REG - Volex PLC - Preliminary results for year ended 5 April 2015 <Origin Href="QuoteRef">VLX.L</Origin> - Part 2
16/07/2015 10:28
- Part 2: For the preceding part double click ID:nRSK8402Pa
62,241 57,220
Other payables 26,185 22,184
Current tax liabilities 6,713 5,793
Retirement benefit obligation 709 659
Provisions 10 3,206 3,966
Derivative financial instruments 1,262 1,020
107,849 90,842
Net current assets / (liabilities) 44,540 41,482
Non-current liabilities
Borrowings 9 24,323 45,895
Other payables 536 243
Deferred tax liabilities 2,185 1,995
Retirement benefit obligation 2,909 2,575
Provisions 10 1,463 2,719
31,416 53,427
Total liabilities 139,265 144,269
Net assets 54,508 36,725
Equity attributable to owners of the parent
Share capital 12 39,755 29,662
Share premium account 7,122 7,122
Non-distributable reserves 2,455 2,455
Hedging and translation reserve (8,566) (9,730)
Own shares (867) (1,103)
Retained earnings / (losses) 14,609 8,319
Total equity 54,508 36,725
Consolidated Statement of Changes in Equity
For the 53 weeks ended 5 April 2015 (52 weeks ended 30 March 2014)
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 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
Profit / (loss) for the period attributable to the owners of the parent - - - - - (10,708) (10,708)
Other comprehensive income / (loss) for the period - - - 1,164 - (1,293) (129)
Total comprehensive income / (loss) for the period - - - 1,164 - (12,001) (10,837)
Issue of share capital 10,093 - - - - 17,813 27,906
Own shares sold or utilised in the period - - - - 218 (350) (132)
Exercise of Non-Executive Long Term Incentive Scheme - - - - 18 (69) (51)
Reserve entry for share option charge / (credit) - - - - - 897 897
Balance at 5 April 2015 39,755 7,122 2,455 (8,566) (867) 14,609 54,508
Consolidated Statement of Cash Flows
For the 53 weeks ended 5 April 2015 (52 weeks ended 30 March 2014)
Notes 2015 $'000 2014 $'000
Net cash generated from / (used in) operating activities 8 7,797 (11,067)
Cash flow generated from / (used in) investing activities
Interest received 40 100
Proceeds on disposal of intangible assets, property, plant & equipment 61 44
Purchases of property, plant & equipment (3,936) (8,156)
Purchases of intangible assets (1,266) (2,278)
Sale / purchase of own shares (net of funds received on option exercise) 490 6,280
Net cash generated / (used in) investing activities (4,611) (4,010)
Cash flows before financing activities 3,186 (15,077)
Cash generated / (used) before non-recurring items 8,601 (7,623)
Cash utilised in respect of non-recurring items (5,415) (7,454)
Cash flow generated from / (used in) financing activities
Dividends paid - (732)
Proceeds on issue of shares 27,906 4,804
Refinancing costs paid (875) -
Repayment of borrowings 9 (25,139) (7,000)
New bank loans raised 9 8,000 8,082
Net cash generated from / (used) in financing activities 9,892 5,154
Net increase / (decrease) in cash and cash equivalents 13,078 (9,923)
Cash and cash equivalents at beginning of period 9 13,675 23,789
Effect of foreign exchange rate changes 9 (550) (191)
Cash and cash equivalents at end of period 9 26,203 13,675
1. Basis of preparation
The preliminary announcement for the 53 weeks ended 5 April 2015 has been
prepared in accordance with the accounting policies as disclosed in Volex
plc's Annual Report and Accounts 2014, as updated to take effect of any new
accounting standards applicable for the period as set out in Volex plc's
Interim Statement 2014.
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 53 weeks ended 5 April 2015, 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 30
March 2014 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 2017 and requires quarterly covenant tests to
be performed in relation to leverage and interest cover.
The Group's forecast and projections, taking reasonable account of possible
changes in trading performance, show that the Group should operate within the
level of the proposed facility for 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 11
June 2015.
2. Business and geographical segments
Operating segments
The internal reporting provided to the Group's Board for the purpose of
resource allocation and assessment of Group performance is based upon the
nature of the products supplied. In addition to the operating divisions, a
Central division exists to capture all of the corporate costs incurred in
supporting the operations.
Power 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, radio-frequency and optical data. These cables can range from simple USB cables to complex high speed cable assemblies. Data cables are used in numerous devices including medical equipment, data centres, telecoms networks and the automotive industry.
Central Corporate costs that are not directly attributable to the manufacture and sale of the Group's products but which support the Group in its operations. Included within this division are the costs incurred by the executive management team and the corporate head office.
The Board believes that the segmentation of the Group based upon product
characteristics allows it to best understand the Group's performance and
profitability.
53 weeks to 5 April 2015 52 weeks to 30 March 2014 (restated)
Revenue Profit / (loss) Revenue Profit / (loss)
$'000 $'000 $'000 $'000
Power 273,655 5,390 252,208 1,077
Data 149,754 11,197 147,969 9,868
Unallocated central costs - (7,755) - (6,413)
Divisional results before share-based payments and non-recurring items 423,409 8,832 400,177 4,532
Non-recurring operating items (12,528) (11,642)
Share-based payment credit / (expense) (857) 2,288
Operating profit / (loss) (4,553) (4,822)
Finance income 40 100
Finance costs (2,666) (2,840)
Profit / (loss) before tax (7,179) (7,562)
Taxation (3,529) (6,613)
Profit / (loss) after tax (10,708) (14,175)
The prior year segmental reporting has been restated following the transfer of
the internal cable assembly business from the Power division to the Data
division in the current period plus an increased allocation of overhead and
support costs into the operating divisions from the Central division. This
restatement ensures that the prior period is presented on a consistent basis
with the current period.
Credits / charges for share-based payments and non-recurring items have not
been allocated to divisions as management report and analyse division
profitability at the level shown above.
Geographical segments
The Group's revenue from external customers and information about its
non-current assets (excluding deferred tax assets) by geographical location
are provided below:
Revenue Non-Current Assets
2015$'000 2014$'000 2015$'000 2014$'000
Asia (excluding India) 259,940 240,168 33,709 35,391
North America 86,676 82,762 1,390 2,257
Europe 59,690 60,553 4,229 9,125
India 8,370 4,863 584 611
South America 8,733 11,831 624 798
423,409 400,177 40,536 48,182
3. Non-recurring items
2015$'000 2014$'000
Product portfolio realignment 5,825 -
Restructuring costs 5,223 8,643
Movement in onerous lease provisions 1,110 595
Provision for historic sales tax claims 102 835
Financing 72 1,569
Other 196 -
Non-recurring operating costs 12,528 11,642
Non-recurring finance costs - (552)
Total non-recurring items 12,528 11,090
During the current period, the Group reviewed its product portfolio including
ongoing product development projects. The Board, along with the new
Divisional Management teams, concluded that the resources required to complete
the Active Optical Cables ('AOC') development project were better allocated
elsewhere. Under the requirements of IAS 36 'Impairment of Assets' the
recoverable amount of the AOC development asset was assessed and it was
determined to be lower than the carrying value. As a result an impairment
charge of $4,308,000 was booked. Similarly all software and tangible fixed
assets which were deemed specific to the AOC project were reviewed for
impairment and a further charge of $789,000 was processed. Future contracted
costs associated with AOC (including purchase commitments and an onerous lease
on the AOC development facility) were also provided for totalling $707,000 and
severance payments to AOC development engineers of $21,000 were paid.
During FY2015, the Volex Transformation Plan ('VTP'), a Group-wide
restructuring programme initiated in FY2014, concluded. This restructuring
impacted all functions and all regions and sought to align the Group's
manufacturing and support facilities with the expected future performance of
the business. The $5,223,000 (2014: $8,643,000) cost of this programme can be
split into:
· An executive and senior management change element of $711,000 (2014:
$4,913,000). The current period charge relates to the departure of the Group
Chief Financial Officer and the build-up of the Data division's senior
management team. In the prior period, the charge related to the change in
Chief Executive Officer, Chief Financial Officer, Chief Operating Officer,
Company Secretary, certain Non-Executive Directors, the Chief HR Officer and
the recruitment of the new divisional heads.
· An operational element of $3,556,000 (2014: $3,730,000). This includes
significant investment in the sales function with sales offices established in
three new territories, the up-skilling of certain factory managers, the
removal of certain middle management roles throughout the organisation and
costs associated with down-sizing certain operations The prior period charge
included a retention bonus to key non-executive staff of $1,012,000 which
would ordinarily not have been paid given the performance of the business.
· A business process review element of $956,000 (2014: $nil). A
Group-wide project was initiated in the current period to document the Group's
operating cycles and their reliance on the current IT systems. Based upon
this review, improvements to the operations and the underlying ERP system have
been proposed and are currently being acted upon. The cost of external
consultants and internal staff hired directly to work on this project have
been expensed as non-recurring. Further, a small potential acquisition was
investigated in the current period but was not pursued following due
diligence. Directly attributable travel expenditure and external consultancy
costs were treated as non-recurring.
The Group has incurred a non-recurring charge in the period of $1,110,000
(2014: $595,000) in relation to onerous leases. This charge is split between
an increase on a pre-existing provision following a change in the underlying
assumptions of the provision calculation and the recognition of a new onerous
lease following the departure of sub-tenants. The prior year charge arose
from a change in the assumptions used in two onerous lease calculations.
The Group has incurred a $102,000 non-recurring charge in relation to historic
sales tax claims in the Philippines covering the period January 2011 to March
2014. In the prior year, an $835,000 charge was incurred in relation to
penalty claims made relating to sales tax claims arising between July 2008 and
August 2011. In India, the local tax authorities 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 has filed
objections.
In the prior year, the Group explored a number of alternate financing
opportunities to ensure that sufficient funds were available for it to
complete its transformation plan and return the Group to growth. This cost the
Group $1,569,000 which included $300,000 paid to the banking syndicate on
renegotiation of the covenants and $152,000 of bonuses due to key finance
personnel involved in the financing review. In the current year, a further
$72,000 has been expensed following the late receipt of invoices that exceeded
the provision made at the time.
The other charge of $196,000 (2014: $nil) relates primarily to a licencing
dispute with a supplier.
In the prior year, the Group received a refund for overpayment of interest in
earlier periods totalling $552,000.
4. Taxation
2015 2014
$'000 $'000
Current tax - charge for the period 3,062 2,384
Current tax - adjustment in respect of previous periods 605 (265)
Total current tax 3,667 2,119
Deferred tax (138) 4,494
Income tax expense 3,529 6,613
5. Earnings / (loss) per ordinary share
The calculations of the earnings / (loss) per share are based on the following
data:
Earnings / (loss) 2015 2014
$'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 (10,708) (14,175)
Adjustments for:
Non-recurring items 12,528 11,090
Share-based payments (credit) / charge 857 (2,288)
Tax effect of above adjustments (308) -
Underlying earnings / (loss) 2,369 (5,373)
No. shares No. shares(restated)
Weighted average number of ordinary shares for the purpose of basic earnings per share 83,585,697 62,828,916
Effect of dilutive potential ordinary shares / share options 184,697 -
Weighted average number of ordinary shares for the purpose of diluted earnings per share 83,770,394 62,828,916
The number of shares in both the current period and the prior period has been
adjusted for the placing and open offer that completed in July 2014.
2015 2014
Basic earnings / (loss) per share Cents Cents(restated)
Basic earnings / (loss) per share (12.8) (22.6)
Adjustments for:
Non-recurring items 15.0 17.6
Share-based payments (credit) / charge 1.0 (3.6)
Tax effect of above adjustments (0.4) -
Underlying basic earnings / (loss) per share 2.8 (8.6)
5. Earnings / (loss) per ordinary share (continued)
Diluted earnings per share
Diluted earnings / (loss) per share (12.8) (22.6)
Adjustments for:
Non-recurring items 15.0 17.6
Share-based payments (credit) / charge 1.0 (3.6)
Tax effect of above adjustments (0.4) -
Underlying diluted earnings / (loss) per share 2.8 (8.6)
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
2015 2014
$'000 $'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the 52 weeks ended 30 March 2014 of 0.0 cents per share (2013: 3.0 cents) - 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.
No dividend is proposed for the current period.
7. Bank facilities
On 11 June 2014 the Group entered into an amended $45 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 15 June 2017.
Prior to the amendment, the facility totalled $75 million.
The amount available under the facility at 5 April 2015 was $45 million (2014:
$75 million). The facility was secured by fixed and floating charges over the
assets of certain Group companies.
The terms of the facility require the Group to perform quarterly financial
covenant calculations with respect to leverage (adjusted net debt to adjusted
rolling 12-month EBITDA) and interest cover (adjusted rolling 12-month EBITDA
to adjusted rolling 12-month interest). Breach of these covenants could result
in cancellation of the facility. The amendment to the facility in the year
adjusted these covenants to be aligned with the forecast future trading of the
Group.
Professional fees of $875,000 were incurred during the period in relation to
the facility amendment. Of this $300,000 was paid to the Syndicate to agree
to the amendment. The $875,000 has been capitalised and is charged to the
income statement on a straight line basis over the remaining period to
facility expiry.
In the prior year, a further $300,000 was paid to the Syndicate to ease the
covenants in light of the poor trading. Since this change did not lead to any
alteration of the underlying terms of the agreement (e.g. facility amount,
expiry period), this cost along with associated professional fees was
reflected as a non-recurring item in the accounts (see note 3).
8. Notes to cash flow statement
2015 $'000 2014 $'000
Profit / (loss) for the period (10,708) (14,175)
Adjustments for:
Finance income (40) (100)
Finance costs 2,666 2,840
Income tax expense 3,529 6,613
Depreciation on property, plant and equipment 6,413 6,632
Amortisation of intangible assets 799 1,340
Impairment loss 5,098 -
(Gain) / Loss on disposal of property, plant and equipment 14 22
Share option payment (credit) / charge 857 (2,288)
Effects of foreign exchange rate changes 333 (893)
Decrease / (increase) in provisions (1,078) 494
Operating cash flow before movement in working capital 7,883 485
Decrease / (increase) in inventories (4,881) 2,897
Decrease / (increase) in receivables 171 5,713
(Decrease) / increase in payables 9,587 (17,270)
Movement in working capital 4,877 (8,660)
Cash generated from / (used in) operations 12,760 (8,175)
Cash generated from / (used in) operations before non-recurring items 18,175 (721)
Cash utilised by operating non-recurring items (5,415) (7,454)
Taxation paid (2,596) (1,215)
Interest paid (2,367) (1,677)
Net cash generated from / (used in) operating activities 7,797 (11,067)
9. Analysis of net debt
Cash and cash equivalents $'000 Bank loans Debt issue costs$'000 Total
$'000 $'000
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)
Cash flow 13,078 17,139 875 31,092
Exchange differences (550) 4,074 (114) 3,410
Other non-cash changes - - (402) (402)
At 5 April 2015 26,203 (25,159) 836 1,880
9. Analysis of net debt (continued)
Debt issue costs relate to bank facility arrangement fees. Amortisation of
debt issue costs in the period amounted to $402,000 (FY2014: $389,000).
Analysis of cash and cash equivalents: 2015$'000 2014$'000
Cash and bank balances 33,736 13,675
Bank overdrafts (7,533) -
Cash and cash equivalents 26,203 13,675
10. Provisions
Property$'000 Corporate restructuring$'000 Other$'000 Total$'000
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
Charge / (credit) in the period 1,381 85 2,324 3,790
Utilisation of provision (1,185) (2,354) (1,887) (5,426)
Unwinding of discount 112 - - 112
Exchange differences (331) (80) (81) (492)
At 5 April 2015 3,826 259 584 4,669
Less: included in current liabilities 2,363 259 584 3,206
Non-current liabilities 1,463 - - 1,463
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 53 weeks ended 5 April 2015, the Group revised its assumptions on
one onerous property following the receipt of external advice as to likely
future cash outflows. In addition, two further properties became onerous, one
following the decision to suspend the AOC development project and one
following the exit of sub-tenants. Of the $1,381,000 charged to the income
statement, $1,110,000 is shown in non-recurring items as movement in onerous
lease provision and $271,000 is included within the product portfolio
realignment charge as associated with the AOC suspension.
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.
10. Provisions (continued)
Corporate Restructuring
The corporate restructuring provision includes $87,000 (2014: $605,000) for
severance payments due to staff that are set to leave the Group through the
restructuring programme but who have been notified prior to period end. A
further $99,000 (2014: $423,000) is provided for recruitment fees and
associated joining costs due on employees appointed before period end. A
final amount relates to professional fees associated with the liquidation of
dormant overseas entities.
At prior year end, the corporate restructuring provision included 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 payable to senior employees throughout the organisation. This was
paid in the current period resulting in the release of a small surplus
provision.
Other
Other provisions include the Directors' best estimate, based upon past
experience, of the Group's liability under specific product warranties,
purchase commitments and legal claims. The timing of the cash outflow with
respect to these claims is uncertain.
During the year $1,918,000 was provided for professional fees in relation to
the equity raise and the debt refinancing. Of this $173,000 remained
outstanding at period end.
11. Reconciliation of operating profit to underlying EBITDA (earnings
before interest, tax, depreciation, amortisation, non-recurring items and
share-based payment charge):
2015 2014
$'000 $'000
Operating profit (4,553) (4,822)
Add back:
Non-recurring items 12,528 11,642
Share-based payment (credit) / charge 857 (2,288)
Underlying operating profit 8,832 4,532
Depreciation of property, plant and equipment 6,413 6,632
Amortisation of acquired intangible assets 799 1,340
Underlying EBITDA 16,044 12,504
12. Share issue
2015 2014
$'000 $'000
Issued and fully paid:
90,251,892 (2014: 66,184,721) Ordinary shares of 25p each 39,755 29,662
In July 2014, the Company issued 24,067,171 ordinary shares in the Company at
a price of 75 pence per share as part of a Placing and Open Offer. Net of
issue costs this generated $27,906,000.
The issue was effected by way of a cashbox placing. The Company allotted and
issued the shares on a non-pre-emptive basis to the placees in consideration
for Investec Bank plc transferring its holdings of ordinary shares and
redeemable preference shares in Rendezvous 1 Capital (Jersey) Limited to the
Company.
Accordingly, instead of receiving cash as consideration for the issue of new
shares, at the conclusion of the Placing and Open Offer, the Company owned the
entire issued share capital of Rendezvous 1 Capital (Jersey) Limited whose
only asset was its cash reserves, which represented an amount approximately
equal to the net proceeds of the placing.
This information is provided by RNS
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