Wider pre-tax losses caused shares in Volex (VLX) to fall 14 per cent on results day. But a closer look at the power cable supplier's half-year results is encouraging: just 12 months into management's turnaround plan, signs of a much healthier company are emerging.
Revenue at its Power division increased by 15 per cent to $147m (£94m), while underlying operating margins rose 80 basis points to 3.9 per cent as the restructuring of the sales team started to pay off. A focus on key accounts boosted revenues from Volex's top five customers by 24 per cent, while the company also won new customers, such as Chinese mobile phone company Xiaomi.
In the smaller Data division, meanwhile, revenue and underlying operating profit margins came in at $74m (£47m) and 10.5 per cent respectively, against $68m and 8.3 per cent at the 2013 half year. The improvement was again due to an increased engagement with the existing customer base. With the newly installed sales force in place, demand for active copper cables and high-margin healthcare appliances has steadily been picking up.
The company's net debt has also been brought under control, following a $28m placing and open offer in July.
Broker finnCap reduced its forecast for adjusted pre-tax profit by $1.6m to take account of higher operating and interest costs. It now expects $8.1m, giving adjusted EPS of 7.2¢.
| VOLEX (VLX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 65p | MARKET VALUE: | £58m | |
| TOUCH: | 65-66p | 12-MONTH HIGH: | 121p | LOW: 64p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 64¢ | NET DEBT: | 10% | |
| Half-year to 5 Oct | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2013 | 197 | -4.1 | -6.9 | nil |
| 2014 | 221 | -5.8 | -8.6 | nil |
| % change | +12 | - | - | - |
| £1=$1.57 | ||||
