Volex posts record full-year profits

26th Jun 2024 07:20

(Sharecast News) - Power and data transmission technology specialist Volex reported record profits in its preliminary results on Wednesday, with a 26.3% increase in revenue to $912.8m, up from $722.8m year-on-year.

The AIM-traded firm said the growth in the 12 months ended 31 March was driven by a 6.9% rise in organic growth, despite temporary headwinds from customer destocking.

Its underlying operating margin improved by 50 basis points to 9.8%, staying within the target range of 9% to 10%.

Volex said it maintained a year-end net debt covenant leverage of 1.0x, benefiting from strong cash generation which partly offset borrowings used for acquisitions.

A notable acquisition was Murat Ticaret for $196m, which accelerated Volex's five-year plan and facilitated the launch of the off-highway market, further diversifying the business.

Volex also invested $8m to increase capacity and support new customer programmes in key locations.

The company proposed a final dividend of 2.8p per share, totalling 4.2p for the year, marking a 7.7% increase.

Post-year-end, Volex successfully refinanced, securing $600m in long-term debt facilities on improved terms to support growth opportunities.

Market-wise, the electric vehicles sector experienced a short-term revenue decline of 9.6% due to customer destocking.

Consumer electricals meanwhile saw a 7.6% reduction from supply chain normalisation in North America and Asia.

Conversely, the medical sector grew organically by 15.3% as improved component availability allowed customers to address backlogs.

The complex industrial technology sector reported a 31.9% increase in organic revenue, driven by data centre product expansion, while the newly launched off-highway market, following the acquisition of Murat Ticaret, also contributed to diversification.

Looking ahead, Volex said it had secured new projects and anticipated improved demand from electric vehicles and consumer electricals customers towards the year-end, indicating a reduction in the destocking impact.

The company said it was planning to accelerate growth in the off-highway sector and expedite the launch of its North American off-highway business.

For the 2025 financial year, Volex said it was aiming to double its operational investments and expected capital expenditure to be about 5% of revenue.

Entering the new financial year, Volex said it was well-positioned to meet its five-year plan targets.

"We have doubled our revenues in three years, while maintaining impressive operating margins within our target range of 9% to 10%," said executive chairman Nat Rothschild.

"This demonstrates the success of our strategy to diversify our business, increasing the share of our sales involving complex products and managing costs effectively as we grow.

"The transformative acquisition of Murat Ticaret has further enhanced our capabilities and solidified our market position."

Rothschild said the company's strategic investments in 2024 and those planned for 2025 would expand capacity at key locations to meet anticipated future customer demand, positioning Volex for further growth by leveraging its dominant positions in attractive sectors.

"With leading positions in our end markets, strong cash flow and robust financial position, we are ideally positioned to capitalise on the significant growth opportunities available to us.

"Our acquisition pipeline remains promising, alongside incremental organic initiatives, underscoring our commitment to achieving our strategic goals.

"Having started the new fiscal year with strong customer demand, we are confident of making further progress in 2025 and we are firmly on track to achieve our five-year revenue target of $1.2bn by the end of 2027."

At 1110 BST, shares in Volex were down 5.83% at 333.35p.

Reporting by Josh White for Sharecast.com.