Volex declares final dividend as it talks up resilience

Complex assemblies company Volex updated the market on its trading on Thursday, ahead of the announcement of its full-year results, reiterating its current guidance for the financial year ended 5 April.

The AIM-traded firm said it expected its full-year sales to exceed $392m, rising from $372m in the prior year.

It said combined sales for February and March, being the period since the outbreak of the Covid-19 coronavirus, totalled $68m, up from $63m.

Net cash at year-end stood at $31.7m, up from the $7.9m it reported at the half year, with the board saying it intended to declare a final dividend of 2p per share, based on its full-year results.

Looking ahead, it said it appeared likely that economic activity, and thus trading, would be impacted by restrictive governmental measures put in place to contain the spread of Covid-19.

However, the quantum and precise impact would depend on the length of time such measures were in place and their severity, offset against the company’s “defensive exposure” to medical devices and data-centre products, which make up about two-thirds of its complex assemblies division.

Volex said its medical sites had been assigned ‘essential business’ status in the United States and Mexico, adding that its other sites were similarly deemed essential manufacturing locations by respective governments in the countries in which they operate.

As at 16 April, all Volex sites remained operational.

“The worldwide Covid-19 pandemic is forcing governments to implement extreme, restrictive measures in an attempt to curb the spread of the virus,” said executive chairman Nat Rothschild.

“Our priorities are first and foremost: to safeguard the health and safety of our employees and our local communities; where possible to support government actions to slow the spread of Covid-19; and to assess and mitigate the risks to our business continuity.

“However, despite this 'perfect storm', Volex's business has proved remarkably resilient, continuing to produce a solid performance in both sales and operating margins.”

Rothschild said the company’s strategy to diversify its products, customers and geographic footprint, together with its exposure to medical devices and high-speed data centre products, which were in even greater demand as much of the world's population worked from home, had resulted in continued growth and strong cash generation, despite significant headwinds.

“In order to mitigate any unforeseen financial impact should the macroeconomic outlook deteriorate further, the group is taking steps to optimise cash flow.

“However, we have today announced a recommended final dividend of 2p per share, which reflects our robust financial position.”

Rothschild said the company was “closely monitoring” all available forms of relief from governments on direct and indirect taxes, social charges, and employee relief funds, and assessing their relevance to Volex.

“Current headroom under our existing facility, combined with our cash balances, provides the group with circa $60m of liquidity and, in line with our strategy, our team continues to actively look for new opportunities to grow our business and technical capabilities.

“Operationally, there remain substantial identifiable opportunities for both divisions to improve sales and margin performance through disciplined execution of our strategy, in both the short and longer term.

“While the duration and impact of the Covid-19 virus remains uncertain, we remain confident that Volex will continue to progress in the year ahead.”

Volex said it would release its full-year results for the 12 months ended 5 April on 18 June.

At 1018 BST, shares in Volex were up 10.4% at 138p.