TIDMFAN
RNS Number : 1673M
Volution Group plc
11 October 2016
Embargoed until 7.00 am on Tuesday 11 October 2016
Volution Group plc
Preliminary Results for the Year Ended 31 July 2016
Strong results with revenue growth of 19% and EPS up 15%
Volution Group plc ("Volution" or "the Group" or "the Company",
LSE: FAN), a leading supplier of ventilation products to the
residential and commercial construction markets, today announces
its audited financial results for the 12 months ended 31 July
2016.
Highlights
Movement
in constant
2016 2015 Change currency
Revenue (GBPm) 154.5 130.2 18.7% 18.6%
Adjusted operating
profit (GBPm) 32.5 29.4 10.4% 10.3%
Adjusted profit
before tax (GBPm) 31.3 27.5 13.9% 13.8%
Reported profit
before tax (GBPm) 18.4 15.5 18.3% 18.0%
Basic and diluted
EPS (p) 7.8 5.9 32.5% 32.2%
Adjusted basic
and diluted EPS
(p) 12.6 11.0 14.5% 14.0%
Adjusted operating
cash flow (GBPm) 31.1 27.6 12.6%
Dividend per share
(p) 3.80 3.30 15.2%
Net debt (GBPm) 36.1 21.2 14.9
The Group uses some alternative performance measures to track
and assess the underlying performance of the business. These
measures include adjusted operating profit, adjusted profit before
tax, adjusted basic and diluted EPS and adjusted operating cash
flow. For a definition of all adjusted and non-GAAP measures, see
the glossary of terms in note 20.
Financial highlights
-- Four acquisitions completed in the year broadening our
geographic range and routes to market.
-- Revenue growth of 18.7% (18.6% at constant currency) comprised:
-- organic revenue growth of 3.0% (3.1% at constant currency); and
-- inorganic revenue growth of 15.7% (15.5% at constant currency) as a result of acquisitions.
-- Adjusted operating profit growth of 10.4% to GBP32.5 million (10.3% at constant currency).
-- As anticipated, adjusted operating profit margin declined by
1.6%, as a consequence of new acquisitions. Like-for-like adjusted
operating profit margin improved by 0.2 percentage points to
22.8%.
-- Reported profit before tax of GBP18.4 million (2015: GBP15.5 million).
-- Net debt increased as a result of four acquisitions made in
the year; adjusted EBITDA ratio of 1.0x.
-- Full year dividend of 3.80 pence per share, up 15.2%.
-- Adjusted EPS growth of 14.5% to 12.6 pence (2015: 11.0 pence).
Strategic highlights
-- We saw an increase in sales of high end products such as
quiet, silent and energy-efficient fans and the launch of a range
of app-controlled fans in the Group, driving organic growth.
-- Four acquisitions completed during the year with all
integration activity progressing as anticipated:
-- Ventilair provides the Group with access to markets in both Belgium and the Netherlands.
-- Energy Technique (trading as Diffusion) complements the
Group's leading position in the UK with its strong position in the
niche market of fan coils for heating and cooling of both
commercial and residential buildings. Diffusion sells mainly into
the new build market.
-- NVA Services (trading as National Ventilation and Airtech)
provides the Group with additional brands and routes to the UK
market. It supplies ventilation products for both residential and
commercial applications.
-- Welair, a small heat recovery manufacturer in Sweden,
provides the Nordic business with a wider product portfolio and
greater exposure to the new build market.
-- OEM (Torin-Sifan) revenue growth was assisted by growth in
the Electronically Commutated (EC) motor sales category in both the
heating and ventilation markets.
Commenting on the Group's performance, Ronnie George, Chief
Executive Officer, said:
"In our second full financial year since listing, we continued
to deliver strong revenue and earnings growth, assisted by the
completion of four acquisitions. Total revenue was GBP154.5
million, an increase of 18.7% compared to the prior year, with the
organic highlights being growth in the Nordics of 11.3% and 8.8% in
the OEM (Torin-Sifan) segment.
The four acquisitions completed in the year are substantially
integrated in to the Group and are opening up access to new
markets, with significant product cross selling and swap-out
opportunities, all of which will underpin our future growth."
Outlook
The new financial year has started well and notwithstanding the
ongoing uncertainty in the UK post the EU Referendum, our
acquisitions completed in the 2016 financial year, as well as new
product launches and the various sales initiatives across the
Group, give us confidence in delivering further growth in 2017.
-Ends-
For further information:
Enquiries:
Volution Group plc
Ronnie George, Chief +44 (0) 1293
Executive Officer 441501
Ian Dew, Chief Financial +44 (0) 1293
Officer 441536
+44 (0) 207
Tulchan Communications 353 4200
James Macey White
Matt Low
A presentation will be held for analysts at 9.30 am today,
Tuesday 11 October, at the offices of Tulchan Communications, 85
Fleet Street, London, EC4Y 1AE.
A copy of this announcement and the presentation given to
analysts will be available on our website
http://www.volutiongroupplc.com/ from 7.00 am.
This announcement contains inside information.
Note to Editors:
Volution Group plc (LSE: FAN) is a leading supplier of
ventilation products to the residential and commercial construction
markets in the UK and northern Europe.
The Group sold approximately 22 million ventilation products and
accessories in the twelve months ended 31 July 2016. The Volution
Group operates through two divisions: the Ventilation Group and the
OEM (Torin-Sifan) division. The Ventilation Group consists of 11
key brands - Vent-Axia, Manrose, Diffusion, National Ventilation,
Airtech, Fresh, PAX, Welair, inVENTer, Brüggemann and Ventilair,
focused primarily on the UK, Nordic and central European
ventilation markets. The Ventilation Group principally supplies
ventilation products for residential and commercial ventilation
applications. The OEM (Torin-Sifan) division, 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 second full financial year as a listed company continues to
build on the success of the previous year and I am pleased to
report yet another year of strong results. Volution continues to
make good progress in its strategy of making selective value-adding
acquisitions with four acquisitions completed in the year:
-- Ventilair, based in Belgium and the Netherlands, completed in August 2015;
-- Energy Technique (trading as Diffusion) in the UK was completed in December 2015;
-- Welair in Sweden also completed in December 2015;
-- NVA Services in the UK (trading as National Ventilation and
Airtech), completed in May 2016.
The integration of Ventilair was completed during the year with
additional cross selling of heat recovery and domestic fan products
from the UK ventilation business, as well as the recent
introduction of the world's first app-controlled extractor fan from
the Nordics, being sold through the new sales channels for the
Group in Belgium and the Netherlands.
In the UK we achieved another year of good organic growth in the
sales of higher-value ventilation systems used in new residential
dwellings and of more quiet, energy efficient ventilation used for
residential repair, maintenance and improvement (RMI) applications
which was also underpinned by the launch of the new app-controlled
fan.
Torin-Sifan delivered good organic revenue growth, despite
another mild winter, and the benefits of improved customer service
and reliability were delivered with the first full financial year
of operation of the additional new production site in Swindon,
UK.
Ventilation Group
Revenue: GBP134.1 million, 86.8% of Group revenue (GBP134.0 million at constant currency)
(2015: GBP111.5 million, 85.6% of Group revenue)
Adjusted operating profit: GBP31.6 million, 97.3% of Group adjusted operating profit
(2015: GBP28.9 million, 98.3% of Group adjusted operating
profit)
Constant currency
------------------------
2016 2016 2015 Growth
Market sectors GBP000 GBP000 GBP000 %
------------------ ------- ------- ------- ------
Ventilation
Group
UK Residential
RMI 35,427 35,427 36,574 (3.1)%
UK Residential
New Build 19,818 19,818 17,180 15.4%
UK Commercial 21,677 21,677 16,188 33.9%
UK Export 7,803 7,775 8,374 (7.2)%
Nordics 25,521 25,695 22,241 15.5%
Central Europe 23,820 23,653 10,904 116.9%
------------------ ------- ------- ------- ------
Total Ventilation
Group 134,066 134,045 111,461 20.3%
------------------ ------- ------- ------- ------
The Ventilation Group's performance was encouraging, with a
20.3% increase in revenue on prior year (20.3% at constant
currency). Organic growth was 1.9% (2.0% at constant currency)
including the declining revenue from the disappointing results in
UK Residential RMI, offset by the strong organic growth in UK
Residential New Build and in the Nordics.
United Kingdom
Sales in our UK Residential New Build sector were GBP19.8
million (2015: GBP17.2 million), growth of 15.4%, assisted in the
year by the additional revenues from Diffusion, acquired in
December 2015. Organic growth achieved was 7.2% with the order
intake for new residential projects growing more quickly than
sales. The new Kinetic Advance was successfully launched in the
year and has been specified for a number of projects which will
come to fruition in our financial year 2017.
The UK Residential RMI market was soft with both private
refurbishment and public refurbishment volumes declining, with
prices remaining stable. Public refurbishment declined by 5.3% in
the year (organic decline of 6.0%), the first half of the year
declining by 8.7%. The public market remains difficult due to the
ongoing austerity measures and government cutbacks, in particular,
the impact on Housing Association budgets of rent reductions for
their tenants. Several initiatives are underway in an attempt to
gain further market share in the future. The new product
development of the Revive bathroom and kitchen fan was completed in
the year and the product was launched in the summer of 2016.
The Revive is one of the most efficient, quiet and discrete
bathroom and kitchen fans available to the public refurbishment
market and together with the additional new product range there has
been significant investment in the sales team during the year.
Private refurbishment declined by 1.6% in the year (an organic
decline of 3.4%) and this was exacerbated by the annual price
increase being delayed until financial year 2017, against a strong
comparator, which benefited from pre-price increase buying. The new
Svara app-controlled fan was launched in 2016 and has already
established a position with both electrical wholesalers and
retailers which is expected to bring additional revenue benefit in
financial year 2017.
UK Commercial grew by 33.9% in the year to GBP21.7 million
(2015: GBP16.2 million) as a result of the acquisition of
Diffusion. The organic decline was 7.0% which was primarily due to
the RMI market which performed less well than the market for new
applications. Since acquisition, Diffusion sales have performed
very strongly with a number of notable project wins for the supply
of fan coils, requiring us to increase the manufacturing capacity
of the business to support the increasing demand.
UK Export sales were GBP7.8 million (2015: GBP6.6 million
excluding sales to Ventilair which are now eliminated as
intercompany sales), strong growth of 17.4%, benefiting from the
additional export sales from Diffusion with an organic
like-for-like growth of 3.9% (3.5% growth at constant currency).
Sales to our distribution partner Simx in New Zealand performed
particularly well as did sales of heat recovery systems to
Eire.
The Nordics
Sales in the Nordics sector were GBP25.5 million (2015: GBP22.2
million), an increase of 14.7% (15.5% at constant currency) with
organic revenue growth of 10.5% (11.3% growth at constant
currency). Sales of the market-leading, low-energy and near-silent
ventilation products continued to grow during the year as they had
in the prior year. The new Calima fan, the first app-controlled
extractor fan on the market, performed very well in the year. There
was also significant growth in the sales of our electric towel
warmers sold under the PAX brand. Following the acquisition of
Welair in December 2015, integration is progressing as expected and
in the autumn of 2016 we will launch an extended range of heat
recovery units in the Nordics under the Fresh brand, designed and
manufactured by Welair.
Central Europe
Sales in Central Europe were GBP23.8 million, strong growth with
sales more than doubling due to the acquisition of Ventilair in
Belgium and the Netherlands. Sales in Germany were down 2.3% on the
prior year although this was offset by higher gross margin
generated by replacing existing products with those exclusively
manufactured by Volution. This decision, whilst accretive to
earnings, resulted in a small loss of sales whilst the changeover
process was implemented. In June and July 2016 the sales in Germany
generated strong organic growth compared to the prior year. During
the year we increased the number of agents operating in Germany and
now have full coverage of the market, the benefit of which we
expect to see in the financial year 2017.
OEM (Torin-Sifan) segment
Revenue: GBP20.4 million, 13.2% of Group revenue (GBP20.4 million at constant currency)
(2015: GBP18.7 million, 14.4% of Group revenue)
Adjusted operating profit: GBP3.3 million, 10.0% of Group adjusted operating profit
(2015: GBP2.5 million, 8.5% of Group adjusted operating
profit)
Constant currency
------------------------
2016 2016 2015 Growth
Market sectors GBP000 GBP000 GBP000 %
--------------- ------- ------- ------- ------
OEM 20,398 20,358 18,717 8.8%
--------------- ------- ------- ------- ------
Total OEM 20,398 20,358 18,717 8.8%
--------------- ------- ------- ------- ------
Our OEM (Torin-Sifan) segment's revenue in the year was GBP20.4
million (2015: GBP18.7 million), an increase of 9.0% (8.8% at
constant currency), with sales of EC fans growing strongly in the
year despite the delays in launching the new EC3 motorised impeller
range. Sales of alternating current (AC) fans also delivered
growth, mainly as a result of the price increase implemented on the
traditional product lines including spares for gas boilers. Whilst
it was another mild winter with volumes broadly constant with the
prior year, the additional price improvement increased the revenue
in this category. As reported last year, the market for sales of
electrically commutated direct current (EC/DC) motorised impellers
continues to grow as this area is supported by regulatory drivers,
both in the UK and in continental Europe. Our investment in the new
EC3 motorised impeller range, whilst delayed, is expected to gain
sales traction in financial year 2017.
Three strategic pillars
Our strategy continues to focus on three key pillars:
-- organic growth in our core markets (which now extend through
Ventilair 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 were greatly extended during the year and now
extend to Belgium and the Netherlands with the acquisition of
Ventilair, to heat recovery markets in the Nordics through the
acquisition of Welair, more comprehensive commercial exposure in
the UK with the acquisition of Diffusion, and greater access to the
UK residential market with the acquisition of National Ventilation
and Airtech. These markets, as well as the original core markets
for Volution, continue to benefit from the favourable regulatory
backdrop that focuses on reducing carbon emissions from buildings
(in particular new buildings) as well as the need to improve energy
efficiency.
The European market remains highly fragmented and we will
continue to pursue acquisition opportunities leveraging the Group
capabilities in operations, procurement, distribution and finance,
which we have invested in over recent years. Our Research and
Development function, as well as our recently expanded procurement
function, including our own sourcing team in China (a new
investment in 2016), should enable us to deliver substantial
synergies from both existing and potential new acquisitions.
The investment we have made in Torin-Sifan, both in new product
development and a new production facility, helped underpin our
improvements during the financial year 2016. The service levels
from Torin-Sifan, mainly an OEM supplier of motorised impellers,
significantly improved during the year. The launch of the new EC3
motorised impeller range, whilst later than planned, is now
starting to gain approval and we expect to see sales commence
during the financial year 2017.
People
I am delighted to advise that in April 2016 we launched our
second internal Management Development Programme (MDP) which
consists of fifteen high potential managers from across all
geographic and functional areas of the Group. The programme will
now run for just over a year including site visits to several of
the Volution Group locations.
During the financial year 2016, we completed four acquisitions,
with the integration of each of these made so much easier by the
considerable hard work and dedication of our employees. Whilst
focussing on the considerable benefits of integration, the efforts
of our employees, their openness and collaborative approach, has
ensured that all of our employees, including those in the newly
acquired businesses, really do feel part of a wider Volution team.
I am particularly proud of how this process has worked and would
like to thank everyone across the Group for making the year a great
success.
UK referendum on EU membership
Following the UK's vote to leave the European Union, the Company
has been monitoring business performance closely and has not yet
seen any discernible impact on trading.
Although too early to assess the implications for our business
and operations over the longer term, we believe that the outcome of
the referendum will not have any material near-term impact on
demand for our products. Following the four acquisitions completed
during the last financial year, Volution is now a more diversified
and flexible business which can adjust if necessary. With our
proven track record of performing well in challenging trading
environments and our strong balance sheet, we are confident about
delivering on our strategy over time.
Outlook
The new financial year has started well and notwithstanding the
ongoing uncertainty in the UK post the EU Referendum, our
acquisitions completed in the 2016 financial year, as well as new
product launches and the various sales initiatives across the
Group, give us confidence in delivering further growth in 2017.
Ronnie George
Chief Executive Officer
11 October 2016
FINANCIAL REVIEW
Trading Performance Summary
Reported Adjusted (1)
------------------ ------------------
Year Year Year Year
ended ended ended ended
31 July 31 July 31 July 31 July
2016 2015 Movement 2016 2015 Movement
------------------ -------- -------- -------- -------- -------- --------
Revenue (GBPm) 154.5 130.2 18.7% 154.5 130.2 18.7%
EBITDA (GBPm) 33.9 31.4 8.2% 35.4 32.1 10.2%
Operating profit
(GBPm) 18.4 17.2 7.0% 32.5 29.4 10.4%
Finance costs
(GBPm) 1.2 2.2 45.6% 1.2 2.0 39.9%
Profit before
tax (GBPm) 18.4 15.5 18.3% 31.3 27.5 13.9%
Basic and diluted
EPS (p) 7.8 5.9 32.2% 12.6 11.0 14.5%
Total dividend
per share (p) 3.80 3.30 15.2% 3.80 3.30 15.2%
Operating cash
flow (GBPm) 31.1 27.6 12.6% 31.1 27.6 12.6%
Net debt (GBPm) 36.1 21.2 14.9 36.1 21.2 14.9
------------------ -------- -------- -------- -------- -------- --------
(1) 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 to the consolidated financial
statements. For a definition of all adjusted measures see the
glossary of terms in note 20.
Revenue
The Group continued its strong revenue growth during 2016.
Revenue for the year ended 31 July 2016 was GBP154.5 million (2015:
GBP130.2 million), an 18.7% increase (18.6% at constant currency).
Growth was achieved both organically, 3.0% (3.1% at constant
currency), and inorganically from acquisitions, 15.7% (15.5% at
constant currency). The inorganic growth was a result of the four
acquisitions made in the year and the full year effect of the
acquisition of Brüggemann in April 2015.
The Ventilation Group revenues grew by 20.3% (20.3% at constant
currency), of which organic growth represented 1.9% (2.0% at
constant currency). OEM (Torin-Sifan) grew, entirely organically,
by 9.0% (8.8% at constant currency).
Despite the significant weakening of Sterling in June 2016, the
movements in foreign currency exchange rates for the year as a
whole have had a minimal effect on the reported revenue of our
business. If we had translated the full year revenue of our
business at our 2015 exchange rates, the reported Group revenues
would have been GBP154.4 million, less than 0.1% lower.
Profitability
Our underlying result, as measured by adjusted operating profit,
was GBP32.5 million (2015: GBP29.4 million), 21.0% of revenues
(2015: 22.6%), delivering a GBP3.1 million improvement compared to
the prior year. The Group benefited from the effect of the
acquisitions of Ventilair in August 2015, Energy Technique in
December 2015, NVA Services in May 2016 and the full year effect of
the prior year acquisition of Brüggemann in April 2015.
On sales growth of 18.7%, adjusted profit before tax improved by
GBP3.8 million to GBP31.3 million, growth of 13.9%. Our Group
adjusted profit before tax margin of 20.3% declined by 0.8
percentage points in the year as a consequence of the acquisition
of businesses that operated with profit margins lower than our
Group average. Our like-for-like adjusted profit before tax margins
(of the organic portion of our business) improved by 0.8% to 21.9%
of revenues.
The Group's reported profit before tax in the year was GBP18.4
million compared to GBP15.5 million in 2015. The reported profit
before tax for the period has benefited from:
-- increased organic adjusted operating profits and margins;
-- a reduction in finance costs to GBP1.2 million (2015: GBP2.2
million), from the full year effect of our refinancing in February
2015 of the prior financial year; and
-- recent acquisitions.
Acquisitions
The Group's trading benefited in the year from the full year
effect of the acquisition of Brüggemann in Germany, acquired in
April 2015.
A further four acquisitions were completed during the year:
-- Ventilair, based in Belgium and the Netherlands, acquired in
August 2015 for a consideration of EUR14.3 million (approximately
GBP10.0 million net of cash acquired), EUR16.3 million including
settlement of the target's debt on acquisition;
-- Energy Technique (trading as Diffusion), based in the UK,
acquired in December 2015 for a consideration of GBP9.4 million
(GBP8.2 million net of cash acquired);
-- Welair, based in Sweden, acquired in December 2015 for a
consideration of SEK 7.8 million (approximately GBP0.6 million);
and
-- NVA Services (trading as National Ventilation and Airtech),
based in the UK, acquired in May 2016 for a consideration of GBP6.7
million (GBP8.4 million including net debt acquired).
All four 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 GBP1.2 million (2015: GBP0.7 million)
and relate solely to the cost of the four acquisitions made in the
year. Details of these exceptional items can be found in note 7 to
the consolidated financial statements.
The Board believes that the performance measures, 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:
-- Amortisation of acquired intangibles: on acquisition of a
business, where appropriate, we value identifiable intangible fixed
assets acquired such as trademarks and customer base and recognise
these assets in our consolidated statement of financial position;
we then amortise these acquired intangible assets over their useful
lives. In the year the amortisation charge of these intangible
assets increased to GBP12.7 million (2015: GBP11.5 million) as a
consequence of recent acquisitions.
-- Fair value adjustments: 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 GBP1.1 million (2015: gain of GBP0.4
million).
Finance revenue and costs
Finance costs of GBP1.2 million (2015: GBP2.2 million) have
reduced during the year, largely as a consequence of the full year
effect of refinancing our bank debt in February 2015 resulting in
lower interest rates during the period.
Taxation
As a result of the Summer Finance Bill 2015, which achieved
royal assent during the period, future UK corporation tax rates
were reduced to 19% effective from 1 April 2017 and 18% effective
from 1 April 2020. We have large deferred tax liabilities on our
consolidated statement of financial position, arising on
recognition of identifiable intangible fixed assets acquired, and
these liabilities have been recalculated as a consequence of the
tax rate changes. As a result the deferred tax liability has
decreased, with a one-off credit of GBP1.6 million recognised in
the income statement. This has reduced our effective tax rate in
the period to 15.0% (2015: 23.8%). Our underlying effective tax
rate, before the effect of this adjustment to deferred tax
liabilities, was 20.0% (2015: 20.1%).
The Group's medium-term adjusted effective tax rate is expected
to remain around 20% of the Group's adjusted profit before tax.
Operating cash flow
The Group continued to be strongly cash generative in the year
with adjusted operating cash inflow of GBP31.1 million (2015:
GBP27.6 million). This represents a cash conversion, after capital
expenditure and movement in working capital, of 95% (2015: 93%).
The Group continues to manage its working capital efficiently with
operating working capital representing 11.7% of revenue (2015:
12.3%). In addition, the Group continues to invest for the future
with net capital expenditure of GBP4.4 million (2015: GBP4.6
million) including investment in new product development and
improved IT systems. See the glossary of terms in note 20 for a
definition of adjusted operating cash flow and cash conversion.
Employee Benefit Trust
In the period the Group loaned GBP1.5 million to the Volution
Employee Benefit Trust for the exclusive purpose of purchasing
shares in Volution Group plc in order to partly fulfil the
Company's obligations under its Long Term Incentive Plan and
Deferred Share Bonus Plan. The Employee Benefit Trust acquired
916,878 shares at an average price of GBP1.67 per share in the
period, an aggregate consideration of GBP1.5 million. The Employee
Benefit Trust has been consolidated into our results and the shares
purchased have been treated as treasury shares deducted from
shareholders' funds.
Net debt
Year-end net debt was GBP36.1 million (2015: GBP21.2 million),
comprised of bank borrowings of GBP51.8 million (2015: bank
borrowings of GBP32.8 million), offset by cash and cash equivalents
of GBP15.7 million (2015: GBP11.6 million). The net debt of GBP36.1
million represents leverage of 1.0x adjusted EBITDA.
Movements in net debt position for the year ended 31 July
2016
GBPm
----------------------------- ------
Opening net debt 1
August 2015 (21.2)
----------------------------- ------
Movements from normal
business operations:
- Adjusted operating
cash flow 31.1
- Interest paid net
of interest received (1.0)
- Income tax paid (5.2)
- Exceptional items (1.0)
- Dividend paid (6.9)
- Purchase of own
shares (1.5)
- FX on foreign currency
loans/cash (5.4)
Movements from acquisitions:
- Acquisition consideration
net of cash acquired (25.0)
----------------------------- ------
Closing net debt 31
July 2016 (36.1)
----------------------------- ------
Bank facilities, refinancing and liquidity
The Group's bank facilities, at the year end, consisted of a
GBP90 million revolving credit facility, maturing April 2019.
As at 31 July 2016, we had GBP38.2 million of undrawn, committed
bank facilities and GBP15.7 million of cash and cash equivalents on
the consolidated 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 mostly balanced by
Euro expenditure in the UK. We have little US Dollar income but
significant expenditure. We have limited our transactional foreign
exchange risk by purchasing the majority of our forecast US Dollar
requirements for, and in advance of, the 2017 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 GBP15.9 million of borrowings denominated in SEK
(2015: GBP13.4 million). We have partially hedged our risk of
translation of the net assets of inVENTer, Brüggemann and Ventilair
by having Euro-denominated bank borrowings in the amount of GBP22.0
million as at 31 July 2016 (2015: GBP8.3 million). The Sterling
value of our foreign currency-denominated loans increased by GBP5.4
million in the year as a consequence of exchange rate movements, in
particular the significant weakening of Sterling in June 2016. We
do not hedge the translational exchange rate risk to the results of
overseas subsidiaries.
During the year, movements in foreign currency exchange rates
have had a minimal effect on the reported revenue and profitability
of our business. If we had translated the full year performance of
our business at our 2015 exchange rates, our reported Group
revenues would have been GBP154.4 million or less than 0.1% lower
and adjusted operating profit would have been GBP32.5 million or
0.1% lower.
At the end of the financial year the weakening of Sterling
increased the value of foreign currency-denominated working capital
by GBP0.9 million compared to the foreign exchange rates applying
at the beginning of the year.
Earnings per share
The basic and diluted earnings per share for the year was 7.8
pence (2015: 5.9 pence). Our adjusted basic and diluted earnings
per share was 12.6 pence (2015: 11.0 pence), a significant 14.5%
increase.
Dividends
In May 2016 the Group paid an interim dividend of 1.20 pence per
share.
The Board has proposed a final dividend of 2.60 pence per share.
Subject to approval at our Annual General Meeting of shareholders
on 9 December 2016, the recommended final dividend will be paid on
14 December 2016 to shareholders who are on the register on 18
November 2016.
Ian Dew
Chief Financial Officer
11 October 2016
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2016
2016 2015
Notes GBP000 GBP000
-------------------------------------- ----- -------- --------
Revenue 5 154,464 130,178
Cost of sales (79,098) (67,019)
-------------------------------------- ----- -------- --------
Gross profit 75,366 63,159
Distribution costs (22,500) (18,052)
Administrative expenses (33,255) (27,174)
-------------------------------------- ----- -------- --------
Operating profit before exceptional
items 19,611 17,933
Exceptional items 7 (1,209) (731)
-------------------------------------- ----- -------- --------
Operating profit 18,402 17,202
Finance revenue 8 1,164 533
Finance costs 8 (1,202) (2,209)
-------------------------------------- ----- -------- --------
Profit before tax 18,364 15,526
Income tax 10 (2,757) (3,691)
-------------------------------------- ----- -------- --------
Profit for the year 15,607 11,835
Other comprehensive income/(expense):
Items that may subsequently
be reclassified to profit or
loss:
Exchange differences arising
on translation of foreign operations 3,394 (533)
Loss on hedge of net investment
in foreign operations (1,469) (187)
-------------------------------------- ----- -------- --------
Other comprehensive income/(expense)
for the year 1,925 (720)
-------------------------------------- ----- -------- --------
Total comprehensive income for
the year 17,532 11,115
-------------------------------------- ----- -------- --------
Basic and diluted earnings per
share (pence per share) 11 7.8p 5.9p
-------------------------------------- ----- -------- --------
Consolidated Statement of Financial Position
At 31 July 2016
2016 2015
Notes GBP000 GBP000
-------------------------------------- ----- --------- --------
Non-current assets
Property, plant and equipment 19,130 16,047
Intangible assets - goodwill 12 68,228 51,725
Intangible assets - others 13 105,361 100,951
Deferred tax assets 10 450 394
-------------------------------------- ----- --------- --------
193,169 169,117
-------------------------------------- ----- --------- --------
Current assets
Inventories 20,156 15,019
Trade and other receivables 32,935 26,271
Other current financial assets 914 -
Cash and short-term deposits 15,744 11,565
-------------------------------------- ----- --------- --------
69,749 52,855
-------------------------------------- ----- --------- --------
Total assets 262,918 221,972
-------------------------------------- ----- --------- --------
Current liabilities
Trade and other payables (35,090) (25,295)
Other current financial liabilities - (225)
Income tax (2,472) (1,411)
Provisions (1,268) (855)
Deferred tax liabilities 10 (2,395) -
-------------------------------------- ----- --------- --------
(41,225) (27,786)
-------------------------------------- ----- --------- --------
Non-current liabilities
Interest-bearing loans and borrowings 16 (51,235) (31,867)
Provisions (671) (600)
Deferred tax liabilities 10 (16,242) (19,273)
-------------------------------------- ----- --------- --------
(68,148) (51,740)
-------------------------------------- ----- --------- --------
Total liabilities (109,373) (79,526)
-------------------------------------- ----- --------- --------
Net assets 153,545 142,446
-------------------------------------- ----- --------- --------
Capital and reserves
Share capital 2,000 2,000
Share premium 11,527 11,527
Treasury shares (1,533) -
Capital reserve 93,855 92,325
Share-based payment reserve 649 181
Foreign currency translation
reserve 1,462 (463)
Retained earnings 45,585 36,876
-------------------------------------- ----- --------- --------
Total equity 153,545 142,446
-------------------------------------- ----- --------- --------
The consolidated financial statements of Volution Group plc
(registered number: 09041571) were approved by the Board of
Directors and authorised for issue on 11 October 2016.
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 2016
Foreign
Share-based currency
Share Share Treasury Capital payment translation Retained
capital premium shares reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
At 1 August
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
-------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Profit for
the year - - - - - - 15,607 15,607
Other comprehensive
expense - - - - - 1,925 - 1,925
-------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Total comprehensive
income - - - - - 1,925 15,607 17,532
Fair Value
adjustment
(1) - - - 1,530 - - (4) 1,526
Purchase of
own shares - - (1,533) - - - - (1,533)
Share-based
payment including
tax - - - - 468 - - 468
Dividends paid - - - - - - (6,894) (6,894)
-------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
At 31 July
2016 2,000 11,527 (1,533) 93,855 649 1,462 45,585 153,545
-------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
(1) The adjustment relates to a correction to the deferred tax
on fair value adjustments made on acquisitions in prior years.
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 consolidated financial statements in 2014. This
is a non-distributable reserve.
Treasury shares
The treasury shares reserve represents the cost of shares in
Volution Group plc purchased in the market and held by the Volution
Employee Benefit Trust to satisfy obligations under the Group's
share incentive schemes.
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 hedge ineffectiveness has been
recognised in the statement of comprehensive income for any of the
periods presented.
Retained earnings
The parent company of the Volution Group, Volution Group plc,
had distributable retained earnings at 31 July 2016 of
GBP64,368,000.
Consolidated Statement of Cash Flows
For the year ended 31 July 2016
2016 2015
Notes GBP000 GBP000
----------------------------------------- ----- -------- --------
Operating activities
Profit for the year after tax 15,607 11,835
Adjustments to reconcile profit
for the year to net cash flow
from operating activities:
Income tax 2,757 3,691
Loss/(gain) on disposal of property,
plant and equipment 9 (19)
Exceptional costs 7 1,209 731
Cash flows relating to exceptional
costs (795) (89)
Finance revenue 8 (1,164) (533)
Finance costs 8 1,202 2,209
Share-based payment expense 431 181
Depreciation of property, plant
and equipment 2,559 2,536
Amortisation of intangible assets 12,987 11,646
Working capital adjustments:
Decrease/(Increase) in trade receivables
and other assets 572 (895)
Movement in inventories (775) 453
Exceptional costs: fair value
of inventories (332) -
(Decrease)/increase in trade and
other payables (41) 750
Movement in provisions 186 (164)
UK income tax paid (3,900) (2,313)
Overseas income tax paid (1,349) (770)
----------------------------------------- ----- -------- --------
Net cash flow from operating activities 29,163 29,249
----------------------------------------- ----- -------- --------
Investing activities
Payments to acquire intangible
assets (1,626) (1,723)
Purchase of property, plant and
equipment (2,879) (3,880)
Proceeds from disposal of property,
plant and equipment 162 979
Acquisition of subsidiaries, net
of cash acquired 15 (24,983) (1,521)
Interest received 24 66
Net cash flow used in investing
activities (29,302) (6,079)
----------------------------------------- ----- -------- --------
Financing activities
Repayment of interest-bearing
loans and borrowings (15,291) (57,060)
Proceeds from new borrowings 28,222 39,760
Issue costs of new borrowings - (968)
Interest paid (971) (2,004)
Dividends paid (6,894) (2,100)
Purchase of own shares (1,533) -
----------------------------------------- ----- -------- --------
Net cash flow generated from/(used
in) financing activities 3,533 (22,372)
----------------------------------------- ----- -------- --------
Net increase in cash and cash
equivalents 3,394 798
Cash and cash equivalents at the
start of the year 11,565 10,987
Effect of exchange rates on cash
and cash equivalents 785 (220)
----------------------------------------- ----- -------- --------
Cash and cash equivalents at the
end of the year 15,744 11,565
----------------------------------------- ----- -------- --------
Notes to the Consolidated Financial Statements
For the year ended 31 July 2016
1. Publication of non-statutory consolidated financial statements
The preliminary results were authorised for issue by the Board
of Directors on 11 October 2016. The financial information set out
herein does not constitute the Group's statutory consolidated
financial statements for the years ended 31 July 2016 or 2015, but
is derived from those accounts. Statutory consolidated financial
statements for 2016 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 2019 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
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.
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 acquisition
costs, inventory fair value adjustments as a result of acquisitions
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.
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 three years.
The recoverable amount is very 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 identification of the Group's cash generating units (CGU's)
used for impairment testing involves a degree of judgement.
Management have reviewed the Group's assets and cash inflows and
identified the lowest aggregation of assets that generate largely
independent cash inflows.
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
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 payable provision at
31 July 2016 included within trade and other payables is
GBP5,414,000 (2015: GBP5,017,000).
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:
2016 2015
GBP000 GBP000
---------------------- ------- -------
Sale of goods 150,986 127,652
Rendering of services 3,478 2,526
---------------------- ------- -------
Total revenue 154,464 130,178
---------------------- ------- -------
2016 2015
Market sectors GBP000 GBP000
------------------------------------- ------- -------
Ventilation Group
UK Residential RMI 35,427 36,574
UK Residential New Build 19,818 17,180
UK Commercial 21,677 16,188
UK Export 7,803 8,374
Nordics(1) 25,521 22,241
Central Europe(2) 23,820 10,904
------------------------------------- ------- -------
Total Ventilation Group 134,066 111,461
------------------------------------- ------- -------
Original Equipment Manufacturer (OEM
(Torin-Sifan))
OEM (Torin-Sifan) 20,398 18,717
------------------------------------- ------- -------
Total revenue 154,464 130,178
------------------------------------- ------- -------
Notes
1. Represents revenue of Fresh AB and its subsidiaries, PAX AB,
Volution Norge AS and Welair AB.
2. Represents revenue of inVENTer GmbH, Brüggemann
Energiekonzepte GmbH, Ventilair Group Belgium BVBA, Ventilair Group
Netherlands B.V and Ventilair SARL.
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 Original Equipment
Manufacturer (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 operating profit
(see note 20 for definition) from external customers 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
Year ended Group OEM Unallocated Total Eliminations Consolidated
31 July 2016 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ----------- ------- ----------- -------- ------------ ------------
Revenue
External customers 134,066 20,398 - 154,464 - 154,464
Inter-segment 15,999 982 - 16,981 (16,981) -
------------------------ ----------- ------- ----------- -------- ------------ ------------
Total revenue 150,065 21,380 - 171,445 (16,981) 154,464
------------------------ ----------- ------- ----------- -------- ------------ ------------
Gross profit 69,170 6,196 - 75,366 - 75,366
------------------------ ----------- ------- ----------- -------- ------------ ------------
Results
Adjusted segment
EBITDA 33,859 3,780 (2,246) 35,393 - 35,393
Depreciation
and amortisation
of developments
costs, software
and patents (2,217) (524) (147) (2,888) - (2,888)
------------------------ ----------- ------- ----------- -------- ------------ ------------
Adjusted operating
profit/(loss) 31,642 3,256 (2,393) 32,505 - 32,505
Amortisation
of intangible
assets acquired
through business
combinations (11,300) (1,358) - (12,658) - (12,658)
Other non-recurring
items not meeting
the definition
of exceptional (236) - - (236) - (236)
Exceptional
items (373) - (836) (1,209) - (1,209)
------------------------ ----------- ------- ----------- -------- ------------ ------------
Operating profit/(loss) 19,733 1,898 (3,229) 18,402 - 18,402
Unallocated
expenses
Net finance
cost - - (38) (38) - (38)
------------------------ ----------- ------- ----------- -------- ------------ ------------
Profit/(loss)
before tax 19,733 1,898 (3,267) 18,364 - 18,364
------------------------ ----------- ------- ----------- -------- ------------ ------------
Ventilation
Year ended Group OEM Unallocated Total Eliminations Consolidated
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
------------------------ ----------- ------- ----------- -------- ------------ ------------
The Group overhead costs are not allocated to individual
operating segments. Likewise, certain exceptional costs have not
been allocated to individual operating segments.
Inter-segment revenues are eliminated on consolidation.
2016 2015
Geographic information GBP000 GBP000
------------------------------------- ------- -------
Revenue from external customers by
destination
United Kingdom 87,536 79,936
Europe (excluding United Kingdom and
Sweden) 44,716 31,131
Sweden 19,500 16,663
Rest of the world 2,712 2,448
------------------------------------- ------- -------
Total revenue 154,464 130,178
------------------------------------- ------- -------
2016 2015
GBP000 GBP000
-------------------------------------- ------- -------
Non-current assets excluding deferred
tax
United Kingdom 150,239 142,957
Europe (excluding United Kingdom and
Nordics) 27,970 13,787
Nordics 13,360 11,979
-------------------------------------- ------- -------
Total 191,569 168,723
-------------------------------------- ------- -------
Information about major customers
Annual revenue from no individual customer accounts for more
than 10% of Group revenue. In the year ended 31 July 2015 one
customer accounted for annual revenue of GBP13,607,000 which
represented 10.5% of Group revenue.
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:
2016 2015
Notes GBP000 GBP000
---------------------------------- ------ ------- -------
Inventory fair value adjustment
arising on business combinations (a) 332 -
Acquisition costs (b) 877 875
Restructuring and acquisition
integration - 128
Profit on disposal of property
plant and equipment - (261)
Costs associated with the stock
market listing of the Group - (11)
------------------------------------------ ------- -------
1,209 731
Total tax credit for the year (c) (80) (26)
---------------------------------- ------ ------- -------
1,129 705
----------------------------------------- ------- -------
(a) As set out in note 15, inventory acquired on acquisitions
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 relevant inventory was disposed of in the same period it was
acquired.
(b) Acquisition costs relate to professional fees incurred in
respect of the business combinations disclosed in note 15:
2016 2015
GBP000 GBP000
------------------------------------- ------- -------
Brüggemann Energiekonzepte GmbH - 134
Ventilair Group International BVBA 85 559
Fresh AB and its subsidiaries - 49
Energy Technique plc 603 -
Weland Luftbehandling AB 22 -
NVA Services Limited 167 -
Aborted acquisitions - 133
------------------------------------- ------- -------
877 875
------------------------------------- ------- -------
(c) It was deemed that the items allowable for or chargeable to
tax was approximately GBP332,000 (2015: GBP128,000) with a
potential tax benefit of GBP80,000 (2015: GBP26,000).
8. Finance revenue and costs
2016 2015
GBP000 GBP000
---------------------------------- ------- -------
Finance revenue
Net gain on financial instruments
at fair value 1,139 467
Interest receivable 25 66
---------------------------------- ------- -------
Total finance revenue 1,164 533
---------------------------------- ------- -------
Finance costs
Interest payable on bank loans (915) (2,004)
Amortisation of finance costs (232) (102)
Other interest (55) -
---------------------------------- ------- -------
Total interest expense (1,202) (2,106)
Net loss on financial instruments
at fair value - (103)
---------------------------------- ------- -------
Total finance costs (1,202) (2,209)
---------------------------------- ------- -------
Net finance costs (38) (1,676)
---------------------------------- ------- -------
Included in the interest payable on bank loans is GBPnil (2015:
GBP106,000) relating to breakage costs of the interest rate
swaps.
9. Adjusted earnings
2016 2015
GBP000 GBP000
----------------------------------------------- ------- -------
Profit after tax 15,607 11,835
Add back:
Exceptional items 1,209 731
Other non-recurring items not meeting
the definition of exceptional 236 -
Breakage costs of interest rate swaps - 106
Net gain on financial instruments
at fair value (1,139) (364)
Amortisation and impairment of intangible
assets acquired through business combinations 12,658 11,498
Tax effect of the above (3,496) (1,838)
----------------------------------------------- ------- -------
Adjusted profit after tax 25,075 21,968
Add back:
Adjusted tax charge 6,253 5,529
----------------------------------------------- ------- -------
Adjusted profit before tax 31,328 27,497
Add back:
Interest payable on bank loans and
amortisation of financing costs 1,202 2,000
Finance revenue (25) (66)
----------------------------------------------- ------- -------
Adjusted operating profit 32,505 29,431
Add back:
Depreciation of property, plant and
equipment 2,559 2,536
Amortisation of development costs,
software and patents 329 148
----------------------------------------------- ------- -------
Adjusted EBITDA 35,393 32,115
----------------------------------------------- ------- -------
For definitions of terms referred to above see note 20, Glossary
of terms.
10. Income tax
(a) Income tax recognised in profit for the year
2016 2015
GBP000 GBP000
-------------------------------------------- ------- -------
Current income tax
Current UK income tax expense 4,588 4,451
Current foreign income tax expense 1,592 1,178
Tax charge/(credit) relating to the
prior year 73 (100)
-------------------------------------------- ------- -------
Total current tax 6,253 5,529
-------------------------------------------- ------- -------
Deferred tax
Origination and reversal of temporary
differences (1,876) (2,002)
Effect of changes in the tax rate (1,105) 26
Tax (credit)/charge relating to prior
years (515) 138
-------------------------------------------- ------- -------
Total deferred tax (3,496) (1,838)
-------------------------------------------- ------- -------
Net tax charge reported in the consolidated
statement of comprehensive income 2,757 3,691
-------------------------------------------- ------- -------
(b) Income tax recognised in equity for the year
2016 2015
GBP000 GBP000
Increase in deferred tax asset
on share based payments (37) -
------------------------------- -------- --------
Net tax credit reported in
equity (37) -
------------------------------- -------- --------
(c) Reconciliation of total tax
2016 2015
GBP000 GBP000
-------------------------------------------- ------- -------
Profit before tax 18,364 15,526
-------------------------------------------- ------- -------
Profit before tax multiplied by the
standard rate of corporation tax in
the UK of 20.0% (2015: 20.67%) 3,673 3,209
Adjustment in respect of previous
years (442) 38
Expenses not deductible for tax purposes 556 401
Effect of changes in the tax rate
(see explanation below) (1,105) 26
Non-taxable income (39) (38)
Higher overseas tax rate 114 55
-------------------------------------------- ------- -------
Net tax charge reported in the consolidated
statement of comprehensive income 2,757 3,691
-------------------------------------------- ------- -------
The Finance Act (No.2) 2015 was enacted on 18 November 2015 and
introduced a reduction in the headline rate of corporation tax to
19% and 18% to apply from 1 April 2017 and 1 April 2020.The
implications of the rate change are incorporated within the
financial statements, leading to a credit of GBP1,105,000 to the
tax charge. A further reduction in the headline rate to 17% to
apply from 1 April 2020 was included in the Finance Bill 2016. As
the Finance Bill 2016 had not been enacted at 31 July 2016, the
impact of this rate change has not been included in these financial
statements.
(d) Unrecognised deferred tax assets
At 31 July 2016, the Group had not recognised a deferred tax
asset in respect of gross tax losses of GBP5,195,000 relating to
management expenses (2015: nil) and capital losses of GBP3,975,000
arising in UK subsidiaries and gross tax losses of GBP264,000
arising in overseas entities as there is insufficient evidence that
the losses will be utilised. These losses are available to be
carried forward indefinitely.
At 31 July 2016, the Group had no deferred tax liability (2015:
nil) to recognise for taxes that would be payable on the remittance
of certain of the Group's overseas subsidiaries' unremitted
earnings. Deferred tax liabilities have not been recognised as the
Group has determined that there are no undistributed profits in
overseas subsidiaries where an additional tax charge would arise on
distribution.
(e) Deferred tax balances
Deferred tax assets and liabilities arise from the
following:
Credited/
1 August (charged) Credited Translation On 31 July
2015 to income to equity difference Acquisition 2016
2016 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- -------- ---------- ---------- ----------- ------------ --------
Temporary differences:
Depreciation in
advance of capital
allowances (676) 444 - (39) (94) (365)
Fair value movements
of derivative financial
instruments 45 (153) - - - (108)
Customer base,
trademark and patent (18,276) 3,524 - (601) (2,805) (18,158)
Losses 536 (133) - 118 351 872
Untaxed reserves (468) 25 - 45 - (398)
Historical fair
value adjustments - - 1,526 - (1,526) -
Other temporary
differences (40) (211) 37 6 178 (30)
------------------------- -------- ---------- ---------- ----------- ------------ --------
(18,879) 3,496 1,563 (471) (3,896) (18,187)
------------------------- -------- ---------- ---------- ----------- ------------ --------
Deferred tax asset 394 61 - (11) 6 450
Deferred tax liability (19,273) 3,435 1,563 (460) (3,902) (18,637)
------------------------- -------- ---------- ---------- ----------- ------------ --------
(18,879) 3,496 1,563 (471) (3,896) (18,187)
------------------------- -------- ---------- ---------- ----------- ------------ --------
10. Income taxes (continued)
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)
---------------------------- -------- ---------- ----------- ------------ --------
2016 2015
Deferred tax asset GBP000 GBP000
------------------- ------- -------
Non-current 450 394
------------------- ------- -------
2016 2015
Deferred tax liability GBP000 GBP000
----------------------- ------- -------
Current 2,395 -
Non-current 16,242 19,273
----------------------- ------- -------
18,637 19,273
----------------------- ------- -------
11. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit
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 2016
and 2015.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
2016 2015
Year ended 31 July GBP000 GBP000
--------------------------------------- ----------- -----------
Profit attributable to ordinary equity
holders 15,607 11,835
--------------------------------------- ----------- -----------
Number Number
--------------------------------------- ----------- -----------
Weighted average number of ordinary
shares for basic earnings per share
and diluted earnings per share 199,627,253 200,000,000
--------------------------------------- ----------- -----------
Earnings per share:
Basic and diluted 7.8p 5.9p
--------------------------------------- ----------- -----------
2016 2015
Year ended 31 July GBP000 GBP000
----------------------------------------- ----------- -----------
Adjusted profit attributable to ordinary
equity holders 25,075 21,968
----------------------------------------- ----------- -----------
Number Number
----------------------------------------- ----------- -----------
Weighted average number of ordinary
shares for adjusted basic earnings
per share and adjusted diluted earnings
per share 199,627,253 200,000,000
----------------------------------------- ----------- -----------
Adjusted earnings per share:
Basic and diluted 12.6p 11.0p
----------------------------------------- ----------- -----------
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 2014 50,127
Adjustment to goodwill relating to inVENTer
and its subsidiaries 473
On acquisition of Brüggemann Energiekonzepte
GmbH 1,395
Net foreign currency exchange differences (270)
-------------------------------------------------- ------
At 31 July 2015 51,725
-------------------------------------------------- ------
Fair value deferred tax adjustment relating
to prior year acquisitions 1,526
On acquisition of Ventilair Group International
BVBA and its subsidiaries 5,426
On acquisition of Energy Technique Plc
and its subsidiaries 3,859
On acquisition of Weland Luftbehandling
AB 12
On acquisition of NVA Services Limited
and its subsidiaries 3,415
Net foreign currency exchange differences 2,265
-------------------------------------------------- ------
At 31 July 2016 68,228
-------------------------------------------------- ------
13. Intangible assets - other
Development Software Customer
costs costs base Trademarks Patents Other Total
2016 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- ----------- -------- -------- ---------- ------- ------- --------
Cost
At 1 August
2015 1,645 4,325 97,844 37,260 479 - 141,553
Additions 522 1,104 - - - - 1,626
On acquisitions - 114 9,561 2,145 - 300 12,120
Net foreign
currency exchange
differences 65 44 3,568 1,076 94 - 4,847
------------------- ----------- -------- -------- ---------- ------- ------- --------
At 31 July
2016 2,232 5,587 110,973 40,481 573 300 160,146
------------------- ----------- -------- -------- ---------- ------- ------- --------
Amortisation
At 1 August
2015 65 1,669 33,734 5,118 16 - 40,602
Charge for
the year 95 207 10,812 1,668 27 178 12,987
Net foreign
currency exchange
differences 5 4 1,034 144 9 - 1,196
------------------- ----------- -------- -------- ---------- ------- ------- --------
At 31 July
2016 165 1,880 45,580 6,930 52 178 54,785
------------------- ----------- -------- -------- ---------- ------- ------- --------
Net book value
At 31 July
2016 2,067 3,707 65,393 33,551 521 122 105,361
------------------- ----------- -------- -------- ---------- ------- ------- --------
Included in software costs are assets under construction of
GBP86,000 (2015: GBP2,441,000), which are not amortised. Included
in development costs are assets under construction of GBP1,514,000
(2015: GBP1,395,000), which are not amortised.
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 - 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
------------------- ----------- -------- -------- --------- ------- -------
The remaining amortisation periods for acquired intangible
assets at 31 July 2016 are as follows:
Customer
base Trademark Patent
------------------------------- -------- --------- --------
Volution Holdings Limited and
its subsidiaries 6 years 21 years -
Fresh AB and its subsidiaries 3 years 16 years -
PAX AB and PAX Norge AS 5 years 17 years -
inVENTer GmbH 7 years 18 years 18 years
Brüggemann Energiekonzepte
GmbH 4 years - -
Ventilair Group International
BVBA and its subsidiaries 7 years 9 years -
Energy Technique Plc and its
subsidiaries 8 years 20 years -
Weland Luftbehandling AB 4 years - -
NVA Services Limited and its
subsidiaries 10 years 15 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.
During the year the Group has reviewed its cash generating
units. The previously identified cash generating units, used for
the impairment review of tangible and intangible assets during the
year ended 31 July 2015 were updated as a result of the changes to
the group (see note 15) during the year ended 31 July 2016.
UK OEM
Ventilation (Torin-Sifan) Nordics Germany Benelux Diffusion
31 July 2016 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------ -------------- ------- ------- ------- ---------
Carrying value
of goodwill 45,352 5,101 2,887 4,463 6,566 3,859
CGU value in
use headroom* 140,141 31,995 52,182 12,144 2,556 7,046
Applying the same CGU's to the 31 July 2015 goodwill gives the
following headroom.
UK OEM
Ventilation (Torin-Sifan) Nordics Germany Benelux Diffusion
31 July 2015 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------ -------------- ------- ------- ------- ---------
Carrying value
of goodwill 40,672 4,996 2,303 3,754 N/A N/A
CGU value in
use headroom* 154,744 18,823 36,843 18,393 N/A N/A
The table below was disclosed in the 31 July 2015 consolidated
financial statements using the previously identified CGU's.
Residential Residential UK OEM Nordics Germany
31 July RMI New Build Commercial Export (Torin-Sifan) Residential Residential
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
*Headroom is calculated by comparing the VIU of a CGU to the
carrying amount of CGU asset, which 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
performed using a value in use calculation. A discounted cash flow
(DCF) model was used, taking a period of three years, which has
been established using pre-tax discount rates of 11.7% to 14.8%
over that period. In all CGU's it was concluded that the carrying
amount was in excess of the value in use and all CGU's 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 specific
to each CGU are assumed in all markets based on historic data.
-- Growth in the forecast period - specific growth rates have
been used for each of the CGU's for the 5 year forecast period
based on historic growth rates and market expectations.
-- Discount rates - rates reflect the current market assessment
of the risks specific to each operation. The pre-tax discount rate
ranged from 11.7% to 14.8%.
-- 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 2016
Ventilair Group International BVBA
On 5 August 2015, Volution Ventilation Group Limited acquired
the entire issued share capital of Ventilair Group International
BVBA. The transaction was funded from the Group's existing
revolving credit facility. The Group acquired Ventilair Group
International as it offers a channel to sell existing ventilation
products in a new region.
Total consideration for the transaction was cash consideration
of EUR14,312,000 (GBP9,960,000) and contingent consideration with a
fair value of EUR48,000 (GBP34,000).
Transaction costs associated with the acquisition in the period
ended 31 July 2016 were GBP85,000 (2015: GBP559,000) and have been
expensed.
The fair value of the net assets acquired is set out below:
Book value Fair value adjustments Fair value
GBP000 GBP000 GBP000
Intangible assets 114 4,874 4,988
Deferred tax - (1,141) (1,141)
Property, plant and equipment 339 (9) 330
Inventory 1,407 178 1,585
Trade and other receivables 2,574 (369) 2,205
Trade and other payables (3,583) (86) (3,669)
Cash and cash equivalents 270 - 270
-------------------------------- ---------- ---------------------- ----------
Total identifiable net assets 1,121 3,447 4,568
-------------------------------- ---------- ---------------------- ----------
Goodwill on acquisition 5,426
-------------------------------- ---------- ---------------------- ----------
9,994
-------------------------------- ---------- ---------------------- ----------
Discharged by:
Consideration satisfied in cash 9,960
Contingent consideration 34
-------------------------------- ---------- ---------------------- ----------
Goodwill of GBP5,426,000 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.
The fair value of the acquired tradename and customer base was
identified and included in intangible assets, the deferred tax on
these assets has been recognised separately.
The gross amount of trade and other receivables is GBP2,574,000.
The amounts for trade and other receivables not expected to be
collected are GBP369,000.
Ventilair Group International and its subsidiaries generated
revenue of GBP12,737,000 and generated a profit before tax of
GBP962,000 in the period from acquisition to 31 July 2016 that is
included in the consolidated statement of comprehensive income for
this reporting period.
If the combination had taken place as at 1 August 2015, the
Group's revenue would have been GBP154,464,000 and the profit
before tax would have been GBP18,364,000.
Weland Luftbehandling AB
On 1 December 2015, Volution Holdings Sweden AB acquired the
entire issued share capital of Weland Luftbehandling AB. The
transaction was funded from the Group's existing revolving credit
facility. The Group acquired Weland Luftbehandling AB because it
provided additional manufacturing capabilities to the current
Nordics group. The company changed its name on 29 December 2015 to
Welair AB.
Total consideration for the transaction was cash consideration
of SEK 7,808,000 (GBP597,000).
Transaction costs associated with the acquisition in the period
ended 31 July 2016 were GBP22,000 and have been expensed.
The provisional fair value of the net assets acquired is set out
below:
Fair Provisional
Book value fair
value adjustments value
GBP000 GBP000 GBP000
Intangible assets - 156 156
Deferred tax - 47 47
Property, plant and equipment 168 - 168
Inventory 412 (149) 263
Trade and other receivables 235 (1) 234
Trade and other payables (227) (65) (292)
Cash and cash equivalents 9 - 9
------------------------------ -------- ------------ -----------
Total identifiable net assets 597 (12) 585
------------------------------ -------- ------------ -----------
Goodwill on acquisition 12
------------------------------ -------- ------------ -----------
597
------------------------------ -------- ------------ -----------
Discharged by:
Consideration satisfied in
cash 597
------------------------------ -------- ------------ -----------
The fair value of the acquired customer base was identified and
included in intangible assets, the deferred tax on these assets has
been recognised separately.
Goodwill of GBP12,000 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.
Welair AB generated revenue of GBP944,000 and generated a loss
before tax of GBP65,000 in the period from acquisition to 31 July
2016 that is included in the consolidated statement of
comprehensive income for this reporting period.
If the combination had taken place as at 1 August 2015, the
Group's revenue would have been GBP154,997,000 and the profit
before tax would have been GBP18,368,000.
Energy Technique plc
On 21 December 2015, the group acquired the entire issued share
capital of Energy Technique plc ("ET"). The transaction was funded
from the Group's existing revolving credit facility. The Group
acquired ET because there is a strong commercial and cultural fit
between ET and the existing group in terms of their strategies,
products and service offerings. The acquisition is in line with the
strategy to continue to acquire and integrate businesses with
well-established brands in the HVAC and ventilation market,
operating in markets underpinned by favourable structural dynamics
and with an emphasis on heat recovery systems.
Total consideration for the transaction was GBP9,396,000.
Transaction costs associated with the acquisition in the period
ended 31 July 2016 were GBP603,000 and have been expensed.
The provisional fair value of the net assets acquired is set out
below:
Fair Provisional
value fair
Book value adjustments value
GBP000 GBP000 GBP000
Intangible assets 9 4,221 4,230
Deferred tax (23) (774) (797)
Property, plant and equipment 409 112 521
Inventory 816 (49) 767
Trade and other receivables 1,880 - 1,880
Trade and other payables (2,154) (120) (2,274)
Cash and cash equivalents 1,210 - 1,210
------------------------------ -------------- ------------ -----------
Total identifiable net assets 2,147 3,390 5,537
------------------------------ -------------- ------------ -----------
Goodwill on acquisition 3,859
------------------------------ -------------- ------------ -----------
9,396
------------------------------ -------------- ------------ -----------
Discharged by:
Consideration satisfied in
cash 9,396
------------------------------ -------------- ------------ -----------
The fair value of the acquired customer base, trademark,
favourable contract agreements and committed order book were
identified and included in intangible assets, the deferred tax on
these assets has been recognised separately.
Goodwill of GBP3,859,000 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.
The gross amount of trade and other receivables is GBP1,880,000.
It is expected that the full contractual amounts for trade and
other receivables can be collected.
ET generated revenue of GBP7,064,000 and generated a profit
before tax of GBP790,000 in the period from acquisition to 31 July
2016 that is included in the consolidated statement of
comprehensive income for this reporting period.
If the combination had taken place as at 1 August 2015, the
Group's revenue would have been GBP158,911,000 and the profit
before tax would have been GBP17,868,000.
NVA Services Limited
On 10 May 2016, Volution Ventilation Group Limited acquired the
entire issued share capital of NVA services Limited ("NVA"). The
transaction was funded from the Group's existing revolving credit
facility. The Group acquired NVA because there is a strong
commercial and cultural fit between NVA and the existing group in
terms of their strategies, products and service offerings. The
acquisition is in line with the strategy to continue to acquire and
integrate businesses with well-established brands in the
ventilation market.
Total consideration for the transaction was GBP6,697,000.
Transaction costs associated with the acquisition in the period
ended 31 July 2016 were GBP167,000 and have been expensed.
The provisional fair value of the net assets acquired is set out
below:
Fair Provisional
Book value fair
value adjustments value
GBP000 GBP000 GBP000
Intangible assets 286 2,460 2,746
Deferred tax - (479) (479)
Property, plant and equipment 913 - 913
Inventory 1,181 (189) 992
Trade and other receivables 2,066 (55) 2,011
Trade and other payables (3,016) (63) (3,079)
Cash and cash equivalents 178 - 178
-------------------------------- -------- ------------ -------------
Total identifiable net assets 1,608 1,674 3,282
-------------------------------- -------- ------------ -------------
Goodwill on acquisition 3,415
-------------------------------- -------- ------------ -------------
6,697
-------------------------------- -------- ------------ -------------
Discharged by:
Consideration satisfied in cash 6,697
-------------------------------- -------- ------------ -------------
The fair value of the acquired customer base, trademark and
committed order book were identified and included in intangible
assets, the deferred tax on these assets has been recognised
separately.
Goodwill of GBP3,415,000 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.
The gross amount of trade and other receivables is GBP2,066,000.
The amount for trade and other receivables not expected to be
collected is GBP55,000.
NVA generated revenue of GBP2,352,000 and generated a profit
before tax of GBP119,000 in the period from acquisition to 31 July
2016 that is included in the consolidated statement of
comprehensive income for this reporting period.
If the combination had taken place as at 1 August 2015, the
Group's revenue would have been GBP161,936,000 and the profit
before tax would have been GBP18,583,000.
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).
The fair value of the net assets acquired is set out below:
Fair
value
Book 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, which are 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:
2016 2015
GBP000 GBP000
-------------------------------------- ------- -------
Ventilair Group International BVBA
Cash consideration 9,960 -
Less: cash acquired with the business (270) -
Weland Luftbehandling AB
Cash consideration 597 -
Less: cash acquired with the business (9)
Energy Technique plc
Cash consideration 9,396 -
Less: cash acquired with the business (1,210) -
NVA Services Limited
Cash consideration 6,697 -
Less: cash acquired with the business (178) -
Brüggemann Energiekonzepte GmbH
Cash consideration - 1,649
Less: cash acquired with the business - (128)
24,983 1,521
-------------------------------------- ------- -------
16. Interest-bearing loans and borrowings
2016 2015
-------------------- --------------------
Current Non-current Current Non-current
GBP000 GBP000 GBP000 GBP000
-------------------------- ------- ----------- ------- -----------
Unsecured - at amortised
cost
Revolving credit facility - 51,869 - 32,733
Cost of arranging bank
loan - (634) - (866)
- 51,235 - 31,867
-------------------------- ------- ----------- ------- -----------
Interest-bearing borrowings at 31 July 2015 and 2016 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 facility.
Revolving credit facility - at 31 July 2016
Amount
outstanding Termination Repayment
Currency GBP000 dates frequency Rate %
--------------- ------------ ----------- ----------- ---------------
30 April
GBP 14,000 2019 One payment Libor + 1.25%
--------------- ------------ ----------- ----------- ---------------
30 April
Euro 21,973 2019 One payment Euribor + 1.25%
--------------- ------------ ----------- ----------- ---------------
30 April
Swedish Kroner 15,896 2019 One payment Stibor + 1.25%
--------------- ------------ ----------- ----------- ---------------
Total 51,869
--------------- ------------ ----------- ----------- ---------------
Revolving credit facility - at 31 July 2015
Amount
outstanding Termination Repayment
Currency GBP000 dates frequency Rate %
--------------- ------------ ----------- ----------- ---------------
30 April
GBP 11,000 2019 One payment Libor + 1.25%
--------------- ------------ ----------- ----------- ---------------
30 April
Euro 8,283 2019 One payment Euribor + 1.25%
--------------- ------------ ----------- ----------- ---------------
30 April
Swedish Kroner 13,450 2019 One payment Stibor + 1.25%
--------------- ------------ ----------- ----------- ---------------
Total 32,733
--------------- ------------ ----------- ----------- ---------------
The interest rate on borrowings includes a margin that 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
had 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 was 1.00%, at the half year the consolidated leverage level
increased to between 1.0:1 and 1.5:1 and therefore the margin for
the second period of the year ended 31 July 2016 was 1.25%, this
rate will continue into the first period of the year ended 31 July
2017.
At 31 July 2016 the Group had GBP38,131,000 (2015:
GBP57,267,000) of its multicurrency revolving credit facility
unutilised.
17. Dividends paid and proposed
2016 2015
GBP000 GBP000
-------------------------------------- ------- -------
Cash dividends on ordinary shares
declared and paid
Interim dividend for 2016: 1.20 pence
per share (2015: 1.05 pence) 2,394 2,100
-------------------------------------- ------- -------
Proposed dividends on ordinary shares
Final dividend for 2016: 2.60 pence
per share (2015: 2.25 pence) 5,176 4,500
-------------------------------------- ------- -------
The interim dividend payment of GBP2,394,000 is included in the
consolidated cash flow statement.
The proposed final dividend on ordinary shares is subject to
approval at the Annual General Meeting and is not recognised as a
liability at 31 July 2016.
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 is disclosed
below.
No related party loan note balances exist at 31 July 2016 or 31
July 2015.
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 GBP295,000 (2015: GBP295,000)
from Peter Hill, Tony Reading, Paul Hollingworth and Adrian Barden
for their services as Non-Executive Directors.
-- Non-Executive Director Paul Hollingworth is also a
non-executive director of Electrocomponents plc. During the year,
the Group sold goods to Electrocomponents plc amounting to
GBP223,000 (2015: GBP253,000). At the year end, amounts owing by
Electrocomponents plc were GBP12,000 (2015: GBP44,000). During the
year the Group purchased goods from Electrocomponents plc amounting
to GBP85,000 (2015: GBP79,000). At the year end, amounts owed to
Electrocomponents plc were GBP16,000 (2015: GBP15,000).
Compensation of key management personnel
2016 2015
GBP000 GBP000
----------------------------- ------- -------
Short-term employee benefits 2,292 2,134
----------------------------- ------- -------
Key management personnel is defined as the CEO, CFO and the nine
individuals who report directly to the CEO.
19. Events after the reporting period
There have been no material events between 31 July 2016 and the
date of authorisation of the consolidated financial statements that
would require adjustments of the consolidated financial statements
or disclosure.
20. Glossary of terms
Net debt - interest-bearing loans and borrowings less cash and
cash equivalents.
Adjusted operating cash flow - adjusted EBITDA plus or minus
movements in operating working capital, less net investments in
property, plant and equipment and intangible assets (including cash
held in escrow).
Adjusted profit before tax - earnings before tax, exceptional
items, amortisation of financing costs, breakage costs on interest
rate swaps, net gains or losses on financial instruments at fair
value and amortisation and impairment of intangible assets
associated with the customer base, trademarks and patents.
Adjusted operating profit - earnings before tax, exceptional
items, other non-recurring items not meeting the definition of
exceptional, amortisation and impairment of intangible assets
associated with the customer base, trademarks and patents and net
finance costs.
Adjusted EBITDA - earnings before tax, exceptional items, other
non-recurring items not meeting the definition of exceptional, net
finance costs, depreciation, amortisation and impairment.
Change constant currency - to calculate the change at constant
currency we have converted the income statement of our foreign
operating companies for the year ended 31 July 2016 at the average
exchange rate for the year ended 31 July 2015. In addition we have
converted the UK operating companies' sales and purchase
transactions in the year ended 31 July 2016, which were denominated
in foreign currencies, at the average exchange rates for the year
ended 31 July 2015.
Adjusted basic and diluted EPS - calculated by dividing the
adjusted 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 adjusted net profit/(loss) 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
2016 and 2015.
Cash conversion - calculated by dividing adjusted operating cash
flow by adjusted EBITDA less depreciation.
Other non-recurring items not meeting the definition of
exceptional - These are items of expense incurred by the group
which are non-recurring however do not meet the IFRS definition of
exceptional items, they have been adjusted for to give a fairer
representation of the underlying performance of the business.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR URVBRNWARAAA
(END) Dow Jones Newswires
October 11, 2016 02:00 ET (06:00 GMT)
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