REG - Volution Group plc - Half Year Results
13/03/2025 07:00
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RNS Number : 4496A Volution Group plc 13 March 2025
Thursday 13 March 2025
VOLUTION GROUP PLC
Interim results for the six months ended 31 January 2025
Good organic growth and largest acquisition to date completed; FY earnings
expected to be
ahead of consensus
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 2025.
RESULTS SUMMARY
Unaudited Unaudited
6 months to 6 months to
31 January 2025 31 January 2024 Change
Revenue (£m) 187.8 172.5 +8.9%
Adjusted operating profit (£m)(1) (#_ftn1) 42.6 38.6 +10.4%
Adjusted operating profit margin (%)(1) 22.7% 22.4% +0.3pp
Adjusted profit before tax (£m)(1) 38.6 35.0 +10.4%
Adjusted basic EPS (pence)(1) 15.3 13.7 +11.7%
Adjusted operating cash flow (£m)(1) 47.9 38.8 +23.4%
Statutory operating profit (£m) 31.6 33.7 (6.2)%
Statutory profit before tax (£m) 25.7 29.0 (11.3)%
Statutory basic EPS (pence) 9.5 11.1 (14.4)%
Interim dividend per share (p) 3.4 2.8 +21.4%
Return on Invested Capital (ROIC)(1) 25.0% 27.7% (2.7)pp
Adjusted operating cash flow conversion(1) 110% 98% +12.0pp
FINANCIAL HIGHLIGHTS
· Group revenue up 8.9%; +4.0% (cc) organic, +6.6% inorganic and
-1.7% impact from foreign exchange translation
· Adjusted operating profit of £42.6m, up 10.4% on the prior year,
with expansion of adjusted operating margin to 22.7% (H1 2024: 22.4%)
· Statutory profit before tax down 11.3% to £25.7 million (H1 2024:
£29.0 million) due to non-underlying costs associated with Fantech
acquisition (£6.1m) and £3.1m contingent consideration remeasurement
relating to ClimaRad and ERI
· Adjusted operating cash flow up 23.4% on prior year to £47.9
million (H1 2024: £38.8 million), excellent cash conversion of 110% (H1 2024:
98%)
· Strong Balance Sheet (leverage ex-leases at 1.5x) and robust ROIC of
25% after spending £106.7m on the acquisition of Fantech and £29.5m on the
purchase of the minority share of ClimaRad.
· Interim dividend up 21.4% to 3.4 pence per share (H1 2024: 2.8
pence) demonstrating the Board's confidence in the Group's prospects
OPERATIONAL HIGHLIGHTS
· Fantech acquisition completed 2 December 2024, integration
progressing well with strong local management team, first 2 months trading
good
· Strong organic growth in UK residential, with our extensive product
range and tailwind from regulations, improved trading in Central Europe, and
good performance in Australia, contrasting weaker market conditions in New
Zealand, UK OEM and Nordics.
· Procurement and engineering component cost out initiatives, improved
product mix, and good factory efficiencies have delivered an organic
enhancement to profit margins
· Focus on inventory optimisation delivering results via inflow of
working capital and logistics / storage cost efficiencies
· New Regional Leadership structure (Europe and Australasia MDs)
creates bandwidth and platform for future growth
HEALTHY AIR, SUSTAINABLY
· Recycled plastics usage increased to 84.6% (H1 2024: 77.0%) driven
by further progress in the UK and increased adoption in the Nordics
· Low-carbon revenue proportion diluted by acquisition of Fantech,
with 67.8% of revenue (70.4% excluding Fantech) from low-carbon, energy saving
products (H1 2024: 70.5%)
· Received certification of our SBTi aligned carbon reduction targets,
absolute scope 1 and 2 GHG emissions reduce 63% by FY2034 (from a FY2023 base
year) and absolute scope 3 GHG emissions reduce 58.8%
· Good progress on health and safety improvements and awareness,
reportable accident frequency rate down to 0.15 (FY 2024: 0.20)
Commenting on the Group's performance, Ronnie George, Chief Executive Officer,
said:
"With these results, we have once again demonstrated our ability to outperform
our markets. We delivered a strong performance in the first half, with good
organic growth supplemented by two months of contribution from Fantech, our
largest acquisition to date. Our adjusted operating margin was ahead of the
prior year, whilst our adjusted earnings growth and cash performance were
strong. These results are testament to our leading market positions, broad
geographic exposure, and our relentless focus on sales and product initiatives
and customer service excellence. Although the general economic backdrop
remained weak, we continued to benefit from our structural growth drivers:
ever tightening building regulations, increasing awareness of the importance
of indoor air quality, and the need to reduce energy costs. I am hugely
proud to lead our organisation and to witness daily the passion and commitment
our employees show in providing our customers with leading solutions to
improve indoor air quality.
We have good momentum going into the second half, supported by our ongoing
growth initiatives, focus on efficiency and costs, and the benefits that
Fantech is bringing to the Group. As a result, the Board expects earnings
for the Full Year to be ahead of consensus(1)."
Note:
1. The Board believes adjusted earnings per share market forecasts for
the year ending 31 July 2025 are in the range 30.3p - 31.3p with a consensus
of 30.8p.
-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, Thursday 13 March
2025, 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 Thursday 13 March 2025.
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 29 key brands across three regions:
UK: Vent-Axia, Manrose, Diffusion, National Ventilation, Airtech, Breathing
Buildings, Torin.
Continental Europe: Fresh, PAX, VoltAir, Kair, Air Connection, inVENTer,
Ventilair, ClimaRad, ERI Corporation, VMI, I-Vent.
Australasia: Simx, Ventair, Manrose, DVS, Fantech, Ideal Air, NCS Acoustics,
Air Design, Major Air, Systemaire, Burra Steel.
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
Volution has again delivered a strong revenue and adjusted profit performance
in the first half of the year. The backdrop in our end markets continues to be
characterised by inflationary risks, higher than usual interest rates and low
levels of construction activity, especially in the area of new build projects.
Nevertheless, we continue to benefit from the ongoing tightening of building
regulations and an increasing awareness of the importance of indoor air
quality, and our leading market positions and company initiatives enabled us
to outperform the wider market.
With over 2,200 employees in the Group, our strong performance would not have
been possible without the outstanding commitment and efforts in each of our
local markets. We have yet again made excellent progress with our purpose of
providing "Healthy air, sustainably".
In recent half and full year updates it has become commonplace to comment on
the challenging end market conditions in which we operate. I am proud to have
led an organisation that has consistently delivered revenue and earnings
growth and is a testament to our increasing geographic and end market
diversity. In the first half of the year, we delivered organic growth of 4.0%
(cc), in the middle of our long term 3-5% range, and completed the largest
acquisition in our history.
The acquisition of the Fantech Group of companies, based in Australia and New
Zealand, was completed at the beginning of December 2024. This is a
significant milestone for Volution, our largest acquisition to date by some
distance, and consolidates our position as the market leader for residential
and commercial ventilation in both geographies. Having spent considerable time
with the senior management team and colleagues in both Australia and New
Zealand, most recently at the end of February 2025, it further confirms our
belief that we have added a strong and desirable business in the region. The
first few months of trading has been positive whilst the integration is
progressing well, and we are pleased to welcome our new colleagues to the
Volution Group. Our functional teams in both innovation and procurement, as
well as our local managing directors across the Group, have already identified
several opportunities and initiatives to enhance our market positioning and
further increase profitability.
At the end of December 2024, we also completed the purchase of the final 25%
of shares in ClimaRad in the Netherlands. ClimaRad was a strong revenue and
profit growth performer again in the first half of the year. I would like to
thank the previous owners for their support in helping us both integrate and
improve performance of this brand in the four years since the initial 75%
acquisition. These two acquisitions, again fully financed from our own cash
and new debt facilities, will provide further earnings growth in the period
ahead.
On 10 September 2024, the Group refinanced its bank debt. The Group now has in
place a new £230 million multicurrency 'Sustainability Linked Revolving
Credit Facility', together with an accordion of up to £70 million. The
facility matures in September 2027, with the option to extend for up to two
additional years. The old facility was repaid in full.
With debt leverage at 1.5x, proforma LTM Fantech, we have good headroom to
continue to pursue new opportunities for further growth. We adopt a
disciplined and focussed approach to opportunities and with the acquisition of
Fantech, activities in Australasia have moved the Group towards a 60/40
residential vs commercial revenue split having been traditionally around
70/30. Attractive commercial acquisitions will form an increasingly important
element of our M&A approach, alongside our strong desire to acquire
further residential opportunities in new or existing countries in the three
geographic regions where we currently operate.
Our industry continues to benefit from helpful regulatory tailwinds, where
decarbonising of new and existing buildings is essential in delivering against
long term country specific emission reduction targets. Awareness of the
importance of high quality, energy efficient and increasingly heat recovery
ventilation for health inside buildings grows every year. The UK, with a
significant stock of public and private rental properties, will formally
introduce Awaabs law in October 2025, a mandatory requirement for social
housing landlords to repair all emergency hazards within 24 hours.
During the first half of the year, we have continued to strengthen our
management organisation to ensure that we have the bandwidth and capability to
grow. We have appointed two significant regional Managing Director roles in
Europe and one in Australasia. These regional leadership roles, reporting
directly to me as Chief Executive, sit alongside our strong functional
leadership. We will further work to embed these changes in the second half of
the year, the balance between greater empowerment of the senior leadership
team on a wider scale and ensuring we have the end market agility to respond
and react to opportunities as they arise. Our consistently strong revenue and
adjusted profit growth performance since listing in 2014 owes a considerable
amount to the entrepreneurial and agile approach we have in managing the
business day-to-day, and maintaining this culture is a key priority.
During the period we have experienced some inflationary pressures across all
aspects of our supply chain. These input cost pressures in both materials and
labour costs, as well as currency headwinds, were offset through our ongoing
operational excellence programmes. Procurement and technical led value
engineering and innovation component cost out initiatives have yielded
substantial benefits. Alongside an improved product mix, factory efficiency
and operating leverage gains and further success with our cross-selling
initiatives we have delivered an organic enhancement to both our gross and
operating profit margins. The operational excellence programme extends into
our working capital performance which has assisted in underpinning a strong
operating cash conversion in the period. Further gains are expected from these
initiatives helping us to offset the impact of the substantial increase in
national insurance from 6 April 2025 in the UK and to mitigate labour and
facility cost inflation pressures from around the Group.
Our local and agile market teams and wide product portfolio underpinned by
excellent levels of customer service, gives us confidence in the pricing power
of our local market leading brands.
In October 2024 we completed our fourth Group wide Management Development
Programme (MDP) and planning is underway to kick off MDP 5 later in calendar
year 2025. This well-established training and development programme has
yielded excellent results with many of our participants growing into more
senior roles and engendering significant loyalty and retention.
Results
Revenue grew by 8.9%, 10.6% on a constant currency (cc) basis, organic growth
of 4.0% at cc, inorganic growth of 6.6% with a negative impact of 1.7% from
foreign currency translation.
Adjusted operating profit increased 10.4% to £42.6 million in H1 2025 from
£38.6 million in the prior period. Statutory operating profit was £31.6
million (H1 2024: £33.7 million). Adjusted operating margins increased by
30bps to 22.7% (H1 2024: 22.4%) despite the margin-dilutive impact from the
acquisition of Fantech.
Adjusted profit before tax was £38.6 million, up 10.4% versus the prior
period (H1 2024: £35.0 million). Statutory profit before tax was £25.7
million, down 11.3% versus the prior period (H1 2024: £29.0 million). See
financial review for more details.
Adjusted basic earnings per share increased by 11.7% to 15.3 pence (H1 2024:
13.7 pence). Statutory basic earnings per share decreased by 14.4% to 9.5
pence (H1 2024: 11.1 pence).
Adjusted operating cash inflow increased to £47.9 million (H1 2024: £38.8
million), giving a cash conversion rate of 110% (H1 2024: 98%).
Acquisitions
On 2 December 2024 we acquired Fantech, in Australasia, for an initial
consideration of AUD$220 million (£112.0 million) on a debt free cash free
basis, with a further non-contingent consideration of AUD$60 million (£29.6
million) payable twelve months after the completion date. With our balance
sheet strength and headroom (leverage ex leases of 1.5x, proforma LTM
Fantech), we remain focused on adding further earnings accretive acquisitions
to the Group. Return on Invested Capital (ROIC) was strong at 25% despite
the impacts of Fantech and ClimaRad acquisitions.
Regulatory Drivers and indoor air quality
Regulations aimed at improving energy performance of buildings continue to be
a supportive trend in our markets as shown by our performance in UK
residential new build.
In the UK we are waiting for the Future Homes Standard to be published in its
final form, however through our trade associations we continue to work with
the Department for Energy Security and Net Zero on the Home Energy Model. Both
are due for publishing later in 2025.
Following the recast of the Energy Performance of Buildings Directive, article
3 requires all EU countries to establish a National Building Renovation Plan
to be submitted to the Commission by 31 December 2025. These will be assessed
and returned with any recommendations for a final plan due by 31 December
2026. The plans are designed to ensure the renovation of the national stock of
residential and non-residential buildings into highly efficient and
decarbonised stock by 2050.
In New Zealand NZS4303 has been open for public consultation. This standard is
used in the Building Regulation document G4 and covers continuous ventilation.
In Australia AS1668.2:24 was released which will be adopted at the release of
NCC25 due second half of FY25. This will provide guidance on continuous
ventilation for high performance dwellings for the first time.
Focus on sustainability
We are proud to announce that the Science Based Targets initiative (SBTi) has
assessed and approved our Company's Near-Term and Net-Zero targets. This
recognition reaffirms our dedication to ambitious, science-based climate
action aligned with global efforts to limit temperature rise to 1.5°C.
The proportion of our revenue from low carbon, energy saving products was
67.8%. Excluding Fantech it would have been 70.4%, consistent with prior
year (H1 2024: 70.5%). Excluding Fantech our proportion of sales of heat
recovery products increased to 32.8% (H1 2024: 30.7%).
The proportion of recycled plastics used in our manufacturing increased to
84.6% (H1 2024: 77.0%). This was driven primarily by the UK with greater
participation from the Nordics.
Keeping our colleagues safe remains our highest priority, and we are pleased
that our reportable accident frequency rate has decreased to 0.15 per 100,000
hours worked compared to 0.20 for FY24.
Interim dividend
The Board has declared an interim dividend of 3.4 pence per share, up 21.4%
(H1 2024: 2.8 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 6 May 2025 to shareholders on the register at the
close of business on 28 March 2025.
Outlook
With these results, we have once again demonstrated our ability to outperform
our markets. We delivered a strong performance in the first half, with good
organic growth supplemented by two months of contribution from Fantech, our
largest acquisition to date. Our adjusted operating margin was ahead of the
prior year, whilst our adjusted earnings growth and cash performance were
strong. These results are testament to our leading market positions, broad
geographic exposure, and our relentless focus on sales and product initiatives
and customer service excellence. Although the general economic backdrop
remained weak, we continued to benefit from our structural growth drivers:
ever tightening building regulations, increasing awareness of the importance
of indoor air quality, and the need to reduce energy costs. I am hugely
proud to lead our organisation and to witness daily the passion and commitment
our employees show in providing our customers with leading solutions to
improve indoor air quality.
We have good momentum going into the second half, supported by our ongoing
growth initiatives, focus on efficiency and costs, and the benefits that
Fantech is bringing to the Group. As a result, the Board expects earnings
for the Full Year to be ahead of consensus.
Ronnie George
Chief Executive Officer
12 March 2025
Regional Review
United Kingdom
Market sector revenue 6 months to 6 months to Growth Growth (cc)
31 Jan 2025 31 Jan 2024 % %
£m £m
UK
Residential 55.1 49.5 11.4 11.4
Commercial 14.4 15.2 (5.5) (5.5)
Export 6.8 5.7 20.1 21.6
OEM 7.0 7.4 (5.7) (4.8)
Total UK Revenue 83.3 77.8 7.1 7.3
Adjusted operating profit 21.4 18.9 13.5
Adjusted operating profit margin (%) 25.7 24.3 1.6pp
Statutory operating profit 20.5 17.8 14.9
UK revenue grew by 7.1% (7.3% at constant currency (cc)) to £83.3 million
with adjusted operating profit at £21.4 million, an increase of £2.5 million
(13.5%) on the prior year. Adjusted operating profit margin increased to 25.7%
(H1 2024: 24.3%), an increase of 1.6 percentage points, arising from a
favourable mix, good pricing discipline and the operational excellence
programme across the Group helping to reduce product costs.
Residential revenue growth of 11.4% in the first half of the year was an
outstanding performance along with Export (growth of 21.6% at cc) and more
than offset the more difficult commercial and OEM end market. The residential
performance is especially pleasing when considering the strong growth that we
have consistently delivered in recent years.
We continue to prioritise excellent customer service and product stock
availability as a key ingredient of our business model. In residential
ventilation our preference for, and focus on, the distribution route to market
has helped us to consistently scale volumes and gain market share.
Residential
Revenue in our Residential sector was up 11.4% to £55.1 million (H1 2024:
£49.5 million).
Segmenting our UK residential activities into three main areas, UK public and
private refurbishment and new residential activity, it has been another strong
period of growth.
Since the publicity around Awaab Ishak's sad death in 2020 and the significant
increase in awareness of the risks to health of mould and condensation in
residential dwellings, we have seen a positive and prolonged period of
activity in the sector focussing on improving the quality of the housing
stock. We are pleased to report that whilst there is a significant catch-up
period necessary to fully achieve what is commonly referred to as a "decent
homes" standard, the industry has made a huge effort to place insulation,
ventilation and improved indoor air quality and living standards at the centre
of the refurbishment strategy. The significant volume of dwellings in need of
upgrade and the added problem of relatively expensive heating costs and
affordability issues has made the problem more pressing.
Volution, mainly through our market leading Vent-Axia brand, has developed a
leading range of social housing ventilation solutions. Unrivalled in the
supply of decentralised heat recovery and with the widest range of continuous
running ventilation devices in this market, we are benefitting from a positive
market and making new account gains. Utilising our key distributor
relationships to ensure stock is always close to the contractor we are proud
to work with the largest and smallest merchants in the UK in true partnership
fashion.
In private refurbishment we are also experiencing the same increasing
awareness about indoor air quality. With considerable success in growing our
positive input ventilation ranges and again partnering through our key
distributors to position and communicate our wide product portfolio it has
been another successful period. Our sales of more traditional intermittent
exhaust fan ranges are moving towards continuous, more energy efficient
solutions and this trend is expected to continue for the long term.
Despite the weaker new build construction activity reported by housebuilders
in the UK over the last six months, Volution has delivered its strongest
residential revenue growth in this area. We have long signalled the move to
"continuous system" ventilation in new house construction, and this has moved
materially over the last two years. The changes to Part F and Part L of the
building regulations in June 2022 have made a significant difference to the
way developers design and build new homes. Coupled with Part O of the building
regulations, dealing with the overheating risks in new homes, our innovative
and comprehensive product portfolio has enabled us to grow market share. Our
decentralised system ranges as well as our wide range of central systems and
central heat recovery product ranges have again experienced a strong period of
growth. Especially pleasing is the strong project order intake we experienced
in the first half of the year and the significant investments we are making in
our Dudley, West Midlands facility, to support the demand increase. Launched a
few years ago now, we are seeing strong demand for our application software
controlled Econiq ranges complementing strong demand across all mechanical
ventilation heat recovery ranges (MVHR). Early successes with our MVHR with
assisted cooling are helping customers deal with the overheating risks in new
buildings and this is just one example of product ranges focussed on cooling
as well as ventilation in the new build sector.
Commercial
Revenue in our Commercial sector was down 5.5% to £14.4 million (H1 2024:
£15.2 million). The composition of the revenue decline was a c. 10% decline
in the first quarter of FY2025, where we faced strong comparators from the
prior period, with a small revenue growth of c. 1.5% in the second quarter.
The material component of the revenue decline in the first half of the year
was from our fan coil project sales. The insolvency of a long term and loyal
contractor customer resulted in work transferring to other customers where our
relationships were not as strong. This resulted in revenue for fan coils
reducing as we established wider links with the market and has resulted in a
step up in our order intake in the first half of the year.
Despite a disappointing revenue decline in the first half of the year we have
made good progress with our strategic initiatives. New, stronger leadership in
commercial ventilation sales has been in place since spring 2024. A revamp and
improved focus of the commercial team has reinvigorated our approach and
whilst the revenue decline is disappointing, we are now seeing a strong
increase in our project order intake. The success of our focus on order intake
under our Vent-Axia and Breathing Building brands has necessitated a capacity
expansion investment in one of our UK factories to support the anticipated
uptick in demand. Our natural and hybrid range as well as our new Apex range
of centralised commercial heat recovery units is forecast to deliver stronger
revenue in the second half of the year. Our fan coil ranges for high rise
commercial buildings have been enhanced in the year and follows the same
improving order intake trend seen in our commercial hybrid and heat recovery
ranges.
Export
Revenue in our Export sector was up 20.1% (21.6% at cc) to £6.8 million (H1
2024: £5.7 million).
Following a strong performance in the prior year our third-party exports from
the UK continue to grow. Predominantly focussed on our heat recovery and
premium ranges for refurbishment we have enjoyed a strong first half of the
year. Our longstanding partnership in Ireland was renewed for another five
years in October 2024 and we are seeing good growth in our more sophisticated
and higher added value solutions.
OEM
Revenue in our OEM sector was down 5.7% (down 4.8% at cc) to £7.0 million (H1
2024: £7.4 million).
Following a difficult two-year period we have now fully implemented the
turnaround plan in OEM. Operating from our now consolidated single location in
Swindon where we made significant infrastructure investment in the last twelve
months, OEM has made a good contribution to the profit improvement in the
year. Focussing on a narrower range of products, where we can drive excellence
in terms of product quality and service, we have delivered factory efficiency
gains and indirect cost optimisation to enhance profitability. Supply chains
have normalised, and customers have utilised their excess inventories, so we
are now experiencing a more consistent and reliable level of monthly revenues.
Continental Europe
Market sector revenue 6 months to 6 months to Growth Growth (cc)
31 Jan 2025 31 Jan 2024 % %
£m £m
Continental Europe
Nordics 23.9 25.4 (5.8) (3.2)
Central Europe 44.2 43.1 2.7 5.7
Total Continental Europe revenue 68.1 68.5 (0.5) 2.4
Adjusted operating profit 16.4 16.6 (0.9)
Adjusted operating profit margin (%) 24.1 24.2 (0.1)pp
Statutory operating profit 13.7 13.6 0.9
Revenue in Continental Europe was £68.1 million, a decline of 0.5% (growth of
2.4% at constant currency (cc)). Adjusted operating profit was £16.4 million,
down from £16.6 million, in the same period in the prior year.
Adjusted operating margins were broadly unchanged at 24.1% (H1 2024: 24.2%).
The European market can be characterised as experiencing generally weak
demand, especially in areas of new construction. Our organic growth of 2.4% at
cc was therefore a pleasing result.
Nordics
Revenue in the Nordics was £23.9 million (H1 2024: £25.4 million), a
decrease of 5.8% (decline of 3.2% at cc).
The Nordic market continues to be challenging. New build construction has been
weak with our revenues in both Denmark and Finland declining in the period.
Conversely our refurbishment revenues in the Nordics have performed with
greater resilience. Distributor and merchant destocking has largely been
completed and whilst the market is still weak, we are seeing a slight pickup
in activity levels. Whilst still a small proportion of our overall revenue, we
continue to see good traction with cross selling initiatives most notably
decentralised heat recovery products for refurbishment applications.
Central Europe
Revenue in Central Europe was £44.2 million (H1 2024: £43.1 million), an
increase of 2.7% (5.7% at cc).
In Germany our InVENTer brand has been attempting to pivot towards a greater
refurbishment exposure. With over two years of revenue declines, a weak new
build market and outlook still quite negative, we have delivered a small
revenue growth in the first half of the year. Trade association statistics
confirm our market share by volume is broadly constant with revenue growth
being supported by recently launched products. An upgraded range of improved
decentralised heat recovery with acoustic silencing and the relatively new
"Taris" range of exhaust fans have further enhanced our range. Working more
closely with the Dutch team in ClimaRad, we still believe there is greater
potential for our larger airflow decentralised product ranges to get traction
in Germany.
Having increased our RMI exposure we are confident that we are well positioned
in Germany for when new build residential construction strengthens.
ClimaRad in the Netherlands has continued the strong revenue growth trajectory
of the previous year. Our market leading decentralised heat recovery ranges
performed well in the first half of the year and the project order intake was
equally strong. Products are manufactured in our low-cost facility operating
from Sarajevo, Bosnia and several new investments were made in the first half
of the year to support demand. Whilst the existing product ranges are
relatively young, we have commenced the review and planning process for the
next range of decentralised heat recovery for this market. Continuing the
theme of decentralised heat recovery, this time in Slovenia, demand in the
first half of the year has been weaker than compared to the strong demand we
experienced in the first half of last year. We are now fully independent with
our own Group manufactured range of products having replaced a third-party
sourced ventilation device with our own "Taris" range of exhaust fans.
It was a similar story in Belgium where our exposure is more towards the
supply of central systems for new construction. Econiq mechanical ventilation
with heat recovery is gaining traction and we delivered a small growth in
Belgium in the period. It is pleasing to see these relatively new ranges
gaining traction. France delivered stronger revenue growth and is benefitting
from the cross-selling activities and utilising the Groups wide product
portfolio. Product cost reduction initiatives, launched shortly after the
acquisition in April 2023 have also started to yield improvements with good
momentum on product gross margin into the second half of FY2025. Our market
share in France remains low and there are product gaps that we have identified
that we will infill over the next two years with the objective of gaining
share in adjacent ventilation categories.
Our revenue from aluminium heat exchangers, sold under our Energy Recovery
Industries (ERI) brand, relies heavily on new construction projects, which
have been continued to be weaker in Europe during the period. Despite the
weaker market ERI were able to increase revenues in the period. A significant
product development programme has been under way since acquisition, and we are
extending our product range to include rotary wheel heat exchangers to
complement our existing range of plate heat exchangers. ERI will benefit from
further expansion over the coming years as we invest locally in product
development and new infrastructure to support our revenue growth.
Australasia
Market sector revenue 6 months to 6 months to Growth Growth (cc) Organic
31 Jan 2025 31 Jan 2024 % % Growth (cc)
£m £m %
Australasia
Residential 26.8 24.8 7.9 10.8 (1.1)
Commercial 9.6 1.4 572.6 576.1 (11.9)
Total Australasia revenue 36.4 26.2 38.8 41.7 (1.7)
Adjusted operating profit 7.8 6.3 24.3
Adjusted operating profit margin (%) 21.4 23.9 (2.5)
Statutory operating profit 2.3 5.5 (57.3)
Revenue in Australasia was £36.4 million (H1 2024: £26.2 million) and grew
by 38.8% (41.7% at constant currency (cc)) due to the acquisition of Fantech,
with organic revenue declining by 1.7% at cc. Adjusted operating profit
increased by 24.3% to £7.8 million, with our adjusted operating margin
decreasing to 21.4% (H1 2024: 23.9%) due to the lower margin in Fantech.
We were delighted to complete the acquisition of the Fantech Group of
companies in Australasia, our largest acquisition to date, providing us with a
significant and more material position in the local market. With this
important acquisition Volution is the leader in both the residential and
commercial market segments in New Zealand and Australia. Our local brands,
extensive logistics operations and widest available product portfolio provides
us with an excellent platform for further revenue growth in the region. With
over 320 employees and a strong local management team, the acquisition has
bedded in excellently in the first couple of months since completion.
Our 200-day integration process is well advanced, aided by the quality of both
the management and operating systems. We have made excellent progress with the
process and have already identified several exciting product cross selling
initiatives which will roll out in the second half of the year. Fantech Group
companies also share common component sourcing, and the innovation and
procurement teams are working on initiatives to reduce material input costs.
Having spent a considerable time "evaluating" the opportunity to acquire the
group, the first months of trading and integration have confirmed our high
expectations in full.
Fantech entered the Group at the beginning of December 2024, so in the first
half of the year we have benefitted from just two months of trading. December
and January are off season months in the region and so the overall
contribution to the Group's performance in the first two months is typically
lower than a normal two-month period.
Organic activity in the region can be broadly characterised as a continuing
weak economy and revenue performance in New Zealand and Australia performing
very well. Organic revenue declined 1.7% (cc) in the period with Simx and DVS
brands in New Zealand markedly lower than the prior year and Ventair in
Australia offsetting by being materially higher. Our sense is that the New
Zealand construction activity is bottoming out and we have recently seen in
February 2025 a cut in local interest rates from 4.25% to 3.75%, a 50-bps
reduction, with construction activity expected to improve in the period ahead.
Despite these difficult end market conditions in New Zealand and benefitting
from our strong cost control and initiatives, we have delivered a consistent
organic operating profit margin. The reduction in the rate from 23.9% in H1
2024 to 21.4% in H1 2025 reflects the margin dilutionary impact of the Fantech
acquisition.
In Australia we have performed very well and our EC, low carbon ceiling fans
are growing strongly. The move from AC to low carbon ceiling fans has moved
quicker than anticipated in the last couple of years and we are continuing to
bring innovative new low carbon solutions to market.
Since last updating on the regional performance in our full year results for
2024 I have had the opportunity to visit our operating companies on several
occasions. With the strong leadership that came into the group with the
Fantech acquisition, and a newly hired leader in New Zealand covering our Simx
and DVS brands, I am confident that we have an experienced and motivated team
who will further develop our comprehensive opportunity across all aspects of
the market.
FINANCIAL REVIEW
6 months ended 31 January 2025 6 months ended 31 January 2024
Statutory Adjustments Adjusted Statutory Adjustments Adjusted
£m £m results £m £m results
£m £m
Revenue 187.8 ─ 187.8 172.5 ─ 172.5
Gross profit 91.7 4.2 95.9 87.6 ─ 87.6
Administration and distribution costs excluding the costs listed below (53.3) ─ (53.3) (49.0) ─ (49.0)
Amortisation of intangible assets acquired through business combinations (4.9) 4.9 ─ (4.8) 4.8 ─
Costs of business combinations (1.9) 1.9 ─ (0.1) 0.1 ─
Operating profit 31.6 11.0 42.6 33.7 4.9 38.6
Re-measurement of financial liability (0.4) ─ (0.4) (0.3) ─ (0.3)
Re-measurement of contingent consideration (3.1) 3.1 ─ (1.3) 1.3 ─
Net gain on financial instruments at fair value 1.2 (1.2) ─ 0.2 (0.2) ─
Other net finance costs (3.6) ─ (3.6) (3.3) ─ (3.3)
Profit before tax 25.7 12.9 38.6 29.0 6.0 35.0
Income tax (6.8) (1.5) (8.3) (7.0) (1.0) (8.0)
Profit after tax 18.9 11.4 30.3 22.0 5.0 27.0
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.
Results review
Group revenue for the six months ended 31 January 2025 grew 8.9% to £187.8
million (H1 2024: £172.5 million). Organic growth at constant currency (cc)
was 4.0%, whilst the acquisition of Fantech in Australia (completed 2 December
2024) delivered inorganic growth of 6.6% in the period. This was offset in
part by an adverse 1.7% impact from movements in foreign exchange.
Adjusted operating profit grew by 10.4% to £42.6 million (H1 2024: £38.6
million) with adjusted operating margins expanding to 22.7%, up from 22.4% in
the prior period.
Statutory operating profit declined by 6.2% to £31.6 million (H1 2024: £33.7
million). The £11.0 million of adjustments from statutory to adjusted
operating profit all related to acquisitions and comprised:
· Amortisation of acquired inventory (Fantech) fair value
adjustment of £4.2 million (H1 2024: £nil)
· Amortisation of intangible assets acquired through business
combinations was £4.9 million (H1 2024: £4.8 million)
· Cost associated with business combinations were £1.9 million (H1
2024: £0.1 million) due to the acquisition of Fantech
Adjusted profit before tax was £38.6 million, up 10.4% versus the prior
period (H1 2024: £35.0 million).
Statutory profit before tax was £25.7 million, down 11.3% versus the prior
period (H1 2024: £29.0 million). The difference of £12.9 million between
adjusted and statutory profit before tax consists of the £11.0 million of
adjusting items described above and in addition:
· Re-measurement of contingent consideration was £3.1 million (H1
2024: £1.3 million) relating to the acquisition of the minority shareholding
of ClimaRad in the period and the acquisition of ERI
· Gain due to the fair value measurement of financial instruments,
gain of £1.2 million (H1 2024: gain of £0.2 million)
Adjusted basic earnings per share increased by 11.7% to 15.3 pence (H1 2024:
13.7 pence). Statutory basic earnings per share decreased by 14.4% to 9.5
pence (H1 2024: 11.1 pence).
Cash generation in the period was excellent, underpinned by strong working
capital performance, with adjusted operating cash conversion of 110% (H1 2024:
98%).
The Board has declared an interim dividend of 3.4 pence per share, up 21.4%
(H1 2024: 2.8 pence).
Finance costs
Adjusted finance costs increased to £3.6 million (H1 2024: £3.3 million),
reflecting the increase in bank debt in the last two months of the period due
to the acquisition of Fantech and the 25% purchase of ClimaRad. 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 5.0%
compared to 5.1% in the first half of financial year 2024.
Statutory net finance costs were £2.4 million (H1 2024: £3.1 million)
including £1.2 million of net gain on the revaluation of financial
instruments (H1 2024: gain £0.2 million).
Currency impact
Aside from Sterling, the Group's key trading currencies for our non-UK
businesses are the Euro, representing approximately 25% of Group H1 revenues,
Australian Dollar (approximately 13%), Swedish Krona (approximately 8%) and
New Zealand Dollar (approximately 7%). 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.
All of our principal non sterling currencies weakened relative to sterling,
creating an adverse translational impact on revenue and profit.
The average rates of Sterling versus our principal non-Sterling trading
currencies are shown in the table below.
Average rate H1 FY25 Average rate H1 FY24 Movement
Euro 1.194 1.158 3.1%
Swedish Krona 13.684 13.382 2.3%
New Zealand Dollar 2.158 2.073 4.1%
Australian Dollar 1.9624 1.920 2.2%
As at 31 January 2025 the Group had borrowings of £158.9 million (31 July
2024: £49.8 million), of which £41.4m was denominated in Euros, £14.6m in
Swedish Krona and £102.9m in Australian dollars. The increase since the year
end was due to the acquisition of Fantech and the purchase of the 25% of
ClimaRad. The Sterling value of these foreign currency denominated loans, net
of cash, decreased by £2.5 million as a result of exchange rate movements (H1
2024: increased by £0.8 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 $25 million).
Taxation
Our underlying effective tax rate, on adjusted profit before tax, was 21.5%.
This compares with a full year FY2024 rate of 21.8%, the decrease of 0.3
percentage points being attributable to increased levels of patent box relief
in the UK.
Moving forward with the higher rate of tax in Australia (30%) we would expect
our effective tax rate to increase due to the acquisition of Fantech (two
months impact only in H1 2025). We expect our medium term underlying effective
tax rate to be in the range of 22% to 25% of the Group's adjusted profit
before tax.
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
110% (H1 2024: 98%).
Working capital decreased by £1.0 million in the period (H1 2024: increase of
£2.5 million). Inventories reduced by £1.2 million (H1 2024: £2.9 million).
Capital expenditure in the period was £2.8 million (H1 2024: £3.5 million),
with new product development programs (£0.5 million), vehicles (£0.4
million) and tooling and machinery (£0.8 million) the primary areas of spend.
Dividend payments in the period were £12.3 million (H1 2024: £10.9 million),
whilst tax payments were also higher at £8.2 million (H1 2024: £7.2
million).
Acquisition spend consisted of £106.7 million (H1 2024: £8.6 million)
related to the acquisition of Fantech, in Australasia, for an initial
consideration of AUD$220 million (£112.0 million) on a debt free cash free
basis, as well as the purchase of the remaining 25% of ClimaRad (£29.5
million). An additional non contingent consideration of AUD$60 million
(£29.6 million) will be payable in respect of Fantech twelve months after the
completion date. (see note 9).
Net debt at 31 January 2025 was £186.8 million (H1 2024: £84.2 million) and
comprised of bank borrowings of £158.9 million (H1 2024: £71.3 million), net
of cash and cash equivalents of £10.7 million (H1 2024: £17.1 million) and
including lease liabilities of £38.6 million (H1 2024: £30.0 million). Net
debt (excluding lease liabilities) of £148.2 million (H1 2024: £54.2
million) represents leverage of 1.5x, proforma LTM Fantech, adjusted EBITDA
(H1 2024: 0.7x).
6 months to 6 months to
31 January 2025 31 January 2024
£m £m
Opening net debt at 1 August (57.6) (89.3)
Movements from underlying business operations:
Adjusted EBITDA(1) 48.7 43.9
Movement in working capital 1.0 (2.5)
Share-based payments 1.0 0.9
Capital expenditure (2.8) (3.5)
Adjusted operating cash flow: 47.9 38.8
- Interest paid net of interest received (3.0) (2.8)
- Income tax paid (8.2) (7.2)
- Business combination related operating costs (1.9) (0.1)
- Dividend paid (12.3) (10.9)
- Purchase of own shares by the Employee Benefit Trust (1.3) (2.7)
- FX on foreign currency loans/cash 2.5 (0.8)
- Issue costs of new borrowings (1.8) ─
- Lease liabilities (12.7) 1.2
- Payments of lease liabilities (2.2) (1.8)
Movements from acquisitions:
- Acquisition of remaining 25% of ClimaRad (29.5) ─
- Acquisitions in the year, net of cash acquired (106.7) (8.6)
Closing net debt at 31 January (186.8) (84.2)
6 months to 6 months to
31 January 2025 31 January 2024
£m £m
Bank debt (158.9) (71.3)
Cash 10.7 17.1
Net debt (excluding lease liabilities) (148.2) (54.2)
Lease liabilities (38.6) (30.0)
Closing net debt at 31 January (186.8) (84.2)
(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 2025 31 January 2024
£m £m
Net cash flow generated from operating activities 40.6 35.0
Capital expenditure (2.8) (3.5)
UK and overseas tax paid 8.2 7.2
Cash flow relating to business combination costs 1.9 0.1
Adjusted operating cash flow 47.9 38.8
Bank facilities, refinancing and liquidity
On 10 September 2024, the Group refinanced its bank debt. The Group now has in
place a new £230 million multicurrency 'Sustainability Linked Revolving
Credit Facility', together with an accordion of up to £70 million. The
facility matures in September 2027, with the option to extend for up to two
additional years. The old facility was repaid in full.
At 31 January 2025, the Group had £71.1 million of undrawn, committed bank
facilities (31 July 2024: £100.2 million) and £10.7 million of cash and cash
equivalents (31 July 2024: £18.2 million).
High returns on invested capital (ROIC)
The Group's ROIC (pre-tax) for the period was 25.0%, 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 reduction in ROIC from 27.7% at FY24 to 25.0% is attributable to the
acquisition of Fantech and ClimaRad. Excluding these acquisition impacts our
"organic" business ROIC would have increased by 1pp driven by further margin
expansion and good working capital and balance sheet discipline.
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.
Returns to shareholders
Our adjusted basic earnings per share for the period was 15.3 pence (H1 2024:
13.7 pence) and our statutory basic earnings per share for the period was 9.5
pence (H1 2024: 11.1 pence). The Board has declared an interim dividend of 3.4
pence (H1 2024: 2.8 pence), up 21.4% 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
12 March 2025
Principal Risks and Uncertainties
The Directors have reviewed the principal risks and uncertainties which could
have a material impact on the Group's performance. Whilst there has been an
increase in global economic uncertainty, the Directors have concluded that
they has been no material change from those described in Volution's Annual
Report 2024, 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 2024 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
12 March
2025
12 March 2025
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 2025;
· 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
12 March 2025
Interim Condensed Consolidated Statement of Comprehensive Income
For the period ended 31 January 2025
Notes Unaudited Unaudited
6 months to 6 months to
31 January 2025 31 January 2024
£000 £000
Revenue from contracts with customers 3 187,833 172,479
Cost of sales (96,107) (84,859)
Gross profit 91,726 87,620
Administrative and distribution expenses (58,182) (53,824)
Operating profit before separately disclosed items 33,544 33,796
Costs of business combinations (1,945) (116)
Operating profit 31,599 33,680
Finance income 1,319 49
Finance costs (3,724) (3,198)
Re-measurement of financial liabilities 11 (455) (304)
Re-measurement of future consideration 11 (3,057) (1,270)
Profit before tax 25,682 28,957
Income tax 5 (6,831) (7,004)
Profit after tax 18,851 21,953
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 (4,992) (422)
Gain/(loss) on currency loans relating to the net investment in foreign 2,774 338
operations
Other comprehensive loss for the period (2,218) (84)
Total comprehensive income for the period, net of tax 16,633 21,869
Earnings per share
Basic earnings per share 6 9.5p 11.1p
Diluted earnings per share 6 9.4p 11.0p
Interim Condensed Consolidated Statement of Financial Position
At 31 January 2025
Notes 31 January 2025
Unaudited 31 July
£000 2024
Audited
£000
Non-current assets
Property, plant and equipment 10 31,599 30,193
Right-of-use assets 35,014 24,894
Intangible assets - goodwill 7 238,800 171,340
Intangible assets - others 8 128,667 76,902
434,080 303,329
Current assets
Inventories 73,963 53,112
Trade and other receivables 69,666 55,239
Other financial assets 988 ─
Income tax assets ─ 392
Cash and short-term deposits 10,677 18,243
155,294 126,986
Total assets 589,374 430,315
Current liabilities
Trade and other payables (61,486) (46,653)
Refund liabilities (12,986) (10,847)
Income tax (3,742) (3,940)
Other financial liabilities 11 (34,365) (22,068)
Interest-bearing loans and borrowings 12 (5,894) (14,363)
Provisions (1,958) (1,450)
(120,431) (99,321)
Non-current liabilities
Interest-bearing loans and borrowings 12 (190,510) (71,630)
Provisions (472) (819)
Deferred tax liabilities (27,970) (12,622)
(218,952) (85,071)
Total liabilities (339,383) (184,392)
Net assets 249,991 245,923
Capital and reserves
Share capital 2,000 2,000
Share premium 11,527 11,527
Treasury shares (2,143) (2,250)
Capital reserve 93,855 93,855
Share-based payment reserve 5,117 5,427
Foreign currency translation reserve (8,470) (6,252)
Retained earnings 148,105 141,616
Total equity 249,991 245,923
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 12 March 2025.
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 2025
Share Share Treasury Capital Share-based Foreign Retained Total
capital premium shares reserve payment currency earnings Equity
£000 £000 £000 £000 reserve translation £000 £000
£000 reserve
£000
At 31 July 2023 (Audited) 2,000 11,527 (2,390) 93,855 5,584 (1,225) 116,894 226,245
Profit for the period ─ ─ ─ ─ ─ ─ 21,953 21,953
Other comprehensive loss ─ ─ ─ ─ ─ (84) ─ (84)
Total comprehensive income ─ ─ ─ ─ ─ (84) 21,953 21,869
Purchase of own shares ─ ─ (2,732) ─ ─ ─ ─ (2,732)
Exercise of shares options ─ ─ 2,872 ─ (1,214) ─ (1,658) ─
Share-based payment including tax ─ ─ ─ ─ 852 ─ ─ 852
Dividend paid ─ ─ ─ ─ ─ ─ (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
Profit for the period ─ ─ ─ ─ ─ ─ 20,844 20,844
Other comprehensive income ─ ─ ─ ─ ─ (4,943) ─ (4,943)
Total comprehensive income ─ ─ ─ ─ ─ (4,943) 20,844 15,901
Share-based payment including tax ─ ─ ─ ─ 205 ─ ─ 205
Dividend paid ─ ─ ─ ─ ─ ─ (5,538) (5,538)
At 31 July 2024 (Audited) 2,000 11,527 (2,250) 93,855 5,427 (6,252) 141,616 245,923
Profit for the period ─ ─ ─ ─ ─ ─ 18,851 18,851
Other comprehensive loss ─ ─ ─ ─ ─ (2,218) ─ (2,218)
Total comprehensive income ─ ─ ─ ─ ─ (2,218) 18,851 16,633
Purchase of own shares ─ ─ (1,325) ─ ─ ─ ─ (1,325)
Exercise of share options ─ ─ 1,432 ─ (1,348) ─ (84) ─
Share-based payment including tax ─ ─ ─ ─ 1,038 ─ ─ 1,038
Dividend paid ─ ─ ─ ─ ─ ─ (12,278) (12,278)
At 31 January 2025 (Unaudited) 2,000 11,527 (2,143) 93,855 5,117 (8,470) 148,105 249,991
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 fair 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 2025
Notes Unaudited Unaudited
6 months to 6 months to
31 January 2025 31 January 2024
£000 £000
Operating activities
Profit for the period after tax 18,851 21,953
Adjustments to reconcile profit for the period to net cash flow from operating
activities:
Income tax 6,831 7,004
Gain on disposal of property, plant and equipment and intangible assets (80) (78)
Amortisation of acquired inventory fair value adjustment 4,133 ─
Re-measurement of financial liability relating to business combinations 455 304
Re-measurement of future consideration relating to business combinations 3,057 1,270
Finance income (1,319) (49)
Finance costs 3,724 3,198
Share-based payment expense 1,038 852
Depreciation of property, plant and equipment 10 2,319 2,212
Depreciation of right of use assets 2,732 2,254
Amortisation of intangible assets 8 5,989 5,666
Working capital adjustments:
Decrease/(Increase) in trade and other receivables 1,217 (2,468)
Decrease in inventories 5,318 2,879
Amortisation of acquired inventory fair value adjustment (4,133) ─
Decrease in trade and other payables (2,083) (2,541)
Movement in provisions 656 (328)
Cash generated by operations 48,705 42,128
UK income tax paid (2,500) (2,500)
Overseas income tax paid (5,708) (4,732)
Net cash flow generated from operating activities 40,497 34,896
Investing activities
Payments to acquire intangible assets 8 (753) (911)
Purchase of property, plant and equipment 10 (2,142) (2,774)
Proceeds from disposal of property, plant and equipment and intangible assets 124 240
Payments to acquire subsidiaries, net of cash acquired 9 (106,629) (8,498)
Interest received 134 49
Net cash flow used in investing activities (109,266) (11,894)
Financing activities
Repayment of interest-bearing loans and borrowings (57,261) (27,223)
Proceeds from new borrowings 169,119 19,505
Repayment of VMI debt acquired (130) (100)
Consideration paid for 25% of ClimaRad (29,509) ─
Issue costs of new borrowings (1,799) ─
Interest paid (3,095) (2,811)
Payment of principal portion of lease liabilities (2,225) (1,830)
Dividend paid (12,278) (10,879)
Purchase of own shares (1,325) (2,732)
Net cash flow generated from / (used in) financing activities 61,497 (26,070)
Net decrease in cash and cash equivalents (7,272) (3,068)
Cash and cash equivalents at the start of the period 18,243 21,244
Effect of exchange rates on cash and cash equivalents (294) (1,093)
Cash and cash equivalents at the end of the period 10,677 17,083
Notes to the Interim Condensed Consolidated Financial Statements
For the period ended 31 January 2025
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 unaudited interim condensed consolidated financial statements were
authorised for issue by the Board of Directors on 12 March 2025.
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 2024. The financial information for
the half years ended 31 January 2025 and 31 January 2024 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 2024 included within this
report does not constitute the full statutory accounts for that period. The
Annual Report 2024 has been filed with the Registrar of Companies. The
Independent Auditor's Report on the Annual Report 2024 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 income tax expense, which is recognised based on
management's estimate of the weighted average effective annual income tax rate
expected for the full financial year. They are consistent with those of the
corresponding interim reporting period.
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 2026.
The financial position remains robust with committed facilities totalling
£230 million, and an accordion of a further £70 million, maturing in
September 2027. 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 2024.
We have then applied a severe but plausible downside scenario to model the
potential concurrent impact of:
- a significant economic slowdown reducing revenue by 15%
compared to plan in FY25, with no recovery in FY26, and
- supply chain difficulties or inflationary cost increases
reducing gross profit margin by 10%;
A reverse stress test scenario has also been modelled which shows a revenue
contraction of >21% in FY25 with no recovery in FY26 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 and discretionary indirect costs.
Over the short period of our climate change assessment (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. We have not
experienced material adverse disruption during periods of adverse or extreme
weather in recent years, and we would not expect this to occur to a material
level over the period 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 2024, with the addition of certain
judgements and estimations applied in the accounting for the Fantech business
combination.
The identification and valuation of intangible assets acquired in Fantech
required significant judgement. As part of the purchase price allocation
(PPA), the Group determined the fair values of identifiable assets and
liabilities, including the separately identifiable intangible assets of
customer relationships and brands. Management exercised judgement in
assessing whether those intangible assets were separately identifiable and
that they meet the criteria for recognition under IFRS 3 Business Combinations
and in assessing the useful economic life of each asset.
The valuation of acquired intangible assets involved significant estimates and
assumptions, including a) The selection of an appropriate discount rate, b)
Revenue Growth and customer Attrition Rates for customer valuation, and c)
Royalty Rates used for brand valuation. These estimates are inherently
uncertain and may be revised during the measurement period as more information
becomes available. Changes in these assumptions could materially impact the
carrying values of intangible assets, goodwill, and amortization expenses.
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.
Based on the Group's ongoing assessment, the Group does not anticipate any new
or revised standards and interpretations that are effective from 1 January
2025 and beyond to have a material impact on its condensed consolidated
financial statements.
2. Adjusted earnings
The Board and key management 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 helpful as they remove items that do not reflect the
day-to-day trading operations of the business and therefore their exclusion is
relevant to an assessment of the day-to-day trading operations, as opposed to
overall annual business performance. 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 2025 31 January 2024
£000 £000
Profit after tax 18,851 21,953
Add back:
Amortisation of acquired inventory fair value adjustment 4,133 ─
Costs of business combinations 1,945 116
Re-measurement of future consideration relating to the business combinations 3,057 1,270
Net (gain)/loss on financial instruments at fair value (1,185) (196)
Amortisation and impairment of intangible assets acquired through business 4,935 4,796
combinations
Tax effect of the above (1,458) (1,016)
Adjusted profit after tax 30,278 26,923
Add back:
Adjusted tax charge 8,289 8,020
Adjusted profit before tax 38,567 34,943
Add back:
Interest payable on bank loans, lease liabilities and amortisation of 3,724 3,394
financing costs
Re-measurement of financial liability relating to the business combination of 455 304
ClimaRad
Finance income (134) (49)
Adjusted operating profit 42,612 38,592
Add back:
Depreciation of property, plant and equipment 2,319 2,212
Depreciation of right-of-use asset 2,732 2,254
Amortisation of development costs, software and patents 1,054 870
Adjusted EBITDA 48,717 43,928
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 2025 31 January 2024
£000 £000
Sale of goods 185,398 169,100
Installation services 2,435 3,379
Total revenue from contracts with customers 187,833 172,479
Sales of goods and installation service revenue in the comparative period has
been represented, total revenue from contracts with customers did not change.
Market sectors 6 months to 6 months to
31 January 2025 31 January 2024
£000 £000
UK
Residential 55,088 49,471
Commercial 14,372 15,209
Export 6,814 5,673
OEM (Torin-Sifan) 7,018 7,441
Total UK 83,292 77,794
Nordics 23,889 25,367
Central Europe 44,270 43,106
Total Continental Europe 68,159 68,473
Total Australasia 36,382 26,212
Total revenue from contracts with customers 187,833 172,479
4. Segmental analysis
6 months ended 31 January 2025 UK Continental Australasia Central / Eliminations Consolidated
£000 Europe £000 £000 £000
£000
Revenue from contracts with customers
Total segment revenue 98,824 86,752 37,825 (35,568) 187,833
Inter-segment revenue (15,532) (18,593) (1,443) 35,568 ─
Revenue from external contracts with customers 83,292 68,159 36,382 ─ 187,833
Gross profit 42,981 34,720 14,025 ─ 91,726
Results
Adjusted segment EBITDA 23,855 18,328 9,203 (2,669) 48,717
Depreciation and amortisation of (2,438) (1,905) (1,423) (339) (6,105)
development costs, software and patents
Adjusted operating profit/(loss) 21,417 16,423 7,780 (3,008) 42,612
Amortisation of intangible assets acquired through business combinations (940) (2,680) (1,315) ─ (4,935)
Amortisation of acquired inventory fair value adjustment (4,133) ─ (4,133)
Business combination-related operating costs ─ ─ ─ (1,945) (1,945)
Operating profit/(loss) 20,477 13,743 2,332 (4,953) 31,599
Unallocated expenses
Net finance cost ─ ─ 124 (2,529) (2,405)
Re-measurement of future consideration ─ (3,057) ─ ─ (3,057)
Re-measurement of financial liability ─ (455) ─ ─ (455)
Profit/(loss) before tax 20,477 10,231 2,456 (7,482) 25,682
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
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 21.5%
(H1 2024: 23.0%).
Our statutory effective tax rate for the period was 26.6% (H1 2024: 24.2%).
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 2,077,163
dilutive potential ordinary shares at 31 January 2025 (H1 2024: 3,128,124).
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 2025 31 January 2024
£000 £000
Profit attributable to ordinary equity holders 18,851 21,953
Number
Number
Weighted average number of ordinary shares for basic earnings per share 197,954,910 197,102,359
Effect of dilution from:
Share options 2,077,163 1,939,674
Weighted average number of ordinary shares for diluted earnings per share 200,032,073 199,042,033
Earnings per share
Basic 9.5p 11.1p
Diluted 9.4p 11.0p
6 months ended 6 months ended
31 January 2025 31 January 2024
£000 £000
Adjusted profit attributable to ordinary equity holders 30,278 26,923
Number
Number
Weighted average number of ordinary shares for adjusted basic earnings per 197,954,910 197,102,359
share
Effect of dilution from:
Share options 2,077,163 1,939,674
Weighted average number of ordinary shares for adjusted diluted earnings per 200,032,073 199,042,033
share
Adjusted earnings per share
Basic 15.3p 13.7p
Diluted 15.1p 13.5p
The weighted average number of ordinary shares has increased as a result of
treasury shares held by the Volution Employee Benefit Trust (EBT) during the
period. At 31 January 2025, a total of 1,965,923 (31 January 2024: 2,206,186)
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, 225,000 ordinary shares in the Company were purchased by
the trustees (6 months to 31 January 2024: 700,000) and 410,291 (6 months to
31 January 2024: 964,914) 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 2023 168,988
On the business combination of DVS 5,037
Net foreign currency exchange differences (2,685)
At 31 July 2024 171,340
On the business combination of Fantech (provisional) 69,870
Net foreign currency exchange differences (2,410)
At 31 January 2025 238,800
8. Intangible assets - other
Total
2025 £000
Cost
At 1 August 2024 247,146
Additions 753
On business combination (provisional) 59,020
Disposals (99)
Net foreign currency exchange differences (2,359)
At 31 January 2025 304,461
Amortisation
At 1 August 2024 170,244
Charge for the period 5,989
Disposals (99)
Net foreign currency exchange differences (340)
At 31 January 2025 175,794
Net book value
At 31 January 2025 128,667
Intangible assets - other, is made up of development costs, software costs,
customer base, trademarks and patents.
9. Business combinations
Business combination in the half year ended 31 January 2025
Fantech
On 29 November 2024, Volution Group acquired Fantech, a market leading
position in commercial and residential ventilation in Australasia. The
acquisition of Fantech 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 Fantech is AUD$280 million (£141.6
million), with initial consideration of AUD$220 million (£112.0 million) on a
debt free cash free basis, with further non contingent consideration of AUD$60
million (£29.6 million) payable twelve months after the completion date.
Transaction costs relating to professional fees associated with the business
combination in the period ending 31 January 2025 were £1,888,000 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 fair values of the acquired assets and liabilities recognized in our
financial statements are provisional, as they are based on the information
available at the acquisition date; adjustments may be required if additional
relevant information becomes available within the measurement period, which
extends up to 12 months from the acquisition date. The provisional fair value
of the net assets acquired is set out below:
Provisional Provisional Provisional
book value fair value Fair value
£000 adjustments £000
£000
Intangible assets 1,127 57,893 59,020
Property, plant and equipment 1,760 - 1,760
Right of use assets 11,315 - 11,315
Inventory 19,648 6,282 25,930
Trade and other receivables 15,462 - 15,462
Trade and other payables (15,106) - (15,106)
Lease Liabilities (14,362) - (14,362)
Income Tax (684) - (684)
Provisions (186) - (186)
Deferred Tax 896 (17,682) (16,786)
Cash and cash equivalents 5,370 - 5,370
Total identifiable net assets 25,240 46,493 71,733
Goodwill on the business combination 69,870
Discharged by:
Cash consideration 111,999
Deferred consideration 29,604
Goodwill of £69,870,000 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 £15,462,000. All of the
trade receivables are expected to be collected in full.
Inventories recorded on the business combination were recognised at fair
value. The fair value uplift is charged to gross profit over a period of 4
months from the date of acquisition.
Fantech generated revenue of £11,386,000 and generated a profit after tax of
£115,000 in the period from acquisition to 31 January 2025 that is included
in the consolidated statement of comprehensive income for this reporting
period.
If the combination had taken place at 1 August 2024, the Group's revenue would
have been £29,650,000 higher and profit before tax from continuing operations
would have been £5,030,000 higher than reported.
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..
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. If EBITDA for each period for which contingent consideration is
measured is 10% higher than expected, contingent consideration would be £nil.
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 fair value of the net assets acquired is set out below:
Book value Fair value
£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.
Cash outflows arising from business combinations are as follows:
6 months to 6 months to
31 January 2025 31 January 2024
£000 £000
Fantech
Cash consideration 111,999 -
Less: cash acquired with the business (5,370) -
DVS
Cash consideration - 8,498
Total revenue from contracts with customers 106,629 8,498
10. Property, plant and equipment excluding right-of-use assets
Total
2025 £000
Cost
At 1 August 2024 55,101
On business combination 1,760
Additions 2,142
Disposals (1,249)
Net foreign currency exchange differences (185)
At 31 January 2025 57,569
Depreciation
At 1 August 2024 24,908
Charge for the period 2,319
Disposals (1,205)
Net foreign currency exchange differences (52)
At 31 January 2025 25,970
Net book value
At 31 January 2025 31,599
Commitments for the acquisition of property, plant and equipment as of 31
January 2025 are £595,000 (31 July 2024: £626,000).
11. Other financial liabilities
2025 Foreign exchange forward contracts Contingent consideration ClimaRad BV Contingent consideration Deferred consideration Total
£000 £000 ERI Fantech £000
£000 £000
At 1 August 2024 192 16,346 5,530 - 22,068
Deferred consideration - - - 29,604 29,604
Re-measurement of financial liability - 455 - - 455
Re-measurement of contingent consideration - 4,021 (964) - 3,057
Consideration paid - (20,046) - - (20,046)
Foreign exchange (192) 31 - (612) (773)
At 31 January 2025 - 807 4,566 28,992 34,365
Analysis
Current - 807 4,566 28,992 34,365
Non-current - - - - -
Total - 807 4,566 28,992 34,365
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 remeasurement of contingent consideration of £3,057,000 (H1 2024:
£1,270,000) is made up of £699,000 (H1 2024: £nil) resulting from EBITDA
performance for the 2024 ClimaRad and ERI earn-out periods, and £2,358,000
(H1 2024: £1,270,000) resulting from the unwinding of the discounted
liabilities.
Contingent consideration related to the acquisition of ERI has been extended
to include a potential payment of €0 to €6,000,000 based on EBITDA
performance for the year ending 31 December 2029, with the threshold set at
€10,000,000 and the maximum payable at €11,000,000. Based on current
expectations, it is not anticipated that the conditions for payment will be
met, and as such, the contingent consideration has been assessed as £nil.
2023 Foreign exchange forward contracts Contingent consideration Contingent consideration Contingent consideration Total
£000 ClimaRad BV I-Vent ERI £000
£000 £000 £000
At 1 August 2023 330 8,877 4,115 7,720 21,042
Re-measurement of financial liability ─ 870 ─ ─ 870
Re-measurement of contingent consideration ─ 6,599 (1,529) (316)
4,754
Consideration paid ─ ─ (2,566) (1,874) (4,440)
Foreign exchange (138) ─ (20) ─ (158)
At 31 July 2024 192 16,346 ─ 5,530 22,068
Analysis
Current 192 16,346 ─ 5,530 22,068
Non-current ─ ─ ─ ─ ─
Total 192 16,346 ─ 5,530 22,068
12. Interest-bearing loans and borrowings
31 January 2025 31 July 2024
Current Non-current Current Non-current
£000 £000 £000 £000
Unsecured - at amortised cost
Borrowings under the revolving credit facility (maturing December 2025) ─ ─ ─ 49,794
Borrowings under the revolving credit facility (maturing September 2027) ─ 158,877 ─ ─
Cost of arranging bank loan ─ (1,578) ─ ─
─ 157,299 ─ 49,794
ClimaRad vendor loan (maturing March 2025) ─ ─ 9,605 ─
Other loans (maturing September 2026) ─ 435 ─ 565
Lease liabilities 5,894 32,776 4,758 21,271
Total 5,894 190,510 14,363 71,630
Revolving credit facility - at 31 January 2025
Currency Amount Termination Repayment Rate %
outstanding date frequency
£000
GBP ─ 9 September 2027 One payment Sonia + margin%
Euro 41,416 9 September 2027 One payment Euribor + margin%
AUD 102,906 9 September 2027 One payment AUD - BBSY+ margin%
Swedish Krona 14,555 9 September 2027 One payment Stibor + margin%
Total 158,877
Revolving credit facility - at 31 July 2024
Currency Amount Termination Repayment Rate %
outstanding date frequency
£000
GBP ─ 2 December 2025 One payment Sonia + margin%
Euro 49,794 2 December 2025 One payment Euribor + margin%
Swedish Krona ─ 2 December 2025 One payment Stibor + margin%
Total 49,794
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 2025, Group
leverage was equal or below 1.5:1 and therefore the margin remains at 1.50% in
H2 2025.
The Group remained comfortably within its banking covenants, which are tested
semi-annually. As at 31 January 2025, the multiple of EBITDA to net finance
charges was 16.7 (31 July 2024: 14.8; 31 January 2024: 14.5), against a
covenant minimum ratio of 4.0, and the multiple of net borrowings to EBITDA
(leverage) was 1.5 (31 July 2024: 0.4; 31 January 2024: 0.7), against a
covenant maximum ratio of 3.0.
On 10 September 2024, the Group refinanced its bank debt. The Group now has in
place a new £230 million multicurrency 'Sustainability Linked Revolving
Credit Facility', together with an accordion of up to £70 million. The
facility matures in September 2027, with the option to extend for up to two
additional years. The old facility was repaid in full.
At 31 January 2025, the Group had £71,123,000 of undrawn, committed bank
facilities (31 July 2024: £100,200,000) and £10,677,000 of cash and cash
equivalents (31 July 2024: £18,243,000).
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 2025 31 January 2024
£000 £000
Cash dividends on ordinary shares declared and paid
Final dividend for 2024: 6.2 pence per share (2023: 5.5 pence) 12,278 10,879
Proposed dividends on ordinary shares
Proposed interim dividend for 2025: 3.4 pence per share (2024: 2.8 pence) 6,733 5,538
A final dividend payment of £12,278,000 is included in the consolidated
statement of cash flows relating to 2025 (2024: £10,879,000).
The Board has declared an interim dividend of 3.4 pence per ordinary share in
respect of the half year ended 31 January 2025 (6 months to 31 January 2024:
2.8 pence per ordinary share) which will be paid on 6 May 2025 to shareholders
on the register at the close of business on 28 March 2025. 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 2025 or 31 January 2024.
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 2024:
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 2,077,163 dilutive potential ordinary shares at 31 January 2025 (H1
2024: 3,128,124).
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 for
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 intangible assets
acquired through business combinations and the tax effect on these items.
Adjusted profit before tax: profit before tax before adjustments for
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 2025 at the average exchange rate for the period
ended 31 January 2024. In addition, we have converted the UK operating
companies' sale and purchase transactions in the period ended 31 January 2025,
which were denominated in foreign currencies, at the average exchange rates
for the period ended 31 January 2024.
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 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.
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