Volex Plc · LSE:VLX
Volex — H1 FY2013 Earnings Presentation
32 slides from Volex's earnings presentation, Oct 31, 2012
Slide 1: Half Year Results for the 26 weeks ending 30 September 2012
Half Year Results for the 26 weeks ending 30 September 2012 31 October 2012
Slide 2: Warning
Warning THIS PRESENTATION CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE GENERAL ECONOMIC CONDITIONS, CURRENCY FLUCTUATIONS, COMPETITIVE FACTORS, THE LOSS O
Slide 3: H1 FY2013 Financial highlights
H1 FY2013 Financial highlights • Revenue in H1 FY2013 of $249.3m (H1 FY2012: $270.7m) • Gross margin of 17.8% for H1 FY2013 (H1 FY2012: 19.2%) • Normalised operating profit1 of $5.3m (H1 FY2012: $14.9m) • Normalised diluted EPS of 5.8 cents (H1 FY2012: 17.6 cents) • Capex of $14.2m (H1 FY2012: $4.8m
Slide 4: Understanding our Consumer business
Understanding our Consumer business 4
Slide 5: Understanding our Consumer business
Understanding our Consumer business Phones Tablets Laptops Desktops 5 Watt USB adaptor 24 Watt adaptor with Duckhead for 250 Watt internal for iPhone Magsafe power adaptor for laptops, power supply for a desktop Microsoft Surface and available in 45/60/85 Watts 10 Watt USB adaptor with Duckhead for
Slide 6: Growing and evolving Consumer markets
Growing and evolving Consumer markets Consumer Telecommunications devices Mobiles 2012 – 2016 Set-top boxes CAGR Other communications +12% 2,290m units 3,600m units Consumer Electronic devices TV’s, DVD’s and home ent’ment Cameras Gaming & portable media +8% Power tools eBooks Other consumer 779m un
Slide 7: Clarifications following our 18-09-12 Trading Update
Clarifications following our 18‐09‐12 Trading Update The Trading Update attributed the reduced FY2013 revenues to: 1. Delays in product launches by our largest customer 2. A change in product component strategy by our largest customer and spoke of softer demand from our Consumer customers including
Slide 8: Historic financials
Volex Historic financials
Slide 9: Trends in total group revenues
Trends in total group revenues FY10 = $365m FY11 = $490m FY12 = $518m H1 = $249m 150 125 Quarterly Revenues, US$millions 100 75 50 25 0 FY10‐Q1 FY10‐Q2 FY10‐Q3 FY10‐Q4 FY11‐Q1 FY11‐Q2 FY11‐Q3 FY11‐Q4 FY12‐Q1 FY12‐Q2 FY12‐Q3 FY12‐Q4 FY13‐Q1 FY13‐Q2 • Annual revenues grew 34% from FY2010 to FY2011 and
Slide 10: Revenue trends explained
Revenue trends explained 80 Consumer ex. largest customer Non‐Consumer Largest customer 70 Quarterly Revenues, US$mns 60 50 40 30 20 10 0 FY10‐Q1FY10‐Q2FY10‐Q3FY10‐Q4FY11‐Q1FY11‐Q2FY11‐Q3FY11‐Q4FY12‐Q1FY12‐Q2FY12‐Q3FY12‐Q4FY13‐Q1FY13‐Q2 • The Consumer (excluding our largest customer) and non‐Consume
Slide 11: Gross margin trends and drivers
Gross margin trends and drivers 3 quarters of Consumer Consumer margins declining Exceptional new product Consumer margins margins > 20% due to over 4 quarters as copper start-up costs in adversely impacted 30% suppressed copper prices rose to >$10,000 Consumer by ramp-up costs 25% Quarterly Gross M
Slide 12: Revenues and margins outside of Consumer
Revenues and margins outside of Consumer 60 Half yearly revenues, US$millions 50 40 • Revenues in Telecom/Datacom and 30 Industrial reduced significantly in H2 FY2012 and have recovered only 20 modestly in H1 FY2013 10 • Healthcare revenues disappointed in 0 H1 FY2013 due to delays in customer 30% F
Slide 13: Operating profit by quarter
Operating profit by quarter Quarterly operating profit1, $m Quarterly operating profit1 as % of sales 9.5 8.6 7.1% 6.6% 7.0 7.1 6.8 5.5% 5.7% 6.3 5.4% 5.0% 3.1 2.5% 2.2 1.8% Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 • Flat revenues and temporaril
Slide 14: Free Cash Flow and Net Debt
Free Cash Flow and Net Debt Summarised cash flow, $'m H1 FY13 H1 FY12 Operating cash flow before working capital 6.6 15.9 Movement in working capital (1.2) (6.4) Cash generated by operations 5.4 9.5 Tax and interest payments (2.7) (3.4) Purchases of tangible and intangible assets (9.0) (4.8) Free ca
Slide 15: Focus for H2 FY2013
Volex Focus for H2 FY2013
Slide 16: Focus for the remainder of FY2013
Focus for the remainder of FY2013 1. Convert existing sales pipeline to drive H2 revenue growth 2. Restore the margins on our largest customer to 18% or above by the end of FY2013, and consequently group margins to 20% or above 3. Complete existing cost reductions to reduce annualised operating cost
Slide 17: FY2013 H2 revenue outlook
FY2013 H2 revenue outlook • Revenues from our largest customer have now stabilised around their current levels • Sales pipeline of new customers is greater than at any time during the last four years • A number of our customers in the Telecom/Datacom, Healthcare and Industrial sectors will be introd
Slide 18: FY2013 H2 gross margin improvement plan
FY2013 H2 gross margin improvement plan • Upgrading process and quality engineering across the company • Bringing targeted core processes (e.g. PCBa and precision tooling making) in house • Rolling out new precision moulding and tooling equipment • Have introduced a new New Product Introduction proc
Slide 19: Immediate OPEX reduction program
Immediate OPEX reduction program • Phase 1 annualised OPEX savings of approximately $7m to be delivered in H2 • This will add more than 1% to operating profit margins • Actions are already well advanced and will be substantially completed during Q3 • Reducing management layers, relocating functions
Slide 20: Full year forecast operating profit
Full year forecast operating profit* • The preceding revenue, margin and OPEX programs will deliver benefits during H2 to return normalised H2 operating profits to their previous levels and above. • More importantly they will underpin increased profit levels in FY2014 20 * Excluding share based paym
Slide 21: Conclusions
Volex Conclusions
Slide 22: Outlook
Outlook • All four sectors anticipated to deliver half‐over‐half and year‐on‐year growth in H2 FY2013 • Overall group gross margins expected to return to 20% or above by the end of FY2013 • OPEX savings expected to lower FY2014 OPEX by around $10m • Exceptional costs of around $5m will be incurred d
Slide 23: Appendices
Volex Appendices
Slide 24: Revenue performance by quarter
Revenue performance by quarter Quarterly revenue by sector, $m 160 140 120 100 80 60 40 20 0 Q3 FY10 Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Consumer Telecoms / Datacoms Healthcare Industrial Revenue, $m H1 FY13 H1 FY12 Growth Norm. gross margin % H1 F
Slide 25: Consumer Revenue and gross margin by half year
Consumer Revenue and gross margin by half year Half year revenue by region, $m Half year normalised gross margin %1 180 169.9 164.7 25% 22.9% 160.5 151.2 153.2 21.1% 160 20% 18.2% 17.7% 140 118.4 17.0% 17.2% 120 14.8% 104.0 15% 100 80 10% 60 40 5% 20 0 0% H1 FY10 H2 FY10 H1FY11 H2 FY11 H1 FY12 H2 FY
Slide 26: Telecoms / Datacoms Revenue and gross margin by half year
Telecoms / Datacoms Revenue and gross margin by half year Half year revenue by region, $m Half year normalised gross margin %1 60 57.4 56.2 23.0% 52.5 25% 22.0% 50.3 20.5% 50 44.4 19.8% 43.2 45.2 17.8% 20% 17.1% 40 15% 12.1% 30 10% 20 10 5% 0 0% H1 FY10 H2 FY10 H1FY11 H2 FY11 H1 FY12 H2 FY12 H1 FY13
Slide 27: Healthcare Revenue and gross margin by half year
Healthcare Revenue and gross margin by half year Half year revenue by region, $m Half year normalised gross margin %1 29.3% 30 27.5 27.7% 27.0% 30% 24.2 25.4% 25 22.0 25% 22.0% 22.9 21.2% 20.0% 18.7 20 20% 15.6 15.2 15 15% 10 10% 5 5% 0 0% H1 FY10 H2 FY10 H1FY11 H2 FY11 H1 FY12 H2 FY12 H1 FY13 H1 FY
Slide 28: Industrial Revenue and gross margin by half year
Industrial Revenue and gross margin by half year Half year revenue by region, $m Half year normalised gross margin %1 25 30% 20.3 24.6% 23.4% 23.8% 24.2% 25% 21.7% 20 18.2 17.4 20.5% 20.5% 16.0 16.0 20% 15 11.7 15% 10 5.8 10% 5 5% 0 0% H1 FY10 H2 FY10 H1FY11 H2 FY11 H1 FY12 H2 FY12 H1 FY13 H1 FY10 H
Slide 29: Abridged income statement
Abridged income statement $m H1 FY13 H1 FY12 Revenue 249.3 270.7 Cost of sales (205.0) (218.8) Gross profit 44.3 51.9 Operating expenses (39.0) (37.0) Operating profit (b/f non‐recurring items & share based payments) 5.3 14.9 Non‐recurring items (0.7) ‐ Share based payments (1.2) (2.1) Operating pro
Slide 30: Abridged statement of financial position
Abridged statement of financial position $m H1 FY13 H1 FY12 Goodwill 3.1 3.0 Property, plant and equipment and intangible assets 34.2 17.0 Other non‐current assets 6.1 2.9 Total Non‐Current Assets 43.4 22.9 Inventories 59.7 52.9 Trade receivables 91.4 115.4 Other receivables 17.9 12.4 Cash and cash
Slide 31: Abridged statement of cash flows
Abridged statement of cash flows $m H1 FY13 H1 FY12 Operating cash flow before working capital movements 6.6 15.9 Movement in working capital (1.2) (6.4) Cash generated by operations 5.4 9.5 Tax and interest payments (2.7) (3.4) Purchases of tangible and intangible assets (9.0) (4.8) Free cash flow
Slide 32: Power supply / power cord market data
Power supply / power cord market data 2012 figures 2016 figures Total All figures volumes expressed External Embedded External Embedded 2012 ‐ in millions of units Total External Total External power power power power 2016 & Embedded & Embedded supplies supplies supplies supplies CAGR Mobile phones