Volex plc

Good morning, ladies and gentlemen, and welcome to the Volex PLC investor presentation for the four-year results for the year-ended 4th of April 2021. Throughout this presentation, investors will be in listen-only mode. Questions are encouraged and could be submitted at any time by the Q&A tab situated on the right-hand corner of your screen. Simply click Q&A, type in your question, and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via Investor Meet Company dashboard, and we'll notify you once they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Nat Rothschild, Executive Chairman, John Bowden, CFO of Olex PLC. Good morning.

Good morning, or should I say good afternoon, everyone? And welcome to the AdWords presentation for Olex PLC. My name is Nat Rothschild, Executive Chairman, and I'm joined today by John Burton, our Chief Financial Officer. I'm delighted to be presenting another set of excellent results with our underlying operating profit the highest on record for the last 20 years. We have delivered tremendous progress at Volex since 2016 by bringing in a number of senior operational executives who committed some very good people already in place by acquisitions, which have brought new capabilities and by being relentlessly focused on the implementation of our strategy. Today, we would like to take you through the performance we have delivered this year, our outlook and our strategy. There'll be plenty of time for your questions after the presentation. I'm particularly proud of the fantastic results we've delivered this year. because we've achieved this despite the challenges that our business and our employees have experienced as a result of the pandemic. This is a testament to the strong and diverse business we have reshaped and to the commitment and talent of our colleagues around the world. Today, we will start with an overview of the principal achievements and operational highlights for the year. Then I will hand over to John who will take us through the financial performance and talk about our customer sectors and cash generation. Then I would like to provide you with an update on our strategy and the outlook for Volex. Turning to the first slide, I would like to explain how we have delivered the best underlying operating profit that Volex has seen in 20 years. We have grown our revenue by more than 13% this year. Tom will take us through revenue movements by customer sector shortly, but it is worth mentioning the significant progress we have made with our electric vehicle customers. We are the leading manufacturer of grid cords for electric vehicles, providing a safe and convenient product that allows customers of some of the biggest EV brands to charge at home. Grid cords are difficult products to manufacture. Safe is paramount. And we believe we are well positioned to maintain our market-leading position, especially with the cost-saving initiatives we have underway. We have significantly increased underlying operating profit, which is up to $42.9 million, an increase of over 35% from last year. This means that our underlying operating margin is now at 9.7%. This compares with an underlying operating margin of less than 2%. when I joined Bolex in 2016, showing just how far we have come as a business in the last five years. We also made a strategic acquisition in the year, buying the leading power cord manufacturer in the European market. The acquisition of Deka means we are now the only power cord producer in the world with a truly global footprint across three continents. We have a winning combination Our global scale and investment in vertical integration and automation allows us to achieve customer cost requirements. Our extensive engineering experience and investment in developing our own products in areas such as electric vehicles and data center products is a differentiator. We are proposing an increased final dividend of 2.2 pence per share, a 10% improvement on the prior year. Having controlled cash extremely carefully during the year, it is a testament to the strong cash generation of our business that we have the confidence to increase the dividend. We closed the year end with net debt of just $7 million excluding leases. This is excellent considering the investment we've made during the year in both acquisitions and improving our facilities and infrastructure. It also leaves us with significant headroom for further investment and acquisitions. I'm also pleased to report that customer demand in the first few months has been very strong. We are seeing encouraging signs of recovery in areas where some of our customers have been affected by the pandemic, such as the medical sector. I will provide more colour on the outlook in due course. Turning to slide three, let me take you through some of the operational highlights. In a challenging and turbulent year, you really see the benefit of excellent customer relationships and the importance of exceptional customer service. It has been a very complicated year with a lot of changes to demand and logistical complexity. We have stood by our customers providing solutions to their problems. With customer facing teams around the world, we know and understand our customers and they trust us to deliver. This has been so important over the last year. We began the year cautiously, pausing some of our strategic investment and development activity as we work to understand the impact of the pandemic on our business and on demand. As our confidence grew, we invested more in the areas that we believe will deliver long-term growth. This included a significant expansion to our factory in Batam, which doubled the production space. Batam is one of our most versatile facilities, gives us an opportunity to manufacture in Asia and deliver to the US with low tariffs. We were also able to relocate our manufacturing facility in Suzhou to a state-of-the-art facility elsewhere in the city. This gave us the opportunity to expand our capacity as well as a chance to create an engineering center of excellence in Asia, support product development. We've expanded our sales and marketing teams, particularly in areas where we can offer a complex vision into a growing market, such as our data center products. Our marketing strategy has been refreshed during the year and we are encouraged by the number of new customer inquiries we are dealing with. With a heritage of over 100 years in delivering consumer power products, we have an incredible level of expertise in the production of power cords for consumer electronics, domestic appliances and electric vehicles. We have a small but important number of patents which are helping us win new business implications where the design requirements of new technology introduce challenges that traditional solutions cannot overcome. We are making investment in specific areas through the recruitment of new engineers and development expenditure focused on the customer segments where we believe we can deliver growth and further cost optimization. Having acquired six businesses in three years, integration is important for us. We are maximizing our global footprint and compelling skill set to cross-sell to our expanded customer base. Our global scale and centralized procurement team mean we have significant pricing power in negotiations with key suppliers. Related to this, it is worth me providing a bit of color around the impact of the recent inflationary pressure we have seen with commodities such as copper increasing significantly. Like any business, we are not immune from inflation, but we are fortunate that the model in our industry is that input cost increases are passed on to customers. In particular, for our power products, where copper is a significant component of the bill of materials, we have formal mechanisms in the majority of our contracts allowing us to change prices as copper moves. We have worked incredibly hard to improve our margins to where they are today, and we will work equally hard to protect them from erosion. And with that, I would like to hand over to our CFO, John Bowden, who is going to take us through financial performance.

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