Volex maintains expectations amid strong organic growth
By Josh White
Date: Monday 27 Jan 2025
(Sharecast News) - Volex reported strong organic growth in a trading update for the 39 weeks ended 29 December on Monday, reinforcing confidence in meeting full-year expectations.
The AIM-traded company said revenue for the period reached $789.4m, representing a 21.8% increase compared to the prior year.
That growth was driven by a 9.6% organic increase, a 13.1% contribution from acquisitions, and a minor adverse impact from foreign exchange movements.
Sequentially, sales rose 2% compared to the second quarter, reflecting sustained demand across key markets.
The electric vehicles segment continued to be a major driver of organic growth, while consumer electricals also delivered a strong performance.
Medical sales had softened slightly, aligning with the normalisation trend observed in the first half and a stronger prior-year comparative.
Growth in complex industrial technology had improved relative to the first half, with notable progress among other industrial customers.
The off-highway segment growth rates had meanwhile stabilised, with some end markets experiencing subdued demand.
Volex said it maintained operating profit margins within its target range of 9% to 10%, supported by disciplined pricing and effective operational cost management.
The firm said its financial position remained robust, with net debt standing at $151m at the end of the third quarter, resulting in a leverage ratio of 1.3x, consistent with the first half.
Working capital improved during the quarter, despite increased inventory levels in North America due to heightened demand from a major data centre customer.
In early January, the company said it satisfied the first tranche of deferred consideration for its 2023 acquisition of Murat Ticaret, amounting to €10m.
Additionally, Volex exited its investment in TT Electronics, generating a small profit after accounting for associated professional fees.
The company said it was continuing to pursue its five-year growth strategy, with targeted investments in high-growth regions such as India and Indonesia.
Efforts to enhance vertical integration and automation were underway to support the expanding electric vehicles business.
Despite ongoing macroeconomic uncertainties, Volex said it was confident in achieving high single-digit organic growth for the full year and maintaining profit margins within the targeted range.
The company said it was well-positioned to capitalise on opportunities across its diversified end markets through a focus on value-added solutions, operational efficiencies, and disciplined capital allocation.
"Our third quarter performance reflects the strength of our business model and our ability to deliver consistent growth across diverse markets," said executive chairman Nat Rothschild.
"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."
At 1203 GMT, shares in Volex were up 1.24% at 286p.
Reporting by Josh White for Sharecast.com.
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