MIDAS SHARE TIPS UPDATE: Financier Nathaniel Rothschild plugs in to profits at Volex

New direction: Nathaniel Rothschild

Volex traces its roots back to Victorian times, making electrical goods in Gorton, just outside Manchester. Successful for many years, the company hit problems in the early 2000s and underwent a difficult period until new management were appointed in 2015, under financier Nathaniel Rothschild, scion of the famous Rothschild banking family.

Rothschild and his team have devoted time and energy to turning Volex round, through a combination of organic growth and selective acquisitions.

The company specialises in electric and electronic products, from components for magnetic resonance imaging (MRI) scanners to high-speed cables for data centres. Volex is also the world’s largest producer of power cords and plugs, used for TVs, computers, dishwashers and virtually every other electric gadget.

In order to make Volex more resilient to economic cycles, Rothschild has expanded across five key industries: consumer goods, medical equipment, electric cars, industrial technology and off-road vehicles, such as trucks and diggers.

Half-year figures to October 1, 2023 show the benefits of this spread of businesses. Overall sales rose 11 per cent to $398 million (£313 million), profits rose 15.5 per cent to $34 million and the interim dividend was raised by almost 8 per cent to 1.4p.

Within this however, sales relating to electric cars and consumer goods fell, as end demand declined and Volex customers used up existing stocks built up last year.

But sales in the other divisions increased at pace, particularly industrial technology, which delivered organic growth of more than 30 per cent. Analysts are optimistic about the group’s future, predicting sales of $850 million, profits of $73 million and a 4.5p dividend for the year to next March, with further gains thereafter. (Figures are in dollars because most of the company’s sales are in the US currency.)

Rothschild said last year that he planned to take sales to $1.2 billion by 2027 and raise profit margins to around 10 per cent. The group remains confident of delivering those targets, even if economic conditions are mixed. Slower markets are likely to bounce back, as consumer confidence returns and the electric car industry regains momentum.

Volex has also deliberately chosen to work in industries with long-term growth prospects. And a global network should make the firm more resilient, including the recent purchase of Turkish offroad specialist, Murat Ticaret, which is a big player in Europe and is now expected to expand into North America.

Midas verdict: Midas recommended Volex in September 2022 when the shares were £2.63. Today, they are 18 per cent higher at £3.10 and brokers say they should hit £4 over the next 12 months. Nervous investors may want to bank some profits after recent gains but they should retain some stock as Rothschild and his crew are determined to deliver much more growth and rising dividends too.

Traded on: AIM Ticker: VLX Contact: volex.com or 01256 442570

This post first appeared on Dailymail.co.uk