REG - Volex PLC - Preliminary Group Results FY2023
22/06/2023 07:00
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RNS Number : 5170D Volex PLC 22 June 2023
22 June 2023
Volex plc
("Volex", the "Company", or the "Group")
Preliminary Group Results
for the 52 weeks ended 2 April 2023
On track with five-year plan with strong growth and margin progression
Volex plc (AIM: VLX), the specialist integrated manufacturer of critical power
and data transmission products, announces its preliminary results for the 52
weeks ended 2 April 2023 ("FY2023").
Financial Highlights 52 weeks to 52 weeks to Year on year change
2 April 2023 3 April 2022
Revenue $722.8m $614.6m 17.6%
Underlying(1) operating profit $67.3m $56.2m 19.8%
Statutory operating profit $53.8m $41.0m 31.2%
Underlying(1) profit before tax $59.3m $51.4m 15.4%
Statutory profit before tax $45.8m $36.2m 26.5%
Underlying(1) basic earnings per share 30.2c 26.9c 12.3%
Final dividend (per share) 2.6p 2.4p 8.3%
Net debt (before operating lease liabilities)(2) $76.4m $74.4m 2.7%
Net debt $103.7m $95.3m 8.8%
(1) Before adjusting items and share-based payments charge (see note 3 for
more details)
(2) Represents cash and cash equivalents, less bank loans, debt issue costs
and finance leases, but excluding operating lease liabilities (see definitions
section for more details)
Financial and strategic highlights
· Group revenue increased by 17.6% to $722.8m (FY2022: $614.6m) driven
by strong organic growth and acquisitions
· Organic constant-currency revenue growth of 11.4% delivering total
revenue for FY2023 of $722.8m
· Further improvement in underlying operating margin to 9.3% (FY2022:
9.1%) demonstrating effective management of inflation and cost control
· Final dividend increased by 8.3% to 2.6 pence per share
· Year-end net debt covenant leverage decreased to 1.0x from 1.2x in
FY2022 driven by our cash generative model and working capital unwind
· Excellent progress made towards five-year growth plan supported by
continued customer-led investment programme
· Further investment in increasing capacity across India, Mexico,
Poland and Indonesia
· Review Display Systems Group ("RDS") acquired for initial
consideration of $5.5m to enhance our capabilities and accelerate growth in
the UK
Market highlights
· Electric Vehicles - strong demand continues with sales up 33%
organically over last year with an increasingly diverse customer base and
expanding product set
· Consumer Electricals - slightly higher volumes were more than offset
by lower input cost pass-through on copper and PVC which resulted in a small
organic revenue reduction of 3%
· Medical - continued strong demand for medical products as healthcare
providers look to accelerate the rollout of new technology driving an organic
revenue increase of 16%
· Complex Industrial Technology - strong growth reflecting improving
supply chain and the delivery of new customer projects resulting in an organic
revenue increase of 19%
Outlook
· Entered the new financial year with good momentum and high levels of
customer demand
· Supply chains much improved, enabling step-up in production
· Confident in making continued excellent progress towards five-year
plan
Dividend
Subject to approval by shareholders at the upcoming AGM on 27 July 2023, the
proposed final dividend of 2.6p per ordinary share will be paid on 25 August
2023 to shareholders on the register on 21 July 2023. The ex-dividend date
will be 20 July 2023.
Shareholders may elect to receive the final dividend as shares in the Company,
in lieu of cash, under the Volex plc Scrip Dividend Scheme. The reference
price for the Scrip Dividend will be announced on 27 July 2023. Shareholders
who wish to elect to receive the final dividend in shares must (i) complete a
Scrip Dividend Mandate Form (available on the Company's website) and return it
to Link Group, (ii) make a Scrip election online via www.signalshares.com or
(iii) submit a Dividend Election Input Message in CREST, in each case by no
later than 5.00 p.m. on 4 August 2023. Those shareholders who have opted into
a permanent scrip election by completing (and not cancelling) a Scrip Dividend
Mandate Form either in hard copy or via www.signalshares.com do not need to
complete a new mandate form for the final dividend. However, shareholders
holding their shares in CREST need to make an election for each dividend and
would need to submit a Dividend Election Input Message in respect of the final
dividend. A copy of the terms and conditions for the Volex plc Scrip Dividend
Scheme are available on the Company's website
https://www.volex.com/wp-content/uploads/2022/07/Volex-Plc-Scrip-Dividend-Scheme-Terms-Conditions-Final.pdf.
Nat Rothschild, Volex's Executive Chairman said:
"Our dynamic and diverse business has continued to demonstrate strong growth,
whilst delivering excellent operating margins of 9.3% in a high inflationary
environment, highlighting our ability to successfully manage inflation.
"With strong cash generation, a healthy balance sheet and access to funding we
are well placed to capitalise on the significant opportunities across our
markets. The investments we have made in FY2023 are focused on our pursuit of
further growth, benefitting from the leading position we have in attractive
sectors. With an exciting acquisition pipeline and further organic projects we
will continue to deliver against this strategy.
"With our track record over the past five years, we are confident that our
strategy and operating model continues to provide us with the opportunity to
deliver long-term organic growth alongside complementary, earnings-enhancing
acquisitions.
"We have seen a strong start to the new financial year with high levels of
customer demand. We remain confident of achieving our five-year plan target of
revenues of $1.2 billion by the end of FY2027."
Analyst Presentation
A live presentation for analysts will be held online at 10.30 a.m. BST on 22
June 2023. 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.
Investor Presentation
A live presentation will be held online at 10.30 a.m. BST on 23 June 2023 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
investor.relations@volex.com
Jon Boaden, Chief Financial Officer
Peel Hunt LLP - Nominated Adviser & Joint Broker
+44 20 7418 8900
Ed Allsopp
Tom Ballard
Ben Harrington
HSBC Bank plc - Joint Broker
+44 20 7991 8888
Simon Alexander
Keith Welch
Joe Weaving
Powerscourt - Media
Enquiries
+44 20 7250 1446
James White
Nicholas Johnson
Maxim Hibbs
About Volex plc
Volex plc (AIM: VLX) is a leading specialist integrated manufacturer of critical power and data transmission 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 power products. With sales teams located around the globe, combined with authorised distribution partners, we have the ability to service our customers' needs and deliver our products to Original Equipment Manufacturers ('OEMs') and Electronic Manufacturing Services ('EMS') companies worldwide. The critical products and services that we offer are integral to the increasingly complex digital world in which we live, providing power and connectivity from the most common household items to the most complex medical equipment. We are headquartered in the UK and operate from 19 manufacturing locations with a global workforce of over 8,000 employees across 22 countries.
Important notices:
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated in the United
Kingdom by the FCA, is acting as Corporate Broker to Volex and no one else in
connection with the matters described in this Announcement and will not be
responsible to anyone other than Volex for providing the protections afforded
to clients of Peel Hunt, or for providing advice in connection with the
matters referred to herein. Neither Peel Hunt nor any of its group
undertakings or affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client of Peel
Hunt in connection with this Announcement or any matter referred to herein.
HSBC Bank plc ("HSBC"), which is authorised by the PRA and regulated in the
United Kingdom by the FCA and the PRA, is acting as Corporate Broker to Volex
and no one else in connection with the matters described in this Announcement
and will not be responsible to anyone other than Volex for providing the
protections afforded to clients of HSBC, or for providing advice in connection
with the matters referred to herein. Neither HSBC nor any of its group
undertakings or affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client of HSBC in
connection with this Announcement or any matter referred to herein.
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 operating lease liabilities) represents cash and cash
equivalents, less bank loans, debt issue costs and finance leases, but
excluding operating lease liabilities. The lease liabilities include $27.3
million of operating lease liabilities (FY2022: $20.9 million).
Net debt covenant leverage is net debt (before operating lease liabilities)
divided by underlying EBITDA adjusted for depreciation of right-of-use assets.
Organic revenue growth is calculated using constant exchange rates ("CER") by
taking the total reported revenue (excluding the impact of acquisitions and
disposals) divided by the preceding financial year's revenue at the current
year's exchange rates.
Return on capital employed is calculated as the last twelve months underlying
operating profit as a percentage of average net assets excluding net
cash/debt.
Forward looking statements
This announcement contains certain forward-looking statements which have been
made by the Directors in good faith using information available up until the
date they approved the announcement. Forward-looking statements should be
regarded with caution as by their nature such statements involve risk and
uncertainties relating to events and circumstances that may occur in the
future. Actual results may differ from those expressed in such statements,
depending on the outcome of these uncertain future events.
Executive Chairman's Statement
The Group has delivered another year of excellent progress, sustaining
double-digit organic revenue growth and further improving underlying operating
margins.
Our success is a combination of targeted investment into the business and a
strategic focus on key market sectors which have and will continue to deliver
significant growth. It is also a clear indication of our teams' abilities to
harness the structural growth drivers in our chosen markets.
The last three years have been challenging for global manufacturing, and yet
with margins sustainably within our target range, we have proven that we have
a robust business, capable of navigating logistical challenges and exceeding
customer expectations.
Our focus on building a business based on innovation, service and quality
continues to be the key differentiator in our market. Price is a factor, but
it is not the only consideration. Whilst we remain committed to providing
exceptional value to our customers and supporting their growth through our
unrivalled global footprint, we are equally focused on providing our
shareholders with an attractive investment opportunity.
We continued to invest in our business as we delivered revenue growth of 17.6%
in FY2023 and an increase in underlying operating profit of 19.8%. We also
achieved significant constant currency organic revenue growth of 11.4%, giving
us a three-year average constant currency organic annual rate of 12.9%.
Operating margins rose to 9.3% (FY2022: 9.1%), reflecting the strength and
consistency of our commercial proposition. Our covenant leverage has improved
ahead of expectations to 1.0x in the past year and is now 0.2x lower than it
was at the beginning of FY2023. It is these strong performance metrics that
make us believe we are well positioned for future growth as we continue to
innovate and expand globally.
Our renewed competitiveness fuelled by our investment in vertical integration,
manufacturing efficiency and continuous improvement initiatives, is
accelerating new contract wins and increasing market share. These awards have
been secured by our ability to offer best-in-class products and services,
underpinned by a global supply chain that is lean and responsive.
Strategic focus
We are benefitting from very significant structural changes in the
manufacturing landscape as our customers reconfigure their supply chains. For
a combination of logistical and geopolitical reasons, there is a marked
increase in initiatives to reduce complexity and bring the source of critical
components nearer to the point of final assembly. This plays to our strengths
given our expertise in delivering reliable, resilient and flexible
manufacturing solutions.
Our investments in new capacity are helping to meet the demand for
localisation. In particular, we are expanding our sites in India, Mexico,
Poland and Indonesia following positive feedback from existing and potential
customers.
We are already seeing the benefits arising from this strategy having announced
a major Electric Vehicles ("EV") power products contract win for our site in
Tijuana, Mexico in May. We have a detailed plan to successfully onboard EV
products into Mexico, and the opportunity to grow this business while still
maintaining attractive margins is significant.
Success in markets with significant structural growth drivers
There are significant growth drivers that support our expansion plans in key
markets. Electrification is transforming the automotive industry and
contributing to carbon reduction targets around the globe.
Adoption of Electric Vehicles is accelerating as consumers recognise the
advantages. As the market grows, we are broadening our product suite,
utilising our specialist manufacturing expertise to encompass on-car
assemblies as well as a variety of charging infrastructure products.
The growth we have seen in the Medical sector is underpinned by continued
innovation, with healthcare providers improving patient outcomes through
cutting-edge imaging and diagnostic technology. Customers in our diverse
Complex Industrial Technology sector are also experts in delivering
transformational technology through advanced engineering. Our specialist
manufacturing locations support this progress by delivering mission critical
assemblies.
We continued to win market share as the Consumer Electricals market
experienced a period of normalisation off the back of higher demand in the
previous two years. This was achieved because we have highly competitive
operations with an unparalleled global footprint.
People and culture
Volex has made tremendous progress since I joined the business in 2015, having
first become a Volex shareholder in 2008.
We have grown into an ambitious, successful organisation with a clear
strategic focus and this has been achieved through the creation of an
exceptional team who understand every aspect of our operations and work
tirelessly to deliver exceptional results to our customers.
We operate with agility, empowering our people to make decisions and think
entrepreneurially, allowing us to demonstrate leadership in our chosen
markets.
We are an international business with a global perspective and a solution
focused mindset. We believe that our people are at the heart of everything we
do, so we aim to provide them with the opportunity to be successful in every
aspect of their career.
By being open and collaborative, we create an environment where everyone can
thrive and contribute. Our performance culture is designed to allow a group of
remarkably talented people to work together, contributing to alignment and
accountability within a decentralised operating model. This is supported by a
leadership team who nurture talent and encourage development, creating an
environment where collaboration can flourish.
Delivering our strategic ambitions
A year ago, we set out an ambitious five-year plan, to double our revenues to
$1.2 billion by the end of FY2027, through a combination of acquisitions and
organic growth.
Our compelling performance this financial year further supports our confidence
in achieving these objectives while our key positioning in attractive markets
with structural growth drivers is a major element of this strategy.
At the same time, we need to scale our operations to ensure continued
efficiency in our business. We are enhancing our capabilities to deliver more
to our customers and support their increasing requirements.
Our manufacturing sites are well-invested, with key processes vertically
integrated and well-defined quality assurance procedures. This allows us to
sustain high levels of customer satisfaction while maintaining price
competitiveness.
It is difficult to replicate these capabilities which supports the long-term
profitable relationships we maintain with our customers. We believe that our
business model is a competitive advantage, which will allow us to continue
growing and providing value to all stakeholders.
Acquisitions
The execution of our acquisition strategy has significantly enhanced our
business, bringing diversification, value-add capabilities and significant new
global customer relationships.
We maintain a disciplined acquisition strategy by concentrating on businesses
that provide access to compelling markets, connect us to new customers,
enhance our geographic footprint or enable us to consolidate within fragmented
sectors. During the year, we acquired RDS, a specialist designer and
manufacturer of digital display solutions, enhancing our capabilities in the
European market.
Sustainability
As a responsible business, we recognise the impact that we have on the world
around us. We take sustainability seriously and we are focused on reducing our
environmental impact. This has seen us reduce our carbon intensity by 31% over
the last three years.
We have launched an ambitious new plan to achieve net zero on scope 1 and 2
emissions by 2035. This is creating a framework for action at every level of
the organisation as we identify and implement meaningful changes to be cleaner
and greener.
We are improving our energy efficiency and reducing the amount of waste we
create by increasing recycling, reusing materials and finding alternative uses
for waste. We are also actively working to reduce our water consumption by
increasing water recycling and optimising the use of grey water in our
facilities.
Dividend
Having delivered another year of strong growth, and with a robust balance
sheet, the Board is pleased to propose a final dividend of 2.6 pence per
share. Together with the interim dividend payment of 1.3 pence, this gives
rise to a total dividend for the year of 3.9 pence, an increase of 8.3% on the
prior year. The Board considers this to be an appropriate and sustainable
level of dividend that reflects our confidence in the Company's ability to
deliver sustained growth.
Outlook
We entered the new financial year with good momentum, with high levels of
customer demand. Our supply chains are now much improved and are therefore
enabling us to step up production, particularly for high value-add complex
products.
With a diverse offering, proven success in attracting and retaining customers,
and extensive experience operating in our highly attractive markets, we
believe that Volex has the potential to grow significantly.
We are confident that with a strong strategy, clear demand for our products
and solutions, and ambitious team members, we will continue to make excellent
progress towards our five-year plan financial targets.
Review of FY2023 Performance
2023 2022
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 339.8 - 339.8 272.1 - 272.1
Asia 171.4 - 171.4 142.7 - 142.7
Europe 211.6 - 211.6 199.8 - 199.8
722.8 - 722.8 614.6 - 614.6
Cost of sales (565.8) - (565.8) (488.8) - (488.8)
Gross profit 157.0 - 157.0 125.8 - 125.8
Operating expenses (89.7) (13.5) (103.2) (69.6) (15.2) (84.8)
Operating profit 67.3 (13.5) 53.8 56.2 (15.2) 41.0
Share of net profit from associates 1.1 - 1.1 0.4 - 0.4
Finance income 0.4 - 0.4 0.3 - 0.3
Finance costs (9.5) - (9.5) (5.5) - (5.5)
Profit on ordinary activities before taxation 59.3 (13.5) 45.8 51.4 (15.2) 36.2
Taxation (10.7) 2.3 (8.4) (9.1) 3.3 (5.8)
Profit after tax 48.6 (11.2) 37.4 42.3 (11.9) 30.4
The Group has delivered strong revenue growth and excellent profitability, in
line with the five-year plan. In a high-inflation environment the diverse and
resilient business performed strongly, managing operational complexity while
improving profitability. Though the impact of government restrictions and
lockdowns related to Covid-19 remained at relatively low levels throughout the
year, market dislocation complicated supply chains, resulting in increased
prices and longer lead times across multiple components. Lead times are
stabilising and incidences of component shortages have decreased compared to
FY2022.
Demand from customers across the Group remained strong throughout the year. We
continued to experience rapid growth in the Electric Vehicles sector as we
consolidated our position as market leader for grid cords, while bringing new
products to market and winning several new customers.
Despite gaining market share, organic revenue in our Consumer Electricals
business was marginally lower year-on-year, principally as a result of reduced
prices for copper and PVC, the costs of which are passed through to customers.
Trading performance overview
The Group generated revenue of $722.8 million (FY2022: $614.6 million). This
included organic revenue growth of 11.4%, the contribution from the
newly-acquired RDS business and the full year effect of our FY2022
acquisitions. Organic revenue growth included 33% in Electric Vehicles, as
well as 16% in Medical and 19% in Complex Industrial Technology.
Consumer Electricals volumes were broadly flat with PVC and copper price
deflation resulting in a small organic revenue reduction of 3%.
Underlying operating profit increased by 20% to $67.3 million (FY2022: $56.2
million), driven by organic revenue growth and acquisitions. Statutory
operating profit was $53.8 million (FY2022: $41.0 million), including
adjusting items and share-based payments of $13.5 million (FY2022: $15.2
million).
The underlying operating margin was 9.3%, an improvement on the 9.1% achieved
in the prior year. The margin benefited from higher volumes, increased
pricing, strong cost controls and vertical integration efficiencies, partially
offset by the impact of the sales mix. Achieving this improvement despite the
macro-headwinds and inflationary pressures in the second half of the year
demonstrates the resilience of the business.
With strong free cash flow generation, after capital investment, dividend
payments and acquisitions spend of approximately $45 million, net debt was
$76.4 million at 2 April 2023 (3 April 2022: $74.4 million), excluding $27.3
million (3 April 2022: $20.9 million) of operating lease liabilities. The
covenant net debt/adjusted EBITDA ratio was 1.0 times (FY2022: 1.2 times) well
below the covenant limit of 2.75 times.
Impact of the macroeconomic backdrop
Volex continues to be 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, overcoming disruption to global supply chains,
the challenges posed by Covid-19 and the war in Ukraine.
It has been a year of volatile inflation, with large cost increases over
several components, while PVC and copper, the principal constituents of power
cords, have experienced significant deflation. Contracts with power cord
customers, where copper is a significant percentage of our bill of materials,
allow for the pass-through of changes in cost to the customer, although there
can be a short lag in the implementation of pricing changes. Lower levels of
cost pass-through, compared to the high levels experienced in the prior year,
resulted in reduced revenue in our Consumer Electricals sector.
Other price inflation is passed on to 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, although inventory
levels have eased slightly as the supply chain disruption has shown signs of
improvement, but lead times remain higher than historical levels.
Government restrictions relating to the Covid-19 pandemic have remained at low
levels in FY2023, although there have been instances of local and national
lockdowns in Asia which have had some limited and temporary impacts on trade.
We did not experience any significant downtime at our sites in FY2023 and we
continue to adhere to stringent health and safety measures across the
business.
Our direct operational exposure to Russia and Ukraine is minimal. We have no
facilities or employees in either country and have no significant dependency
on direct supplies of components or materials from either Russia or Ukraine.
Revenue by customer sector
Electric Vehicles
The electric vehicle industry is expected to continue its rapid expansion as
consumer uptake increases, assisted by legislation encouraging adoption. 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 EV charging, we have expanded 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 is important as competition
increases.
Organic revenue from our Electric Vehicles customers increased year-on-year by
33% to $138.3 million (FY2022: $104.2 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 successfully
continued to expand our product offerings and customer base in line with our
strategy in this space.
Consumer Electricals
Consumer Electricals revenue was marginally lower in FY2023 at $261.8 million
(FY2022: $262.4 million). Our revenue benefited from a full year of revenues
from Prodamex, which was acquired in FY2022, as well as the consumer portion
of inYantra revenue. On an organic basis, revenue for this sector declined by
3%, with the war in Ukraine adversely impacting the consumer electricals
market in Europe, along with the impact of high inflation in the Western world
reducing consumer spend. Two of the most significant components in our power
cords, copper and PVC, have reduced in price during the year, allowing us to
pass on lower costs to customers and reducing revenue. Volumes are broadly
flat year-on-year.
Trends towards increased localisation 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, using our global domestic appliance presence.
Medical
The demand levels in the Medical sector remained strong throughout the year,
driven by backlogs which had built up through the Covid-19 pandemic.
Consequently, Medical revenues were up 16% on an organic basis at $145.0
million (FY2022: $128.3 million). This sector also benefited from the
acquisition of RDS at the end of October and the remainder of the first 12
months revenue from our acquisition of Irvine in FY2022.
There remains a global backlog in medical procedures following the pressures
on healthcare systems that arose during the pandemic, which should mean that
medium-term demand for medical technology continues to be elevated. 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 organically by 19% to
$177.7 million (FY2022: $119.7 million). Total revenue includes five months of
post-acquisition revenue from RDS and the full year effect from the FY2022
acquisitions. Excluding Data Centre customers, revenues were 18% 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. Component availability has begun to improve in FY2023 as
supply chain pressures decrease.
Data Centre customers are reported within Complex Industrial Technology and
represented 21.2% (FY2022: 26.2%) of revenue in this sector. The revenue in
this sub-sector grew by 20% year-on-year, partly as a result of destocking in
the prior year in preparation for the transition to the new 400
gigabit-per-second cables. There continued to be shortages of the new network
equipment needed to support the adoption of 400 gigabit-per-second
architecture in data centres, which impacted sales in the first half of the
year. However, demand increased in the second half of the year as the network
equipment situation improved.
Revenue by reportable segment
Volex is a diverse and resilient business with a global footprint. There is an
increasing and accelerating requirement from customers 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
therefore analyse our customer revenue geographically on this basis. 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
47.0% of Group revenue (FY2022: 44.3%). Revenue grew by 24.9% to $339.8
million (FY2022: $272.1 million). This reflects some of the strong organic
growth we experienced with our Electric Vehicles customers, as well as the
annualised impact from the acquisitions of Irvine, Prodamex and TC part-way
through FY2022.
Asia
Asia makes up 23.7% of Group revenue (FY2022: 23.2%). Asia revenue increased
by 20.1% to $171.4 million (FY2022: $142.7 million) with the majority of
revenue in the Consumer Electricals sector. The increase is largely as a
result of the acquisition of inYantra at the end of FY2022, which has been
partially offset by lower copper prices.
Europe
Europe makes up 29.3% of Group revenue (FY2022: 32.5%). Revenue in Europe
increased by 5.9% to $211.6 million (FY2022: $199.8 million) driven by an
increased demand for Electric Vehicles offset by a moderate decrease in
European domestic appliances sales as a result of the impact of the war in
Ukraine on energy prices and consumer spending appetite.
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.
Customers are at the heart of what we do and we pride ourselves on our regular
and transparent communication with them. 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. Our continued
investment in vertical integration gives us greater control over the supply
chain and protecting margins. The customer service we provide drives organic
revenue growth as customers are onboarded and increase our allocation of their
products.
Delivering excellent customer service and improving processes requires great
people. We have strengthened the organisation by bringing in talented leaders,
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.
Acquisitions are another key pillar of our strategic plan and 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 yet available for sale. We have successfully deployed
over $210 million on 11 strategic acquisitions over the last five years, which
has contributed to expanding our product offering, improving our international
manufacturing footprint, and are accretive to earnings and margin.
Creating value through organic investment
Over the past few years, we have increased the focus on organic investment in
the business. Building on our track record of creating value, we focus on
growth areas, while employing stringent financial criteria. Payback on these
investments is 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 to enable our future
growth.
Total gross capital investment increased to $27.0 million (FY2022: $15.0
million), amounting to 3.7% of revenue (FY2022: 2.4% of revenue). This spend
includes $8.7m of assets which were purchased under lease agreements. Capital
investment in the year was slightly lower than planned, as extended lead times
meant that some investment was deferred into FY2024. In the year, investment
was focused on high-growth areas, including EV and data centre capabilities,
as well as surface mount technology, consistent with our strategy, and the
first phase of the new global ERP system. We have expanded our capabilities in
printed circuit board assembly and are now able to deliver this from our site
in Tijuana. We expect our investment to increase in FY2024, 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 continue to enhance our
research and development teams through FY2024.
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
off-market transactions, as well as those being run in a process. All
opportunities are qualified and discussed by an investment committee before we
progress to negotiation. In an environment where factors outside of
managements control (such as Covid-19) 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 11 businesses in the last five 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 will continue to actively pursue 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 FY2023 we successfully completed the acquisition of Review Display
Systems Limited ("RDS") for cash consideration of $5.5 million, paying an
Enterprise Value/EBITDA multiple of 5.7 times, which demonstrates our
continued ability to acquire quality businesses at attractive valuations. RDS
contributed revenues of $5.7 million to the Group in FY2023.
RDS offers a complete turnkey service for the design and manufacture of
industrial electronic display, embedded and Internet of Things ("IoT") enabled
systems. Alongside this, the business is focused on the design-in and
specialist technical distribution of electronic displays, touchscreens,
embedded intelligence and wireless mesh networking solutions and IoT system
solutions. RDS will combine with and complement GTK, our successful and
growing UK-based subsidiary.
Sustainability
We have continued to develop our approach to conducting business in a
sustainable way. It is vitally important to our business, customers,
employees, the communities we operate in and our shareholders. During the year
we have designed standardised sustainability performance metrics and
implemented a Group-wide sustainability reporting platform. 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.
Our enhanced focus on sustainability will lead to a significant number of
improvement activities happening in all of our sites and it will be exciting
to see the cumulative impact of these improvements on our Group's overall
performance.
Chief Financial Officer's Review
52 weeks to 2 April 2023 52 weeks to 3 April 2022
Revenue Profit/(loss) $'000 Revenue Profit/(loss) $'000
$'000
$'000
North America 339.8 30.9 272.1 21.4
Asia 171.4 12.5 142.7 11.6
Europe 211.6 31.5 199.8 32.1
Unallocated Central costs - (7.6) - (8.9)
Divisional results before share-based payments 722.8 67.3 614.6 56.2
and adjusting items
Adjusting operating items (9.8) (10.8)
Share-based payment charge (3.7) (4.4)
Operating profit 53.8 41.0
Share of net profit from associates 1.1 0.4
Finance income 0.4 0.3
Finance costs (9.5) (5.5)
Profit before taxation 45.8 36.2
Taxation (8.4) (5.8)
Profit after taxation 37.4 30.4
Basic Earnings per share:
Statutory 23.2 cents 19.3 cents
Underlying* 30.2 cents 26.9 cents
* Before adjusting items and share-based payments charge, net of tax.
Statutory results
Revenue grew 17.6% to $722.8 million (FY2022: $614.6 million). Statutory
operating profit increased by $12.8 million to $53.8 million (FY2022: $41.0
million) which is an increase of 31.2% compared to the prior year. Net finance
costs were $9.1 million (FY2022: $5.2 million), resulting in a profit before
tax of $45.8 million (FY2022: $36.2 million) which is an increase of 26.5%.
There was a tax charge for the year of $8.4 million (FY2022: $5.8 million).
Basic earnings per share were 23.2 cents (FY2022: 19.3 cents), an increase of
20.2%.
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 17.6% to $722.8 million (FY2022: $614.6 million)
driven by strong organic growth from customer demand, project wins with both
new and existing customers and the contribution from acquisitions. With the US
dollar strengthening during FY2023, sales in currencies other than US dollars
resulted in a foreign exchange loss of approximately 3.4%. Group organic
revenue growth was 11.4%, of which the majority was driven by volumetric
growth of approximately 8.1%, and approximately 2.6% from inflation-related
price increases.
Organic revenue from the fast-growing Electric Vehicles sector was
particularly strong, increasing 32.9% to $138.3 million (FY2022: $104.2
million), as we diversified our product offering. Demand in the Consumer
Electricals sector fell in FY23 with organic decline of 3.2%, the main cause
of which was the deflation in the cost of the key commodities copper and PVC
where price decreases were passed on to customers. Additionally, there was a
fall in demand in the second half of FY2023 for consumer product power cords
due to moderation in global consumer spending power driven by macroeconomic
factors. Overall Consumer Electricals revenue was broadly flat at $261.8
million (FY2022: $262.4 million). Our Medical revenue saw growth in FY2023
driven by the continued backlogs built up during the Covid-19 pandemic and the
acquisition of RDS during the year. Medical revenues increased 16.1% on an
organic basis to $145.0 million (FY2022: $128.3 million). Revenue from Complex
Industrial Technology increased to $177.7 million (FY2021: $119.7 million),
18.7% higher on an organic basis. Excluding data centre customers, revenues
were 17.7% higher on an organic basis. Data Centre revenues were $37.7
million, (FY2022: $31.4 million). Demand for Data Centres products grew by
20.3% during the year.
Gross margin
The Group's gross margin was 21.7% (FY2022: 20.5%). This was due in part to
deflation in the cost of core components of PVC and copper. Where our
contracts with power cord customers allow us to pass on the cost of raw
materials to customers, the cost of sales as a percentage of revenue
decreases, which increases the gross margin percentage. Most raw materials
purchases are also denominated in US dollars but other costs, such as labour
costs, are paid in local currencies. With a strong dollar versus other
currencies, this had a small beneficial impact.
Operating profit
Underlying operating profit increased 19.8% to $67.3 million (FY2022: $56.2
million). This was favourably impacted by the strong organic growth and a full
year of contribution from acquisitions acquired in FY2022. The ratio of
underlying operating expenses to revenue marginally increased to 12.4%, from
11.3% in the prior year and there continues to be a strong focus on cost
control and continuous improvement activities. Statutory operating profit
increased by 31.2% to $53.8 million (FY2022: $41.0 million), also reflecting
the factors above.
The Group's underlying operating margin of 9.3% was better than the 9.1%
achieved in FY2022. Despite headwinds from inflation in a number of areas,
including materials and utilities, operating margin benefited from better
gross margins, continued cost control improvements over our cost base and
vertical integration activities across our sites. The stronger dollar also
helped in relation to costs such as rent, utilities and salaries paid in local
currencies.
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 $1.3 million (FY2022: $2.5 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.
Amortisation of acquired intangibles decreased to $8.9 million (FY2022:
$10.3million) due to the DE- KA open order book being fully amortised in the
prior year.
The charge recognised through the income statement for share-based payment
awards comprises $4.6 million (FY2022: $3.8 million) in respect of senior
management, credit of $0.9 million (FY2022: $0.6 million charge) in respect of
acquisitions where awards lapsed in the year and $nil (FY2022: $nil) 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 for an acquisition. 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 $9.1 million (FY2022: $5.2 million) mainly due
to the working capital requirements for the supply chain disruption
experienced in FY2023 and the utilisation of the revolving credit facility
following the acquisitions of Irvine, TC, Prodamex and inYantra during FY2022
and RDS in FY2023. The financing element for leases for the year was $1.7
million (FY2022: $1.0 million). The Group recognises interest income of $0.2
million (FY2022: $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 $8.4m (FY2022: $5.8m),
representing an effective tax rate ("ETR") of 18.3% (FY2022: 16.0%). 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 previous years are principally due to the
recognition of historical operating losses, unclaimed capital allowances and
other temporary 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.
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 impact of deferred tax asset recognition on underlying profit after tax
was $5.8 million (FY2022: $2.9 million). During FY2023 management considered
all available evidence, including the continued growth in the Group's
profitability, and determined that all the remaining unrecognised tax losses
in a key jurisdiction should be recognised as a deferred tax asset. The Group
has $28.8 million (FY2022: $64.1 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 effective tax rate.
The underlying ETR (representing the income tax expense on profit before tax,
adjusting items and share-based payments) was 18.0% (FY2022: 17.7%). The ETR
was again 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
3.2% adverse (FY2022: 4.7%), mainly arising in Turkey.
The net favourable impact on the underlying ETR from judgements over deferred
tax asset recognition across multiple territories was 7.1% (FY2022: 4.3%).
Deferred tax assets arising from historical tax losses are now fully
recognised in a major jurisdiction and therefore the impact of deferred tax
asset recognition on the ETR is expected to be reduced going forwards.
Cash tax paid during the period was $7.9 million (FY2022: $6.5 million),
representing an underlying cash ETR of 13.3% (FY2022: 12.6%). The underlying
cash ETR continues to be below the reported underlying ETR due to the
utilisation of tax losses and the timing of cash tax payments.
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 2 April 2023, the Group has net current tax liabilities of $13.7 million
(FY2022: $8.2 million) which include $10.4 million (FY2022: $7.2 million) of
provisions for tax uncertainties.
Earnings per share
Underlying diluted earnings per share increased 14.3% to 28.8 cents (FY2022:
25.2 cents). Basic earnings per share increased to 23.2 cents (FY2022: 19.3
cents).
The weighted average number of shares in the year was 158.7 million (FY2022:
157.2 million).
Foreign exchange
The majority of the Group's revenue is in US dollars, with sales in other
currencies including euro 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 gains recognised in the income statement for the
period were $0.6 million (FY2022: $0.6 million loss).
Cash flow
Operating cash flow before movements in working capital was $78.4 million
(FY2022: $60.9 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 $8.6
million, which compares to a $34.4 million adverse movement in FY2022. The
reasons for this working capital movement are set out below:
· An increase in inventory leading to a cash outflow of $0.2 million
(FY2022: $28.1 million cash outflow). Supply chain lead times have stabilised
and incidences of component shortages have decreased compared to FY2022, which
have resulted in the level of inventory being held having stabilised.
Inventories have increased where required due to growth in our operations and
new customer projects;
· The acquisition of more working capital heavy complex projects over
this period has also contributed to the higher working capital days.
· An increase in receivables leading to a cash outflow of $15.4 million
(FY2022: $14.2 million cash outflow) with the increase reflecting growth of
the business; and
· An inflow related to payables of $7.0 million (FY2022: $7.9 million
cash inflow). This was also due to the growth of the business.
Total gross capital expenditure increased to $27.0 million from $15.0 million
in FY2022. Of the $27.0 million, $18.3 million related to cash spend and the
remaining $8.7 million related to new finance leases accounted for as
right-of-use assets under IFRS16. During the year, the Group has invested in
expanding facilities in Batam, Indonesia and Pune, India in order to increase
capacity and capabilities as the Group continues to grow. We have continued
with our investment in automation, vertical integration and in our
higher-growth sectors.
Free cash flow was $38.1 million (FY2022: $4.1 million). Free cash flow
represents net cash flows before financing activities excluding the net
outflow from the acquisition of subsidiaries.
Net financing outflows were $31.4 million (FY2022: inflows $40.4 million).
This included dividend payments of $5.7 million (FY2022: $7.2 million) which
were lower than the prior year due to the take-up of the scrip dividend in
FY2023. In FY2022, net financing inflows included legal costs and arrangement
fees of $2.5 million relating to the drawing of the revolving credit facility
("RCF") to fund acquisitions.
Total cash expenditure on acquisitions (net of cash acquired) was $12.2
million (FY2022: $54.9 million), including $7.1 million (FY2022: $19.2
million) in respect of contingent consideration.
The Group is expecting to make payments of $3.5 million in FY2024 in relation
to contingent consideration for acquisitions made in FY2023 and previous
years.
The cash outflow associated with the settlement of awards under share-based
payment arrangements was $7.2 million (FY2022: $5.1 million).
Net debt and gearing
At 2 April 2023, the Group's net debt was $76.4 million before operating lease
liabilities and $103.7 million including operating lease liabilities. At 3
April 2022, net debt before operating lease liabilities was $74.4 million and
$95.3 million including operating lease liabilities.
At 2 April 2023 the Group's covenant basis net debt/underlying EBITDA ratio
was 1.0 times (3 April 2022: 1.2 times). For further details on the Group's
covenants, see the section on 'Banking facilities, covenants and going
concern'.
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 2.6 pence per share (FY2022: 2.4 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 $5.1 million.
Together with an interim dividend of 1.3 pence per share paid in December
2022, this equates to a full year dividend of 3.9 pence per share (FY2022: 3.6
pence per share), an increase of 8.3%. If approved, the final dividend will be
paid on 25 August 2023 to all shareholders on the register at 21 July 2023.
The ex-dividend date will be 20 July 2023.
Banking facilities, covenants and going concern
As at the FY2023 year end, the Group banking facilities remained at $300
million, which are due to expire in February 2026. The facility comprises a
$125 million revolving credit facility, a $75 million term loan and an
additional $100 million uncommitted accordion. During FY2023, the first of two
options to extend for an additional year was taken.
As at 2 April 2023, drawings under the facility were $91.5 million (FY2022:
$103.8 million) with $1.7 million drawn under the cash pool (FY2022: $3.2
million).
At the year end the net debt to underlying EBITDA ratio was 1.0x and interest
cover was 11.0 times, well within the covenant terms.
The Group's financial statements have been prepared on the going concern
basis, which contemplates the continuity of normal business activity with the
realisation of assets and the settlement of liabilities in the normal course
of business. When assessing the going concern status of the Group, the
Directors have considered in particular its financial position, including its
significant balance of cash and cash equivalents and the borrowing facility in
place, including its terms, remaining duration and covenants.
The Directors have prepared a cash flow forecast for the period to end of
September 2024, which is based on the FY2024 Board-approved budget. The
Directors have performed sensitivity analysis on the cash flow forecast using
a base case and downside scenario that take into account the principal risks
and uncertainties identified by the Directors. The Directors have considered
the potential impact of climate change on the going concern assessment and do
not believe there to be a significant impact in the going concern period. The
severe but plausible downside scenario models a 15% reduction in year-on-year
revenue, equivalent to the worst result in recent history, and still provides
significant covenant and liquidity headroom. The Directors have considered the
impact of potential acquisitions in both the base case and severe but
plausible downside scenarios, where appropriate.
Based on their assessment and these sensitivity scenarios, the Directors are
satisfied that there are no material uncertainties regarding the Group's going
concern status and that there is a reasonable expectation that the Group has
adequate resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements. The Directors
therefore consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements.
Financial instruments and cash flow hedge accounting
In September 2022 an interest rate swap was entered into following market
evaluation, which has enabled the Group to fix the interest rate paid on a
notional value of $50 million.
For most products we sell to Consumer Electricals customers, the price of
copper has an impact on the cost of key raw materials. This risk is minimised
by passing the variability in cost through to the end customer in the majority
of cases. Where the customer contract does not provide for the pass-through of
risk, the Group enters into forward contracts to mitigate the Group's exposure
to copper price volatility.
The forward contracts act as an economic hedge against the impact of copper
price movements. They meet the hedge accounting requirements of IFRS 9 and
therefore are accounted for as cash flow hedges of forecast future purchases
of copper. As at 2 April 2023, a financial asset of $nil (FY2022:$nil) has
been recognised in respect of the fair value of open copper contracts. This
credit is retained in reserves until such time as the forecast copper
consumption takes place, at which point it will be recycled through the income
statement.
A charge of $0.3 million has been recognised in cost of sales for FY2023
(FY2022: credit of $0.1 million) in respect of copper hedging contracts that
closed out during the period. This charge has arisen since the average London
Metal Exchange copper price in the period has been below the contracted price.
The Group also has certain foreign operations whose net assets are exposed to
foreign currency translation risk. The Group's policy is to hedge this
exposure through designating certain amounts of foreign currency denominated
debt as a hedging instrument.
Defined benefit pension schemes
The Group's net pension deficit under IAS 19 as at 2 April 2023 was $2.6
million (FY2022: $3.1 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 2 April 2023 (52 weeks ended 3 April 2022)
2023 2022
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 2 722.8 - 722.8 614.6 - 614.6
Cost of sales (565.8) - (565.8) (488.8) - (488.8)
Gross profit 157.0 - 157.0 125.8 - 125.8
Operating expenses (89.7) (13.5) (103.2) (69.6) (15.2) (84.8)
Operating profit 2 67.3 (13.5) 53.8 56.2 (15.2) 41.0
Share of net profit from associates 1.1 - 1.1 0.4 - 0.4
Finance income 0.4 - 0.4 0.3 - 0.3
Finance costs (9.5) - (9.5) (5.5) - (5.5)
Profit on ordinary activities before taxation 59.3 (13.5) 45.8 51.4 (15.2) 36.2
Taxation 4 (10.7) 2.3 (8.4) (9.1) 3.3 (5.8)
Profit for the period 48.6 (11.2) 37.4 42.3 (11.9) 30.4
Profit is attributable to:
Owners of the parent 48.0 (11.2) 36.8 42.3 (11.9) 30.4
Non-controlling interests 0.6 - 0.6 - - -
48.6 (11.2) 37.4 42.3 (11.9) 30.4
Earnings per share (cents)
Basic 30.2 23.2 26.9 19.3
5
Diluted 5 28.8 22.1 25.2 18.1
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 2 April 2023 (52 weeks ended 3 April 2022)
2023 2022
$'m $'m
Profit for the period 37.4 30.4
Items that will not be reclassified subsequently to profit or loss
Actuarial (loss)/gain on defined benefit pension schemes (0.5) 0.7
Tax relating to items that will not be reclassified 0.1 (0.1)
(0.4) 0.6
Items that may be reclassified subsequently to profit or loss
Gain arising on cash flow hedges during the period 1.4 0.1
Exchange loss on translation of foreign operations (7.0) (5.9)
Tax relating to items that may be reclassified 0.2 0.1
(5.4) (5.7)
Other comprehensive expense for the period (5.8) (5.1)
Total comprehensive income for the period attributable to the owners of the 31.6 25.3
parent
Non-controlling interests - -
Consolidated Statement of Financial Position
As at 2 April 2023 (3 April 2022) Notes
2023 2022
$'m
$'m
Non-current assets
Goodwill 82.3 82.9
Other intangible assets 41.8 47.0
Property, plant and equipment 50.1 43.4
Right-of-use asset 34.5 19.4
Interests in associates 2.6 1.5
Other receivables 1.8 2.1
Derivative financial instruments 0.9 -
Deferred tax asset 24.6 20.6
238.6 216.9
Current assets
Inventories 120.5 119.3
Trade receivables 136.2 119.0
Other receivables 15.7 16.7
Current tax assets 0.8 1.9
Derivative financial instruments 0.9 0.4
Cash and bank balances 8 22.5 29.1
296.6 286.4
Total assets 535.2 503.3
Current liabilities
Borrowings 8 1.8 5.0
Lease liabilities 8 15.6 4.3
Trade payables 84.4 84.7
Other payables 65.2 61.9
Current tax liabilities 14.5 10.1
Retirement benefit obligation 0.3 1.1
Provisions 9 0.9 2.3
Derivative financial instruments - 0.1
182.7 169.5
Net current assets 113.9 116.9
Non-current liabilities
Borrowings 8 89.6 98.5
Lease liabilities 8 19.2 16.6
Other payables 1.4 1.0
Deferred tax liabilities 6.9 7.0
Retirement benefit obligation 2.3 2.0
Provisions 9 0.4 0.2
119.8 125.3
Total liabilities 302.5 294.8
Net assets 232.7 208.5
Equity
Share capital 11 62.7 62.5
Share premium account 11 60.7 60.9
Non-distributable reserves 12 2.5 2.5
Hedging and translation reserve (14.6) (9.8)
Own shares 12 (1.0) (0.2)
Retained earnings 115.0 85.2
Total attributable to owners of the parent 225.3 201.1
Non-controlling interests 7.4 7.4
Total equity 232.7 208.5
Consolidated Statement of Changes in Equity
For the 52 weeks ended 2 April 2023 (52 weeks ended 3 April 2022)
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 4 April 2021 62.0 60.9 2.5 (4.1) (3.3) 66.0 184.0 - 184.0
Profit for the period - - - - - 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 - - - - - - - 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 paid - - - - - (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
Profit for the period - - - - - 36.8 36.8 0.6 37.4
Other comprehensive expense for the period - - - (4.8) - (0.4) (5.2) (0.6) (5.8)
Total comprehensive income for the period - - - (4.8) - 36.4 31.6 - 31.6
Own shares sold/(utilised) in the period - - - - 4.2 (4.2) - - -
Own shares purchased in the period - - - - (5.0) - (5.0) - (5.0)
Dividend paid - - - - - (7.1) (7.1) - (7.1)
Scrip dividend related share issue 0.2 (0.2) - - - 1.4 1.4 - 1.4
Credit to equity for equity-settled share-based payments - - - - - 3.7 3.7 - 3.7
Tax effect of share options - - - - - (0.4) (0.4) - (0.4)
Balance at 2 April 2023 62.7 60.7 2.5 (14.6) (1.0) 115.0 225.3 7.4 232.7
Consolidated Statement of Cash Flows
For the 52 weeks ended 2 April 2023 (52 weeks ended 3 April 2022)
Notes
2023
2022
$'m
$'m
Net cash generated from operating activities 7 55.7 18.5
Cash flow used in investing activities
Interest received 0.2 0.1
Acquisition of businesses, net of cash acquired 13 (5.1) (35.7)
Deferred and contingent consideration for businesses acquired 13 (7.1) (19.2)
Proceeds on disposal of intangible assets, property, plant and equipment 0.1 0.5
Purchases of property, plant and equipment (14.6) (10.8)
Purchases of intangible assets (3.7) (4.2)
Proceeds from the repayment of preference shares 0.4 -
Net cash used in investing activities (29.8) (69.3)
Cash flows before financing activities 25.9 (50.8)
Cash generated/(used) before adjusting items 28.1 (48.8)
Cash used in respect of adjusting items (2.2) (2.0)
Cash flow generated from financing activities
Dividend paid (5.7) (7.2)
Net purchase of shares for share schemes (7.2) (5.1)
Refinancing costs paid 8 (0.5) (2.5)
New bank loans raised 8 25.0 69.3
Repayment of borrowings 8 (35.3) (3.4)
Outflow from factoring 8 (0.7) (6.0)
Interest element of lease payments 8 (1.7) (1.0)
Receipt from lease debtor 0.5 0.5
Capital element of lease payments 8 (5.8) (4.2)
Net cash (used in)/generated from financing activities (31.4) 40.4
Net decrease in cash and cash equivalents (5.5) (10.4)
Cash and cash equivalents at beginning of period 25.9 36.5
Effect of foreign exchange rate changes 0.3 (0.2)
Cash and cash equivalents at end of period 8 20.7 25.9
1 Basis of preparation
The preliminary announcement for the 52 weeks ended 2 April 2023 has been
prepared in accordance with the accounting policies as disclosed in Volex
plc's Annual Report and Accounts 2022, as updated to take effect of any new
accounting standards applicable for the period as set out in Volex plc's
Interim Statement 2023.
The annual financial information presented in this preliminary announcement is
based on, and is consistent with, that in the Group's audited financial
statements for the 52 weeks ended 2 April 2023, and those financial statements
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting. The independent auditors' report on those financial
statements is unqualified and does not contain any statement under section 498
(2) or 498 (3) of the Companies Act 2006.
Information in this preliminary announcement does not constitute statutory
accounts of the Group within the meaning of section 434 of the Companies Act
2006. The full financial statements for the Group for the 52 weeks ended 3
April 2022 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 with the
realisation of assets and the settlement of liabilities in the normal course
of business. When assessing the going concern status of the Group, the
Directors have considered in particular its financial position, including its
significant balance of cash and cash equivalents and the borrowing facility in
place, including its terms, remaining duration and covenants.
The Directors have prepared a cash flow forecast for the period to end of
September 2024, which is based on the FY2024 Board-approved budget. The
Directors have performed sensitivity analysis on the cash flow forecast using
a base case and downside scenario that take into account the principal risks
and uncertainties identified by the Directors. The Directors have considered
the potential impact of climate change on the going concern assessment and do
not believe there to be a significant impact in the going concern period. The
severe but plausible downside scenario models a 15% reduction in year-on-year
revenue, equivalent to the worst result in recent history, and still provides
significant covenant and liquidity headroom. The Directors have considered the
impact of potential acquisitions in both the base case and severe but
plausible downside scenarios, where appropriate.
Based on their assessment and these sensitivity scenarios, the Directors are
satisfied that there are no material uncertainties regarding the Group's going
concern status and that there is a reasonable expectation that the Group has
adequate resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements. The Directors
therefore consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements.
This preliminary announcement was approved by the Board of Directors on 21
June 2023.
2 Business and geographical segments
Operating segments
Segment information is based on the information provided to the chief
operating decision maker, being 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 2 April 2023.
The Group evaluates segmental information on the basis of profit or loss from
operations before adjusting items, share-based payments, 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 where the products are delivered. 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 2 April 2023 52 weeks to 3 April 2022
Revenue Profit/(loss) Revenue Profit/(loss)
$'m $'m $'m $'m
North America 339.8 30.9 272.1 21.4
Asia 171.4 12.5 142.7 11.6
Europe 211.6 31.5 199.8 32.1
Unallocated Central costs - (7.6) - (8.9)
Divisional results before share-based payments 722.8 67.3 614.6 56.2
and adjusting items
Adjusting operating items (9.8) (10.8)
Share-based payment charge (3.7) (4.4)
Operating profit 53.8 41.0
Share of net profit from associates 1.1 0.4
Finance income 0.4 0.3
Finance costs (9.5) (5.5)
Profit before taxation 45.8 36.2
Taxation (8.4) (5.8)
Profit after taxation 37.4 30.4
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
2023 2022 2023
$'m $'m $'m 2022
$'m
North America 339.8 272.1 51.4 49.3
Asia 171.4 142.7 59.0 47.2
Europe 211.6 199.8 103.6 99.8
722.8 614.6 214.0 196.3
3 Adjusting items and share-based payments
2023 2022
$'m $'m
Acquisition-related costs 1.3 2.5
Acquisition-related remuneration (see note 13) 0.9 -
Adjustment to fair value of contingent consideration (1.3) (0.2)
Restructuring costs - 0.8
Amortisation of acquired intangibles 8.9 10.3
Paycheck Protection Program ('PPP') loan forgiveness - (2.6)
Total adjusting items 9.8 10.8
Share-based payments 3.7 4.4
Total adjusting items and share-based payments before tax 13.5 15.2
Tax effect of adjusting items and share-based payments (note 4) (2.3) (3.3)
Total adjusting items and share-based payments after tax 11.2 11.9
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 $1.3m (2022: $2.5m) consist of legal and
professional fees relating to potential and completed acquisitions. The
acquisition-related costs associated with acquisitions completed during the
year relate to the acquisition of Review Display Systems ('RDS') ($0.2m). The
remaining acquisition costs relate to other acquisitions that have been or are
being pursued. During the prior year the $2.5m of acquisition-related costs
consisted of legal and professional fees associated primarily with the
acquisitions of 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 adjustment to the fair value of contingent consideration relates to a
remeasurement of contingent consideration on the acquisition of De-Ka
Elektroteknik Sanayi ve Ticaret Anonim Şirketi ('DE-KA').
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 $8.9m (2022: $10.3m)
for the period. The reduction from the prior year primarily reflects the
completion of acquired order books being fully amortised during the period.
This was partially offset due to the annualised impact of acquisitions from
the prior year, being Irvine, Prodamex, TC and inYantra, and the new
acquisition, RDS, in the current year.
During the prior period the Group's North American operations received
notification that $2.6m of Payroll Protection Program loans provided during
the pandemic were forgiven.
4 Taxation
2023 2022
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 (14.7) 0.2 (14.5) (10.1) 0.2 (9.9)
Current tax - adjustment in respect of previous periods 0.1 - 0.1 (0.1) - (0.1)
Total current tax expense (14.6) 0.2 (14.4) (10.2) 0.2 (10.0)
Deferred tax - credit for the period 4.5 2.1 6.6 0.8 3.1 3.9
Deferred tax - adjustment in respect of previous periods (0.6) - (0.6) 0.3 - 0.3
Total deferred tax credit 3.9 2.1 6.0 1.1 3.1 4.2
Income tax expense (10.7) 2.3 (8.4) (9.1) 3.3 (5.8)
UK corporation tax is calculated at the standard rate of 19% (2022: 19%) of
the estimated assessable profit for the period. Taxation for other
jurisdictions is calculated at the rates prevailing in the respective
jurisdictions.
2023 2022
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 59.3 (13.5) 45.8 51.4 (15.2) 36.2
Tax at the UK corporation tax rate (11.3) 2.6 (8.7) (9.8) 2.9 (6.9)
Tax effect of:
Expenses that are not deductible and income that is not taxable in determining (0.1) (0.8) (0.9) 0.1 0.4 0.5
taxable profit
Foreign exchange on entities with different tax and functional currencies (1.9) - (1.9) (2.4) - (2.4)
Adjustment in respect of previous periods (0.5) - (0.5) 0.2 - 0.2
Changes to tax rates (0.4) 0.1 (0.3) 1.7 0.1 1.8
Overseas tax rate differences (0.7) 0.2 (0.5) (1.1) 0.3 (0.8)
Current year tax losses and other items not recognised (1.5) - (1.5) (0.1) (0.1) (0.2)
Recognition of previously unrecognised deferred tax assets 5.8 0.2 6.0 2.9 - 2.9
Derecognition of previously recognised deferred tax assets (0.1) - (0.1) (0.6) (0.3) (0.9)
Income tax expense (10.7) 2.3 (8.4) (9.1) 3.3 (5.8)
The tax expense for the period is lower (2022: 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 a net decrease to the Group's
estimated exposure arising from uncertain tax positions of $0.6m (2022:
increase of $0.4m).
A deferred tax credit of $6.0m (2022: $2.9m) arose due to the recognition of
additional deferred tax assets, primarily relating to historical tax losses,
following management's updated assessment of the probability of future taxable
profits arising in certain jurisdictions.
The main rate of corporation tax in the UK increased from 19% to 25% on 1
April 2023 and will therefore be applicable to the Group's UK profits from the
next financial year. This is expected to increase the Group's effective tax
rate going forwards as it will increase the weighted average statutory tax
rate applicable to the Group's pre-tax profits.
The income tax expense reported directly in equity of $0.4m (2022: $0.8m)
relates to share-based payments and consists of a current tax credit of $0.7m
(2022: $1.6m) and a deferred tax expense of $1.1m (2022: $2.4m).
5 Earnings per ordinary share
The calculations of the earnings per share are based on the following data:
Earnings 2023 2022
$'m $'m
Profit for the purpose of basic and diluted earnings per share being net 36.8 30.4
profit attributable to owners of the parent
Adjustments for:
Adjusting items 9.8 10.8
Share-based payments charge 3.7 4.4
Tax effect of adjusting items and share-based payments (2.3) (3.3)
Underlying earnings 48.0 42.3
No. shares No. shares
Weighted average number of ordinary shares for the purpose of basic earnings 158,681,078 157,245,284
per share
Effect of dilutive potential ordinary shares/share options 7,896,423 10,309,105
Weighted average number of ordinary shares for the purpose of diluted earnings 166,577,501 167,554,389
per share
2023 2022
Basic earnings per share Cents Cents
Basic earnings per share 23.2 19.3
Adjustments for:
Adjusting items 6.1 6.9
Share-based payments charge 2.3 2.8
Tax effect of adjusting items and share-based payments (1.4) (2.1)
Underlying basic earnings per share 30.2 26.9
5 Earnings per ordinary share (continued)
2023 2022
Diluted earnings per share Cents Cents
Diluted earnings per share 22.1 18.1
Adjustments for:
Adjusting items 5.9 6.5
Share-based payments charge 2.2 2.6
Tax effect of adjusting items and share-based payments (1.4) (2.0)
Underlying diluted earnings per share 28.8 25.2
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 has a $200m committed facility (the 'facility') together with an
additional $100m uncommitted accordion (the 'accordion'). The syndicate
comprises of 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 banking facility there are floating charges
over certain subsidiaries and their assets. The accordion feature provides
further capacity for potential future acquisitions. This facility comprises a
$125m revolving credit facility and a $75m term loan. The facility is secured
by fixed and floating charges over the assets of certain Group companies. As
at the year end these totalled $226.5m (2022: $217.8m).
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). A 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
2023 2022
$'m $'m
Profit for the period 37.4 30.4
Adjustments for:
Finance income (0.4) (0.3)
Finance costs 9.5 5.5
Income tax expense (note 4) 8.4 5.8
Share of net profit from associates (1.1) (0.4)
Depreciation of property, plant and equipment (note 10) 8.2 6.4
Depreciation of right-of-use assets 4.8 3.4
Amortisation of intangible assets 10.2 10.4
Loss/(profit) on disposal of property, plant and equipment 0.1 (0.2)
Share-based payment charge 3.7 4.4
PPP loan forgiveness (note 3) - (2.6)
Contingent consideration adjustments (note 3) (1.3) (0.2)
Decrease in provisions (1.1) (1.7)
Operating cash flow before movement in working capital 78.4 60.9
Increase in inventories (0.2) (28.1)
Increase in receivables (15.4) (14.2)
Increase in payables 7.0 7.9
Movement in working capital (8.6) (34.4)
Cash generated from operations 69.8 26.5
Cash generated from operations before adjusting items 72.0 28.5
Cash used by adjusting operating items (2.2) (2.0)
Taxation paid (7.9) (6.5)
Interest paid (6.2) (1.5)
Net cash generated from operating activities 55.7 18.5
8 Analysis of net debt
Cash and cash equivalents Bank Factoring Lease Debt issue Total
$'m
$'m loans $'m liabilities costs
$'m
$'m
$'m
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)
Business combination 0.4 (0.7) - (2.1) - (2.4)
Cash flow (5.9) 10.3 0.7 7.5 0.5 13.1
New leases entered into during the year - - - (17.8) - (17.8)
Lease interest - - - (1.7) - (1.7)
Exchange differences 0.3 0.7 - 0.2 (0.1) 1.1
Amortisation of debt issue costs - - - - (0.7) (0.7)
At 2 April 2023 20.7 (91.5) - (34.8) 1.9 (103.7)
Debt issue costs relate to bank facility arrangement fees. In February 2023
the Group extended the facility by exercising the first of its two one-year
extension options, thereby extending the termination date to 10 February 2026.
The $0.5m of costs associated with the extension request were capitalised.
Analysis of cash and cash equivalents: 2023 2022
$'m $'m
Cash and bank balances 22.5 29.1
Bank overdrafts (1.8) (3.2)
20.7 25.9
9 Provisions
Property Restructuring Other Total
$'m $'m $'m $'m
At 4 April 2021 0.2 0.1 1.8 2.1
Charge/(credit) 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
Credit in the period - - (0.6) (0.6)
Utilisation of provision - (0.6) (0.1) (0.7)
Amounts acquired on business combination 0.1 - - 0.1
Exchange differences - - - -
At 2 April 2023 0.4 - 0.9 1.3
Current liabilities - - 0.9 0.9
Non-current liabilities 0.4 - - 0.4
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 was made to cover the redundancy and other associated exit costs. The
closure was completed in the year and the provision was fully utilised.
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 (2022: $0.9m) 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.
During the year the Group made additional office dilapidation provisions.
These provisions relate to the RDS offices acquired during the year and a new
office being utilised by the Group located in Japan.
10 Reconciliation of operating profit to underlying EBITDA (earnings before interest, tax, depreciation, amortisation, adjusting items and share-based payments)
2023 2022
$'m $'m
Operating profit 53.8 41.0
Add back:
Adjusting operating items 9.8 10.8
Share-based payment charge 3.7 4.4
Underlying operating profit 67.3 56.2
Depreciation of property, plant and equipment 8.2 6.4
Depreciation of right-of-use assets 4.8 3.4
Amortisation of intangible assets not acquired in a business combination 1.3 0.1
Underlying EBITDA 81.6 66.1
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 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
Issue of new shares 388,376 0.2 (0.2) -
At 2 April 2023 159,107,085 62.7 60.7 123.4
During the current year there was an issue of new ordinary shares.
Shareholders were able to elect to receive ordinary shares in place of the
final dividend of 2.4p per ordinary share (in relation to year ended 3 April
2022) and the interim dividend of 1.3p (in relation to the current year) under
the terms of the Company's scrip dividend scheme. This resulted in the issue
of 377,615 and 10,761 new fully paid ordinary shares respectively (2022: nil).
During the prior period the Company 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.
12 Own shares and non-distributable reserves
Own shares 2023 2022
$'m $'m
At the beginning of the period 0.2 3.3
Sale of shares (4.2) (7.5)
Purchase of shares 5.0 4.4
At end of the period 1.0 0.2
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 Employees' 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 Employees' Share
Trust at 2 April 2023 was 233,978 (2022: 53,205). The market value of the
shares as at 2 April 2023 was $0.6m (2022: $0.2m).
Unless and until the Company notifies a trustee of The Volex Group PLC
Employees' 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 1,242,155 (2022: 3,645,040) shares were utilised on the
exercise of share awards. During the year, the Company purchased 1,422,928
shares (2022: 1,100,000) at a cost of $5.0m (2022: $4.4m) and issued zero new
shares to the Trust (2022: 1,666,668).
In December 2013, The Volex Group PLC Employees' 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
Review Display Systems
On 28 October 2022 the Group completed the acquisition of 100% of the
shareholding of GSRG Holdings Limited ('GSRG'), the holding company for Review
Display Systems Limited ('RDS') and two other subsidiaries. RDS is a UK-based
specialist distribution company focused on the design and manufacture of
electronic touchscreen displays, embedded solutions and IoT solutions.
RDS and the other entities in the group were acquired for initial cash
consideration of $5.5m funded from the Group's existing debt facilities. As
part of the acquisition, additional payments of up to $3.4m are payable
depending upon the EBITDA performance of the business over the two years
post-acquisition. In accordance with IFRS 3, this is accounted for as
remuneration rather than deferred or contingent consideration due to the
on-going service conditions. An expense of $0.9m has been recorded in
adjusting items related to this post-acquisition performance.
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:
Fair Value
$'m
Identifiable intangible assets 1.8
Property, plant and equipment 0.1
Right-of-use asset 2.1
Inventories 2.0
Trade receivables 2.4
Trade payables (0.5)
Other debtors and creditors (1.0)
Loans (0.7)
Provisions (0.1)
Cash 0.4
Deferred taxes (0.4)
Lease liabilities (2.1)
Total identifiable assets 4.0
Goodwill 1.5
Consideration 5.5
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.
None of the goodwill recognised is expected to be deductible for income tax
purposes.
In FY2023, the entities acquired contributed $5.7m to Group revenue and $0.6m
to adjusted operating profit. Associated acquisition costs of $0.2m and
intangible asset amortisation of $0.4m have both been expensed as adjusting
items in the period.
If these entities had been acquired at the beginning of the year, they would
have contributed revenues of $14.5m and operating profit of $1.9m to the
results of the Group.
Net cash outflow on acquisitions $'m
Cash consideration
- RDS 5.5
Total cash consideration 5.5
Less: cash and cash equivalents acquired
- RDS 0.4
Net cash outflow 5.1
Payment of deferred and contingent consideration
- DE-KA 1.0
- TC 1.1
- inYantra 5.0
Net cash outflow 7.1
13 Business combinations (continued)
14 Events after balance sheet date
There are no disclosable events after the balance sheet date.
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