Robust H1 performance – resilient business model responding well to Covid-19

Volex plc (“Volex”), a global provider of integrated manufacturing services and power products, today announces its half year results for the 26 weeks ended 4 October 2020 (“H1 FY2021”).

Financial and Corporate Highlights

• Operational agility and our unique geographic footprint, coupled with the decision to diversify our capabilities and customer base, has allowed Volex to navigate an exceptionally difficult period in the wider global economy caused by the Covid-19 pandemic
• Underlying gross margins have continued to improve significantly from 23.1% in H1 FY2020 to 25.1% in H1 FY2021, driven by a disciplined approach to capital allocation and cost control across both divisions
• Underlying operating profit has increased by 30.8% to a record $20.8 million resulting in our underlying operating margin improving from 8.1% to 10.3%
• Interim dividend increased by 10% to 1.1 pence per share reflecting our confidence in the ongoing prospects of the business
• Post period end, we have today announced that we have signed an agreement to acquire De-Ka Elektroteknik Sanayi ve Ticaret Anonim Sirketi (“DEKA”), a leading European power cord manufacturer headquartered in Turkey, accelerating our strategy of creating the most efficient and lowest-cost global producer in the industry
• We have also signed a new, three-year $100 million multi-currency revolving credit facility to replace our current $30 million credit facility, increasing our capacity for investment in future growth. The facility consists of a $70 million committed facility with a $30m accordion feature and is effective from 12 November 2020
• Daren Morris has left the Board with immediate effect and will be leaving the business. Jon Boaden, who joined the business in April 2019 as Deputy Chief Financial Officer, has been promoted to the role of CFO. We have also announced that Sir Peter Westmacott, a senior British Diplomat, has agreed to join the Board as an Independent Non-Executive Director and member of the Company’s Nominations Committee.

Operational and Divisional Highlights

• Power Products – sales of products for use in electric vehicles grew by 78% year-on-year and overall profitability continues to improve due to our focus on automation and vertical integration
• Integrated Manufacturing Services – we have improved profitability levels as a result of our focus on higher value-added products despite very challenging conditions in the medical installation business as a result of Covid-19
• Upgrade of capacity and facilities – during the period we have relocated our Suzhou plant to a new state-of-the-art facility and we have also commenced work on our new cable extrusion plant in Batam which we expect to be operational by the summer of 2021

Outlook

• Having delivered a robust performance in the first half of the year, coupled with a strong forward order-book, the Board remains confident in delivering on full-year expectations, absent any material disruptions to our business that may be caused by Covid-19
• We continue to monitor the dynamic and evolving situation in relation to the Covid-19 pandemic closely and are mindful of the impact that future government-imposed restrictions designed to control the spread of the virus could have on our business in various geographies
• The longer-term prospects for our business remain strong and we continue to invest in increasing capacity in our key facilities to meet customer demand and to implement vertical integration to improve our competitiveness and profitability

Nat Rothschild, Volex’s Executive Chairman said:

“Our response to the unprecedented challenges of Covid-19 is a fitting testament to Volex’s forward planning, resilience and agility. In a period of profound global disruption, we have prioritised keeping our people safe and protecting our operations while growing our operating profit, improving our margins and continuing to progress well with our strategic objectives.

This relentless focus on operational and process improvements gives us sufficient confidence to increase our interim dividend by 10%.

Today we have also announced our acquisition of DEKA, a world-class Power Products business. As one of the two leading power cord producers in Europe, with a strong management team and a world-class customer list, DEKA is a perfect fit with our business model, and the acquisition accelerates our strategy of creating the most efficient and lowest-cost global producer in the industry, providing an immediate and scalable European platform.

Our outlook for the remainder of the year remains unchanged, absent any material disruptions that may be caused by Covid-19, and we continue to invest across the business in order to meet customer demand and deliver on our long-term growth prospects.”