Volex (VLX ), a supplier of performance-critical data and power assemblies for data centres, EVs, and consumer electricals, issued a trading update for the year ended 2 April 2023 (FY23).
Volex expects revenues of at least US$710m in FY23, representing a 15.5% year-on-year increase. Underlying operating profit is expected to be 17.4% higher at US$66m, with both revenue and underlying profit ahead of market expectations. Operating margins are expected to increase to 9.3% from 9.1% in FY22.
Operating free cash flow in the second half was substantially higher than the first. After capital investment, dividend payments, and acquisitions of approx. US$46m in the year, pre-IFRS 16 net debt is expected to be approx. US$76m. This represents a reduction of US$22m since the half year.
Volex continued its commercial strategy focused on targeting structural growth markets, leveraging Volex's global footprint, and expanding its range of offerings.
Nat Rothschild, Executive Chairman, commented: "I am delighted with the strong organic growth performance delivered by the business during the period. We continue to deliver against the long-term, strategic growth plan that we unveiled last year and I firmly believe that Volex's diverse global footprint, ongoing investment plans and reputation for excellence will continue to drive ongoing outperformance versus our competitors. This, combined with our robust balance sheet and healthy cash generation, means that the Group is well positioned as we enter the new financial year."
View from Vox
Volex delivered FY23 results ahead of market expectations, driving VLX shares 17.2% higher today. Revenue and profits growth reflected its continued aggressive commercial strategy in key growth markets. An increase in gross margins and continued cost control measures also delivered a strengthening in underlying operating margins to 9.3%.
Volex enters FY24 with strong momentum as it continues to target growth markets where EV, industrial technology, and medical sectors delivered strong organic revenue growth in FY23. Volex's expanding global footprint has enabled it to benefit from heightened demand in regions where customer supply chains were focused on partners with local facilities. Volex also invested in expanding its product portfolio in FY23, leading to a number of project wins with new and existing customers.
With a robust balance sheet, healthy cashflow, and a growing pipeline of contracts, Volex is well-positioned to reach its 5-year goal of $1.2bn in revenues by FY27.
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