Cables group is able to ride the ‘perfect storm’
Volex, the Warrington-based cables group, said its exposure to medical and high-speed data centre products has helped it weather the coronavirus storm so far.
In a trading update ahead of its full year results announcement in June, the company gave a rundown of guidance for the period to April 5, 2020.
It said full-year sales are expected to exceed $392m, compared with $372m the previous year.
It also revealed that combined sales for February and March, the period since the outbreak of the COVID-19 virus, were $68m, up from $63m in the same period a year ago.
Net cash as at April 5, of $31.7m compared with $7.9m reported at the half year.
Volex also confirmed that it intends to declare a final dividend of two pence per share, based on its full-year results.
Looking ahead, it appears likely that economic activity, and consequently trading, will be impacted by restrictive governmental measures put in place to contain the spread of COVID-19.
However, this will depend on the length of time such measures are in place and their severity, offset against the group’s defensive exposure to medical devices and data-centre products, which make up approximately two-thirds of its complex assemblies division.
Volex’s medical sites have been assigned “essential business” status in the US and Mexico, and its other sites are similarly deemed essential manufacturing locations by respective governments in the countries in which they operate. As of April 16, all Volex sites were operational.
Executive chairman, Nat Rothschild, said: “The worldwide COVID-19 pandemic is forcing governments to implement extreme, restrictive measures in an attempt to curb the spread of the virus.
“Our priorities are first and foremost: to safeguard the health and safety of our employees and our local communities; where possible to support government actions to slow the spread of COVID-19; and to assess and mitigate the risks to our business continuity.
“However, despite this ‘perfect storm’, Volex’s business has proved remarkably resilient, continuing to produce a solid performance in both sales and operating margins.
“Our strategy to diversify our products, customers and geographic footprint, together with our exposure to medical devices (and high-speed data centre products, which are in even greater demand as much of the world’s population works from home), has resulted in continued growth and strong cash generation, despite significant headwinds.
“In order to mitigate any unforeseen financial impact should the macroeconomic outlook deteriorate further, the group is taking steps to optimise cash flow. However, we have today announced a recommended final dividend of two pence per share, which reflects our robust financial position.”
He added: “We are closely monitoring all available forms of relief from governments on direct and indirect taxes, social charges, and employee relief funds, and assessing their relevance to Volex.
“Current headroom under our existing facility, combined with our cash balances, provides the group with circa $60m of liquidity and, in line with our strategy, our team continues to actively look for new opportunities to grow our business and technical capabilities.
“Operationally, there remain substantial identifiable opportunities for both divisions to improve sales and margin performance through disciplined execution of our strategy, in both the short and longer term.
“While the duration and impact of the COVID-19 virus remains uncertain, we remain confident that Volex will continue to progress in the year ahead.”