Thursday 20 July 2023

Volution Group plc

Pre-close Trading Update for the Financial Year ending 31 July 2023

Continued good progress; EPS ahead of consensus; new acquisition in New Zealand

Volution Group plc ("Volution" or "the Group" or "the Company", LSE: FAN), a leading international designer and manufacturer of energy efficient indoor air quality solutions, today releases a scheduled Pre-close Trading Update for the financial year ending 31 July 2023 ("FY23" or the "Period").

Good progress; expect adjusted EPS ahead of current market consensus

Volution has continued to make good progress in the Period and the Board expects adjusted earnings per share to be towards the top end of current market forecasts (see note 1).

Good overall organic growth; strong UK performance offsets some weaker market areas

We are expecting Group organic revenue growth on a constant currency basis of approximately 5%, despite a challenging macro-economic backdrop in which the rapid rise in interest rates has adversely impacted new build construction levels and consumer confidence. Within this:

·    The UK has delivered our highest rate of organic growth, with residential revenue performing particularly strongly. Public refurbishment RMI has benefited from increasing demand arising from the heightened awareness of health risks associated with mould and condensation; private RMI demand has proved resilient whilst also delivering well on price; and new build revenue has benefited from key account wins and regulatory underpinnings

·    Continental Europe has softened in the second half of the year with Germany in particular affected by a contraction of new build activity and the Nordics impacted by both new build weakness and some earlier, but now completed, destocking in the refurbishment market.  By contrast ClimaRad and ERI have continued to perform strongly

·    Revenue growth in Australasia has slowed this year after a number of years of very strong growth.

Strong Group operating margins maintained at c.21%

Whilst material input cost inflation has eased in the year, inflationary pressures have continued with rising labour costs and pressures on overhead costs such as facility rent and rates. Strong pricing discipline along with robust cost control, value engineering initiatives and good factory efficiency continue to underpin our operating margin, which is expected to be c. 21% for FY23.

Two exciting European acquisitions completed

We completed two acquisitions in the year, I-Vent in Slovenia/Croatia and VMI in France, investing a total of €35 million upfront with a potential future contingent consideration of up to €20 million based on stretching growth targets.  

Third acquisition; scheduled to complete early in new financial year

We have signed an agreement to acquire DVS (Proven Systems Ltd) in New Zealand for initial consideration of NZ$18 million (c.£8.7 million) with potential contingent consideration of up to NZ$9 million based on stretching future earnings targets. The transaction, which has recently received competition authority approval, is due to complete in August 2023.  DVS is a direct-to-consumer supplier of home ventilation systems, focusing on mechanical ventilation with heat recovery (MVHR).  For the year ended 31 March 2023, DVS reported unaudited revenues of NZ$18 million and profit before tax of NZ$2 million.

Financial position remains strong

We are expecting a strong year of cash generation, underpinned by good working capital management, with operating cash conversion (note 2) expected to be above our targeted level of 90% and leverage at 31 July 2023 below 1.0x with ample headroom for continued M&A.

Ronnie George, Volution Chief Executive Officer, commented:

"Volution has delivered another year of good progress against a backdrop of difficult end markets, again demonstrating the robustness of our business model and the benefit of the Group's diverse geographic and end market positioning. Whilst higher interest rates, leading to higher mortgage rates, are dampening new build construction demand, RMI, which accounts for approximately 70% of Group revenue, has proved resilient enabling us to deliver Group organic growth of c.5%.

"The Group's structural growth drivers remain supportive and, although general end market sentiment is weaker, we continue to see high levels of interest in our wide range of low carbon ventilation solutions, driven by consumer awareness of the importance of indoor air quality, and the regulatory back drop focused on decarbonising buildings."

Full year results

The full year results for the year ending 31 July 2023 will be announced on Thursday 5 October 2023.

-ends-

For further information: 

Note:

1.       The Board believes current market forecasts for the year ending 31 July 2023 to be adjusted earnings per share in the range of 23.7p to 25.6p with a consensus of 24.4p

2.       Cash conversion defined as: Adjusted operating cash flow / (Adjusted operating profit + amortisation).  Leverage defined as adjusted EBITDA divided by net debt (excl. IFRS16 liabilities)

Volution Group plc Legal Entity Identifier: 213800EPT84EQCDHO768.

Note to Editors:

Volution Group plc (LSE: FAN) is a leading international designer and manufacturer of energy efficient indoor air quality solutions. Volution Group comprises 21 key brands across three regions:

UK: Vent-Axia, Manrose, Diffusion, National Ventilation, Airtech, Breathing Buildings, Torin-Sifan.

Continental Europe: Fresh, PAX, VoltAir, Kair, Air Connection, Rtek, inVENTer, Ventilair, ClimaRad, ERI Corporation, VMI, I-Vent.

Australasia: Simx, Ventair, Manrose.

For more information, please go to: www.volutiongroupplc.com

Cautionary statement regarding forward-looking statements

This document may contain forward-looking statements which are made in good faith and are based on current expectations or beliefs, as well as assumptions about future events. You can sometimes, but not always, identify these statements by the use of a date in the future or such words as "will", "anticipate", "estimate", "expect", "project", "intend", "plan", "should", "may", "assume" and other similar words. By their nature, forward-looking statements are inherently predictive and speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. You should not place undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to factors that could cause our actual results to differ materially from those expressed or implied by these statements. The Company undertakes no obligation to update any forward-looking statements contained in this document, whether as a result of new information, future events or otherwise.