TIDMVLX
RNS Number : 3549J
Volex PLC
27 June 2017
27 June 2017
Volex plc
Publication and posting of Annual Report and Accounts 2017 &
Notification of Annual General Meeting
Volex plc (the "Company"), the global provider of power and data
cabling solutions, announces that it has posted to shareholders its
Annual Report and Accounts 2017 (the "Annual Report") and the
Notice of Annual General Meeting, which is to be held at Meeting
Room 2, The Novotel Reading Centre, 25b Friar Street, Reading, RG1
1DP on 25 July 2017 at 2.00 p.m. (the "AGM"), together with a Form
of Proxy for use in connection with the AGM.
A copy of the Annual Report and Form of Proxy is available on
the Company's website, www.volex.com and will shortly be submitted
to the UK Listing Authority's National Storage Mechanism and will
then be available at www.hemscott.com/nsm.do.
In compliance with the Disclosure and Transparency Rules (DTR)
6.3.5, the following information is extracted from the Annual
Report and should be read in conjunction with the Company's
Preliminary Announcement issued on 8 June 2017, both of which can
be viewed at www.volex.com. Together these constitute the material
required by DTR 6.3.5 to be communicated to the media in unedited
full text through a Regulatory Information Service.
This material is not a substitute for reading the Annual Report
in full and page numbers and cross-references in the extracted
information below refer to page numbers and cross-references in the
Annual Report.
Statement of the Directors' responsibilities
The following statement is repeated here solely for the purpose
of complying with DTR 6.3.5. This statement relates to, and is
extracted from, page 52 of the Annual Report. Responsibility is for
the full Annual Report not the extracted information presented in
this announcement or the Preliminary Results Announcement.
The Directors of Volex plc (the 'Company') are responsible for
preparing the Annual Report, the Directors' Remuneration Report and
the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group and parent Company financial statements in
accordance with International Financial Reporting Standards
('IFRSs') as adopted by the European Union. In preparing these
financial statements, the Directors have also elected to comply
with IFRSs, issued by the International Accounting Standards Board
('IASB'). Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
Company and of the profit or loss of the Company and Group for that
period. In preparing these financial statements, the Directors are
required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and accounting estimates that are reasonable and prudent;
-- State whether applicable IFRSs as adopted by the European
Union and IFRSs issued by IASB have been followed, subject to any
material departures disclosed and explained in the financial
statements; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements and the Directors'
remuneration report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the Company and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
performance, business model and strategy.
Each of the Directors, whose names and functions are listed on
page 26 confirm that, to the best of their knowledge:
-- The Group and Company financial statements, which have been
prepared in accordance with IFRSs as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Group;
-- The Strategic Report, on pages 4 to 26, includes a fair
review of the development and performance of the business and the
position of the Group, together with a description of the principal
risks and uncertainties that it faces; and
-- The Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Group's performance,
business model and strategy.
Principal Risks
A description of the principal risks that the Company faces is
extracted from pages 21 to 23 of the Annual Report.
The table below summarises the Group's principal risks and how
they are managed centrally. The Board considers these the most
significant risks that could materially affect the Group's
financial condition, performance, strategies and prospects. The
risks listed do not comprise all risks faced by the Group and are
not set out in any order of priority. Additional risks not
presently known to management, or currently deemed to be less
material, may also have an adverse effect on the business.
Risk Possible Impact Risk Mitigation Activities
----------------------- ------------------------------ --------------------------------
Strategic
----------------------- ------------------------------ --------------------------------
Competitor With the presence The Group intends
Risk of competitors to focus on markets
that are vertically and customers where
integrated, financially we can differentiate
stronger and on factors other than
with ability price including engineering
to invest in know-how and quality.
newer technology
and capabilities, During the year, various
the Group is projects have been
highly susceptible undertaken to optimise
to increased manufacturing efficiency
competition and and identify process
price pressures. improvements with
the aim of driving
The Group's business cost reductions and
and future results cash generation.
may be adversely
impacted if it In the coming year,
is unable to it is planned that
compete adequately the joint venture
and secure new Volex has entered
business in the into with Joinsoon
markets in which Electronics Mfg Co
it operates. Ltd will begin producing
lower cost raw materials
for Volex to use in
its product offering,
thereby becoming more
cost competitive.
----------------------- ------------------------------ --------------------------------
Customer Concentration With the Group's The decline in revenues
Risk top ten customers with our largest customer
accounting for had a significant
64% (2016: 68%) impact on Group performance.
of total revenue, Whilst the concentration
the Group is of business with this
exposed to customer customer had long
concentration been highlighted a
risk where its risk, the business
performance, was unable to diversify
financial condition the customer base
and future prospects due to an uncompetitive
may be significantly cost structure, high
impacted if there staff turnover and
is a shift in slow response times.
allocation on
a key customer During the year the
account. above obstacles have
been addressed and
The Group's largest a new sales strategy
customer accounted developed. We are
for 18% of total optimistic that this
revenue, down new strategy will
from 26% in the lead to new revenue
previous year. opportunities and
a further reduction
in reliance on the
historic customers.
We have already received
firm purchase orders
from a number of new
premium brand customers
and we hope to scale
these accounts in
FY2018.
----------------------- ------------------------------ --------------------------------
Operational
----------------------- ------------------------------ --------------------------------
Supplier Dependency The Group's delivery Single-source supplier
Risk of the strategy risks are identified
is dependent during the year and
on the availability where operationally
and timely receipt feasible, dual sources
of raw materials. and local multi-sourcing
As it continues for key materials
to be heavily and critical components
reliant on single-source are being developed.
suppliers for
key materials Strategic relationships
or critical components, with key suppliers
any disruptions are established to
may impact production enable flexible sourcing
and the Group's arrangements that
ability to meet are balanced with
customer commitments, appropriate levels
win future business of inventory.
or achieve operational The Group continues
results. to monitor financial
and operational viability
Disruption to of key suppliers periodically.
key supplies
may be a result As noted above, the
of insolvency joint venture agreement
of the supplier, Volex has entered
scarcity of materials into should reduce
or the suppliers' the reliance on several
inability to Chinese raw material
meet our standards suppliers.
such as quality,
reliability and
cost reductions.
In turn, the
Group's inability
to drive cost
reductions may
also result in
a lack of competitiveness.
----------------------- ------------------------------ --------------------------------
Quality Risk Our customers The Group recognizes
specify quality, that the quality of
performance and our products is critical.
reliability standards. Quality assurance
Should our quality processes are embedded
systems fail, in the entire supply
the risk of customers chain and every stage
receiving unsafe, of the manufacturing
faulty or non-performing process across all
products is increased. sites, supporting
Consequently, compliance with safety
the Group may and customer quality
experience delays standards.
in shipment and
product rework New moulds, tooling
or replacement and technology are
costs. acquired as part of
our quality continuous
Subsequent customer improvement programme
complaints, warranty to sustain high quality
claims and product output.
recall or replacement
may result in The Group has developed
reputational new internal KPI's
damage and reduced that include quality
allocation. metrics and which
will be reviewed by
the Board.
----------------------- ------------------------------ --------------------------------
Product Development Power and data Close communication
to Combat Disruptive cable markets with all key customers
Technology are impacted on their product roadmap
by disruptive takes place. Volex
technologies continually investigates
which include partnerships/co-operation
wireless data for technology gaps.
transmission,
improved battery During the year the
lives and new engineering function
industry standards has been reorganized
such as USB-C. to assist in the better
sharing of information
Failure to adapt and knowledge. Now
could lead to all engineering functions
the loss of key including R&D engineers,
accounts. production engineers
(responsible for the
Volex may not running of the lines
be leveraging and tooling) and "field
advancements application engineers"
in technology (engineers close to
in its business customers who are
model to achieve responsible for feeding
or sustain competitive back challenges faced)
advantage. report up to a single
head of engineering.
Under the new long
term strategy there
will be significant
investment in the
engineering function.
----------------------- ------------------------------ --------------------------------
Key People After several The fact that our
years of poor Executive Chairman
performance and is the largest shareholder
a major restructuring provides considerable
the Group is assurance to other
more reliant stakeholders that
than ever on Executive management's
the small number goals are aligned
of key executives with their own. Other
who are leading key managers have
the turnaround. been given PSP awards,
allowing them to participate
Until we can directly in the impact
establish a more of the turnaround.
sustainable business
model and organisation The Group has recently
this risk will added senior sales
remain and therefore and operational expertise
the turnaround in Asia and North
itself is at America.
risk.
----------------------- ------------------------------ --------------------------------
Financial
----------------------- ------------------------------ --------------------------------
Going Concern The Group has The Group reviews
a $30 million its performance against
multi-currency budget to ensure that
revolving credit funding is balanced
facility which against economic results.
has been renewed
to June 2019. The Group continues
The facility to maintain an open
is subject to and transparent dialogue
a quarterly assessment with the facility
of two financial providers to ensure
covenants, namely that they are well
the leverage aware of the developments
covenant and in the business.
interest covenant.
During the year, a
Whilst the Group's number of loans drawn
forecasts have under the senior credit
indicated that facility have been
both covenants repaid and net debt
will be met, has reduced.
any unforeseen
downturn may The Group's forecasts
result in failure indicate that it will
to meet the covenant meet the covenant
test. Consequently, tests under the facility.
this may result If performance was
in an 'event not in line with the
of default' where forecast, the Group
immediate repayment has a number of mitigating
is requested. actions that could
be implemented.
----------------------- ------------------------------ --------------------------------
Copper Price Many of the Group's Copper price movements
Volatility products, in are continuously monitored
Risk particular power and where appropriate,
cords are manufactured are reflected in the
from wire components pricing of our products.
that contain Whilst copper prices
significant amounts are fixed quarterly
of copper. Wire with major suppliers
components accounted based on average LME
for approximately rate over the prior
50% of the Group's quarter, approx. 55%
purchases for of our power cord
the year. As related revenues are
copper price covered by copper
volatility is clauses which provide
the single largest for quarterly adjustments
commodity price to our selling prices
exposure facing based on our material
the Group and costs.
driven by market
volatility, failure The Group maintains
to manage the forward copper purchase
impact of copper contracts extending
price changes out twelve months
may result in and are refreshed
erosion of profit on a rolling monthly
margins and loss basis.
of competitive
advantage.
Whilst copper
price movements
are passed on
to customers,
delays in passing
through the costs
may create short
term volatility
in the Group's
gross margins.
----------------------- ---------------------------- ----------------------------------
Foreign Exchange The Group is The group's central
exposed to currency finance function closely
transactional monitors the exposure
risk relating to key currencies
to day-to-day such as the Chinese
sales and purchases Renminbi, EURO and
with customers Pound Sterling. Hedging
and suppliers. is undertaken where
appropriate.
Reported results
of overseas subsidiaries Billing currencies
are subject to have been adjusted
translational to achieve a high
risk which may level of natural hedging
cause volatility where possible.
in earnings and
the balance sheet. In order to minimise
foreign exchange fluctuations
The Group's financial in the income statement
results may be of the Group, drawdowns
impacted by the on the senior credit
fluctuation of facility in currencies
the US Dollar other than the functional
against foreign currency of the drawing
currencies, exchange entity will be treated
rate controls where possible as
or regulatory a net investment hedge.
restrictions
on transfers The Group Treasury
of funds. Policy Statement sets
out procedures on
exchange rate risk
management.
----------------------- ---------------------------- ----------------------------------
Legal, Tax The Group is The Group takes an
and Regulatory subject to diverse uncompromising approach
Compliance laws and regulations towards non-compliance.
Risk in the global The group's Code of
markets in which Conduct provides a
it operates, framework to general
particularly compliance and governance
in certain territories policies that have
where the risk been established to
is elevated due ensure compliance
to jurisdictions with laws, regulations
with immature and standards.
business practices
and/or systems. The Group continually
monitors developments
The areas include in applicable laws
but are not limited and regulations in
to those related the jurisdictions
to product safety, in which it operates
environmental, and external advice
health and safety, is sought where necessary.
export controls
or customs, tax Regular monitoring
laws and anti-bribery programs are in place
and corruption. at all sites to enable
continuous improvement.
Non-compliance
with legislation Irrespective of our
or other regulatory own internal controls
requirements and advice provided
may compromise by external consultants,
the Group's ability we have noted in the
to conduct business past year that certain
in certain jurisdictions. taxation authorities
They may expose facing local funding
the Group to shortfalls are becoming
potential reputational more aggressive in
damage, financial their application
penalties and/or of tax law to the
suspension of point of imposing
business activities, significant penalties
any of which on minor offences
could have a and even in some cases
material adverse imposing tax demands
effect. that have little basis
in the local tax rules.
In these instances,
we continue to engage
with local independent
consultants and on
their advice appeal
these findings to
a higher office.
----------------------- ---------------------------- ----------------------------------
For further information please contact:
Volex plc
Daren Morris, Chief Financial Officer and Company Secretary
+44 (0)208 017 3240
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSBCGDLXXDBGRR
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