Is Volex value yet?

Volex, a supplier of power cables and USB leads to electronics manufacturers, has undergone something of a transformation over the past 18 months. Unfortunately, its share price has, too, and a series of profits warnings has halved the market cap. Clearly, knocking the business into shape has cost time and money and progress has been slower than anticipated. But management thinks the rout is now over and first benefits of all the hard work are finally visible.

In November, we were told that reported losses grew to $5.8 million in the six months to 5 October on revenue up 12% to $221 million. Underlying profit was £1.8 million. A month later, finance boss Nick Parker said he was leaving just 18 months into the role. Non-executive director and qualified accountant Daren Morris has taken over until a permanent replacement is found.

Before chief executive Christoph Eisenhardt joined in July 2013 Volex had acquired a reputation as accident-prone, alienating its biggest customer Apple.

However, since the interims Volex as continued to trade as expected and full-year underlying operating profit should match forecasts. "[The transformation] aims to sustainably improve the position of the group over time, and we have seen the first related benefits in our financial results with increased sales, gross margins and operating profits," said the firm.

"In the coming year we will make further investment in both of our divisions and also continue to diversify our customer base while delivering sustainable, profitable growth."

There's a greater focus on operational cash generation to bankroll further investment in the business. Net debt on 13 March had fallen to $12.2 million from $32.2 million a year ago, although there is still lots of work to do here. The reduction followed a $27.9 million refinancing at 75p a share last July, which cut net borrowing in October to $5.6 million.

Of the transformation, Volex said: "We are now entering the delivery phase where we leverage our divisional structure and our market differentiating global footprint to improve performance and increase our market presence." The final exceptional costs will be booked in the second half of this financial year ending 5 April.

"The transformation of Volex has strengthened our business and our focus on working more closely with key customers is expected to deliver further growth in sales and margins in the coming year."