Volex Plc · LSE:VLX
Volex — H1 FY2020 Earnings Presentation
17 slides from Volex's earnings presentation, Nov 14, 2019
Slide 1: Interim Results 2019/20
Interim Results 2019/20 Nat Rothschild Daren Morris 14 November 2019
Slide 2: Disclaimer
Disclaimer This Presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful, nor shall it (or any
Slide 3: Volex Today
Volex Today • Global leader in the production of interconnect solutions – complex assemblies and power products • Cash generation allows us to invest in growth • Electric Vehicle plugs, connectors and cable • Data Centre high speed interconnects • Medical complex sub-assemblies • Acquisitions – to f
Slide 4: Volex Today – Products
Volex Today – Products • Volex has a long history of high quality production and deep engineering expertise in Power Products • This allows us to carve a niche position in Electric Vehicle connectors and charging solutions • And has allowed us to design and manufacture complex harnesses and sub-asse
Slide 5: Volex Today - Strategic Direction
Volex Today - Strategic Direction Where do we want to be in 5 years time? FY20 - >$400m sales Target sales of $650m Integrated Manufacturing Services Organic growth and selected acquisitions Data Centre Products Consumer Power Cords 2/3 of business in IMS/Data Centres Compl ex Assemblies Power Opera
Slide 6: Volex Today – Transformed
Volex Today – Transformed H1 Sales ($m) • Growth following a repositioning away 10% CAGR from legacy business with low margin customers 195.7 182.4 161.5 • We are replacing this with higher margin customers and products focusing on: H1 - FY18 H1 - FY19 H1 - FY20 • Medical • Hyperscale Data Centres H
Slide 7: Summary of H1 Results: Financial Highlights
Volex Today - Summary of H1 Results Financial Highlights • Pre Exceptional operating profit up 62 % to $16.0 million (H1FY19 $9.9million) driven by cost reduction, improvement in product mix and contribution from acquisitions • Consolidated revenue increased 7% to $196million as compared with the pr
Slide 8: Summary of H1 Results: Operational Highlights
Volex Today - Summary of H1 Results Operational Highlights • Successful integration of MC, Silcotec, GTK, Ta Hsing and Servatron – diversifying our customer base and manufacturing footprint • Servatron and Silcotec allow us to move up value curve by offering more complex integrated manufacturing sol
Slide 9: Financial Review
Financial Review
Slide 10: Financial Summary
Financial Summary $m FY19 H1-19 H1-20 Revenue 372.1 182.4 195.7 • Sales diversification and Gross Profit 73.5 34.0 45.3 growth strategy starting to - Gross Margin 19.8% 18.6% 23.1% show benefits Operating Costs (51.9) (24.1) (29.3)• Gross margin continues to increase as lean initiatives take Operati
Slide 11: Adjusting Items
Adjusting Items $m FY-19 H1-19 H1-20 Restructuring Costs 1.9 1.9 0.0 Acquisition Costs 1.8 0.8 0.2 Amortistion of Acquired Intangibles 2.0 0.6 2.8 Pension Past Service Costs / Tax 0.3 -0.1 -0.5 Exceptional Costs 6.0 3.2 2.5 Share based payments 2.4 0.8 2.6 8.4 4.0 5.1 • Minimal restructuring during
Slide 12: Complex Assemblies
Complex Assemblies $m FY19 H1-19 H1-20 Change Revenue 173.2 78.2 104.6 33.8% Gross Profit* 37.1 15.2 26.9 77.0% Gross Margin* 21.4% 19.5% 25.7% Operating Costs 23.7 10.0 15.2 52.0% Operating Profit* 13.4 5.2 11.7 125.0% Operating Margin* 7.7% 6.7% 11.2% *Underlying measure before Share Based Payment
Slide 13: Power Cords
Power Cords $m FY19 H1-19 H1-20 Change Revenue 198.9 104.2 91.1 -12.6% Gross Profit* 36.4 18.8 18.4 -2.1% Gross Margin* 18.3% 18.0% 20.2% Operating Costs 23.1 10.7 11.2 4.7% Operating Profit* 13.2 8.1 7.2 -11.1% Operating Margin* 6.7% 7.7% 7.9% • Revenue down by nearly 13% (as budgeted) due to a num
Slide 14: Cash Flow
Cash Flow $60 $50 $40 Cash Flow ($m) $30 20.6 $20 $10 7.9 $0 FY19 Net Cash Operating Cash Increase in Investment (Capex, Other FY20-H1 Net Cash Flow Working Capital Acquisitions) • Net cash has reduced from from $20.6million to $7.9million • Operating cash flow before change in WC increased to $17.5
Slide 15: Cash Targets
Cash Targets Cash Balances since July 2018 ($m) 40.0 • Management is focused on Servatron acquisition cash generation as part of 35.0 the FY2020 incentive scheme 30.0 • Ex acquisitions and 25.0 exceptional items we are incentivized on generating 20.0 $20 to $26 million of cash flow from operations i
Slide 16: Outlook for FY20
Outlook for FY20 • Expect to continue to grow both revenue and operating profit in FY20 • Effects of “Trump Tariffs” uncertain at this time. Our global footprint remains a strong differentiator when compared to our China-based competition • Volex is reducing capacity at its Shenzhen and Suzhou locat
Slide 17: Peer Group Valuation
Peer Group Valuation 2019 EV / EBIT (x) 2019 EBIT Margin 15.8 10.1% 12.3 8.4% 10.9 11.0 11.3 7.4% 6.4% 6.0% 4.2% 5.7 Volex Luceco Dialight TT Electronics Belden Leoni Leoni Belden Dialight Volex TT Electronics Luceco Source: Market Consensus and Volex assumptions – calenderised to December year end