TIDMFAN
RNS Number : 1063I
Volution Group plc
23 March 2015
Monday 23 March 2015
VOLUTION GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JANUARY 2015
Revenue and profitability in line with expectations. Strong cash
generation.
Volution Group plc ("Volution" or "the Group" or "the Company",
LSE: FAN), a leading supplier of ventilation products to the
residential construction market, today announces its unaudited
interim financial results for the 6 months ended 31 January
2015.
Highlights 6 months Pro-Forma Change Change
to January 6 months Constant
2015 to January Currency
2014
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Revenue (GBP000) 64,349 58,169 10.6% 14.7%
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Adjusted EBITDA (GBP000) 15,038 (1) 13,957 (1,2) 7.7% 12.1%
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Adjusted operating profit
(GBP000) 13,990 (1) 13,095 (1,2) 6.8% 11.2%
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Adjusted profit before
tax (GBP000) 12,709 (1) 11,812 (1,2) 7.6% 12.4%
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Reported profit/(loss)
before tax (GBP000) 7,499 (8,087)
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Basic and diluted EPS
(p) 2.94 (8.20)
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Adjusted basic and diluted
EPS (p) 4.98 (1,3) 4.59 (1,2,3) 0.39p 0.58p
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Adjusted operating cash
flow (GBP000) 11,809 (1,3) 11,640 (1,2) 1.5%
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Interim dividend per share
(p) 1.05 n/a n/a
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
Net debt (GBP000) 31,400 (1) 183,193 (1)
---------------------------- ----------------- ------ ---------------- --------- ------- ----------
The Group uses some alternative performance measures to track
and assess the underlying performance of the business. These
measures include adjusted EBITDA, adjusted operating profit,
adjusted profit before tax, adjusted basic and diluted EPS and
adjusted operating cash flow. For a definition of all adjusted and
non-GAAP measures, see the glossary of terms at note 20.
Notes:
1. Details of adjusted EBITDA, adjusted operating profit and
adjusted profit before tax can be found in note 7.
2. To provide a more meaningful comparison of our performance in
the current period we have presented the prior period including
pro-forma adjustments to reflect the cost of public ownership and
the current debt structure. More information on the adjustments can
be found in note 8.
3. On the 23 June 2014, a share for share exchange converted the entire share capital (after reorganisation) of Windmill Topco Limited to new ordinary shares of Volution Group plc. The weighted average number of shares has been calculated assuming the share for share exchange took place as from 1 August 2013. The pro-forma EPS assumes the same weighted average number of shares in the 6 months to 31 January 2014 as in the 6 months to January 2015 to ensure we are showing a consistent comparison.
Overview
Financial highlights
-- Results are in line with our expectations and ahead on a constant currency basis.
-- Revenue in the 6 months was GBP64.3 million, a 10.6% increase (14.7% at constant currency).
-- Revenue growth comprised of 0.5% organic revenue growth (3.8%
at constant currency), with inorganic revenue growth of 10.1%
(10.9% at constant currency) as a result of acquisitions.
-- Ventilation Group revenue growth including acquisitions was
18.5% at constant currency, with a particular highlight being UK
Residential New Build growth of 16.6%.
-- OEM (Torin-Sifan) results declined as revenue fell due to a
difficult end market for boiler spares during the mild winter.
-- Adjusted Operating Profit increased by 6.8% to GBP14.0
million (11.2% at constant currency) a margin of 21.7% of revenues
(H1 2014: 22.5%).
-- The Group's reported pre-tax profit of GBP7.5 million (H1
2014: loss of GBP8.1 million) improved significantly, mainly as a
consequence of lower finance cost of GBP1.3 million (H1 2014:
GBP15.0 million).
-- Continued strong cash generation reduced net debt to GBP31.4 million.
-- Maiden interim dividend of 1.05 pence per share.
Strategic highlights
-- Organic revenue growth was driven by a 16.6% increase in UK
Residential New Build and strong growth in private UK Residential
RMI supported through upselling and partially offset by a softer
public housing market.
-- Integration of inVENTer is progressing well with a number of
new sales agent appointments in Germany already gaining traction
with sales.
-- OEM (Torin-Sifan) new EC/DC motorised impellor manufacturing
site commissioned and operational in October 2014.
-- In February 2015: New Group bank facility of GBP90 million,
reducing gross debt and financing costs as well as providing more
flexibility for potential acquisitions.
Interim dividend declaration and policy
-- The Board has declared a maiden interim dividend of 1.05
pence per share. This dividend will be paid on 14 May 2015 to
shareholders on the register at the close of business on 7 April
2015.
-- Our dividend policy remains to target a dividend of
approximately 30% of the Group's adjusted net income for each
financial year.
Commenting on the Group's first half performance, Ronnie George,
Chief Executive Officer, said:
"It is pleasing to see our results in line with our expectations
and our continuing strong cash generation. Sales growth of 16.6% in
UK Residential New Build systems was the highlight of our first
half and we are beginning to see the benefits of our actions to
improve sales in Germany.
New product innovation and development is key to underpinning
our organic growth and a number of new product launches are nearing
completion and will further assist revenue growth in the second
half of 2015. This will continue to strengthen our position as one
of the leading players in the European market for ventilation
products, including heat recovery systems."
Outlook
"Despite foreign exchange challenges, the first half was in line
with our expectations and we remain confident of making continued
progress in the second half."
-Ends-
Enquiries:
Volution Group plc
Ronnie George, Chief Executive
Officer +44 (0) 1293 441501
Ian Dew, Chief Financial
Officer +44 (0) 1293 441536
Brunswick +44 (0) 20 7404 5959
volution@brunswickgroup.com
Craig Breheny, Simone Selzer,
Chris Buscombe
Notes to Editors
Volution Group plc (LSE: FAN) is a leading supplier of
ventilation products to the residential construction market in the
UK, Sweden and Germany.
The Group sold approximately 11 million ventilation products and
accessories in the six months ended 31 January 2015. It consists of
five key brands, focused primarily on the UK, Swedish and German
ventilation markets - Vent-Axia, Manrose, Fresh, PAX and inVENTer -
and operates through two divisions: the Ventilation Group, which
principally supplies ventilation products for residential
construction applications in the UK, Sweden and Germany and
ventilation products for commercial construction applications in
the UK; and OEM (Torin-Sifan), which supplies motors, fans and
blowers to OEMs of heating and ventilation products for both
residential and commercial construction applications in Europe.
For more information, please go to:
http://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.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
Our results for the 6 months were strong, reflecting growth both
organically and through acquisitions. Revenue was up year-on-year
by 10.6% (14.7% at constant currency) at GBP64.3 million. Adjusted
EBITDA grew strongly, up 7.7% (12.1% at constant currency) to
GBP15.0 million, 23.4% of revenue.
The acquisition of inVENTer was integrated in the half year. In
addition significant investment was made in new product development
and a new production facility was acquired, commissioned and opened
at Torin-Sifan. We also saw some good organic growth, especially in
the important area of higher value ventilation systems used in new
residential dwellings.
We have made good progress in product development with a new
range of application software (APP) controlled intermittent extract
fans and more energy efficient heat recovery products will be
launched in the second half of the calendar year.
Ventilation Group: Revenue of GBP54.4 million (H1 2014: GBP47.5
million)
Adjusted operating profit of GBP13.3 million (H1 2014: GBP11.6
million)
Our Ventilation Group segment's revenue was GBP54.4 million (H1
2014: GBP47.5 million) in the six months, a 14.7% increase on prior
year (18.5% at constant currency rates). Organic growth was 2.2%
(5.3% at constant currency). Inorganic growth came substantially
from the acquisition of inVENTer in Germany, in April 2014 and was
supported by the full half year effect of PAX in Sweden, the
acquisition of which was completed in August 2013.
The UK Residential RMI market grew at 0.9% with private
refurbishment experiencing very strong growth partly offset by a
disappointing decline in public refurbishment, a more difficult
market due to local authority austerity measures and cut backs. Our
focus on the quiet, energy efficient solutions for the private
market continues to grow and we expect these initiatives to gain
further traction as the recovery in the private RMI market takes
hold in the UK.
The UK Residential New Build market is seeing ongoing growth in
completions as well as the greater penetration of central heat
recovery ventilation systems as the preferred method of ventilation
in new homes. This increase in new house completions, as well as
the greater use of our products for the provision of ventilation,
delivered sales growth of 16.6%. We are continuing to invest
heavily in this market segment and will be launching a new and
further improved range of central heat recovery systems products in
the autumn of 2015. The Group manufactures the central ventilation
systems as well as the ducting and accessories that are required
for the installation of a "whole house" ventilation system,
resulting in the revenue of these systems being 10-20 times that of
more traditional and historically used intermittent extract
fans.
We were delighted to recently announce the latest new build
residential project win for Barratt London's Enderby Wharf
development in the Royal Borough of Greenwich, South East London,
an area benefitting from significant regeneration. Volution's
Vent-Axia division will supply Sentinel Kinetic BH ventilation
units for part of the first phase of 197 homes in the new Enderby
Wharf development, a mix of one, two and three-bedroom apartments
and duplexes on a site stretching across 200 metres of river front
with west-facing views towards Canary Wharf and the City.
UK Export sales also grew by 13.4%, despite the strength of GBP
versus the Euro (15.7% at constant currency) in particular assisted
by the growth in our central heat recovery systems products.
Late in 2014 we carried out a heat recovery manufacturing
capacity enhancement and indirect cost reduction reorganisation of
the Dudley, West Midlands manufacturing and distribution facility.
This also resulted in taking on a lease for additional storage
space next to our main manufacturing site at Dudley and we have
released the original distribution site for disposal.
Sales in the Nordic Sector were GBP11.6 million (H1 2014:
GBP11.7 million) a decline of 0.9%, however at constant currency
growth was 11.1%. The integration of PAX into the Group has been a
considerable success. We have been consolidating our leadership
position in residential ventilation in the Swedish market and have
achieved significant growth in the sales of the market leading low
energy and near silent ventilation products "Intellivent" and
"Passad". The Group continues to focus on these important product
categories and will launch a new range of products for the Nordic
market in the summer of 2015. These new products will have even
better controls and functionality over the current range on
offer.
The Nordic team continue to focus on the new opportunities post
integration and sales in Norway in particular have been growing
very strongly.
The integration of inVENTer into the Group continues to progress
very well, with sales of GBP5.3 million (H1 2014: GBPnil) and
provides us with the platform to capture share of the growing
residential energy efficient ventilation market in Germany. Over
the last six months we have successfully appointed several new
sales agents and these new agents are starting to gain traction in
the market place. We also launched a new product, the "iV12-Smart"
as well as the inVENTer "PAX" (an internal room decentralised heat
recovery solution). The inVENTer "PAX" is supplied from the Swedish
operations and is an example of the cross selling opportunities we
can exploit now that inVENTer is part of the Group. We will
continue to give considerable focus to sales growth initiatives in
the coming months. This will include the further appointment of new
sales agents, a price increase successfully implemented on 1
January 2015, the growth in sales of new products such as
"iV12-Smart" and inVENTer "PAX" and the recovery of sales in the
North area of Germany through a number of projects already started.
On top of the selling initiatives, inVENTer is now benefitting from
the wider Group knowledge and support on product development and
sourcing which are expected to result in product cost reductions
during the latter part of 2015.
OEM (Torin-Sifan): Revenue of GBP9.9 million (H1 2014: GBP10.7
million)
Adjusted operating profit of GBP1.5 million (H1 2014: GBP2.2
million)
Our OEM (Torin-Sifan) segment revenue was GBP9.9 million (H1
2014: GBP10.7 million) in the six months and has declined by 7.3%
(declined 2.5% at constant currency) mainly as a consequence of
lower sales of spare parts for non-condensing boilers during the
recent mild winter. There is a correlation between mild winters and
lower sales of these replacement parts.
OEM (Torin-Sifan) has had a challenging start to the year with
the winter being much milder than usual until after Christmas 2014.
The sales of gas boiler combustion motors has therefore declined
versus the prior year although is performing better more
recently.
Sales of EC/DC motorised impellors continues to grow as this
area is supported by the market growth, both in the UK and in
continental Europe, for central system ventilation where these
motors provide the air movement capabilities.
Three Strategic Pillars
Our strategy continues to focus on three key pillars:
-- Organic growth in our core markets;
-- Growth through a disciplined and value-adding acquisition strategy; and
-- To further develop OEM (Torin-Sifan)'s range, build customer preference and loyalty.
In our core markets, we expect to continue to benefit from a
favourable regulatory backdrop that focuses on reducing carbon
emissions from buildings; the need for improving energy efficiency
and the emerging understanding of the importance of indoor air
quality in the developed world. The Group will continue to gain
from these market developments with our specialised approach to
each market area. By building on our internal resources and
focusing on product management and product development, this will
enable us to deliver product and system solutions to meet
customers' needs.
The ventilation market in Europe remains highly fragmented and
we continue to explore selective acquisition opportunities to
increase our international footprint. Our track record over the
last two years of making acquisitions and successfully integrating
them into our Group shows our ability to add new competencies and
to expand into new markets and this serves us well for future
acquisitions in the coming years. This area continues to be a high
priority for the Group.
Over the last two years we have made a significant investment in
OEM (Torin Sifan) in new product development and a new production
facility to capitalise on the growth in demand for EC
(Electronically commutated) motors used in various residential and
commercial ventilation products. The new EC production facility is
now fully commissioned and operational and the product development
of the new range of high performance air movement products is
nearing completion. These new products will be launched in H2
2015.
Ronnie George
Chief Executive Officer
23 March 2015
FINANCIAL REVIEW
Trading Performance Summary
Adjusted(1) and
Adjusted(1) Pro-forma(2) Reported
------------ -------------------------- --------------------------- --------- ------------------------------------
6 months
to 31 6 months to
6 months to 31 January 6 months to 31 January January 31 January
2015 2014 Movement 2015 2014 Movement
------------ -------------------------- --------------------------- --------- ----------- ------------ ---------
Revenue
(GBP'000) 64,349 58,169 10.6% 64,349 58,169 10.6%
------------ ------------ ------------ ------------ ------------- --------- ----------- ------------ ---------
EBITDA
(GBP'000) 15,038 (1) 13,957 (1,2) 7.7% 14,992 13,204 13.6%
------------ ------------ ------------ ------------ ------------- --------- ----------- ------------ ---------
Operating
profit
(GBP'000) 13,990 (1) 13,095 (1,2) 6.8% 8,142 6,889 18.2%
------------ ------------ ------------ ------------ ------------- --------- ----------- ------------ ---------
Finance
costs
(GBP'000) 1,287 1,287 (1,2) 0.0% 1,287 14,980 (91.4%)
------------ ------------ ------------ ------------ ------------- --------- ----------- ------------ ---------
Profit/
(loss)
before tax
(GBP'000) 12,709 (1) 11,812 (1,2) 7.6% 7,499 (8,087)
------------ ------------ ------------ ------------ ------------- --------- ----------- ------------ ---------
Basic and
diluted
EPS (p) 4.98 (1) 4.59 (1,2,3) 8.5% 2.94 (8.20)
------------ ------------ ------------ ------------ ------------- --------- ----------- ------------ ---------
Operating
cash flow
(GBP'000) 11,809 (1) 11,640 (1,2) 1.5% 11,809 11,640 1.5%
------------ ------------ ------------ ------------ ------------- --------- ----------- ------------ ---------
Net Debt
(GBP'000) 31,400 183,193 31,400 183,193
------------ ------------ ------------ ------------ ------------- --------- ----------- ------------ ---------
The reconciliation of the Group's reported profit before tax to
adjusted measures of performance is summarised in the table above
and in detail in note 7 and 8 to the consolidated financial
statements.
1. Details of adjusted EBITDA, adjusted operating profit and
adjusted profit before tax can be found in note 7. For a definition
of all adjusted measures see the glossary of terms at note 20.
2. To provide a more meaningful comparison of our performance in
the current period we have also presented the prior period
including pro-forma adjustments to reflect public ownership with
the current debt structure. More information on the adjustments can
be found in note 8
3. On the 23 June 2014, a share for share exchange converted the entire share capital (after reorganisation) of Windmill Topco Limited to new ordinary shares of Volution Group plc. The weighted number of shares has been calculated assuming the share for share exchange took place as from 1 August 2013. The pro-forma EPS assumes the same weighted average number of shares in the 6 months to 31 January 2014 as in the 6 months to January 2015 to ensure we are showing a consistent comparison.
Revenue
Group Revenue during the six months ended 31 January 2015 was
GBP64.3 million (H1 2014: GBP58.2 million) a 10.6% increase (14.7%
at constant currency). This comprised 0.5% organic growth (3.8% on
a constant currency basis), with 10.1% the result of acquisitions
(10.9% at constant currency).
The Group is enjoying strong demand for its ventilation
products, especially newer, higher value added ventilation systems.
Organic growth was helped by 16.6% growth in UK Residential New
Build sales. Growth in the UK Residential RMI sector was 0.9%,
comprised of strong growth in our private RMI revenue partially
offset by a decline in the more difficult public RMI market. In the
UK commercial sector, growth was 0.8% and UK Exports grew by 13.5%
(15.7% at constant currency). Sales in our OEM (Torin-Sifan)
segment declined by 7.3% (declined 2.5% at constant currency) as
sales of boiler spares fell during the mild winter.
Profitability
Our underlying result, as measured by adjusted EBITDA, was
GBP15.0 million (H1 2014: GBP14.0 million), 23.4% of revenues,
delivering a GBP1.0 million improvement compared to the prior year
(GBP1.7 million improvement at constant currency). The Group
benefited significantly from the recent acquisition of inVENTer. In
addition, cost reductions and other synergy benefits were secured
in our subsidiaries in Sweden, partially offset by the decline in
profits in OEM (Torin-Sifan).
On sales growth of 10.6% our adjusted profit before tax improved
by GBP0.9 million to GBP12.7 million, growth of 7.6%. The
percentage growth in adjusted profit before tax was effected by
lower sales of higher margin boiler spares in our OEM (Torin-Sifan)
segment and the recent acquisition of inVENTer which is yet to
benefit from improved operational leverage post acquisition.
The Group's reported profit before tax in the six months was
GBP7.5 million compared to a loss of GBP8.1 million in H1 2014. The
reported profit before tax for the period has benefited from:
-- A significant reduction in finance costs to GBP1.3 million
(H1 2014: GBP15.0 million) as a result of lower borrowings and no
amortisation of refinancing costs.
-- Lower exceptional costs of GBP0.1 million (H1 2014: GBP1.4 million).
Acquisitions
The Group's trading benefitted in the six months from the full
effect of the acquisition of PAX in Sweden, acquired August 2013
and the 6 months trading of inVENTer in Germany, acquired April
2014. No acquisitions were made in the 6 month period ended 31
January 2015.
Exceptional Items and adjusted performance measures
Exceptional items, by virtue of their size, incidence or nature,
are disclosed separately in order to allow a better understanding
of the underlying trading performance of the Group. During the
period ended 31 January 2015 exceptional items were GBP0.1 million
(H1 2014 GBP1.4 million). Details of these exceptional items can be
found in note 6.
The Board believes that the performance measures; adjusted
EBITDA, adjusted operating profit and adjusted profit before tax,
stated before deduction of exceptional items, give a clearer
indication of the underlying performance of the business. A
reconciliation of these measures of performance to profit before
tax is detailed in note 7.
In addition to exceptional items, the following are also
excluded from adjusted measures, as reconciled in note 7:
-- On acquisition of a business, we obtain an independent
valuation of identifiable acquired intangible fixed assets such as
trademarks and customer base and recognise these assets in our
consolidated statement of financial position; we then amortise
these acquired assets over their useful lives. In the six months
the amortisation charge of these intangible assets was GBP5.8
million (H1 2014: GBP5.5 million);
-- Bank refinancing costs in H1 2015 were GBPnil (H1 2014: GBP7.4 million); and
-- At each reporting period end date we measure the fair value
of financial derivatives and recognise any gains or losses
immediately in finance cost. In the six months we recognised a gain
of GBP0.6 million (H1 2014: loss GBP0.7 million).
Finance Revenue and Costs
Finance costs of GBP1.3 million in the six months (H1 2014:
GBP15.0 million) have reduced significantly, largely as a
consequence of the change in capital structure on refinancing in
June 2014 and the write off of accumulated third party bank
financing costs, mentioned above, of GBP7.4 million in the prior
period. Prior to listing the business was under private equity
ownership and was predominantly financed by bank borrowings and
senior unsecured debt.
Operating Cash Flow
The Group continued to be cash generative in the six months with
adjusted operating cash inflow of GBP11.8 million. This represents
a cash conversion, after capital expenditure of 84.1% (H1 2014:
86.6%). The Group continues to manage its working capital
efficiently with operating working capital representing 28% of half
year revenue. See glossary of terms at note 20 for a definition of
adjusted operating cash flow.
Net Debt
Period end net debt was GBP31.4 million (FY 2014: GBP42.9
million, H1 2014: GBP183.2 million) made up of bank borrowings of
GBP52.3 million (FY 2014: bank borrowings GBP53.9 million, H1 2014:
GBP109.6 million bank borrowings and GBP81.2 million investor loan
notes) offset by cash and cash equivalents of GBP20.9 million (FY
2014: GBP11.0 million, H1 2014: GBP7.6 million).
Movements in Net Debt position for the year ended 31 January
2015
GBPm
--------------------------------------------- ----------------
Opening net debt 1 February 2014 (183.2)
--------------------------------------------- ----------------
Movements from normal business operations
adjusted operating cash flow 22.5
interest paid (7.3)
income tax paid (2.1)
Exceptional (1.0)
Other 2.6
Movements from acquisitions
acquisition consideration (19.1)
Movements from the IPO
conversion of investor debt to equity 91.7
share issue proceeds 72.0
IPO costs (7.5)
--------------------------------------------- ----------------
Closing net debt 31 January 2015 (31.4)
--------------------------------------------- ----------------
Movements in Net Debt position for the 6 months ending 31
January 2015
GBPm
------------------------------------------- ----------------
Opening net debt 1 August 2014 (42.9)
------------------------------------------- ----------------
Movements from normal business operations
adjusted operating cash flow 11.8
interest paid (1.3)
income tax paid (0.4)
Exceptional (0.1)
Other 1.5
Closing net debt 31 January 2015 (31.4)
------------------------------------------- ----------------
Bank Facilities, refinancing and Liquidity
The Group's bank facilities, at the period end 31 January 2015,
consisted of fully drawn term loans of GBP52.3 million, an
unutilised revolving credit facility (RCF) of GBP13.0 million and
an unutilised approved acquisition facility of GBP20.0 million. The
term loans are repayable in full in February 2019.
As at 31 January 2015 we had GBP11.5 million of undrawn,
committed bank facilities and a GBP20.0 million acquisition
facility in addition to GBP20.9 million cash and cash equivalents
on the statement of financial position.
After the reporting date, on 13 February 2015, the Group
refinanced its bank debt. The Group now has in place a GBP90
million revolving credit facility, maturing April 2019. This new
facility is provided under standard Loan Market Association terms
and replaces the Group's existing facilities. The new facility is
provided at a lower interest rate than the facility being
refinanced and the covenant headroom has been improved.
Foreign Exchange
The Group is exposed to the impact of changes in the foreign
currency exchange rates on transactions denominated in currencies
other than the functional currency of our operating businesses. We
have significant Euro income in the UK which is partly balanced by
Euro expenditure. For US Dollars we have little income but
significant expenditure. Our policy is to limit our transactional
foreign exchange risk by purchasing the majority of our forecast US
Dollar requirements for, and in advance of, the ensuing financial
year.
We are also exposed to translational currency risk as the Group
consolidates foreign currency denominated assets, liabilities,
income and expenditure into Group reporting denominated in GBP. We
hedge the translation risk of the net assets in Fresh and PAX with
GBP17.8 million borrowings denominated in SEK (H1 2014: GBP20.5
million). We have partially hedged our risk of translation of the
net assets of inVENTer by having Euro denominated bank borrowings
in the amount of GBP9.5 million as at 31 January 2015. We do not
hedge the results of overseas subsidiaries.
During the six months movements in foreign currency exchange
rates have had an adverse effect on the reported revenue and
profitability of our business. If we had translated the H1 2015
performance of our business at our 2014 exchange rates our reported
Group revenues would have been GBP2.4 million or 3.7% higher and
operating profit would have been GBP0.5 million or 6.2% higher.
Earnings per Share
The basic and diluted earnings per share for the 6 months ended
31 January 2015 was 2.94 pence (H1 2014: loss 8.20 pence). Our
adjusted basic and diluted earnings per share was 4.98 pence (H1
2014 pro-forma adjusted basic and diluted earnings per share: 4.59
pence).
Ian Dew
Chief Financial Officer
23 March 2015
PRINCIPAL RISKS AND UNCERTANTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The directors do not consider that the principal risks and
uncertainties have changed since the publication of the Annual
Report for the year ended 31 July 2014. These risks are summarised
below, and how the Group seeks to mitigate these risks is set out
on pages 24 and 27 of the Annual Report 2014 which can be found at
www.volutiongroupplc.com.
A summary of the nature of the risks currently faced by the
Group is as follows:
Economic Risk
A decline in general economic activity and/or a specific decline
in activity in the construction industry would result in a decline
in demand for our products serving the residential and commercial
RMI and new build markets would decline. This would result in a
reduction in revenue and profitability.
Foreign Exchange Risk
The exchange rates between currencies that we use may move
adversely. The commerciality of transactions denominated in
currencies other than the functional currency of our businesses
and/or the perceived performance of foreign subsidiaries in our GBP
denominated Group accounts may be adversely affected by changes in
exchange rates.
Acquisitions
We may fail to identify suitable acquisition targets at an
acceptable price or we may fail to consummate or properly integrate
the acquisition. The impact could include: revenue and
profitability which may not grow in line with management's
ambitions and investor expectations; a failure to properly
integrate a business may distract senior management from other
priorities and adversely affect revenue and profitability;
financial performance by failure to integrate acquisitions.
Innovation
We may fail to innovate commercially or technically viable
products to maintain and develop our product leadership position.
Scarce development resource may be misdirected and costs incurred
unnecessarily. Failure to innovate may result in an ageing product
portfolio which falls behind that of our competition.
Supplies
Raw materials or components may become difficult to source
because of material scarcity or disruption of supply. Sales and
profitability may be reduced during the period of constraint.
Prices for the input material may increase and our costs may
increase.
People
Our continuing success depends on retaining key personnel and
attracting skilled individuals. Skilled and experienced employees
may decide to leave the Group, potentially moving to a competitor.
Any aspect of the business could be impacted with resultant
reduction in prospects, sales and profitability.
IT systems
We may be adversely affected by a breakdown in our IT systems or
a failure to properly implement any new systems. Failure of our IT
and communication systems could affect any or all of our business
processes and have significant impact on our ability to trade,
collect cash and make payments.
Customers
A significant amount of our revenue is derived from a small
number of customers and from our relationships with heating and
ventilation consultants. Any deterioration in our relationship with
a significant customer could have an adverse significant effect on
our revenue to that customer.
Legal and regulatory environment
Changes in laws or regulation relating to the carbon efficiency
of buildings or the efficiency of electrical products may change.
The shift towards higher value-added and more energy-efficient
products may not develop as anticipated resulting in lower sales
and profit growth. If our products are not compliant and we fail to
develop new products in a timely manner we may lose revenue and
market share to our competitors.
STATEMENT OF DIRECTORS' RESPONSIBILITES
The directors confirm that to the best of their knowledge:
The condensed set of financial statements has been prepared in
accordance with International Accounting Standard 34 'Interim
Financial Reporting' as adopted by the European Union and that the
interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period, and any changes in the related party
transactions described in the Annual Report 2014.
The directors of Volution Group plc are as listed in the
Company's Annual Report for the year ended 31 July 2014.
By order of the Board
Ronnie George Ian Dew
Chief Executive Chief Financial Officer
Officer
23 March 2015 23 March 2015
INDEPENDENT REVIEW REPORT TO VOLUTION GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 January 2015 which comprises the interim
condensed consolidated statement of comprehensive income, interim
condensed consolidated statement of financial position, interim
condensed consolidated statement of changes in equity, interim
condensed consolidated statement of cash flows and the related
notes 1 to 20. We have read the other information contained in the
half yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
January 2015 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
23 March 2015
(Notes:)
(1. The maintenance and integrity of the Volution Group plc web
site is the responsibility of the directors; the work carried out
by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial information since
it was initially presented on the web site.)
(2. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.)
Interim condensed consolidated statement of comprehensive
income
For the six months ended 31 January
31 January 31 January
2015 2014
Unaudited Unaudited
Notes GBP000 GBP000
Revenue 4 64,349 58,169
Cost of sales (32,996) (29,990)
---------- ----------
Gross profit 31,353 28,179
Distribution costs (9,832) (7,907)
Administrative expenses (13,333) (12,030)
---------- ----------
Operating profit before exceptional
items 8,188 8,242
Exceptional items 6 (46) (1,353)
---------- ----------
Operating profit 8,142 6,889
Finance revenue 644 4
Finance costs 9 (1,287) (14,980)
---------- ----------
Profit/(loss)before tax 7,499 (8,087)
Income tax 10 (1,621) 638
---------- ----------
Profit/(loss) for the period 5,878 (7,449)
Other comprehensive expense:
Items that may subsequently be reclassified
to profit or loss:
Exchange differences arising
on translation of foreign
operations (343) (457)
Loss on hedge of net investment
in foreign operation (49) (35)
---------- ----------
Other comprehensive expense
for the period (392) (492)
---------- ----------
Total comprehensive income/(expense)
for the period 5,486 (7,941)
========== ==========
Profit/(Loss) per share
Basic and diluted, pence
per share 11 2.94 (8.20)
Interim condensed consolidated statement of financial
position
31 January 31 July
2015 2014
Unaudited Audited
Notes GBP000 GBP000
Non-current assets
Property, plant and equipment 12 16,146 15,915
Intangible assets - goodwill 49,858 50,127
Intangible assets - other 13 107,150 113,651
Deferred tax assets 732 732
---------- ---------
173,886 180,425
---------- ---------
Current assets
Inventories 15,742 15,922
Trade and other receivables 24,067 25,422
Income tax - 1,093
Other current financial assets 15 689 422
Cash and short term deposits 20,886 10,987
---------- ---------
61,384 53,846
---------- ---------
Assets classified as held for sale 359 -
---------- ---------
Total assets 235,629 234,271
========== =========
Current liabilities
Trade and other payables (20,795) (22,821)
Other current financial liabilities 15 (242) (467)
Income tax (1,210) -
Provisions (1,103) (1,018)
---------- ---------
(23,350) (24,306)
---------- ---------
Non-current liabilities
Interest bearing loans and borrowings 14 (52,286) (53,903)
Other non-current financial liabilities 15 - (122)
Provisions (600) (600)
Deferred tax liabilities (20,657) (22,090)
---------- ---------
(73,543) (76,715)
---------- ---------
Total liabilities (96,893) (101,021)
========== =========
Net assets 138,736 133,250
========== =========
Capital and reserves
Share capital 2,000 2,000
Share premium 11,527 11,527
Capital reserve 92,325 92,325
Foreign currency translation reserve (135) 257
Retained earnings 33,019 27,141
------- -------
Total equity 138,736 133,250
======= =======
Interim condensed consolidated statement of changes in
equity
Foreign
currency
Share Share Capital translation Retained
capital premium reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 August
2013(Audited) 3 2,098 - 582 (16,231) (13,548)
Loss for the
period - - - - (7,449) (7,449)
Other
comprehensive
expense - - - (492) - (492)
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
Total
comprehensive
income - - - (492) (7,449) (7,941)
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
At 31 January
2014(Unaudited) 3 2,098 - 90 (23,680) (21,489)
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
Loss for the
period - - - - (6,809) (6,809)
Other
comprehensive
expense - - - 167 - 167
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
Total
comprehensive
expense - - - 167 (6,809) (6,642)
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
Net adjustment to
reserves
arising from
Group
re-organisation (3) (2,098) - - - (2,101)
Share for share
exchange as
part of Group
reorganisation 1,520 - 92,325 - - 93,845
Issue of new
ordinary shares
on stock market
listing 480 71,520 - - - 72,000
Share issue costs - (2,363) - - - (2,363)
Capital reduction - (57,630) - - 57,630 -
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
At 31 July
2014(Audited) 2,000 11,527 92,325 257 27,141 133,250
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
Profit for the
period - - - - 5,878 5,878
Other
comprehensive
expense - - - (392) - (392)
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
Total
comprehensive
income - - - (392) 5,878 5,486
------------------- ------------------ ------------------ ----------------- ------------------ -----------------
At 31 January
2015(Unaudited) 2,000 11,527 92,325 (135) 33,019 138,736
=================== ================== ================== ================= ================== =================
Capital reserve
The capital reserve is the difference in share capital and
reserves arising from the use of the pooling of interest method for
preparation of the financial statements.
Foreign currency translation reserve
Exchange differences arising on translation of the Group's
foreign subsidiaries into GBP are included in the foreign currency
translation reserve. The Group hedges some of its exposure to its
net investment in foreign operations, foreign exchange gains and
losses relating to the effective portion of the net investment
hedge are accounted for by entries made directly to the foreign
currency translation reserve. No ineffectiveness has been
recognised in the statement of comprehensive income for any of the
periods presented.
These two items are the only items in other comprehensive
income.
Interim condensed consolidated statement of cash flows
For the six months ended 31 January
31 January 31 January
2015 2014
Unaudited Unaudited
Notes GBP'000 GBP'000
Operating activities
Profit/(loss) for the
period after tax 5,878 (7,449)
Adjustments to reconcile
profit/(loss) for the
period to net cash flow
from operating activities:
Income tax 1,621 (638)
(Gain)/loss on disposal
of property, plant and
equipment (28) 11
Exceptional items 6 46 1,353
Cash flows relating to
exceptional costs (46) (811)
Finance revenue (644) (4)
Finance costs 9 1,287 14,980
Depreciation of property,
plant and equipment 990 822
Amortisation of intangible
assets 5,860 5,493
Working capital adjustments:
Decrease/(increase) in
trade receivables and
other assets 1,065 (244)
Decrease/(increase) in
inventories 180 (2,686)
Exceptional costs: fair
value of inventories - (102)
(Decrease)/increase in
trade payables and other
payables (1,952) 1,875
(Decrease)/increase in
provisions 85 (116)
UK income tax paid (373) (1,200)
Overseas income tax paid (27) (250)
----------- -----------
Net cash flow from operating
activities 13,942 11,034
=========== ===========
Investing activities
Payments to acquire intangible
assets (700) (1,062)
Purchase of property,
plant and equipment (2,062) (613)
Proceeds from disposal
of property, plant and
equipment 183 20
Acquisition of subsidiaries,
net of cash acquired - (10,632)
Interest received 6 4
----------- -----------
Net cash flow used in
investing activities (2,573) (12,283)
=========== ===========
Financing activities
Repayment of interest
bearing loans and borrowings - (41,881)
Proceeds from new borrowings - 41,050
Issue costs of new borrowings - (3,756)
Interest paid (1,287) (2,363)
-------- -----------
Net cash flow used in
financing activities (1,287) (6,950)
======== ===========
Net increase /(decrease)
in cash and cash equivalents 10,082 (8,199)
Cash and cash equivalents
at the start of the period 10,987 15,943
Effect of exchange rates
on cash and cash equivalents (183) (100)
-------- -----------
Cash and cash equivalents
at the end of the period 20,886 7,644
======== ===========
1. Corporate Information
The Company is a public limited company and is incorporated and
domiciled in the UK (registered number: 09041571). The share
capital of the Company is listed on the London Stock Exchange. The
address of its registered office is Fleming Way, Crawley, West
Sussex RH10 9YX.
The interim results were authorised for issue by the Board of
Directors on 23 March 2015. The financial information set out
herein does not constitute the statutory accounts and is
unaudited.
2. Accounting policies
Basis of preparation
These condensed consolidated financial statements of the Group
have been prepared in accordance with IAS 34, 'Interim Financial
Reporting', as adopted by the European Union. They do not include
all disclosures that would otherwise be required in a complete set
of financial statements and should be read in conjunction with the
2014 annual report. The financial information for the half years
ended 31 January 2015 and 31 January 2014 do not constitute
statutory within the meaning of Section 434(3) of the Companies Act
2006 and are unaudited.
The annual financial statements of Volution Group plc are
prepared in accordance with IFRS as adopted by the European Union.
The comparative financial information for the year ended 31 July
2014 included within this report does not constitute the full
statutory accounts for that period. The statutory Annual Report and
Financial statements for 2014 have been filed with the Registrar of
Companies. The Independent Auditors' Report on that Annual Report
and Financial Statement for 2014 was unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a
statement under 498(2) and 498(3) of the Companies Act 2006.
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the half-yearly condensed consolidated financial
statements.
The same accounting policies, presentation and methods of
computation are followed in these condensed consolidated financial
statements as were applied in the Group's latest annual audited
financial statements, except for the impact of new accounting
standards and amendments adopted in the period. The following new
accounting standards and amendments have been adopted during the
period:
IFRS 10 'Consolidated Financial Statements' builds on existing
principles by identifying the concept of control as the determining
factor in whether an entity should be included in the consolidated
accounts of the Company. The standard provides additional guidance
to assist in the determination of control where this is difficult
to assess.
IFRS 12 'Disclosure of Interests in Other Entities' includes the
disclosure requirements for all forms of interests in other
entities.
2010-2012 Annual Improvements cycle - The IASB's annual
improvements process deals with non-urgent, but necessary,
clarifications and amendments to IFRS. The 2010-12 cycle includes
an amendment to IFRS 8 Operating Segments that requires the Group
to disclose the judgements made by management in applying the
aggregation criteria in IFRS 8, including a brief description of
the economic characteristics used to assess whether the segments
are similar.
Adoption of IFRS 10 and 12 and the 2010-12 Annual Improvements
cycle has no impact on the Group's reported results or financial
position.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies,
management is required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Judgments
The following are the critical judgments (apart from those
involving estimations), that management has made in the process of
applying the entity's accounting policies and that have the most
significant effect on the amounts recognised in financial
statements:
Exceptional items
The Group discloses exceptional items by virtue of their nature,
size or incidence to allow a better understanding of the underlying
trading performance of the Group. The Group identifies an item or
expense of income as exceptional, when in management's judgment,
the underlying event giving rise to the exceptional item is deemed
to be non-recurring in its nature, size or incidence such that
Group results would be distorted without specific reference to the
event in question. To enable the full impact of an exceptional item
to be understood, the tax impact is disclosed and they are
presented separately in the statement of cash flows.
Development costs
Development costs that are directly attributable to the
development of a product are capitalised using management's
assessment of the likelihood of a successful outcome for each
product being released to market, this is based on management's
judgement that the product is technologically, commercially and
economically feasible in accordance with IAS 38 'Intangible
assets'.
Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of the assets and liabilities within the next financial
year, are described below. The Group based its assumptions and
estimates on parameters available when these financial statements
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
Fair value of assets acquired during business combinations
Judgements and estimates are required in assessment of fair
value of the consideration and net assets acquired, including the
identification and valuation of intangible assets.
Impairment of goodwill and other intangible assets
The Group's impairment test for goodwill is based on a value in
use calculation using a discounted cash flow model. The cash flows
are derived from the budget for the following five years. The
recoverable amount is most sensitive to the discount rate used for
the discounted cash flow model as well as the expected future
cash-inflows and the growth rate used for extrapolation
purposes.
The Group records all assets and liabilities acquired in
business acquisitions, at fair value. Intangible assets are
reviewed for impairment annually if events or changes in
circumstances indicate that the carrying amount may not be
recoverable.
Rebates payable and receivable
The Group has a number of customer and supplier rebate
agreements that are recognised as a reduction from sales or a
reduction of cost of sales as appropriate (collectively referred to
as rebates). Rebates are based on an agreed percentage of revenue
or purchases, which will increase with the level of revenue
achieved or purchases made. These agreements typically run to a
different reporting period to that of the Group with some of the
amounts payable and receivable being subject to confirmation after
the reporting date. At the reporting date, the Directors make
estimates of the amount of rebate that will become both payable and
due to the Group under these agreements based upon their best
estimates of volumes and product mix that will be bought or sold
over each individual rebate agreement period. Where the respective
customer or supplier has been engaged with the Group for a number
of years, historical settlement trends are also used to assist in
ensuring an appropriate estimate is recorded at the reporting date
and that appropriate internal approvals and reviews take place
before rebates are recorded.
4. Revenue
Revenue recognised in the statement of comprehensive income is
analysed below:
For the For the
six months six months
ended ended
31 January 31 January
2015 2014
Unaudited Unaudited
GBP000 GBP000
Sale of goods 63,215 56,770
Rendering of services 1,134 1,399
----------- -----------
Total revenue 64,349 58,169
=========== ===========
For the For the
six months six months
ended ended
31 January 31 January
2015 2014
Unaudited Unaudited
GBP000 GBP000
Market Sectors
Ventilation Group
UK Residential RMI 17,907 17,751
UK Residential New Build 7,782 6,674
UK Commercial 7,960 7,895
UK Export 3,923 3,458
Nordics 11,570 11,677
Germany 5,274 -
Total Ventilation Group 54,416 47,455
----------- -----------
Original Equipment Manufacturer (OEM (Torin-Sifan))
OEM (Torin-Sifan) 9,933 10,714
Total OEM (Torin-Sifan) 9,933 10,714
----------- -----------
Total revenue 64,349 58,169
=========== ===========
5. Segmental analysis
In identifying its operating segments, management follows the
Group's product markets. The Group is considered to have two
reportable segments: Ventilation Group and OEM (Torin-Sifan). Each
reportable segment is managed separately as they require different
marketing approaches.
Operating segments that provide ventilation services have been
aggregated as they have similar economic characteristics, assessed
by reference to the gross margins of the segments. In addition the
segments are similar in relation to the nature of products,
services, production processes, type of customer, method for
distribution and regulatory environment.
The measure of revenue reported to the chief operating decision
maker to assess performance is total revenue for each operating
segment. The measure of profit reported to the chief operating
decision maker to assess performance is adjusted EBITDA (see note
20 for definition) for each operating segment. Gross profit and the
analysis below segment profit is additional voluntary information
and not 'segment information' prepared in accordance with IFRS
8.
Finance revenue and costs are not allocated to individual
operating segments as the underlying instruments are managed on a
Group basis.
Total assets and liabilities are not disclosed as this
information is not provided by operating segment to the chief
operating decision maker on a regular basis.
Transfer prices between operating segments are on an arm's
length basis on terms similar to transactions with third
parties.
Six months ended
31 January 2015 -
Unaudited Ventilation Group OEM (Torin Sifan) Unallocated Total Group eliminations Consolidated
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
External customers 54,416 9,933 - 64,349 - 64,349
Inter-segment 6,546 620 - 7,166 (7,166) -
----------------- ----------------- ------------- ------- ------------------ --------------
Total revenue 60,962 10,553 - 71,515 (7,166) 64,349
================= ================= ============= ======= ================== ==============
Gross profit 28,294 3,059 - 31,353 - 31,353
================= ================= ============= ======= ================== ==============
Results
Adjusted EBITDA 14,077 1,717 (756) 15,038 - 15,038
================= ================= ============= ======= ================== ==============
Amortisation of
development
costs, software
and patents and
Depreciation (780) (268) - (1,048) - (1,048)
Adjusted operating
profit 13,297 1,449 (756) 13,990 - 13,990
----------------- ----------------- ------------- ------- ------------------ ------------
Amortisation of
other intangibles
(customer base
and trademarks) (5,156) (646) - (5,802) - (5,802)
Exceptional items - - (46) (46) - (46)
Operating
profit/(loss) 8,141 803 (802) 8,142 - 8,142
Unallocated
expenses:
Net finance cost - - (643) (643) - (643)
----------------- ----------------- ------------- ------- ------------------ --------------
Profit/(loss)
before tax 8,141 803 (1,445) 7,499 - 7,499
================= ================= ============= ======= ================== ==============
The Group overhead costs of GBP756,000 are not allocated to
individual operating segments. Likewise, exceptional costs incurred
by the holding companies have not been allocated to individual
operating segments.
Six months
ended 31
January 2014- Ventilation OEM (Torin Unallocated
Unaudited Group Sifan) Total Group eliminations Consolidated
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
External
customers 47,455 10,714 - 58,169 - 58,169
Inter-segment 3,323 632 - 3,955 (3,955) -
----------- ------------- ----------------- -------- ---------------------- ------------
Total revenue 50,778 11,346 - 62,124 (3,955) 58,169
=========== ============= ================= ======== ====================== ============
Gross profit 24,442 3,737 - 28,179 - 28,179
=========== ============= ================= ======== ====================== ============
Results
Adjusted EBITDA 12,250 2,422 (115) 14,557 - 14,557
=========== ============= ================= ======== ====================== ============
Amortisation
of
development
costs,
software and
patents and
Depreciation (681) (181) - (862) - (862)
Adjusted
operating
profit 11,569 2,241 (115) 13,695 - 13,695
----------- ------------- ----------------- -------- ---------------------- ------------
Amortisation of
other
intangibles
(customer base
and
trademarks) (4,774) (679) - (5,453) - (5,453)
Exceptional
items (1,353) (1,353) - (1,353)
Operating
profit/(loss) 6,795 1,562 (1,468) 6,889 - 6,889
Unallocated
expenses:
Net finance
cost - - (14,976) (14,976) - (14,976)
----------- ------------- ----------------- -------- ---------------------- ------------
Profit/(loss)
before tax 6,795 1,562 (16,444) (8,087) - (8,087)
=========== ============= ================= ======== ====================== ============
Geographic
information
For the six months ended 31 For the six months ended
January 2015 31 January 2014
Unaudited Unaudited
GBP000 GBP000
Revenue from external customers (by
destination):
United Kingdom 39,025 36,878
Europe (excluding United Kingdom and Nordics) 12,781 8,514
Nordics 11,232 11,594
Rest of the world 1,311 1,183
Total revenue 64,349 58,169
================================ ==========================
31 January
2015 31 July 2014
Unaudited Unaudited
GBP000 GBP000
Non-current assets:
United Kingdom 140,400 150,801
Europe (excluding United Kingdom & Nordics) 16,152 13,850
Nordics 16,602 15,042
Total 173,154 179,693
========== ============
Non-current assets exclude deferred tax.
6. Exceptional items
The Group discloses exceptional items by virtue of their nature,
size or incidence to allow a better understanding of the underlying
trading performance of the Group. Exceptional costs are summarised
below:
For the six For the six
months ended months ended
31 January 31 January
2015 2014
Unaudited Unaudited
GBP000 GBP000
Inventory fair value adjustment
arising on business combinations - 102
Acquisition costs - 176
Restructuring and acquisition
integration - 609
Costs associated with the
stock market listing of the
Group 46 466
46 1,353
Total tax credit relating
to the items above - (204)
------------- -------------
46 1,149
============= =============
7. Adjusted earnings
For the six For the six
months ended months ended
31 January 31 January
2015 2014
Unaudited Unaudited
GBP000 GBP000
Profit/(loss) before tax 7,499 (8,087)
Add back:
Exceptional items 46 1,353
Amortisation of financing costs - 7,440
Net (gain) or loss on financial instruments
at fair value (638) 673
Amortisation and impairment of other
intangible assets (customer base and
trademarks) 5,802 5,453
------------- -------------
Adjusted profit before tax 12,709 6,832
Add back:
Interest payable on bank overdraft and
bank loans 1,287 2,678
Interest on loan notes - 4,189
Finance income (6) (4)
------------- -------------
Adjusted operating profit 13,990 13,695
Add back:
Depreciation of property, plant and equipment 990 822
Amortisation of development costs, software
and patents 58 40
------------- -------------
Adjusted EBITDA 15,038 14,557
============= =============
For an explanation of the adjusted terms used above please see
the glossary of terms at note 20.
8. Adjusted and pro-forma earnings
6 months to 31 January 2015 (Unaudited) 6 months to 31 January 2014 (Unaudited)
Adjusted Pro-forma Adjusted Pro-forma Pro-forma
Reported Adjustments results adjustments Results Reported Adjustments results adjustments results
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 64,349 - 64,349 - 64,349 58,169 - 58,169 - 58,169
Cost of sales (32,996) - (32,996) - (32,996) (29,990) - (29,990) - (29,990)
--------- ------------ --------- ------------ --------- --------- ------------ --------- ------------ ----------
Gross profit 31,353 - 31,353 - 31,353 28,179 - 28,179 - 28,179
Admin &
Distribution
costs (23,165) 5,802 (17,363) - (17,363) (19,937) 5,453 (14,484) (600) (1) (15,084)
--------- ------------ --------- ------------ --------- --------- ------------ --------- ------------ ----------
Operating
profit
before
exceptional
items 8,188 5,802 13,990 - 13,990 8,242 5,453 13,695 (600) 13,095
Exceptional
items (46) 46 - - - (1,353) 1,353 - - -
--------- ------------ --------- ------------ --------- --------- ------------ --------- ------------ ----------
Operating
profit 8,142 5,848 13,990 - 13,990 6,889 6,806 13,695 (600) 13,095
Finance
revenue 644 (638) 6 - 6 4 - 4 - 4
Finance costs (1,287) - (1,287) - (1,287) (14,980) 8,113 (6,867) 5,580 (2) (1,287)
--------- ------------ --------- ------------ --------- --------- ------------ --------- ------------ ----------
Profit /(loss)
before tax 7,499 5,210 12,709 - 12,709 (8,087) 14,919 6,832 4,980 11,812
Income tax (1,621) (1,126) (2,747) - (2,747) 638 (2,164) (1,526) (1,111) (2,637)
--------- ------------ --------- ------------ --------- --------- ------------ --------- ------------ ----------
Profit/(loss)
after tax 5,878 4,084 9,962 - 9,962 (7,449) 12,755 5,306 3,869 9,175
========= ============ ========= ============ ========= ========= ============ ========= ============ ==========
EBITDA 14,992 46 15,038 - 15,038 13,204 1,353 14,557 (600) 13,957
--------- ------------ --------- ------------ --------- --------- ------------ --------- ------------ ----------
Basic and
diluted
EPS (pence
per
share) (3) 2.94 4.98 4.98 (8.20) 5.84 4.59
Notes
In order to better compare and explain our financial performance in the current period with
the comparative period we have restated the comparative period to show what it would have
looked like under public ownership with the current debt structure.
(1) Admin and distribution costs - A pro-forma adjustment has been made to the prior period admin
and distribution costs for our estimated incremental cost increase as a result of our listing
on the London Stock Exchange (LSE). Such adjustments include increased audit fees, salary
increases, corporate governance costs and other costs directly incurred as a result of the
Group being listed on the LSE.
Finance costs - An adjustment has been made to finance costs in the prior period to reflect
(2) the current debt structure.
(3)
On the 23 June 2014, a share for share exchange converted the entire share capital (after
reorganisation) of Windmill Topco Limited to new ordinary shares of Volution Group plc. The
weighted number of shares has been calculated assuming the share for share exchange took place
as from 1 August 2013. The pro-forma EPS assumes the same weighted average number of shares
in the 6 months to 31 January 2014 as in the 6 months to January 2015 to ensure we are showing
a consistent comparison.
9. Finance costs
As a result of the Group re-organisation and subsequent premium
listing on the Main Market of the London Stock Exchange the debt
structure of the Group changed significantly. The change has led to
the material reduction in finance costs between January 2014 and
January 2015. In addition the period to January 2014 includes
GBP7,430,000 of unamortised finance costs written off upon
re-financing of debt.
10. Income taxes
The income tax expense is recognised based on the best estimate
of the weighted average annual income tax rate expected to apply
for the full financial year. The estimated average annual adjusted
tax rate for the period ended 31 January 2015 is approximately
21.6% (H1 2014: 22.3%). In accordance with IAS 34, the tax effect
of exceptional or one-off items has not been included in the
calculation of the estimated average annual tax rate.
11. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the
profit/(loss) for the period attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the profit/(loss) attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on conversion of any dilutive
potential ordinary shares into ordinary shares. There are no
dilutive potential ordinary shares for the periods ended 31 January
2015 and 2014.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
Six months ended 31 January
2015 2014
Unaudited Unaudited
GBP000 GBP000
Profit/(loss) attributable to ordinary equity holders 5,878 (7,449)
No. No.
Weighted average number of ordinary shares for basic earnings per share and diluted
earnings
per share* 200,000,000 90,840,698
Earnings per share
Basic and diluted 2.94p (8.20)p
*The weighted average number of ordinary shares identified above
used for the calculation of earnings per share relate to the
following deemed parent entity for each of the periods
presented:
-- 6 months ended 31 January 2015 - Volution Group plc
-- 6 months ended 31 January 2014 - Windmill Topco Limited
The weighted number of shares has been calculated assuming the
share for share exchange took place from 1 August 2013. The share
for share exchange, gives effect to the sales of the entire share
capital (after the reorganisation) of the Windmill Topco Limited
shares in exchange for new Ordinary shares of Volution Group
plc.
12. Property, plant and equipment
During the six months ended 31 January 2015, the Group acquired
assets with a cost of GBP2,062,000 (31 July 2014: GBP2,930,000).
Assets with a net book value of GBP155,000 (31 July 2014:
GBP47,000) were disposed of resulting in a net profit on disposal
of GBP28,000 (31 July 2014: GBP15,000). Assets with a net book
value of GBP359,000 (31 July 2014: GBPnil) were transferred to
current assets and categorised as held for sale by the Group during
the six months ended 31 January 2015. In the six months ended 31
January 2015 movements in foreign exchange rates lead to an overall
reduction in carrying value of GBP327,000 (31 July 2014:
GBP290,000) on property, plant and equipment.
13. Intangible assets - other
During the six months ended 31 January 2015, the Group acquired
assets with a cost of GBP700,000 (31 July 2014: GBP20,312,000). The
amortisation charge on other intangible assets during the six
months ended 31 January 2015 was GBP5,860,000 (31 July 2014:
GBP11,201,000). In the six months ended 31 January 2015 movements
in foreign exchange rates lead to an overall reduction in carrying
value of GBP1,341,000 (31 July 2014: GBP1,903,000) on other
intangible assets.
14. Interest bearing loans and borrowings
Current Non-current Current Non-current
31 July 31 July
31 January 2015 31 January 2015 2014 2014
Unaudited Unaudited Audited Audited
GBP000 GBP000 GBP000 GBP000
Secured - at amortised cost
GE Corporate Finance Bank loan - 52,286 - 53,903
- 52,286 - 53,903
=============== =============== ======== ===========
The facilities agreement gives GE Corporate Finance Bank SAS,
London Branch, as security agent, for itself and any other bank
which participates in the facilities, a fixed and floating charge
over the assets of the Group.
15. Other financial assets and liabilities
Current Non-current Current Non-current
31 July 31 July
31 January 2015 31 January 2015 2014 2014
Unaudited Unaudited Audited Audited
GBP000 GBP000 GBP000 GBP000
Financial assets
Cash held in Escrow account 398 - 422 -
FX forward contracts 291 - - -
689 - 422 -
=============== =============== ======== ===========
Financial liabilities
Interest rate swap (242) - - (122)
FX forward contracts - - (467) -
(242) - (467) (122)
=============== =============== ======== ===========
16. Fair values of financial assets and financial liabilities
There is no material differences between the book values and
fair values for any of the Group's financial instruments carried at
amortised cost. Derivate financial instruments have all been valued
using other techniques, for which all inputs which have a
significant effect on the recorded fair value are observable,
either, directly or indirectly.
17. Related party transactions
Transactions between Volution Group Plc and its subsidiaries and
transactions between subsidiaries, are eliminated on consolidation
and are not disclosed in this note. A breakdown of transactions
between the Group and its related parties are disclosed below.
In December 2013, the Group repaid GBP40,006,000 of loan notes
back to the Loan note holders comprising principle of GBP34,628,000
and interest of GBP5,378,000. Immediately prior to admission to the
London Stock Exchange in June 2014 the remaining Loan notes issued
by Windmill Midco Limited were novated to Windmill Topco Limited
and then subsequently converted into shares in Windmill Topco
Limited. Deposits held by Windmill Holdings BV and Windmill
Holdings Cooperatief UA were repaid in July 2014.
There were no material transactions or balances between the
Company and its key management personnel or members of their close
family. At the end of the period, key management personnel did not
owe the Company any amounts.
Non-executive director Paul Hollingworth is also a non-executive
director of Electrocomponents plc. During the 6 months to 31
January 2015, the Group sold goods to Electrocomponents plc
amounting to GBP136,000 (6 months to 31 January 2014: GBP116,000).
At 31 January 2015, amounts owing by Electrocomponents plc were
GBP27,000 (31 July 2014: GBP35,000). During the 6 months to 31
January 2015 the Group purchased goods from Electrocomponents plc
amounting to GBP48,000 (6 months to 31 January 2014: GBP47,000). At
31 January 2015, amounts owed to Electrocomponents plc were
GBP15,000 (31 July 2014: GBP13,000). All transactions with
Electrocomponents plc were completed at an arm's length basis.
18. Dividends
The Board has declared an interim dividend of 1.05 pence per
ordinary share in respect of the half year ended 31 January 2015
which will be paid on 14 May 2015 to shareholders on the register
at the close of business on 7 April 2015. The total dividend
payable has not been recognised as a liability in these
accounts.
19. Events after the balance sheet date
On 13 February 2015, the Group refinanced its bank debt. The
Group now has in place a GBP90 million revolving credit facility,
maturing April 2019. This new facility is provided under standard
Loan Market Association terms and replaces the Group's existing
facilities. The new facility is provided at a lower interest rate
than the facility being refinanced and the covenant headroom has
been improved, and is tested on a bi-annual basis.
20. Glossary of terms
Net debt - bank borrowings less cash and cash equivalents
Adjusted operating cash flow -Adjusted EBITDA plus or minus
movements in operating working capital, less net investments in
property, plant and equipment and intangible assets (including cash
held in escrow).
Adjusted profit before tax - earnings before tax, exceptional
items, amortisation of financing costs, breakage costs on interest
rate swaps, net gains or losses on financial instruments at fair
value and amortisation and impairment of intangible assets
associated with the customer base, trademarks and patents.
Adjusted operating profit- earnings before tax, exceptional
items, amortisation and impairment of intangible assets associated
with the customer base, trademarks and patents and net finance
costs.
Adjusted EBITDA - earnings before tax, exceptional items, net
finance costs, depreciation, amortisation and impairment.
Change constant currency - to calculate the change at constant
currency we have converted the income statement of our foreign
operating companies for the period ended 31 January 2015 at the
average exchange rate for the period ended 31 January 2014. In
addition we have converted the UK operating companies' sales and
purchase transactions in the period ended 31 January 2015, which
were denominated in foreign currencies, at the average exchange
rates for the period ended 31 January 2014.
Adjusted basic and diluted EPS - is calculated by dividing the
adjusted profit/(loss) for the period attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the adjusted net profit/(loss) attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the period plus the weighted average
number of ordinary shares that would be issued on conversion of any
dilutive potential ordinary shares into ordinary shares. There are
no dilutive potential ordinary shares for the periods ended 31
January 2015 and 2014.
On the 23 June 2014, a share for share exchange converted the
entire share capital (after reorganisation) of Windmill Topco
Limited to new ordinary shares of Volution Group plc. The weighted
number of shares has been calculated assuming the share for share
exchange took place as from 1 August 2013. The pro-forma EPS
assumes the same weighted average number of shares in the 6 months
to 31 January 2014 as in the 6 months to January 2015 to ensure we
are showing a consistent comparison.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SESFWSFISEDD
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