results for the half year ended 4 october 2009 presentations – 3 and … · 2018-05-02 · volex...
TRANSCRIPT
1
Results for the half year ended 4 October 2009
Presentations – 3 and 4 November 2009
2
Contents
1. Key Points
2. Market Trends
3. Business Overview
4. Financial Highlights
3
Key Points
1. Revenues down year on year in line with industry,
but up quarter on quarter
2. Profits increasing through higher margin business,
lower commodity prices and tight cost control
3. Strong cash generation with net debt reducing
4. New market focused sales organisation delivering
5. Transformation programs on track
4
When Volex started the new financial year we set forth a clear and measurable strategy to drive revenues and improve margins. This is to be achieved through i) a market sector focused Global Sales and Marketing organisation, ii) implementing efficiency through improved information technology and processes and delivering savings from a streamlined supply-chain process and iii) attracting world-class talent to the management ranks to fully deliver on these initiatives. Despite difficult trading conditions and an unstable macro-economic environment, we are pleased to report progress on all fronts, much of which is evidenced in the half-year financial results.
Ray Walsh
Group Chief Executive
5
Market Overview
6
Relative competitive performanceVolex has suffered smaller revenue declines than it peers, and is
the only company to report improvements in operating profits
Source: Most recent six months results reported by
the Cable Assembly / Connector divisions of each group
Reported
Revenues
Reported
Adjusted
Operating
Profits
Tyco
-41%
Leoni
-41%
Molex
-27%
Amphenol
-18%Volex
-18%
Volex
+48%
Amphenol
-29%
Molex
-256%
Leoni
-125%
Tyco
-113%
7
Performance by product line
• Both divisions have experienced the same year on year
revenue declines, underpinning that the major driver is the
general economic situation
• The Cable Assemblies industry generally has fallen 31.5% from
US$12.4Bn to US$8.5Bn between 2008 and 20091
1 Source : Fleck Research “2009 Compared to 2008” report
TOTALINTERCONNECT
POWER
PRODUCTS
-29%-28%-30%
Constant Currency
Reported
-17% -18% -18%
8
Significant regional variations
• Volex’s regional performance reflects
• respective end market demand
• eastwards migration of our customer’s manufacturing
• performance of individual customers in respective markets
External revenues by destination
- Year on year declines
TOTAL
-18%
EUROPE
-46%
AMERICAS
-17%
ASIA
-2%
9
Sector Performance – Revenues
• Consumer the main sector due to Power Cords - has suffered due
to reduced consumer demand and OEM de-stocking
• Telecoms-Datacoms down due to reduced/delayed network
rollout in India and China
• Healthcare marginally up reflecting traction of new sales org
010203040
5060708090
Consumer Telecoms-
Datacoms
Healthcare Industrial
Re
ve
nu
es
£m
H1 FY09
H1 FY10
Note : subject to minor revisions as boundaries of the 4 sectors currently being re-defined.
10
High Speed
• Mini Displayport
• CXP Cable Plugs
Fiber Optic
• Robust Optical Connector (ROC)
• Robust Transceiver Connectors
Radio Frequency
• Remote Radio WCDMA
• Low profile antennae
Power Products
• Halogen-free power cords
• Power cord accessories
Driving Volex Content & Margins
11
Business Overview
12
At the full year we said we would….
• Develop people skills
• Upgrade IT infrastructure
• Enhance management
information
• Streamline business
processes
• Improve business controls
• Create sector focused
sales organisation
• Enhance global account
management
• Reposition as a value
added content partner
• Introduce new products
• Penetrate new markets
and accounts
• Exploit scale economies
• Rationalise vendor base
• Cut production overheads
• Reduce freight costs
• Minimise working capital
Skills, information,
processes and systems
Marketing, sales and
product development
Procurement, supply chain
and manufacturing
….. we are happy to report that significant progress
is being made in each of these areas
13
Procurement, supply chain and manufacturing
1. Reviewed Copper sourcing and consumption
2. Rationalising vendor base
3. Consolidating to single global freight partner
4. Re-engineering factory processes and layout
5. Re-aligned capacity to current demand levels
6. Improving quality control and assurance standards
7. Generating cash and profits from written-off stock
8. Reducing working capital requirements
9. New Operations SVP to drive further improvements from 1/1/10
14
Marketing, sales and product development
1. Healthcare piloting new sector sales organisation
2. Sales Incentive Plans rewarding sales and margins
3. Global bonuses incenting co-operation and cross-selling
4. Customers enjoying unified service and pricing
5. Substantial new business opportunities under negotiation
6. Intensified participation in standards setting
7. New Volex designed products completed or in process
8. Jeff Bierman, new Sales & Market SVP started 26/9/09
15
Skills, information, processes and systems
• Paul Mather, new Human Resources Director
• Andrew Ducker, new Marketing VP
• Established Business Transformation Program Office
• Moved Head Office from Warrington to London
• New Corporate Performance Management system implemented
• Intranet launched to aid internal communications
• IT infrastructure improvements scheduled for H2
• Data standardisation program in progress
• BPCS upgrade and process standardisation in planning
• Management information tool rolling out in H2
16
Cost reduction and operational
leverage
During the first half Volex :
• Reduced direct headcount across every factory location in
order to maintain margins
• Reduced indirect labour in all regions
In addition a host of initiatives are already delivering or due to
deliver reductions in non-labour costs
The above initiatives have delivered annualised saving of over
£1m. However they have been focused on building efficiencies
rather than just cutting costs. As a result the company is well
positioned to capitalise on any economic upturn by rapidly
increasing capacity at low incremental cost.
17
Financial Highlights
18
Summary Income Statement
3.0p6.3pAdjusted basic earnings per share from continuing operations
0.10.9Retained profit
(1.7)-Loss from discontinued operations
1.80.9Profit/(loss) from continuing operations
(1.0)(0.8)Taxation
2.81.7Profit on ordinary activities before taxation
(1.4)(1.8)Net finance costs
4.23.5Operating profit
0.1(2.7)Non-recurring items
4.16.1Operating profit before non-recurring items
133.9110.2Revenue from continuing operations
H1 FY09H1 FY10£millions
19
Revenues trends
• Reported PP and I/C revenues both declined around 18% year
over year and by 29% on a constant currency basis.
• PP stabilised in H1 FY10 relative to H2 FY09 and grew 17%
quarter over quarter during H1 FY10
• I/C declined in H1 FY10 c.f. H2 FY09 but has stabilised in H1
FY10 (down 6% on reported basis, up 1% on constant currency)
POWER PRODUCTS 80.3
70.466.5
80.3
56.8 55.9
H1 FY09 H2 FY09 H1 FY10
Re
ve
nu
e £
m
INTERCONNECT
53.6
60.9
43.7
53.650.4
38.8
H1 FY09 H2 FY09 H1 FY10
Re
ve
nu
e £
m
Reported Constant Currency
20
Gross margins trends
• Gross profit margins are up significantly year over year in
both PP and I/C
• I/C margins flattened in H1 FY10 c.f. the preceding half while
PP margins increased significantly in part boosted by
reduced copper prices.
14.2
16.2
21.1
14.4
17.4
14.8
18.618.920.1
H1 FY09 H2 FY09 H1 FY10
Gro
ss
Ma
rgin
%
Power Products
Interconnect
Total
21
Adjusted operating profits trends
• Reported PP profits have recovered well having declined
during H2 FY09, and are up quarter over quarter
• Having addressed structural profitability issues in H2 FY09,
I/C profitability has been adversely impacted by declining
revenues especially among Telecom customers.
POWER PRODUCTS
3,474
2,540
4,449
1,501
3,3973,474
H1 FY09 H2 FY09 H1 FY10
Ad
jus
ted
Op
era
tin
g P
rofi
t £
00
0 INTERCONNECT
656
4,505
1,678
656
3,553
1,299
H1 FY09 H2 FY09 H1 FY10
Ad
jus
ted
Op
era
tin
g P
rofi
t
£0
00
Reported Constant Currency
22
Cash flow and net debt
(1.0)(3.4)(1.2)Cash utilised by non-recurring items
14.8
6.5
0.9
5.6
-
(0.8)
(0.9)
(3.0)
10.3
8.6
5.1
H2 FY09
11.218.6Net Debt
0.44.2Net increase in cash and cash equivalents
(2.6)(0.9)Repayment of borrowing
3.15.1Net cash movement b/f repayment of borrowing
(0.8)-Refinancing costs
(1.6)-Disposal of VWS
(0.8)(1.0)Capital expenditures
(1.6)(0.9)Tax and interest payments
7.97.0Cash generated by operations
3.75.1Decrease in working capital
5.23.1Operating cashflow b/f non-recurring items and
working capital
H1 FY10H1 FY09£millions
23
Outlook
24
Outlook and prospects
• Trading environment continues to be
challenging.
• Revenues and adjusted operating profit in the
second half of the year expected to be slightly
higher than in the first half.
2525
Contact Details
CEO Ray Walsh +44 7775 602 577 [email protected]
CFO Andrew Cherry +44 780 123 3366 [email protected]
London Stock Exchange code : VLX
New London Address
10 Eastbourne TerracePaddingtonLondon W2 6LGEngland
26
Appendices
27
FTSE All Share Liquidity Requirement
• The liquidity of the stock has increased with several renowned
institutions increasing their holdings and we are hopeful of
returning to the FTSE All Share Index in June 2010
Liquidity Test Threshold for admission to All Share Index
0.00%
0.06%
0.11%
0.17%
0.23%
Dec-0
7
Jan-0
8
Feb-0
8
Mar-
08
Apr-
08
May-0
8
Jun-0
8
Jul-08
Aug-0
8
Sep-0
8
Oct-
08
Nov-0
8
Dec-0
8
Jan-0
9
Feb-0
9
Mar-
09
Apr-
09
May-0
9
Jun-0
9
Jul-09
Aug-0
9
Sep-0
9
Oct-
09
Liq
uid
ity
Source: Datastream
28
Share price performance
Volex Competitors - Share Prices
-50%
0%
50%
100%
150%
200%
250%
300%
03/0
4/09
10/0
4/09
17/0
4/09
24/0
4/09
01/0
5/09
08/0
5/09
15/0
5/09
22/0
5/09
29/0
5/09
05/0
6/09
12/0
6/09
19/0
6/09
26/0
6/09
03/0
7/09
10/0
7/09
17/0
7/09
24/0
7/09
31/0
7/09
07/0
8/09
14/0
8/09
21/0
8/09
28/0
8/09
04/0
9/09
11/0
9/09
18/0
9/09
25/0
9/09
02/1
0/09
09/1
0/09
16/1
0/09
23/1
0/09
Volex Tyco Molex Amphenol Leoni
(all figures in millions) Tyco Elect. Molex Amphenol Leoni Volex
Weighted
Average
ex. Volex
Last 12 month - Ended Date 29/07/09 30/06/09 30/09/09 30/609 05/04/09
Market Cap. (29.10.09) $10,160 $3,340 $7,080 € 372 £48 $21,131
Total Revenue $11,479 $2,582 $2,817 € 2,323 £265 $20,316
Adjusted Income $892 $55 $452 -€ 67 £11 $1,300
Ratios:
Mkt. Cap / Rev. 0.89 1.29 2.51 0.16 0.18 1.04*
Mkt. Cap / Op. Inc. 11.39 60.73 15.66 -5.59 4.29 14.71**
* Weighted Average Mkt. Cap / Rev ratio based on Tyco, Molex, Amphenol and Leoni
** Weighted Average Mkt. Cap / Op. Inc. ratio based on Tyco, Molex and Amphenol (Leoni excluded on basis of negative Adjusted Income)