REG - Volex PLC - Volex plc - Half-year Announcement <Origin Href="QuoteRef">VLX.L</Origin> - Part 2
10/11/2017 07:06
- Part 2: For the preceding part double click ID:nRSJ1111Wa
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.
The following is an analysis of the Group's revenues and results by reportable
segment.
26 weeks to 1 October 2017 26 weeks to 2 October 2016
Revenue$'000 Profit/(loss)$'000 Revenue$'000 Profit/(loss)$'000
Power Cords 90,528 2,703 100,403 1,469
Cable Assemblies 70,921 5,245 65,694 4,812
Unallocated central costs (excluding share-based payments) (2,484) (1,973)
Divisional results before share-based payments and non-recurring items 161,449 5,464 166,097 4,308
Non-recurring items - (8,741)
Share-based payments (388) (170)
Operating profit/(loss) 5,076 (4,603)
Share of net profit/(loss) from associates (52) -
Finance income 8 11
Finance costs (873) (1,014)
Profit/(loss) before tax 4,159 (5,606)
Tax (674) (1,072)
Profit/(loss) after tax 3,485 (6,678)
2. Business and geographical segments (continued)
(Audited)52 weeks to 2 April 2017
Revenue$'000 Profit/(loss)$'000
Power Cords 188,256 3,228
Cable Assemblies 131,328 10,528
Unallocated central costs (excluding share-based payments) - (4,677)
Divisional results before share-based payments and non-recurring items 319,584 9,079
Non-recurring items (15,232)
Share-based payments (468)
Operating profit/(loss) (6,621)
Finance income 19
Finance costs (1,898)
Profit/(loss) before tax (8,500)
Tax 1,452
Profit/(loss) after tax (7,048)
The accounting policies of the reportable segments are in accordance with the
Group's accounting policies.
The non-recurring items charge within operating profit for the period was $nil
(H1 FY2017: $8,741,000, FY2017: $15,232,000) was split $nil (H1 FY2017:
$6,485,000, FY2017: $12,740,000) to Power Cords, $nil (H1 FY2017: $1,616,000,
FY2017: $1,754,000) to Cable Assemblies and $nil (H1 FY2017: $640,000, FY2017:
$738,000) to Central.
Other segmental information
External revenue Non-current assets (excluding deferred tax assets)
26 weeks to 1 October 2017$'000 26 weeks to 2 October 2016$'000 (Audited)52 weeks to 2 April 2017 $'000 26 weeks to 1 October 2017$'000 26 weeks to 2 October 2016$'000 (Audited)52 weeks to 2 April 2017 $'000
Geographical segments
Asia (excluding India) 88,758 96,773 182,079 16,562 23,764 16,914
North America 45,040 39,503 78,084 1,048 1,202 1,090
Europe 25,512 25,878 52,752 3,440 3,136 3,179
India 2,139 2,360 4,929 794 857 774
South America - 1,583 1,740 - 15 -
161,449 166,097 319,584 21,844 28,974 21,957
3. Non-recurring items and share-based payments
26 weeks to 1 October 2017$'000 26 weeks to 2 October 2016$'000 (Audited)52 weeks to 2 April 2017 $'000
Impairment - 6,166 12,491
Restructuring costs - 1,636 1,656
Manufacturing optimisation consultancy - 621 815
Movement in onerous lease provision - 318 270
Total non-recurring items - 8,741 15,232
Share-based payments (credit) / charge 388 170 468
Non-recurring items and share-based payments 388 8,911 15,700
Costs that are one-off in nature and significant, such as restructuring costs
or impairment charges, are deemed to be non-recurring by virtue of their
nature and size. They 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 financial performance of the
Group.
During H1 FY2018, the Group has not recorded any non-recurring charges.
In the prior year, following a downturn in Power revenue (particularly with
the Group's largest customer), a full review of the Group's cost base was
performed. As a result of this, the largest Power factory was downsized with
one of the three available buildings returned to the landlord. This resulted
in impairment of the associated fit-out costs. Further the number of
production lines running in the remaining two buildings was reduced resulting
in the impairment of the redundant plant, machinery and tooling. Finally,
given the reduced sales from the largest customer and the already thin
margins, the forecast profitability from the continuing lines was assessed and
deemed insufficient to support the associated fixed asset cost base. As a
consequence, an impairment charge of $11,987,000 (H1 FY2017: $6,166,000) was
recorded in the Power Cords division. In addition during FY2017 the Cable
Assemblies division recorded a $491,000 impairment charge following the
closure of Volex Do Brasil Ltda.
During the prior year, the Group also incurred $1,656,000 (H1 FY2017:
$1,636,000) of restructuring spend in response to the reduced revenues. The
non-recurring cost included the departure of the Head of Engineering and an
operational element relating to the reduction of direct and indirect
manufacturing headcount in a number of factories, the removal of certain
middle-management roles and redundancies associated with the closure of our
Brazil, Ireland, Austin and Jakarta operations.
Following his appointment in November 2016, the Executive Chairman sought to
address the production issues facing our factories across the globe in order
to make them more cost competitive. To support the management function, an
external manufacturing consultancy was employed on a fixed term contract of 9
months, to advise on manufacturing best practice and implementation. This
contract expired in December 2016 at a cost of $815,000 (H1 FY2017:
$621,000).
During FY2017 the Group incurred an onerous lease charge of $270,000 primarily
in relation to the sub-let of a property in North America. The sub-lease was
for the full head lease term and mirrored the head lease clauses with the
exception of an initial quarter rent free period.
The Group has a share based payment charge of $388,000 in H1 FY2018 (H1
FY2017: charge of $170,000, FY2017: charge of $468,000). The increase reflects
the cost of employee share options granted during FY2017.
4. Tax charge
The Group tax charge for the period is based on the forecast tax charge for
the year as a whole and has been influenced by the differing tax rates in the
UK and the various overseas countries in which the Group operates.
5. Earnings per ordinary share
The calculations of the earnings per share are based on the following data:
Earnings/(loss) 26 weeks to 1 October 2017$'000 26 weeks to 2 October 2016$'000 52 weeks to 2 April2017$'000
Earnings/(loss) for the purpose of basic earnings per share 3,485 (6,678) (7,048)
Adjustments for:
Non-recurring items - 8,741 15,232
Share based payments charge/(credit) 388 170 468
Tax effect of above adjustments - - (214)
Underlying earnings 3,873 2,333 8,438
Weighted average number of ordinary shares No. shares No. shares No. shares
Weighted average number of ordinary shares for the purpose of basic earnings per share 88,956,532 88,956,532 88,956,532
Effect of dilutive potential ordinary shares - share options 1,874,381 38,862 281,330
Weighted average number of ordinary shares for the purpose of diluted earnings per share 90,830,913 88,995,394 89,237,862
Basic earnings/(loss) per share Cents Cents Cents
Basic earnings/(loss) per share from continuing operations 3.9 (7.5) (7.9)
Adjustments for:
Non-recurring items - 9.8 17.1
Share based payments charge/(credit) 0.5 0.2 0.5
Tax effect of above adjustments - - (0.2)
Underlying basic earnings per share 4.4 2.5 9.5
Diluted earnings/(loss) per share
Diluted earnings/(loss) per share 3.8 (7.5) (7.9)
Adjustments for:
Non-recurring items - 9.8 17.1
Share based payments charge/(credit) 0.5 0.2 0.5
Tax effect of above adjustments - - (0.2)
Underlying diluted earnings per share 4.3 2.5 9.5
The underlying earnings per share has been calculated on the basis of
continuing activities before non-recurring items and the share-based payments
charge, net of tax. The Directors consider that this earnings per share
calculation gives a better understanding of the Group's earnings per share in
the current and prior period.
6. Own shares
26 weeks to 1 October 2017$'000 26 weeks to 2 October 2016$'000 (Audited)52 weeks to 2 April2017 $'000
At the start and end of the period 867 867 867
The own shares reserve represents the cost of shares in the Company held by
the Volex Group plc Employee Share Trust to satisfy future share option
exercises under the Group's share option schemes.
The number of ordinary shares held by the Volex Group plc Employee Share Trust
at 1 October 2017 was 1,295,361 (H1 FY2017: 1,295,361, FY2017: 1,295,361).
7. Investments in associates
On the 12 April 2017 the Group acquired 26.09% of the voting shares in Kepler
SignalTel Limited (a company incorporated in Hong Kong) for consideration of
$300,000. The company manufacturers medical, high frequency data transmission
and specialist industrial cable assemblies from a facility in China. As part
of the shareholder agreement Volex is entitled to appoint one of the three
Directors to the company.
Summarised financial information in respect of the company is set out below.
The summarised information below represents amounts before intragroup
eliminations.
As at1 October 2017$'000
Current assets 788
Non-current assets 199
Current liabilities (38)
Non-current liabilities -
Net assets 949
26 weeks to 1 October 2017$'000
Revenue -
Profit/(loss) for the period (201)
Other comprehensive income for the period -
Total comprehensive income for the period (201)
A reconciliation of the above summarised financial information to the carrying amount of the interests in the consolidated financial statements is set out below:
As at 1 October 2017$'000
Net assets of the associate 949
Proportion of the Group 26.09%
Carrying amount of the Group's interest in Kepler SignalTel Limited 248
8. Analysis of net debt
2 April 2017 $'000 Cash flow $'000 Exchange movement $'000 Other non-cash changes $'000 1 October 2017$'000
Cash and cash equivalents 29,565 (6,942) (162) - 22,461
Bank loans (18,720) 3,000 (1,636) - (17,356)
Debt issue costs 490 494 44 (339) 689
Net debt 11,335 (3,448) (1,754) (339) 5,794
1 October 2017$'000 2 October 2016$'000 (Audited)2 April 2017 $'000
Cash and bank balances 23,464 33,432 29,565
Overdrafts (included in short term borrowings) (1,003) - -
Cash and cash equivalents 22,461 33,432 29,565
9. Related parties
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
In April 2018 the company made a $300,000 investment in Kepler Signaltek
Limited in return for 26.09% of the voting shares. The venture is equity
accounted for as an associate. Other than the initial investment, there have
been no further transactions with the associate during the period.
10. Contingent Liabilities
As a global Group, subsidiary companies, in the normal course of business,
engage in significant levels of cross-border trading. The customs, duties and
sales tax regulations associated with these transactions are complex and often
subject to interpretation. While the Group places considerable emphasis on
compliance with such regulations, including appropriate use of external legal
advisors, full compliance with all customs, duty and sales tax regulations
cannot be guaranteed.
Through the normal course of business, the Group provides manufacturing
warranties to its customers and assurances that its products meet the required
safety and testing standards. When the Group is notified that there is a
fault with one of its products, the Group will provide a rigorous review of
the defective product and its associated manufacturing process and if found at
fault and contractually liable will provide for costs associated with recall
and repair as well as rectify the manufacturing process or seek recompense
from its supplier. The Group does not provide for such costs where fault has
not yet been determined and investigations are ongoing.
This information is provided by RNS
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