Transforming a company is an expensive business, as Volex (VLX) is finding out. The power cable supplier, which raised £7m just before Christmas through a secondary share sale and placing (at 116p) wants another £18m to pay down debt. Thankfully, Volex has supportive shareholders and there is evidence that business is picking up, too.
And it must. A $73m (£43m) slump in full-year revenue caused a two-thirds plunge in underlying operating profit - which strips out over $9m of mainly one-off restructuring costs - to $4.5m. That's at the bottom of the range of City forecasts. Net debt has ballooned as a result and could threaten the recovery programme. Getting the placing and open offer (at 75p) away will not only solve that problem, but also secure a new three-year deal with its banks. That gives new management breathing space to get Volex back on track. Revenue, already up 13 per cent in the first two months of this financial year, is tipped to grow 10 per cent in the first quarter and to beat the previous quarter by 4 per cent. Profit margins are up, too.
After tweaking forecasts for 2015, broker finnCap now expects adjusted EPS of 8.2¢ for 2015 (from 11.2¢ in 2014).
VOLEX (VLX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 79p | MARKET VALUE: | £52m | |
| TOUCH: | 78-79p | 12-MONTH HIGH: | 130p | LOW: 75p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE | 55¢* | NET DEBT: | 88% | |
| Year to 30 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 229 | 6.9 | 9.3 | nil |
| $m | $m | (¢) | (¢) | |
| 2011 | 490 | 20.3 | 29.3 | 2 |
| 2012 | 518 | 19.2 | 30.4 | 4.5 |
| 2013 | 473 | 1.9 | -1.6 | 5 |
| 2014 | 400 | -7.6 | -23.7 | nil |
| % change | -15 | - | - | - |
Includes intangible assets of $8.7m, or 13¢ a share £1=$1.70 | ||||
