TIDMFAN
RNS Number : 4580C
Volution Group plc
16 October 2015
Friday 16 October 2015
VOLUTION GROUP PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2015
EARNINGS AHEAD OF EXPECTATIONS, STRONG ORDER PIPELINE IN NEW
BUILD
Volution Group plc ("Volution" or "the Group" or "the Company",
LSE: FAN), a leading supplier of ventilation products to the
residential and commercial construction market, today announces its
audited financial results for the 12 months to 31 July 2015.
Highlights Change
Constant
2015 2014 Change Currency
Revenue (GBPm) 130.2 120.7 7.9% 12.4%
Adjusted EBITDA (GBPm) 32.1 (1) 28.5 (1) 12.6% 17.8%
Adjusted operating profit
(GBPm) 29.4 (1) 26.5 (1) 10.9% 18.8%
Adjusted profit before
tax (GBPm) 27.5 (1) 14.0 (1) 96.4% 111.4%
Reported profit/(loss)
before tax (GBPm) 15.5 (15.5)
Basic and diluted EPS
(p) 5.9 (14.0)
Adjusted basic and diluted
EPS (p) 11.0 (1) 8.8 (1,2,3) 25.0%
Adjusted operating cash
flow (GBPm) 27.6 (1) 22.8 (1) 21.1%
Dividend per share (p) 3.30 (4) n/a
Net debt (GBPm) 21.2 (5) 42.9 (5)
The Group uses 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 and adjusted operating cash flow.
Commenting on the Group's performance, Ronnie George, Chief
Executive Officer, said:
"In our first full financial year as a listed company we made
good progress. Revenue was GBP130.2 million up 12.4% at a constant
currency, reflecting both organic growth of 4.9%, and inorganic
growth from the acquisition of Brüggemann and inVENTer. Our
adjusted EPS of 11.0p is a 25% increase versus the prior year
pro-forma EPS of 8.8p.
I am particularly pleased with our cash flow performance, which
reduced net debt from GBP42.9 million to GBP21.2 million. Our
strong cash flow coupled with the refinanced banking facilities
completed in February 2015, provides significant flexibility for
further accretive acquisitions. The integration of our most recent
acquisition, Ventilair Group, acquired in August 2015, is
progressing well."
Outlook
The year has started positively with a very strong performance
in the Nordics helped by new product launches, but with mixed
results in the UK as softness in the residential RMI market was
partly offset by growth in residential new build.
We remain focussed on delivering profitable growth and making
further value enhancing acquisitions during this financial
year.
Highlights
Financial:
-- Results ahead of our expectations despite significant currency headwinds.
-- Revenue growth of 7.9% (12.4% at constant currency) comprised of:
Ø Organic revenue growth of 1.0% (4.9% at constant
currency).
Ø Inorganic revenue growth of 6.9% (7.5% at constant currency)
mainly as a result of the full year effect of the acquisition of
inVENTer in April 2014.
-- Ventilation Group revenue growth was 10.0% (14.9% at constant
currency) including UK Residential New Build growth of 17.7%.
-- OEM (Torin-Sifan) revenue fell slightly due to a difficult
end market for boiler spares during the mild winter.
-- Adjusted operating profit increased by 10.9% to GBP29.4
million from GBP26.5 million in 2014 (18.8% at constant currency) a
margin of 22.6% of revenues (2014: 22.0%).
-- The Group's reported profit before tax of GBP15.5 million
(2014: loss of GBP15.5 million) improved significantly, helped by
lower finance costs of GBP2.0 million (2014: GBP21.2 million) and
lower exceptional items of GBP0.7 million (2014: GBP7.8
million).
-- Continued strong cash generation reduced year end net debt to
GBP21.2 million (2014: GBP42.9 million).
-- Final dividend proposed of 2.25 pence per share.
Strategic:
-- Acquisition of Brüggemann Energiekonzepte GmbH based in
Germany, for GBP1.6 million, completed in April 2015.
-- Integration of inVENTer completed and a number of new sales
agent appointments in Germany are gaining traction with sales.
Integration of Brüggemann is progressing.
-- OEM (Torin-Sifan) electrically commutated direct current
(EC/DC) motorised impeller manufacturing site commissioned and
operational in October 2014.
-- New Group bank facility of GBP90 million, reducing gross debt
and financing costs as well as providing more flexibility for
potential acquisitions.
Strategic development after financial year end:
-- Acquisition of Ventilair Group International BVBA based in
Belgium and the Netherlands, for GBP11.6 million, completed on 5
August 2015 (not consolidated into the Volution Group plc financial
statements for this financial year).
Notes:
1. Details of adjusted EBITDA, adjusted operating profit and adjusted
profit before tax can be found in note 9. 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 with that of the prior period we have presented the prior period
after making pro-forma adjustments to reflect the higher cost of public
ownership and to reflect the lower cost of our current debt structure.
These are set out and explained in note 9.
3. On 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 year ended 31 July 2014 as in the year ended
31 July 2015 to ensure we are showing a consistent comparison.
4. Interim dividend of 1.05 pence per share paid on 14 May 2015 and proposed
final dividend for 2014/15 of 2.25 pence per share.
5. Net debt is defined as interest-bearing loans and borrowings less cash
and cash equivalents.
6. For a definition of all adjusted measures see the glossary of terms
in note 20 to the consolidated financial statements.
-Ends-
Enquiries:
Volution Group plc
Ronnie George, Chief Executive Officer +44 (0) 1293 441501
Ian Dew, Chief Financial Officer +44 (0) 1293 441536
Brunswick
Craig Breheny, Simone Selzer, Chris Buscombe volution@brunswickgroup.com
+44 (0) 20 7404 5959
Note to Editors
Volution Group plc (LSE: FAN) is a leading supplier of
ventilation products to the residential and commercial construction
market in the UK and northern Europe.
The Group sold approximately 21 million ventilation products and
accessories in the twelve months ended 31 July 2015. The Volution
Group operates through two divisions: the Ventilation Group and the
OEM (Torin-Sifan) division. The Ventilation Group consists of 7 key
brands - Vent-Axia, Manrose, Fresh, PAX, inVENTer, Brüggemann and
Ventilair focused primarily on the UK, Nordic, German and Benelux
ventilation markets. The Ventilation Group principally supplies
ventilation products for residential and commercial ventilation
applications. The OEM division (Torin-Sifan), 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 first full financial year as a listed company has been a
successful one and I am pleased to report on a year of strong
results. Volution has also made good progress in its strategy of
making selective value-adding acquisitions. Two acquisitions were
made, Brüggemann Energiekonzepte GmbH based in Germany, completed
in April 2015, and Ventilair Group International BVBA, based in
Belgium and the Netherlands, completed in August 2015, both funded
from the Group's existing cash and banking facilities.
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The integration of inVENTer in Germany was completed during the
year with cross selling of some heat recovery products from the
Nordic ventilation business already underway. In the UK, at
Torin-Sifan, significant investment was made in new product
development and a new production facility was acquired. We also saw
good organic growth (on a constant currency basis), especially in
the important area of higher-value ventilation systems used in new
residential dwellings and quieter, more efficient ventilation used
for residential repair, maintenance and improvement (RMI)
applications.
We have made good progress in product development, with a new
range of application software (app) controlled, intermittent
extractor fans and more energy efficient heat recovery products
which will be launched later in the calendar year 2015.
Ventilation Group segment
Our Ventilation Group's performance was very strong with a 10.0%
increase in revenue on prior year (14.9% at constant currency).
Organic growth was 1.9% (6.0% at constant currency). Inorganic
growth of 8.1% (8.9% at constant currency) came substantially from
Germany with the full year effect of inVENTer, acquired in April
2014 and the acquisition of Brüggemann in April 2015.
Sales in our UK Residential New Build sector were GBP17.2
million (2014: GBP14.6 million), growth of 17.7% (2014: 11.2%) with
some niche areas such as retirement dwelling completions growing at
above market rates. As well as this growth in completions we are
seeing a greater penetration of central heat recovery ventilation
systems as the method of ventilation in many new homes. An ongoing
product development pipeline in this market sector means that we
will bring several new products to market later this calendar year.
The new Kinetic Advance, launched to the UK sales team in June
2015, is expected to deliver the highest level of efficiency
available in the UK Building Energy Performance Assessment.
The UK Residential RMI market was soft with private
refurbishment experiencing good growth offset by a continuing
decline in public refurbishment, a more difficult market due to
local authority austerity measures and cut backs. This resulted in
revenue in this sector of GBP36.6 million (2014: GBP37.0 million) a
decline of 1.1% (2014: growth of 2.8%). New product launches in the
public refurbishment market are taking hold and with further new
products being launched later on in calendar year 2015, we expect
to see a turnaround in sales in this market as we aim to capture
greater market share. Our focus on the quiet, energy efficient
solutions for the private market continues to be well received with
particular success of our national radio advertising campaign in
July 2015.
UK Commercial sales were down 1.3% in the year at GBP16.2
million (2014: GBP16.4 million) having delivered good growth in the
prior year. Our exposure is primarily to the RMI market which has
performed less well than for new applications. The energy efficient
kitchen axial fan sales grew very well and a range of quieter, more
energy efficient commercial box fans will be launched early in
2016.
UK Export sales were GBP8.4 million (2014: GBP7.1 million),
strong growth of 17.5% (2014: 2.0%), despite the strength of
Sterling against the Euro (25.2% growth at constant currency) with
the growth coming substantially from increased sales of heat
recovery systems.
Sales in the Nordics sector were GBP22.2 million (2014: GBP22.7
million), a decline of 2.0%; however, at constant currency growth
was 12.5%. Sales of the market leading, low energy and near silent
ventilation products continued to grow during the year and in May
2015, at Elfack, the largest trade show of the year for the Swedish
electrical products industry, we launched the new Calima fan, the
first app controlled extractor fan on the market. Organic growth in
the Nordic region was very pleasing, especially in Norway where the
combined Fresh and PAX sales team is working very efficiently with
a much more comprehensive offer and improved service for the
market.
Sales in the Germany sector were GBP10.9 million (3 months of
2014: GBP3.5 million). Whilst the German market has had its
challenges, we have improved our position, including acquiring
Brüggemann, a distribution channel in northern Germany, and by
investing in new agents to provide a more comprehensive coverage in
that market.
OEM (Torin-Sifan) segment
Our OEM (Torin-Sifan) segment's revenue in the year was GBP18.7
million (2014: GBP19.4 million), a decline of 3.6% (down 0.6% at
constant currency), mainly as a consequence of lower sales of spare
parts for non-condensing boilers due to a mild winter. There is a
correlation between mild winters and lower sales of these
replacement parts. The sales of gas boiler combustion motors
therefore declined compared to the prior year although an improved
performance was noted in the second half of the year.
Sales of electrically commutated direct current (EC/DC)
motorised impellers continue 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 (which now extend through
Ventilair Group to Belgium and the Netherlands);
-- Growth through a disciplined and value-adding acquisition strategy; and
-- Further develop Torin-Sifan's range, build customer preference and loyalty.
Our core markets now extend to Belgium and the Netherlands with
the acquisition of the Ventilair Group. These markets, as well as
the original core markets for Volution, continue to benefit from
the favourable regulatory backdrop that focuses on carbon reduction
from buildings (in particular new buildings) as well as the need to
improve energy efficiency.
The European market remains highly fragmented and we continue to
pursue acquisition opportunities. Our track record over the last
three years, since the acquisition of Fresh AB in October 2012, has
been to add several new markets to the Group's reach and to improve
substantially, the financial returns of these companies. Our
centrally inspired and led, but locally managed, Research and
Development function is now achieving new economies of scale when
developing new capabilities, the most recent example being the
software app controls, which, once fully completed, will provide
controls to new products sold in the UK, Nordics and Germany.
Over the last two years we have made a significant investment at
Torin-Sifan in new product development and a new production
facility to capitalise on the growth in demand for electronically
commutated (EC) 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 the first half
of the 2016 financial year.
People
In anticipation of our future growth plans and to provide the
best possible foundation for our talented management team, it is
our intention to launch the second Management Development Programme
at the beginning of 2016.
I would like to acknowledge, thank and recognise all our
committed employees for underpinning the success of the Group. Our
employees, along with the management team, have made our first full
year as a listed company a great success. I am extremely grateful
to our employees for the considerable hard work and dedication to
providing great customer service and satisfaction and also the way
in which newly acquired Volution companies are integrated and made
to feel welcome as part of the larger Group.
Ronnie George
Chief Executive Officer
16 October 2015
Financial Review
Trading Performance Summary
Adjusted
Reported Adjusted(1) and pro-forma(2)
---------------------- ------------------------------- -------------- -------------------- ---------
Year to Year to
31 July 31 July Year to 31 Year to 31
2015 2014 Movement July 2015 July 2014 Movement
---------------------- --------- --------- --------- -------------- -------------------- ---------
Revenue (GBPm) 130.2 120.7 7.9% 130.2 120.7 7.9%
---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
EBITDA (GBPm) 31.4 20.7 51.7% 32.1 (1) 27.3 (1,2) 17.6%
---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
Operating profit
(GBPm) 17.2 5.7 201.8% 29.4 (1) 25.3 (1,2) 16.2%
---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
Finance costs (GBPm) (2.2) (21.2) (89.6)% (2.0) (2.5) (1,2) (20.0)%
---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
Profit/(loss) before
tax (GBPm) 15.5 (15.5) 200.0% 27.5 (1) 22.8 (1,2) 20.6%
---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
Basic and diluted
EPS (p) 5.9 (14.0) 142.1% 11.0 (1) 8.8 (1,2,3) 25.0%
---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
Total dividend
per share (p) 3.30 - 3.30 3.30 - 3.30
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---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
Operating cash
flow (GBPm) 27.6 22.8 21.1% 27.6 (1) 22.8 (1) 21.1%
---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
Net Debt (GBPm) 21.2 42.9 (21.7) 21.2 42.9 (21.7)
---------------------- --------- --------- --------- -------- ---- -------- ---------- ---------
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 9.
1. Details of adjusted EBITDA, adjusted operating profit and adjusted
profit before tax can be found in note 9. 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 with that of the prior period we have also presented
the prior period after making pro-forma adjustments to reflect the
higher cost of public ownership and to reflect the lower cost of
our current debt structure.
3. On 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 year to 31 July 2014
as in the year to July 2015 to ensure we are showing a consistent
comparison.
Revenue
The Group has made good progress during 2015 and continues to
enjoy strong demand for its ventilation products. Group Revenue for
the year ended 31 July 2015 was GBP130.2 million (2014: GBP120.7
million) a 7.9% increase (12.4% at constant currency). This
comprised 1.0% organic growth (4.9% on a constant currency basis),
with 6.9% the result of acquisitions (7.5% at constant
currency).
Organic growth came substantially from the 17.7% growth in UK
Residential New Build sales and the 17.5% (25.2% at constant
currency) growth in the UK Exports sector. The UK Residential RMI
sector revenue declined by 1.1%, comprised of growth in our private
RMI revenue offset by a decline in the more difficult public RMI
market and initiatives have been put in place to address the
decline in this market. The UK Commercial sector revenue also
declined slightly by 1.3%, while sales in our OEM (Torin-Sifan)
segment declined by 3.6% (a slight decline of 0.6% at constant
currency) as income from boiler spares fell during the mild
winter.
During the year, movements in foreign currency exchange rates
have had an adverse effect on the reported revenue of our business.
If we had translated the full year performance of our business at
our 2014 exchange rates, our reported Group revenues would have
been GBP135.7 million or 4.2% higher.
Profitability (prior year adjusted results are also
pro-forma)
Our underlying result, as measured by adjusted EBITDA, was
GBP32.1 million (2014: GBP27.3 million), 24.7% of revenues,
delivering a GBP4.8 million improvement compared to the prior year
pro-forma adjusted EBITDA (GBP6.3 million improvement at constant
currency). The Group benefited significantly from the full year
effect of the acquisition of inVENTer in April 2014 and to a lesser
extent the acquisition of Brüggemann in April 2015. Gross margin
performance was encouraging with a 130bps increase to 48.5% (2014:
47.2%).
On sales growth of 7.9%, our adjusted profit before tax improved
by GBP4.7 million to GBP27.5 million compared to the prior year
pro-forma adjusted profit before tax of GBP22.8 million, growth of
20.6%. The growth in our adjusted profit before tax margins was
affected by improving sales mix and margins in Sweden and UK
ventilation. This growth was slightly offset by lower sales of
higher margin boiler spares in our OEM (Torin-Sifan) segment and
the recent acquisition of inVENTer which, despite its positive
contribution to Group profitability, is yet to benefit from
improved operational leverage post acquisition.
The Group's reported profit before tax in the year was GBP15.5
million compared to a loss of GBP15.5 million in 2014. The reported
profit before tax for the period has benefited from:
-- A significant reduction in finance costs to GBP2.2 million
(2014: GBP12.6 million) as a result of the post listing capital
structure, lower borrowings and, after refinancing in February
2015, lower interest rate margins;
-- Lower amortisation of financing costs written off upon
refinancing of GBPnil (2014: GBP8.6 million); and
-- Lower net exceptional costs of GBP0.7 million (2014: GBP7.8
million). Included in 2014 were the costs incurred as a consequence
of the IPO of GBP5.5 million, costs associated with the acquisition
of Fresh, PAX and inVENTer of GBP0.9 million, costs associated with
the fair value adjustments at the time of acquisitions of GBP0.2
million and costs associated with the re-organisation of businesses
following acquisitions of GBP1.2 million.
Acquisitions
The Group's trading benefited in the year from the full year
effect of the acquisition of inVENTer in Germany, acquired April
2014 and from the acquisition of Brüggemann in Germany, acquired
April 2015.
One acquisition was completed during the year, Brüggemann based
in Germany, in April 2015 which was acquired for a total cash
consideration of EUR2.3 million (GBP1.6 million). Brüggemann has
contributed to revenue and profitability in the year.
Immediately after our financial year end, on 5 August 2015, we
acquired Ventilair Group International BVBA, based in Belgium with
operations in Belgium and the Netherlands, for EUR16.3 million
(approximately GBP11.6 million), on a debt free, cash free basis.
Ventilair will be consolidated in the Group's results for the first
time during our financial year ending 31 July 2016.
Both acquisitions were funded in full from the Group's existing
cash and banking facilities.
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
year, exceptional items were GBP0.7 million (2014: GBP7.8 million).
Details of these exceptional items can be found in note 7 to the
consolidated financial statements.
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 9. In addition to exceptional items, the
following are also excluded from adjusted measures, as reconciled
in note 9:
-- On acquisition of a business, where appropriate, 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 year
the amortisation charge of these intangible assets was GBP11.5
million (2014: GBP13.1 million);
-- Write-off of bank refinancing costs and other finance costs
during the year was GBPnil (2014: GBP8.6 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. During the year, we recognised a gain
of GBP0.4 million (2014: loss of GBP0.2 million).
Furthermore, to provide a more meaningful comparison of our
performance in the current period with that of the prior period, we
have also presented the prior period after making pro-forma
adjustments to reflect the higher cost of public ownership and to
reflect the lower cost of our current debt structure. More
information on the adjustments can be found in note 9.
Finance revenue and costs
Finance costs of GBP2.2 million during the year (2014: GBP21.2
million) have reduced significantly, largely as a consequence of
the change in capital structure on our listing and refinancing in
June 2014 and, in the prior period, the write-off of accumulated
third party bank financing costs, mentioned above, of GBP8.6
million. In addition, on 13 February 2015, we refinanced our bank
debt with resulting lower interest rates. Prior to listing in June
2014, 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 year with
adjusted operating cash inflow of GBP27.6 million (2014: GBP22.8
million). This represents a cash conversion, after capital
expenditure of 93% (2014: 86%). The Group continues to manage its
working capital efficiently with operating working capital
representing 12.3% of revenue (2014: 15.3%). In addition, the Group
continues to invest for the future with net capital expenditure
increasing to GBP4.6 million (2014: GBP4.5 million) including
investment in new product development, improved IT systems and
factory relocation. During the year, we rationalised our operations
in Dudley and disposed of one of our factory units at that location
for a gross consideration of GBP0.8 million. The profit on disposal
of GBP0.3 million has been reported as an exceptional item. See
glossary of terms in note 20 for a definition of adjusted operating
cash flow and cash conversion.
Net debt
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Year-end net debt was GBP21.2 million (2014: GBP42.9 million),
made up of bank borrowings of GBP32.8 million (2014: bank
borrowings GBP53.9 million), offset by cash and cash equivalents of
GBP11.6 million (2014: GBP11.0 million).
Movements in net debt position for the year ended 31 July
2015
GBPm
------------------------------------------------------ ----------------
Opening net debt 1 August 2014 (42.9)
------------------------------------------------------ ----------------
Movements from normal business operations
Adjusted operating cash flow 27.6
Interest paid net of interest received (1.9)
Income tax paid (3.0)
Exceptional items (0.1)
Dividend paid (2.1)
FX on foreign currency loans/cash 3.7
Cost of refinancing (1.0)
Movements from acquisitions
Acquisition consideration net of cash acquired (1.5)
Closing net debt 31 July 2015 (21.2)
------------------------------------------------------ ----------------
Bank facilities, refinancing and liquidity
On 13 February 2015, the Group refinanced its bank debt. The
Group now has in place a GBP90 million revolving credit facility,
maturing in April 2019, which includes a permitted acquisition
facility. This new facility is provided under standard Loan Market
Association terms and replaces the Group's previous facilities. The
new facility is provided at a lower interest rate than the facility
refinanced and the covenant headroom has been improved.
Before February 2015, the Group's bank facilities consisted of
fully drawn term loans of GBP52.3 million, an unutilised revolving
credit facility of GBP13.0 million and an unutilised approved
acquisition facility of GBP20.0 million. The term loans were
repayable in full in February 2019.
As at 31 July 2015, we had GBP57.2 million of undrawn, committed
bank facilities and GBP11.6 million cash and cash equivalents on
the statement of financial position.
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
Sterling. We hedge the translation risk of the net assets in Fresh
and PAX with GBP13.4 million borrowings denominated in SEK (2014:
GBP17.8 million). We have partially hedged our risk of translation
of the net assets of inVENTer and Brüggemann by having Euro
denominated bank borrowings in the amount of GBP8.3 million as at
31 July 2015 (2014: GBP10.0 million). The Sterling value of our
foreign currency denominated loans decreased by GBP3.9 million in
the year as a consequence of exchange rate movements. We do not
hedge the results of overseas subsidiaries.
During the year, 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 full year
performance of our business at our 2014 exchange rates, our
reported Group revenues would have been GBP135.7 million or 4.2%
higher and adjusted operating profit would have been GBP31.5
million or 6.9% higher.
Corporate restructuring
During the year the Group's corporate and capital structure
underneath Volution Group plc was reorganised in line with the
expectations laid out in the Initial Public Offering Prospectus
dated 18 June 2014. The purpose of the internal reorganisation was
to relieve historic blocks in the dividend chain. There was no
change to the Group's overall capital structure or net debt as a
result of the changes.
Earnings per share
The basic and diluted earnings per share for the year was 5.9
pence (2014: (14.0) pence). Our adjusted basic and diluted earnings
per share was 11.0 pence (2014 pro-forma adjusted basic and diluted
earnings per share: 8.8 pence), a significant 25.0% increase.
Dividends
In May 2015 the Group paid an interim dividend of 1.05 pence per
share.
The Board has proposed a final dividend of 2.25 pence per share.
Subject to approval at our Annual General Meeting of shareholders
on 15 December 2015, this final dividend will be paid on 18
December 2015 to shareholders on the register on 27 November
2015.
Ian Dew
Chief Financial Officer
16 October 2015
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2015
2015 2014
Notes GBP000 GBP000
------------------------------------------------------- ----- -------- --------
Revenue 5 130,178 120,709
Cost of sales (67,019) (63,748)
------------------------------------------------------- ----- -------- --------
Gross profit 6 63,159 56,961
Distribution costs (18,052) (16,657)
Administrative expenses (27,174) (26,857)
------------------------------------------------------- ----- -------- --------
Operating profit before exceptional items 17,933 13,447
Exceptional items 7 (731) (7,783)
------------------------------------------------------- ----- -------- --------
Operating profit 17,202 5,664
Finance revenue 8 533 7
Finance costs 8 (2,209) (21,183)
------------------------------------------------------- ----- -------- --------
Profit/(Loss) before tax 15,526 (15,512)
Income tax 10 (3,691) 1,254
------------------------------------------------------- ----- -------- --------
Profit/(Loss) for the year 11,835 (14,258)
Other comprehensive income/(expense):
Items that may subsequently be reclassified to profit
or loss:
Exchange differences arising on translation of foreign
operations (533) (497)
(Loss)/Gain on hedge of net investment in foreign
operation (187) 172
------------------------------------------------------- ----- -------- --------
Other comprehensive expense for the year (720) (325)
------------------------------------------------------- ----- -------- --------
Total comprehensive income/(expense) for the year 11,115 (14,583)
------------------------------------------------------- ----- -------- --------
Profit/(Loss) per share
Basic and diluted earnings per share (pence per
share) 11 5.9p (14.0)p
------------------------------------------------------- ----- -------- --------
Consolidated Statement of Financial Position
At 31 July 2015
2015 2014
Notes GBP000 GBP000
Non-current assets
Property, plant and equipment 16,047 15,915
Intangible assets - goodwill 12 51,725 50,127
Intangible assets - others 13 100,951 113,651
Deferred tax assets 10 394 732
---------------------------------------- -------- ---------
169,117 180,425
---------------------------------------- -------- ---------
Current assets
Inventories 15,019 15,922
Trade and other receivables 26,271 25,422
Income tax - 1,093
Other current financial assets - 422
Cash and short-term deposits 11,565 10,987
---------------------------------------- -------- ---------
52,855 53,846
---------------------------------------- -------- ---------
Total assets 221,972 234,271
---------------------------------------- -------- ---------
Current liabilities
Trade and other payables (25,295) (22,821)
Other current financial liabilities (225) (467)
Income tax (1,411) -
Provisions (855) (1,018)
---------------------------------------- -------- ---------
(27,786) (24,306)
---------------------------------------- -------- ---------
Non-current liabilities
Interest-bearing loans and borrowings 16 (31,867) (53,903)
Other non-current financial liabilities - (122)
Provisions (600) (600)
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Deferred tax liabilities 10 (19,273) (22,090)
---------------------------------------- -------- ---------
(51,740) (76,715)
---------------------------------------- -------- ---------
Total liabilities (79,526) (101,021)
---------------------------------------- -------- ---------
Net assets 142,446 133,250
---------------------------------------- -------- ---------
Capital and reserves
Share capital 2,000 2,000
Share premium 11,527 11,527
Capital reserve 92,325 92,325
Share based payment reserve 181 -
Foreign currency translation reserve (463) 257
Retained earnings 36,876 27,141
---------------------------------------- -------- ---------
Total equity 142,446 133,250
---------------------------------------- -------- ---------
The consolidated financial statements of Volution Group plc
(registered number: 09041571) were approved by the Board of
Directors and authorised for issue on 16 October 2015.
On behalf of the Board
Ronnie George Ian Dew
Chief Executive Officer Chief Financial Officer
Consolidated Statement of Changes in Equity
For the year ended 31 July 2015
Foreign
Share-based currency
Share Share Capital payment translation Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------- ------- -------- ------- ----------- ----------- -------- --------
At 1 August 2013 3 2,098 - - 582 (16,231) (13,548)
---------------------------------- ------- -------- ------- ----------- ----------- -------- --------
Loss for the year - - - - - (14,258) (14,258)
Other comprehensive
expense - - - - (325) - (325)
---------------------------------- ------- -------- ------- ----------- ----------- -------- --------
Total comprehensive
expense - - - - (325) (14,258) (14,583)
Net adjustment to
reserves arising from
Group re-organisation (3) (2,098) - - - - (2,101)
Share for share exchange
as part of Group re-organisation 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 2,000 11,527 92,325 - 257 27,141 133,250
---------------------------------- ------- -------- ------- ----------- ----------- -------- --------
Profit for the year - - - - - 11,835 11,835
Other comprehensive
expense - - - - (720) - (720)
---------------------------------- ------- -------- ------- ----------- ----------- -------- --------
Total comprehensive
income/(expense) - - - - (720) 11,835 11,115
Share-based payment - - - 181 - - 181
Dividends paid - - - - - (2,100) (2,100)
At 31 July 2015 2,000 11,527 92,325 181 (463) 36,876 142,446
---------------------------------- ------- -------- ------- ----------- ----------- -------- --------
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 in 2014. This is a
non-distributable reserve.
Share based payment reserve
The share based payment reserve is used to recognise the value
of equity-settled share-based payments provided to key management
personnel, as part of their remuneration.
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.
Consolidated Statement of Cash Flows
For the year ended 31 July 2015
2015 2014
Notes GBP000 GBP000
-------------------------------------------------------- ----- -------- ---------
Operating activities
Profit/(Loss) for the year after tax 11,835 (14,258)
Adjustments to reconcile profit/(loss) for the year
to net cash flow from operating activities:
Income tax 3,691 (1,254)
Gain on disposal of property, plant and equipment (19) (15)
Exceptional costs 7 731 7,783
Cash flows relating to exceptional costs (89) (6,847)
Finance revenue 8 (533) (7)
Finance costs 8 2,209 21,183
Share based payment expense 181 -
Depreciation of property, plant and equipment 2,536 1,932
Amortisation of intangible assets 13 11,646 11,201
Impairment of intangible assets - 1,949
Working capital adjustments:
Increase in trade receivables and other assets (895) (1,803)
Movement in inventories 453 (1,370)
Exceptional costs: fair value of inventories - (201)
Increase in trade and other payables 750 1,450
Movement in provisions (164) 299
Withholding tax paid on loan note interest - (34)
UK income tax paid (2,313) (2,650)
Overseas income tax paid (770) (475)
-------------------------------------------------------- ----- -------- ---------
Net cash flow from operating activities 29,249 16,883
-------------------------------------------------------- ----- -------- ---------
Investing activities
Payments to acquire intangible assets 13 (1,723) (1,664)
Purchase of property, plant and equipment (3,880) (2,930)
Proceeds from disposal of property, plant and equipment 979 62
Acquisition of subsidiaries, net of cash acquired (1,521) (29,795)
Interest received 66 7
-------------------------------------------------------- ----- -------- ---------
Net cash flow used in investing activities (6,079) (34,320)
-------------------------------------------------------- ----- -------- ---------
Financing activities
Repayment of interest-bearing loans and borrowings (57,060) (106,106)
Proceeds from new borrowings 39,760 59,479
Issue costs of new borrowings (968) (4,652)
Interest paid (2,004) (5,900)
Transaction costs on issue of new shares - (2,363)
Proceeds from issue of new shares - 72,000
Dividends paid 17 (2,100) -
-------------------------------------------------------- ----- -------- ---------
Net cash flow (used in)/generated from financing
activities (22,372) 12,458
-------------------------------------------------------- ----- -------- ---------
Net increase/(decrease) in cash and cash equivalents 798 (4,979)
Cash and cash equivalents at the start of the year 10,987 15,943
Effect of exchange rates on cash and cash equivalents (220) 23
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-------------------------------------------------------- ----- -------- ---------
Cash and cash equivalents at the end of the year 11,565 10,987
-------------------------------------------------------- ----- -------- ---------
Notes to the Consolidated Financial Statements
For the year ended 31 July 2015
1. Publication of non-statutory consolidated financial statements
The preliminary results were authorised for issue by the Board
of Directors on 15 October 2015. The financial information set out
herein does not constitute the Group's statutory consolidated
financial statements for the years ended 31 July 2015 or 2014, but
is derived from those accounts. Statutory consolidated financial
statements for 2015 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditors have
reported on those accounts; their report was unqualified and did
not contain a statement under section 237 (2) or (3) of the
Companies Act 2006.
2. Going concern
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future
Group cash flow forecasts have been produced for the period to
31 July 2017 and demonstrate that the Group will be able to meet
its liabilities as and when they fall due for the foreseeable
future. The Group is also forecast to remain in compliance with its
banking agreement covenants at each quarter end during the forecast
period.
The Directors confirm that, after making appropriate enquiries,
they have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason, the Directors continue to adopt the going
concern basis in preparing the financial statements.
3. Accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements have been consistently
applied to the years presented.
Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards (IFRS) adopted by the European Union and the Companies
Act 2006. The consolidated financial statements have been prepared
under the historical cost convention, except as disclosed in the
accounting policies below.
The preparation of the consolidated financial information in
conformity with IFRS requires the use of certain critical
accounting estimates and requires management to exercise judgement
in the process of applying the Group's accounting policies. The
areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the
consolidated financial statements are set out in note 4.
The consolidated financial statements are presented in GBP and
all values are rounded to the nearest thousand (GBP000), except as
otherwise indicated. 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.
4. Critical accounting judgements and key sources of estimation uncertainty
Judgements
The following are the critical judgements (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 mainly relating to the IPO,
acquisition costs and restructuring costs following acquisitions.
The Group identifies an item of expense or income as exceptional,
when in managements judgement, 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. See note 7 for details of exceptional items.
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 the market, this is based on management's
judgement that the product is technologically, commercially and
economically feasible in accordance with IAS 38 Intangible Assets.
In determining the amounts to be capitalised, management makes
assumptions regarding the expected future cash generation of the
project, discount rates to be applied and the expected period of
benefits. See note 13 for amounts capitalised as development costs.
Critical accounting judgements and key sources of estimation
uncertainty (continued)
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. In valuing
certain intangible assets management has made assumptions about the
retention rate of customers and cash flow forecasts used to
determine the fair value of the assets at the date of acquisition.
Note 15 provides details on business combinations.
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 business plan for the following 3 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
key assumptions used to determine the recoverable amount for the
different cash generating units are explained further in note
14.
The Group's accounting policy for impairment of other intangible
assets is set out in note 3. 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. Further details are included in note 13.
Taxation
The Group establishes provisions, based on reasonable estimates,
for possible consequences of audits by tax authorities of the
respective countries in which it operates. The amount of such
provisions is based on various factors, such as experience with
previous tax audits and differing interpretations of tax
regulations by the taxable entity and the responsible
authority.
Management judgement is required to determine the amount of
deferred tax assets that can be recognised, based on the likely
timing and level of future taxable profits together with an
assessment of the effect of future tax planning strategies. A
breakdown of the deferred tax asset is included in note 10.
Uncertainties exist with respect to the interpretation of complex
tax regulations, changes in tax laws and the amount and timing of
future taxable income. Given the wide range of international
business relationships and the long-term nature and complexity of
existing contractual agreements, differences arising between the
actual results and the assumptions made, or future changes to such
assumptions, could necessitate future adjustments to tax income and
expense already recorded.
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. The total rebate provision at 31 July
2015 is GBP5,017,000 (2014: GBP4,485,000).
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Provisions for warranties, bad debts and inventory
obsolescence
Provisions for warranties are made with reference to recent
trading history and historic warranty claim information, and the
view of management as to whether warranty claims are expected.
Provisions for bad debts and inventory obsolescence are made
with reference to the ageing of receivables and inventory balances
and the view of management as to whether amounts are recoverable.
Bad debt and warranty provisions will be determined with
consideration to recent customer trading and management experience,
and provision for inventory obsolescence to sales history and to
latest sales forecasts.
5. Revenue
Revenue recognised in the statement of comprehensive income is
analysed below:
2015 2014
GBP000 GBP000
---------------------------------------------------- ------- -------
Sale of goods 127,652 117,924
Rendering of services 2,526 2,785
---------------------------------------------------- ------- -------
Total revenue 130,178 120,709
---------------------------------------------------- ------- -------
2015 2014
Market sectors GBP000 GBP000
---------------------------------------------------- ------- -------
Ventilation Group
UK Residential RMI 36,574 36,979
UK Residential New Build 17,180 14,592
UK Commercial 16,188 16,409
UK Export 8,374 7,129
Nordics(1) 22,241 22,702
Germany(2) 10,904 3,493
Total Ventilation Group 111,461 101,304
---------------------------------------------------- ------- -------
Original Equipment Manufacturer (OEM (Torin-Sifan))
OEM (Torin-Sifan) 18,717 19,405
Total revenue 130,178 120,709
---------------------------------------------------- ------- -------
Notes
1. Represents revenue of Fresh AB and its subsidiaries, PAX AB,
Volution Norge AS and PAX Norge AS.
2. Represents revenue of inVENTer GmbH and Brüggemann Energiekonzepte GmbH.
6. 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) after exceptional items 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.
Ventilation
Group OEM Unallocated Total Eliminations Consolidated
Year ended 31 July 2015 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Revenue
External customers 111,461 18,717 - 130,178 - 130,178
Inter-segment 11,834 1,249 - 13,083 (13,083) -
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Total revenue 123,295 19,966 - 143,261 (13,083) 130,178
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Gross profit 57,702 5,457 - 63,159 - 63,159
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Results
Adjusted segment EBITDA 31,117 2,977 (1,979) 32,115 - 32,115
Depreciation and amortisation
of developments costs,
software and patents (2,176) (477) (31) (2,684) - (2,684)
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Adjusted operating profit/(loss) 28,941 2,500 (2,010) 29,431 - 29,431
Amortisation of intangible
assets acquired through
business combinations (10,140) (1,358) - (11,498) - (11,498)
Exceptional items 6 (24) (713) (731) - (731)
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Operating profit/(loss) 18,807 1,118 (2,723) 17,202 - 17,202
Unallocated expenses
Net finance cost - - (1,676) (1,676) - (1,676)
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Profit/(loss) before
tax 18,807 1,118 (4,399) 15,526 - 15,526
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Ventilation
Group OEM Unallocated Total Eliminations Consolidated
Year ended 31 July 2014 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Revenue
External customers 101,304 19,405 - 120,709 - 120,709
Inter-segment 6,775 1,185 - 7,960 (7,960) -
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Total revenue 108,079 20,590 - 128,669 (7,960) 120,709
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Gross profit 51,818 6,210 - 58,028 (1,067) 56,961
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Results
Adjusted segment EBITDA 26,082 3,062 (615) 28,529 - 28,529
Depreciation and amortisation
of developments costs,
software and patents (1,655) (371) - (2,026) - (2,026)
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Adjusted operating profit/(loss) 24,427 2,691 (615) 26,503 - 26,503
Amortisation and impairment
of intangible assets
acquired through business
combinations (11,698) (1,358) - (13,056) - (13,056)
Exceptional items (686) (133) (6,964) (7,783) - (7,783)
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Operating profit/(loss) 12,043 1,200 (7,579) 5,664 - 5,664
Unallocated expenses
Net finance cost - - (21,176) (21,176) - (21,176)
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
Profit/(loss) before
tax 12,043 1,200 (28,755) (15,512) - (15,512)
--------------------------------- ----------- ------- ----------- -------- ------------ ------------
The Group overhead costs are not allocated to individual
operating segments. Likewise, certain exceptional costs, which
include the re-organisation costs and IPO costs, have not been
allocated to individual operating segments.
The 2014 unallocated costs have been restated in-line with the
2015 allocation method to allow a more accurate comparison of the
years presented. The 2014 segmental analysis does not include any
adjustments for pro-forma numbers, therefore there is a significant
increase in unallocated costs in the year ended 31 July 2015 due to
the additional costs of being a fully listed group.
Reconciliation of management reporting to IFRS
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During the year ended 31 July 2014 the Group converted to IFRS
for financial reporting purposes; however throughout the year ended
31 July 2014, the Board continued to use alternative management
reporting information for making operational and resource
allocation decisions. During the year ended 31 July 2015, the
information used by the Board has been prepared using IFRS
accounting policies. The 2014 segmental information set out above
has been restated accordingly.
Inter-segment revenues are eliminated on consolidation.
2015 2014
Geographic information GBP000 GBP000
----------------------------------------------- ------- -------
Revenue from external customers by destination
United Kingdom 79,936 76,623
Sweden 16,663 16,239
Europe (excluding United Kingdom and Sweden) 31,131 25,451
Rest of the world 2,448 2,396
----------------------------------------------- ------- -------
Total revenue 130,178 120,709
----------------------------------------------- ------- -------
2015 2014
GBP000 GBP000
----------------------------------------------- ------- -------
Non-current assets excluding deferred tax
United Kingdom 142,957 150,801
Europe (excluding United Kingdom & Nordics) 13,787 13,850
Nordics 11,979 15,042
----------------------------------------------- ------- -------
Total 168,723 179,693
----------------------------------------------- ------- -------
Information about major customers
Annual revenue from one customer in the Ventilation Group
segment accounts for more than 10% of Group revenue. In the year
ended 31 July 2015, revenue was GBP13,607,000 (2014:
GBP14,340,000).
7. 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:
2015 2014
Notes GBP000 GBP000
--------------------------------------------------- ------ ------ ------
Inventory fair value adjustment arising on
business combinations (a) - 201
Acquisition costs (b) 875 850
Restructuring and acquisition integration (c) 128 1,198
Profit on disposal of property plant and equipment (d) (261) -
Costs associated with the stock market listing
of the Group (e) (11) 5,534
--------------------------------------------------- ------ ------ ------
731 7,783
Total tax credit for the year (f) (26) (224)
--------------------------------------------------- ------ ------ ------
705 7,559
---------------------------------------------------------- ------ ------
(a) Inventory acquired on acquisitions during year ended 31 July
2014 was recognised at fair value, which is based on selling price
less costs of disposal and a profit allowance for selling efforts.
In line with the Group's definition of exceptional costs, inclusion
of the inventory fair value adjustment within trading results would
not be reflective of ongoing business performance. The inventory
fair value adjustment has therefore been presented separately.
The fair value adjustment in the year ended 31 July 2014 relates
to the acquisitions of PAX AB, PAX Norge AS and inVENTer GmbH.
The relevant inventory was disposed of in the same period it was
acquired.
(b) Acquisition costs substantially relate to professional fees
incurred in respect of the business combinations disclosed in note
15 and the acquisition of Ventilair completed post year end and are
set out below:
2015 2014
GBP000 GBP000
------------------------------------------------------------- ------ ------
Brüggemann Energiekonzepte GmbH 134 -
Ventilair Group International BVBA, completed after year end 559 -
Volution Group Limited - 72
Fresh AB and its subsidiaries(1) 49 -
PAX AB and PAX Norge AS - 39
inVENTer GmbH - 683
Aborted acquisitions 133 56
------------------------------------------------------------- ------ ------
875 850
------------------------------------------------------------- ------ ------
(1) Acquisition costs of GBP49,000 for the acquisition of Fresh
AB and its subsidiaries relates to the write-back of a potential
VAT claim, which was disclosed as a contingent liability at 31 July
2014.
(c) During the year ended 31 July 2015, the Group incurred costs
of GBP128,000 (2014: GBP28,000) in simplifying the corporate
structure. This cost was incurred as a result of the commitment
made in the Initial Public Offering Prospectus dated 18 June 2014.
The project was started and completed during year. During the year
ended 31 July 2014, GBP524,000 was incurred relating to
restructuring of the Group's Nordic operations and GBP133,000 in
relation to the restructuring of the OEM (Torin-Sifan) site, UK
restructuring costs of GBP513,000 were also incurred.
(d) During the year ended 31 July 2015, the Group sold a
property previously included within property, plant and equipment
on the statement of financial position. The profit on sale was
GBP261,000.
(e) Costs incurred in relation to the stock market listing in
2014 have been included here. An overprovision of the Real Estate
Transfer Tax (RETT) in relation to the purchase of Volution
Deutschland Real Estate GmbH in the prior year has been written
back during the year ended 31 July 2015. Whilst the overall size of
the write back is not significant, the original RETT expense was
included within exceptional items therefore we have included the
corresponding credit as exceptional for consistency and
comparability. In addition it meets the criteria of being
exceptional due to its nature.
(f) Out of the exceptional items incurred in the year it was
deemed that the items allowable for or chargeable to tax was
approximately GBP128,000 with a potential tax benefit of
GBP26,000.
8. Finance revenue and costs
2015 2014
GBP000 GBP000
------------------------------------------------ ------- --------
Finance revenue:
Net gain on financial instruments at fair value 467 -
Interest receivable 66 7
------------------------------------------------ ------- --------
Total finance revenue 533 7
------------------------------------------------ ------- --------
Finance costs:
Interest payable on bank loans (2,004) (5,947)
Interest on loan notes - (6,720)
Amortisation of finance costs (102) (8,338)
Other interest - (17)
------------------------------------------------ ------- --------
Total interest expense (2,106) (21,022)
Net loss on financial instruments at fair value (103) (161)
------------------------------------------------ ------- --------
Total finance costs (2,209) (21,183)
------------------------------------------------ ------- --------
Net finance costs (1,676) (21,176)
------------------------------------------------ ------- --------
The charge for amortisation of finance costs in 2014 includes
GBP7,005,000 of unamortised finance costs written off upon
re-financing of debt in December 2013. In addition, GBP821,000 of
financing fees relating to the new bank facility were written off
during June 2014. Included in the interest payable on bank loans is
GBP106,000 (2014: GBP144,000) relating to breakage costs of the
interest rate swaps.
9. Adjusted and pro-forma earnings
2015 2014
GBP000 GBP000
------------------------------------------------------------- ------ --------
Profit/(Loss) before tax 15,526 (15,512)
Add back:
Exceptional items 731 7,783
Amortisation of financing costs written off upon refinancing - 8,338
Breakage costs of interest rate swaps 106 144
Net (gain)/loss on financial instruments at fair value (364) 161
Amortisation and impairment of intangible assets acquired
through business combinations 11,498 13,056
------------------------------------------------------------- ------ --------
Adjusted profit before tax 27,497 13,970
Add back:
Interest payable on bank loans and amortisation of
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financing costs 2,000 5,803
Interest on loan notes - 6,720
Finance (revenue)/costs (66) 10
------------------------------------------------------------- ------ --------
Adjusted operating profit 29,431 26,503
Add back:
Depreciation of property, plant and equipment 2,536 1,932
Amortisation of development costs, software and patents 148 94
Adjusted EBITDA 32,115 28,529
------------------------------------------------------------- ------ --------
For definitions of terms referred to above see note 20, glossary
of terms.
Year ended 31 July 2015 Year ended 31 July 2014
Adjusted Pro-forma Adjusted 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 130,178 - 130,178 - 130,178 120,709 - 120,709 - 120,709
Cost of sales (67,019) - (67,019) - (67,019) (63,748) - (63,748) - (63,748)
---------------- --------- ------------ --------- ------------ --------- ------------- ------------ --------- ------------ ---- ----------
Gross profit 63,159 - 63,159 - 63,159 56,961 - 56,961 - 56,961
Admin &
Distribution
costs (45,226) 11,498 (33,728) - (33,728) (43,514) 13,056 (30,458) (1,200) (1) (31,658)
---------------- --------- ------------ --------- ------------ --------- ------------- ------------ --------- ------------ ---- ----------
Operating
profit before
exceptional
items 17,933 11,498 29,431 - 29,431 13,447 13,056 26,503 (1,200) 25,303
Exceptional
items (731) 731 - - - (7,783) 7,783 - - -
---------------- --------- ------------ --------- ------------ --------- ------------- ------------ --------- ------------ ---- ----------
Operating
profit 17,202 12,229 29,431 - 29,431 5,664 20,839 26,503 (1,200) 25,303
Finance revenue 533 (467) 66 - 66 7 - 7 - 7
Finance costs (2,209) 209 (2,000) - (2,000) (21,183) 8,643 (12,540) 10,003 (2) (2,537)
---------------- --------- ------------ --------- ------------ --------- ------------- ------------ --------- ------------ ---- ----------
Profit /(loss)
before tax 15,526 11,971 27,497 - 27,497 (15,512) 29,482 13,970 8,803 22,773
Income tax (3,691) (1,838) (5,529) - (5,529) 1,254 (4,314) (3,060) (2,025) (5,085)
---------------- --------- ------------ --------- ------------ --------- ------------- ------------ --------- ------------ ---- ----------
Profit/(loss)
after tax 11,835 10,133 21,968 - 21,968 (14,258) 25,168 10,910 6,778 17,688
---------------- --------- ------------ --------- ------------ --------- ------------- ------------ --------- ------------ ---- ----------
EBITDA 31,384 731 32,115 - 32,115 20,746 7,783 28,529 (1,200) 27,329
---------------- --------- ------------ --------- ------------ --------- ------------- ------------ --------- ------------ ---- ----------
Basic and
diluted EPS
(pence per
share) (3) 5.9 11.0 11.0 (14.0) 5.5 8.8
---------------- --------- ------------ --------- ------------ --------- ------------- ------------ --------- ------------ ---- ----------
Notes
In order to better compare and explain our financial performance in the current year with the
comparative year we have restated the comparative year 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 year 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 year to reflect the
2 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 year ended
31 July 2014 as in the year ended 31 July 2015 to ensure we are showing a consistent comparison.
10. Income taxes
(a) Income tax recognised in profit/(loss) for the year
2015 2014
GBP000 GBP000
-------------------------------------------------- ------- -------
Current income tax
Current income tax expense 4,451 957
Foreign income taxes 1,178 471
Tax credit relating to the prior year (100) (330)
-------------------------------------------------- ------- -------
Total current tax 5,529 1,098
-------------------------------------------------- ------- -------
Deferred tax
Origination and reversal of temporary differences (2,002) (2,524)
Effect of changes in the tax rate 26 211
Tax charge/(credit) relating to prior years 138 (39)
-------------------------------------------------- ------- -------
Total deferred tax (1,838) (2,352)
-------------------------------------------------- ------- -------
Net tax charge/(credit) 3,691 (1,254)
-------------------------------------------------- ------- -------
(b) Reconciliation of total tax
2015 2014
GBP000 GBP000
----------------------------------------------------- ------ --------
Profit/(Loss) before tax 15,526 (15,512)
----------------------------------------------------- ------ --------
Profit/(Loss) before tax multiplied by the standard
rate of corporation tax in the UK of 20.67% (2014:
22.33%) 3,209 (3,463)
Adjustment in respect of previous years 38 (369)
Expenses not deductible for tax purposes 401 2,725
Effect of difference in tax rates 26 211
Utilisation of previously unrecognised tax losses (38) (77)
Unrelieved tax losses - 1
Additional relief for research and development - (150)
Higher/(lower) overseas tax rate 55 (132)
----------------------------------------------------- ------ --------
Net tax charge/(credit) reported in the consolidated
statement of comprehensive income 3,691 (1,254)
----------------------------------------------------- ------ --------
(c) Unrecognised deferred tax assets
At 31 July 2015, the Group had an unrecognised deferred asset of
GBPnil (2014:GBP41,000) arising in overseas entities.
(d) Deferred tax balances
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Deferred tax assets and liabilities arise from the
following:
Credited/
1 August (charged) Translation On 31 July
2014 to income difference acquisition 2015
2015 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ -------- --------- ----------- ----------- --------
Temporary differences
Depreciation in advance of capital
allowances (58) (618) - - (676)
Fair value movements of derivative
financial instruments 122 (77) - - 45
Customer base, trademark and patent (21,050) 2,241 587 (54) (18,276)
Losses 560 (57) 33 - 536
Untaxed reserves (617) 82 67 - (468)
Other temporary differences (315) 267 8 - (40)
------------------------------------ -------- --------- ----------- ----------- --------
(21,358) 1,838 695 (54) (18,879)
------------------------------------ -------- --------- ----------- ----------- --------
Deferred tax asset 732 (378) 40 - 394
Deferred tax liability (22,090) 2,216 655 (54) (19,273)
------------------------------------ -------- --------- ----------- ----------- --------
(21,358) 1,838 695 (54) (18,879)
------------------------------------ -------- --------- ----------- ----------- --------
Credited/
1 August (charged) Translation On 31 July
2013 to income difference acquisition 2014
2014 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ -------- --------- ----------- ----------- --------
Temporary differences
Depreciation in advance of capital
allowances (76) 18 - - (58)
Fair value movements of derivative
financial instruments 73 49 - - 122
Customer base, trademark and patent (21,449) 2,168 - (1,769) (21,050)
Temporary differences (250) 117 101 (340) (372)
------------------------------------ -------- --------- ----------- ----------- --------
(21,702) 2,352 101 (2,109) (21,358)
------------------------------------ -------- --------- ----------- ----------- --------
Deferred tax asset 99 633 - - 732
Deferred tax liability (21,801) 1,719 101 (2,109) (22,090)
------------------------------------ -------- --------- ----------- ----------- --------
(21,702) 2,352 101 (2,109) (21,358)
------------------------------------ -------- --------- ----------- ----------- --------
The Finance Act 2013 was enacted in July 2013 and introduced a
reduction in the headline rate of corporation tax to 21% by 1 April
2014 and to 20% by 1 April 2015. The implications of the rate
change are incorporated within the financial statements. Further
changes have been announced, with reductions to 19% and 18% to
apply from 1 April 2017 and 1 April 2020, respectively.
As the further changes were not substantively enacted at the
balance sheet date, they are not reflected within the financial
statements. The estimated impact of the announced changes is not
expected to have a significant impact on the deferred tax
balance.
11. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the
profit/(loss) for the year attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the year 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 years ended 31 July 2015
and 2014.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
Year ended 31 July
--------------------
2015 2014
GBP000 GBP000
------------------------------------------------------ --------- ---------
Profit/(Loss) attributable to ordinary equity holders 11,835 (14,258)
------------------------------------------------------ --------- ---------
Number Number
----------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for basic
earnings per share and diluted earnings per share 200,000,000 102,205,228
Earnings per share
Basic and diluted 5.9p (14.0)p
----------------------------------------------------- ----------- -----------
Year ended 31 July
--------------------
2015 2014(1)
GBP000 GBP000
-------------------------------------------------------- --------- ---------
Adjusted profit attributable to ordinary equity holders 21,968 17,688
-------------------------------------------------------- --------- ---------
Number Number
-------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for adjusted
basic earnings per share and adjusted diluted earnings
per share 200,000,000 200,000,000
Adjusted Earnings per share
Basic and diluted 11.0p 8.8p
-------------------------------------------------------- ----------- -----------
(1.) 2014 adjusted profit attributable to ordinary equity
holders is stated after pro-forma adjustments. See note 9 for
details of the adjustments made. See note 20, glossary of terms for
an explanation of the adjusted basic and diluted earnings per share
calculation.
See note 20, glossary of terms, for explanation of the adjusted
basic and diluted earnings per share calculation.
12. Intangible assets - goodwill
GBP000
-------------------------------------------------------------------- ------
Cost and net book value:
At 1 August 2013 46,488
Adjustment to goodwill relating to Fresh AB and its subsidiaries 15
On acquisition of PAX AB and PAX Norge AS 2,211
On acquisition of inVENTer GmbH 2,138
Net foreign currency exchange differences (725)
-------------------------------------------------------------------- ------
At 31 July 2014 50,127
-------------------------------------------------------------------- ------
At 1 August 2014 50,127
Adjustment to goodwill relating to inVENTer and its subsidiaries(1) 473
On acquisition of Brüggemann Energiekonzepte GmbH 1,395
Net foreign currency exchange differences (270)
-------------------------------------------------------------------- ------
At 31 July 2015 51,725
-------------------------------------------------------------------- ------
1. During the year ended 31 July 2015 Volution Management
Holdings GmbH purchased the entire issued share capital of
Brüggemann Energiekonzepte GmbH. When inVENTer GmbH was acquired by
Volution Management Holdings GmbH, during the prior year,
Brüggemann Energiekonzepte GmbH was a customer of inVENTer and
therefore an amount was included in the customer base intangible
asset in relation to Brüggemann Energiekonzepte GmbH. On
acquisition of Brüggemann Energiekonzepte GmbH during the year, the
net book value of the intangible customer base which related to
Brüggemann Energiekonzepte GmbH of GBP360,000 was transferred to
goodwill. In addition an adjustment of GBP113,000 was made to the
provisional value of the goodwill initially recognised for inVENTer
GmbH in the prior year.
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13. Intangible assets - other
Development Software Customer
costs costs base Trademark Patents Total
2015 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ----------- -------- -------- --------- ------- -------
Cost
At 1 August 2014 1,029 2,973 100,066 38,182 927 143,177
Additions 637 1,086 - - - 1,723
Disposals - (5) - - - (5)
On acquisition - - 208 - - 208
Transfers(1) - 271 (360) - (176) (265)
Net foreign currency
exchange differences (21) - (2,070) (922) (272) (3,285)
---------------------- ----------- -------- -------- --------- ------- -------
At 31 July 2015 1,645 4,325 97,844 37,260 479 141,553
---------------------- ----------- -------- -------- --------- ------- -------
Amortisation
At 1 August 2014 40 1,576 24,212 3,691 7 29,526
Charge for the year 25 97 9,904 1,594 26 11,646
Disposals - (4) - - - (4)
Transfers - - - - (15) (15)
Net foreign currency
exchange differences - - (382) (167) (2) (551)
---------------------- ----------- -------- -------- --------- ------- -------
At 31 July 2015 65 1,669 33,734 5,118 16 40,602
---------------------- ----------- -------- -------- --------- ------- -------
Net book value
At 31 July 2015 1,580 2,656 64,110 32,142 463 100,951
---------------------- ----------- -------- -------- --------- ------- -------
1. During the year it was identified that costs related to
patents and software had been incorrectly classified as fixtures,
fittings, tools and equipment and have therefore been transferred
accordingly. In addition GBP360,000 has been transferred from the
customer base to goodwill in connection with the purchase of
Brüggemann Energiekonzepte GmbH (see note 12 for more details).
Included in software costs are assets under construction of
GBP2,441,000 (2014: GBP1,466,000), which are not amortised.
Included in development costs are assets under construction of
GBP1,395,000 (2014: GBP758,000), which are not amortised.
Development Software Customer
costs costs base Trademark Patents Total
2014 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ----------- -------- -------- --------- ------- -------
Cost
At 1 August 2013 446 2,133 88,314 33,961 - 124,854
Additions 583 840 - - 241 1,664
On acquisition - - 13,120 4,798 730 18,648
Net foreign currency
exchange differences - - (1,368) (577) (44) (1,989)
---------------------- ----------- -------- -------- --------- ------- -------
At 31 July 2014 1,029 2,973 100,066 38,182 927 143,177
Amortisation
At 1 August 2013 9 1,520 12,912 2,021 - 16,462
Charge for the year 31 56 9,424 1,683 7 11,201
Impairment - - 1,949 - - 1,949
Net foreign currency
exchange differences - - (73) (13) - (86)
---------------------- ----------- -------- -------- --------- ------- -------
At 31 July 2014 40 1,576 24,212 3,691 7 29,526
---------------------- ----------- -------- -------- --------- ------- -------
Net book value
At 31 July 2014 989 1,397 75,854 34,491 920 113,651
---------------------- ----------- -------- -------- --------- ------- -------
The impairment loss of GBP1,949,000 represents the write down of
the customer base relating to the Residential German CGU, within
the Ventilation segment, as the value in use was deemed to be below
the book value at which it was valued on acquisition. This arose as
a result of reduced levels of revenues of existing customers since
the acquisition. The impairment charge is recorded within
administrative expenses in the statement of comprehensive
income.
The remaining amortisation periods for acquired intangible
assets at 31 July 2015 are as follows:
Customer
base Trademark Patent
------------------------------------------- -------- --------- --------
Volution Group Limited and its subsidiaries 7 years 22 years -
Fresh AB and its subsidiaries 4 years 17 years -
PAX AB and PAX Norge AS 6 years 18 years -
InVENTer GmbH 8 years 19 years 19 years
Brüggemann Energiekonzepte GmbH 5 years - -
------------------------------------------- -------- --------- --------
14. Impairment assessment of goodwill
Goodwill acquired through business combinations has been
allocated for impairment testing purposes to cash generating units.
These represent the lowest level within the Group at which goodwill
is monitored for internal management purposes.
UK Residential UK Residential UK UK OEM
RMI New Build Commercial Export (Torin-Sifan) Nordics Germany
31 July 2015 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- -------------- -------------- ---------- ------ ------------- ------- -------
Carrying value of goodwill 21,195 7,143 8,744 3,590 4,996 2,303 3,754
CGU value in use headroom* 72,267 33,946 31,985 16,546 18,823 36,843 18,393
Discount rate (%) (post tax) 10.0 10.0 10.0 10.0 10.0 11.8 11.8
----------------------------- -------------- -------------- ---------- ------ ------------- ------- -------
UK Residential UK Residential UK UK OEM
RMI New Build Commercial Export (Torin-Sifan) Nordics Germany
31 July 2014 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- -------------- -------------- ---------- ------ ------------- ------- -------
Carrying value of goodwill 21,195 7,143 8,744 3,590 4,996 2,729 1,730
CGU value in use headroom* 51,031 17,198 21,054 8,643 11,971 33,564 6,406
Discount rate (%) (post tax) 11.0 11.0 11.0 11.0 11.0 11.0 13.0
----------------------------- -------------- -------------- ---------- ------ ------------- ------- -------
* Includes the net book value of fixed assets (tangible and
intangible), goodwill and operating working capital (current assets
and liabilities).
Impairment review
Under IAS 36 Impairment of Assets, the Group is required to
complete a full impairment review of goodwill, which has been
achieved using a value in use calculation. A discounted cash flow
(DCF) model was used, taking a period of five years, which has been
established using pre-tax discount rates of 12% to 15% (post tax:
10% to 12%) over that period. In all periods it was concluded that
the carrying amount was in excess of the value in use and all CGUs
had positive headroom.
Key assumptions in the value in use calculation
The calculation of value in use for all CGUs is most sensitive
to the following assumptions:
-- Price inflation - small annual percentage increases are
assumed in all markets based on historic data.
-- Growth in the ventilation market - assumed to be static in
all markets and is based on recent historic trends with a 2%
inflationary increase.
-- Discount rates - rates reflect the current market assessment
of the risks specific to each operation. The pre-tax discount rate
ranged from 12% to 15% (post tax: 10% to 12%).
-- Raw material cost - assumed to be at the industry average of sales price.
-- Excise duty - no future duty changes have been used in projections.
-- No growth rate has been used to extrapolate cash flows beyond
the forecast period other than the 2% rate of inflation.
The value in use headroom for each cash generating unit where
these sensitivities would be applicable has been set out above. No
reasonably possible change in the above key assumptions would cause
the carrying value of the cash generating units to materially
exceed their recoverable value.
15. Business combinations
Acquisition in the year ended 31 July 2015
Brüggemann Energiekonzepte GmbH
On 14 April 2015, Volution Management Holdings GmbH acquired the
entire issued share capital of Brüggemann Energiekonzepte GmbH. The
transaction was funded from the Group's existing revolving credit
facility. The Group acquired Brüggemann as it offers a channel to
sell existing ventilation products in a new region.
Total consideration for the transaction was cash consideration
of EUR2,280,000 (GBP1,649,000)
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The provisional fair value of the net assets acquired is set out
below:
Book Fair value Provisional
value adjustments fair value
GBP000 GBP000 GBP000
-------------------------------- ------ ----------- -----------
Intangible assets - 208 208
Deferred tax - (54) (54)
Property, plant and equipment 63 (12) 51
Inventory 8 - 8
Trade and other receivables 23 - 23
Trade and other payables (110) - (110)
Cash and cash equivalents 128 - 128
-------------------------------- ------ ----------- -----------
Total identifiable net assets 112 142 254
-------------------------------- ------ ----------- -----------
Goodwill on acquisition 1,395
-------------------------------- ------ ----------- -----------
1,649
-------------------------------- ------ ----------- -----------
Discharged by:
Consideration satisfied in cash 1,649
-------------------------------- ------ ----------- -----------
The fair value of the acquired customer base was identified and
included in intangible assets.
Goodwill of GBP1,395,000 reflects certain intangible assets that
cannot be individually separated and reliably measured due to their
nature. These items include the value of expected synergies and the
experience and skill of the workforce arising from the
acquisition.
Brüggemann Energiekonzepte GmbH generated revenue of GBP719,000
and a profit after tax of GBP55,000 in the period from acquisition
to 31 July 2015 that is included in the consolidated statement of
comprehensive income for this reporting period.
If the combination had taken place at 1 August 2014, the Group's
revenue would have been GBP132,539,000 and the profit before tax
from continuing operations would have been GBP15,705,000.
Cash outflows arising from business combinations are as
follows:
2015 2014
GBP000 GBP000
-------------------------------------- ------ -------
Brüggemann Energiekonzepte GmbH
Cash consideration 1,649 -
Less: cash acquired with the business (128) -
inVENTer GmbH
Cash consideration - 19,146
PAX AB and PAX Norge AS
Cash consideration - 11,462
Less: cash acquired with the business - (1,037)
1,521 29,571
-------------------------------------- ------ -------
16. Interest-bearing loans and borrowings
2015 2014
Current Non-current Current Non-current
GBP000 GBP000 GBP000 GBP000
---------------------------------- ------- ----------- ------- -----------
Unsecured - at amortised cost
Revolving Credit Facility(1) - 32,733 - -
Cost of arranging bank loan - (866) - -
Secured - at amortised cost
GE Corporate Finance Bank loan(1) - - - 53,903
- 31,867 - 53,903
---------------------------------- ------- ----------- ------- -----------
Notes
1. During the year ended 31 July 2015 the GE corporate finance
bank loan was repaid in full and a new multicurrency revolving
credit facility entered into. Interest bearing borrowings at 31
July 2015 comprise a revolving credit facility from Danske Bank
A/S, HSBC and The Royal Bank of Scotland with HSBC acting as agent
and are governed by a facilities agreement. The outstanding loans
are set out in the table below. No security is provided under the
new facility. Bank loans at 31 July 2014 comprised a facility from
GE Corporate Finance Bank SAS, London Branch and were governed by a
facilities agreement. The outstanding loans as at 31 July 2014 are
also set out in the table below. The facilities agreement gave 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.
2. During the year ended 31 July 2014 all the costs of arranging
the bank loans were written off to the consolidated statement of
comprehensive income as part of the re-financing following
admission to the London Stock Exchange in June 2014.
Revolving credit facility - at year ended 31 July 2015
Amount
outstanding Termination Repayment
Currency GBP000 dates frequency Rate %
-------------- ----------- ------------- ----------- ---------------
GBP 11,000 30 April 2019 One payment Libor + 1.25%
-------------- ----------- ------------- ----------- ---------------
Euro 8,283 30 April 2019 One payment Euribor + 1.25%
-------------- ----------- ------------- ----------- ---------------
Stibor +
Swedish Kroner 13,450 30 April 2019 One payment 1.25%
-------------- ----------- ------------- ----------- ---------------
The interest rate on borrowings includes a margin which is
dependent on the consolidated leverage level of the Group in
respect of the most recently completed reporting period. For the
year ended 31 July 2015, Group leverage was between 1.0:1 and 1.5:1
and therefore the margin was 1.25%. The consolidated leverage level
has fallen below 1.0:1 for the year ended 31 July 2015 and
therefore the margin for the first period of the year ended 31 July
2016 will fall to 1.0%.
At 31 July 2015 the Group had GBP57,267,000 of its multicurrency
revolving credit facility unutilised.
GE Corporate Finance bank loan - at year ended 31 July 2014
Amount
Principal outstanding Repayment Repayment
Element GBP000 GBP000 dates frequency Rate %
-------- --------- ----------- ------------- ----------- -----------
Term B 26,100 26,100 February 2019 One payment Libor + 3%
-------- --------- ----------- ------------- ----------- -----------
SEK Libor +
Term B1 20,500 17,818 February 2019 One payment 3.75%
-------- --------- ----------- ------------- ----------- -----------
Euro Libor
Term B2 10,600 9,985 February 2019 One payment + 3%
-------- --------- ----------- ------------- ----------- -----------
At 31 July 2014 the Group had two credit facilities: the
acquisition facility (GBP20,000,000), which matured in February
2018; and a revolving facility (GBP13,000,000), which matured in
February 2018. Part of the revolving facility related to
ancillaries (GBP1,500,000), which was used at 31 July 2014 for an
amount of GBP502,000.
17. Dividends paid and proposed
2015 2014
GBP000 GBP000
------------------------------------------------------- ------ ------
Cash dividends on ordinary shares declared and paid:
------------------------------------------------------- ------ ------
Interim dividend for 2015: 1.05 pence per share (2014:
nil) 2,100 -
------------------------------------------------------- ------ ------
Proposed dividends on ordinary shares:
------------------------------------------------------- ------ ------
Final dividend for 2015: 2.25 pence per share (2014:
nil) 4,500 -
------------------------------------------------------- ------ ------
The Interim dividend payment of GBP2,100,000 is included in the
consolidated cash flow statement.
The proposed dividend on ordinary shares is subject to approval
at the Annual General Meeting and is not recognised as a liability
at 31 July 2015.
18. 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.
No related party loan note balances exist at 31 July 2015 or 31
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.
Other disclosures on Directors' remuneration required by the
Companies Act 2006 and those specified for the audit by the
Directors' Remuneration Report Regulation 2013 are included in the
Directors' Remuneration Report.
Other transactions with related parties include the
following:
-- the Group incurred costs of GBPnil (2014: GBP168,000) from
Windmill Holdings BV (the previous direct controlling party) and
Windmill Cooperatief U A (a previous intermediate parent
undertaking) for management services; and
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