REG - Volex PLC - Preliminary Group Results FY2024
26/06/2024 07:00
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RNS Number : 8633T Volex PLC 26 June 2024
26 June 2024
Volex plc
("Volex", the "Company", or the "Group")
Preliminary Group Results
for the 52 weeks ended 31 March 2024
Record profits delivered; accelerating strategic investments in growth
opportunities
Volex plc (AIM: VLX), the specialist integrated manufacturer of critical power
and data transmission products, announces its preliminary results for the 52
weeks ended 31 March 2024 ("FY2024").
Financial Highlights 52 weeks to 52 weeks to Year on year change
31 March 2024 2 April 2023
Revenue $912.8m $722.8m 26.3%
Underlying(1) operating profit $89.7m $67.3m 33.3%
Statutory operating profit $63.9m $53.8m 18.8%
Underlying(1) profit before tax $77.4m $59.3m 30.5%
Statutory profit before tax $51.6m $45.8m 12.7%
Underlying(1) basic earnings per share 33.7c 30.2c 11.6%
Statutory basic earnings per share 21.8c 23.2c (6.0%)
Final dividend (per share) 2.8p 2.6p 7.7%
Net debt(2) $154.0m $103.7m 48.5%
Net debt (before operating lease liabilities)(3) $121.1m $76.4m 58.5%
(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 lease liabilities
(3) Represents net debt including finance leases, but excluding pre-IFRS16
operating lease liabilities (see note 15 for more details)
Financial and strategic highlights
· Group revenue increased by 26.3% to $912.8m (FY2023: $722.8m) driven
by strong organic growth of 6.9%, in spite of temporary headwinds caused by
customer destocking
· Underlying operating margin increased by 50 bps to 9.8% (FY2023:
9.3%) comfortably within the target range of 9-10%
· Year-end net debt covenant leverage maintained at 1.0x with strong
cash generation partly offsetting borrowings used to fund acquisitions
· Murat Ticaret Kablo Sanayi A.S. ("Murat Ticaret") acquired for total
consideration of $196m, accelerating the five-year plan and facilitating
launch of Off-Highway as fifth end-market to further diversify the business
· Further investment of $8m in increasing capacity and delivering major
new customer programmes in key locations to support future growth
· Proposed final dividend of 2.8 pence per share, totalling 4.2 pence
for the year, an increase of 7.7%
· Successful refinancing post year end providing $600m of long-term
debt facilities on improved terms to support growth opportunities
· Continued progress made towards five-year strategic plan supported by
customer-led investment programme and acquisitions
Market highlights
· Electric Vehicles - short-term customer destocking and prior year
customer inventory building resulted in organic revenue reduction of 9.6%
· Consumer Electricals - organic revenue reduction of 7.6% resulting
from supply chain normalisation in North America and Asian markets
· Medical - improved component availability has enabled customers to
begin to address their substantial backlogs leading to organic revenue growth
of 15.3%
· Complex Industrial Technology - organic revenue growth of 31.9%
driven by expansion in data centre products
· Off-Highway - fifth end-market launched in the year, following the
acquisition of Murat Ticaret
Outlook
· Continued success in securing new projects, highlighting our strong
global capabilities and manufacturing footprint
· Improved demand from Electric Vehicles and Consumer Electricals
customers toward year end, indicating reducing destocking impact.
· Identified opportunity to accelerate growth in Off-Highway sector;
expediting launch of North American Off-Highway business
· Accelerating investment programme for long-term growth in FY2025,
with capex expected to be about 5% of revenue and operational investments
approximately doubling during the year
· Business in excellent shape entering FY2025, well-positioned to meet
five-year plan targets
Nat Rothschild, Volex's Executive Chairman said:
"We have doubled our revenues in three years, while maintaining impressive
operating margins within our target range of 9-10%. This demonstrates the
success of our strategy to diversify our business, increasing the share of our
sales involving complex products and managing costs effectively as we grow.
"The transformative acquisition of Murat Ticaret has further enhanced our
capabilities and solidified our market position. Our strategic investments in
FY2024 and those planned for FY2025 will expand capacity at key locations to
meet anticipated future customer demand, positioning Volex for further growth
by leveraging our dominant positions in attractive sectors. With leading
positions in our end markets, strong cash flow and robust financial position,
we are ideally positioned to capitalise on the significant growth
opportunities available to us.
"Our acquisition pipeline remains promising, alongside incremental organic
initiatives, underscoring our commitment to achieving our strategic goals.
Having started the new fiscal year with strong customer demand, we are
confident of making further progress in FY2025 and we are firmly on track to
achieve our five-year revenue target of $1.2 billion by the end of FY2027."
Dividend
Subject to approval by shareholders at the upcoming AGM on 1 August 2024, the
proposed final dividend of 2.8p per ordinary share will be paid on 30 August
2024 to shareholders on the register on 26 July 2024. The ex-dividend date
will be 25 July 2024.
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 1 August 2024. 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 8 August 2024. 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.
Analyst Briefing
A live presentation for analysts will be held via conference call at 9.00 a.m.
BST today. If you are an analyst and would like to join for this briefing,
please contact Volex@powerscourt-group.com
(mailto:Volex@powerscourt-group.com) .
Investor Presentation
A live presentation will be held online at 10.00 a.m. BST on Friday 28 June
2024 on the Investor Meet Company ("IMC") platform.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event on the IMC dashboard up until 9.00 am BST on the
day before the meeting, or at any time during the live presentation.
Investors can sign up to IMC and register to meet Volex via:
https://www.investormeetcompany.com/volex-plc/register-investor
Investors who already follow Volex on the IMC platform will automatically be
invited.
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
Dom Convey
Ben Harrington
HSBC Bank plc - Joint
Broker
+44 20 7991 8888
Simon Alexander
Joe Weaving
Stephanie Cornish
Powerscourt - Media
Enquiries
+44 20 7250 1446
James White
Nicholas Johnson
About Volex plc
Volex plc (AIM:VLX) is a driving force in integrated manufacturing for
mission-critical applications and a global leader in power and data
connectivity solutions. Our diverse operations support international blue-chip
customers in five key sectors: Electric Vehicles, Consumer Electricals,
Medical, Complex Industrial Technology and Off-Highway. Headquartered in the
UK, we orchestrate operations across 28 advanced manufacturing facilities,
uniting over 14,000 dynamic individuals from 25 different nations. Our
extraordinary products find their way to market through our localised sales
teams and authorised distributor partners, supporting Original Equipment
Manufacturers and Electronic Manufacturing Services companies across the
globe. In a world that grows more digitally complex by the day, customers
trust us to deliver power and connectivity that drives everything from
household essentials to life-saving medical equipment. Learn more at
www.volex.com.
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 $32.9
million of operating lease liabilities (FY2023: $27.3 million).
Covenant leverage is net debt (before operating lease liabilities) divided by
underlying EBITDA adjusted for depreciation of right-of-use assets and
pro-rated for acquisitions.
Organic revenue growth is calculated using constant exchange rates by taking
the total reported revenue (excluding the impact of acquisitions and
disposals) divided by the preceding financial year's revenue at the current
year's exchange rates.
Return on capital employed is calculated as the last twelve months underlying
operating profit as a percentage of average net assets excluding net
cash/debt.
Forward looking statements
This announcement contains certain forward-looking statements which have been
made by the Directors in good faith using information available up until the
date they approved the announcement. Forward-looking statements should be
regarded with caution as by their nature such statements involve risk and
uncertainties relating to events and circumstances that may occur in the
future. Actual results may differ from those expressed in such statements,
depending on the outcome of these uncertain future events.
Executive Chairman's Statement
FY2024 was another year of significant progress for Volex. Despite headwinds
from destocking, we increased revenue to $912.8 million, achieving organic
growth of 6.9%, with strong half-on-half sequential growth of 30%. Overall,
our business is delivering excellent performance, with strong profitability
and cash generation. We now have a leading Off-Highway business, having
completed the acquisition of Murat Ticaret in August 2023, further
diversifying Group earnings. Delivering consecutive years of record results
reaffirms our belief that our strategy is effective and validates our
confidence in achieving the five-year plan.
We have doubled revenue in three years, with 40% of this growth from organic
expansion. For the fourth consecutive year, we have achieved an underlying
operating profit margin within our target range of 9% to 10%. This year, our
underlying operating profit was $89.7 million, representing a margin of 9.8%,
while underlying EBITDA reached $111.6 million, a 36.8% increase from the
previous year. We ended the year with a strong balance sheet and covenant
leverage of 1.0x, comfortably within our target range of 1.0x to 2.0x.
Strong organic growth through cycle
FY2024 saw a marked improvement in component availability and supply chain
reliability. Some customers rebuilt inventory, leading to increased demand.
Others used this stability to normalise inventory levels. Effects varied
across markets and customer sectors, but in aggregate we delivered robust
organic revenue growth of 6.9%.
Against particularly strong comparatives for both Electric Vehicles and
Consumer Electricals, revenues declined in FY2024 due to normalisation and
destocking. However, both sectors showed signs of recovery in the second half
of the year.
Sales to Medical and Complex Industrial Technology customers increased, driven
by improved supply chain conditions, that enabled customers to expedite order
backlogs. Additionally, there was a significant boost in sales of high-speed
data centre cables, supported by growing demand as technology companies
implement artificial intelligence infrastructure.
Integration of Murat Ticaret and our Off-Highway strategy
The acquisition of Murat Ticaret completed at the end of August 2023 and
significantly enhances our scale in the attractive Off-Highway market. We
generated revenues of $163 million in this sector, producing complex wire
harnesses for various applications, including agricultural and construction
equipment, buses and coaches, and material handling machinery. This
acquisition advances our strategy of providing specialised manufacturing
solutions, driving profitable growth, and fostering deep, long-term
relationships with our clients.
Integration is progressing well, as we enhance the organisation and embed our
working methods and delivery approach. Customer engagement has been excellent,
leading to securing several incremental projects and the identification of
cross-selling opportunities.
Murat Ticaret is a fast-growing business and we are increasing factory
capacity and optimising facilities. We have recruited a talented management
team with international experience to support the continued success of the
operations and to deliver the integration programme.
A recurring theme in feedback from Off-Highway customers is the desire for us
to replicate the high-quality manufacturing services they receive in Europe
within the North American market. We are building a team and accelerating our
investment in infrastructure to make this happen.
Investing for growth
The complex assemblies and critical components we manufacture are essential to
customers' operations. Recent supply chain disruptions have fundamentally
reshaped procurement thinking and sourcing strategies. Many customers want to
simplify their supply networks, reduce complexity, minimise risk and promote
sustainability. This is an unprecedented opportunity to support our customers'
localisation initiatives. We are, therefore, actively expanding our
manufacturing footprint.
We have significant strength in strategic locations, such as Mexico and
Türkiye, which bring manufacturing closer to our clients in the US and
Europe. Additionally, we offer extensive capabilities in highly competitive
regions, like Indonesia and India.
Relocating production can be challenging and our experienced teams are
well-versed in managing such transitions. It is crucial for us to have
available capacity that aligns with our customers' project timelines.
Consequently, by the end of the summer, we will have added incremental
capacity in Mexico, Türkiye, India, Indonesia and Poland. Although this will
incur some short-term additional costs, as these sites become operational with
customer projects, we anticipate enhanced profitability from these locations
over the longer term.
We are disciplined with our returns criteria for capital investment projects
and target cash payback within two years of production going live. This
industry-leading return enables us to consistently maintain a return on
capital employed of over 20%.
Enhancing our organisation
The majority of our products are highly complex, some with hundreds of
individual components. To meet the highest quality standards in delivering
these critical assemblies, we implement rigorous quality assurance measures
and innovative production techniques. Consequently, we employ highly skilled
engineers and manufacturing specialists. Over the past year, we have recruited
additional experts and invested in enhancing our capabilities in automation
and efficient manufacturing.
Our decentralised operating model continues to provide the quick
decision-making and flexibility necessary for managing our diverse and complex
business. In recent years, we have enhanced this model with regional
leadership teams that bring significant manufacturing experience. These teams
provide support and governance to the management in our manufacturing
facilities. This year, we established a regional leadership team for Türkiye,
underscoring the importance of this region to our growth plans.
Sustainability
Our Group is deeply committed to sustainability, integrating it into every
aspect of our operations. We collaborate with customers, many of whom are at
the forefront of the transition to a low-carbon economy, to provide
sustainable power products and connectivity solutions. This approach leverages
data-driven insights from our Sustainability Reporting System to prioritise
improvements and maximise the benefits we can achieve through our
sustainability initiatives.
Since FY2022, we have aligned our sustainability efforts with the UN's
Sustainable Development Goals, implementing new environmental management and
responsible water use policies. The Group aims to decarbonise its scope 1 and
2 emissions by 2035 and its scope 3 emissions by 2050.
Every production facility contributes to sustainability through tailored
kaizen improvement plans, leading to innovations in energy efficiency, waste
reduction, and environmental protection. Significant achievements include a
28% reduction in carbon intensity since FY2019, expansion of on-site solar
generation and a commitment to reducing water and waste.
Our sustainability strategy also involves addressing scope 3 emissions and
enhancing the supply chain's sustainability. The Group has updated its
Supplier Code of Conduct and is developing a sustainable procurement policy to
further its environmental goals. Overall, we are dedicated to building a
sustainable future through continuous improvement and strategic initiatives.
Board changes
In October 2023, Dean Moore stepped down from the Board after six and a half
years, during which he served as the Chair of the Audit Committee and our
Senior Non-Executive Director. We extend our gratitude to Dean for his support
and guidance during this period.
We welcomed John Wilson to the Board in October. John brings a strong
background in the technology, components, and connectivity solutions sectors,
including his current role as CEO of Bulgin Limited, a leading global
manufacturer of sealed connectors and components. John has assumed the role of
Chair of the Audit Committee. At the same time, Sir Peter Westmacott was
appointed as our Senior Non-Executive Director.
Dividend
Having achieved another year of robust growth and maintaining a strong balance
sheet, the Board is pleased to propose a final dividend of 2.8 pence per
share. Combined with the interim dividend of 1.4 pence, this totals 4.2 pence
for the year, marking a 7.7% increase from the previous year. The Board
believes this dividend level is both appropriate and sustainable, reflecting
our confidence in the Company's ongoing ability to deliver consistent growth.
Outlook
The improvement in demand from our Electric Vehicles and Consumer Electricals
customers towards the end of FY2024 and the beginning of FY2025 is
encouraging, indicating a reduction in the impact of destocking in these
areas. The significant growth in Medical and Complex Industrial Technology
included some one-off catch-up due to better component availability, which is
not expected to repeat in FY2025. However, we continue to secure new projects
in these sectors, demonstrating how our global capabilities and manufacturing
footprint support our growth objectives.
There is a significant opportunity to accelerate our growth in the Off-Highway
sector outside of existing geographies served by the Group. Based on customer
feedback and requests, we are therefore expediting our plans to launch an
Off-Highway business in North America. This initiative will underpin our
growth strategy in this sector.
With a clear strategy and execution plan for each of our markets, we are
accelerating our investment programme to achieve long-term growth. This
includes broadly doubling operational investments and raising capital
expenditure to around 5% of revenue for the next year. We enter FY2025 with
the business in excellent shape, positioning us to meet our five-year plan
targets and deliver sustained growth and value for shareholders.
Review of FY2024 performance
2024 2023
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 372.3 - 372.3 339.8 - 339.8
Asia 185.1 - 185.1 171.4 - 171.4
Europe 355.4 - 355.4 211.6 - 211.6
912.8 - 912.8 722.8 - 722.8
Cost of sales (710.0) - (710.0) (565.8) - (565.8)
Gross profit 202.8 - 202.8 157.0 - 157.0
Operating expenses (113.1) (25.8) (138.9) (89.7) (13.5) (103.2)
Operating profit 89.7 (25.8) 63.9 67.3 (13.5) 53.8
Share of net profit from associates 3.2 - 3.2 1.1 - 1.1
Finance income 1.3 - 1.3 0.4 - 0.4
Finance costs (16.8) - (16.8) (9.5) - (9.5)
Profit before taxation 77.4 (25.8) 51.6 59.3 (13.5) 45.8
Taxation (15.9) 4.5 (11.4) (10.7) 2.3 (8.4)
Profit after tax 61.5 (21.3) 40.2 48.6 (11.2) 37.4
The Group has achieved strong results, showing good revenue growth and
increased profitability, and is on track with its five-year plan. The
acquisition of Murat Ticaret has improved both revenue and profitability and
has expanded our presence into a fifth end-market sector, speeding up our
diversification. Our operations across varied end-markets have made our
business resilient, allowing us to deliver strong financial performance even
in varied market conditions.
Over the past year, supply chains continued to normalise and the lead time
variability experienced in the prior periods reduced. This has resulted in two
contrasting market dynamics. In our high complexity areas, component
availability improved enabling our customers to address significant backlogs
that had accumulated. Conversely, in the higher volume parts of our business,
the more stable supply chain conditions allowed customers to reduce their
inventory levels.
Trading performance overview
The Group generated revenue of $912.8 million (FY2023: $722.8 million), an
increase of 26.3% compared to the previous year. This included organic revenue
growth of 6.9% and $142.9 million contribution from acquisitions, being
principally the recently acquired Murat Ticaret business, in addition to the
full-year effect of our FY2023 acquisition.
Customers with complex requirements accelerated demand thanks to better
availability of components, with organic revenue growth of 15% in Medical and
32% in Complex Industrial Technology. Supply chain improvements and stability
allowed other customers to reduce buffer stocks. This effect was seen in
Electric Vehicles, where there was an organic revenue reduction of 10% and in
Consumer Electricals, where the reduction was 8%. Underlying operating profit
increased by 33% to $89.7 million (FY2023: $67.3 million), primarily due to
the acquisition of Murat Ticaret. Statutory operating profit also rose to
$63.9 million (FY2023: $53.8 million) and included adjusting items and
share-based payments of $25.8 million (FY2023: $13.5 million).
The Group's underlying operating margin was 9.8%, an improvement of 50 basis
points, driven by higher volumes, stringent cost controls, vertical
integration efficiencies, sales mix and the acquisition of Murat Ticaret. This
improvement, achieved despite macroeconomic challenges and inflationary
pressures, demonstrates the resilience and agility of our business.
Additionally, we have continued to invest in expanding the capacity of the
business to support future growth.
Strong free cash flow generation and an equity raise earlier in the year
supported capital investment, dividend payments and acquisitions spend of
approximately $177 million. Consequently, net debt (before operating leases)
was $121.1 million at 31 March 2024 (2 April 2023: $76.4 million), excluding
$32.9 million (2 April 2023: $27.3 million) of operating lease liabilities.
The covenant net debt to adjusted EBITDA ratio was 1.0 times (FY2023: 1.0
times) giving the Group significant headroom.
Impact of the macroeconomic backdrop
Volex remains well positioned to navigate the challenges of a dynamic
macro-environment. This strength is supported by our diverse markets,
extensive capabilities and global manufacturing footprint. These core
strengths have been essential to our continued strong progress, enabling us to
overcome disruptions to global supply chains, as well as the challenges posed
by Covid-19 and the war in Ukraine.
Although inflation rates remain elevated in many parts of the world compared
to the previous decade, they have moderated from the previous year. Our
well-defined and transparent process for managing inflation is well understood
by our customers. For power cord customers, where copper is a significant part
of our bill of materials, contracts allow for the pass-through of cost changes
to the customer, although there can be a short time lag in implementing price
changes. Other price inflation is addressed through price discussions with
customers, which occur on a regular basis, such as quarterly, or on an ad hoc
basis as necessitated by changes in costs.
Supply chains continued to improve, allowing some customers to accelerate
production to address backlogs, while others optimised inventory levels and
reduced buffer stock. The normalisation of supply chain conditions also
allowed the Group to improve working capital, resulting in a net cash inflow
for the year.
Revenue by reportable segment
Volex partners with a wide range of global blue-chip businesses. Supporting
our customers is integral to our business model, and our global footprint
allows us to achieve this effectively. Customers increasingly require
manufacturing in multiple locations to mitigate the risk of supply chain
disruption from any single country and to align production closer to where the
final product is manufactured. Our regional operational focus supports these
needs and we, therefore, analyse our customer revenue geographically. Revenue
is allocated based on where the customer relationship is managed, reflecting
our customer-centric approach.
North America
North America represents our largest customer segment, where we collaborate
with some of the region's major technology companies and global innovators.
This segment comprises 40.8% of Group revenue (FY2023: 47.0%). Revenue grew by
9.6% to $372.3 million (FY2023: $339.8 million). This reflects some of the
strong organic growth we experienced with our Medical customers and within
Data Centres, supplemented by the contributions from the Murat Ticaret North
American customers. Offsetting these are the reduction in revenue levels
within the Electric Vehicles and Consumer Electricals end-markets as customers
rationalised inventory levels.
Asia
Asia constitutes 20.3% of Group revenue (FY2023: 23.7%). Asia revenue
increased by 8.0% to $185.1 million (FY2023: $171.4 million). The increase is
largely because of the growth from inYantra, which is exposed to the rapidly
expanding Indian market. However, this positive trend was somewhat mitigated
by the normalisation seen in the Consumer Electricals end-market.
Europe
Europe now accounts for 38.9% of Group revenue (FY2023: 29.3%). Revenue in
Europe increased by 68.0% to $355.4 million (FY2023: $211.6 million)
principally due to the acquisition of Murat Ticaret. Additionally, strong
organic growth from our Medical customers and the annualised impact of the
FY2023 acquisition of RDS contributed to the year-on-year revenue increase.
Revenue by customer sector
Electric Vehicles
Revenues in Electric Vehicles were lower year-on-year against a particularly
strong comparative. In FY2023, customers built up buffer stocks to mitigate
the impact of variable lead times. In FY2024, our customers were able to
reduce their inventory as lead times normalised, resulting in a reduction in
demand. Organic revenue from our Electric Vehicles customers decreased
year-on-year by 10% to $123.7 million (FY2023: $138.3 million), but still 19%
higher than FY2022, illustrating sustained growth over the longer-term.
The electric vehicle industry is set for continued growth as consumer adoption
increases, supported by government legislation. Volex, with its market-leading
position and strong reputation as an innovative manufacturer in this sector,
is well-positioned to capitalise on this growth. Leveraging our extensive
experience with EV charging technology, we have expanded our product offering
to support faster AC charging and out-of-home charging solutions, aiming to
broaden our customer base. To maintain our competitive edge as one of the
industry's lowest-cost producers, we continue to invest in new product
development, enhance vertical integration, and refine our manufacturing
processes. This is important as the competitive landscape intensifies.
Consumer Electricals
Improvements in supply chains allowed our Consumer Electricals customers to
reduce buffer stock levels in the year. Consequently, revenue reduced in
FY2024 to $235.3 million (FY2023 restated: $259.6 million). The previous
year's revenue has been restated to move $2.2 million revenue to the newly
launched Off-Highway end-market. On an organic basis, revenue for this sector
declined by 8%. Two of the most substantial components in our power cords,
copper and PVC, were, on average, at a lower price during the year compared to
the prior year, allowing us to pass on cost savings to customers which in turn
contributed to part of the revenue reduction.
The ability to deliver a truly global solution to supply high-quality power
cords in every major market is a key reason why Volex is a critical supplier
to many household name Consumer Electricals brands. With proven expertise in
wire harness manufacturing, we are receiving an excellent response as we look
to expand in this area. Our relatively low levels of penetration for domestic
appliance harnesses offer a strong opportunity for expansion. This is combined
with a focus on cross-selling, capitalising on our widespread manufacturing
capabilities, supporting sustained growth and customer retention in a dynamic
market environment.
Medical
Sales to Medical customers were exceptionally strong this year, benefiting
significantly from the supply chain normalisation. This improvement enabled
our customers to acquire components that were previously in short supply and
address pent-up demand. Medical revenues were up 15% on an organic basis to
$177.5 million (FY2023: $145.0 million). Additionally, this sector benefited
from a full year of RDS revenues, following its acquisition part-way through
FY2023.
The medical products we manufacture are complex, with precisely specified
bills-of-materials, making production dependent on the availability of
specialist components. Some of the catch-up that occurred in FY2024 as supply
chain conditions improved is not expected to repeat in FY2025, potentially
leading to slightly reduced or broadly flat demand levels in the near term.
The mid-to-long-term growth prospects for this sector are supported by an
ageing population and advances in medical technology.
Complex Industrial Technology
Revenue from Complex Industrial Technology increased organically by 32% to
$213.4 million (FY2023 restated: $157.7 million), bolstered by the full-year
effect of RDS which was acquired in FY2023. The previous year's revenue has
been restated to move $20.0 million revenue to the newly launched Off-Highway
end-market. Excluding Data Centre customers, revenues within this sector
remained broadly flat on an organic basis. Component availability has improved
in FY2024 as supply chain pressures eased; this could lead to temporarily
lower growth in the short term as customers are able to reduce stock levels.
Data Centre customers are reported within Complex Industrial Technology and
represented 41.7% (FY2023: 21.2%) of revenue in this sector. The revenue in
this sub-sector increased by 131% year-on-year, partly due to prior year
shortages of up-to-date network equipment essential to support the adoption of
400 Gigabit-per-second architecture in data centres. As these shortages abated
towards the end of FY2023 and throughout FY2024, demand levels accelerated as
customers addressed their backlogs. In addition, the expansion of
data-intensive artificial intelligence applications increased demand from Data
Centre customers.
Off-Highway
Following the acquisition of Murat Ticaret, we established Off-Highway as a
distinct fifth end-market sector. Previously, our sales to Off-Highway
customers from our sites in North America and Asia were reported under
Consumer Electricals and Complex Industrial Technology. We have now restated
these figures to reflect the FY2023 Off-Highway comparator of $22.2 million.
Revenues increased to $162.9 million in FY2024, with $132.4 million as a
result of seven months contribution from the acquisition of Murat Ticaret.
There are significant cross-selling opportunities within this end-market
particularly in the highly fragmented US market. Medium-term growth is
supported by factors such as increasing urbanisation, advances in agricultural
technology and the accelerating trend towards environmentally friendly and
sustainable products. Our global footprint and advanced manufacturing assets
position us well to capitalise on these trends and expand our presence in this
sector.
Realising our strategy
Five key pillars encompass our strategy: product development; revenue growth;
operational excellence; investment and acquisition; and talent.
We are committed to developing the right products and capabilities to become
the manufacturing partner of choice for our customers. Through research and
development, we have expanded our product offering, collaborating with our
customers to understand their specific requirements.
Our customers are central to our operations. We excel in delivering
outstanding quality and service by maintaining regular, transparent
communication and continuously striving to add value.
To consistently meet these high standards, we closely monitor our
manufacturing facilities and processes, identifying ways to improve and to
increase efficiency and quality. Our continued investment in vertical
integration gives us greater control over the supply chain and protects
margins. The customer service we provide drives organic revenue growth as
customers are onboarded and increase our allocation of their products.
Investments and acquisitions remain a cornerstone of our strategic plan. Our
investments are tactically selected to enhance capacity and capabilities, led
by the customer and generally approved based on a two-year payback period. We
are constantly evaluating potential acquisition targets, or building
relationships with businesses that show strategic alignment, but are not yet
available for sale. Since FY2019, we have successfully invested nearly $400
million on 12 strategic acquisitions, which has contributed to expanding our
product offering, improving our international manufacturing footprint and
boosting earnings and margin.
All of which requires great people. We continue to strengthen the organisation
by bringing in talented leaders, in addition to creating development
opportunities for existing employees. Effective communication is critical, and
we use diverse channels to drive employee engagement.
Creating value through organic investment
Investing in our business is a crucial component of our strategy, delivering
excellent returns with projects typically recouping costs within two years.
Building on our strong track record of creating value, we focus on growth
areas while adhering to stringent financial criteria. Our investments not only
maintain and enhance our assets but also respond to increased customer demands
and support the development of new products, paving the way for future
expansion.
In response to increasing customer demand, the Group invested in the further
expansion of its global manufacturing base, creating additional capacity to
facilitate growth as part of the Group's five-year growth plans. Total gross
capital investment increased to $31.6 million (FY2023: $27.0 million),
representing 3.5% of revenue (FY2023: 3.7% of revenue). The prior year
expenditure included $8.7m of assets which were purchased under lease
agreements. As well as expanding capacity to support future growth, investment
was concentrated on high-growth areas, including EV and data centre
capabilities. The investment strategy continues to be shaped by customer
demand, localisation requirements and capability enhancements.
In FY2024, we made $8 million of operational investments to support growth.
These investments include additional operating costs to enhance our
operational capacity, expand our market presence, and drive innovation. This
also encompasses increased depreciation expenses from additional capital
investments and costs associated with scaling our organisation and
manufacturing footprint, such as recruiting additional sales and engineering
staff. These targeted expenditures are essential for scaling up our operations
and positioning us for long-term success.
We also continued to invest in expanding our research and development
activities, including the recruitment of additional specialists to advance our
product development programmes. We expect to continue to enhance our research
and development teams through FY2025, ensuring sustained innovation.
Creating value through acquisitions
The successful acquisition and integration of high-quality businesses remains
a pivotal part of our growth strategy. Our typical acquisition target is a
well-managed company in a sector where we have a deep understanding. We favour
businesses with blue-chip, long-term customers and good operational
capabilities. This approach enables us to maximise cross-selling opportunities
and synergies. Targets requiring significant integration or restructuring
effort are only contemplated when we can identify the right management
resources to lead this activity.
Our acquisition process is thorough; we explore both off-market deals and
formal sales processes, with each potential acquisition being rigorously
assessed by our investment committee before we advance 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 there is 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.
Since 2018, we have acquired 12 businesses, refining our expertise in
seamlessly integrating new operations. Our integration strategies are tailored
for each acquisition, concentrating on cost synergies and cross-selling
opportunities while ensuring the new business fits within our regional
structure.
Acquisitions remain a high priority and we will continue to actively pursue
opportunities, at different stages of qualification. We maintain a strong
balance sheet, good access to funding and significant undrawn facilities. The
completion of any acquisition is dependent on the business meeting our
stringent requirements following thorough due diligence and negotiations.
In FY2024, we successfully completed the acquisition of Murat Ticaret for
total consideration of up to $196m including potential earn-outs of up to $46
million over two years, subject to the business achieving certain performance
conditions. This acquisition was completed at an enterprise value to EBITDA
multiple of 5.3 times, assuming the earn-out payments are paid in full. This
demonstrates our continued ability to acquire quality businesses at attractive
valuations. Murat Ticaret contributed revenues of $132.4 million to the Group
in FY2024.
Headquartered in Türkiye, Murat Ticaret is a leading manufacturer of complex
wire harnesses for specialist applications, with a significant global
presence, including nine manufacturing sites across three continents. This
acquisition is our largest to date and instantly scales our capabilities in
the Off-Highway sector, marking it as our fifth end-market and further
diversifying our portfolio. Murat Ticaret also brings a diverse customer base
of blue-chip manufacturers, with products complementary to the rest of the
Volex Group. This provides the ability to market the full range of Volex
production capabilities to the acquired customer base. Additionally, there is
potential to leverage our existing footprint to expand operations in North
America's fragmented Off-Highway market. Integration efforts commenced
immediately post-acquisition and are progressing well, with promising customer
engagement and several exciting cross-selling opportunities, for which we are
developing targeted strategies.
Sustainability
We have continued to progress in enhancing the sustainability of our
operations, recognising its importance to our business, customers, employees,
the communities we operate in and our shareholders. During the year, we have
implemented new policies on environmental management and responsible water use
and have improved our ratings with both CDP and Ecovadis disclosure platforms.
Our commitment to sustainability is embedded in our operational practices
through a kaizen-based framework, which drives continuous improvement
activities across all our factories. This ensures that each facility
identifies and reports on key initiatives that contribute to both operational
excellence and sustainability.
With the integration of our Murat Ticaret acquisition progressing well, we are
enhancing performance across many aspects of sustainability. This progress
will allow us to review our net zero ambitions and solidify our action plans
aimed at progressively decarbonising our operations, thereby reinforcing our
commitment to long-term environmental stewardship.
Chief Financial Officer's Review
52 weeks to 31 March 2024 52 weeks to 2 April 2023
Revenue Profit/(loss) $'000 Revenue Profit/(loss) $'000
$'000
$'000
North America 372.3 32.8 339.8 30.9
Asia 185.1 13.9 171.4 12.5
Europe 355.4 52.9 211.6 31.5
Unallocated Central costs - (9.9) - (7.6)
Divisional results before share-based payments 912.8 89.7 722.8 67.3
and adjusting items
Adjusting operating items (19.5) (9.8)
Share-based payment charge (6.3) (3.7)
Operating profit 63.9 53.8
Share of net profit from associates 3.2 1.1
Finance income 1.3 0.4
Finance costs (16.8) (9.5)
Profit before taxation 51.6 45.8
Taxation (11.4) (8.4)
Profit after taxation 40.2 37.4
Basic Earnings per share:
Statutory 21.8 cents 23.2 cents
Underlying* 33.7 cents 30.2 cents
* Before adjusting items and share-based payments charge, net of tax.
Statutory results
Revenue of $912.8 million (FY2023: $722.8 million) represents year-on-year
growth of 26.3%. Statutory operating profit increased by $10.1 million to
$63.9 million (FY2023: $53.8 million) which is an increase of 18.8% compared
to the prior year. Net finance costs were $15.5 million (FY2023: $9.1
million), resulting in a profit before tax of $51.6 million (FY2023: $45.8
million) which is an increase of 12.7%. There was a tax charge for the year of
$11.4 million (FY2023: $8.4 million). Basic earnings per share were 21.8 cents
(FY2023: 23.2 cents), a decrease of 6.0%.
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'). Alternative performance measures are set out on note 15.
Underlying earnings measures exclude the impact of adjusting items and
share-based payments, with further detail regarding the adjustments shown in
note 3 in the notes to the financial statements. 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 26.3% to $912.8 million (FY2023: $722.8 million)
driven by strong organic growth from customer demand, project wins with both
new and existing customers, and the contribution from acquisitions. Sales in
currencies other than US dollars resulted in an adverse year-on-year foreign
exchange impact on revenue of $2.3 million. Group organic revenue growth was
6.9%.
Organic revenue from the Electric Vehicles sector decreased by 9.6% to $123.7
million (FY2023: $138.3 million), mainly due to customers reducing buffer
stock levels built up in FY2023 following supply chain stabilisation. Sales in
the Consumer Electricals sector fell to $235.3 million in FY2024 (FY2023
restated: $259.6 million), with an organic decline of 7.6%, primarily because
of consumer demand normalising and customers working through excess inventory
levels. Medical revenues increased by 15.3% on an organic basis to $177.5
million (FY2023: $145.0 million). Revenue from Complex Industrial Technology
rose to $213.4 million (FY2023 restated: $157.7 million), marking a 31.9%
increase on an organic basis. Excluding data centre customers, revenues were
broadly flat on an organic basis. Data Centre revenues reached $88.8 million
(FY2023: $37.7 million), reflecting a 135.5% growth driven by improved
availability of semiconductors and the transition to the latest architecture
supporting demand from artificial intelligence applications. In FY2024, with
the completion of the Murat Ticaret acquisition, we achieved immediate scale
in the Off-Highway sector and revenues previously reported in other sectors
were reallocated to Off-Highway. FY2024 Off-Highway revenues were $162.9
million (FY2023 restated: $22.2 million), a 39.9% increase on an organic
basis.
Gross margin
The Group's gross margin increased to 22.2% from 21.7% in FY2023. This
improvement was partly due to the continued deflation in the cost of key raw
materials, such as PVC and copper. Most of our contracts with power cord
customers allow us to pass on changes in raw material costs, affecting the
gross margin percentage. While most raw material purchases are denominated in
US dollars, other costs, such as labour, are paid in local currencies.
Variability in certain key currencies had a beneficial impact of approximately
0.1%.
Operating profit
Underlying operating profit increased 33.3% to $89.7 million (FY2023: $67.3
million). This was favourably impacted by foreign exchange benefit on
retranslation of operating expenses, the strong organic growth, cost
optimisation and contribution from Murat Ticaret, which was acquired in
mid-FY2024. The ratio of underlying operating expenses to revenue was
consistent with the previous year, at 12.4%, and there continues to be a
strong focus on cost control and continuous improvement activities. Statutory
operating profit increased by 18.8% to $63.9 million (FY2023: $53.8 million),
also reflecting the factors above.
The Group's underlying operating margin was maintained within the stated range
of 9% to 10% at 9.8%, which was 50bps better than the 9.3% achieved in FY2023.
Despite continuing headwinds from commodity and labour inflation, operating
margin benefitted from acquisitions blending up the margins, vertical
integration, efficiency improvement plans and cost control. 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 $3.8 million (FY2023: $1.3 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.
Acquisition costs were higher, reflecting the extensive due diligence and
other advisory fees in respect of the acquisition of Murat Ticaret.
Amortisation of acquired intangibles increased to $13.4 million (FY2023: $8.9
million) due to the additional intangible assets identified as part of the
Murat Ticaret acquisition.
The charge recognised through the income statement for share-based payment
awards comprises $5.5 million (FY2023: $4.6 million) in respect of senior
management, $nil (FY2023: $0.9 million credit where awards lapsed in the year)
in respect of acquisitions and $0.8 million (FY2023: $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 $15.5 million (FY2023: $9.1 million) mainly due
to the additional utilisation of the revolving credit facility following the
acquisition of Murat Ticaret at the end of August. The financing element for
leases for the year was $2.7 million (FY2023: $1.7 million). The Group
recognises interest income of $nil (FY2023: $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 $11.4m (FY2023: $8.4m),
representing an effective tax rate ('ETR') of 22.1% (FY2023: 18.3%). The tax
expense and ETR is higher than for the prior year due to the favourable impact
of the full recognition of deferred tax assets in FY2023 in a major
jurisdiction, as required by International Financial Reporting Standards. The
assets 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 impact of deferred tax asset recognition
on underlying profit after tax was $0.7 million (FY2023: $5.8 million). 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 underlying ETR (representing the income tax expense on profit before tax,
adjusting items and share-based payments) was 20.5% (FY2023: 18.0%). The
impact of tax incentives and favourable tax rate regimes contributed a 4.4%
(FY2023: 1.5%) benefit to underlying ETR. This is primarily due to higher
levels of R&D activity around the Group that qualify for R&D-related
incentives and the 5% (FY2023: 1%) corporate income tax rate reduction in
Türkiye for profits attributable to export activities combined with the
acquisition of Murat Ticaret. The net favourable impact on the underlying ETR
from judgements over deferred tax asset recognition across multiple
territories was lower at 0.5% for the year (FY2023: 7.1%) with the significant
reduction due to the full recognition of deferred tax assets in FY2023 in a
major jurisdiction.
FY2024 saw the introduction of inflation accounting for tax purposes in
Türkiye which helped to mitigate the volatility in the underlying ETR caused
by continuing high levels of inflation and currency devaluation, which across
all territories was a net favourable 0.1% impact (FY2023: 3.2% adverse).
Although the conditions of the relevant taxation law have been met, on 30
April 2024 the Turkish Ministry of Finance announced the postponement of the
inflation adjustment for the first fiscal quarter of 2024. It is understood
that this is to make things administratively easier for taxpayers, and
inflation adjustments will be made again from the second fiscal quarter 2024
onwards, but if inflation adjustments for calendar year 2024 were to be
cancelled permanently by a future law change it could have a significant
adverse impact on the Group's underlying ETR during FY2025.
Cash tax paid during the period was $14.9 million (FY2023: $7.9 million),
representing an underlying cash ETR of 19.3% (FY2023: 13.3%). The increase was
mainly caused by the acquisition of Murat Ticaret and the timing of tax
payments in Türkiye, as well as the exhaustion of tax losses in a major
overseas jurisdiction leading to cash tax becoming payable.
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 31 March 2024, the Group has net current tax liabilities of $16.5
million (FY2023: $13.7 million) which include $10.8 million (FY2023: $10.4
million) of provisions for tax uncertainties. There is a further $1.1 million
(FY2023: $nil) of accrued interest relating to these amounts recognised in
other payables.
Earnings per share
Underlying diluted earnings per share increased 14.6% to 33.0 cents (FY2023:
28.8 cents). Basic earnings per share decreased to 21.8 cents (FY2023: 23.2
cents).
The weighted average number of shares in the year was 179.9 million (FY2023:
158.7 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. In addition, foreign exchange losses from retranslation of balance
sheet items and the timing between recognition and settlement of certain
financial assets for the period were $2.3 million (FY2023: $0.6 million gain).
Cash flow
Operating cash flow before movements in working capital was $102.7 million
(FY2023: $78.4 million). While benefiting from the strong operating
performance, operating cash flow reflects the increased investment in the
business. In addition, there was a small favourable working capital movement
of $1.9 million, which compares to a $8.6 million adverse movement in FY2023.
The reasons for the working capital movement are set out below:
· An increase in inventory to support growth leading to a cash outflow
of $5.6 million (FY2023: $0.2 million cash outflow). Supply chain lead times
have stabilised and incidences of component shortages have decreased compared
to FY2023, resulting in a stabilised level of inventory. Inventories have
increased where required due to growth in our operations and new customer
projects;
· An increase in receivables leading to a cash outflow of $17.4 million
(FY2023: $15.4 million cash outflow) with the increase reflecting growth of
the business;
· An inflow related to payables of $24.9 million (FY2023: $7.0 million
cash inflow). This was due to the growth in the business and successfully
negotiated improved terms with a number of suppliers; and
· The acquisition Murat Ticaret, which is a more working
capital-intensive business, has reduced working capital inflows.
Total gross capital expenditure increased to $31.6 million from $27.0 million
in FY2023. In the prior year, 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 Suzhou, China; Bydgoszcz, Poland;
Tijuana, Mexico; 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 high-growth
sectors.
Free cash flow was $49.8 million (FY2023: $38.1 million). Free cash flow
represents net cash flows before financing activities excluding the net
outflow from the acquisition of subsidiaries.
Net financing inflows were $95.5 million (FY2023: outflows $31.4 million),
mainly from increased borrowings and issuing new shares to part-fund the
acquisition of Murat Ticaret. This also included dividend payments of $6.7
million (FY2023: $5.7 million).
Total cash expenditure on acquisitions (net of cash acquired) was $138.8
million (FY2023: $12.2 million), including $2.2 million (FY2023: $7.1 million)
in respect of contingent consideration and $2.3 million (FY2023: $nil) in
respect of purchase of shares of associates.
The Group is expecting to make payments of $21.6 million in FY2025 in relation
to contingent consideration for acquisitions made in FY2024 and previous
years.
The cash outflow associated with the settlement of awards under share-based
payment arrangements was $9.3 million (FY2023: $7.2 million). New shares were
issued in the year providing an inflow of $72.3 million (FY2023: $nil).
Net debt and gearing
At 31 March 2024, the Group's net debt (before operating lease liabilities)
was $121.1 million and $154.0 million including operating lease liabilities.
At 2 April 2023, net debt (before operating lease liabilities) was $76.4
million and $103.7 million including operating lease liabilities.
At 31 March 2024, the Group's covenant leverage was 1.0 times (2 April 2023:
1.0 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, capital expenditure 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 2.8 pence per share (FY2023: 2.6 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 $6.4 million, assuming no
take-up of the scrip dividend.
Together with an interim dividend of 1.4 pence per share paid in December
2023, this equates to a full year dividend of 4.2 pence per share (FY2023: 3.9
pence per share), an increase of 7.7%. If approved, the final dividend will be
paid on 25 August 2024 to all shareholders on the register at 21 July 2024.
The ex-dividend date will be 20 July 2024.
Banking facilities, covenants and going concern
As at the FY2024 year end, the Group banking facilities remained at $300
million, which are due to expire in February 2026. The facility comprises a
$165 million revolving credit facility, a $75 million term loan and an
additional $60 million uncommitted accordion. During FY2023, the first of two
options to extend for an additional year was taken.
As at 31 March 2024, drawings under the facility were $143.6 million (FY2023:
$91.5 million) with $nil drawn under the cash pool (FY2023: $nil).
At the year end, the covenant leverage was 1.0x and covenant interest cover
was 10.3 times, well within the covenant terms of less than 2.75x and greater
than 3.0 times respectively.
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 2025, which is based on the FY2025 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 of the Group. The Directors have considered the potential
impact of climate-related physical and transition risks as part of the going
concern assessment and do not believe there to be a significant impact in the
going concern period. The severe but plausible downside scenario models a 15%
reduction in year-on-year revenue, equivalent to the worst result in the last
20 years, and still provides significant covenant and liquidity headroom.
Subsequent to the year end, the Group has taken advantage of favourable
conditions to increase and extend its credit facilities, thereby further
enhancing covenant compliance and liquidity headroom.
Based on their assessment and these sensitivity scenarios, the Directors are
satisfied that there are no material uncertainties regarding the Group's going
concern status and that there is a reasonable expectation that the Group has
adequate resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements. The Directors
therefore consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements.
In June 2024, the Group completed a refinancing of its banking facilities,
with an eight-bank club. An enlarged $600 million facility replaced the
Group's existing $300 million multicurrency revolving credit facility. The new
facility has an initial four-year term, with an extension option for one
additional year. It comprises a $400 million revolving credit facility and an
additional $200 million uncommitted accordion. The new facility is unsecured,
with improved interest margins and an improved net debt to underlying EBITDA
covenant, providing additional headroom in comparison to the previous
facility, affording greater flexibility to undertake organic and inorganic
investment to support growth. The key terms of the facility are:
• Available until June 2028 with the option to
extend for one further year;
• No scheduled amortisation or security; and
• Interest cover and net debt to underlying EBITDA
leverage covenants.
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 a three-year period.
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 most 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 (which has been identified by the Group as a key risk).
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 31 March 2024, a financial asset of $nil (FY2023: $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 $0.1 million has been recognised in cost of sales for FY2023
(FY2023: $0.3 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 31 March 2024 was $7.1
million (FY2023: $2.6 million deficit). The increase in the pension deficit of
$4.5 million is mainly due to the acquisition of Murat Ticaret during the
year.
Consolidated Income Statement
For the 52 weeks ended 31 March 2024 (52 weeks ended 2 April 2023)
2024 2023
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 2 912.8 - 912.8 722.8 - 722.8
Cost of sales (710.0) - (710.0) (565.8) - (565.8)
Gross profit 202.8 - 202.8 157.0 - 157.0
Operating expenses (113.1) (25.8) (138.9) (89.7) (13.5) (103.2)
Operating profit 2 89.7 (25.8) 63.9 67.3 (13.5) 53.8
Share of net profit from associates 3.2 - 3.2 1.1 - 1.1
Finance income 1.3 - 1.3 0.4 - 0.4
Finance costs (16.8) - (16.8) (9.5) - (9.5)
Profit before taxation 77.4 (25.8) 51.6 59.3 (13.5) 45.8
Taxation 4 (15.9) 4.5 (11.4) (10.7) 2.3 (8.4)
Profit for the period 61.5 (21.3) 40.2 48.6 (11.2) 37.4
Profit is attributable to:
Owners of the parent 60.5 (21.2) 39.3 48.0 (11.2) 36.8
Non-controlling interests 1.0 (0.1) 0.9 0.6 - 0.6
61.5 (21.3) 40.2 48.6 (11.2) 37.4
Earnings per share (cents)
Basic 33.7 21.8 30.2 23.2
5
Diluted 5 33.0 21.4 28.8 22.1
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 31 March 2024 (52 weeks ended 2 April 2023)
2024 2023
$'m $'m
Profit for the period 40.2 37.4
Items that will not be reclassified subsequently to profit or loss
Actuarial loss on defined benefit pension schemes (0.2) (0.5)
Tax relating to items that will not be reclassified 0.1 0.1
(0.1) (0.4)
Items that may be reclassified subsequently to profit or loss
Gain arising on cash flow hedges during the period 0.1 1.4
Exchange gain/(loss) on translation of foreign operations 0.7 (7.0)
Tax (charge)/credit relating to items that may be reclassified (0.2) 0.2
0.6 (5.4)
Other comprehensive expense for the period 0.5 (5.8)
Total comprehensive income for the period attributable to:
Owners of the parent 39.9 31.6
Non-controlling interests 0.8 -
40.7 31.6
Consolidated Statement of Financial Position
As at 31 March 2024 (2 April 2023) Notes
2024 2023
$'m
$'m
Non-current assets
Goodwill 121.4 82.3
Other intangible assets 131.7 41.8
Property, plant and equipment 91.8 50.1
Right-of-use assets 38.4 34.5
Interests in associates 8.1 2.6
Other receivables 2.0 1.8
Derivative financial instruments 1.5 0.9
Retirement benefit asset 0.4 -
Deferred tax assets 25.9 24.6
421.2 238.6
Current assets
Inventories 174.3 120.5
Trade receivables 187.6 136.2
Other receivables 23.4 15.7
Current tax assets 1.8 0.8
Derivative financial instruments 1.0 0.9
Cash and bank balances 8 29.8 22.5
417.9 296.6
Total assets 839.1 535.2
Current liabilities
Borrowings 8 3.3 1.8
Lease liabilities 8 21.3 15.6
Trade payables 133.1 84.4
Other payables 101.4 65.2
Current tax liabilities 18.3 14.5
Retirement benefit obligations - 0.3
Provisions 9 2.9 0.9
Derivative financial instruments 0.4 -
280.7 182.7
Net current assets 137.2 113.9
Non-current liabilities
Borrowings 8 143.1 89.6
Lease liabilities 8 16.1 19.2
Other payables 26.9 1.4
Deferred tax liabilities 28.2 6.9
Retirement benefit obligations 7.5 2.3
Provisions 9 1.0 0.4
222.8 119.8
Total liabilities 503.5 302.5
Net assets 335.6 232.7
Equity
Share capital 11 69.6 62.7
Share premium account 11 62.0 60.7
Non-distributable reserve 12 2.5 2.5
Hedging and translation reserve (13.9) (14.6)
Own shares 12 (4.3) (1.0)
Retained earnings 211.3 115.0
Total attributable to owners of the parent 327.2 225.3
Non-controlling interests 8.4 7.4
Total equity 335.6 232.7
Consolidated Statement of Changes in Equity
For the 52 weeks ended 31 March 2024 (52 weeks ended 2 April 2023)
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 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
Profit for the period - - - - - 39.3 39.3 0.9 40.2
Other comprehensive income/(expense) for the period - - - 0.7 - (0.1) 0.6 (0.1) 0.5
Total comprehensive income for the period - - - 0.7 - 39.2 39.9 0.8 40.7
Equity raise 6.7 1.5 - - - 64.1 72.3 - 72.3
Business combination - - - - - - - 0.2 0.2
Own shares sold/(utilised) in the period - - - - 5.8 (5.8) - - -
Own shares purchased in the period - - - - (9.1) - (9.1) - (9.1)
Dividend paid - - - - - (9.3) (9.3) - (9.3)
Scrip dividend related share issue 0.2 (0.2) - - - 2.6 2.6 - 2.6
Credit to equity for equity-settled share-based payments - - - - - 4.7 4.7 - 4.7
Tax effect of share options - - - - - 0.8 0.8 - 0.8
Balance at 31 March 2024 69.6 62.0 2.5 (13.9) (4.3) 211.3 327.2 8.4 335.6
Consolidated Statement of Cash Flows
For the 52 weeks ended 31 March 2024 (52 weeks ended 2 April 2023)
Notes
2024
2023
$'m
$'m
Net cash generated from operating activities 7 78.3 55.7
Cash flow used in investing activities
Interest received 1.8 0.3
Acquisition of businesses, net of cash acquired 13 (134.3) (5.1)
Deferred and contingent consideration for businesses acquired 13 (2.2) (7.1)
Proceeds on disposal of intangible assets, property, plant and equipment 0.4 0.1
Purchases of property, plant and equipment (27.5) (14.4)
Purchases of intangible assets (4.1) (3.9)
Purchase of shares in associate (2.3) -
Proceeds from the repayment of preference shares 0.9 0.3
Net cash used in investing activities (167.3) (29.8)
Cash flows before financing activities (89.0) 25.9
Cash (used)/generated before adjusting items (82.0) 28.1
Cash used in respect of adjusting items (7.0) (2.2)
Cash flow generated from financing activities
Dividend paid (6.7) (5.7)
Net purchase of shares for share schemes (9.3) (7.2)
Refinancing costs paid 8 (0.3) (0.5)
Proceeds of shares issued 72.3 -
New bank loans raised 8 129.9 25.0
Repayment of borrowings 8 (79.0) (35.3)
Outflow from factoring 8 - (0.7)
Interest element of lease payments 8 (2.7) (1.7)
Receipt from lease debtor 0.2 0.5
Capital element of lease payments 8 (8.9) (5.8)
Net cash generated/(used in) from financing activities 95.5 (31.4)
Net increase/(decrease) in cash and cash equivalents 6.5 (5.5)
Cash and cash equivalents at beginning of period 20.7 25.9
Effect of foreign exchange rate changes 1.6 0.3
Cash and cash equivalents at end of period 8 28.8 20.7
1 Basis of preparation
The preliminary announcement for the 52 weeks ended 31 March 2024 has been
prepared in accordance with the accounting policies as disclosed in Volex
plc's Annual Report and Accounts 2023, as updated to take effect of any new
accounting standards applicable for the period as set out in Volex plc's
Interim Statement 2024.
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 31 March 2024, 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 2
April 2023 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 2025, which is based on the FY2025 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 set out on pages 49 to 55 of the Annual Report. The
Directors have considered the potential impact of climate related physical and
transition risks as part of the going concern assessment and do not believe
there to be a significant impact in the going concern period. The severe but
plausible downside scenario models a 15% reduction in year-on-year revenue,
equivalent to the worst result in the last 20 years, and still provides
significant covenant and liquidity headroom. Subsequent to the year end, the
Group has taken advantage of favourable conditions to increase and extend its
credit facilities, thereby further enhancing covenant compliance and liquidity
headroom. See note 14 for more details.
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 26
June 2024.
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 31 March 2024.
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 31 March 2024 52 weeks to 2 April 2023
Revenue Profit/(loss) Revenue Profit/(loss)
$'m $'m $'m $'m
North America 372.3 32.8 339.8 30.9
Asia 185.1 13.9 171.4 12.5
Europe 355.4 52.9 211.6 31.5
Unallocated Central costs - (9.9) - (7.6)
Divisional results before share-based payments 912.8 89.7 722.8 67.3
and adjusting items
Adjusting items (19.5) (9.8)
Share-based payment charge (6.3) (3.7)
Operating profit 63.9 53.8
Share of net profit from associates 3.2 1.1
Finance income 1.3 0.4
Finance costs (16.8) (9.5)
Profit before taxation 51.6 45.8
Taxation (11.4) (8.4)
Profit after taxation 40.2 37.4
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
2024 2023 2024
$'m $'m $'m 2023
$'m
North America 372.3 339.8 53.0 51.4
Asia 185.1 171.4 72.3 59.0
Europe 355.4 211.6 270.0 103.6
912.8 722.8 395.3 214.0
3 Adjusting items and share-based payments
2024 2023
$'m $'m
Acquisition-related costs 3.8 1.3
Acquisition-related remuneration (see note 13) 1.6 0.9
Adjustment to fair value of contingent consideration (1.3) (1.3)
Cyber incident costs 2.0 -
Amortisation of acquired intangibles 13.4 8.9
Total adjusting items 19.5 9.8
Share-based payments 6.3 3.7
Total adjusting items and share-based payments before tax 25.8 13.5
Tax effect of adjusting items and share-based payments (note 4) (4.5) (2.3)
Total adjusting items and share-based payments after tax 21.3 11.2
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 $3.8m (2022: $1.3m) 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 Murat Ticaret Kablo Sanayi A.Ş. ('Murat
Ticaret') ($3.7m). The remaining acquisition costs relate to other potential
acquisitions that have been or are being pursued.
During the prior year, the $1.3m of acquisition-related costs consisted of
legal and professional fees associated with the acquisitions of Review Display
Systems ('RDS') ($0.2m), Murat Ticaret ($0.6m) and inYantra Technologies Pvt
Ltd ('inYantra') ($0.1m), with the remainder relating to other potential
acquisitions that have been or are being pursued.
The adjustment to the fair value of contingent consideration relates to the
final 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 $13.4m (2023: $8.9m)
for the period. The increase from the prior year is primarily caused by the
amortisation of the intangibles recognised as a result of the Murat Ticaret
acquisition. This was partially offset by the completion of acquired customer
relationships and customer order backlogs being fully amortised during the
period.
In October 2023 the Group experienced a cyber incident. Costs associated with
the recovery and remediation of systems were $2.0m.
Acquisition-related remuneration consists of additional payments due in
relation to post-acquisition performance, to meet ongoing service conditions
associated with the acquisitions of RDS and Murat Ticaret. For both
acquisitions, the post-acquisition performance period is up to two years.
4 Taxation
2024 2023
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 (18.3) 1.3 (17.0) (14.7) 0.2 (14.5)
Current tax - adjustment in respect of previous periods (0.1) - (0.1) 0.1 - 0.1
Total current tax expense (18.4) 1.3 (17.1) (14.6) 0.2 (14.4)
Deferred tax - credit for the period 2.5 3.2 5.7 4.5 2.1 6.6
Deferred tax - adjustment in respect of previous periods - - - (0.6) - (0.6)
Total deferred tax credit 2.5 3.2 5.7 3.9 2.1 6.0
Income tax expense (15.9) 4.5 (11.4) (10.7) 2.3 (8.4)
UK corporation tax is calculated at the standard rate of 25% (2023: 19%) of
the estimated assessable profit for the period. Taxation for other
jurisdictions is calculated at the rates prevailing in the respective
jurisdictions.
The Group's effective tax rate for the period of 22.1% (2023: 18.3%) is lower
(2023: 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:
2024 2023
Before Adjusting Total Before Adjusting Total
adjusting items and $'m adjusting items and $'m
share-based
items
items share-based
payments
$'m
$'m $'m payments
$'m
Profit before tax 77.4 (25.8) 51.6 59.3 (13.5) 45.8
Tax at the UK corporation tax rate (19.4) 6.5 (12.9) (11.3) 2.6 (8.7)
Tax effect of:
Expenses that are not deductible and income that is not taxable in determining (1.7) (0.6) (2.3) (1.0) (0.8) (1.8)
taxable profit
Incentives and reduced rate regimes 3.4 - 3.4 0.9 - 0.9
Foreign exchange and inflation on entities with different tax and functional 0.1 - 0.1 (1.9) - (1.9)
currencies
Adjustment in respect of previous periods (0.1) - (0.1) (0.5) - (0.5)
Changes to tax rates (0.2) (1.2) (1.4) (0.4) 0.1 (0.3)
Overseas tax rate differences 1.6 (0.2) 1.4 (0.7) 0.2 (0.5)
Current year tax losses and other items not recognised (0.2) - (0.2) (1.5) - (1.5)
Recognition of previously unrecognised deferred tax assets 0.7 - 0.7 5.8 0.2 6.0
Derecognition of previously recognised deferred tax assets (0.1) - (0.1) (0.1) - (0.1)
Income tax expense (15.9) 4.5 (11.4) (10.7) 2.3 (8.4)
4 Taxation (continued)
Included in the non-deductible tax items is a net increase to the Group's
estimated exposure arising from uncertain tax positions of $0.7m (2023:
decrease of $0.6m).
The benefits from incentives and reduced rate regimes primarily arise from
R&D and investment incentives and corporate tax rate reductions in respect
of export activities.
A deferred tax credit of $0.7m (2023: $6.0m) 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 income tax credit reported directly in equity of $0.8m (2023: expense of
$0.4m) relates to share-based payments and consists of a current tax credit of
$0.7m (2023: $0.7m) and a deferred tax credit of $0.1m (2023: expense of
$1.1m).
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
implementing the OECD's Pillar Two model rules and introducing a global
minimum effective tax rate of 15% for large groups for financial years
beginning on or after 31 December 2023. Taxation balances are adjusted for a
change in tax law if the change has been substantively enacted by the balance
sheet date. However, the amendments to IAS 12 'Income Taxes' issued by the
IASB provide an exemption from the requirement to recognise and disclose
deferred taxes arising from enacted or substantively enacted tax law relating
to Pillar Two taxes.
Based on an initial analysis of the current year financial data, most
territories in which the Group operates are expected to qualify for one of
the safe harbour exemptions such that top-up taxes should not apply. In
territories where this is not the case there is the potential for Pillar Two
taxes to apply, but these are not expected to be material. The Group
continues to refine this assessment and analyse the future consequences of
these rules.
5 Earnings per ordinary share
The calculations of the basic and diluted earnings per share are based on the
following data:
Earnings 2024 2023
$'m $'m
Profit for the purpose of basic and diluted earnings per share being net 39.3 36.8
profit attributable to owners of the parent
Adjustments for:
Adjusting items 19.5 9.8
Share-based payments charge 6.3 3.7
Tax effect of adjusting items and share-based payments (4.5) (2.3)
Underlying earnings 60.6 48.0
No. shares No. shares
Weighted average number of ordinary shares for the purpose of basic earnings 179,909,482 158,681,078
per share
Effect of dilutive potential ordinary shares/share options 3,421,442 7,896,423
Weighted average number of ordinary shares for the purpose of diluted earnings 183,330,924 166,577,501
per share
2024 2023
Basic earnings per share Cents Cents
Basic earnings per share 21.8 23.2
Adjustments for:
Adjusting items 10.9 6.1
Share-based payments charge 3.5 2.3
Tax effect of adjusting items and share-based payments (2.5) (1.4)
Underlying basic earnings per share 33.7 30.2
5 Earnings per ordinary share (continued)
2024 2023
Diluted earnings per share Cents Cents
Diluted earnings per share 21.4 22.1
Adjustments for:
Adjusting items 10.6 5.9
Share-based payments charge 3.4 2.2
Tax effect of adjusting items and share-based payments (2.4) (1.4)
Underlying diluted earnings per share 33.0 28.8
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 $240m committed facility (the 'facility') together with an
additional $60m uncommitted accordion (the 'accordion'). This financing
arrangement is supported by a consortium that comprises HSBC UK Bank plc,
Citibank, N.A. London branch, Barclays Bank PLC, Fifth Third Bank, National
Association and UniCredit Bank AG, London branch. Within the framework of the
Group's banking structure, floating charges are placed on certain subsidiaries
and their assets. The accordion feature provides further capacity for
potential future acquisitions. This facility comprises a $165m revolving
credit facility and a $75m term loan. The borrowing is secured by fixed and
floating charges over the assets of certain Group companies. As at the year
end, these totalled $251.0m (2023: $226.5m).
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
2024 2023
$'m $'m
Profit for the period 40.2 37.4
Adjustments for:
Finance income (1.3) (0.4)
Finance costs 16.8 9.5
Income tax expense (note 4) 11.4 8.4
Share of net profit from associates (3.2) (1.1)
Depreciation of property, plant and equipment (note 10) 12.3 8.2
Depreciation of right-of-use assets (note 10) 7.4 4.8
Amortisation of intangible assets 15.6 10.2
Loss on disposal of property, plant and equipment - 0.1
Share-based payment charge 6.3 3.7
Contingent consideration adjustments (note 3) (1.3) (1.3)
Decrease in provisions (1.5) (1.1)
Operating cash flow before movement in working capital 102.7 78.4
Increase in inventories (5.6) (0.2)
Increase in receivables (17.4) (15.4)
Increase in payables 24.9 7.0
Movement in working capital 1.9 (8.6)
Cash generated from operations 104.6 69.8
Cash generated from operations before adjusting items 111.6 72.0
Cash used by adjusting operating items (7.0) (2.2)
Taxation paid (14.9) (7.9)
Interest paid (11.4) (6.2)
Net cash generated from operating activities 78.3 55.7
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 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)
Business combination 15.8 (4.1) - (6.6) - 5.1
Cash flow (9.3) (50.9) - 11.6 0.3 (48.3)
New leases entered into during the year - - - (5.1) - (5.1)
Lease interest - (0.2) - (2.7) - (2.9)
Exchange differences 1.6 (0.2) - 0.2 - 1.6
Amortisation of debt issue costs - - - - (0.7) (0.7)
At 31 March 2024 28.8 (146.9) - (37.4) 1.5 (154.0)
Debt issue costs relate to bank facility arrangement fees. In August 2023 the
Group extended the facility by $40m, thereby increasing the facility to $240m.
The $0.3m of costs associated with the extension request were capitalised.
During the prior year, $0.5m of costs associated with a one year extension
request were capitalised.
Analysis of cash and cash equivalents: 2024 2023
$'m $'m
Cash and bank balances 29.8 22.5
Bank overdrafts (1.0) (1.8)
28.8 20.7
9 Provisions
Property Restructuring Other Total
$'m $'m $'m $'m
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
Credit in the period 0.2 - - 0.2
Utilisation of provision - - - -
Amounts acquired on business combination 0.5 - 1.9 2.4
Exchange differences - - - -
At 31 March 2024 1.1 - 2.8 3.9
Current liabilities 0.1 - 2.8 2.9
Non-current liabilities 1.0 - - 1.0
Property
As part of the acquisition of Murat Ticaret, the Group recognised a
dilapidations provision of $0.6m associated with the acquired manufacturing
sites.
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 prior year and the provision was fully utilised.
Other
The Group has a provision of $1.0m (2023: $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. 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. As part of the acquisition of Murat
Ticaret, the Group recognised a $1.9m liability associated with employment and
other claims.
10 Reconciliation of operating profit to underlying EBITDA (earnings before interest, tax, depreciation, amortisation, adjusting items and share-based payments)
2024 2023
$'m $'m
Operating profit 63.9 53.8
Add back:
Adjusting operating items 19.5 9.8
Share-based payment charge 6.3 3.7
Underlying operating profit 89.7 67.3
Depreciation of property, plant and equipment 12.3 8.2
Depreciation of right-of-use assets 7.4 4.8
Amortisation of intangible assets not acquired in a business combination 2.2 1.3
Underlying EBITDA 111.6 81.6
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 3 April 2022 158,718,709 62.5 60.9 123.4
Issue of new shares - scrip dividend 388,376 0.2 (0.2) -
At 2 April 2023 159,107,085 62.7 60.7 123.4
Issue of new shares - scrip dividend 692,267 0.2 (0.2) -
Equity raise 21,818,181 6.7 1.5 8.2
At 31 March 2024 181,617,533 69.6 62.0 131.6
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 2.6p per ordinary share (in relation to year ended 2 April
2023) and the interim dividend of 1.4p (in relation to the current year) under
the terms of the Company's scrip dividend scheme. This resulted in the issue
of 478,491 and 213,776 new fully paid ordinary shares respectively (2023:
377,615 and 10,761 respectively).
On 22 June 2023, the Group completed an equity raise to raise finances for the
completion of the acquisition of Murat Ticaret. The Group issued 21,818,181
new ordinary shares of 25 pence each, comprising the 'Placing Shares' and the
'Retail Offer Shares' (together, the 'equity raise'). The shares were issued
at a price of 275 pence per share, representing a discount of 3.8% to the
closing share price of 286 pence per share on 21 June 2023. In aggregate, the
equity raise represented gross proceeds of £60.0m ($74.0m) and net proceeds
of £58.6m ($72.3m).
12 Own shares and non-distributable reserves
Own shares 2024 2023
$'m $'m
At the beginning of the period 1.0 0.2
Purchase of shares 9.1 5.0
Sale of shares (5.8) (4.2)
At end of the period 4.3 1.0
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 31 March 2024 was 1,047,529 (2023: 233,978). The market value of the
shares as at 31 March 2024 was $3.8m (2023: $0.6m).
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 1,524,813 (2023: 1,242,155) shares were utilised on the
exercise of share awards. During the year, the Company purchased 2,338,364
shares (2023: 1,422,928) at a cost of $9.1m (2023: $5.0m) and issued zero new
shares to the Trust (2023: zero).
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
Murat Ticaret Kablo A.Ş.
On 31 August 2023, the Group completed the acquisition of 100% of the share
capital of Murat Ticaret Kablo A.Ş. ('Murat Ticaret') a leading manufacturer
of complex wire harnesses, headquartered in Türkiye. Murat Ticaret has a
number of subsidiaries which have minority interests. The acquisition expands
the Group presence in the off-highway sector with operations on three
continents and nine manufacturing sites.
The purchase has been accounted for as a business combination. Details of the
purchase consideration, the net assets acquired and goodwill are as follows:
Provisional Fair value of consideration transferred $'m
Initial consideration 150.2
Deferred consideration 6.0
Contingent consideration 39.8
Total purchase consideration 196.0
13 Business combinations (continued)
Initial consideration includes initial cash of $150.1m and an estimated
working capital adjustment payable of $0.1m. Deferred consideration is the
fair value of a €7.5m payment due in 2029.
The contingent consideration is dependent upon certain EBITDA targets being
met post-acquisition over two one-year measurement periods. The fair value
above has been based on the probable outcome of each based upon the
information available at 31 March 2024. The maximum undiscounted contingent
consideration payment across the two periods is $43.1m (€40m).
In addition to these payments, a further $2.0m is payable upon certain service
conditions being met over a two year period. In accordance with IFRS 3, this
is accounted for as remuneration rather than deferred or contingent
considerations due to the ongoing service conditions. An expense of $0.7m has
been recorded in adjusting items related to this post-acquisition performance.
An exercise has been conducted to assess the provisional fair values of assets
acquired and liabilities assumed. This exercise identified customer
relationships and order backlog intangible assets. Property, plant and
equipment were uplifted following an external valuation. The provisional fair
value amounts recognised in respect of the identifiable assets acquired and
liabilities assumed are set out in the table below:
Provisional Fair Value
$'m
Identifiable intangible assets 101.9
Property, plant and equipment 26.3
Right-of-use asset 6.6
Inventories 47.4
Trade receivables 39.7
Cash 15.8
Other debtors and creditors (9.3)
Trade payables (27.5)
Provisions (2.4)
Retirement benefit obligations (4.8)
Loans (4.1)
Lease liabilities (6.6)
Deferred taxes (26.1)
Total identifiable assets 156.9
Less non-controlling interest (0.2)
Goodwill 39.3
Consideration 196.0
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 assets and goodwill and a possible adjustment to the amortisation
charge shown in the income statement. The non-controlling interest has been
initially measured at fair value.
13 Business combinations (continued)
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 FY2024, the Murat Ticaret businesses contributed $132.4m to Group revenue,
$20.6m to adjusted operating profit and $10.5m to operating profit. Associated
acquisition-related costs of $3.7m, acquisition-related remuneration of $0.7m
and intangible asset amortisation of $7.4m have all 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 $216.7m and operating profit of $24.6m to the
results of the Group.
Net cash outflow on acquisitions $'m
Cash consideration
- Murat Ticaret 150.1
Total cash consideration 150.1
Less: cash and cash equivalents acquired
- Murat Ticaret (15.8)
Net cash outflow for Murat Ticaret 134.3
Payment of deferred and contingent consideration
- DE-KA 2.2
Total cash outflow 136.5
Net cash outflows in respect of acquisitions comprises:
14 Events after balance sheet date
In June 2024 the Group completed a refinancing of its banking facilities, with
an eight-bank club. An enlarged $600 million facility replaced the Group's
existing $300 million multicurrency revolving credit facility. The new
facility has an initial four-year term, with an extension option for one
additional year. It comprises a $400 million revolving credit facility and an
additional $200 million uncommitted accordion. The new facility is unsecured,
with improved interest margins and an improved net debt to underlying EBITDA
covenant.
15 Alternative performance measures
The Group makes use of underlying and other alternative performance measures
in addition to the measures set out in International Financial Reporting
Standards.
Underlying operating profit and underlying EBITDA
Underlying operating profit is defined as operating profit excluding adjusting
items and share-based payments. Underlying EBITDA is defined as underlying
operating profit adjusted for depreciation and amortisation. The Group uses
underlying operating profit and underlying EBITDA to present meaningful
year-on-year comparisons. The reconciliation between operating profit and
underlying operating profit and underlying EBITDA is presented in note 10.
Underlying basic earnings per share and underlying diluted earnings per share
Underlying basic earnings per share is defined by the profit attributable to
the owners of the parent company, excluding adjusting items, divided by the
weighted average number of shares in issue during the year. Underlying diluted
earnings per share adjusts the basic earnings per share by the effect of
dilutive potential share options as at the period end date. Both metrics are
reconciled to statutory measures in note 5.
Organic growth
As the group has undertaken twelve acquisitions in the past six years,
management uses organic revenue growth so that meaningful year-on-year
comparisons can be made.
Organic revenue growth is calculated using constant exchange rates by taking
the total reported revenue (excluding the impact of acquisitions and
disposals) divided by the preceding financial year's revenue at the current
year's exchange rates.
Electric Vehicles Consumer Electricals Medical Complex Industrial Technology Off-Highway Total
$'m $'m $'m $'m $'m $'m
Revenue
2023 revenue reported 138.3 261.8 145.0 177.7 - 722.8
Restatement * - (2.2) - (20.0) 22.2 -
2023 revenue restated 138.3 259.6 145.0 157.7 22.2 722.8
FX impact (1.4) (5.0) 3.7 0.8 (0.4) (2.3)
2023 revenue at 2024 FX rates 136.9 254.6 148.7 158.5 21.8 720.5
Organic growth (13.2) (19.3) 22.7 50.5 8.7 49.4
Organic growth % (9.6%) (7.6%) 15.3% 31.9% 39.9% 6.9%
Acquisitions - - 6.1 4.4 132.4 142.9
2024 revenue 123.7 235.3 177.5 213.4 162.9 912.8
* Upon acquisition of Murat Ticaret we gained scale in the Off-Highway market,
allowing us to launch a new fifth market sector. Previously we reported sales
to Off-Highway customers from our sites in North America and Asia within
Consumer Electricals and Complex Industrial Technology. This has been restated
to ensure comparability going forwards.
15 Alternative performance measures (continued)
Leverage and interest cover covenants
At the year end, the Group had a $240m committed facility together with an
additional $60m uncommitted accordion, which has since been refinanced to an
increased $400m committed facility, with an additional $200m uncommitted
accordion.
The terms of the RCF require the Group to perform quarterly financial covenant
calculations with respect to leverage (net debt (before operating leases) to
covenant EBITDA) and interest cover (covenant EBITDA to covenant interest).
Breach of these covenants could result in cancellation of the facility. Net
debt (before operating leases) in the financial statements is defined as net
debt excluding lease liabilities but including pre-IFRS 16 finance leases.
Covenant EBITDA is defined as underlying EBITDA adjusted for depreciation of
right-of-use assets.
Note 2024 2023
$'m $'m
Net debt 8 (154.0) (103.7)
Lease liabilities 8 37.4 34.8
Finance leases (4.5) (7.5)
Net debt (before operating lease liabilities) (121.1) (76.4)
Underlying EBITDA 111.6 81.6
Depreciation of right-of-use assets (7.4) (4.8)
Prorated acquired EBITDA 15.5 -
Covenant EBITDA 119.7 76.8
Interest on bank overdrafts and loans 11.2 6.4
Interest on finance leases 0.4 0.4
Covenant interest 11.6 6.8
Covenant leverage 1.0x 1.0x
Covenant interest cover 10.3 11.0
Free cash flow and underlying free cash flow
Free cash flow and underlying free cash flow are used where they allow for
year-on-year comparisons to be made by excluding cost of acquisitions and
adjusting items which vary year-to-year.
Free cash flow is defined as the net cash flow before financing activities
excluding the net outflow from the acquisition of subsidiaries.
15 Alternative performance measures (continued)
Underlying free cash flow is the net cash before financing activities and
excluding costs of acquisition, adjusting items and share-based payments.
Note 2024 2023
$'m $'m
Cash flow before financing activities (89.0) 25.9
Less: Acquisition of businesses, net of cash acquired 13 134.3 5.1
Less: Contingent consideration for businesses acquired 13 2.2 7.1
Less: Purchase of shares in associate 2.3 -
Free cash flow 49.8 38.1
Less: Cash utilised in respect of adjusting items 7.0 2.2
Underlying free cash flow 56.8 40.3
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