REG - Volex PLC - Preliminary results for year ended 30 March 2014 <Origin Href="QuoteRef">VLX.L</Origin> - Part 2
06/09/2014 02:15
- Part 2: For the preceding part double click ID:nRSL4482Ja
(2,278) (2,567)
Sale / purchase of own shares (net of funds received on option exercise) 6,281 359
Net cash generated / (used in) investing activities (4,010) (26,664)
Cash flows before financing activities (15,077) (20,299)
Cash generated / (used) before non-recurring items (7,623) (13,405)
Cash utilised in respect of non-recurring items (7,454) (6,894)
Cash flow generated from / (used in) financing activities
Dividends paid (732) (2,813)
Proceeds on issue of shares 4,804 -
Repayment of borrowings 9 (7,000) -
New bank loans raised 9 8,082 6,000
Repayments of obligations under finance leases 9 - (117)
Net cash generated from / (used) in financing activities 5,154 3,070
Net increase / (decrease) in cash and cash equivalents (9,923) (17,229)
Cash and cash equivalents at beginning of period 9 23,789 41,180
Effect of foreign exchange rate changes 9 (191) (162)
Cash and cash equivalents at end of period 9 13,675 23,789
Consolidated Statement of Changes in Equity
For the 52 weeks ended 30 March 2014 (52 weeks ended 31 March 2013)
Share capital Share premium account Non-distributable reserves Hedging and translation reserve Own shares Retained earnings / (losses) Total equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 April 2012 28,180 2,586 - (4,252) (5,271) 30,069 51,312
Profit / (loss) for the period attributable to the owners of the parent - - - - - (887) (887)
Other comprehensive income / (loss) for the period - - - (2,301) - (755) (3,056)
Total comprehensive income / (loss) for the period - - - (2,301) - (1,642) (3,943)
Dividends - - - - - (2,813) (2,813)
Own shares utilised in the period - - - - 326 33 359
Reserve entry for share option charge / credit - - - - - 731 731
Balance at 31 March 2013 28,180 2,586 - (6,553) (4,945) 26,378 45,646
Profit / (loss) for the period attributable to the owners of the parent - - - - - (14,175) (14,175)
Other comprehensive income / (loss) for the period - - - (3,177) - 268 (2,909)
Total comprehensive income / (loss) for the period - - - (3,177) - (13,907) (17,084)
Issue of share capital 1,090 3,714 - - - - 4,804
Dividends 228 822 - - - (1,723) (673)
Own shares sold or utilised in the period - - 2,455 - 3,842 (17) 6,280
Exercise of Non-Executive Long Term Incentive Scheme 164 (258) (94)
Reserve entry for share option charge / credit - - - - (2,154) (2,154)
Balance at 30 March 2014 29,662 7,122 2,455 (9,730) (1,103) 8,319 36,725
1. Basis of preparation
The preliminary announcement for the 52 weeks ended 30 March 2014 has been
prepared in accordance with the accounting policies as disclosed in Volex
plc's Annual Report and Accounts 2013, as updated to take effect of any new
accounting standards applicable for the period as set out in Volex plc's
Interim Statement 2013.
The annual financial information presented in this preliminary announcement
for the 52 weeks ended 30 March 2014 is based on, and is consistent with, that
in the Group's audited financial statements for the 52 weeks ended 30 March
2014, 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 31
March 2013 have been delivered to the Registrar of Companies. The independent
auditor's report on those financial statements was unqualified and did not
contain a statement under section 498 (2) or 498 (3) of the Companies Act
2006.
Going concern
The key terms of the Group's revolving credit facility, through which it will
meet its day to day working capital requirements, are shown in Note 7. This
facility is available until June 2015 and requires quarterly covenant tests to
be performed in relation to leverage and interest cover.
Due to the relatively short period after the year end until expiry of the
facility and the combination of a high level of non-recurring items and a
lower level of profitability than initially anticipated, it became necessary
during the year and subsequent to year end for the Group to hold extensive
discussions with its bankers. The result of these discussions was that the
financial covenants referred to above were initially adjusted to allow for the
poor trading that the Group was experiencing at that time. The costs of
agreeing these adjustments are reflected as non-recurring items in Note 3.
Subsequent to year end, renewed facilities sized at $45.0 million have been
agreed conditional only upon the raising of $25.0 million (net of issue costs)
from the sale of shares as detailed below. This $45.0 million facility
extends through to 15 June 2017. The financial covenants that are associated
with these facilities are based upon the same criteria as the previous
agreement but also reflect the latest financial forecasts for Group with a
suitable degree of headroom incorporated.
In addition to the extended banking facilities the Group, as announced today
and detailed in Note 12, will issue 24,067,171 new shares for a gross
consideration of $30.3 million. 75% of the shares will be underwritten with
the remaining 25% being committed shares taken up by the Group's largest
shareholder and certain Directors. The issuance of these shares will be
subject only to approval by a simple majority of those voting at a general
meeting on 1 July 2014. The Company has irrevocable commitments to vote in
favour of the resolution to issue the shares at that meeting from shareholders
holding 26% of the Group's share capital.
Given the above, the Group's forecast and projections, taking reasonable
account of possible changes in trading performance, show that the Group should
operate within the level of the proposed facility for the foreseeable future
and should comply with covenants over this period. The Group also has access
to and uses additional uncommitted facilities. Further the Group has a number
of mitigating actions available to it should actual performance fall below the
current financial forecasts. The Directors have the financial controls and
monitoring available to them to put in place those mitigating actions in a
timely fashion if they see the need to do so. The Directors therefore believe
that the Group is well placed to manage its business within its covenants.
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for at least 12 months from the date of
these accounts. Accordingly, they continue to adopt the going concern basis
in preparing the Annual Report and financial statements.
This preliminary announcement was approved by the Board of Directors on 12
June 2014.
2. Business and geographical segments
Operating segments
Subsequent to the change in the Executive Management of the Group and a
restructuring of the operations, the operating results presented to the Board
have been revised. Replacing the four sectors of Consumer, Telecoms/Datacoms,
Healthcare and Industrial are the two divisions of Power and Data. These
divisions are based upon the nature of products that they supply. In
addition, a Central division has been established to capture all of the
corporate costs incurred in supporting the operations.
Power The sale and manufacture of electrical power products to manufacturers of electrical / electronic devices and appliances. These include laptop / desktop computers, printers, televisions, power tools and floor cleaning equipment.
Data The sale and manufacture of cables permitting the transfer of electronic and radio-frequency data. These cables can range from simple USB cables to complex high speed cable assemblies. Data cables are used in numerous devices including medical equipment, computer data centres, telecoms networks and the automotive industry.
Central Corporate costs that are not directly attributable to the manufacture and sale of the Group's products but which support the Group in its operations. Included within this division are the costs incurred by the Executive Management Team and the Corporate Head Office.
The Board believes that the segmentation of the Group based upon product
characteristics allows it to better understand the Group's performance and
profitability.
52 weeks to 30 March 2014 52 weeks to 31 March 2013 (restated)
Revenue Profit / (loss) Revenue Profit / (loss)
$'000 $'000 $'000 $'000
Power 265,384 7,258 323,056 18,827
Data 134,793 12,650 150,098 12,760
Unallocated central costs (excluding share-based payments) - (15,376) - (19,245)
Divisional results before share-based payments and non-recurring items 400,177 4,532 473,154 12,342
Non-recurring operating items (11,642) (7,966)
Share-based payment credit / (expense) 2,288 (181)
Operating profit / (loss) (4,822) 4,195
Finance income 100 141
Finance costs (2,840) (2,410)
Profit / (loss) before tax (7,562) 1,926
Taxation (6,613) (2,813)
Profit / (loss) after tax (14,175) (887)
Credits / charges for share-based payments and non-recurring items have not
been allocated to divisions as management report and analyse division
profitability at the level shown above.
Geographical segments
The Group's revenue from external customers and information about its
non-current assets (excluding deferred tax assets) by geographical location
are provided below:
Revenue Non-Current Assets
2014$'000 2013$'000 2014$'000 2013$'000
Asia (excluding India) 240,168 295,781 35,391 37,278
North America 82,762 83,163 2,257 1,329
Europe (excluding UK) 60,553 73,454 518 492
India 4,863 6,869 611 681
South America 11,831 13,887 798 611
UK - - 8,607 6,984
400,177 473,154 48,182 47,375
3. Non-recurring items
2014$'000 2013$'000
Restructuring costs 8,643 7,243
Financing 1,569 -
Provision for historic sales tax claims 835 -
Movement in onerous lease provisions 595 (435)
New product start-up costs - 1,158
Non-recurring operating costs 11,642 7,966
Non-recurring finance costs (552) -
Total non-recurring items 11,090 7,966
In the current period, a Group-wide restructuring programme which commenced in
FY2013, continued across all functions and all regions to align the Group's
manufacturing and support facilities with the expected future performance of
the business. The $8,643,000 (FY2013: $7,243,000) cost of this programme can
be split into:
· an executive and senior management change element. This includes the
change of Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer, Company Secretary, certain non-executive directors, the HR director
and the recruitment of the new divisional heads. In total, this has generated
a non-recurring charge of $4,913,000 (FY2013: $1,200,000) which includes
joining bonuses of $330,000; and
· an operational element. This includes the closure of our North America
administrative centre, further reductions in our direct and indirect
manufacturing headcount, the removal of certain middle management roles
throughout the organisation and costs associated with down-sizing certain
operations. In total, this has generated a non-recurring charge of $3,730,000
(FY2013: $6,043,000) which also includes a retention bonus to key
non-executive staff of $1,012,000 which would ordinarily not be paid given the
performance of the business.
During FY2014 the Group has explored a number of alternate financing
opportunities to ensure that sufficient funds are available for it to complete
its transformation plan and return the Group to growth. This has cost the
Group $1,569,000 (FY2013: $nil) which includes $300,000 paid to the banking
syndicate on renegotiation of the covenants. Included within the $1,569,000
is $152,000 of bonuses due to key finance personnel involved in the financing
review.
The Group has in addition taken a $835,000 (FY2013: $nil) charge in FY2014 in
relation to penalty claims made against the Group relating to sales tax claims
made between July 2008 and August 2011. In India, the local tax authorities
have lodged penalty and interest claims totalling $817,000 for alleged errors
in the reporting of our sales tax position in periods to August 2011. Volex
disputes these claims and will appeal against them, however, experience
indicates the difficulty in reclaiming prepaid penalty sums.
The Group has increased its onerous lease provision held against two
properties resulting in an exceptional charge of $595,000 (FY2013: credit of
$435,000). Assumptions made in the calculation of these two provisions have
been refreshed resulting in the charge. In the prior year, Volex exited a
lease on Dornoch House in return for making a one-off payment. This payment
was less than the onerous lease provision held in the accounts and as a
result, $435,000 of the provision was released.
In the prior year, operational inefficiencies of $1,158,000 were incurred in
relation to new products introduced in FY2012; specifically the migration from
PVC to halogen-free power cords. These new products necessitated wide ranging
improvements to our manufacturing processes and investments in higher grade
tooling and precision moulding technologies. The exceptional costs include the
materials scrap costs and labour inefficiencies associated with the new
product lines.
During the current year, the Group received a refund for overpayment of
interest in earlier periods totalling $552,000 (FY2013: $nil).
4. Taxation
2014 2013
$'000 $'000
Current tax - charge for the period 2,384 2,782
Current tax - adjustment in respect of previous periods (265) 452
Total current tax 2,119 3,234
Deferred tax 4,494 (421)
Income tax expense 6,613 2,813
5. Earnings / (loss) per ordinary share
The calculations of the earnings / (loss) per share are based on the following
data:
Earnings / (loss) 2014 2013
$'000 $'000
Profit / (loss) for the purpose of basic and diluted earnings / (loss) per share being net profit attributable to equity holders of the parent (14,175) (887)
Adjustments for:
Non-recurring items 11,090 7,966
Share-based payments (credit) / charge (2,288) 181
Tax effect of above adjustments - (792)
Underlying earnings / (loss) (5,373) 6,468
No. shares No. shares
Weighted average number of ordinary shares for the purpose of basic earnings per share 59,766,443 56,913,780
Effect of dilutive potential ordinary shares / share options - 771,673
Weighted average number of ordinary shares for the purpose of diluted earnings per share 59,766,443 57,685,453
2014 2013
Basic earnings / (loss) per share Cents Cents
Basic earnings / (loss) per share (23.7) (1.6)
Adjustments for:
Non-recurring items 18.5 14.0
Share-based payments (credit) / charge (3.8) 0.3
Tax effect of above adjustments - (1.3)
Underlying basic earnings / (loss) per share (9.0) 11.4
Diluted earnings per share
Diluted earnings / (loss) per share (23.7) (1.6)
Adjustments for:
Non-recurring items 18.5 13.8
Share-based payments (credit) / charge (3.8) 0.3
Tax effect of above adjustments - (1.3)
Underlying diluted earnings / (loss) per share (9.0) 11.2
The underlying earnings / (loss) per share has been calculated on the basis of
profit / (loss) before non-recurring items and share-based payments, net of
tax. The Directors consider that this earnings / (loss) per share calculation
gives a better understanding of the Group's earnings / (loss) per share in the
current and prior period.
6. Dividends
2014 2013
$'000 $'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the 52 weeks ended 31 March 2013 of 3.0 cents per share (2013: 3.0 pence per share) 1,723 1,690
Interim dividend for the 52 weeks ended 30 March 2014 of 0.0 cents per share (2013: 2.0 cents per share) - 1,123
1,723 2,813
Proposed final dividend for the 52 weeks ended 30 March 2014 of 0.0 cents per share (2013: 3.0 cents per share) - 1,723
At the Volex plc Annual General Meeting held on 22 July 2013, the shareholders
approved the proposed final dividend for FY2013 of 3.0 cents per share. At
the same meeting a Scrip Dividend Scheme, which gave shareholders the right to
elect to receive new ordinary shares in the Company (credited as fully paid)
instead of a cash dividend, was also approved.
Payment of the final dividend in respect of the year ended 31 March 2013 was
made on 17 October 2013. Of the shareholder base eligible for dividends,
59.1% elected for the Scrip Dividend Scheme resulting in a cash payment of
$732,000 and 566,467 new shares being issued.
7. Bank facilities
On 31 May 2011 the Group entered into a $75 million multi-currency combined
revolving, overdraft and guarantee facility with a syndicate of three banks
(Lloyds Banking Group plc, HSBC Bank plc and Clydesdale Bank plc - together
'the Syndicate'). The facility is available until June 2015. The principal
terms of the facility are as follows:
· no scheduled facility amortization;
· pricing (margin over LIBOR) payable linked to a net debt:EBITDA
leverage ratio. Average margin of 3.7% during FY2013 (2012: 2.5%);
· interest cover and net debt:EBITDA leverage covenants; and
· the facility is secured by fixed and floating charges over the assets
of certain Group companies.
At 30 March 2014, the Group had available $28,194,000 (FY2013: $26,541,000) of
undrawn committed borrowing facilities.
Due to the relatively short period after the year end until expiry of the
facility and also due to the high level of non-recurring items incurred during
the year when combined with the lower level of profitability than initially
anticipated, it became necessary during the year and subsequent to year end
for the Group to hold extensive discussions with its bankers.
The result of these discussions was that the financial covenants referred to
above were initially adjusted to allow for the poor trading that the Group was
experiencing at that time. The cost of agreeing these adjustments with the
Syndicate was $300,000. This cost along with associated professional fees is
reflected as a non-recurring item in the accounts (see Note 3).
Subsequent to year end, renewed facilities sized at $45.0 million have been
agreed conditional only upon the raising of $25.0 million (net of issue costs)
from the sale of shares (see Note 12). This $45.0 million facility extends
through to 15 June 2017. The financial covenants that are associated with
these facilities are based upon the same criteria as the previous agreement
but also reflect the latest financial forecasts for Group with a suitable
degree of headroom incorporated.
8. Notes to cash flow statement
2014 $'000 2013 $'000
Profit / (loss) for the period (14,175) (887)
Adjustments for:
Finance income (100) (141)
Finance costs 2,840 2,410
Income tax expense 6,613 2,813
Depreciation on property, plant and equipment 6,632 4,812
Amortisation of intangible assets 1,340 1,131
(Gain) / Loss on disposal of property, plant and equipment 22 (28)
Share option payment (credit) / charge (2,288) 181
Effects of foreign exchange rate changes (893) -
Decrease / (increase) in provisions 494 (1,444)
Operating cash flow before movement in working capital 485 8,847
Decrease / (increase) in inventories 2,897 6,374
Decrease / (increase) in receivables 5,713 19,504
(Decrease) / increase in payables (17,270) (22,712)
Movement in working capital (8,660) 3,166
Cash generated from / (used in) operations (8,175) 12,013
Cash generated from / (used in) operations before non-recurring items (721) 18,907
Cash utilised by operating non-recurring items (7,454) (6,894)
Taxation paid (1,215) (3,868)
Interest paid (1,677) (1,780)
Net cash generated from / (used in) operating activities (11,067) 6,365
9. Analysis of net debt
Cash and cash equivalents $'000 Bank loans Finance leases Debt issue costs$'000 Total
$'000 $'000 $'000
At 1 April 2012 41,180 (38,663) (117) 1,243 3,643
Cash flow (17,229) (6,000) 117 - (23,112)
Exchange differences (162) 566 - (45) 359
Other non-cash changes - - - (390) (390)
At 31 March 2013 23,789 (44,097) - 808 (19,500)
Cash flow (9,923) (1,082) - - (11,005)
Exchange differences (191) (1,193) - 58 (1,326)
Other non-cash changes - - - (389) (389)
At 30 March 2014 13,675 (46,372) - 477 (32,220)
Debt issue costs relate to bank facility arrangement fees. Amortisation of
debt issue costs in the period amounted to $389,000 (FY2013: $390,000).
9. Analysis of net debt (continued)
Analysis of cash and cash equivalents: 2014$'000 2013$'000
Cash and bank balances 13,675 25,044
Bank overdrafts - (1,255)
Cash and cash equivalents 13,675 23,789
10. Provisions
Property$'000 Corporate restructuring$'000 Other$'000 Total$'000
At 1 April 2012 5,371 151 146 5,668
Charge / (credit) in the period (452) 299 572 419
Utilisation of provision (917) (41) (282) (1,240)
Unwinding of discount 287 - - 287
Exchange differences (234) (12) (17) (263)
At 31 March 2013 4,055 397 419 4,871
Charge / (credit) in the period 574 3,743 160 4,477
Utilisation of provision (1,266) (1,639) (361) (3,266)
Unwinding of discount 106 - - 106
Exchange differences 380 107 10 497
At 30 March 2014 3,849 2,608 228 6,685
Less: included in current liabilities (1,130) (2,608) (228) (3,966)
Non-current liabilities 2,719 - - 2,719
Property provisions
Property provisions represent the anticipated net costs of onerous leases and
associated dilapidations. The provisions have been recorded taking into
account management's best estimate, following appropriate advice, of the
anticipated net cost of the lease over the remaining lease term and the level
of sublease rental income, if any, that can be obtained from sub-tenants. This
provision will be utilised as the rental payments, net of any sublease income,
fall due through to 2020.
During the 52 weeks ended 30 March 2014, the Group revised its assumptions on
two onerous properties following the receipt of external advice as to likely
future cash outflows. During the 52 weeks ended 31 March 2013, the Group
entered into negotiations with the landlord of one of the onerous properties
with a view to exiting the lease. As a consequence of this, $435,000 of the
property provision was released. This property was exited in July 2013.
Corporate Restructuring
The corporate restructuring provision includes a joining bonus of $330,000 to
certain senior management, $152,000 of bonuses due to finance personnel
following the financing review and a retention bonus of $1,012,000 (FY2013:
$nil) payable to senior employees throughout the organisation to reflect their
commitment to Volex during the restructuring period. This bonus is to be paid
despite the poor trading performance and is not dependent upon any future
actions. Also included within the provision is $605,000 (FY2013: $397,000)
for severance payments due to staff that have either left the Group through
the restructuring programme or who are due to leave shortly and have been
notified. $423,000 (FY2013: $nil) has been provided for ongoing relocation
support to newly hired executive management and tax thereon. This support is
due to cease in May 2014. A final amount relates to professional fees
associated with the liquidation of dormant overseas entities.
Other
Other provisions include the Directors' best estimate, based upon past
experience, of the Group's liability under specific product warranties and
legal claims. The timing of the cash outflow with respect to these claims is
uncertain.
11. Reconciliation of operating profit to underlying EBITDA (earnings
before interest, tax, depreciation, amortisation, non-recurring items and
share-based payment charge):
2014 2013
$'000 $'000
Operating profit (4,822) 4,195
Add back:
Non-recurring items 11,642 7,966
Share-based payment (credit) / charge (2,288) 181
Underlying operating profit 4,532 12,342
Depreciation of property, plant and equipment 6,632 4,812
Amortisation of acquired intangible assets 1,340 1,131
Underlying EBITDA 12,504 18,285
12. Post balance sheet events
The Group intends to issue 24,067,171 new shares for a gross consideration of
$30.3 million post year end. 75% of these shares will be underwritten with
the remaining 25% being committed shares taken up by the Group's largest
shareholder and certain Directors. The issuance of these shares will be
subject only to approval by a simple majority of those voting at a general
meeting on 1 July 2014.
The Group has irrevocable commitments to vote in favour of the resolution to
issue the shares at that meeting from shareholders holding 26% of the Group's
share capital.
This information is provided by RNS
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