Volex Group Plc Ord

Good morning, ladies and gentlemen, and welcome to the Volex PLC four-year results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. They can be submitted at any time using the Q&A tab that's situated on the right-hand corner of your screen. Just please simply type in your question at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself, given the attendance today. However, the company will review all questions submitted today and publish responses is where it's appropriate to do so. Before we begin with participation, I'd now like to hand over to John Bowden, CFO, and Nat Rothschild, Chairman. Good morning to you both.

Good morning, everyone, and welcome to the annual results presentation for Volex PLC. I'm Nat Rothschild, Executive Chairman. I'm joined today by John Bowden, our Chief Financial Officer. We are pleased to be sharing with you another excellent set of results. 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. Then I would like to provide you with an update on our strategy, including our new five-year plan and the outlook for Volex. There will be an opportunity for questions to be submitted at the end of the presentation. So when we set about transforming Volex back in 2016, our vision was to create a diverse and resilient business that could deliver growth in attractive markets. Although it has been a challenging year for all manufacturers with high material costs and increased lead times, I'm very pleased with the way our organisations responded to these challenges to deliver another set of record results. We delivered higher revenue, including significant organic growth. We achieved an underlying operating margin of 9.1%, successfully managing the impact of inflation. Our robust performance and outlook give us the confidence to once again increase our dividend with a 9.1% increase on last year. Our strategy is clearly working as we deliver growth across our market sectors and benefit from our investments in both acquisitions and infrastructure. We are focused on long-term growth and our performance puts us firmly ahead of the stretching goals we set for 2024. To maintain momentum and continue our growth trajectory, today we are launching an ambitious new five-year strategy. More about this later.

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We believe we've created something unique in Volex, which is positioning us for future growth. Our geographic spread is a major differentiator and a key selling point. Customers want to simplify their supply chains to reduce risk and complexity. Having expanded our global footprint, we are well-placed to support this. We now have six production sites in North America, giving us capability across all our key markets. We have printed circuit board assembly infrastructure in two of our US facilities and we are deploying this technology in our flagship medical site in Tijuana, Mexico. This will help us meet growing customer requirements and improve our competitiveness for higher value add box build projects. In Europe, we also have six sites, including two in Turkey that support our European customers. These sites range in capability from complex sub-assemblies for specialist medical equipment to power cords and wire harnesses for a range of domestic appliances. Our six sites in Asia include our facilities in Batam, Indonesia, and in Hanoi, Vietnam. These locations are important because we can ship to the US with lower tariffs compared to Chinese manufacturers, giving us an important cost advantage. We also undertake a lot of our research and development activities in Asia where we benefit from local engineering skill. Our site in Pune, India is our most recent acquisition. We are constructing a new purpose-built medical production site to offer a low cost manufacturing opportunity to our largest medical customers. We're excited about the growth opportunities that India offers. I'll now hand over to John who will take us through the financial performance.

Good morning, everyone, and thank you, Nat. As Nat mentioned, it's been another excellent year for Volex, and we have delivered a strong financial performance. Our revenue is up by 39% to $615 million. Half of the revenue growth was organic. In addition, revenues in our Turkish business that we acquired in FY21 were up by over a third, as customers looked to avoid higher freight costs by sourcing locally. We increased our underlying operating profit by 31% to $56.2 million. This represents an underlying operating margin of 9.1% and I will step through the movement in operating margin later in the presentation. Profit before tax increased to $36.2 million, an increase of 23.1% compared to the previous year. Finally, as Nat mentioned earlier, we are increasing our dividend. We paid an interim dividend of 1.2 pence in December and we are proposing a final dividend of 2.4 pence, taking the total dividend for the year to 3.6 pence. This is an increase of 9.1% year on year. Slide six illustrates our success in delivering revenue and profit growth year on year, including through some challenging macroeconomic and operating environments. This demonstrates the success of our strategy and the steps that we have taken to optimize our cost base, including vertical integration, automation and continuous improvements. This has enhanced our competitiveness and helped us win projects with both new and existing customers. We are a more diversified business than we were five years ago, working with customers that suits our manufacturing capabilities. Our acquisitions have delivered new relationships and allowed us to achieve cross-sell opportunities. We have a well-balanced book of business, giving us confidence that we can grow through the cycle. We have achieved underlying operating margins of between nine and 10% for the last two years. This level of margin gives us the right balance between profitability and growth, allowing us to reinvest in further enhancing our business. On slide seven, I've set out the impact we saw during the year from inflation. Copper prices have been about 40% higher than the previous year. most of our power product contracts allow us to pass through higher copper costs with a short delay we also pass through increases in the cost of other raw materials and freight in line with our established practice and again there was a short delay as we recalculated the prices and agreed these with our customers through fy22 copper remained relatively stable but it is still higher than it was 18 months ago Since the year end, we've seen reductions in freight and some key raw materials such as PVC resin, although there are some components where the costs are still increasing. Labour costs increase during the year and we will keep these costs under close review. We manage our costs very closely and focus on delivering savings through continuous improvements, although this is harder to achieve in an inflationary environment. We know that our operations are extremely efficient and this gives us confidence that even after increasing prices to reflect higher raw material costs, we still have an extremely competitive commercial proposition. As a result, we will continue with our approach of passing through cost increases where we need to.

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Slide eight provides some more colour on the movements in our margin. I've broken out the impact of the prior year one off COVID related employment tax credits, which was 50 basis points. And without this benefit, our FY21 operating margin would have been 9.2%, which is very much in line with this year. There is a benefit from cost optimisation as we kept tight control over our operating costs, which helped us improve our operating margin by 120 basis points. We sold more power products in the year relative to more complex, higher margin products. This resulted in a 90 basis point reduction in margins. As you can see, there's a 70 basis point benefit from acquisitions, which includes DECA. The inflation impact is due to a combination of factors. There is the impact of passing through higher costs such as copper, which dilutes margins. In addition, there's a short delay in the pass-through of costs, which reduces margins when costs are increasing, but becomes a benefit if input costs start to fall. Slide 9 sets out the movement in cash during the year. There was an outflow due to higher working capital as we grew the business and sales increased. We decided to increase inventory to meet customer commitments and protect revenue. We want to avoid delaying an entire assembly for the sake of one missing component. So we are buying components earlier to ensure that we have availability for scheduled builds. We were holding about two weeks more inventory compared to a typical year end. We expect to maintain higher levels of inventory in FY23 with ongoing variable and extended lead times. We are used to managing greater supply chain complexity now, and it's a headache for our production schedulers, but it is not affecting our ability to keep the factories busy and well-utilized. Trade receivable and trade payable days were broadly in line with historical averages, demonstrating our tight control over these important elements of working capital. We paid $55 million for acquisitions, and this included contingent consideration for DECA because it's exceeded its earn-out targets. To reduce dilution from employee share plans, we purchased $5 million of shares in the market to settle awards. At the end of the year, we had $111 million of headroom in respect of our revolving credit facility, giving us plenty of firepower to execute our strategic plans. We invested around $15 million in capital projects, almost double the figure from the previous year as we increased investment to meet customer demand, as well as due to our increased scale. This investment is not speculative and is in response to customer demand and the increases in organic revenue that we saw, as well as to keep pace with anticipated demand in future periods. As we have successfully transformed our operations, we have increased confidence in our ability to generate value through the sensible deployments of organic capital investments. Levels of investment have increased, reflecting our successful expansion in areas with strong growth characteristics, such as electric vehicles. We have invested in vertical integration and automated production lines to enhance efficiency and maintain our competitive position. Towards the end of the year, we increased the production capacity of DECA with the introduction of two more automated production lines, allowing us to meet the strong demand we are experiencing. Investment levels in future years are expected to increase based on the number of exciting growth opportunities we are seeing. Most of our investments are low risk as they achieve a cash payback within two years. We believe this represents an extremely good return for shareholders. We are also increasing our manufacturing footprint with expansion activities in India, Poland, Indonesia and Mexico, all driven by additional customer requirements and our ongoing sales success as we are awarded new project wins. The movements in earnings per share this year are quite complicated due to the effect of deferred tax, so I've included some analysis on slide 11. First, let me go through the key movements before tax. The increase in underlying earnings per share due to the higher level of operating profit was 8.7 cents. Having made four acquisitions in the period, interest expense was up. There was a small impact due to the issue of shares in FY21 related to acquisitions, including DECA. As you may remember, in FY21 we recognised a deferred tax asset in relation to historical tax losses. Accounting standards require you to recognise a deferred tax asset when you become confident that you will generate suitable profits to receive a future cash benefit from the tax losses. As the group became more profitable, we achieved that threshold and recognised a deferred tax asset worth $12.9 million in FY21 and an additional asset of $2.9 million in FY22. Before tax, EPS grew 20% in the year.

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Turning to electric vehicles and consumer electricals. We started our EV business from scratch five years ago and continue to go from strength to strength, which reflects our leading position in grid cords and expanded product sets and increased customer base. Revenues were over $100 million, up 96%, which was all organic. We have substantial market presence due to our design and engineering skills, building deep technical partnerships with our customers. Our vertical integration helps maintain our position as a lowest cost manufacturer. We have expanded our range as the EV market develops. We sell to vehicle manufacturers, to automotive supply chain specialists and to the manufacturers of out-of-home charging solutions. This has allowed us to expand rapidly, supporting a broad cross-section of the North American and European EV market. We've seen strong progress in our consumer electrical sector. supporting leading global consumer brands in the electronics and appliances space. Revenues were up by almost $100 million to $262 million, an increase of 60%. Longer shipping times and higher freight costs are encouraging European customers to choose Deka, with sales up by over a third on a like-for-like basis. We saw organic growth of 14%, including the impact of copper pass-through. Cost optimisation and efficiency programmes have improved competitiveness and our global capabilities and successful cross sales are allowing us to win more business. Some customers are reporting a softening in demand for some consumer electrical products in the first half of FY23 due to lower consumer spending. We believe that the increases in our market share will broadly offset the impact of the changes in demand. We're really pleased with the strong return in demand in the medical sector, with sales up 10% above pre-COVID levels and growth of 14%, which was virtually all organic. Sales of complex assemblies increased with high customer demand due to healthcare providers investing in infrastructure to tackle waiting lists. This should be sustained over the medium term, given the complex nature of the end products that we support and the structural growth in this market. Having experienced real challenges during the pandemic in securing supplies, some of our medical customers are looking for our support to relocate production, moving closer to their manufacturing sites. With specialist medical sites across three continents, we are perfectly positioned to support this activity. Our complex industrial technology customers range from businesses that support industrial automation, manufacturing technology, defence specialists to global data centre operators. Demand from the industrial space has been strong, particularly from customers who sell technologies that help businesses achieve efficiencies and automation in their industrial processes. In FY21, we saw strong demand for high-speed cables as customers stocked up to avoid disruption to their supply chains. There's been some normalization of inventory at our customers in FY22, reducing demand for 100 gigabit products. Our engineering team developed next generation 400 gigabit per second high speed cables for our data center customers. We have successfully qualified these products with our largest customers who will look to retrofit their existing estates when there is greater availability of compatible servers later in FY23. I would now like to hand back to Nat who will take us through some strategic and operational highlights.

Thank you very much, John. So acquisitions, they've played an important part in our growth and development over the last four years, helping us diversify. So we now have a global footprint, a broader customer base and enabling us to achieve vertical integration, among other benefits. We purchased Irvine in October and TC in January, both aligned to the North American defence market. Irvine produces mission critical printed circuit board assemblies for defence and aerospace applications. TC produces complex wire harnesses for use in a variety of specialist vehicles. Prodomex produces wire harnesses for the North American domestic appliance market. With a strong presence in this market in Europe and Asia, this acquisition allows us to offer a single global solution to major manufacturers, as well as leverage economies of scale. Finally, in Yantra, is a high-growth specialist manufacturing business producing printed circuit board assemblies and box bills. We acquired additional land, allowing us to create a dedicated facility for our medical customers, supporting the demand for a low-cost manufacturing alternative to China. We're seeing an increase in potential acquisition targets coming to market, and in general, valuations are sensible. This means that we have some interesting opportunities at various stages in our acquisition pipeline. On slide 16, we set out some of our key achievements in ESG during the period. ESG is important to our board, our employees, our customers, and other stakeholders. One of our key objectives this year was to roll out a group-wide ESG reporting tool so we can capture reliable data set to understand the impact we have from a sustainability perspective. This information will help us prioritise our future improvement activity and provide a baseline so we can set targets and measure our progress. Employee safety is very important for us And we've implemented a group-wide health and safety policy to ensure that we maintain high standards in this area across our organisation. Moving forward, our focus will be on establishing additional sustainability targets for the organisation, which we will track through our reporting process. we have waste to landfill and employee turnover as two key priorities for FY23. And we will put in place improvement initiatives to deliver positive change in these areas. On slide 17, we set out our approach to capital allocation. I'm sure that none of this will come as a surprise given the strategic priorities we have discussed. Investing in growth areas of our business is a high priority. We invest where we can identify established demand and we have a high degree of confidence of delivering a strong return. Acquisitions are an excellent way for us to enhance our capabilities and reach new customers. We have demonstrated that we are good at acquiring and integrating businesses which perform well within our organisation. Our intention is to pay a sustainable dividend. and we have increased the dividend over the last three years. Finally, we would look at returning capital to shareholders if we are unable to generate value through investment. The board believes that the leverage ratio net debt to EBITDA between 1.5 to two times is sensible for our business. And at the year end leverage was 1.3 times. Back in November 19, we announced a challenging plan to achieve $650 million of revenue by FY24. Having delivered strong organic growth in FY22 alongside some attractive acquisitions, we are on course to achieve this plan significantly ahead of schedule. Our ambition is to deliver $1.2 billion of revenue by the end of FY27. We aim to achieve this growth while maintaining underlying operating margins of around nine to 10%. Our expectation is that at least $200 million of revenue will be the result of new acquisitions, maintaining our commitment to identify and integrate attractive businesses that enhance our operations. To continue our growth momentum, We have developed a new detailed strategy for each of our market sectors. In five years, we have grown our electric vehicles business from nothing to over $100 million in revenue. We have built a talented engineering and design team who have translated our experience in consumer power cords into cutting edge designs for EV customers. we will continue to develop innovative products to meet the evolving requirements of the EV market as the world transitions to EV technology. In consumer electricals, we have been gaining market share through cross sales and our low tariff freight efficient locations. With plans for further continuous improvement, vertical integration and automation, we will enhance our competitiveness, supporting our growth. We have an excellent reputation, brand and relationships with the best customers in this space. We are well established with some major medical customers who trust us to support their latest innovations. Healthcare providers are investing in advanced technology to support an ageing population and deliver improved treatment outcomes. Our global capabilities align with the trend to reassess manufacturing locations, supporting customers looking to simplify their supply chains. Our ongoing investment in PCB assembly capability will increase our competitiveness for box build projects. For our data center customers, the move to the next generation of high-speed cables will generate considerable demand. We have a range of highly competitive and low-tariff solutions for this market. In addition, our skill at acquiring good businesses at reasonable valuations will support our growth. In summary, we have delivered another record performance with substantial organic revenue growth. We have invested in growing our business with a focus on optimising our manufacturing and enhancing our competitiveness through vertical integration, automation and continuous improvement. Our strong performance puts us well ahead of our existing five-year plan and we have set out our updated strategy with an ambition to achieve revenues of $1.2 billion by the end of FY27. In terms of our outlook for FY23, we have started the year well. Customers are ordering earlier in view of continued extended lead times, and this gives us better visibility into the first half of the year. We continue to follow best practice to reduce the risk of COVID and all of our sites have remained open so far in FY23. There were some delays in shipping times for goods transiting through Shanghai at the beginning of the year, but this has largely cleared. We are, of course, mindful of some of the challenges emerging in the broader economic environment and we continue to manage risk carefully in respect of growing our business and our investment strategy. Our alignment to four attractive market sectors gives us a balance of opportunities with our global blue chip customer base. The sensible investments we've made in the last 12 months in people, capabilities and continuous improvement will help us continue our progress in FY23 and position us well as we move towards our new ambitious five-year plan. So we would now be happy to take your questions electronically.

That's great. Nat, John, thank you very much indeed for updating investors this morning. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the right hand corner of your screen. But just while Nat and John take a few moments to review your questions submitted already, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your InvestorMeet company dashboard. Nat, John, as you can see, investors have submitted a number of questions electronically through today's presentation. And if I may just ask you to read out the questions and give a response where it's appropriate to do so, and then I'll pick up from you at the end.

Okay, so there's hundreds of questions literally on here. So I'm just going to try and sort of pick out a few interesting questions that resonate with me. Well, Alan A says, please can you let me have your thoughts regarding the share price? Well, obviously I'm disappointed in where the shares are today because I think we have a very, very strong investment proposition. I think that the market overall is obviously going sideways and the broader market in our industrial space has sold off. I do think that if you take a long-term view you're prepared to kind of look out beyond the current cycle. I think our shares are incredibly undervalued at these levels. And that's why myself and other members of the management team have been acquiring shares. We've also bought in around $5 million of shares over the last 12 months to satisfy stock options. And the final thing is that what differentiates businesses like ours is the quality of the management team. And we have a genuinely brilliant management team inside of Volex who have obviously taken the business from the brink of extinction in 2015 to something which is a company which we believe can generate a billion to a revenue by 2027. So that's one question. John, do you want to answer on just unutilised tax losses?

A question from Michael R. Yes, absolutely. So let me just find Michael's question and read it out. So Michael asks, do you still have unutilised tax losses? If so, how much? And I think we've had a few questions similar to that. So we do have unutilised tax losses. The tax losses are generated in a number of territories. Some of those territories, territories are more relevant to our ongoing operations and the tax losses are easier to access. Our expectation based on our current plans is that we'll be able to utilise tax losses in certain jurisdictions for the next three to five years, although that is of course dependent on a number of factors and things such as changes in legislation and also where we generate profits around the group.

Okay, thanks, John. So there's another question here. Noted the recent investment in Yantra. Does this herald increasing investments in the Indian market? Well, obviously, we've acquired in Yantra. We've guided that the company will generate around $20 million of revenues for this year. But the exciting thing about Inyantra is the land, the 13 and a half acres that we bought with the company. And that land is going to enable us to invest around $4 to $5 billion to build a 100,000 square foot state-of-the-art medical facility. And we looked high and low in India for an acquisition. And there's really very, very few companies engaging in medical cable assembly because most of our competitors are focused on the automotive market. So we do think India is a really, really interesting area. And there's also the opportunity to go into power cord in India. And obviously as well, there's the longer term desire to go into the electric vehicle space as well in India. And there's obviously been some talk of major Western manufacturers putting down new factory developments there. And if that did occur, then we'd obviously react very quickly.

Good. Thanks, Nat. I've spotted there's a couple of questions on the Turkish lira and we talked about how pleased we are with the progress that we've made with Deka, the business that we acquired in Turkey in February 2021. So Chris S asks, can you explain the impact of the falling lira on your Turkish business? And I think I saw another similar question, which was also from Chris S. Do you buy raw materials and sell from DECA in dollars or Turkish lira? So first of all, we are selling from DECA. in euros and in dollars with a very small amount of sales in Turkish lira. So on a sales side, we have virtually no exposure to Turkish lira. We are buying raw materials in euros and in dollars. predominantly in euros, where we do have some exposure to Turkish lira is on staff costs, because we're obviously we're paying our workforce in Turkish lira. And what we found is that although there is significant wage cost inflation in Turkey, because the currency is devaluing at the same time, if you look at wages on a euro basis, then wages are relatively stable. And the way that we operate with our largest customers in DECA, it's on a semi-open book basis, which means where we experience either increased cost or reduced cost as a result of labour, then that is passed through to the customer. So that's the way that they have established that business and the practice that they have for that European white goods space. So overall, we don't have a significant impact

issue in operating profit terms as a result of our activities in turkey and our exposure to the lira okay thanks john so here's a question from mark a in terms of acquisitions what does the pipeline look like and new territories you would like to expand into Well, we mentioned it in the presentation that the acquisition pipeline at the moment is quite deep and quite varied. And I think I'd like to sort of underline that point. We have a tremendous amount of interesting acquisition opportunities at the moment. And they are... As you would expect across the globe, there are a number of interesting low-cost regions in Europe. So further east you go. That does not include the Ukraine, which is obviously a terrible situation. But we have nothing in the Ukraine. We have virtually, I think our sales into Russia are kind of half of 1%. But in terms of the pipeline, there are some very interesting low-cost regions in the east of Europe. And obviously, Turkey is a market that we like very much. And we've made a tremendously successful acquisition there. So there are very, very interesting opportunities there. The North American market is a huge captive market. And again, we're looking at a variety of deals in North America and then also in Southeast Asia. The one area we're not looking at is China. We have enough scale and capacity in China. China remains an important market to us. But one of our advantages and one of our differentiators is we have a truly global footprint. And that was by design. And clearly the... The COVID situation in China has just made it impossible to go there. It's also made it a much more difficult place to do business. And then I mentioned in the earlier call with the analysts that specialised vehicles, what we call non-passenger automotive, is an interesting area where there are So rich, you know, rich pickings, it's not as it's not as competitive, you can get interesting margins. And, and that's an area we want to we potential potential new vertical for us.

good thanks nat um getting some really good questions in so try and answer some of these questions quite quickly so we've got time to get through through them all uh question from paul b how many customers do volex have for electric vehicle charge charges and is one of them tesla so as a policy we don't disclose the names of our customers but we we have said previously that we work with some of the largest automotive brands in the EV space. And we're really, really proud of the customers that we work with. Our go-to-market strategy in EV is to either work directly with manufacturers or we will work with major automotive supply chain companies and use that as a route into lots of different brands through their existing relationships. And that's been a great way for us to accelerate our growth. And we also are really excited by the opportunities for what you might call out of home charging or charging infrastructure. And of course, as EV adoption grows and for the ability for people to charge away from the home becomes really important. So we're working with a broad cross section of different companies in the EV space. then if i can pick another one here from henry w what is the split of organic growth between higher prices and higher volumes so we haven't published that we've given details of the organic growth that we've achieved and really pleased to have achieved 19.4 organic growth this year it varies the split between price and volume varies by the different parts of our organization, the different customer sectors that we face into. So it's hard to give an answer that is sensible across all of those markets. But the majority of the growth that we've seen has been volume driven rather than price driven. And I'll take one more and then I'll hand back to you Nat to answer a few more. So Bill C says, underlying PBT is up by 23.6%, well done. But underlying diluted EPS excluding deferred tax asset recognition is somewhat pedestrian, 6.3% up. Why this massive adverse difference between the two metrics? so i believe i've covered this on the eps slide so a big part of it is tax we've explained that before tax eps is up 20 there's a deferred tax difference between this year and last year there's also a current tax difference so we've published the the numbers in the press release that we put out this morning, there's a detailed analysis of tax. But I think that the answer to that question, you can drill into that by looking at what we've published on the slide and in the press release.

So here's an easy question to answer. It says, NR, you own almost 50% directly and indirectly. Could this be a reason that the share price is hampered? Well, I wish I owned 50% of Vox, but that is actually not the case. I own just about exactly 25%. And the second part of your question is market might consider that you will be a constant seller. Well, I've never sold any shares of Vox ever since I've been the executive chairman, and I've only ever So that question we can quickly move on from. There's another question here, which is, hang on, is it from the same person? Let's see, what will be the impact of rising interest rates on and further acquisitions on finance costs? Well, John could give you a more kind of granular answer to that. But I mean, obviously, if we borrow more money, our interest bill will be higher. And the way I think about it is, you know, if you have a... And I'm just throwing a number out. If you have a 5% interest rate and you can do better than 5% in your investments, then you want to seriously consider making the investment. So what we've said very clearly is we're going to prudently invest. leverage the business. So I think we used a figure of 1.2 times net debt to EBITDA, and we're comfortably below that. But John, if you wanted just to give a slightly more granular answer to that question, I'd appreciate it.

Yeah, of course. I mean, I thought your answer was really good. And it's true. We talk about the sensible levels of leverage in the business and growing in a sustainable way. We a confident in the returns that we can generate with on our own business through organic investment as well as acquisitions and as the interest rate environment changes my view is that that has an impact on valuations of businesses that we look to acquire so we made a we said in in the presentation that we're seeing businesses coming to market at sensible valuations and people are understanding that the economic conditions are different to what they were two years ago and that's reflected in the valuations so as nat said we will always look at the returns that we can generate through any type of investment that we do and they're typically significantly higher than the the cost of carry on any debt that's associated with the with the acquisition so a question here from henry w he said what changes have analysts made to forecast for fy23 this morning well i haven't been through the notes that have been published in detail yet the So analysts made some changes back in April when we did our trading update and that gave them an opportunity to revise, of course, their position for FY22, but also firm up their view for FY23. I think we've got some really great analysts that cover volex and provide a lot of of insight and they all come at it with a slightly different perspective and different different questions but they they produce some really good quality quality research. There's a question here from Lionel H who says, can you provide more detail on the new five year plan? What will be the key drivers, geographies, products for doubling annual revenue? So I'm not sure whether that question was asked after we'd put the slide up. It was the penultimate slide where we did go into detail in each of the markets. We set out the growth rates. in those markets but what i would like to say about the five-year plan is this is not a top-down plan that's been dreamt up in head office this is a bottom-up plan that we've put together across the business involving our sales teams our operational teams and our finance teams around the world to create a stretching and ambitious plan that will be incredibly hard work for us to deliver but with the momentum that we've built in this business the competitiveness that we've achieved through our continuous improvement programs the cross-sell opportunities we've got and the quality of the management team all organization at all levels in the organization we're confident that we can deliver this this five-year plan so it will be a mixture across the different parts of the organization we've done really well creating this balanced And we want to keep the business balanced by growing in all aspects of our operations.

Okay, here's a question from Greg M. How much can you improve margins? over the next three years, what return on capital employed you're achieving and what is your target? We said very clearly, Greg, that we're trying to keep the margins between 9% and 10% over the course of this year. of this of this five-year plans i think that answers uh that question we've taken the margins from nothing to nine nine plus percent over the last seven years we think this is the right margin for this um for this business and then you the second part of your question was around the return on capital employed it's come down from sort of 30 to 20 percent because of the effect of um acquisitions but it's still an incredibly healthy number and it shows you you know why these are such kind of great businesses because they require such little capital and they are extremely cash generative when you when you get them right and so what you're seeing is you're seeing the organic growth now is we're really putting money uh back into the business and and that's obviously um that's obviously sort of coming through in the numbers The question is, why aren't we buying back shares right now? Well, the answer is we have a tremendous amount of investment opportunities. So rather than buying back shares, we are investing back into the business. What I would say is that internally we have an informal policy that for the share awards, we like to buy the shares in for the awards, which is a form of a share buyback. And we do that because we want to underline the value of the shares, the cost of these shares to the management. And what you'll see is if you look at our share count, year on year, it's hardly moved. Um, it's hardly moved at all. And that's because we've been so, um, uh, so, um, assiduous in, in, in, in buying in shares, which as I say, is a form of share buyback. Um, So Ariel, I'll just do one more, John. I mean, Ariel Cohen says, perhaps the share price has fallen this morning despite the excellent results of the market is worried about the company meeting forward guidance. If there is a global recession, are you still confident of achieving double-digit growth in the event of a recession? Well, look, the answer, Ariel, is this, is that since we started this journey, we've never missed a... earnings um uh forecast so we we take it incredibly seriously um we don't want to um over promise and and under deliver we're the other way around and so all our forecasts uh have historically been extremely conservative which is why we've always uh We've always met or beaten them. And, you know, what's interesting about our business today is that we're winning a lot of market share. So we've got some big customers who like us and who want to do business with us. And so that, I hope and believe, and we have a saying inside of Volex that hope belongs in churches. But I genuinely... believe that we're going to have a good year this year, even in the event of a recession. And in terms of your final question, what do you think is an appropriate P multiple to be valued on? I mean, what I would say is that in the broader M&A universe that we look at, companies that are being sold, for example, by private equity, are almost all going for 10 times EBITDA multiples at the low end. And when you look at the size, the sort of complexity, the diversity of this business, this business that we have is better than any business that we have looked at. And we've looked at hundreds and hundreds of deals over the last four years. And this is as good a business as we've...

we've uh as we've come across so obviously you know i i think in a you know if this were a private company it would command a a far higher multiple than where it's trading out at the moment good thanks now i think we've got time for a couple more questions so there's one here from andrew g which is how does volex share best practice across sites globally to drive efficiency and performance um I mean, I think that's a question that's well illustrated by an example. And what we've done is we've put in place global specialists who focus on continuous improvement. So we have a global continuous improvement. expert who is taking best practice to the site he's learning from sites and what efficiencies they've had and delivering that in other parts of the organization we're also doing a lot of cross-site collaborative activity so helping our general managers from sites visit other sites and understand where they found improvements the best example is what we've been doing in power cords now something a lot of people don't realize is that when you're extruding your own cable for power cords you have a particular recipe for that and everyone has got their own recipe it's a bit like your mum's recipe for victoria sponge and it's it's everyone is slightly different now we have got some very clever people in our cable extrusion businesses, and they've been getting together. So we flew our management team from Batam to our factory in Turkey, and they had two or three days where they're exchanging ideas. They were looking at their recipes. They're looking at how they can optimize the product. And then from that, we believe we can make some significant savings in the cost of our cable that we're extruding around the world by sharing that knowledge and that best practice. And of course, what that translates into is more competitive products, which is one of the ways that we will drive further sales. So thanks for that question, Andrew. And then final question that we'll answer for today. There's been a couple of questions around acquisitions in the EV space. So Ketan says, are you looking at any acquisitions in the EV space to vertically integrate or will the growth be totally organic? And Ariel has asked, have potential acquisition targets in the EV space now come down to attractive valuations? Are you particularly focusing on acquisitions in that space, given its highest growth? And the way I think about this, and it'd be interesting to get Nat's perspective as well, is that we've built entirely organically a $100 million revenue EV business. We've been putting in vertical integration. We've been optimizing our production ourselves through organic investment, and that's been a the right strategy to allow us to grow. Of course, if we did find an attractive opportunity in EV, then we would look at it. But the valuations for EV businesses, given the opportunity in EV, do tend to be quite high. believe we've got one of the best ev businesses going so it's hard to think about what we would buy that would further enhance that but we would certainly look at if there's gaps in our capability a way to accelerate the the knowledge and so to build that capability could be through through acquisition so we keep an open mind to that did you have anything to add on that now before we we bring the call to a close

I don't. I think EV is an organic grower. We don't need inorganic opportunities for EV. The organic opportunities in EV are so profound that they would cost inordinate amounts of money to try and acquire them.

That's great, John. Nat, thank you very much indeed for your time this afternoon. Thank you to all those investors that have submitted questions today. And we'll make all the questions available to management post today's call. Nat, John, I know investor feedback is particularly important to you both, and I'll shortly redirect investors to provide you with their thoughts and expectations. But before doing so, I wondered if I may, Nat, just ask you for a few closing comments before I redirect the investors on the call.

Thank you. Thank you, Mark. I mean, look, all I would like to say at this point is thank my colleagues. We have 7,000 of them. This has not been an easy time and people have worked extraordinarily hard to deliver these results. This was a true team effort. We are very excited about this coming year, notwithstanding the headwinds. It's a challenge. but it's a challenge that we're up for. I'm just looking forward to next year when we can present these results again and again deliver for all our stakeholders, for our employees, for our customers and for you guys, the shareholders. So thank you very much.

That's great. Nat, John, thank you once again for your time this morning and for updating investors. Could I please ask investors not to close this session as we will now automatically redirect you for the opportunity to provide feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be highly valued by the company. On behalf of the management team of Olex PLC, we'd like to thank you for attending today's presentation. That now concludes today's session. I may wish you all a very pleasant morning.

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