FAN Volution Group Plc

Wednesday 24 July 2024

Volution Group plc

Pre-close Trading Update for the Financial Year ending 31 July 2024

Adjusted earnings slightly ahead underpinned by strong performance in the UK

Volution Group plc ("Volution" or "the Group" or "the Company", LSE: FAN), a leading international designer and manufacturer of energy efficient indoor air quality solutions, today is pleased to announce a scheduled Pre-close Trading Update for the financial year ending 31 July 2024 ("FY24").

Further progress; expect adjusted EPS to be slightly ahead of current market forecasts

Volution has continued to make good progress in the year ending 31 July 2024 and the Board expects adjusted earnings per share to be slightly ahead of current market forecasts (see note 1).

Organic growth in H2 ahead of H1; with continued strength in UK residential

The Board is expecting to deliver Group total revenue growth on a constant currency (cc) basis for FY24 of over 7%, within which organic growth (cc) is expected to be slightly over 1% (H1 2024: 0.9%) despite a challenging macroeconomic backdrop characterised by subdued levels of new construction activity, high interest rates and weak consumer confidence.  Within this:

·    UK residential revenue has grown strongly. Our refurbishment and improvement market, most notably public RMI, continues to benefit from strong demand due to the ongoing heightened awareness of the health risks associated with mould and condensation. New build systems revenue has been underpinned by key account wins and the benefit of regulations driving housebuilders towards adopting more sophisticated low carbon and energy efficient ventilation solutions.  By contrast it has been a weak second half in UK commercial, and OEM demand also remains weak albeit with year-on-year revenue declines bottoming out in the second half as we start to lap softer comparatives.

·    Continental Europe growth has been driven by the acquisitions of VMI in France and I-Vent in Slovenia late in FY23, with organic revenue expected to be broadly flat at constant currency. Performance in the Nordics has continued broadly as seen in the first half of the year, with resilient refurbishment revenue contrasting with difficult conditions in our new build oriented businesses in Denmark and Finland.  ClimaRad has performed strongly in the year, whilst in Germany our additional focus on refurbishment has led to an improved second half.

·    Australasia is expected to deliver small organic revenue growth at constant currency, supplemented by inorganic growth from the acquisition of DVS in New Zealand early in FY24.  Underlying performance in New Zealand, which has been facing a challenging market environment, has been weak. In contrast, Australia has had another strong year where we continue to gain share. 

Operational excellence growing our strong Group operating margins

With input cost inflationary pressures (other than labour and some overhead areas such as facility costs) and pricing returning to more "normal" conditions in the year, we have focused on the delivery of initiatives such as insourcing, value engineering and factory efficiency to continue to underpin and improve the Group's strong operating margins.  The three acquisitions completed last year have also bedded in well, with new product introduction and product cost initiatives already actioned in all three.  We expect to improve Group adjusted operating margins to around 22% for the year (2023: 21.3%).

Strong cash generation, leverage (note 2) expected to be c.0.5x, significant headroom for M&A

Operating cash conversion (note 2) is expected to be above our targeted level of 90%, assisted by strong management of inventory and good working capital management across the Group, and we therefore expect leverage at 31 July 2024 to be c.0.5x (note 3).  Acquisitions are a key part of our long-term strategy and value creation, and we go into FY25 with ample headroom for further earnings accretive acquisitions.

Ronnie George, Volution Chief Executive Officer, commented:

"In the year we celebrated 10 years as a public company, we were very pleased to extend our value creation track record and make further strategic and financial progress against what are widely recognised as challenging end markets. Our refurbishment and improvement activities, representing c.70% of the Group's activities, have continued to show resilience and our new build activities, despite lower levels of construction activity, have been underpinned by regulatory drivers and the requirement for more sophisticated ventilation solutions in new lower carbon buildings.

Volution's strong focus on operational excellence has underpinned operating profit margins, and our close focus on inventory has helped us to deliver strong operating cash flow.  Our three more recent acquisitions have been successfully integrated and our pipeline of acquisition opportunities remains encouraging.

I am hugely appreciative of our near 2,000 colleagues successfully delivering another year of "Healthy air, sustainably" and we look forward to another year of progress in FY25."

Full year results

The full year results for the year ending 31 July 2024 will be announced on Thursday, 10 October 2024.

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For further information: 

Note:

1.     Current market forecasts for the year ending 31 July 2024 (taken from Factset) are:

·    Adjusted earnings per share in the range of 26.7p to 27.1p with a consensus of 26.9p

2.     Cash conversion defined as: Adjusted operating cash flow / (Adjusted operating profit + amortisation). 

3.     Leverage defined as adjusted EBITDA divided by net debt (excl. IFRS16 liabilities)

Volution Group plc Legal Entity Identifier: 213800EPT84EQCDHO768.

Note to Editors:

Volution Group plc (LSE: FAN) is a leading international designer and manufacturer of energy efficient indoor air quality solutions. Volution Group comprises 22 key brands across three regions:

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

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

Australasia: Simx, Ventair, Manrose, DVS.

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

Cautionary statement regarding forward-looking statements

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