Volex plc

Good morning, ladies and gentlemen, and welcome to the Volex four-year results presentation for the year-ending 5th of April 2020. Before we begin, we'd like to submit the following poll. For your information throughout this presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. The company may not be in a position to answer every question it receives during the meeting itself, but the company will review all questions submitted today and publish answers where it's appropriate to do so. Finally, I'd like to remind you that this presentation has been recorded. I'd now like to hand over to Darren Morris, CFO, and Nat Rothschild, Executive Chairman of OLEX. Thank you, guys.

Thank you very much. And thank you to everyone who has joined this call today. this morning. This is the first of these calls that we as a company have done for about five years. So we're very happy to be back online and we're glad that we have a good set of results to go through with you today. So if you turn now to slide two, or we will turn to slide two, let me just go through the overview of this year's results. 46% increase in underlying operating profit to a record $32 million. Underlying operating margin up to 8.1% from 5.8%, driven by better sales mix and a move to much higher margin sales. Record revenue of $391 million, an improvement of 5.2%. We hoped to get to 400 million for the year, but the shutdown in our China facilities in January and February didn't help. Two successful acquisitions in the year. Exceptional three cash flow of 48.8 million. And, of course, a robust debt-free balance sheet, which is fantastic. certainly a differentiating factor for many of our competitors. So onto slide four, financial results. Operating margin up to 8.1%. Our target is 10%. We've really prioritized margin over volume. We're not so interested in top line. Cash in the bank is what really excites us. Careful cost control. We've invested in automation. significant cash and undrawn facilities at year end. So we've got good relationships with our banks. We can turn to our banks if we want to dip into the facilities that we have. Dividend is a critical part of our philosophy. So we want shareholders to share with us in the success of the business. So a three-peer share dividend. And the dividend policy is going to be progressive. So we want to increase the dividend next year. We're making acquisitions. So acquisitions is part of our DNA. And we'll continue to do that. We did two last year. We've done five in total. Just to give you an idea, acquisitions make up about 25% of our revenues at the moment. And then we're investing outside of China. So we're conscious of the geopolitical risks associated with China. So we're putting money into our manufacturing facilities outside of China. But we're not... moving out of china we we like china still but we're just trying to create a natural a natural hedge so on to slide five it really shows in uh diagrammatically what what i've just been uh what i've just been talking about and i think maybe the main thing to to point out here is in the um is in the bottom left hand corner margins in in both divisions are improving nicely So on to slide six. Again, this is just really articulating what we've already said in previous slides. The one thing I would point to here is the return on capital employed. So we have about 100 million of assets and we're making about $30 million a year off those 100 million of assets. So the business does not need a lot of outside capital. And these are pretty interesting businesses to be involved with. And that number is an important barometer of our financial health. And it's one of the reasons why we like this business so much and why we think we can grow it and why we think just to remind everyone that we have a a plan a five-year plan to grow this business to 650 million dollars in revenues and 65 million dollars in profit through a combination of organic and inorganic growth and throughout that we consider we can we're committed to a consistent dividend payment So on slide seven, we just talk a little bit about group revenue, how we got from last year to this year. The important point to note is the IMS division is growing organically and inorganically. So the organic growth last year was about 5%. And on top of that, we were able to include in the acquisition of Servitron. The power side of the business has increased. gone back slightly but this is a reduction that has been consistently flagged in all of our results and we believe that it has plateaued and we're hoping this year coming that we're going to be able to see some growth in power again and that growth will come because we've lowered the overall cost we've made the business more cost competitive and that's enabled us to win new business from new customers And within that, we've got a nascent electric vehicle business that is growing very nicely. And that growth has obviously been delayed somewhat by the COVID-19 outbreak. So in FY 2020, we estimate that there was a reduction in revenue of about $8 million, as I referred to earlier. And we now believe that the growth should come, should steadily start to come back in EV within our power products division. So on slide eight, again, that just puts into numbers what I've already talked about. I mean, what is interesting is that the business in FY 2021, so this year, is from a profit standpoint, is actually ahead of where we expected to be. So our operating margin is actually ahead of last year. And that's because of a very favourable mix coming through from our data centre products. People have to work at home at the moment. There's a tremendous demand for the construction of data centers and the replenishment of existing data centers. And we are really benefiting from that today. We've seen some weakness in the medical install side of the business, which we've obviously talked about in our in our results and we also delivered margin improvements through operating efficiencies and and that's again credit to our to our to our team in in inside of um inside of volex the last thing i would say on this slide before we before we turn over is we are moving up the value chain so so we've bought businesses in the last two years that have enabled us to do more things for our customers. So printed circuit board manufacturing and also box builds. So we are very much a company that is able to do more and to spread itself out across the requirements of our customers. So slide nine is just a little look at the power side of the business. Again, Our revenues have gone down. It's been absolutely flagged throughout the last two years, but our profits have gone up. And again, profits are what we care about. Top line is vanity. Profit is sanity. And cash and bank is reality. So we are happy about the performance of this business. And as I said earlier, it has plateaued and we do expect it to grow again next year.

Don't forget about spelling and grammar mistakes. Just click on the highlighted areas and Grammarly's advanced spelling and grammar suggestions will fix those right up. Looks good to me. Submit it.