REG - Volution Group plc - Half Year Results
15/03/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240315:nRSO9534Ga&default-theme=true
RNS Number : 9534G Volution Group plc 15 March 2024
Friday 15 March 2024
VOLUTION GROUP PLC
Interim results for the six months ended 31 January 2024
Strong earnings growth, provides confidence of further progress in the second
half of the year
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 announces its unaudited interim financial results for
the six months ended 31 January 2024.
RESULTS SUMMARY
6 months to 6 months to
31 January 2024 31 January 2023 Change
Revenue (£m) 172.5 162.3 6.3%
Adjusted operating profit (£m) 1 (#_ftn1) 38.6 34.2 12.9%
Adjusted operating profit margin (%)(1) 22.4% 21.1% 1.3pp
Adjusted profit before tax (£m)(1) 35.0 31.8 9.9%
Adjusted basic EPS (pence)(1) 13.7 12.4 10.5%
Adjusted operating cash flow (£m)(1) 38.8 30.6 26.9%
Statutory operating profit (£m) 33.7 27.8 21.1%
Statutory profit before tax (£m) 29.0 22.6 28.4%
Statutory basic EPS (pence) 11.1 8.6 29.1%
Interim dividend per share (p) 2.8 2.5 12.0%
Return on Invested Capital (ROIC)(1) 27.7% 27.6% 0.1pp
Adjusted operating cash flow conversion(1) 98% 88% 10pp
FINANCIAL HIGHLIGHTS
· Group revenue up 6.3%; +0.9% organic, +7.8% inorganic and -2.4%
impact from foreign exchange
· Strong performance from UK residential (+19.4%) and acquisitions
offset weaker results in UK OEM and Continental Europe
· Adjusted operating profit of £38.6m, up 12.9% on the prior year,
statutory profit before tax up 28.4% to £29.0 million (H1 2023: £22.6
million)
· Further expansion of adjusted operating margin to 22.4% (H1 2023:
21.1%), driven by strong pricing discipline and operational excellence
initiatives
· Adjusted operating cash flow up 26.9% on prior year to £38.8
million (H1 2023: £30.6 million), cash conversion of 98% (H1 2023: 88%)
· Balance sheet remains strong (leverage ex-leases at 0.7x),
providing significant headroom for earnings accretive acquisitions
· Interim dividend up 12.0% to 2.8 pence per share (H1 2023: 2.5
pence) demonstrating the Board's confidence in the Group's prospects
OPERATIONAL HIGHLIGHTS
· Regulatory and consumer tailwinds offsetting weakness in new build
activity
· Continued excellent levels of customer service whilst optimising
component inventory levels
· Enhanced product mix, product cost reduction initiatives and strong
factory efficiencies enhancing operating profit margin
· Significant new product launches in the first six months of the
year, primarily focused on heat recovery solutions
HEALTHY AIR, SUSTAINABLY
· Continued progress against our key sustainability targets:
o 77.0% of plastic used in own manufacturing facilities from recycled
sources vs. target of 90% by end FY25 (H1 2023: 76.4%)
o 70.5% of revenue from low-carbon, energy saving products vs. target of 75%
by end FY26 (H1 2023: 69.4%)
· Good progress on health and safety improvements and awareness, with
reportable accident frequency rate down to 0.21 (FY 2023: 0.30)
· Completion of the first Group wide employee engagement survey, with
positive results and valuable insights for further improvements
Commenting on the Group's performance, Ronnie George, Chief Executive Officer,
said:
"We made strong progress in the first half of the year, against a backdrop of
higher interest rates and weaker new build demand. UK residential was once
again the standout performer, with tighter regulation and strong social
housing demand continuing to drive activity levels. Our greater exposure to
refurbishment supported organic revenue growth in the period, and inorganic
growth was strong due to a good performance from our recent acquisitions.
Continued strong execution of our operational excellence model enabled us to
expand Group adjusted operating margins and grow earnings in all three
geographic regions. The excellent operating cash generation further
strengthened our balance sheet and positions us favourably to continue to
invest in future growth, both organic and through acquisitions.
"Our strong performance in the first half, together with the tailwind from our
three recent acquisitions, gives the Board confidence in delivering adjusted
earnings per share for the current financial year slightly ahead of
consensus(1).
"With our diversified geographic and end-market positioning, and agile
business model, along with favourable regulatory trends and the increasing
importance of indoor air quality, Volution remains well positioned to continue
growing shareholder value into the future."
Note:
1. Bloomberg consensus adjusted earnings per share forecast for the year
ending 31 July 2024 is 26.1p.
-Ends-
For further information:
Enquiries:
Volution Group plc
Ronnie George, Chief Executive Officer +44 (0) 1293 441501
Andy O'Brien, Chief Financial Officer +44 (0) 1293 441536
FTI Consulting +44 (0) 203 727 1340
Richard Mountain
Susanne Yule
A meeting for analysts will be held at 09:30am GMT today, Friday 15 March
2024, at the offices of Berenberg, 60 Threadneedle Street, London EC2R 8HP.
Please contact FTI_Volution@fticonsulting.com to register to attend or for
instructions on how to connect to the meeting via conference facility.
A copy of this announcement and the presentation given to analysts will be
available on our website www.volutiongroupplc.com
(http://www.volutiongroupplc.com) on Friday 15 March 2024.
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, inVENTer,
Ventilair, ClimaRad, rtek, ERI, VMI, I-Vent.
Australasia: Simx, Ventair, Manrose, DVS.
For more information, please go to: www.volutiongroupplc.com
(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
We are delighted with the strong performance we have delivered in the first
half of the year. Despite a backdrop of high inflation, higher interest rates
and low levels of construction activity, we have delivered strong earnings
growth, with organic and inorganic progress. These results are, a testament to
our effective business model and loyal and committed colleagues who are
passionate about our purpose of delivering "Healthy Air, Sustainably".
The global macroeconomic environment remains uncertain, and whilst inflation
levels are starting to fall, we are trading in markets where general
confidence levels have remained quite low. Offsetting this we continue to see
further strengthening of regulatory and consumer tailwinds driving demand for
our ventilation products. Our greater exposure to refurbishment, which
accounted for around two-thirds of sales, has provided a more supportive
market backdrop in the period, with the opportunity for enhanced growth when
new build demand returns.
I am immensely proud to lead our organisation that has made great strides with
employee engagement and sustainability awareness in recent years. Our
increasingly embedded focus and behaviour around sustainability is borne out
by the progress we have made with our recycled plastics initiative and the
drive to increase the proportion of our revenue derived from low carbon
product solutions. Our first Group-wide employee engagement survey was carried
out in October 2023, and we will report the findings in detail in our annual
report for 2024. Our 1,886 colleagues are key to our success delivering great
customer service and support on a daily basis. I am deeply impressed by what
I've seen and heard during visits to our various brands.
In October 2023 we kicked off our fourth Group-wide management development
programme. A cohort of seventeen high potential leaders from across the global
business are participating in our internally managed programme. The focus of
this programme is based on our sustainability goals and the team are making
good progress with the schedule. With ambitious organic and inorganic growth
goals it is essential we have the talent inside the Group to maximise our
opportunities. I am delighted that we have successfully hired a new Managing
Director for our ClimaRad business in Netherlands, replacing the previous
owner and founder Peter Schabos. We are also close to completing our project
to further strengthen Group Technical Leadership as we look to further enhance
our capability and delivery around innovation and new product development.
With three important acquisitions completed in the calendar year 2023 we have
further extended our market reach and enriched our product portfolio. With
every acquisition, Volution benefits from greater scale in the ventilation
industry that helps us win market share against mostly smaller, local
competitors. Our industry is seeing marked changes, as both new and existing
buildings are required to de-carbonise. This is coupled with an
ever-increasing awareness of the importance of good indoor air quality for
health, the fabric of the building and its contents. Mould and condensation in
homes, exacerbated by people heating their properties to lower than usual
temperatures to reduce energy cost, is driving activity levels, a trend which
we expect to continue on a multiyear basis.
Our strong financial performance in the first half of the year was underpinned
by our focus on operational excellence. Having previously invested in greater
than usual levels of component inventory to support excellent customer
service, we are now optimising those levels, in some cases making meaningful
reductions whilst still maintaining service levels. The disruption to shipping
in the Red Sea has led to some additional logistics costs and minor delays in
receiving key components. However, we do not expect this to have a material
impact on our business.
Our organisational structure of decentralised local managing directors driving
local market revenues is supported by central technical and procurement
functions where we have driven many new value engineering and product cost
initiatives, further enhancing our gross margins. Our market leading local
brands have again supported a strong pricing discipline, and this coupled with
our operational excellence initiatives has enhanced Group adjusted operating
profit margin.
Results
Revenue grew by 6.3%, organic growth of 0.9% on a constant currency (cc)
basis, inorganic growth of 7.8% at cc with an impact of 2.4% from foreign
currency.
Our adjusted operating profit increased 12.9% to £38.6 million in H1 2024
from £34.2 million in the prior period. Statutory operating profit was £33.7
million (H1 2023: £27.8 million). At 22.4% (H1 2023: 21.1%) our adjusted
operating margin was in line with the highest levels since 2015.
Adjusted operating cash inflow increased to £38.8 million (H1 2023: £30.6
million) as inventory levels were optimised, giving a cash conversion rate of
98% (H1 2023: 88%).
In the first half of financial year 2024 we acquired DVS (Proven Systems Ltd),
in New Zealand, for an initial consideration of £8.5 million (NZ$17.7
million), net of cash acquired, with further contingent consideration of up to
NZ$9 million. Our pipeline of potential acquisition opportunities remains
healthy, and with our balance sheet strength and headroom (leverage ex leases
of 0.7x), we are optimistic of being able to add further earnings accretive
acquisitions to the Group.
Our OEM activities in the UK experienced weak revenues as indicated at the end
of FY23. Following consultation with the local team we have taken the decision
to consolidate the two facilities in Swindon into one of the existing sites.
This reorganisation regrettably resulted in forty-five redundancies and was
completed in the first half of the year at a cost of c. £400k. The site
consolidation exercise will be completed by the end of the financial year,
placing the OEM activities on an improved footing.
Focus on sustainability
We have further embedded our sustainability initiatives across the Group in
the first half of the year and can report our progress on the key metrics as
follows:-
· The proportion of our revenue from low carbon, energy saving products
increased to 70.5% versus our long-term target of 75% by end of FY26 (H1 2023:
69.4%). Within this our proportion of sales of heat recovery products remained
broadly flat at 30.7% (H1 2023: 32.2%), with declines in activity in Germany
and a reduced proportion of heat recovery sales in the UK (where our growth
was driven by refurbishment) partly offset by the acquisition of I-Vent.
· The proportion of recycled plastics used in our manufacturing
increased to 77.0% versus our long-term target of 90% by end of FY25 (H1 2023:
76.4%). Progress was slower in the first half of the year than we had hoped,
and it will be difficult to reach our 90% target for the end of 2025. However
further initiatives have been established, most notably in the Nordics, where
good progress was made towards the end of the first half of the year. This is
a hugely important area for us, and we will continue to dedicate the required
resources and focus to ensure we make continued progress.
· Keeping our colleagues safe remains our highest priority, and we are
pleased that our reportable accident frequency rate has decreased to 0.21 per
100,000 hours worked compared to 0.30 for the year ended 31 July 2023. Whilst
not being complacent, it seems that actions taken last year to enhance our
safety culture have had a positive impact and our aim remains that every one
of our colleagues goes home safe every day.
Regulatory Drivers and indoor air quality
In the first half of the year, we have seen new regulatory frameworks launched
in the UK in both new build and social housing. In new build, the Future Homes
Standard consultation was issued in December 2023. These standards are
designed to ensure that from 2025, new buildings will be net zero ready. This
means that no further work will be needed for new buildings to produce zero
carbon emissions as the electricity grid de-carbonises. This will drive
increases in the specification of continuous running, energy efficient
ventilation systems including heat recovery over lower cost intermittent
solutions. In addition, the UK Government is now set to roll out Awaab's Law
through a new amendment to the social housing bill. For the first time social
landlords will have strict time limits to fix damp and mould in any reported
properties which will continue to drive the uptake of our condensation control
solutions within the sector.
In December 2023, EU legislators reached an agreement on the recast of the
Energy Performance of Buildings Directive (EPBD). Although it still has to be
formally adopted, the new legislation has the potential to boost energy
efficient renovation in Europe for poorly performing buildings. As a key
supplier of decentralised heat recovery solutions, Volution is well placed to
support those renovations.
Interim dividend
The Board has declared an interim dividend of 2.8 pence per share, up 12.0%
(H1 2023: 2.5 pence), reflecting the strong first half performance and
demonstrating the Board's confidence in the Group's prospects. The interim
dividend will be paid on 7 May 2024 to shareholders on the register at the
close of business on 2 April 2024.
Outlook
Our strong performance in the first half, together with the tailwind from our
three recent acquisitions, gives the Board confidence in delivering adjusted
earnings per share for the current financial year slightly ahead of consensus.
With our diversified geographic and end-market positioning, and agile business
model, along with favourable regulatory trends and the increasing importance
of indoor air quality, Volution remains well positioned to continue growing
shareholder value into the future.
Ronnie George
Chief Executive Officer
14 March 2024
Regional Review
United Kingdom
Market sector revenue 6 months to 6 months to Growth Growth (cc)
31 Jan 2024 31 Jan 2023 % %
£m £m
UK
Residential 49.5 41.4 19.4 19.4
Commercial 15.2 14.3 6.5 6.5
Export 5.7 5.3 7.5 7.9
OEM 7.4 12.7 (41.2) (41.1)
Total UK Revenue 77.8 73.7 5.6 5.7
Adjusted operating profit 18.9 15.6 20.7
Adjusted operating profit margin (%) 24.3 21.2 3.1pp
Statutory operating profit 17.8 13.4 33.1
UK revenue grew by 5.6% (5.7% at constant currency (cc)) to £77.8 million
with adjusted operating profit at £18.9 million, an increase of £3.3 million
on the prior year. Adjusted operating profit margin increased to 24.3% (H1
2023: 21.2%), an increase of 3.1 percentage points, arising from good
procurement cost management, material input cost softening (plastics and
electronics) and strong levels of labour and factory efficiency.
Residential growth of 19.4% in the first half of the year was an outstanding
performance and more than offset the more difficult OEM end market.
The leadership changes made in the UK a couple of years ago, the move to
focusing on four discrete areas of the market and the increased focus that we
now have in tracking each of these areas has been a significant success. We
have also made further progress with simplifying the UK operational footprint
with the planned closure of our Westmead (OEM), manufacturing site which will
be consolidated into the existing Greenbridge (OEM) site, and the proposed
relocation of Soham based production to Dudley, both planned for H2 2024. This
simplification will result in overhead cost efficiency and reduced logistical
movements in servicing demand.
As reported last year we have embedded the principles of strong pricing
discipline, cost reduction and efficiency initiatives, and a growing mix shift
towards higher value, higher gross margin, low carbon, and innovative
solutions has been a continued key driver of performance. Whilst the
competitive environment in the UK from a customer service perspective has
normalised, we have gained market share in all areas of our residential
ventilation activities.
Revenue in our Residential sector was up 19.4% to £49.5 million (H1 2023:
£41.4 million). The detail of our key residential end markets is as follows.
Volution, through its Vent-Axia and Airtech brands is the leader in the
provision of ventilation products and solutions in the UK social housing
market. Social housing landlords are facing unparalleled disrepair claims in
their housing stock as a result of increasing regulation over the last five
years. Following the Homes (Fitness for Human Habitation) Act 2018, the
Housing Ombudsman's report on damp and mould in October 2021, and the Social
Housing (Regulation) Act 2023, demand for continuous run and decentralised
heat recovery ventilation solutions has increased dramatically and is set to
continue. We have positioned our products and solutions, whilst ensuring
unrivalled stock availability from our distribution partners, at the forefront
of this market need.
Private residential refurbishment is also growing with the same indoor air
quality (IAQ), mould and condensation concerns evident, and consumers are more
aware and mindful than ever of the negative impacts of poor IAQ. Through our
UK trade association membership, we have seen the substantial growth of
positive input ventilation (PIV) in the first half of the financial year with
our brands now the leading share of this growing market segment. We continue
to develop and launch additional ventilation product solutions to our
refurbishment ranges, with acute focus on the benefits of silence, energy
efficiency and heat recovery at the fore and commanding a premium over more
traditional solutions. Add to this market leading range a strong focus on
partnering with our distributors and we are confident that we are
outperforming in the UK refurbishment ventilation market.
We are particularly pleased with the revenue we have achieved in the
residential new build market, in a period where housing completions have
fallen sharply, our revenue was still improving which positions us well for
when new build market volumes recover. We have seen the much anticipated
up-swing towards continuous system ventilation away from more traditional
intermittent ventilation, with unit values per dwelling increasing. We
anticipated this move to "systems only" ventilation at the half year 2023 and
we expect to see further momentum in the period ahead. New account wins and an
increasing product value for each dwelling as housebuilders look to further
decarbonise new build construction, will further underpin our revenue stream
despite lower house construction activity.
UK Commercial market revenue progressed well, growing by 6.5% to £15.2
million (H1 2023: £14.3 million), albeit our market share in UK commercial is
considerably smaller than in residential. Revenue progress has been
underpinned by the launch of our new range of commercial heat recovery (Apex)
and an extension to the range of hybrid ventilation products under our
Breathing Buildings brand. These recent product launches are expected to gain
further traction in the second half of the year as we look to make market
share gains underpinned by these new product launches. A further strengthening
of the commercial sales leadership team is underway and we see a good
long-term opportunity to make market share gains in this area.
UK Export market revenue was £5.7 million, up 7.5% (7.9% at cc). UK exports
are principally to Eire where we are enjoying strong residential new build
activity and regulations that are supportive of mainly system and heat
recovery ventilation solutions.
OEM revenue was £7.4 million, a disappointing revenue decline of 41.2% (41.1%
at cc) continuing from the weak performance in the second half of FY23. With
supply chains normalised, lower demand for EC3 motorised impellors linked to
reduced new build construction activity and significant de-stocking from our
customers, this has been a very weak period for our OEM activities. We
embarked on an improvement plan in the latter part of FY23, including closing
one of our manufacturing facilities which will be consolidated into the other
Swindon site by the close of our financial year FY24. Initiatives to improve
the product gross margin, further capitalise on the growing internal demand
and the lower overhead costs in the business will return an improved
performance in the second half of the year. I am hugely grateful to the local
team in Swindon for their relentless focus on turning around the business
following a difficult calendar year 2023.
Continental Europe
Market sector revenue 6 months to 6 months to Growth Growth (cc)
31 Jan 2024 31 Jan 2023 % %
£m £m
Continental Europe
Nordics 25.4 26.6 (4.8) 0.5
Central Europe 43.1 37.7 14.4 15.1
Total Continental Europe revenue 68.5 64.3 6.5 9.0
Adjusted operating profit 16.6 15.4 7.4
Adjusted operating profit margin (%) 24.2 24.0 0.2pp
Statutory operating profit 13.6 12.1 12.6
Revenue in Continental Europe was £68.5 million, with growth of £4.2
million, an increase of 6.5% (9.0% at constant currency (cc)). Organic revenue
declined by 7.2% (4.7% at cc) and adjusted operating profit was £16.6
million, up from £15.4 million, in the same period in the prior year.
Adjusted operating margins were marginally up at 24.2% (H1 2023: 24.0%). With
two new acquisitions completed last financial year, the country mix has
changed, and we saw a big variation in the performance of our different
markets, with some areas growing organically in the period and Germany
declining.
Revenue in the Nordics was £25.4 million (H1 2023: £26.6 million), a
decrease of 4.8% (growth of 0.5% at cc). Our weighting towards refurbishment
markets provided some resilience to our revenue. The notable declines in the
first half of the year were in new build activity in Denmark and Finland, and
we also saw some de-stocking in the Swedish trade market. Aside from these
weaker areas we made good progress with our repair, maintenance, and
improvement (RMI) activities in Norway and Finland underpinned by strong
growth in our decentralised heat recovery ranges, starting from a small base
but continuing to gain good growth traction in the marketplace.
The indiscriminate de-stocking by distributors we have been experiencing is
now tailing off and order patterns are now more representative of end market
demand. Volution has strong market shares in RMI with Sweden being our leading
area for the Nordics closely followed by Norway.
We continued to make progress in Central Europe, delivering revenue of £43.1
million and growth of 14.4% (15.1% at cc), helped by the acquisition of VMI
and I-Vent. Organic revenue declined by 8.9% (8.4% at cc) almost solely
attributable to the difficult situation for residential new build activity in
Germany.
Our inVENTer brand in Germany, where the majority of our revenue is exposed to
new build, witnessed a sharp decline in revenue in the calendar year 2023. As
trailed in our full year results for FY23 we had expected this weakness to
continue in the first half of financial year 2024. Trade association market
share statistics confirm that our share has remained constant and that there
has been a notable contraction in the decentralised heat recovery market in
the year. InVENTer has been working on new initiatives to target the
refurbishment market and revenues in the last quarter are slowly pivoting
towards this area of the market. In the second half of 2024 the comparators
are much weaker and consistent with the revenue rates achieved in the most
recent months. The refurbishment sales initiative coupled with new product
innovation adding to our leading range of decentralised heat recovery provides
confidence that the revenue performance has now stabilised.
The long-term opportunity for decentralised heat recovery ventilation in
Germany, and all across our markets, is a positive one as demonstrated by our
performance in the Netherlands and Slovenia in the first half of the year.
ClimaRad in the Netherlands, supplying primarily decentralised heat recovery
for refurbishment projects, had a strong first half performance. The project
order intake has been strong, and we have made additional investments in our
factory in Sarajevo, Bosnia, to support this ongoing demand. We have started
to successfully cross sell these products in Germany and we expect to make
further progress in the second half of the year.
I-Vent in Slovenia, an acquisition that completed in June 2023, made excellent
progress in the first half of the year. Milan Kuster, the former owner of
I-Vent, and his innovative and experienced team delivered a strong revenue and
earnings performance in the period. Several new product initiatives are under
way and will be launched in Slovenia in the second half of the year.
In Belgium, we are starting to deliver revenue from the new enhanced Econiq
ranges of mechanical ventilation with heat recovery (MVHR). This project,
delivered later than originally anticipated, equips the local team with an
efficient, quiet, and leading proposition with which to regain lost share. Our
later than anticipated delivery of this solution had left us behind some of
the local competition, but the situation is now remedied, and some interesting
project successes have already been secured to date.
In France, our recent acquisition of Ventilairsec is making good progress. As
part of the pre-planned process to succeed the former owner, a new managing
director, Joseph Colantuano, has been appointed. He has been working on an
expansive plan to introduce several of our Group products into the market.
This extensive cross selling project has made considerable progress in recent
months with a significant enhancement of our product portfolio for the French
market commencing in the second half of the year. Our market share is
currently low and with a narrow product range, so this important initiative
will provide new opportunities for growth in the years ahead.
Our revenue from aluminium heat exchangers, sold under our Energy Recovery
Industries (ERI) brand, relies heavily on new construction projects, which
have been notably weaker in Europe during the period. Despite this, revenue in
the period was broadly flat, and we are investing in expanding our product
range, upgrading manufacturing equipment, and enhancing facilities to gain
market share. Collaborating closely with the ERI team, we aim to explore other
segments of the heat exchanger market. Our current management is dedicated to
the project for the long term, with substantial additional capital investment
anticipated over the next 1-2 years.
Australasia
Market sector revenue 6 months to 6 months to Growth Growth (cc)
31 Jan 2024 31 Jan 2023 % %
£m £m
Total Australasia revenue 26.2 24.3 7.8 16.9
Adjusted operating profit 6.3 5.5 14.1
Adjusted operating profit margin (%) 23.9 22.6 1.3pp
Statutory operating profit 5.5 4.9 11.6
Revenue in Australasia was £26.2 million and grew by 7.8% (16.9% at constant
currency (cc)), compared to the previous period, helped by the acquisition of
DVS, with organic revenue growing by 1.1% at cc. Adjusted operating profit
increased by 14.1% to £6.3 million in the face of significant foreign
currency translation headwinds, with our adjusted operating margin increasing
to 23.9% (H1 2023: 22.6%).
We are pleased with the progress we have made in the region in the first half
of the year. The improvement in adjusted operating profit margin up to 23.9%
(H1 2023: 22.6%), an increase of 1.3 percentage points, arising from good
price management and input cost softening (especially freight) has been
delivered despite adding the DVS Proven Systems acquisition, in itself
currently at a lower operating margin.
Our Simx business has been operating in what is currently a weak New Zealand
economy, characterised by a lack of consumer confidence. However, the local
market is slowly moving towards continuous system ventilation and our new
mechanical extract ventilation systems (MEV) are gaining revenue traction. DVS
Proven Systems, a consumer facing ventilation solutions provider, acquired in
August 2023, will further assist us in educating customers about the value of
system ventilation with and without heat recovery. During a recent trip to New
Zealand, we were able to experience first-hand from our comprehensive sales
teams how this is an important next step for the development of the New
Zealand market. Seasonality, with the region just coming out of the summer
period, is such that results in New Zealand are weighted towards the end of
the second half of the financial year.
In Australia, Ventair has made excellent progress with the launch of several
new product ranges. The move to DC low energy product ranges has powered ahead
in the first half of the year with over 60% of our revenue now derived from
low carbon products. Ventair was acquired approximately five years ago and has
made excellent progress in establishing a fully Australian-wide proposition
with considerable investment in external sales personnel to support the market
coverage. New product launches have enhanced product margins, and we have more
new product introductions scheduled for the second half of the year.
FINANCIAL REVIEW
Strong delivery on key financial metrics
The Group delivered a strong performance against its key financial metrics in
the period, continuing to demonstrate its resilience in the context of a
generally challenging external market backdrop.
Revenue growth of 6.3%, coupled with adjusted operating margin expansion to
22.4%, resulted in an increase in adjusted basic earnings per share of 10.5%
to 13.7p (H1 2023: 12.4p). Cash generation in the period was excellent, with
adjusted operating cash conversion of 98% (H1 2023: 88%), whilst return on
invested capital (ROIC) remained broadly unchanged at 27.7% (H1 2023: 27.6%).
The Board has declared an interim dividend of 2.8 pence per share, up 12.0%
(H1 2023: 2.5 pence).
Statutory Adjusted(2)
6 months to 6 months to Movement 6 months to 6 months to Movement
31 January 2024 31 January 2023 31 January 2024 31 January 2023
Revenue (£m) 172.5 162.3 6.3% 172.5 162.3 6.3%
EBITDA (£m) 43.8 38.6 13.6% 43.9 38.7 13.4%
Operating profit (£m) 33.7 27.8 21.1% 38.6 34.2 12.9%
Net finance costs (£m) 3.1 3.5 (10.0)% 3.3 2.0 70.4%
Profit before tax (£m) 29.0 22.6 28.4% 35.0 31.8 9.9%
Basic EPS (p) 11.1 8.6 29.1% 13.7 12.4 10.5%
Interim dividend per share (p) 2.8 2.5 12.0% 2.8 2.5 12.0%
Operating cash flow (£m) 38.7 30.4 27.3% 38.8 30.6 26.9%
Net debt (£m)(1) 84.2 79.2 5.0 84.2 79.2 5.0
Return on Invested Capital (ROIC) (%) 27.7% 27.6% 0.1pp
(1) H1 2024 includes lease liabilities of £30.0 million (H1 2023: £23.3
million)
(2) The Group uses some alternative performance measures to track and assess
the underlying performance of the business. These measures include adjusted
EBITDA, adjusted operating profit, adjusted Net finance costs, adjusted profit
before tax, adjusted basic EPS, adjusted operating cash flow, return on
invested capital, net debt, and net debt (excluding lease liabilities). The
reconciliation of the Group's statutory profit before tax to adjusted measures
of performance is summarised in the table below and in detail in note 2 to the
interim condensed consolidated financial statements. For a definition of all
the adjusted and non-GAAP measures, please see the glossary of terms in note
16 to the interim condensed consolidated financial statements.
Good organic growth in UK offsets a more challenging picture in Continental
Europe; acquisitions contributing well
Group revenue for the six months ended 31 January 2024 was £172.5 million (H1
2023: £162.3 million), an increase of 6.3%. On a constant currency (cc) basis
revenue grew by 8.7%, of which 0.9% was organic and 7.8% inorganic, with an
adverse 2.4% impact from foreign exchange.
Organic growth of 0.9% at cc was underpinned by continuing strength in our UK
residential categories, most notably in RMI, with awareness of and demand for
our mould and condensation solutions continuing to be very strong. OEM revenue
was weak in the period, with customer de-stocking compounding a weak demand
picture, as our solutions are predominantly used in new build applications.
Outside of the UK we also enjoyed strong demand and good organic growth in
ClimaRad and Australia, offset by weakness in Central Europe, notably Germany.
On a Group organic basis, price contribution is estimated at c2.6% with a
volume reduction of c1.7%.
Inorganic revenue of £12.6 million included a strong performance from I-Vent
in Slovenia, whilst in France the roll out of Group products through VMI is
underway. In New Zealand, our peak activity period typically comes in the
Southern hemisphere winter, so we anticipate an improving level of activity in
DVS as we move through the second half of the financial year.
Adjusted operating profit up 12.9%, with adjusted operating margin increased
to 22.4%
Adjusted operating profit increased by 12.9% (16.0% at cc) to £38.6 million
(H1 2023: £34.2 million). Group adjusted operating profit margin of 22.4% was
1.3pp up on prior year, with gross margins up 3.4pp to 50.8% (H1 2023: 47.4%)
reflecting a combination of good price management, material, and input cost
softening (freight, plastics, electronics) and strong levels of labour and
factory efficiency, especially in the UK.
Administration and distribution costs increased by £6.3 million to £49.0
million (H1 2023: £42.7 million). £4.2 million of the increase was
attributable to the new acquisitions, with £1.8 million attributable to
salary increases and wage inflation, which remained high in the period. We
undertook a rationalisation and restructuring in our OEM business in the UK
which resulted in additional administration costs of c. £0.4 million due to
staff redundancies. A further cost (of similar or smaller value) is expected
to be incurred in the second half of the year when we consolidate our
operations from two sites into one.
6 months ended 31 January 2024 6 months ended 31 January 2023
Statutory Adjustments Adjusted Statutory Adjustments Adjusted
£m £m results £m £m results
£m £m
Revenue 172.5 ─ 172.5 162.3 ─ 162.3
Gross profit 87.6 ─ 87.6 76.9 ─ 76.9
Administration and distribution costs excluding the costs listed below (49.0) ─ (49.0) (42.7) ─ (42.7)
Amortisation of intangible assets acquired through business combinations (4.8) 4.8 ─ (6.2) 6.2 ─
Costs of business combinations (0.1) 0.1 ─ (0.2) 0.2 ─
Operating profit 33.7 4.9 38.6 27.8 6.4 34.2
Re-measurement of financial liability (0.3) ─ (0.3) (0.4) ─ (0.4)
Re-measurement of future consideration (1.3) 1.3 ─ (1.3) 1.3 ─
Net gain/(loss) on financial instruments at fair value 0.2 (0.2) ─ (1.5) 1.5 ─
Other net finance costs (3.3) ─ (3.3) (2.0) ─ (2.0)
Profit before tax 29.0 6.0 35.0 22.6 9.2 31.8
Income tax (7.0) (1.0) (8.0) (5.7) (1.7) (7.4)
Profit after tax 22.0 5.0 27.0 16.9 7.5 24.4
Adjusted profit before tax of £35.0 million was 9.9% higher than H1 2023
(£31.8 million). Statutory profit before tax £29.0 million was 28.4% higher
than H1 2023 (£22.6 million), and is after charging:
· £4.8 million in respect of amortisation of intangible assets (H1
2023: £6.2 million), down £1.4 million in the period as a number of our
older intangible assets reached the end of their amortisation life
· £0.1 million (H1 2023: £0.2 million) of other costs of business
combinations, being professional fees and due diligence related costs
· £1.3 million re-measurement of future consideration (H1 2023:
£1.3 million); and
· £0.2 million gain due to the fair value measurement of financial
instruments (H1 2023: loss of £1.5 million).
Finance costs
Adjusted finance costs increased to £3.3 million (H1 2023: £2.0 million),
reflecting the significant increase in bank base rates across our
jurisdictions. The weighted average interest rate on our borrowings (all of
which are part of the Group's sustainability linked Revolving Credit Facility)
for the period was 5.13% compared to 2.62% in the first half of 2023.
Statutory net finance costs were £3.1 million (H1 2023: £3.5 million)
including £0.2 million of net gain on the revaluation of financial
instruments (H1 2023: loss £1.5 million).
Taxation
Our underlying effective tax rate, on adjusted profit before tax, was 23.0%
(H1 2023: 23.2%). The decrease of 0.2 percentage points in our adjusted
effective tax rate compared to the prior period is primarily due to business
mix and increased levels of patent box relief in the UK, offsetting the impact
of the increase in UK Corporation tax rate to 25% which took effect in April
2023.
We expect our medium term underlying effective tax rate to be in the range of
23% to 25% of the Group's adjusted profit before tax.
Currency impact
Aside from Sterling, the Group's key trading currencies for our non-UK
businesses are the Euro, representing approximately 27% of Group revenues,
Swedish Krona (approximately 9%), New Zealand Dollar (approximately 8%) and
Australian Dollar (approximately 8%). We do not hedge the translational
exchange risk arising from the conversion of the results of overseas
subsidiaries, although we do denominate borrowings in our non-sterling trading
currencies, which offsets some of the translation risk relating to net assets.
The average rates of sterling versus our principal non-sterling trading
currencies are shown in the table below.
Average rate H1 FY24 Average rate H1 FY23 Movement
Euro 1.158 1.152 0.5%
Swedish Krona 13.382 12.533 6.8%
New Zealand Dollar 2.073 1.927 7.6%
Australian Dollar 1.920 1.755 9.4%
The Group had Euro denominated borrowings as at 31 January 2024 of £71.3
million (31 July 2023: £79.4 million). The Sterling value of these foreign
currency denominated loans, net of cash, increased by £0.8 million as a
result of exchange rate movements (H1 2023: increased by £4.4 million).
Transactional foreign exchange exposures arise principally in the form of US$
denominated purchases from our suppliers in China. We aim to purchase a
substantial proportion of our expected requirements approximately twelve
months forward, and as such, we have forward currency contracts in place for
approximately 85% of our forecast average forward requirements for the next
twelve months (approximately $20 million).
High returns on invested capital (ROIC)
The Group's ROIC (pre-tax) for the period was 27.7%, measured as adjusted
operating profit for the last 12 months (LTM) divided by average net assets,
after adding back net debt, acquisition related liabilities, and historic
goodwill and acquisition related amortisation charges (net of the associated
deferred tax). The measure also excludes the goodwill and intangible assets
arising from the original transaction that created the Group when it was
bought out via a leveraged buy-out transaction by private equity house
Towerbrook Capital Partners in 2012.
The slight increase in ROIC versus prior year (H1 2023: 27.6%) was due to the
continued expansion in operating margin in the period. Adjusted operating
profit (LTM) increased by 10.6%, ahead of the increase in average invested
capital which was up 6.1% to £431.3 million (H1 2023: £406.6 million) due to
the acquisitions of VMI, I-Vent and DVS.
Although, at the time of entry to the Group acquisitions will be dilutive to
ROIC, our track record of improving the returns post acquisition, coupled with
continued organic growth and strong margins, provides us with confidence of
maintaining Group ROIC above 20% over the medium term while continuing to
invest to grow the business.
Cash flow and net debt
Group cash conversion, defined as adjusted operating cash flow as a percentage
of adjusted earnings before interest, tax and amortisation (see note 16) was
98% (H1 2023: 88%). With the Group's typical cash seasonality profile weighted
slightly more towards the second half of the year, this is well on track to
exceed our stated financial target of 90% for the full year 2024.
Working capital increased by £2.5 million in the period (H1 2023: increase of
£5.0 million). Inventories reduced by £2.9 million, offset by reduction in
payables and an increase in receivables.
Capital expenditure in the period was £3.5 million (H1 2023: £4.1 million),
with new product development programs (£0.8 million), vehicles (£1.0
million) and tooling and machinery in the UK (£0.9 million) the primary areas
of spend.
Dividend payments in the period were £10.9 million (H1 2023: £9.9 million),
whilst tax payments were also higher at £7.2 million (H1 2023: £6.5
million).
Acquisition spend of £8.5 million (H1 2023: £0.4 million) related to the
acquisition of DVS (Proven Systems Ltd), in New Zealand, for an initial
consideration of £8.5 million (NZ$17.7 million), net of cash acquired, with
further contingent consideration of up to NZ$9 million. (see note 9).
Net debt at 31 January 2024 was £84.2 million (H1 2023: £79.2 million) and
comprised of bank borrowings of £71.3 million (H1 2023: £72.5 million), net
of cash and cash equivalents of £17.1 million (H1 2023: £16.6 million) and
including lease liabilities of £30.0 million (H1 2023: £23.3 million). Net
debt (excluding lease liabilities) of £54.2 million (H1 2023: £55.9 million)
represents leverage of 0.7x adjusted EBITDA (H1 2023: 0.8x).
6 months to 6 months to
31 January 2024 31 January 2023
£m £m
Opening net debt at 1 August (89.3) (85.8)
Movements from normal business operations:
Adjusted EBITDA(1) 43.9 38.7
Movement in working capital (2.5) (5.0)
Share-based payments 0.9 1.0
Capital expenditure (3.5) (4.1)
Adjusted operating cash flow: 38.8 30.6
- Interest paid net of interest received (2.8) (1.5)
- Income tax paid (7.2) (6.5)
- Business combination related operating costs (0.1) (0.2)
- Dividend paid (10.9) (9.9)
- Purchase of own shares by the Employee Benefit Trust (2.7) (0.9)
- FX on foreign currency loans/cash (0.8) (4.4)
- Issue costs of new borrowings ─ (0.3)
- Lease liabilities 1.2 1.7
- Payments of lease liabilities (1.8) (1.6)
Movements from acquisitions:
- Business combination of non-controlling interest ─ (0.4)
- Business combination of subsidiaries, net of cash acquired (8.5) ─
- Business combination of subsidiaries, debt repaid (0.1) ─
Closing net debt at 31 January (84.2) (79.2)
6 months to 6 months to
31 January 2024 31 January 2023
£m £m
Bank debt (71.3) (72.5)
Cash 17.1 16.6
Net debt (excluding leased liabilities) (54.2) (55.9)
Lease liabilities (30.0) (23.3)
Closing net debt at 31 January (84.2) (79.2)
(1) A reconciliation of the Group's statutory profit before tax to adjusted
measures of performance are shown in detail in note 2 to the interim condensed
consolidated financial statements.
Reconciliation of adjusted operating cash flow
6 months to 6 months to
31 January 2024 31 January 2023
£m £m
Net cash flow generated from operating activities 35.0 28.0
Capital expenditure (3.5) (4.1)
UK and overseas tax paid 7.2 6.5
Cash flow relating to business combination costs 0.1 0.2
Adjusted operating cash flow 38.8 30.6
Acquisitions
Acquisition spend in the year net of cash acquired was £8.5 million (H1 2023:
£0.4 million). We completed the acquisition of DVS Proven Systems (New
Zealand), on 4 August 2023 for an initial consideration of £8.5 million
(NZ$17.7 million), net of cash acquired, with further contingent consideration
of up to NZ$9 million. DVS is a market leading supplier and installer of home
ventilation solutions in New Zealand.
Bank facilities, refinancing and liquidity
At 31 January 2024, the Group had £78.7 million of undrawn, committed bank
facilities (31 July 2023: £70.6 million) and £17.1 million of cash and cash
equivalents on the interim condensed consolidated statement of financial
position (31 July 2023: £21.3 million).
Returns to shareholders
Our adjusted basic earnings per share for the period was 13.7 pence (H1 2023:
12.4 pence) and our statutory basic earnings per share for the period was 11.1
pence (H1 2023: 8.6 pence). The Board has declared an interim dividend of 2.8
pence (H1 2023: 2.5 pence), up 12.0% in total.
Going concern
After reviewing the Group's current liquidity, net debt, covenants, financial
forecasts and stress testing of potential risks, the Board confirms there are
no material uncertainties which impact the Group's ability to continue as a
going concern for the period to 31 July 2025 and these interim condensed
consolidated financial statements have therefore been prepared on a going
concern basis.
Andy O'Brien
Chief Financial Officer
14 March 2024
Principal Risks and Uncertainties
The Directors have reviewed the principal risks and uncertainties which could
have a material impact on the Group's performance and have concluded that they
has been no material change from those described in Volution's Annual Report
2023, which can be found at www.volutiongroupplc.com
(http://www.volutiongroupplc.com) .
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
The condensed consolidated set of financial statements has been prepared in
accordance with International Accounting Standard 34 'Interim Financial
Reporting' as adopted by the United Kingdom and that the interim management
report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or the performance of the Group during that period; and any changes
in the related party transactions described in the Annual Report 2023 that
could do so.
The full list of current Directors can be found on the Company's website at
www.volutiongroupplc.com.
By order of the Board
Ronnie
George
Andy O'Brien
Chief Executive
Officer
Chief Financial Officer
14 March
2024
14 March 2024
Independent Review Report to Volution Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Volution Group Plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Interim results of
Volution Group Plc for the 6 month period ended 31 January 2024 (the
"period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Interim Condensed Consolidated Statement of Financial Position
as at 31 January 2024;
· the Interim Condensed Consolidated Statement of Comprehensive
Income for the period then ended;
· the Interim Condensed Consolidated Statement of Cash Flows for the
period then ended;
· the Interim Condensed Consolidated Statement of Changes in Equity
for the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim results of Volution
Group Plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Interim results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Interim results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Interim results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
14 March 2024
Interim Condensed Consolidated Statement of Comprehensive Income
For the period ended 31 January 2024
Notes Unaudited Unaudited
6 months to 6 months to
31 January 2024 31 January 2023
£000 £000
Revenue from contracts with customers 3 172,479 162,287
Cost of sales (84,859) (85,378)
Gross profit 87,620 76,909
Administrative and distribution expenses (53,824) (48,904)
Operating profit before separately disclosed items 33,796 28,005
Costs of business combinations (116) (187)
Operating profit 33,680 27,818
Finance income 49 33
Finance costs (3,198) (3,531)
Re-measurement of financial liabilities 11 (304) (428)
Re-measurement of future consideration 11 (1,270) (1,336)
Profit before tax 28,957 22,556
Income tax 5 (7,004) (5,639)
Profit after tax 21,953 16,917
Attributable to the shareholders 21,953 16,908
Attributable to non-controlling interests - 9
Other comprehensive expense
Other comprehensive income that may be reclassified to profit or loss in
subsequent periods:
Exchange differences arising on translation of foreign operations (422) 2,934
Gain/(loss) on currency loans relating to the net investment in foreign 338 (3,805)
operations
Other comprehensive loss for the period (84) (871)
Total comprehensive income for the period, net of tax 21,869 16,046
Attributable to the shareholders 21,869 16,037
Attributable to non-controlling interests - 9
Earnings per share
Basic earnings per share 6 11.1p 8.6p
Diluted earnings per share 6 11.0p 8.5p
Interim Condensed Consolidated Statement of Financial Position
At 31 January 2024
Notes 31 January 2024
Unaudited 31 July
£000 2023
Audited
£000
Non-current assets
Property, plant and equipment 10 30,174 29,448
Right-of-use assets 28,759 29,902
Intangible assets - goodwill(1) 7 173,925 168,988
Intangible assets - others 8 82,677 83,863
315,535 312,201
Current assets
Inventories 57,319 58,980
Trade and other receivables 54,935 52,336
Cash and short-term deposits 17,083 21,244
129,337 132,560
Total assets 444,872 444,761
Current liabilities
Trade and other payables (42,857) (47,108)
Refund liabilities (12,154) (9,817)
Income tax (5,080) (4,662)
Other financial liabilities(1) 11 (2,694) (2,901)
Interest-bearing loans and borrowings 12 (3,070) (3,754)
Provisions (1,764) (1,791)
(67,619) (70,033)
Non-current liabilities
Interest-bearing loans and borrowings 12 (108,267) (116,704)
Other financial liabilities(1) 11 (19,707) (18,141)
Provisions (467) (301)
Deferred tax liabilities (13,457) (13,337)
(141,898) (148,483)
Total liabilities (209,517) (218,516)
Net assets 235,355 226,245
Capital and reserves
Share capital 2,000 2,000
Share premium 11,527 11,527
Treasury shares (2,250) (2,390)
Capital reserve 93,855 93,855
Share-based payment reserve 5,222 5,584
Foreign currency translation reserve (1,309) (1,225)
Retained earnings 126,310 116,894
Total equity 235,355 226,245
(1) An adjustment has been made during the measurement period relating to the
acquisition of I-Vent to increase the fair value of contingent consideration
by €4,800,000 (£4,115,000) with an equivalent increase in goodwill. See
note 9 for further details.
The interim condensed consolidated financial statements of Volution Group plc
(registered number: 09041571) were approved by the Board of Directors and
authorised for issue on 14 March 2024.
On behalf of the Board
Ronnie George
Andy O'Brien
Chief Executive Officer
Chief Financial Officer
Interim Condensed Consolidated Statement of Changes in Equity
For the period ended 31 January 2024
Share Share Treasury Capital Share-based Foreign Retained Shareholder's equity Non-Controlling Interest Total
capital premium shares reserve payment currency earnings £000 £000 Equity
£000 £000 £000 £000 reserve translation £000 £000
£000 reserve
£000
At 31 July 2022 (Audited) 2,000 11,527 (3,574) 93,855 5,058 3,099 96,247 208,212 96 208,308
Profit for the period ─ ─ ─ ─ ─ ─ 16,908 16,908 9 16,917
Other comprehensive loss ─ ─ ─ ─ ─ (871) ─ (871) ─ (871)
Total comprehensive income ─ ─ ─ ─ ─ (871) 16,908 16,037 9 16,046
Purchase of own shares ─ ─ (911) ─ ─ ─ ─ (911) ─ (911)
Exercise of shares options ─ ─ 3,018 ─ (1,379) ─ (1,639) ─ ─ ─
Share-based payment including tax ─ ─ ─ ─ 968 ─ ─ 968 ─ 968
Dividend paid ─ ─ ─ ─ ─ ─ (9,881) (9,881) ─ (9,881)
Acquisition of non-controlling interest ─ ─ ─ ─ ─ ─ (264) (264) (105) (369)
(note 9)
At 31 January 2023 (Unaudited) 2,000 11,527 (1,467) 93,855 4,647 2,228 101,371 214,161 ─ 214,161
Profit for the period ─ ─ ─ ─ ─ ─ 20,465 20,465 ─ 20,465
Other comprehensive income ─ ─ ─ ─ ─ (3,453) ─ (3,453) ─ (3,453)
Total comprehensive income ─ ─ ─ ─ ─ (3,453) 20,465 17,012 ─ 17,012
Purchase of own shares ─ ─ (923) ─ ─ ─ ─ (923) ─ (923)
Share-based payment including tax ─ ─ ─ ─ 937 ─ ─ 937 ─ 937
Dividends paid ─ ─ ─ ─ ─ ─ (4,942) (4,942) ─ (4,942)
At 31 July 2023 (Audited) 2,000 11,527 (2,390) 93,855 5,584 (1,225) 116,894 226,245 ─ 226,245
Profit for the period ─ ─ ─ ─ ─ ─ 21,953 21,953 ─ 21,953
Other comprehensive loss ─ ─ ─ ─ ─ (84) ─ (84) ─ (84)
Total comprehensive income ─ ─ ─ ─ ─ (84) 21,953 21,869 ─ 21,869
Purchase of own shares ─ ─ (2,732) ─ ─ ─ ─ (2,732) ─ (2,732)
Exercise of share options ─ ─ 2,872 ─ (1,214) ─ (1,658) ─ ─ ─
Share-based payment including tax ─ ─ ─ ─ 852 ─ ─ 852 ─ 852
Dividend paid ─ ─ ─ ─ ─ ─ (10,879) (10,879) ─ (10,879)
At 31 January 2024 (Unaudited) 2,000 11,527 (2,250) 93,855 5,222 (1,309) 126,310 235,355 ─ 235,355
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.
Capital reserve
The capital reserve is the difference in share capital and reserves arising
from the use of the pooling of interest method for preparation of the
financial statements in 2014. This is a non-distributable reserve.
Share-based payment reserve
The share-based payment reserve is used to recognise the value of
equity-settled share-based payments provided to key management personnel, as
part of their remuneration.
Foreign currency translation reserve
For the purpose of presenting consolidated financial information, the assets
and liabilities of the Group's foreign operations are expressed in GBP using
exchange rates prevailing at the end of the reporting period. Income and
expenses are translated at the average exchange rate for the period. Exchange
differences arising are classified as other comprehensive income and are
transferred to the foreign currency translation reserve. All other translation
differences are taken to profit and loss with the exception of differences on
foreign currency borrowings to the extent that they are used to finance or
provide a hedge against Group equity investments in foreign operations, in
which case they are taken to other comprehensive income together with the
exchange difference on the net investment in these operations.
Interim Condensed Consolidated Statement of Cash Flows
For the period ended 31 January 2024
Notes Unaudited Unaudited
6 months to 6 months to
31 January 2024 31 January 2023
£000 £000
Operating activities
Profit for the period after tax 21,953 16,917
Adjustments to reconcile profit for the period to net cash flow from operating
activities:
Income tax 7,004 5,639
Gain on disposal of property, plant and equipment and intangible assets - (78) (2)
other
Costs of business combinations 116 187
Cash flows relating to business combination costs (116) (187)
Re-measurement of financial liability relating to business combinations 304 428
Re-measurement of future consideration relating to business combinations 1,270 1,336
Finance income (49) (33)
Finance costs 3,198 3,531
Share-based payment expense 852 968
Depreciation of property, plant and equipment 10 2,212 1,974
Depreciation of right of use assets 2,254 1,870
Amortisation of intangible assets 8 5,666 6,892
Working capital adjustments:
(Increase)/decrease in trade receivables and other assets (2,468) 3,963
Decrease/(increase) in inventories 2,879 (2,537)
Decrease in trade and other payables (2,541) (6,467)
Movement in provisions (328) 18
Cash generated by operations 42,128 34,497
UK income tax paid (2,500) (2,320)
Overseas income tax paid (4,732) (4,170)
Net cash flow generated from operating activities 34,896 28,007
Investing activities
Payments to acquire intangible assets 8 (911) (1,622)
Purchase of property, plant and equipment 10 (2,774) (2,513)
Proceeds from disposal of property, plant and equipment and intangible assets 240 19
- other
Business combination of subsidiaries, net of cash acquired 9 (8,498) ─
Interest received 49 33
Net cash flow used in investing activities (11,894) (4,083)
Financing activities
Repayment of interest-bearing loans and borrowings (27,223) (18,700)
Proceeds from new borrowings 19,505 13,000
Repayment of VMI debt acquired (100) ─
Acquisition of non-controlling interest 9 ─ (369)
Issue costs of new borrowings ─ (300)
Interest paid (2,811) (1,554)
Payment of principal portion of lease liabilities (1,830) (1,584)
Dividends paid (10,879) (9,881)
Purchase of own shares (2,732) (911)
Net cash flow used in financing activities (26,070) (20,299)
Net (decrease)/increase in cash and cash equivalents (3,068) 3,625
Cash and cash equivalents at the start of the year 21,244 13,543
Effect of exchange rates on cash and cash equivalents (1,093) (564)
Cash and cash equivalents at the end of the period 17,083 16,604
Notes to the Interim Condensed Consolidated Financial Statements
For the period ended 31 January 2024
Volution Group plc (the Company) is a public limited company and is
incorporated and domiciled in the UK (registered number: 09041571). The share
capital of the Company is listed on the London Stock Exchange. The address of
its registered office is Fleming Way, Crawley, West Sussex RH10 9YX.
The interim condensed consolidated financial statements were authorised for
issue by the Board of Directors on 14 March 2024.
1. Basis of preparation
These condensed consolidated financial statements have been prepared in
accordance with UK-adopted International Accounting Standards (IAS) 34
'Interim financial reporting'. They do not include all disclosures that would
otherwise be required in a complete set of financial statements and should be
read in conjunction with the Annual Report 2023. The financial information for
the half years ended 31 January 2024 and 31 January 2023 do not constitute
statutory accounts within the meaning of Section 434(3) of the Companies Act
2006 and are unaudited.
The annual financial statements of Volution Group plc are prepared in
accordance with UK-adopted international accounting standards. The comparative
financial information for the year ended 31 July 2023 included within this
report does not constitute the full statutory accounts for that period. The
Annual Report 2023 has been filed with the Registrar of Companies. The
Independent Auditor's Report on the Annual Report 2023 was unqualified, did
not draw attention to any matters by way of emphasis, and did not contain a
statement under section 498(2) and 498(3) of the Companies Act 2006.
The accounting policies adopted are consistent with those of the previous
financial year except for the estimation of income tax. They are consistent
with those of the corresponding interim reporting period.
The Group has adjusted prior period balances for contingent consideration
liability and goodwill due to the fair value of the contingent consideration
liability and goodwill recognised on acquisition of I-Vent in 2023 being
determined only provisionally. During the 12-month remeasurement period since
acquisition a remeasurement period adjustment was identified and adjustments
to the contingent consideration liability and goodwill have been recognised by
revising comparative information for the prior period presented in the
statement of financial position as if the accounting for the business
combination had been finalised at the acquisition date. Contingent
consideration liabilities in the prior period have been increased by
€4,800,000 (£4,115,000) and goodwill on acquisition of I-Vent has been
increased by €4,800,000 (£4,115,000). The adjustments are shown in the
condensed consolidated statement of financial position, note 7, note 9 and
note 11.
Going Concern
The financial statements have been prepared on a going concern basis. 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 in the foreseeable future, assessed for
the 18-month period ending 31 July 2025.
The financial position remains robust with committed facilities totalling
£150 million, and an accordion of a further £30 million, maturing in
December 2025. The financial covenants on these facilities are for leverage
(net debt/adjusted EBITDA) of not more than three times and for adjusted
interest cover of not less than four times.
The base case scenario has been prepared using robust forecasts from each of
our operating companies, with each considering the risks and opportunities the
businesses face, including the high inflation environment and economic
uncertainty across many of the countries in which we operate, and the other
principal risks set out in the Annual report 2023.
We have then applied a severe but plausible downside scenario to model the
potential concurrent impact of:
- a significant economic slowdown reducing revenue by 20%
compared to plan in H2 FY24, with no recovery in FY25.
- supply chain difficulties or inflationary cost increases
reducing gross profit margin by 10%; and
- a significant acquisition increasing debt but with no
positive cash flow contribution, and significant contingent consideration
payments relating to prior acquisitions
A reverse stress test scenario has also been modelled which shows a revenue
contraction of >30% in H2 FY24 with no recovery in FY25 without the
implementation of any mitigations would be required to breach covenants or
compromise liquidity, which is considered by the Directors an extremely remote
scenario.
Mitigations available within the control of management include reducing
discretionary capex, discretionary indirect costs, and dividends. Over the
short period of our climate change assessment published in the Annual report
2023 (aligned to our going concern assessment) we have concluded that there is
no material adverse impact of climate change and hence have not included any
impacts in either our base case or downside scenarios of our going concern
assessment.
The Directors have concluded that the results of the scenario testing combined
with the significant liquidity profile available under the revolving credit
facility confirm that there is no material uncertainty in the use of the going
concern assumption.
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.
In preparing the interim condensed consolidated financial statements, the
areas where judgement has been exercised and the key sources of estimation
uncertainty were the same as those applied to the consolidated financial
statements for the year ended 31 July 2023.
New standards and interpretations
Any new standards or interpretations in issue, but not yet effective, are not
expected to have a material impact on the Group's net assets or results.
The following new standards and amendments became effective as at 1 January
2024 and will be adopted for the financial year commencing 1 August 2024. The
Group has not early adopted any other standard, interpretation or amendment
that has been issued but not yet effective.
· Amendments to IAS 1 "Classification of liabilities as current or
non-current"
· Amendments to IFRS 16 "Lease liability in a sale and leaseback"
· Amendments to IAS 1 "Non-current liabilities with covenants"
· Amendments to IAS 7 "Supplier Finance Arrangements"
These have not had an impact on these condensed consolidated financial
statements.
2. Adjusted earnings
The Board and key management personnel use some alternative performance
measures to track and assess the underlying performance of the business. These
measures include adjusted operating profit and adjusted profit before tax.
These measures are deemed more appropriate as they remove income and
expenditure which is not directly related to the ongoing trading of the
business. Such alternative performance measures are not defined terms under
IFRS and may not be comparable with similar measures disclosed by other
companies. Likewise, these measures are not a substitute for IFRS measures of
profit. A reconciliation of these measures of performance to the corresponding
statutory figure is shown below.
6 months to 6 months to
31 January 2024 31 January 2023
£000 £000
Profit after tax 21,953 16,917
Add back:
Costs of business combinations 116 187
Re-measurement of future consideration relating to the business combinations 1,270 1,336
Net (gain)/loss on financial instruments at fair value (196) 1,535
Amortisation and impairment of intangible assets acquired through business 4,796 6,174
combinations
Tax effect of the above (1,016) (1,729)
Adjusted profit after tax 26,923 24,420
Add back:
Adjusted tax charge 8,020 7,368
Adjusted profit before tax 34,943 31,788
Add back:
Interest payable on bank loans, lease liabilities and amortisation of 3,394 1,996
financing costs
Re-measurement of financial liability relating to the business combination of 304 428
ClimaRad
Finance income (49) (33)
Adjusted operating profit 38,592 34,179
Add back:
Depreciation of property, plant and equipment 2,212 1,974
Depreciation of right-of-use asset 2,254 1,870
Amortisation of development costs, software and patents 870 718
Adjusted EBITDA 43,928 38,741
For definitions of terms referred to above see note 16, Glossary of terms.
3. Revenue from contracts with customers
Revenue recognised in the statement of comprehensive income is analysed below:
6 months to 6 months to
31 January 2024 31 January 2023
£000 £000
Sale of goods 168,467 158,751
Installation services 4,012 3,536
Total revenue from contracts with customers 172,479 162,287
Market sectors 6 months to 6 months to
31 January 2024 31 January 2023
£000 £000
UK
Residential 49,471 41,423
Commercial 15,209 14,284
Export 5,673 5,277
OEM (Torin-Sifan) 7,441 12,658
Total UK 77,794 73,642
Nordics 25,367 26,649
Central Europe 43,106 37,673
Total Continental Europe 68,473 64,322
Total Australasia 26,212 24,323
Total revenue from contracts with customers 172,479 162,287
4. Segmental analysis
6 months ended 31 January 2024 UK Continental Australasia Central / Eliminations Consolidated
£000 Europe £000 £000 £000
£000
Revenue from contracts with customers
Total segment revenue 90,350 87,079 26,241 (31,191) 172,479
Inter-segment revenue (12,556) (18,606) (29) 31,191 ─
Revenue from external contracts with customers 77,794 68,473 26,212 ─ 172,479
Gross profit 38,981 34,917 13,722 ─ 87,620
Results
Adjusted segment EBITDA 21,291 18,472 6,928 (2,763) 43,928
Depreciation and amortisation of (2,425) (1,902) (668) (341) (5,336)
development costs, software and patents
Adjusted operating profit/(loss) 18,866 16,570 6,260 (3,104) 38,592
Amortisation of intangible assets acquired through business combinations (1,050) (2,953) (793) ─ (4,796)
Business combination-related operating costs ─ ─ ─ (116) (116)
Operating profit/(loss) 17,816 13,617 5,467 (3,220) 33,680
Unallocated expenses
Net finance cost ─ ─ (55) (3,094) (3,149)
Re-measurement of future consideration ─ (1,270) ─ ─ (1,270)
Re-measurement of financial liability ─ (304) ─ ─ (304)
Profit/(loss) before tax 17,816 12,043 5,412 (6,314) 28,957
6 months ended 31 January 2023 UK Continental Australasia Central / Eliminations Consolidated
£000 Europe £000 £000 £000
£000
Revenue from contracts with customers
Total segment revenue 85,310 83,490 24,439 (30,952) 162,287
Inter-segment revenue (11,668) (19,168) (116) 30,952 ─
Revenue from external contracts with customers 73,642 64,322 24,323 ─ 162,287
Gross profit 34,119 30,776 12,014 ─ 76,909
Results
Adjusted segment EBITDA 17,649 16,982 6,141 (2,031) 38,741
Depreciation and amortisation of (2,013) (1,554) (655) (340) (4,562)
development costs, software and patents
Adjusted operating profit/(loss) 15,636 15,428 5,486 (2,371) 34,179
Amortisation of intangible assets acquired through business combinations (2,249) (3,338) (587) ─ (6,174)
Business combination-related operating costs ─ ─ ─ (187) (187)
Operating profit/(loss) 13,387 12,090 4,899 (2,558) 27,818
Unallocated expenses
Net finance cost ─ ─ (214) (3,284) (3,498)
Re-measurement of future consideration ─ (1,336) ─ ─ (1,336)
Re-measurement of financial liability ─ (428) ─ ─ (428)
Profit/(loss) before tax 13,387 10,326 4,685 (5,842) 22,556
5. Income tax
Income tax expense is recognised based on management's estimate of the
weighted average effective annual income tax rate expected for the full
financial year.
Our underlying effective tax rate, on adjusted profit before tax, was 23.0%
(H1 2023: 23.2%).
Our statutory effective tax rate for the period was 24.2% (H1 2023: 25.0%).
In June 2023, the UK Government substantively enacted legislation introducing
a global minimum corporate income tax rate, to have effect from 2024 in line
with the OECD's Pillar Two model framework on large multinational Enterprises
with a consolidated group revenue of €750m plus. The Group has performed an
assessment of its potential exposure to Pillar Two income taxes and based on
an assessment of the most recent information available regarding the financial
performance of the constituent entities in the Group, we do not expect to be
within the scope of Pillar Two and therefore do not expect it to have a
material impact on the Group's tax rate or tax payments.
6. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit for the period
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the period plus the weighted
average number of ordinary shares that would be issued on conversion of any
dilutive potential ordinary shares into ordinary shares. There are 3,128,124
dilutive potential ordinary shares at 31 January 2024 (H1 2023: 3,465,898).
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
6 months ended 6 months ended
31 January 2024 31 January 2023
£000 £000
Profit attributable to ordinary equity holders 21,953 16,917
Number
Number
Weighted average number of ordinary shares for basic earnings per share 197,102,359 197,146,809
Effect of dilution from:
Share options 1,939,674 2,664,529
Weighted average number of ordinary shares for diluted earnings per share 199,042,033 199,811,338
Earnings per share
Basic 11.1p 8.6p
Diluted 11.0p 8.5p
6 months ended 6 months ended
31 January 2024 31 January 2023
£000 £000
Adjusted profit attributable to ordinary equity holders 26,923 24,420
Number
Number
Weighted average number of ordinary shares for adjusted basic earnings per 197,102,359 197,146,809
share
Effect of dilution from:
Share options 1,939,674 2,664,529
Weighted average number of ordinary shares for adjusted diluted earnings per 199,042,033 199,811,338
share
Adjusted earnings per share
Basic 13.7p 12.4p
Diluted 13.5p 12.2p
The weighted average number of ordinary shares has declined as a result of
treasury shares held by the Volution Employee Benefit Trust (EBT) during the
period. At 31 January 2024, a total of 2,206,186 (31 January 2023: 2,571,123)
ordinary shares in the Company were held by the Volution EBT, all of which
were unallocated and available for transfer to participants of the Long-Term
Incentive Plan, Deferred Share Bonus Plan and Sharesave Plan on exercise.
During the period, 700,000 ordinary shares in the Company were purchased by
the trustees (6 months to 31 January 2023: 550,000) and 964,914 (6 months to
31 January 2023: 162,542) were released by the trustees.
The shares are excluded when calculating the statutory and adjusted EPS.
Adjusted profit attributable to ordinary equity holders has been reconciled in
note 2, adjusted earnings.
See note 16, Glossary of terms, for an explanation of the adjusted basic and
diluted earnings per share calculation.
7. Intangible assets - goodwill
Goodwill Total
£000
Cost and net book value
At 31 July 2022 142,661
On the business combination of VMI 4,072
On the business combination of I-Vent 23,944
On the business combination of ClimaRad 126
Net foreign currency exchange differences (1,815)
At 31 July 2023(1) 168,988
On the business combination of DVS 5,037
Net foreign currency exchange differences (100)
At 31 January 2024 173,925
(1) An adjustment has been made during the measurement period relating to the
acquisition of I-Vent. See note 9 for further details.
As a result of the downturn in performance in H1 2024 and the subsequent
restructuring of the OEM Torin Sifan business, an impairment review has been
performed on the OEM Torin Sifan CGU using a value in use calculation. A
discounted cash flow (DCF) model was used, using pre-tax discount rates of
15.4% (FY 2023: 15.4%). It was concluded that the carrying amount was in
excess of the value in use, with significant positive headroom. The
calculation of value in use is most sensitive to i) the future growth rate
that has been used, based on historical growth rates and market expectations,
of 3% and ii) discount rates reflecting our current market assessment.
We have tested the sensitivity of our headroom calculations in relation to the
above assumptions and the Group does not consider that changes in these
assumptions that could cause the carrying value of the CGUs to materially
exceed their recoverable value are reasonably possible.
8. Intangible assets - other
Total
2024 £000
Cost
At 1 August 2023 243,690
Additions 911
On business combination 4,011
Disposals (151)
Net foreign currency exchange differences (73)
At 31 January 2024 248,388
Amortisation
At 1 August 2023 159,827
Charge for the period 5,666
Disposals (65)
Net foreign currency exchange differences 283
At 31 January 2024 165,711
Net book value
At 31 January 2024 82,677
9. Business combinations
Business combination in the half year ended 31 January 2024
DVS
On 4 August 2023, Volution Group acquired the trade and assets of Proven
Systems Limited ("DVS"), a market leading supplier and installer of home
ventilation solutions in New Zealand. The acquisition of DVS is in line with
the Group's strategy to grow by selectively acquired value-adding businesses
in new and existing markets and geographies.
Total consideration for the purchase of the trade and assets of DVS was £8.5
million (NZ$17.7 million), net of cash acquired, with further contingent cash
consideration of up to NZ$9 million based on stretching targets for the
financial results for the 12 months ended 3 August 2024 and the 12 months
ended 31 March 2026. Contingent consideration was assessed based on the
current estimate of the future performance of the business for the 12 months
ended 3 August 2024 as £nil, with NZ$3 million payable if EBITDA exceeds NZ$3
million, and for the 12 months ended 31 March 2026 as NZ$Nil with a range of
NZ$Nil to NZ$6 million based on EBITDA performance from NZ$3.5 million to NZ$4
million..
If EBITDA for each period for which contingent consideration is measured is
10% higher than expected, contingent consideration would be £1.5 million
higher, discounted to present value. The fair value of contingent
consideration is calculated by estimating the future cash flows for the
company based on management's knowledge of the business and how the current
economic environment is likely to impact performance.
Transaction costs relating to professional fees associated with the business
combination in the period ending 31 January 2024 were £31,000 and have been
expensed as cost of business combinations separately disclosed on the face of
the consolidated statement of comprehensive income above operating profit.
The provisional fair value of the net assets acquired is set out below:
Book value Fair value Provisional
£000 adjustments Fair value
£000 £000
Intangible assets 35 3,976 4,011
Property, plant and equipment 185 - 185
Inventory 875 - 875
Trade and other receivables 130 - 130
Trade and other payables (627) - (627)
Deferred tax liabilities - (1,113) (1,113)
Total identifiable net assets 598 2,863 3,461
Goodwill on the business combination 5,037
Discharged by:
Cash consideration 8,498
Goodwill of £5,037,000 reflects certain intangibles that cannot be
individually separated and reliably measured due to their nature. These items
include the value of expected synergies arising from the business combination
and the experience and skill of the acquired workforce. The fair value of the
acquired tradename and customer base was identified and included in intangible
assets.
The gross amount of trade and other receivables is £130,000. All of the trade
receivables are expected to be collected in full.
DVS generated revenue of £3,560,000 and generated a profit after tax of
£60,000 in the period from acquisition to 31 January 2024 that is included in
the consolidated statement of comprehensive income for this reporting period.
If the combination had taken place at 1 August 2023, the Group's revenue and
profit before tax would have been the same as reported, as the acquisition
took place on the 4 August 2023.
I-Vent
The Group has adjusted prior period balances for contingent consideration
liability and goodwill due to the fair value of the contingent consideration
liability and goodwill recognised on acquisition of I-Vent in 2023 being
determined only provisionally. During the 12-month remeasurement period since
acquisition a remeasurement period adjustment was identified and adjustments
to the contingent consideration liability and goodwill have been recognised by
revising comparative information for the prior period presented in the
statement of financial position as if the accounting for the business
combination had been finalised at the acquisition date. The measurement period
adjustment relates to new information that existed at the acquisition date
about the degree of seasonality of the business, which was not evident when
calculating the fair values last year. Contingent consideration liabilities in
the prior period have been increased by €4,800,000 (£4,115,000) and
goodwill on acquisition of I-Vent has been increased by €4,800,000
(£4,115,000).
10. Property, plant and equipment excluding right-of-use assets
Total
2024 £000
Cost
At 1 August 2023 51,529
On business combination 185
Additions 2,774
Disposals (798)
Net foreign currency exchange differences 156
At 31 January 2024 53,846
Depreciation
At 1 August 2023 22,081
Charge for the period 2,212
Disposals (722)
Net foreign currency exchange differences 101
At 31 January 2024 23,672
Net book value
At 31 January 2024 30,174
Commitments for the acquisition of property, plant and equipment as of 31
January 2024 are £729,000 (31 July 2023: £582,000).
11. Other financial liabilities
Other financial liabilities:
2024 Foreign exchange forward contracts Contingent consideration Contingent consideration ClimaRad BV Contingent consideration Total
£000 I-Vent(1) £000 ERI £000
£000 £000
At 1 August 2023 330 4,115 8,877 7,720 21,042
Re-measurement of financial liability ─ ─ 304 ─ 304
Re-measurement of contingent consideration ─ ─ 1,000 270 1,270
Foreign exchange (195) (20) ─ ─ (215)
At 31 January 2024 135 4,095 10,181 7,990 22,401
Analysis
Current 135 2,559 ─ ─ 2,694
Non-current ─ 1,536 10,181 7,990 19,707
Total 135 4,095 10,181 7,990 22,401
The fair value of contingent consideration is calculated by estimating the
future cash flows for the acquired company. These estimates are based on
management's knowledge of the business and how the current economic
environment is likely to impact performance. The relevant future cash flows
are dependent on the specific terms of the sale and purchase agreement. For
non-current liabilities due more than one year from the balance sheet date,
the assessed contingent liability is discounted using the discount rates for
the relevant CGU. The contingent consideration was assessed based on the
current estimate of future performance of the business, discounted to present
value.
The financial liabilities to pay contingent consideration relating to the
acquisitions of I-Vent, ClimaRad, ERI, and DVS are sensitive to the estimation
of the expected future performance of each acquisition, which is used to
calculate the future amount payable. If EBITDA for each period for which
contingent consideration is measured is 10% higher than expected, contingent
consideration would be £1.4 million, £1.9 million, £1.7 million, and £1.5
million higher for I-Vent, ClimaRad, ERI and DVS respectively, discounted to
present value.
2023 Foreign exchange forward contracts Contingent consideration Contingent consideration ClimaRad BV Contingent consideration Total
£000 I-Vent(1) £000 ERI £000
£000 £000
At 1 August 2022 ─ ─ 7,052 7,080 14,132
Further consideration recognised ─ 4,131 ─ ─ 4,131
Re-measurement of financial liability ─ ─ (54) ─ (54)
Re-measurement of contingent consideration ─ ─ 1,879 640 2,519
Foreign exchange 330 (16) ─ ─ 314
At 31 July 2023 330 4,115 8,877 7,720 21,042
Analysis
Current 330 2,571 ─ ─ 2,901
Non-current ─ 1,544 8,877 7,720 18,141
Total 330 4,115 8,877 7,720 21,042
(1) An adjustment has been made during the measurement period relating to the
acquisition of I-Vent. See note 9 for further details.
12. Interest-bearing loans and borrowings
31 January 2024 31 July 2023
Current Non-current Current Non-current
£000 £000 £000 £000
Unsecured - at amortised cost
Borrowings under the revolving credit facility (maturing December 2025) ─ 71,313 ─ 79,369
Cost of arranging bank loan ─ (447) ─ (692)
─ 70,866 ─ 78,677
ClimaRad vendor loan (maturing March 2025) ─ 9,724 ─ 9,771
Other loans (maturing September 2026) ─ 702 ─ 802
Lease liabilities 3,070 26,975 3,754 27,454
Total 3,070 108,267 3,754 116,704
Revolving credit facility - at 31 January 2024
Currency Amount Termination Repayment Rate %
outstanding date frequency
£000
GBP ─ 2 December 2025 One payment Sonia + margin%
Euro 71,313 2 December 2025 One payment Euribor + margin%
Swedish Krona ─ 2 December 2025 One payment Stibor + margin%
Total 71,313
Revolving credit facility - at 31 July 2023
Currency Amount Termination Repayment Rate %
outstanding date frequency
£000
GBP ─ 2 December 2025 One payment Sonia + margin%
Euro 79,369 2 December 2025 One payment Euribor + margin%
Swedish Krona ─ 2 December 2025 One payment Stibor + margin%
Total 79,369
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 period ended 31 January 2024, Group
leverage was below 1.0:1 and therefore the margin remains at 1.25% in H2 2024.
The Group remained comfortably within its banking covenants, which are tested
semi-annually. As at 31 January 2024, the multiple of EBITDA to net finance
charges was 14.5 (31 July 2023: 17.9; 31 January 2023: 22.8), against a
covenant target ratio of 4.0, and the multiple of net borrowings to EBITDA
(leverage) was 0.7 (31 July 2023: 0.8; 31 January 2023: 0.8), against a
covenant target ratio of 3.0.
At 31 January 2024, the Group had £78,687,000 (31 July 2023: £70,631,000) of
its multicurrency revolving credit facility unutilised.
13. Fair values of financial assets and financial liabilities
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
· Level 1 - quoted (unadjusted) prices in active markets
for identical assets or liabilities;
· Level 2 - other techniques for which all inputs that
have a significant effect on the recorded fair value are observable, either
directly or indirectly; and
· Level 3 - techniques which use inputs which have a
significant effect on the recorded fair value that are not based on observable
market data.
Financial instruments carried at fair value comprise the derivative financial
instruments and the contingent consideration in note 11. For hierarchy
purposes, derivative financial instruments are deemed to be Level 2 as
external valuers are involved in the valuation of these contracts. Their fair
value is measured using valuation techniques, including a DCF model. Inputs to
this calculation include the expected cash flows in relation to these
derivative contracts and relevant discount rates.
Contingent consideration is deemed to be Level 3; see note 11 for details on
the valuation techniques used to measure the fair value.
14. Dividends paid and proposed
6 months ended 6 months ended
31 January 2024 31 January 2023
£000 £000
Cash dividends on ordinary shares declared and paid
Final dividend for 2023: 5.50 pence per share (2022: 5.00 pence) 10,879 9,881
Proposed dividends on ordinary shares
Proposed interim dividend for 2024: 2.80 pence per share (2023: 2.50 pence) 5,519 4,942
A final dividend payment of £10,879,000 is included in the consolidated
statement of cash flows relating to 2024 (2023: £9,881,000).
The Board has declared an interim dividend of 2.80 pence per ordinary share in
respect of the half year ended 31 January 2024 (6 months to 31 January 2023:
2.50 pence per ordinary share) which will be paid on 7 May 2024 to
shareholders on the register at the close of business on 2 April 2024. The
total dividend payable has not been recognised as a liability in these
accounts. The Volution EBT has agreed to waive its rights to all dividends.
15. 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.
No material related party balances, other than those transactions that have
been eliminated on consolidation, exist at 31 January 2024 or 31 January 2023.
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 (H1 2023:
Nil).
16. Glossary of terms
Adjusted basic and diluted EPS: calculated by dividing the adjusted
profit/(loss) for the period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during
the period.
Diluted earnings per share amounts are calculated by dividing the adjusted net
profit/(loss) attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the period plus
the weighted average number of ordinary shares that would be issued on
conversion of any dilutive potential ordinary shares into ordinary shares.
There are 3,128,124 dilutive potential ordinary shares at 31 January 2024 (H1
2023: 3,465,898).
Adjusted EBITDA: adjusted operating profit before depreciation and
amortisation.
Adjusted finance costs: finance costs before net gains or losses on financial
instruments at fair value and the exceptional write-off of unamortised loan
issue costs upon refinancing.
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 less the operating activities part of the
contingent consideration.
Adjusted operating profit: operating profit before adjustments to
re-measurement of contingent consideration, costs of business combinations,
amortisation of acquired inventory fair value adjustments and amortisation of
assets acquired through business combinations.
Adjusted profit after tax: profit after tax before adjustments to
re-measurement of contingent consideration, net gains, or losses on financial
instruments at fair value, costs of business combinations, amortisation of
acquired inventory fair value adjustments, amortisation of assets acquired
through business combinations and the tax effect on these items.
Adjusted profit before tax: profit before tax before adjustments to
re-measurement of contingent consideration, net gains, or losses on financial
instruments at fair value, costs of business combinations, amortisation of
acquired inventory fair value adjustments and amortisation of assets acquired
through business combinations.
Adjusted tax charge: the statutory tax charge less the tax effect on the
adjusted items.
CAGR: compound annual growth rate.
Cash conversion: is calculated by dividing adjusted operating cash flow by
adjusted EBITA.
Constant currency: to determine values expressed as being at constant currency
we have converted the income statement of our foreign operating companies for
the 6 months ended 31 January 2024 at the average exchange rate for the period
ended 31 January 2023. In addition, we have converted the UK operating
companies' sale and purchase transactions in the period ended 31 January 2024,
which were denominated in foreign currencies, at the average exchange rates
for the period ended 31 January 2023.
EBITDA: profit before net finance costs, tax, depreciation, and amortisation.
Net debt: bank borrowings and lease liabilities less cash and cash
equivalents.
Operating cash flow: EBITDA plus or minus movements in operating working
capital, less share-based payment expense, less net investments in property,
plant and equipment and intangible assets.
ROIC: measured as adjusted operating profit for the year divided by average
net assets adding back net debt, acquisition related liabilities, and historic
goodwill and acquisition related amortisation charges (net of the associated
deferred tax).
1 (#_ftnref1) The Group uses some alternative performance measures to track
and assess the underlying performance of the business. These measures include
adjusted operating profit, adjusted operating profit margin, adjusted profit
before tax, adjusted basic EPS, adjusted operating cash flow, return on
invested capital and adjusted operating cash flow conversion. The
reconciliation of the Group's statutory profit before tax to adjusted measures
of performance is summarised in note 2 to the interim condensed consolidated
financial statements. For a definition of all the adjusted and non-GAAP
measures, please see the glossary of terms in note 16 to the interim condensed
consolidated financial statements.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR VZLFFZXLXBBBRecent news on Volution
See all newsREG - Volution Group plc - Appointment of Joint Corporate Broker
AnnouncementREG - Volution Group plc Aegon Ltd - Holding(s) in Company
AnnouncementREG - Volution Group plc - Total Voting Rights
AnnouncementREG - Volution Group plc - Share Purchase by Chairman
AnnouncementREG - Volution Group plc - Holding(s) in Company
Announcement