Volex's (VLX) reliance on one large customer to buy its electronic components came badly unstuck after Apple (US: AAPL) switched a parts contract for its iPad tablet computers to another supplier. The sudden move caught the company just as it was ramping-up production in China and meant that profits were further hit by the need to rapidly reduce headcount. Excluding £7.2m of restructuring costs and a £1.1m write-off of new product start-up costs, underlying operating profits were decimated from $32m (£15m) to $10.1m.
The effects of the dislocation caused by Apple's decision were felt across the company - employee numbers fell from a high of 9,750 to 7,300 and accounted for the bulk of the year's $7.2m exceptional costs, though it is hoped that the changes will save about $17.5m annually. There were also complications from the upgrade of its manufacturing capacity in Shenzhen, China, following last year's launch of new products. As a result, scrappage rates soared to 3.6 per cent of production in the first half, falling to 2.1 per cent overall as disruption died down.
Senior management has not been immune from the clearout, with incoming chief executive Christoph Eisenhardt, formerly of KVT Koenig, brought in to reposition Volex with the help of a new chief financial officer.
Broker Investec forecasts pre-tax profits of $13.1m and EPS of 15.4¢ (from $10.1m and 11.2¢ in 2013).
VOLEX (VLX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 96p | MARKET VALUE: | £60m | |
| TOUCH: | 95-97p | 12-MONTH HIGH: | 275p | LOW: 82p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | na | |
| NET ASSET VALUE: | 73¢* | NET DEBT: | 43% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 265 | 3.5 | 2.8 | nil |
| 2010 | 229 | 6.9 | 9.3 | nil |
| $m | $m | (¢) | (¢) | |
| 2011 | 490 | 20.3 | 29.3 | 2.0 |
| 2012 | 518 | 19.2 | 30.4 | 4.5 |
| 2013 | 473 | 1.9 | -1.6 | 5.0 |
| % change | -9 | -90 | - | +11 |
Ex-div: 4 Sep Payment: 7 Oct *Includes intangible assets of $7m, or 11¢ a share £1=$1.51 | ||||
