Volex returns to full profitability amid challenging market

The AIM-traded firm said its underlying operating profit was $11.5m, up from $9.1m, while on a statutory basis it swung to an operating profit of $8.8m, from a loss of $6.6m in the 2017 financial year.

Basic earnings per share were 4.4 US cents, compared to a loss of 7.9 cents per share, while underlying diluted earnings per share fell to 8.9 cents from 9.5 cents.

At year end, Volex had net cash of $9.9m, down from a balance of $11.3m at the beginning of the period.

“I am hugely encouraged by the performance of Volex over the past 12 months,” said executive chairman Nat Rothschild.

“The return to top line growth, albeit modest, validates the new sales strategy with the growth coming from both new and existing customers, most notably a well-known manufacturer of electric vehicles which has scaled from a standing start in the prior year to a multi-million dollar account.”

Rothschild said the company was continuing to see “significant” cost inflation in both raw materials and labour rates, as well as adverse movements in foreign exchange.

However, he added that the underlying gross margin had been maintained year-on-year through improvements in productivity and operational efficiency, as well as stringent cost control.

“As a result, I am pleased to see the group return to full profitability.”

The improved trading position had enabled the board to consider its longer term strategic objectives, Rothschild explained, and in that regard he said he was “grateful” for the support the firm received from its shareholders post year-end in raising £36mof equity capital.

“These funds will be used to strengthen our balance sheet, enable factory automation and for targeted acquisitions.

“Volex is in a much stronger position now, than it has been for many years.”

While Volex’s core markets were expected to remain highly competitive in the near term, Rothschild said that with an “encouraging” set of projects in the sales pipeline, the board anticipated that its underlying revenues would continue to deliver organic growth in the coming year.

“Improved operational efficiency, particularly in our Mexican facility is expected to offset further cost inflation and pressure from foreign exchange rate movements.

“Given the above, I am confident in Volex's ability to continue to make progress and deliver further value to our shareholders in the year ahead.”