Volex – 164p

31 October 2012 – interim results

The group has issued disappointing half-yearly results for the six months to 30 September with revenues falling to $249.3m (2011: $270.7m) and normalised operating profit dropping to $5.3m (2011: $14.9m).  The group has suffered from the challenging market conditions but has continued to invest in the business, with capex of $14.2m in the period compared with $4.8m in the same period last year.  Net debt has fallen to $4.6m compared with $11.9m a year ago and the interim dividend has been increased to 2.0c (2011: 1.5c).  Despite the fall in revenue, sales to the largest customer increased and the group has a greater sales pipeline than at any time in the last four years.  A restructuring to reduce costs by $10m a year has been initiated and the group is confident that it will meet market expectations for 2013 with further growth in 2014.  Although clearly investors are disappointed with these results we believe the shares look cheap on a medium term view – BUY.

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