy and the organic growth we have delivered, combined
with attractive acquisition opportunities to deliver further growth, has given
us the confidence to deploy further investment. With a strong track record of
delivering compelling returns, we have successfully completed a number of
transformational projects this year. In particular, we have vertically
integrated our Electric Vehicles power cable production and created an
efficient production capability for the next generation of high-speed data
centre cables.
People and organisation structure
Successfully combining the skills and expertise of our talented workforce has
allowed us to deliver transformational change, continuous improvement and
exceed customer expectations. Effective collaboration, encouraging change and
an entrepreneurial spirit, creates an environment in which innovation can
flourish. With talented local management in our manufacturing facilities, we
are able to respond quickly to changing customer requirements and disruptions
in the supply chain.
To enhance the delivery of growth and integration, we have formalised a
regional leadership structure, enhancing our ability to lead change programmes
and identify cross-selling opportunities.
On behalf of the Board, I thank all our employees for achieving so much in
what has been a very challenging manufacturing environment.
Environmental, Social and Governance ("ESG")
Many of our products are aligned to key ESG objectives, including
manufacturing for electric vehicle charging, medical purposes and for greater
efficiency including robotics and automation.
However, focusing on our own performance, as well as what we sell to
customers, is also important. This year we have implemented a sustainability
reporting system to help define and measure progress towards ESG objectives.
Going forward, this will be an increasing area of focus for our business as we
look to embed a culture of improvement in these areas.
We have also developed a kaizen-based framework to drive
sustainability-related improvement activities at all our factories. This
programme, once implemented, will ensure that every factory identifies and
then reports on key improvement initiatives within the sustainability
framework.
Dividend
Reflecting our confidence and the Group's robust financial position, the Board
is pleased to announce it is recommending a final dividend of 2.4 pence per
share. Together with the interim payment of 1.2 pence, this gives a total
dividend for the year of 3.6 pence, an increase of 9.1% on the prior year.
Outlook
We have seen a strong start to the new financial year, with high levels of
customer demand. This includes strong orders for more complex products with
longer lead times.
We have adapted to the significant supply chain and inflationary challenges
which have developed during FY2022 and continue to monitor developments
closely, taking a proactive approach to addressing issues as they emerge. We
run our operations flexibly and will respond quickly to changing supply and
demand environments.
Having built a dynamic, resilient business with diverse capabilities and
excellent customer relationships in attractive markets, we are well positioned
to deliver on the tremendous potential of Volex's business and capitalise on
the growth opportunities in our markets.
With a clear strategy, strong demand and an ambitious and talented team, we
are excited about the opportunity in FY2023 and beyond.
Review of FY2022 Performance
2022 2021
Before Adjusting Total Before Adjusting Total
adjusting items and $m adjusting items and $m
share-based
items and
items and share-based
payments
share-based
$m share-based payments
payments payments $m
$m $m
Revenue
North America 272.1 - 272.1 203.1 - 203.1
Asia 142.7 - 142.7 133.7 - 133.7
Europe 199.8 - 199.8 106.5 - 106.5
614.6 - 614.6 443.3 - 443.3
Cost of sales (488.8) - (488.8) (339.4) - (339.4)
Gross profit 125.8 - 125.8 103.9 - 103.9
Operating expenses (69.6) (15.2) (84.8) (61.0) (12.2) (73.2)
Operating profit/(loss) 56.2 (15.2) 41.0 42.9 (12.2) 30.7
Share of net profit from associates and joint ventures 0.4 - 0.4 0.8 - 0.8
Finance income 0.3 - 0.3 0.3 - 0.3
Finance costs (5.5) - (5.5) (2.4) - (2.4)
Profit/(loss) on ordinary activities before taxation 51.4 (15.2) 36.2 41.6 (12.2) 29.4
Taxation (9.1) 3.3 (5.8) 7.2 2.3 9.5
Profit after tax 42.3 (11.9) 30.4 48.8 (9.9) 38.9
Volex delivered strong revenue growth and record underlying operating profits
in FY2022, in a challenging year for manufacturing businesses worldwide,
demonstrating we have established a diverse and resilient business able to
perform well within a complex and changing environment. Whilst the impact of
government restrictions and lockdowns related to Covid-19 reduced in the year,
market dislocation has caused additional supply chain issues, including
increasing prices and lengthening lead times across multiple components and
products.
Demand from customers across the Group was strong throughout the year. We
continued to experience rapid growth from Electric Vehicles customers as we
consolidated our position as market leader for grid cords, whilst bringing new
products to market and winning several new customers.
Our Consumer Electricals business was able to pass-on price inflation to
customers as the mechanisms within the majority of our contracts stipulate the
pass-through of increased copper prices.
Our Medical customers saw access to hospitals steadily improve, leading to
increased demand for medical products, after a slight decline caused by
Covid-19 access-related restrictions.
Demand reduced for our data centre products due to a very strong comparator
period as customers increased their inventory levels to mitigate potential
supply chain challenges. The unwind of inventory positions this year as
conditions normalised impacted our revenue. For other Complex Industrial
Technology customers, order books remained strong through the year.
Overall, we were proactive and maintained high factory utilisation, despite
supply chain complexities.
We have increased investment in our business in FY2022, with a number of
important capital expenditure projects. This was focused on our key
high-growth areas, as well as vertical integration and the first phase of our
new global ERP system. We have recruited specialist research and development
roles in the year to drive product development programmes, which will deliver
future growth.
As we have continued to grow, our working capital requirements have increased
to support our expansion. Additional inventory investment has been required to
meet customer requirements, in the face of extended lead times and supply
chain shortages. Although this ties up cash, holding key components has
allowed us to meet customer commitments, with particular relevance for our
more complex products.
It has been a busy year in relation to acquisitions with four businesses
joining the Group. Three of these businesses are based in North America -
Irvine, Prodamex and TC - strengthening our manufacturing footprint for
domestic appliances, integrated manufacturing services and defence in this
critical region.
The acquisition of inYantra positions us in the high-growth Indian market,
where it is involved in the manufacture of printed circuit board assemblies
and box builds. Growth through acquisitions remains a high priority, and a key
strategic pillar.
Our business is built on the talent and hard work of our employees. The Group
now has a global workforce of over 7,800 employees. During the year we have
implemented a regional structure, with senior operational management aligned
to each region to optimise our future performance. We continue to invest in
developing talent within the organisation and supporting the growth and
development of our colleagues at all levels.
Trading performance overview
The Group generated revenue of $614.6 million (FY2021: $443.3 million). This
included organic revenue growth of 19% and the contribution from our FY2022
acquisitions and the remainder of the first 12 months of our FY2021
acquisitions. Organic revenue growth included 96% growth in our Electric
Vehicles sector, as well as 14% organic growth from our Consumer Electricals
and 13% from our Medical sectors.
Our Complex Industrial Technology sector also increased revenue, although
organic sales were down 2% on the prior year primarily due to the transition
to the new 400Gb cables in our data centre market. This market is expected to
show growth later in FY2023.
Underlying operating profit increased by 31% to $56.2 million (FY2021: $42.9
million), driven by organic revenue growth and acquisitions. Statutory
operating profit was $41.0 million (FY2021: $30.7 million), including
adjusting items and share-based payments of $15.2 million (FY2021: $12.2
million).
The underlying operating margin was 9.1%, slightly down from 9.7% in the prior
year, and broadly flat on H1 FY2022. The margin reflects the benefits of
higher volumes in the year - albeit with an adverse impact from a higher sales
mix of power products - strong cost controls and vertical integration
benefits. It was achieved despite the macro-headwinds, most notably freight
and commodity price inflation. The prior year also included a favourable
impact from the temporary lowering of employment taxes in some Asian
countries, relating to the Covid-19 outbreak.
After acquisitions, and partially offset by cash generated, net debt was $74.4
million at 3 April 2022 (4 April 2021: $7.3 million), excluding $20.9 million
(4 April 2021: $20.0 million) of lease liabilities. The covenant net
debt/adjusted EBITDA ratio was 1.3 times (FY2021: 0.3 times).
Impact of the macroeconomic backdrop
Volex is well positioned to navigate the challenges of a dynamic
macro-environment. This is underpinned by our diverse markets, capabilities
and global manufacturing footprint. These strengths have been central to the
continued strong progress made, despite the on-going disruption to global
supply chains, the challenges posed by Covid-19 and, more recently, the
Russian invasion of Ukraine.
Copper, freight and other material prices are going through a period of high
inflation. Our contracts with power cord customers, where copper is a
significant percentage of our costs, allow us to pass increases through to the
customer, although there can be a short delay in the implementation of pricing
changes.
Other price inflation is passed onto customers through regular price
discussions, which either happen on a regular basis such as quarterly, or on
an ad hoc basis where required by changes in the costs.
Working capital has increased due to our sales growth, as well as investment
in higher levels of inventory to maintain our position as a reliable partner
to customers in an environment with extended supplier lead times. Our
freight costs have also increased due to demand for global shipping capacity
exceeding supply.
Government restrictions relating to the Covid-19 pandemic have eased in
FY2022, although there have been instances of local and national lockdowns
which have had some limited and temporary impacts on trade. We did not
experience any significant downtime at our sites in FY2022 and we continue to
adhere to stringent health and safety measures across the business.
Our direct operational exposure to Russia and Ukraine is low. We have no
facilities or employees in either country. In the financial year ended 3 April
2022, sales to Russia represented less than 0.5% of Group revenue, with
revenue into Ukraine being negligible. We have no significant dependency on
direct supplies of components or materials from either Russia or Ukraine.
Revenue by customer sector
Electric Vehicles
The rapid expansion of the electric vehicle industry is expected to continue
as the technology enters the mainstream, in part driven by legislation.
Volex has achieved continued strong growth due to our market leading position
and strong reputation as a grid cord manufacturer. Building on our significant
experience with technology related to electric vehicle charging, we are
expanding our product set to support faster AC charging and out-of-home
charging solutions. This will help us to further broaden our customer base. We
are continuing to invest in new products and in our manufacturing processes to
retain our place as one of the lowest cost producers. This will be important
as competition increases.
Organic revenue from our Electric Vehicles customers increased year-on-year by
96% to $104.2 million (FY2021: $53.1 million), with demand remaining strong.
This growth is being driven by Volex's continuing position as a low-cost
manufacturer following our vertical integration activity. We have also
successfully onboarded three new customers as we diversify our customer base.
Consumer Electricals
Consumer Electricals revenue increased in FY2022 by 60% to $262.4 million
(FY2021: $164.0 million) with demand for consumer electrical products
remaining robust through the year. Our revenue benefited from a full-year of
revenues from our Turkish DE-KA business, which was acquired in FY2021, and
three-months of trading from Prodamex. On an organic basis, revenue for this
sector increased by 14%, with approximately 4% of this relating to the
pass-through of copper and other price increases.
Higher freight costs and longer shipping times favour our global manufacturing
footprint, which give us the flexibility to manufacture for customers from
locations close to where they are. We are also delivering cross-selling
success, following the acquisition of DE-KA, which has traded strongly. We
will continue to pursue cross-sales opportunities, using our global domestic
appliance presence, following the acquisition of Prodamex.
Medical
The sector has recovered well from the Covid-19-related softening in demand we
saw in the prior year, as access to hospitals has now improved, allowing
installation of larger medical equipment. Consequently, Medical revenues were
up 13% on an organic basis at $128.3 million (FY2021: $112.7 million), and
these are now back above pre-pandemic levels.
There remains a global backlog in healthcare procedures following the
pressures on the healthcare system created by Covid-19, which should mean that
medium-term demand is sustainable. The medical products we manufacture are
complex, with specified bills-of-materials. Extended lead times can delay
individual projects but the high mix of products we manufacture allows us to
maintain efficient production through dynamic planning.
Complex Industrial Technology
Revenue from Complex Industrial Technology increased 6% to $119.8 million
(FY2021: $113.5 million), 2% lower on an organic basis. This includes
five-months of revenue from Irvine and three-months from TC following
acquisition. Excluding Data Centre customers, revenues were 12% higher than
last year on an organic basis. Order books are strong with key customers
placing demand well in advance of production, due to longer lead times for
certain components. The longer lead times and component availability have
served to constrain growth in the year.
Data Centre customers are reported within Complex Industrial Technology and
made up 26.2% (FY2021: 36.9%) of revenue in this sector. This sub-sector
declined year-on-year due to a number of contributory factors. There was some
stocking up in data centres in the prior year, with destocking this year in
preparation for the transition to the new 400Gb cables. There were also
shortages of the new network equipment needed to support the adoption of 400Gb
architecture in data centres. However, we have qualified 400Gb products with
our key customers and expect strong sales when demand increases later in
FY2023.
Revenue by reportable segment
Volex has developed over the years to be a geographically interconnected
business. Customers want to have manufacturing in multiple locations, reducing
the risk of supply chain disruption from any particular country. We operate
with a regional focus to meet this need and we analyse our customer revenue
geographically to reflect this. We allocate geographic revenue based on where
the customer relationship is, reflecting our customer-centric nature.
North America
North America is our largest customer segment, and we work with some of its
largest technology companies and global innovators. North America comprises
44.3% of Group revenue (FY2021: 45.8%). Revenue grew by 34.0% to $272.1
million (FY2021: $203.1 million). This reflects some of the strong organic
growth we experienced with our Electric Vehicles customers, as well as the
acquisitions of Irvine, Prodamex and TC.
Asia
Asia makes up 23.2% of Group revenue (FY2021: 30.2%). Asia revenue increased
by 6.7% to $142.7 million (FY2021: $133.7 million) with the majority of
revenue in the Consumer Electricals sector. Demand was strong throughout the
year due to our competitive pricing and ability to respond quickly to customer
requirements.
Europe
Europe makes up 32.5% of Group revenue (FY2021: 24.0%). Revenue in Europe
increased by 87.6% to $199.8 million (FY2021: $106.5 million) driven by an
increased demand for Electric Vehicles and an increase in European domestic
appliances sales led by the acquisition of DE-KA at the end of FY2021.
Realising our strategy
Our strategy is built around five key pillars; product development, revenue
growth, operational excellence, investment and acquisition and people.
We aim to develop the right products and capabilities to be the manufacturing
partner of choice for our customers. We have invested in product development
through research and development, working with our customers to understand
their product requirements.
We put the customer at the heart of what we do, through regular and
transparent communication. We deliver customer value, alongside exceptional
quality and customer service. To meet these high standards, we closely monitor
our manufacturing facilities and processes, identifying ways to improve which
will increase efficiency and quality. We have invested in vertical
integration, giving us greater control over the supply chain and protecting
margins.
Delivering excellent customer service and improving processes requires great
people. We have strengthened the organisation by bringing in outside
expertise, in addition to creating development opportunities for existing
employees. Effective communication is important and we use a variety of
channels to drive employee engagement. We have continued with our site
excellence awards as a way of recognising exceptional performance and
teamwork.
We are constantly assessing businesses that are going through a sales process,
or building relationships with potential acquisition targets that show
strategic alignment, but are not ready for sale.
Creating value through organic investment
We have increased organic investment in the business, building on our track
record of creating value, as we focus on growth areas, while employing
stringent financial criteria, with payback on the investment typically
achieved within two years. Our investment in the business not only maintains
and enhances our assets, but also meets identified increased customer demand
and develops new products. This investment is enabling our future growth.
Total capital investment increased to $15.0 million (FY2021: $7.8 million),
amounting to 2.4% of revenue (FY2021: 1.8% of revenue). Capital investment
in the year was slightly lower than planned, as extended lead times meant that
some investment was deferred into FY2023. In the year, investment was focused
on high-growth areas, including EV and data centre capabilities, as well as
vertical integration into our cable production, consistent with our strategy,
and the first phase of the new global ERP system. Importantly, we now have the
capability to produce our own cable in two more of our facilities in Asia. We
expect our investment to increase in FY2023, as we pursue growth opportunities
in our markets.
We have also continued to invest in expanding our research and development
activities. This includes the recruitment of additional specialists to drive
our product development programmes. We expect to enhance our research and
development teams through FY2023.
Creating value through acquisitions
The successful acquisition and integration of quality businesses continues to
be a major part of our strategy. Our typical acquisition target is a strong,
well-managed business in a sector where we have a deep understanding. We are
attracted to businesses with blue-chip, long-term customers and good
capabilities, enabling us to benefit from cross-selling opportunities. Targets
requiring significant integration or restructuring effort are only
contemplated when we can identify the right management resources to lead this
activity.
We identify potential acquisitions through a variety of methods, seeking out
businesses that are not on the market, as well as those already in a process.
All opportunities are qualified and discussed by an investment committee
before we progress to negotiation. In an environment where Covid-19 has
impacted profitability at potential targets, both positively and negatively,
valuation can be complex, and we have taken a prudent approach in this regard.
We proceed to due diligence only when we have an alignment on commercial
terms and we only pursue opportunities that meet the strict value criteria
that we tailor for each transaction, based on its specific characteristics.
Having acquired 10 businesses in four years, we have become skilled at
integrating new operations into our organisation. We tailor the integration
programme to the requirements of the individual transaction, focusing on cost
synergies and opportunities to cross sell.
Acquisitions remain a high priority and we are actively pursuing a number of
opportunities, at different stages of qualification. We have good access to
funding, with significant undrawn facilities. The completion of any
acquisition is dependent on the business meeting our stringent requirements
following appropriate due diligence and negotiations.
During FY2022 we successfully completed the acquisitions of four businesses
for a combined cash consideration of $47.1 million, paying an average
Enterprise Value/EBITDA multiple of 5.5 times, which demonstrates our ability
to acquire quality businesses at reasonable valuations. These acquisitions
contributed revenues of $12.5 million to the Group in FY2022.
· Irvine Electronics, LLC is based in California, USA and was acquired
in October 2021 for total cash consideration of $15.1 million.
Irvine is a manufacturer of electronic solutions, including printed circuit
board assemblies, with over 30 years' experience and deep relationships across
a wide variety of blue-chip customers, particularly in the defence, military
aerospace and medical markets. The acquisition will strengthen our profile in
North America, adding further capabilities and capacity to the Group's
existing operations in Washington State and Mexico, creating a compelling
value proposition for customers in the region. Expanding on our integrated
manufacturing services strategy, the acquisition will further strengthen
Volex's ability to provide customers with vertically integrated solutions
through enhanced printed circuit board assembly capabilities.
· Prodamex SA de CV and Terminal & Cable TC Inc. were acquired in
January 2022 for a total cash consideration of $18.9 million.
Prodamex provides an advanced manufacturing facility in Central Mexico serving
North American customers with higher volume requirements. It complements our
plants in Tijuana and Juarez, Mexico, creating additional local flexibility
for customers. The business has long-standing expertise in wire harnesses for
domestic appliances. It provides cross-selling opportunities with our DE-KA
business in Turkey and the recently expanded facility in Batam, Indonesia.
It gives us a global low-cost presence in the white goods and commercial
markets.
TC is one of the largest wire harness manufacturers in Canada with over 50
years' experience, establishing a strong Canadian market presence for Volex as
a leading defence supplier. It complements our Irvine acquisition and broadens
our defence market capabilities into ground vehicles on long-term customer
programmes. TC has ruggedised wire harness capabilities, allowing expansion
into the attractive "off-highway" market sector supporting industrial,
agricultural and construction machinery manufacturers.
· An investment of $13.1 million, in March 2022, for 51% of the equity
and 100% of the land and buildings of inYantra Technologies Pvt Ltd. In the
first quarter of FY2023, $5.0 million of this transaction price was paid.
inYantra is an electronic manufacturing services provider based in Pune, India
delivering PCB assemblies and box build to automotive, consumer electrical and
industrial automation customers. This acquisition allows Volex to enter an
important new geography, which benefits from strong macroeconomic trends, with
the Indian Government seeing high-technology electronics manufacturing
businesses as a key growth sector. The acquisition of the land enables us to
scale this operation over time.
Chief Financial Officer's Review
52 weeks to 3 April 2022 52 weeks to 4 April 2021
Revenue Profit/(loss) $'000 Revenue Profit/(loss) $'000
$'000
$'000
North America 272.1 21.4 203.1 19.8
Asia 142.7 11.6 133.7 14.1
Europe 199.8 32.1 106.5 15.4
Unallocated Central costs - (8.9) - (6.4)
Divisional results before share-based payments 614.6 56.2 443.3 42.9
and adjusting items
Adjusting operating items (10.8) (5.6)
Share-based payment charge (4.4) (6.6)
Operating profit 41.0 30.7
Share of net profit from associates and joint ventures 0.4 0.8
Finance income 0.3 0.3
Finance costs (5.5) (2.4)
Profit before taxation 36.2 29.4
Taxation (5.8) 9.5
Profit after taxation 30.4 38.9
Basic Earnings per share:
Statutory 19.3 cents 25.5 cents
Underlying* 26.9 cents 32.1 cents
* Before adjusting items and share-based payments charge.
Statutory results
Revenue grew 38.6% to $614.6 million (FY2021: $443.3 million). Statutory
operating profit increased by $10.3 million to $41.0 million (FY2021: $30.7
million) which is an increase of 33.6% compared to the prior year. Net finance
costs were $5.2 million (FY2021: $2.1 million), resulting in a profit before
tax of $36.2 million (FY2021: $29.4 million) which increased 23.1%. There was
a tax charge for the year of $5.8 million, compared to a tax credit in FY2021
of $9.5 million due to the recognition of deferred tax assets. Basic earnings
per share were 19.3 cents (FY2021: 25.5 cents), a decrease of 24.3%. Before
tax, basic earnings per share increased, but due to the recognition of a
significant deferred tax asset in FY2021 basic earnings per share after tax
decreased in FY2022.
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 ('IFRS'). Underlying earnings measures exclude the impact of
adjusting items and share-based payments, with further detail regarding the
adjustments shown in note 3. The Board and management team make use of
alternative performance measures because they believe they provide additional
information on the underlying performance of the business and help to make
meaningful year-on- year comparisons.
Group revenue
Group revenue increased by 38.6% to $614.6 million (FY2021: $443.3 million)
driven by strong organic growth from customer demand and the contribution from
acquisitions. Group organic revenue growth was 19%, of which approximately 4%
was driven by inflation-related price increases, with the remaining 15% from
volumetric growth.
Organic revenue from the fast-growing Electric Vehicles sector was
particularly strong, increasing 96% to $104.2 million (FY2021: $53.1 million),
as we expanded our product set. There was robust demand in the Consumer
Electricals sector with organic growth of 14%. Overall our Consumer
Electricals revenue increased 60% to $262.4 million (FY2021: $164.0 million),
as it benefited from a full year contribution from DE-KA and the FY2022
acquisition of Prodamex. Our Medical revenue was also strong, following
delays in the installation of large medical equipment in the prior year due to
Covid-19-related access issues. Medical revenues increased 13% on an organic
basis to $128.3 million (FY2021: $112.7 million), and are now above
pre-Covid-19 levels. Revenue from Complex Industrial Technology increased 6%
to $119.8 million (FY2021: $113.5 million), 2% lower on an organic basis.
Excluding data centre customers revenues were 12% higher on an organic basis.
Data Centre revenue, is an important sub-sector of this market and declined
due to customer destocking in preparation for the transition to the new 400Gb
cables, as well as a slower increase in demand due to shortages of the new
network equipment needed to support the adoption of 400Gb architecture in data
centres.
Gross margin
The Group's gross margin was 20.5% (FY2021: 23.4%). This was due in part to
product mix with a higher volume of lower margin Electric Vehicles and
Consumer Electricals products as well as an adverse impact from global
commodity price inflation. Our contracts with power cord customers, where
copper is a significant cost component, have allowed us to pass increases in
the cost of copper to customers, maintaining absolute gross profit levels,
although there is a short delay to allow implementation of price changes. In
passing through higher raw material costs, absolute profit is preserved, but
cost of sales as a percentage of revenue increases, which reduces the gross
margin percentage.
Operating profit
Underlying operating profit increased 31.0% to $56.2 million (FY2021: $42.9
million). This was favourably impacted by the strong organic growth and the
contribution from acquisitions. In addition, the ratio of underlying
operating expenses to revenue improved to 11.3%, from 13.8% in the prior year,
demonstrating tight cost control and continuous improvement activities. This
was despite our increased, targeted investment in the business. Statutory
operating profit also increased by 33.6% to $41.0 million (FY2021: $30.7
million), also reflecting the factors above.
The Group's underlying operating margin of 9.1% reduced slightly from 9.7% in
FY2021. The margin benefited from higher volumes in the year, continued strong
control over our cost base and vertical integration activities in our Chinese
and Batam, Indonesia sites. There were a number of headwinds which brought
down margins in the year, with the adverse product mix and commodity price
inflation set out in the 'gross margin' section above. In addition, the prior
year benefited from the temporary lowering of employment taxes in some Asian
countries, related to the Covid-19 outbreak.
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.
Acquisition costs of $2.5 million (FY2021: $0.4 million) were incurred in the
year. As well as undertaking third-party due diligence, the Group uses its own
experts and in-depth understanding of the sector to conduct a robust
assessment of all acquisition targets.
Partially offsetting these items was a gain of $2.6 million (FY2021: $nil)
recognised on the forgiveness of the US Paycheck Protection Program loans
provided to parts of the Group's North America operations.
Amortisation of acquired intangibles increased to $10.3 million (FY2021: $5.2
million) largely as a result of the full year impact of amortisation of DE-KA
intangibles. The Group has recognised two classes of separately identifiable
intangible assets, which are customer relationships and the acquired open
order book. The open order book is amortised over a period of less than three
years, so amortisation is higher in the first few years following acquisition
in comparison to subsequent years. Customer relationship intangible assets are
generally amortised over a longer period, reflecting the long-term
relationships we gain through our acquisitions.
The charge recognised through the income statement for share-based payment
awards comprises $3.8 million (FY2021: $2.4 million) in respect of senior
management, $0.6 million (FY2021: $2.6 million) in respect of acquisitions and
$nil (FY2021: $1.6 million) for associated payroll taxes.
Share-based payments include awards made to incentivise senior management as
well as awards granted to the senior management of acquired companies. The
awards made to acquired company management form an important part of the
negotiation of consideration in an acquisition situation. They are used to
reduce the cash consideration, and as an incentivisation and retention tool.
In accordance with IFRS, where these awards include ongoing performance
features, they are recognised in the income statement rather than as part of
the cost of acquisition.
Net finance costs
Net finance costs increased to $5.2 million (FY2021: $2.1 million) mainly due
to the increased utilisation of the revolving credit facility following the
acquisition of DE-KA in the prior year and the subsequent acquisitions of
Irvine, TC, Prodamex and inYantra during FY2022. The financing element for
leases for the year was $1.0 million (FY2021: $0.7 million). The Group
recognises interest income of $0.2 million (FY2021: $0.2 million) in relation
to accrued interest receivable on the 10% preference shares issued by our
associate, Kepler SignalTek.
Taxation
The Group's income tax expense for the period was $5.8m (FY2021: credit of
$9.5m), representing an effective tax rate ("ETR") of 16.0% (FY2021: -32.4%).
The tax expense and the effective tax rate is affected by the recognition of
deferred tax assets, as required by International Financial Reporting
Standards. The assets recognised this year and in the prior year are
principally due to the recognition of historical operating losses, unclaimed
capital allowances and other temporary timing differences. The decision to
recognise these assets is based on an assessment, in the relevant
jurisdiction, of the probability of future taxable profits which will be
reduced by the historical losses and allowances. As the profitability of the
Group's operations has increased in recent years, this threshold has been met
in certain countries.
In FY2021, management made an assessment of the probability of future
operating profits in a key location, recognising a corresponding deferred tax
asset resulting in a credit to underlying profit after tax of $12.9 million.
For FY2022, having performed the same assessment, the credit to underlying
profit after tax was $2.9 million. Tax credits and charges relating to the
underlying operations of the Group, including losses that have arisen through
underlying activities, are reported in underlying profit after tax. The
recognised deferred tax assets are expected to be recovered from profits
arising from our underlying operations. Tax charges and credits arising from
transactions reported as adjusting items and share-based payments are reported
outside of underlying profit after tax. The deferred tax assets are recovered
in future periods by reducing cash tax payable and recognising a deferred tax
expense in the income statement.
The Group has $64.1 million (FY2021: $80.1 million) of tax losses for which no
deferred tax asset is currently recognised due to uncertainty over forecast
future profitability in the respective jurisdictions where the tax losses
arose. Depending on the Group's future growth and performance in those
jurisdictions it is possible that some of the unrecognised tax losses may
become recoverable, leading to additional deferred tax assets being recognised
in future periods and reducing the ETR.
The underlying ETR (representing the income tax expense on profit before tax,
adjusting items and share-based payments) was 17.7% (FY2021: -17.5%). This
difference is, as set out above, mainly due to lower deferred tax asset
recognition. The ETR was also affected by changes in foreign exchange rates
where local entities calculate tax in local currency rather than the
functional currency for Group reporting. The impact of foreign exchange
volatility on the underlying ETR was 4.7% adverse (FY2021: 1.9% favourable),
mainly arising in Turkey. There was also a $1.7 million underlying tax credit
from changes to tax rates, particularly due to the effect on deferred tax
assets of the increase in the UK tax rate to 25% from 1 April 2023, which had
a 3.3% favourable impact on the underlying ETR (FY2021: 0.2% adverse).
Cash tax paid during the period was $6.5 million (FY2021: $3.1 million),
representing an underlying cash ETR of 12.6% (FY2021: 7.5%). The increase to
the underlying cash ETR is due to the above-mentioned foreign exchange
volatility whereby a depreciating local currency increases tax payable, and
the effect of acquisitions in higher-tax jurisdictions where the Group does
not have historical tax losses.
The Group operates in a number of different tax jurisdictions and is subject
to periodic tax audits by local authorities in the normal course of business
on a range of tax matters in relation to corporate tax and transfer pricing.
As at 3 April 2022, the Group has net current tax liabilities of $8.2 million
(FY2021: $6.7 million) which include $7.2 million (FY2021: $7.9 million) of
provisions for tax uncertainties.
Earnings per share
Underlying diluted earnings per share decreased 16.0% to 25.2 cents (FY2021:
30.0 cents) reflecting the deferred tax asset recognised lower than the prior
year partially offset by increased underlying operating profits. Excluding
deferred tax asset recognition underlying diluted earnings per share increased
by 6.3%. Basic earnings per share decreased to 19.3 cents (FY2021: 25.5
cents).
The weighted average number of shares in the year was 157.2 million (FY2021:
152.2 million).
Foreign exchange
The majority of the Group's revenue is in US dollars, with limited sales in
other currencies including euros and British pounds sterling. Most raw
materials purchases are also denominated in US dollars but other costs such as
rent, utilities and salaries are paid in local currencies. This creates a
small operating profit exposure to movements in foreign exchange, some of
which is hedged. Foreign exchange losses recognised in the income statement
for the period were $0.6 million (FY2021: $1.3 million).
Cash flow
Operating cash flow before movements in working capital was $60.9 million
(FY2021: $50.0 million). While benefiting from the strong operating
performance, operating cash flow reflects the increased investment in the
business. In addition, there was an adverse working capital movement of $34.4
million, which compares to a $7.6 million outflow in FY2021. The reasons for
this working capital movement are set out below:
• An increase in inventory leading to a cash outflow
of $28.1 million (FY2021: $12.2 million). Extended supply chain lead times
have resulted in approximately two additional weeks of inventory being held as
shipments of finished goods to customers take longer, and therefore
goods-in-transit increase. Extended supplier lead times have also increased
inventory levels. This was in addition to the increase in inventories required
due to growth in our operations and new customer projects;
• An increase in receivables leading to a cash
outflow of $14.2 million (FY2021: $17.0 million) with the increase reflecting
growth of the business; and
• An inflow related to payables of $7.9 million
(FY2021: $21.6 million). This was also due to the growth of the business.
Capital expenditure increased to $15.0 million from $7.8 million in FY2021.
During the year, the Group has continued to invest in automation to deliver
further production efficiencies in our higher volume factories. We have also
increased our investment in vertical integration and in our higher-growth
sectors.
Free cash flow was $4.1 million (FY2021: $31.3 million). Free cash flow
represents net cash flows before financing activities excluding the net
outflow from the acquisition of subsidiaries.
Net financing inflows were $40.4 million (FY2021: inflows $14.5 million). This
included dividend payments of $7.2 million (FY2021: $6.0 million) and the
drawing of the revolving credit facility ("RCF") to fund acquisitions. As part
of the extension and enhancement of the Group's RCF, legal costs and
arrangement fees of $2.5 million (FY2021: $1.1 million) were incurred during
the year, and these will be amortised over the life of the facility.
Total cash expenditure on acquisitions (net of cash acquired) was $54.9
million (FY2021: $42.2 million), including $19.2 million (FY2021: $1.3
million) in respect of contingent consideration.
The Group is expecting to make payments of $17.8 million in FY2023 in relation
to contingent consideration for acquisitions made in FY2022 and previous
years. This includes $5.0 million of inYantra consideration relating to
land, which was paid in the first quarter of FY2023.
The cash outflow associated with the settlement of awards under share-based
payment arrangements was $5.1 million (FY2021: $9.1 million).
Net debt and gearing
At 3 April 2022, the Group's net debt was $74.4 million before lease
liabilities and $95.3 million including lease liabilities. At 4 April 2021,
net debt before lease liabilities was $7.3 million and $27.3 million including
lease liabilities.
At 3 April 2022 the Group's covenant basis net debt/underlying EBITDA ratio
was 1.3 times (4 April 2021: 0.3 times).
Dividend
The Board's dividend policy, while taking into account earnings cover, also
takes into account other factors such as the expected underlying growth of the
business, its capital and other investment requirements. The strength of the
Group's balance sheet and its ability to generate cash are also considered.
A final dividend of 2.4 pence per share (FY2021: 2.2 pence) will be
recommended to shareholders at the Annual General Meeting, reflecting the
Board's confidence and the Group's robust financial position. The cash cost of
this dividend is expected to be approximately $5.0 million.
Together with an interim dividend of 1.2 pence per share paid in December
2021, this equates to a full year dividend of 3.6 pence per share (FY2021: 3.3
pence per share), an increase of 9.1%. If approved, the final dividend will be
paid on 26 August 2022 to all shareholders on the register at 22 July 2022.
The ex-dividend date will be 21 July 2022.
Banking facilities
In February 2022 the Group completed a refinancing of its banking facilities,
with a syndicate of five banks. An enlarged $300 million facility replaced the
Group's existing $100 million multi-currency revolving credit facility. The
new facility has an initial three-year term, with two one-year extension
options. It comprises a $125 million revolving credit facility, a $75 million
term loan and an additional $100 million uncommitted accordion.
The new facility has an improved net debt to underlying EBITDA covenant
facility, providing additional headroom in comparison to the previous
facility, affording greater flexibility to undertake organic and inorganic
investment to support growth.
Defined benefit pension schemes
The Group's net pension deficit under IAS 19 as at 3 April 2022 was $3.1
million (FY2021: $5.2 million). The largest element of the pension obligation
relates to a defined benefit scheme in the United Kingdom which has been
closed to new entrants for some years. The scheme's assets and liabilities are
recorded in British pounds sterling with a small part of the decrease due to
the movement in exchange rates.
Consolidated Income Statement
For the 52 weeks ended 3 April 2022 (52 weeks ended 4 April 2021)
2022 2021
Before Adjusting items and share-based payments Total Before Adjusting items and share-based payments Total
adjusting items and share-based payments (Note 3) adjusting items and share-based payments (Note 3)
Notes $'m $'m $'m $'m $'m $'m
Revenue 2 614.6 - 614.6 443.3 - 443.3
Cost of sales (488.8) - (488.8) (339.4) - (339.4)
Gross profit 125.8 - 125.8 103.9 - 103.9
Operating expenses (69.6) (15.2) (84.8) (61.0) (12.2) (73.2)
Operating profit 2 56.2 (15.2) 41.0 42.9 (12.2) 30.7
Share of net profit from associates 0.4 - 0.4 0.8 - 0.8
Finance income 0.3 - 0.3 0.3 - 0.3
Finance costs (5.5) - (5.5) (2.4) - (2.4)
Profit on ordinary activities before taxation 51.4 (15.2) 36.2 41.6 (12.2) 29.4
Taxation 4 (9.1) 3.3 (5.8) 7.2 2.3 9.5
Profit for the period attributable to the owners of the parent 42.3 (11.9) 30.4 48.8 (9.9) 38.9
Earnings per share (cents)
Basic 5 26.9 19.3 32.1 25.5
Diluted 5 25.2 18.1 30.0 23.9
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 3 April 2022 (52 weeks ended 4 April 2021)
2022 2021
$'m $'m
Profit for the period 30.4 38.9
Items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit pension schemes 0.7 (1.1)
Tax relating to items that will not be reclassified (0.1) 0.5
0.6 (0.6)
Items that may be reclassified subsequently to profit or loss
Gain arising on cash flow hedges during the period 0.1 1.9
Exchange (loss)/gain on translation of foreign operations (5.9) 3.2
Tax relating to items that may be reclassified 0.1 0.3
(5.7) 5.4
Other comprehensive (expense)/income for the period (5.1) 4.8
Total comprehensive income for the period attributable to the owners of the 25.3 43.7
parent
Consolidated Statement of Financial Position
As at 3 April 2022 (4 April 2021) Notes 2021
2022 RESTATED
$'m
$'m
Non-current assets
Goodwill 82.9 68.0
Other intangible assets 47.0 39.6
Property, plant and equipment 43.4 32.4
Right-of-use asset 19.4 18.0
Interests in associates and joint ventures 1.5 0.9
Other receivables 2.1 4.4
Deferred tax asset 20.6 22.0
216.9 185.3
Current assets
Inventories 119.3 76.9
Trade receivables 119.0 100.3
Other receivables 16.7 10.3
Current tax assets 1.9 2.8
Derivative financial instruments 0.4 0.4
Cash and bank balances 8 29.1 36.5
286.4 227.2
Total assets 503.3 412.5
Current liabilities
Borrowings 8 5.0 9.6
Lease liabilities 8 4.3 4.6
Trade payables 84.7 72.1
Other payables 61.9 58.9
Current tax liabilities 10.1 9.5
Retirement benefit obligation 1.1 1.1
Provisions 9 2.3 1.8
Derivative financial instruments 0.1 -
169.5 157.6
Net current assets 116.9 69.6
Non-current liabilities
Borrowings 8 98.5 34.2
Lease liabilities 8 16.6 15.4
Other payables 1.0 9.1
Deferred tax liabilities 7.0 7.8
Retirement benefit obligation 2.0 4.1
Provisions 9 0.2 0.3
125.3 70.9
Total liabilities 294.8 228.5
Net assets 208.5 184.0
Equity
Share capital 11 62.5 62.0
Share premium account 11 60.9 60.9
Non-distributable reserves 12 2.5 2.5
Hedging and translation reserve (9.8) (4.1)
Own shares 12 (0.2) (3.3)
Retained earnings 85.2 66.0
Total attributable to owners of the parent 201.1 184.0
Non-controlling interests 7.4 -
Total equity 208.5 184.0
RESTATED: In accordance with IFRS 3 the Group has amended provisional fair
value associated with an acquisition completed in the prior period. This has
led to an increase in Goodwill and contingent consideration which is included
in other payables. See note 13 for further information.
Consolidated Statement of Changes in Equity
For the 52 weeks ended 3 April 2022 (52 weeks ended 4 April 2021)
Share Share premium account Non-distributable reserves Hedging and translation reserve Own shares Retained earnings Equity attributable to owners Non-controlling interests Total equity
capital
$'m $'m $'m $'m $'m $'m $'m $'m $'m
Balance at 5 April 2020 60.3 46.5 2.5 (9.5) (1.0) 32.0 130.8 - 130.8
Profit for the period attributable to the owners of the parent - - - - - 38.9 38.9 - 38.9
Other comprehensive income/(expense) for the period - - - 5.4 - (0.6) 4.8 - 4.8
Total comprehensive income for the period - - - 5.4 - 38.3 43.7 - 43.7
Share issue 1.6 14.4 - - - - 16.0 - 16.0
Exercise of deferred bonus shares 0.1 - - - - (0.1) - - -
Own shares sold/(utilised) in the period - - - - 1.7 (3.1) (1.4) - (1.4)
Own shares purchased in the period - - - - (4.0) - (4.0) - (4.0)
Dividend - - - - - (6.0) (6.0) - (6.0)
Credit to equity for equity-settled share-based payments - - - - - 0.1 0.1 - 0.1
Tax effect of share options - - - - - 4.8 4.8 - 4.8
Balance at 4 April 2021 62.0 60.9 2.5 (4.1) (3.3) 66.0 184.0 - 184.0
Profit for the period attributable to the owners of the parent - - - - - 30.4 30.4 - 30.4
Other comprehensive (expense)/income for the period - - - (5.7) - 0.6 (5.1) - (5.1)
Total comprehensive income for the period - - - (5.7) - 31.0 25.3 - 25.3
Share issue 0.5 - - - - (0.5) - - -
Business combination (see note 13) - - - - - - - 7.4 7.4
Own shares sold/(utilised) in the period - - - - 7.5 (7.5) - - -
Own shares purchased in the period - - - - (4.4) - (4.4) - (4.4)
Dividend - - - - - (7.2) (7.2) - (7.2)
Credit to equity for equity-settled share-based payments - - - - - 4.2 4.2 - 4.2
Tax effect of share options - - - - - (0.8) (0.8) - (0.8)
Balance at 3 April 2022 62.5 60.9 2.5 (9.8) (0.2) 85.2 201.1 7.4 208.5
Consolidated Statement of Cash Flows
For the 52 weeks ended 3 April 2022 (52 weeks ended 4 April 2021)
Notes
2022
2021
$'m
$'m
Net cash generated from operating activities 7 18.5 38.7
Cash flow used in investing activities
Interest received 0.1 -
Acquisition of businesses, net of cash acquired 13 (35.7) (40.9)
Contingent consideration for businesses acquired 13 (19.2) (1.3)
Proceeds on disposal of intangible assets, property, plant and equipment 0.5 0.4
Purchases of property, plant and equipment (10.8) (7.7)
Purchases of intangible assets (4.2) (0.1)
Proceeds from the repayment of preference shares - -
Net cash used in investing activities (69.3) (49.6)
Cash flows before financing activities (50.8) (10.9)
Cash used before adjusting items (48.8) (10.5)
Cash utilised in respect of adjusting items (2.0) (0.4)
Cash flow generated from financing activities
Dividend paid (7.2) (6.0)
Net purchase of shares for share schemes (5.1) (9.1)
Refinancing costs paid 8 (2.5) (1.1)
New bank loans raised 8 69.3 37.2
Repayment of borrowings 8 (3.4) (3.1)
(Outflow)/inflow from factoring 8 (6.0) 0.5
Interest element of lease payments 8 (1.0) (0.7)
Receipt from lease debtor 0.5 0.5
Capital element of lease payments 8 (4.2) (3.7)
Net cash generated from financing activities 40.4 14.5
Net (decrease)/increase in cash and cash equivalents (10.4) 3.6
Cash and cash equivalents at beginning of period 36.5 31.7
Effect of foreign exchange rate changes (0.2) 1.2
Cash and cash equivalents at end of period 8 25.9 36.5
1 Basis of preparation
The preliminary announcement for the 52 weeks ended 3 April 2022 has been
prepared in accordance with the accounting policies as disclosed in Volex
plc's Annual Report and Accounts 2021, as updated to take effect of any new
accounting standards applicable for the period as set out in Volex plc's
Interim Statement 2022.
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 3 April 2022, 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 4
April 2021 have been delivered to the Registrar of Companies. The independent
auditors' 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 Group's financial statements have been prepared on the going concern
basis, which contemplates the continuity of normal business activity and 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 the end of
September 2023, which is based on the FY2023 Board-approved budget. The
Directors have sensitised the cash flow forecast using a base case and
downside scenario that take into account the principal risks and uncertainties
of the Group and the potential future impact from Covid-19. The sensitivity
analysis includes a severe but plausible downside scenario which models a 15%
reduction in year-on-year revenue, equivalent to the worst result in recent
history, which still provides significant covenant headroom.
Based on their assessment and these sensitivity scenarios, the Directors are
satisfied that that there are no material uncertainties that cast doubt on 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.
This preliminary announcement was approved by the Board of Directors on 23
June 2022.
2 Business and geographical segments
Operating segments
Segment information is based on the information provided to the chief
operating decision maker, the Executive members of the Company's Board and the
Chief Operating Officer. This is the basis on which the Group reports its
primary segmental information for the period ended 3 April 2022.
The Group evaluates segmental information on the basis of profit or loss from
operations before adjusting items, interest and income tax expense. The
segmental results that are reported to the Executive members of the Company's
Board and Chief Operating Officer include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
The internal reporting provided to the Executive members of the Company's
Board and the Chief Operating Officer for the purpose of resource allocation
and assessment of Group performance is based upon the regional performance of
where the customer is based and the products are delivered to. In addition to
the operating divisions, a Central division exists to capture all of the
corporate costs incurred in supporting the operations.
Unallocated central costs represent corporate costs that are not directly
attributable to the manufacture and sale of the Group's products but which
support the Group in its operations. Included within this division are the
costs incurred by the executive management team and the corporate head office.
The following is an analysis of the Group's revenues and results by reportable
segment:
52 weeks to 3 April 2022 52 weeks to 4 April 2021
Revenue $'m Profit/(loss) $'m Revenue $'m Profit/(loss) $'m
North America 272.1 21.4 203.1 19.8
Asia 142.7 11.6 133.7 14.1
Europe 199.8 32.1 106.5 15.4
Unallocated Central costs - (8.9) - (6.4)
Divisional results before share-based payments 614.6 56.2 443.3 42.9
and adjusting items
Adjusting operating items (10.8) (5.6)
Share-based payment charge (4.4) (6.6)
Operating profit 41.0 30.7
Share of net profit from associates and joint ventures 0.4 0.8
Finance income 0.3 0.3
Finance costs (5.5) (2.4)
Profit before taxation 36.2 29.4
Taxation (5.8) 9.5
Profit after taxation 30.4 38.9
Charges for share-based payments and adjusting items have not been allocated
to regions as management report and analyse division profitability at the
level shown above. The accounting policies of the reportable segments are in
accordance with the Group's accounting policies.
2 Business and geographical segments (continued)
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
2022 2021 2022 RESTATED
$'m $'m $'m 2021
$'m
North America 272.1 203.1 49.3 23.1
Asia 142.7 133.7 47.2 25.7
Europe 199.8 106.5 99.8 114.5
614.6 443.3 196.3 163.3
The restatement relates to amendment of the provisional value of Goodwill
associated with the
DE-KA acquisition (see note 13).
3 Adjusting items and share-based payments
2022 2021
$'m $'m
Acquisition-related costs 2.5 0.4
Adjustment to fair value of contingent consideration (0.2) (0.1)
Restructuring costs 0.8 -
Amortisation of acquired intangibles 10.3 5.2
Paycheck Protection Program ('PPP') loan forgiveness (2.6) -
Pension past service costs - 0.1
Total adjusting operating items 10.8 5.6
Share-based payments 4.4 6.6
Total adjusting items and share-based payments before tax 15.2 12.2
Tax effect of adjusting items and share-based payments (note 4) (3.3) (2.3)
Total adjusting items and share-based payments after tax 11.9 9.9
Adjusting items include costs that are one-off in nature and significant as
well as the non-cash amortisation of acquired intangible assets. 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.
3 Adjusting items and share-based payments (continued)
Acquisition-related costs of $2.5m (2021: $0.4m) consist of legal and
professional fees relating to potential and completed acquisitions. The
acquisition-related costs associated with acquisitions completed during the
year are Irvine Electronics LLC ('Irvine') ($0.7m), Terminal & Cable TC
Inc ('TC') ($0.4m), Prodamex SA de CV ('Prodamex') ($0.4m) and inYantra
Technologies Pvt Ltd ('inYantra') ($0.6m). The Irvine acquisition costs also
include consultancy fees agreed with the previous owners as part of the
acquisition to support the transition of certain activities. The inYantra
acquisition costs included the associated costs of acquiring the land and
building. The remaining acquisition costs relate to other acquisitions that
have or are being pursued. During the prior year the $0.4m of
acquisition-related costs consisted of legal and professional fees associated
with the acquisition of De-Ka Elektroteknik Sanayi ve Ticaret Anonim Şirketi
('DE-KA').
The adjustment to the fair value of contingent consideration primarily relates
to the acquisition of Ta Hsing Industries Ltd in July 2019. As the lease was
not extended a final contingent payment associated with a lease extension was
not required. During March 2022 the Group commenced the closure of this site
in China with production being transferred to other sites within the Group.
The associated restructuring costs of $0.8m comprises of $0.5m of redundancy
costs and $0.3m of other closure-related costs.
Associated with the acquisitions, the Group has recognised certain intangible
assets, including customer relationships and customer order backlogs. The
amortisation of these intangibles is non-cash and totals $10.3m (2021: $5.2m)
for the period. The increase from prior year relates to the three acquisitions
completed during the current period, Irvine, Prodamex and TC, and the
annualised impact of DE-KA which was acquired in February 2021.
During the period the Group's North American operations received notification
that $2.6m of Payroll Protection Program loans provided during the pandemic
were forgiven.
In 2019, the Group recognised a pension past service cost of $0.5m in
adjusting items as a result of Guaranteed Minimum Pension (GMP) equalisation
following a legal judgement requiring all pension schemes to conduct an
equalisation of male and female members' benefits for the effect of unequal
GMPs. The additional cost of $0.1m in 2021 arose as a result of a further
legal judgement which confirmed there was also an obligation to pay additional
amounts where certain past transfer payments had not been equalised for the
effects of GMPs.
4 Taxation
2022 2021
Before Adjusting Total Before Adjusting Total
adjusting items and share-based payments $'m adjusting items and share-based payments $'m $'m
items $'m items
$'m $'m
Current tax - expense for the period (10.1) 0.2 (9.9) (3.9) 0.1 (3.8)
Current tax - adjustment in respect of previous periods (0.1) - (0.1) 0.2 - 0.2
Total current tax expense (10.2) 0.2 (10.0) (3.7) 0.1 (3.6)
Deferred tax - credit for the period 0.8 3.1 3.9 10.8 2.1 12.9
Deferred tax - adjustment in respect of previous periods 0.3 - 0.3 0.1 0.1 0.2
Total deferred tax credits 1.1 3.1 4.2 10.9 2.2 13.1
Income tax (expense)/credit (9.1) 3.3 (5.8) 7.2 2.3 9.5
UK corporation tax is calculated at the standard rate of 19% (2021: 19%) of
the estimated assessable profit for the period. Taxation for other
jurisdictions is calculated at the rates prevailing in the respective
jurisdictions.
2022 2021
Before Adjusting Total Before Adjusting Total
adjusting items and share-based payments $'m adjusting items and share-based payments $'m $'m
items $'m items
$'m $'m
Profit before tax 51.4 (15.2) 36.2 41.6 (12.2) 29.4
Tax at the UK corporation tax rate (9.8) 2.9 (6.9) (7.9) 2.3 (5.6)
Tax effect of:
Expenses that are not deductible and income that is not taxable in determining 0.1 0.4 0.5 1.6 (0.9) 0.7
taxable profit
Foreign exchange on entities with different tax and functional currencies (2.4) - (2.4) 0.8 - 0.8
Adjustment in respect of previous periods 0.2 - 0.2 0.3 0.1 0.4
Changes to tax rates 1.7 0.1 1.8 (0.1) - (0.1)
Overseas tax rate differences (1.1) 0.3 (0.8) (0.3) 0.1 (0.2)
Current year tax losses and other items not recognised (0.1) (0.1) (0.2) (0.1) - (0.1)
Recognition of previously unrecognised deferred tax assets 2.9 - 2.9 12.9 0.7 13.6
Derecognition of previously recognised deferred tax assets (0.6) (0.3) (0.9) - - -
Income tax (expense)/credit (9.1) 3.3 (5.8) 7.2 2.3 9.5
The tax (expense)/credit for the period is lower (2021: lower) than the
standard rate of corporation tax in the UK and can be reconciled to the profit
before tax per the income statement as follows:
4 Taxation (continued)
Included in the non-deductible tax items is an increase to uncertain tax
provisions of $0.4m (2021: $0.4m). The Group recognises provisions for
uncertain tax positions when the Group has a present obligation as a result of
a past event and management judges that it is probable that there will be a
future outflow within the Group to settle the obligation. Uncertain tax
positions are assessed and measured within the jurisdictions that we operate
in using the best estimate of the most likely outcome. It is inevitable that
the Group will be subject to routine tax audits or be in ongoing disputes with
tax authorities in the multiple jurisdictions it operates within.
The income tax expense reported directly in equity of $0.8m (2021: credit of
$4.8m) relates to share-based payments and consists of a current tax credit of
$1.6m (2021: $0.8m) and a deferred tax expense of $2.4m (2021: credit of
$4.0m).
5 Earnings per ordinary share
The calculations of the earnings per share are based on the following data:
Earnings 2022 2021
$'m $'m
Profit for the purpose of basic and diluted earnings per share being net 30.4 38.9
profit attributable to owners of the parent
Adjustments for:
Adjusting items 10.8 5.6
Share-based payments charge 4.4 6.6
Tax effect of adjusting items and share-based payments (3.3) (2.3)
Underlying earnings 42.3 48.8
No. shares No. shares
Weighted average number of ordinary shares for the purpose of basic earnings 157,245,284 152,230,980
per share
Effect of dilutive potential ordinary shares / share options 10,309,105 10,288,152
Weighted average number of ordinary shares for the purpose of diluted earnings 167,554,389 162,519,132
per share
2022 2021
Basic earnings per share Cents Cents
Basic earnings per share 19.3 25.5
Adjustments for:
Adjusting items 6.9 3.7
Share-based payments charge 2.8 4.4
Tax effect of adjusting items and share-based payments (2.1) (1.5)
Underlying basic earnings per share 26.9 32.1
5 Earnings per ordinary share (continued)
2022 2021
Diluted earnings per share Cents Cents
Diluted earnings per share 18.1 23.9
Adjustments for:
Adjusting items 6.5 3.4
Share-based payments charge 2.6 4.1
Tax effect of adjusting items and share-based payments (2.0) (1.4)
Underlying diluted earnings per share 25.2 30.0
The underlying earnings per share has been calculated on the basis of profit
before adjusting items and share-based payments, net of tax. The Directors
consider that this calculation gives a better understanding of the Group's
earnings per share in the current and prior period.
6 Bank facilities
The Group started the period with a $70.0m multi-currency combined revolving
overdraft and guarantee facility. The syndicate comprised HSBC UK Bank plc,
J.P. Morgan Securities PLC and Citibank, N.A. London branch. The facility
included an additional $30.0m uncommitted 'accordion' feature to provide
further capacity for potential future acquisitions. The facility was secured
by fixed and floating charges over the assets of certain Group companies.
In September 2021 the Group activated the $30.0m accordion feature on the
facility. In February 2022 the Group completed a refinancing with a syndicate
of five banks, replacing its existing $100 million revolving credit facility
with a new $200 million committed facility (the "Facility") together with an
additional $100 million uncommitted accordion (the "Accordion"). As a number
of the terms changed as a result of the refinancing the facility the $0.8m
debt issue costs associated with the previous facility were written off during
the current period.
The new syndicate comprised HSBC UK Bank plc, Citibank, N.A. London branch,
Barclays Bank PLC, Fifth Third Bank, National Association and Unicredit Bank
AG, London Branch. As part of the Group's new banking facility there are
floating charges over certain subsidiaries and their assets. As at the year
end these totalled $217.8m (2021: $192.3m).
The terms of the facility require the Group to perform quarterly financial
covenant calculations with respect to leverage (adjusted total 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 result in cancellation of the facility. The Group was
compliant with these covenants during the period and remains compliant in the
period subsequent to the period end.
7 Notes to statement of cash flows
2022 2021
$'m $'m
Profit for the period 30.4 38.9
Adjustments for:
Finance income (0.3) (0.3)
Finance costs 5.5 2.4
Income tax expense/(credit) (note 4) 5.8 (9.5)
Share of net profit from associates (0.4) (0.8)
Depreciation of property, plant and equipment (note 10) 6.4 4.6
Depreciation of right-of-use assets 3.4 3.2
Amortisation of intangible assets 10.4 5.3
(Profit)/loss on disposal of property, plant and equipment (0.2) 0.1
Share-based payment charge 4.4 6.6
Fair value adjustment to derivatives - (0.2)
PPP loan forgiveness (note 3) (2.6) -
Contingent consideration adjustments (note 3) (0.2) -
Decrease in provisions (1.7) (0.3)
Operating cash flow before movement in working capital 60.9 50.0
Increase in inventories (28.1) (12.2)
Increase in receivables (14.2) (17.0)
Increase in payables 7.9 21.6
Movement in working capital (34.4) (7.6)
Cash generated from operations 26.5 42.4
Cash generated from operations before adjusting items 28.5 42.8
Cash utilised by adjusting operating items (2.0) (0.4)
Taxation paid (6.5) (3.1)
Interest paid (1.5) (0.6)
Net cash generated from operating activities 18.5 38.7
8 Analysis of net (debt)/funds
Cash and cash equivalents Bank Factoring Lease Debt issue Total
$'m
$'m loans $'m liabilities costs
$'m
$'m
$'m
At 5 April 2020 31.7 (0.1) - (10.9) 0.5 21.2
Business combination 6.4 (4.4) (6.5) (9.2) - (13.7)
Cash flow (2.8) (34.1) (0.5) 4.4 1.1 (31.9)
New leases entered into during the year - - - (3.5) - (3.5)
Lease interest - - - (0.7) - (0.7)
Exchange differences 1.2 0.5 0.2 (0.1) 0.2 2.0
Amortisation of debt issue costs - - - - (0.7) (0.7)
At 4 April 2021 36.5 (38.1) (6.8) (20.0) 1.1 (27.3)
Business combination 5.3 (1.1) - (5.2) - (1.0)
Cash flow (15.7) (65.9) 6.0 5.2 2.5 (67.9)
New leases entered into during the year - - - (0.5) - (0.5)
Lease interest - - - (1.0) - (1.0)
PPP loan forgiveness - 2.6 - - - 2.6
Exchange differences (0.2) 0.7 0.1 0.6 (0.1) 1.1
Amortisation of debt issue costs - - - - (1.3) (1.3)
At 3 April 2022 25.9 (101.8) (0.7) (20.9) 2.2 (95.3)
Debt issue costs relate to bank facility arrangement fees. During the year,
$2.5m of professional fees were capitalised, $2.3m related to the new banking
facility entered into during February 2022 and $0.2m associated with executing
the accordion on the previous facility. During the prior year, $1.1m was
capitalised related to the extension of the previous facility. The refinancing
resulted in a write-off of $0.8m (2021: $0.4m) during the current period.
Analysis of cash and cash equivalents: 2022 2021
$'m $'m
Cash and bank balances 29.1 36.5
Bank overdrafts (3.2) -
25.9 36.5
9 Provisions
Property Restructuring Other Total
$'m $'m $'m $'m
At 5 April 2020 0.3 0.1 1.0 1.4
Charge in the period (0.1) - 0.8 0.7
Utilisation of provision - - (0.1) (0.1)
Exchange differences - - 0.1 0.1
At 4 April 2021 0.2 0.1 1.8 2.1
Charge in the period - 0.5 (0.1) 0.4
Utilisation of provision - - (0.1) (0.1)
Amounts acquired on business combination 0.1 - - 0.1
Exchange differences - - - -
At 3 April 2022 0.3 0.6 1.6 2.5
Current liabilities 0.1 0.6 1.6 2.3
Non-current liabilities 0.2 - - 0.2
Restructuring
During March 2022 the Group commenced the closure of its Ta Hsing factory in
China with production being transferred to other sites within the Group.
Following the communication to all those involved a restructuring provision of
$0.5m made to cover the redundancy and other associated exit costs.
Other
Other provisions include the Directors' best estimate, based upon past
experience, of the Group's liability under specific product warranties and
legal claims. The timing of the cash outflows with respect to these claims is
uncertain. The Group has a provision of $0.9m (2021: $0.7m) 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.
The Group has $0.3m (2021: $0.3m) provided for legal costs associated with a
pending legal case in Canada. The case is on going and based on the evidence
available, in the view of the Directors it is not probable that the case will
result in the material outflow of economic benefits for the Group, therefore
no further provision has been recognised beyond the legal costs.
During the year the Group made the second payment related to a legacy legal
claim at MC Electronics LLC. The case was identified as part of the
acquisition with an indemnity obtained from the sellers. The Group holds a
provision of $0.1m to cover the final payment and associated costs which will
be payable during FY2023.
10 Reconciliation of operating profit to underlying EBITDA (earnings before interest, tax, depreciation, amortisation, adjusting items and share-based payments)
2022 2021
$'m $'m
Operating profit 41.0 30.7
Add back:
Adjusting operating items 10.8 5.6
Share-based payment charge 4.4 6.6
Underlying operating profit 56.2 42.9
Depreciation of property, plant and equipment 6.4 4.6
Depreciation of right-of-use assets 3.4 3.2
Amortisation of intangible assets not acquired in a business combination 0.1 0.1
Underlying EBITDA 66.1 50.8
11 Share capital
Ordinary shares of £0.25 each Number Par Share Total
Value Premium $'m
$'m $'m
Allotted, called up and fully paid:
At 5 April 2020 151,818,762 60.3 46.5 106.8
Issue of deferred bonus shares 432,040 0.1 - 0.1
Acquisition of DE-KA 3,320,000 1.1 14.4 15.5
Acquisition of Servatron - contingent consideration 1,481,239 0.5 - 0.5
At 4 April 2021 157,052,041 62.0 60.9 122.9
Issue of new shares 1,666,668 0.5 - 0.5
At 3 April 2022 158,718,709 62.5 60.9 123.4
During the current and prior year the Group issued shares to satisfy the
requirement of share awards, deferred bonus awards and fund acquisitions. The
current year movements were as follows:
· Issued 1,666,668 ordinary shares to satisfy the vesting of the share
awards granted to the senior employees and/or former owners of Servatron and
GTK as the businesses met the required operating profit targets set out in the
acquisition agreements.
The prior year movements were:
· Issued 432,040 shares under the 2019 deferred share bonus plan.
· Issued 3,320,000 shares as part of the initial consideration for the
acquisition of DE-KA.
· Issued 1,481,239 shares to the former owners of Servatron as the
business met the required operating profit targets set out in the acquisition
agreement.
12 Own shares and non-distributable reserves
Own shares 2022 2021
$'m $'m
At the beginning of the period 3.3 1.0
Sale of shares (7.5) (1.7)
Purchase of shares 4.4 4.0
At end of the period 0.2 3.3
The own shares reserve represents both the cost of shares in the Company
purchased in the market and the nominal share capital of shares in the Company
issued to the Volex Group plc Employee Share Trust to satisfy future share
option exercises under the Group's share option schemes.
The number of Ordinary shares held by the Volex Group plc Employee Share Trust
at 3 April 2022 was 53,205 (2021: 931,577). The market value of the shares as
at 3 April 2022 was $0.2m (2021: $4.4m).
Unless and until the Company notifies a trustee of the Volex Group plc
Employee Share Trust, in respect to shares held in the Trust in which a
beneficial interest has not vested, rights to dividends in respect to the
shares held in the Trust are waived.
During the year 3,645,040 (2021: 625,000) shares were utilised on the exercise
of share awards. During the year, the Company purchased 1,100,000 shares
(2021: 1,100,001) at a cost of $4.4m (2021: $4.0m) and issued 1,666,668 new
shares (2021: nil).
In December 2013, the Volex Group plc Employee Share Trust sold 3,378,582
shares at £1.16 per share to the open market. The average price of shares
held by the Trust at the time was £0.70 with a number of the shares having
been issued by Volex plc to the Trust at nominal value. In accordance with the
Accounting Standards, the difference between the sales price of £1.16 and the
average share price of £0.70 was recorded as a non-distributable reserve,
giving rise to the $2.5m non-distributable reserve balance.
13 Business combinations
Irvine Electronics LLC
On 29 October 2021 the Group completed the acquisition of 100% of the
membership interests in Irvine Electronics LLC ('Irvine'), a US-based
manufacturer of electronic solutions, including printed circuit board
assemblies, across a wide variety of blue-chip customers, particularly in the
defence, military aerospace and medical markets.
Irvine was acquired for cash consideration of $15.1m funded from the Group's
existing debt facilities. Cash paid includes the initial consideration and the
working capital adjustment. There is no deferred or contingent consideration.
Fair Value
$'m
Identifiable intangible assets 7.0
Property, plant and equipment 0.1
Right-of-use asset 1.6
Inventories 5.2
Trade receivables 3.2
Trade payables (1.1)
Other debtors and creditors (0.3)
Customer deposits (3.6)
Provisions (0.1)
Cash 0.9
Lease liabilities (1.6)
Total identifiable assets 11.3
Goodwill 3.8
Consideration 15.1
13 Business combinations (continued)
The provisional fair value amounts recognised in respect of the identifiable
assets acquired and liabilities assumed are set out in the table below:
An exercise has been conducted to assess the provisional fair value of assets
and liabilities assumed. This exercise identified customer relationships and
order backlog intangible assets.
The fair value adjustments are provisional and will be finalised within 12
months of the acquisition date. Any resulting changes in the fair values will
have an impact on the acquisition accounting and will result in a reallocation
between the assets and goodwill and a possible adjustment to the amortisation
charge shown in the income statement.
The provisional goodwill balance recognised above includes certain intangible
assets that cannot be separately identified and measured due to their nature.
This includes control over the acquired business, the skills and experience of
the assembled workforce and the anticipated synergies arising on integration.
The goodwill recognised is expected to be deductible for income tax purposes
over a 15-year period.
In FY2022, Irvine contributed $6.8m to Group revenue and $40,000 to adjusted
operating profit. Associated acquisition costs of $0.7m and intangible asset
amortisation of $0.5m have both been expensed as adjusting items in the
period.
If Irvine had been acquired at the beginning of the year, it would have
contributed revenues of $21.7m and operating profit of $4.4m to the results of
the Group.
13 Business combinations (continued)
Terminal & Cable TC Inc and Prodamex SA de CV
On 4 January 2022 the Group completed the acquisitions of Terminal and Cable
TC Inc ('TC') and Prodamex SA de CV ('Prodamex'). TC provides ruggedised wire
harness manufacturing capabilities focusing in the "off-highway" market
sector, supporting defence, industrial, agricultural and construction
machinery. Prodamex is a business focused on wire harnesses for domestic
appliances from its manufacturing facility in Central Mexico.
TC and Prodamex were acquired for a combined cash consideration of $18.9m
funded from the Group's existing debt facilities. Included within this amount
is the estimated working capital adjustment of $1.2m which will be paid during
FY2023. There is no deferred or contingent consideration.
The provisional fair value amounts recognised in respect of the identifiable
assets acquired and liabilities assumed are set out in the table below:
TC Prodamex Total
$'m $'m $'m
Identifiable intangible assets 3.0 3.0 6.0
Property, plant and equipment 0.3 0.7 1.0
Right-of-use asset 2.8 0.7 3.5
Inventories 3.7 3.6 7.3
Trade receivables 2.1 1.2 3.3
Trade payables (1.0) (1.6) (2.6)
Other debtors and creditors (0.5) (0.5) (1.0)
Cash 1.8 - 1.8
Deferred taxes (0.8) (0.6) (1.4)
Retirement benefit obligation - (0.1) (0.1)
Lease liabilities (2.8) (0.7) (3.5)
Total identifiable assets 8.6 5.7 14.3
Goodwill 1.7 2.9 4.6
Consideration 18.9
An exercise has been conducted to assess the provisional fair value of assets
and liabilities assumed. This exercise identified customer relationships and
order backlog intangible assets.
The fair value adjustments are provisional and will be finalised within 12
months of the acquisition date. Any resulting changes in the fair values
will have an impact on the acquisition accounting and will result in a
reallocation between the assets and goodwill and a possible adjustment to the
amortisation charge shown in the income statement.
The provisional goodwill balance recognised above includes certain intangible
assets that cannot be separately identified and measured due to their
nature. This includes control over the acquired businesses, the skills and
experience of the assembled workforce and the anticipated synergies arising on
integration. None of the goodwill recognised is expected to be deductible for
income tax purposes.
13 Business combinations (continued)
In FY2022, TC contributed $2.4m to Group revenue and a loss of $0.1m to the
Group adjusted operating profit. Associated acquisition costs of $0.4m and
intangible asset amortisation of $0.1m have both been expensed as adjusting
items in the period. If TC had been acquired at the beginning of the year, it
would have contributed revenues of $11.6m and operating profit of $0.9m to the
results of the Group.
In FY2022, Prodamex contributed $3.3m to Group revenue and $0.2m to adjusted
operating profit. Associated acquisition costs of $0.4m and intangible asset
amortisation of $0.2m have both been expensed as adjusting items in the
period. If Prodamex had been acquired at the beginning of the year, it would
have contributed revenues of $14.9m and operating profit of $1.0m to the
results of the Group.
inYantra Technologies Pvt Ltd
On 30 March 2022 the Group completed the acquisition of 51% of the share
capital in inYantra Technologies Pvt Ltd ('inYantra') and 100% of the
industrial land and operational buildings. The company operates from a site in
Pune, India, with expertise in printed circuit board assembly and box build
integrated solutions.
The inYantra business was acquired for a total cash consideration of $13.1m
with $8.1m paid initially with $5.0m paid in April 2022 upon completion of the
transfer of the building. There is no other deferred or contingent
consideration.
The provisional fair value amounts recognised in respect of the identifiable
assets acquired and liabilities assumed are set out in the table below:
Fair Value
$'m
Identifiable intangible assets 2.3
Property, plant and equipment 6.0
Inventories 3.6
Trade receivables 3.9
Trade payables (4.5)
Other debtors and creditors (1.4)
Cash 2.5
Deferred taxes (0.7)
Bank loan (1.1)
Total identifiable assets 10.6
Less non-controlling interest (7.4)
Goodwill 9.9
Consideration 13.1
An exercise has been conducted to assess the provisional fair value of assets
and liabilities assumed. This exercise identified customer relationships and
order backlog intangible assets. The property and property, plant and
equipment were subject to an external valuation.
13 Business combinations (continued)
The fair value adjustments are provisional and will be finalised within 12
months of the acquisition date. Any resulting changes in the fair values will
have an impact on the acquisition accounting and will result in a reallocation
between the assets and goodwill and a possible adjustment to the amortisation
charge shown in the income statement. The interest of the non-controlling
interest has been initially measured at fair value.
The provisional goodwill balance recognised above includes certain intangible
assets that cannot be separately identified and measured due to their nature.
This includes control over the acquired business, the skills and experience of
the assembled workforce and the anticipated synergies arising on integration.
None of the goodwill recognised is expected to be deductible for income tax
purposes.
Due to the timing of the acquisition no trading activity has been consolidated
into the FY2022 income statement. Associated acquisition costs of $0.6m have
been expensed as adjusting items in the period. If inYantra had been acquired
at the beginning of the year, it would have contributed revenues of $21.9m and
operating profit of $1.2m to the results of the Group.
Net cash outflow on acquisitions $'m
Cash consideration
- Irvine 15.1
- TC and Prodamex 17.7
- inYantra 8.1
Total cash consideration 40.9
Less: cash and cash equivalents acquired
- Irvine 0.9
- TC and Prodamex 1.8
- inYantra 2.5
Net cash outflow 35.7
Payment of deferred and contingent consideration
- DE-KA 17.2
- Servatron 1.7
- Ta Hsing 0.3
Net cash outflow 19.2
DE-KA
On 18 February 2021 Volex plc completed the acquisition of DE-KA. In
accordance with IFRS 3 'Business Combinations' the group has updated the
provisional fair value of the contingent consideration used in calculating
Goodwill. The change in estimate reflects improved understanding associated
with a potential working capital payment to/from the former owners of the
business measured over the July - December 2022 period. The impact of this
change was to increase Goodwill by $2.5m and record contingent consideration
of $2.5m.
14 Events after balance sheet date
There are no disclosable events after the balance sheet date.
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