Volex plc · LSE:VLX
Volex — FY2010 Earnings Presentation
24 slides from Volex's earnings presentation, April 2010
Slide 1: Preliminary Results for the financial year ending 4 April 2010
Preliminary Results for the financial year ending 4 April 2010
Slide 2: Operational highlights and strategic direction
Operational highlights and strategic direction 1. Upskilling talent > Executive team fully refreshed and next level strengthened > H.O. relocated from Warrington to London 2. Driving revenues via global, sector-based sales and account management, and focus on Asia, India & Brazil > market sector and
Slide 3: Moving up the value chain
Moving up the value chain New Volex Old Volex - contract manufacturer Margins Old Volex > supplying mature and declining products ~ 30% > 15 – 20% margins > 2 – 3 years of remaining revenues > 10 – 30% allocation as a 2nd or 3rd source Margin Uplift Sales Margins Product life 4 – 5 years Revenue Imp
Slide 4: Financial highlights
Financial highlights > Revenues of £229m, down 14% year-on-year (in line with wider industry) but up quarter-over-quarter throughout the year > Gross margin % up from 15.9% to 20.2% > Operating profit1 of £13.4m, up 19% yoy and up qoq throughout year > Profit before tax1 of £10.0m, up 22% on last ye
Slide 5: Returning to growth
Returning to growth Quarterly revenue from ongoing operations by Sector, £m 80 73.1 66.9 64.3 60.8 57.9 60.9 60 54.1 56.1 40 20 0 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Consumer Telecoms Telecom s / Datacom s / Datacoms Healthcare Healthcare IndustrialIndustrial Total £m FY2
Slide 6: Consistent delivery of profits
Consistent delivery of profits Adjusted 1 reported total group operating profit, £m Steady quarter over quarter growth in operating profits Adjusted 2 quarterly gross margin from ongoing operations Driven by consistent improvement in gross margins 1 Adjusted for non-recurring items and share based p
Slide 7: Paying down debt
Paying down debt Reported Volex Group Net Debt, £m > Cash generated by operations before non-recurring items of £18.6m (2009: £21.8m) > £6.2m of non-recurring cash outflows > Net debt halved during the year from £14.8m to £7.6m 6 Volex Group plc April 2010
Slide 8: Consumer sector surging
Consumer sector surging Ongoing Consumer revenues, £m 50 44.9 36.6 38.6 35.7 38.5 40 32.5 34.5 30.7 30 20 10 0 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Americas Europe India Total Asia Americas Europe India > Annual revenues down 9% from £153m to £139m > First Sector to return
Slide 9: Consumer sector case study
Consumer sector case study > Leading the industry with environmentally-friendly halogen-free products replacing traditional PVC and BFR1 materials, which emit toxic gases when disposed of at end of life, and phthalate-free products, which contain carcinogens > Working with our global customers, incl
Slide 10: Telecoms / Datacoms recovering
Telecoms / Datacoms recovering Ongoing Telecoms / Datacoms revenue, £m 30 23.9 20.0 19.7 20 17.9 16.5 15.1 14.8 13.0 10 0 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Asia Americas Europe India Asia Americas Europe India > Annual revenues down 27% from £81m to £59m > Impacted by d
Slide 11: Telecoms / Datacoms sector case study
Telecoms / Datacoms sector case study > Track record of servicing the world’s top telecoms and datacoms equipment- manufacturers in Europe and North America > Now securing significant new business with Asian manufacturers who are increasingly at the forefront of market innovation e.g. Huawei from wh
Slide 12: Healthcare gaining traction
Healthcare gaining traction Ongoing Healthcare revenue, £m > Annual revenues down slightly from £21m to £19m > Strong recovery witnessed in Q4 FY10 with momentum maintained in the current financial year > Strength in Americas and Europe to be leveraged in India and Asia > Penetration into new market
Slide 13: Healthcare sector case study
Healthcare sector case study > Success in Healthcare is dependent on innovative engineered solutions and excellence in quality > Extended product development lead-times and long product lifecycles, result in long-term supplier relationships. Volex’s strength recognised by “Best Overall Supplier” awa
Slide 14: Industrial exploring growth options
Industrial exploring growth options Ongoing Industrial revenues, £m 5 4.1 4 3.2 3.0 2.8 3 2.3 1.7 1.8 1.8 2 1 0 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Asia Americas Europe India Asia Americas Europe > Annual revenues up 10% from £10m to £11m > Smallest of the four sectors bu
Slide 15: Industrial sector case study
Industrial sector case study > New product launches in the solar energy segment where we have developed junction boxes and cable assemblies that interconnect solar arrays for Photovoltaic (PV) installations > Working with the fastest growing suppliers of such installations. > Chosen because of our a
Slide 16: Manufacturing case study
Manufacturing case study Before After > Increased labour productivity > Lower WIP inventory Less than 5% of lines > Better factory utilisation converted in first quarter, now > Improved satisfaction of customer delivery dates being rolled out globally > Higher quality 15 Volex Group plc April 2010
Slide 17: Driving future top line growth
Driving future top line growth ENABLERS RESULTS • Sector expertise 1. Greater share of wallet • Global account management > e.g. increased allocation to HP due to more competitive pricing and improved • Upskilled sales team credit rating • Improved sales tools and techniques 2. Deeper account penetr
Slide 18: Improving gross profit margins
Improving gross profit margins STRATEGIC Repositioning as a provider of engineered solutions by increasing the proportion of Volex-designed connectors and assemblies to drive higher margins OPERATIONAL Global supply chain and procurement to reduce material and freight costs LEAN manufacturing to dri
Slide 19: Increasing future cash generation
Increasing future cash generation 1. Increasing operating profits 2. LEAN manufacturing reductions in inventory working capital 3. Structural reviews of trade debtor and creditor relationships 4. Improved cash pooling to release “locked” cash 5. Reducing interest burden 6. Utilising substantial defe
Slide 20: Conclusions and outlook
Conclusions and outlook > Successful year – restructuring complete and foundations laid for return to growth > Firm Q1 trading with improving order book > Aim to be net cash positive by year end > Widespread operational and commercial improvement programs in process which will deliver benefits this
Slide 21: Appendices: Abridged financial statements
Appendices Abridged financial statements
Slide 22: A. Abridged income statement
A. Abridged income statement 2010 2009 Revenues from continuing operations 229.0 265.1 Cost of sales (182.8) (223.0) Gross margin 46.2 42.1 Operating expenses (ex. non-recurring items and share based payments) (32.8) (31.0) Operating profit (b/f non-recurring items and share based payments) 13.4 11.
Slide 23: B. Abridged statement of financial position
B. Abridged statement of financial position 2010 2009 Goodwill 1.9 1.9 Property, plant and equipment and intangible assets 8.2 8.6 Other non-current assets 0.5 0.7 Total Non-current Assets 10.6 11.2 Inventories 27.5 24.1 Trade receivables and other current assets 60.5 59.8 Cash and cash equivalents
Slide 24: C. Abridged statement of cash flows
C. Abridged statement of cash flows 2010 2009 Operating cash flow before working capital and non-recurring items 13.9 8.1 Movement in working capital 4.7 13.7 Cash generated by operations before non-recurring items 18.6 21.8 Tax and interest payments (4.0) (3.7) Purchases of tangible and intangible