Trading Update

Volex (AIM: VLX), the specialist integrated manufacturer of critical power and data transmission products, today releases a trading update for the 39 weeks ended 29 December 2024.

The Group delivered a robust performance in Q3, maintaining the strong organic growth momentum demonstrated in the first half of the year, while continuing to invest in future growth opportunities and maintaining margins.

In the financial year-to-date, revenue was $789.4 million, an increase of 21.8% on the comparative prior year period. This comprises organic growth of 9.6%, 13.1% from acquisitions, and a small adverse impact from foreign exchange movements. Sequentially, sales increased by 2% compared to Q2, reflecting continued momentum across core markets. Demand from Electric Vehicles customers continues to deliver significant organic growth. Consumer Electricals has continued to perform strongly. Medical sales have softened slightly, continuing the normalisation trend seen in the first half of the year and reflecting a stronger comparative in the second half of the previous year. Complex Industrial Technology growth has improved relative to the first half, particularly for other industrial customers. Off-Highway growth rates have normalised with some end markets showing subdued demand.

Operating profit margins have been maintained within our target range, supported by pricing discipline and the effective management of operational costs.

Strong financial position supports further investment in growth

Net debt at the end of Q3 was $151 million, resulting in a covenant leverage1 ratio of 1.3x, in line with the position at the end of the first half. Working capital improved in Q3 despite increased demand from a major data centre customer, resulting in higher levels of inventory in North America. In early January, the Company satisfied the first tranche of deferred cash consideration for the 2023 acquisition of Murat Ticaret of €10m. In addition, the Group has exited from its investment in shares of TT Electronics plc, recognising a small profit after taking account of the associated professional fees.

The performance of the Group and strong financial position continues to provide a platform for our ongoing programme of targeted investment to deliver growth as part of our five-year plan. This included significant capacity expansions in high-growth economies including India and Indonesia during the year. In addition, we are investing in further vertical integration and automation to support our growing Electric Vehicles customer base.

Outlook

The Group's underlying operating profit2 expectations for the full year remain unchanged and are in line with market forecasts3. Positive customer interactions underpin confidence in sustaining high single-digit organic growth for the full year, as well as maintaining margins in the target corridor of 9%-10%.

While mindful of ongoing macroeconomic uncertainties, the Group is well-positioned to capitalise on a number of attractive opportunities across its diversified and specialist end markets. Continued focus on delivering value-added solutions, operational efficiencies and disciplined capital allocation supports the Board's confidence in delivering sustainable and profitable growth.

Nat Rothschild, Volex's Executive Chairman said:

"Our Q3 performance reflects the strength of our business model and our ability to deliver consistent growth across diverse markets. With robust momentum, strategic investments in high-growth areas and a strong financial position, we are well-placed to capitalise on opportunities and deliver sustained profitable growth, keeping us firmly on track to achieve our full-year expectations and five-year strategy."

1 Covenant leverage represents the ratio of net debt, excluding operating lease liabilities, to EBITDA excluding the impact of right of use amortisation arising on operating lease arrangements. This measure is aligned with the covenant calculations used for external debt facilities.

3 As at 22 January 2025, the average of company compiled analysts' forecasts for the 52 weeks ending 30 March 2025 for revenue is $1,031.4 million with a range of $1,027.7million to $1,040.0 million, the average for underlying operating profit is $96.7 million, with a range of $95.7 million to $97.6 million.