Volex plc · LSE:VLX
Volex — H1 2003 Earnings Presentation
36 slides from Volex's earnings presentation, 2003
Slide 1: Interim Results
Volex Group p.l.c. Interim Results 2003 TOTAL CABLE ASSEMBLY SOLUTIONS
Slide 2: Briefing Agenda
Briefing Agenda 1. Introduction Dom Molloy, Chairman 2. First Half Overview John Corcoran, Group CEO 3. Financials David Hudson, Group FD 4. Regional Perspectives John Corcoran, Group CEO Volex Group p.l.c. Interim Results 2003 2
Slide 3: Financial summary H1 2003
Financial summary H1 2003 Turnover £113m Operating loss* £(0.7)m Pre-tax loss* £(2.7)m Net Debt £40.6m * pre goodwill amortisation and exceptionals Volex Group p.l.c. Interim Results 2003 3
Slide 4: H1 Drivers
H1 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 - Minori
Slide 5: Key Features of Year to Date
Key Features of Year to Date Regional growth in Asia and Europe Re-profiling of manufacturing base continues Successfully tracked MNC migration to Asia Capital expenditure controlled despite capacity demand increases Order book strengthens Secured new / incremental accounts Gross margin broadly hold
Slide 6: Trading Conditions
Trading Conditions Tele/Networking • Wireless improves with WCDMA and EDGE • Broadband drives Europe growth • Market decline continues in wireline Computing • PC unit sales lift, pricing lower, revenues flat • Server improves marginally, SUN losing • Dell as reseller providing opportunity Consumer P
Slide 7: Group Sales by Destination
Group Sales by Destination Europe 2003/04 Percentage variation on prior H2 Americas 14.0% 15% Asia 10% 5% 1.5% 0% -5% -3.6% 28% 33% 39% Volex Group p.l.c. Interim Results 2003 7
Slide 8: Group Sales by Product
Group Sales by Product Data/Telecommunications 2003/04 Percentage variation on prior H2 Power Cords Harnesses 20% 10.1% 10% 1.4% 0% -10% 13% -20% -12.9% 43% 44% Volex Group p.l.c. Interim Results 2003 8
Slide 9: Group Sales by Market Sector
Group Sales by Market Sector Data/Telecommunications 2003/04 Percentage variation on prior H2 Consumer Appliances Consumer Electronics 40% 24.8% Vehicles & Aerospace 20% 0% -20% -9.5% -11.3% -40% -28.2% 13% 12% 56% 19% Volex Group p.l.c. Interim Results 2003 9
Slide 10: Volex Market Share
Volex Market Share The world’s No. 3 cable assembly provider. Rank Companies Shipments* Market Share Global cable assembly 2002 2002 ($'m) 2002 market in 2002: 1 Hon Hai $594 5.55% $10.703 billion* 2 Tyco $490 4.58% * Does not include power cords. 3 Volex $354 3.31% 4 Furukawa/Lucent $344 3.21% 5 Mo
Slide 11: Financial Highlights
Volex Group p.l.c. Financial Highlights
Slide 12: Financial Highlights for the Half Year to September 2003
Financial Highlights for the Half Year to 30 September 2003 H1 H2 H1 2003 2002 2002 £m £m £m Sales 113 110 120 Operating (Loss)/Profit* (0.7) 0.4 0.2 Pre-Tax Loss* (2.7) (2.6) (1.4) * before goodwill amortisation & impairment and exceptionals Volex Group p.l.c. Interim Results 2003 12
Slide 13: Turnover
Turnover 217 250 201 200 160 120 116 113 150 110 £M 100 50 0 HY1 HY2 HY1 HY2 HY1 HY2 HY1 2001 2002 2003 2004 Volex Group p.l.c. Interim Results 2003 13
Slide 14: Operating Profits
Operating Profits* 4 2 OpProfit (£m) 0 -2 -4 H1 H2 H1 H2 H1 02 02 03 03 04 H1 inefficiencies Benefits of e-auctions in H2 2003/04 - European manufacturing transfer - N. America into Mexico/Asia Effect of Exchange Rates vs H1 2002/03 - Excessive ramp-up costs - Turnover £(1.8)m - Operating Profit £(0
Slide 15: Group Sales by origin ("output")
Group Sales by origin (“output”) Europe 2003/04 Percentage variation on prior H2 Americas 20% 15% Asia 15% 10% 4% 5% 0% 31% -5% -3% 36% 33% Volex Group p.l.c. Interim Results 2003 15
Slide 16: Taxation
Taxation Group Composite Tax Rates – charge/(credit) 31 March ’01 31 March ’02 31 March ’03 31 March ’04 ACTUAL ACTUAL ACTUAL H1 Effective rate 29.0% (27.8%) (7.0%) (19.5%) Underlying rate* 28.0% (29.6%) (23.6%) (20.0%) *Pre goodwill amortisation and impairment Effective Tax Rates Countries Up to 20
Slide 17: Cash Flow
Cash Flow £m Net Cash Outflow from Operating Activities: Operating Loss (post goodwill and exceptional item) (3.8) Depreciation and amortisation 3.1 Working Capital (1.0) Cash impact of exceptional item (0.4) (2.1) Volex Group p.l.c. Interim Results 2003 17
Slide 18: Cash Flow cont/d
Cash Flow cont/d £m Net Cash Outflow from Operating Activities (2.1) Purchase of fixed assets (net) (0.7) Tax refunds 0.2 Interest paid (net) (0.4) Refinancing costs (0.8) Exchange 2.0 Increase in Net Borrowings (1.8) Volex Group p.l.c. Interim Results 2003 18
Slide 19: Borrowings/Deposits
Borrowings/Deposits 30 Sep 03 31 Mar 03 31 Sept 02 £m £m £m Cash at Bank 8.5 13.7 7.6 Borrowings: - within 1 year (3.6) (3.8) (5.4) - over 1 year (45.5) (48.7) (48.8) Net Borrowings (40.6) (38.8) (46.6) Gearing 101% 86% 83% Volex Group p.l.c. Interim Results 2003 19
Slide 20: Bank Covenants
Bank Covenants 1. Gross Profit June 2003, September 2003 2. Net Worth 3. Interest Cover December 2003, March 2004 4. Debt to EBITDA Volex Group p.l.c. Interim Results 2003 20
Slide 21: Group Capital Expenditure
Group Capital Expenditure Half Year 1 Half Year 2 Capex multiple over depreciation 1.1 0.37 2004 1.2 1.2 0.35 2003 3.2 1.4 0.54 2002 6.7 7.5 1.8 2001 0 5 10 15 £m Volex Group p.l.c. Interim Results 2003 21
Slide 22: Regional Reports
Volex Group p.l.c. Regional Reports
Slide 23: Current Global Profile
Current Global Profile 24 Manufacturing Units 6 Development/NPI/Sales Units 7 Sales Offices 22 Countries 8,350 Employees (average) 1.3 mil. sq ft Manufacturing Capacity Volex Group p.l.c. Interim Results 2003 23
Slide 24: 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 25: Volex in the Americas
Volex in the Americas Revenue declined by 3% over H2 of prior year Telecom decline pronounced, particularly CDMA Migration of OEM’s to China transfers revenue Profiling of US and Canadian sites to Engineering/Service locations Market strengthening since August Weakened dollar hits imports from Asia
Slide 26: 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 27: Volex in Asia
Volex in Asia Sales improved by 15% over previous H2 Telecom market in China remains stalled to declining Telecom infrastructure still an opportunity SARS effect lifted and demand now real-time Migration of MNCs to China accelerated Green product set provides leverage Internet auction conducted on e
Slide 28: 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 29: Volex in Europe
Volex in Europe Sales up 4% on comparable period – H2 FY’03 Growth in infocom, powercords weaker ADSL/Broadband deployment continues to strengthen revenue line Significant re-structuring at European HQ Vehicle Harness steady to slightly negative Depressed conditions continued in Aerospace Volex Grou
Slide 30: The Future
Volex Group p.l.c. The Future
Slide 31: 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 32: 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 33: Maximising Customer Satisfaction
Defining Volex Total Solution Provider • Global technology • Global materials • Product transfer GLOBAL • Localisation • Low cost options • Account management PRODUCT SERVICE • Product breadth • Design • Competitive total cost • Development • Component substitution • Portfolio mgt. • Standardised mf
Slide 34: Growth Potential
Growth Potential Leverage the Consolidation/Outsourcing opportunity through Value Creation and Competitiveness Markets Telecoms Computing Consumer Consumer Harness Electronics Appliances Characteristics Global Price/ Short Product Supply Technology Technology Life Cycle Consolidation Driven Demands
Slide 35: H2 Drivers
H2 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 - Minori
Slide 36: Interim Results 2003
Volex Group p.l.c. Interim Results 2003