Volex plc · LSE:VLX
Volex — FY2004 Earnings Presentation
44 slides from Volex's earnings presentation, 2004
Slide 1: Annual Results 2004
Volex Group p.l.c. Annual Results 2004 TOTAL CABLE ASSEMBLY SOLUTIONS
Slide 2: Briefing Agenda
Briefing Agenda 1. Introduction Dom Molloy, Chairman 2. Full Year Overview John Corcoran, Group CEO 3. Financials David Hudson, Group FD 4. Operations Review John Corcoran 5. Future View John Corcoran Volex Group p.l.c. Annual Results 2004 2
Slide 3: Financial Summary 2004
Financial Summary 2004 Turnover £238m Operating Profit* £2.5m Pre-tax loss* £(1.3)m Cash generation from operations** £8.1m Net Debt £32m * pre goodwill amortisation and exceptional operating items ** pre exceptional operating items Volex Group p.l.c. Annual Results 2004 3
Slide 4: 2004 Drivers
2004 Drivers Remaining Financed Reduce Debt - Adhering to Covenant requirements - Controlling Capital Expenditure Return to - Managing Working Capital - Implement re-structuring to plan Profitability - Attack Materials Cost Base Positioning for Market Growth Earning - New Customer Development - Mino
Slide 5: Recovery Dynamic
Recovery Dynamic PROFITS Margin Cash Enhancement Generation SALES DEBT Customer / Market Penetration Volex Group p.l.c. Annual Results 2004 5
Slide 6: Key Features of Year
Key Features of Year Sales Improved sales for third consecutive half year H2:H1 growth of 11% Margin Stable year-on-year, copper price impacted improvement Profits Quarter-on-Quarter improvement. All units profitable in fourth quarter Cash Cash from operating activities of £8.1m generated, of which
Slide 7: Recent Years.…Sales
Recent Years.…Sales £’m £418 450 400 350 £276 £230 £238 300 250 200 150 100 50 0 2001 2002 2003 2004 Growth year on year – FY 2004 vs. FY 2003: As reported 4% Before adverse currency effect 7% Volex Group p.l.c. Annual Results 2004 7
Slide 8: Recent Stability….Sales
Recent Stability….Sales 160 160 125 120 113 140 116 110 120 100 £M 80 60 40 20 0 H1 H2 H1 H2 H1 H2 2002 2003 2004 Growth half year on half year FY 2004 H2 vs. FY 2004 H1 11% FY 2004 H2 vs. FY 2003 H2 14% Volex Group p.l.c. Annual Results 2004 8
Slide 9: Operating Profit – Quarter by Quarter
Operating Profit – Quarter by Quarter Quarter Profit/(Loss) £'m Q1 Q2 Q3 Q4 Volex Group p.l.c. Annual Results 2004 9
Slide 10: Stabilised Gross Margin
Stabilised Gross Margin 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2001 2002 2003 2004 Gross FY’01 FY’02 FY’03 FY’04 Margin 17.2% 11.6% 14.8% 14.4% Volex Group p.l.c. Annual Results 2004 10
Slide 11: Trading Conditions
Trading Conditions Tele/Networking • Wireless demand improves over decline in 2003 • Network degradation issues being addressed • Developing countries now in focus Computing • China deployment slower from award to volume • Fixed line business lagging wireline • Enterprise demand sluggish • PC unit s
Slide 12: Trading Conditions
Trading Conditions Consumer Products • Consumer demand holding in Asia/Europe • Softness in US recovery, debt tightens • Product migration to digital continues EMS Providers • Technology churn of benefit to design-in • Demand less seasonal, pricing key • Appliance demand steady, supply base focus •
Slide 13: Market Diversity
Market Diversity Turnover by Market Sector Vehicles & Aerospace Data/ Telecommunications 13% Consumer Electronics 17% 42% 9% 19% Medical/ Industrial Consumer Appliances Volex Group p.l.c. Annual Results 2004 13
Slide 14: Product Diversity
Product Diversity Turnover by Product Data/Telecommunications Wiring Harnesses (Industry Standard, RF, (vehicle, aerospace) High Speed, Fibre Optics) 13% 46% 41% Power Cords Volex Group p.l.c. Annual Results 2004 14
Slide 15: Geographic Spread
Geographic Spread Turnover by Destination Americas Europe Turnover by Origin (gross) 31% 41% Americas Asia 28% 31% 32% Asia 37% Europe Volex Group p.l.c. Annual Results 2004 15
Slide 16: Financial Highlights
Volex Group p.l.c. Financial Highlights
Slide 17: Financial Highlights for the Year to April 2004
Financial Highlights for the Year to 4 April 2004 H1 H2 Full Year 2003 Last Year £m £m £m £m Sales 113 125 238 230 Operating Profit/(Loss)* (0.7) 3.2 2.5 0.6 Pre-Tax Profit/(Loss)* (2.7) 1.4 (1.3) (4.0) •before exceptionals, goodwill amortisation and impairment N.B.: Goodwill amortisation £0.3m Vole
Slide 18: Operating Profits/(Loss)
Operating Profits/(Loss)* Margin 2.5% 4 2 Margin 0.1% Margin 0.4% Op Profit (£m) 0 -2 Margin (0.6%) -4 Margin (2.6%) H2 H1 H2 H1 H2 02 03 03 04 04 H1 impacted by: H2 Benefits of: - European manufacturing transfer - Sales growth - N. America into Mexico/Asia More robust order book - Excessive ramp-
Slide 19: Exchange Rates
Exchange Rates Average % Year End % 2004 2003 Change 2004 2003 Change United States 1.68 1.54 9.1% 1.83 1.57 16.6% Singapore 2.91 2.72 7.0% 3.07 2.78 10.4% Euro 1.44 1.54 (6.5)% 1.51 1.46 3.4% Canada 2.29 2.39 (4.2)% 2.41 2.30 4.8% Brazil 4.99 4.48 11.4% 5.29 5.28 0.2% Sweden 13.17 14.33 (8.1)% 13.9
Slide 20: Exceptional Operating Items
Exceptional Operating Items P&L Cash 2004 2004 £m £m Cessation of manufacturing in Ireland (3.0) (2.4) Impairment of Irish manufacturing facility (3.4) - Loss on disposal of current asset investments (0.3) 1.2 (6.7) (1.2) Transfer of Irish Write down of Irish facility Disposal of US facility. manufa
Slide 21: Taxation
Taxation £m Group tax charge (2.4) Underlying tax charge impacted by: • Impact of expenses not deductible for tax purposes 1.4 • Prior year adjustments 0.7 • Losses for which no credit recognised (net) 2.8 Normalised tax 2.5 Tax credit if all recognised at UK rate of 30% 2.5 Effective Tax Rates Coun
Slide 22: Cash Flow
Cash Flow £m Net Cash Inflow from Operating Activities: Operating Loss (post goodwill) (4.5) Depreciation & Impairment 9.8 Loss on asset held for resale 0.3 Goodwill 0.3 Working Capital (0.3) Net Cash Inflow from Operating Activities 5.6 Cash outflow from exceptional operating items 2.4 Net Cash Inf
Slide 23: Cash Flow cont/d
Cash Flow cont/d £m Net Cash Inflow from Operating Activities: 5.6 Purchase of fixed assets (net) (0.6) Tax Refunds 0.2 Interest Paid (3.1) Refinancing costs (expensed in FY03) (1.0) Issue of Ordinary Share Capital 0.9 New Finance Lease (0.2) Exchange 5.2 Reduction in Borrowings 7.0 Volex Group p.l.
Slide 24: Borrowings/Deposits
Borrowings/Deposits 4 April 04 30 Mar 03 £m £m Cash at Bank 11.9 13.7 Borrowings: - within 1 year (3.8) (3.8) - over 1 year (39.8) (48.7) Net Borrowings (31.7) (38.8) Gearing % 97.6 86.0 Note 1. Bank facilities in place to 30 June 2005. Note 2. Net borrowings reduced by £18.7m over last 2 years. Vol
Slide 25: Net Borrowings – last two years
Net Borrowings – last two years Volex Group plc - Net Borrowings 55,000 52,388 50,000 50,409 44,085 45,000 46,605 41,496 £18.7m 40,000 40,587 38,804 35,000 30,000 31,739 25,000 2002 2002 2002 2002 2003 2003 2003 2003 2004 March June Sept Dec March June Sept Dec March Net Borrow ings Volex Group p.l.
Slide 26: Group Capital Expenditure
Group Capital Expenditure Half Year 1 Half Year 2 Capex multiple over depreciation 2004 1.2 1.3 0.39 2003 1.2 1.2 0.35 3.2 1.4 0.54 2002 6.7 7.5 1.8 2001 2000 5.6 5.0 1.5 0 5 10 15 £'M Volex Group p.l.c. Annual Results 2004 26
Slide 27: Operations Review
Volex Group p.l.c. Operations Review
Slide 28: Volex Global Footprint
Volex Global Footprint Sales Offices 37 sales offices Volex Group p.l.c. Annual Results 2004 28
Slide 29: Volex Global Footprint....contd.
Volex Global Footprint....contd. Regional Centres, Manufacturing, Support units Group HQ 3 Regional Centres 21 Manufacturing units 10 Engineering/sales/logistic support units Volex Group p.l.c. Annual Results 2004 29
Slide 30: Group Developments
Group Developments Quarter-on-Quarter improvements in Sales and Operating Profit Group Account team strengthened across additional 10 accounts Group Strategic Purchasing team established with coverage in all regions and across all commodities Global information technology team formalised with focus
Slide 31: Volex Locations - Americas
Volex Locations - Americas 4 Development/NPI/Sales units 1 Manufacturing/Sales unit 4 Satellite Manufacturing units Regional Centre Ottawa, Canada Downsized Downsized Fremont, CA, USA Quincy, MA, USA Tijuana, Mexico Conover, NC, USA Downsized Hermosillo, Mexico Aguascalientes, Mexico Indianapolis, I
Slide 32: Volex in the Americas
Volex in the Americas Revenue declined by 14% over prior year Second-half of current year improved 13% over first-half Migration of OEM’s to China transfers revenue to Volex Asia Profiling of US and Canadian sites to Engineering/Service locations impacts H1 performance Market strengthening since Sep
Slide 33: Volex Locations - Asia
Volex Locations - Asia 12 Manufacturing/Sales units 7 Sales Offices Regional Centre Beijing,China Seoul, Korea Tokyo, Japan Melbourne, Osaka, Japan Australia Suzhou, China Taipei, Taiwan Shenzhen, China Zhongshan, China Istanbul, Turkey Hong Kong Laguna, Philippines Ayudthaya, Thailand Chennai, Indi
Slide 34: Volex in Asia
Volex in Asia Sales improved by 23% over prior year (S$) Telecom market in China slower to volume than expected Telecom infrastructure still an opportunity Powercord sales strong on consumer electronics New product designs represent 25% of powercord sales Green product set continues to provide lever
Slide 35: Volex Locations - Europe
Volex Locations - Europe 2 Development/NPI/Sales units 2 Manufacturing/Sales units 5 Satellite Manufacturing units Regional Centre Group Head Office Downsized Östersund, Sweden Kuressaare, Estonia Downsized Castlebar, Ireland Warrington, England Downsized Leigh (2 sites), England Stoke-on-Trent, Eng
Slide 36: Volex in Europe
Volex in Europe Sales up 15% on comparable period –FY’03 Growth in infocom with wireless, DSL Transfers from Ireland to Croatia/Poland impacted first-half Impairment of Castlebar facility on market review Powercord unit aligned into Volex Asia management structure Vehicle Harness steady to slightly
Slide 37: The Future
Volex Group p.l.c. The Future
Slide 38: Our Strategy
Our Strategy To be the leading Value provider of Global cable assembly Solutions • Service • Quality • Design • Responsiveness • Development • Flexibility • Footprint • NPI • Independence • Account mgt. • Logistics • Product transfer • Portfolio mgt. • Low cost options • Supply base mgt. • Global te
Slide 39: Defining Cable Assembly Solutions
Defining Cable Assembly Solutions Total Product Supply Services Cable Portfolio Management Total Solution Services Approved Vendor List Control Provider Outsource/In-source Management Portfolio NPI Product/Solution Applications Rationalisation Management Design Value Add Services Hubbing/ JIT-to-Lin
Slide 40: Enablers: Globalised, Standardised Service
Enablers Global Global IT Global Procurement Account & Logistics GLOBAL Management PRODUCT PEOPLE SERVICE Globalised, Standardised Volex Group p.l.c. Annual Results 2004 40
Slide 41: Breadth of Segment Coverage
Breadth of Segment Coverage.... Consumer - Base Stations - Computers Telecom - Antenna products - Imaging/Printing - Switching devices - Audio/Stereo equipment - Transmission devices - Domestic appliances - Broadband devices - Garden & DIY tools Industrial Datacom - Servers - Automation - Storage -
Slide 42: Breadth of Technology Coverage
Breadth of Technology Coverage.... Power Products Industry Standard Medical Harnesses Fibre Radio High Optics Frequency Speed Volex Group p.l.c. Annual Results 2004 42
Slide 43: Maximising Customer Satisfaction
Defined Value Offering.... GLOBAL • Global service for a global customer base • Global cost solutions for a regional customer base PRODUCT PEOPLE Providing a one-stop Volex has the people: shop to service our • Account Management customer’s total product • Engineering requirements with a • SCM exper
Slide 44: Outlook
Outlook............. Demand improving environment expected to continue…. But….. Oil prices continue to pressure global economy Material purchases (PVC and Copper) under pressure Consumer spending fragile, US election/deficit issue So…. Expect single digit growth to continue (cautious) Expect full-ye