Volex (LSE: VLX) revises its full-year forecasts.
Shares in Volex (LSE: VLX) slipped over 30% from last night's close of 140.25p, with early morning trading seeing the price fall to 98.03p at the time of writing.
This follows a trading update in which the provider of cables for electronics manufacturers announced a "general softening of demand across all sectors as well as delays in specific project timelines". This has led Volex to revise its full-year revenue forecasts to fall within the range of $470m-$485m, and full-year normalised operating profit to be in the range of $11m-$14m.
Management has revealed a three-point plan to improve profitability:
- reductions in operating expenses actioned to date exceed the initial 10% target;
- underlying consumer gross margin improvements are on track;
- revenue pipeline continues to grow, but conversion to revenues delayed.
Elsewhere within the company, further action is being taken to combat the reduced revenues and plans are under way to widen the scope of the cost-reduction initiatives, strengthen the senior sales leadership, implement programmes to "better align the sales organisation with current and future customer needs" and accelerate Volex's move to a higher-margin product portfolio.
In the trading update, the company also declared that former Fiberweb group finance director (GFD) Daniel Abrams would succeed Andrew Cherry as Volex's GFD and executive director of the board on 17 December. Karen Slatford, currently a non-executive director of the company, will assume the role of deputy chairman.
Encouragingly, the board also emphasised that the project delays does not include its largest customer. So with the response to the revised forecast, many private investors will be asking the question 'is Volex a falling knife?' In the depths of the financial crash in 2008-09, its share price hit a low of 16.5p; however, it recovered significantly to reach a peak of 377p near the end of 2010.
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> Sam does not own shares in Volex.
