Volex Group PLC 15 February 2008 15 February 2008 Volex Group plc Interim Management Statement Volex Group plc, the global electrical and electronic cable assemblies company, is today publishing its second Interim Management Statement relating to the 17 week period from 1 October to 28 January. In light of the trading statement released on 29 January 2008, we are providing a fuller update and releasing financial information in respect of this period. Current Trading Although we have faced some execution challenges during the period, we have continued to push ahead with our strategy to drive long term growth and increase margins. Revenue growth of 8% has been slightly ahead of expectations, while operating profit has been significantly behind. Revenue growth was driven by our core Power Products business, which performed strongly and has gained significant new business with key customers such as Sony and Dell. The profit shortfall is a result of a much slower and more difficult restructuring of our Wiring Harness business combined with a significant slowdown in order levels from Interconnect customers in the Wireless Infrastructure sector. Power Products Revenue increased 20% and operating margins were significantly ahead of the same period last year. The increase in operating margins is partly due to more effective management of the fluctuations in copper pricing. Interconnect Revenue declined 10% compared to the same period last year as weak volumes from major Wireless Infrastructure customers, which account for 47% of our Interconnect revenue, masked the underlying growth being achieved from new business sectors. Our strategy to diversify our Interconnect business remains valid and we are starting to see the impact of this in rapid growth of the accounts we have targeted. 27% of our Interconnect business in the period derived from the Medical and Data sectors, which we have targeted for growth due to the higher margin potential. Sales for these sectors grew 34% in the period. Operating margins have declined due to a combination of factors: inability to reduce costs in line with the sudden fall in Wireless Infrastructure volumes; initial new business volumes in the Medical and Data sectors are not yet high enough for efficient production; and, we increased costs in the first half to develop new business with additional costs for sales, engineering and related expenses. Wiring Harness Revenue is 17% ahead of the same period last year as a result of developing existing key accounts, particularly in the construction sector. However, operating margins have deteriorated from the same period last year as we have struggled to deliver the benefits of the restructuring. Manufacturing efficiency in the division remains low which has a consequential impact on our cost base with significant costs being incurred to maintain customer service levels. While our internal performance indicators are now beginning to show some steady but slow improvement in efficiency levels, this is likely to be insufficient to return to profit by the end of the current financial year, as previously expected. Net debt has increased to £23.8m compared to £16.6m at the same date last year. This is a result of the cash utilisation of the Wiring Harness division during the restructuring, lower profitability and cash generation of the Interconnect division and working capital requirement of the strong growth in Power Products. There have been no other significant changes in the financial position of the Group in the period since the publication of the Interim Report for the 26 weeks ended 30 September 2007. The outlook for the remainder of the financial year is in line with the trading update of 29 January 2008. Our order outlook remains solid and the new business pipeline is robust. Whilst it is too early to be certain, there are signs that the Wiring Harness division is beginning to show the expected operational efficiency improvements, however, growth from the construction sector is likely to moderate. For the Interconnect division we are confident that the growth of the target markets will continue, however, we are cautious on the timing of the recovery of the Wireless Infrastructure segment. While the outlook for the Power Products division currently remains strong, we are aware that a reduction in global demand for consumer products would impact us. The Board acknowledges that we have faced challenges in the period since our half-year announcement, however, we remain confident in our business model and the management, who are taking the necessary actions to drive profitability towards peer group levels over time, combined with solid top line growth. Appendix 1 Divisional Trading Performance (Unaudited) 17 weeks to 27 17 weeks to 28 January 2008 January 2007 £'000 £'000 -------------------------------------------------------------------------------- Revenue Power Products 47,605 39,850 Interconnect 26,525 29,501 Wiring Harness 12,609 10,805 -------------------------------------------------------------------------------- 86,739 80,156 -------------------------------------------------------------------------------- Operating Profit Power Products 2,506 465 Interconnect (855) 1,328 Wiring Harness (1,300) (332) -------------------------------------------------------------------------------- 351 1,461 -------------------------------------------------------------------------------- Appendix 2 Analysis of Interconnect Revenue Sector Proportion of Growth rate total -------------------------------------------------------------------------------- Wireless Infrastructure 47% -32% Data and Medical 27% +34% Other 26% +14% -------------------------------------------------------------------------------- 100% -10% -------------------------------------------------------------------------------- END Volex Group plc 01925 844601 Heejae Chae, Group Chief Executive Ian Degnan, Group Finance Director Weber Shandwick Financial 020 7067 0700 Terry Garrett Nick Dibden James White This information is provided by RNS The company news service from the London Stock Exchange