TIDMFAN
RNS Number : 3676S
Volution Group plc
09 March 2023
Thursday 9 March 2023
VOLUTION GROUP PLC
Half year Results for the six months ended 31 January 2023
Strong first half performance, underpinned by structural growth
drivers
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 2023.
RESULTS SUMMARY
6 months to 6 months to
31 January 2023 31 January 2022 Movement
------------------------------------ ---------------- ---------------- --------
Revenue (GBPm) 162.3 149.6 +8.5%
Adjusted operating profit (GBPm) 34.2 31.9 +7.1%
Adjusted operating margin (%) 21.1% 21.3% (0.2)pp
Adjusted profit before tax (GBPm) 31.8 30.0 +6.0%
Adjusted basic EPS (pence) 12.4 11.7 +6.0%
Reported operating profit (GBPm) 27.8 23.3 +19.6%
Reported profit before tax (GBPm) 22.6 21.4 +5.6%
Reported basic EPS (pence) 8.6 8.2 +4.9%
Adjusted operating cash flow (GBPm) 30.6 16.2 +88.1%
Net debt (GBPm)(1) 79.2 104.0 (24.8)
Interim dividend per share (p) 2.50 2.30 +8.7%
------------------------------------ ---------------- ---------------- --------
(1) H1 2023 includes lease liabilities of GBP23.3 million (H1
2022: GBP24.8 million).
The Group uses some alternative performance measures to manage
and assess the underlying performance of the business. These
measures include adjusted operating profit, adjusted profit before
tax, adjusted EPS, adjusted operating cash flow and net debt. A
definition of all the adjusted and non-GAAP measures is set out in
the glossary of terms in note 16 to the condensed consolidated
financial statements. A reconciliation to reported measures is set
out in note 2 to the condensed consolidated financial
statements.
FINANCIAL HIGHLIGHTS
-- Revenue up 8.5%; 7.3% organic growth (6.3% at constant
currency ('cc')) and 1.2% inorganic growth (1.2% at cc). All three
regions grew organically, delivered through both volume and
price
-- Adjusted operating margin of 21.1% (H1 2022: 21.3%), above
our long-term operating margin target as we successfully mitigated
inflationary headwinds
-- Adjusted operating cash flow significantly up on prior year
at GBP30.6 million as inventory levels normalised (H1 2022: GBP16.2
million), leading to a cash conversion of 88% (H1 2022: 50%)
-- Balance sheet remains strong (leverage ex-leases at 0.8x),
providing significant headroom for earnings accretive
acquisitions
-- Reported profit before tax up 5.6% to GBP22.6 million (H1
2022: GBP21.4 million), with higher operating profits partially
offset by increased finance charges as a result of interest rate
rises
-- Interim dividend up 8.7% to 2.50 pence per share (H1 2022: 2.30 pence)
OPERATIONAL HIGHLIGHTS
-- Excellent levels of customer service underpinned by our
group-wide optimisation of component inventory
-- Pricing discipline in all three geographical regions underpinned margin delivery
-- Improved Health & Safety performance, with significant
reduction in accident frequency rate, at 0.15 per 100,000 hours
worked (H1 2022: 0.25)
-- Good progress on a number of important new product
development programs, with several new product launches anticipated
during the second half of the year
HEALTHY AIR, SUSTAINABLY
-- Continued progress against our key sustainability targets:
o 76.4% of plastic used in own manufacturing facilities from
recycled sources vs. target of 90% by end FY25 (H1 2022: 58.0%)
o 69.4% of revenue from low-carbon, energy saving products vs.
target of 70% by end FY25 (H1 2022: 65.1%)
-- Heat recovery further increased to 32.2% of the total Group revenue
Commenting on the Group's performance, Ronnie George, Chief
Executive Officer, said:
"We delivered a strong first half performance across our three
regions, driven in particular by strong UK residential RMI demand.
We have successfully managed inflationary headwinds and supply
chain challenges through pricing discipline and inventory
optimisation and in doing so maintained our operating margin at
21%. This strong result is testament to the hard work and
commitment of our employees."
"The importance of indoor air quality to our health and the need
for energy efficient, low carbon buildings, are moving even further
up the global agenda and increasingly supported by government
policy and regulation, driving demand for Volution's innovative
ventilation and heat recovery systems. This was evidenced in the
first half by strong refurbishment demand, particularly in the UK,
as homeowners and landlords focused on fixing mould and
condensation issues, exacerbated by a reduction in heating use in
response to the energy crisis.
"Looking ahead, although mindful of the cautious sentiment in
some of our segments, residential RMI demand remains supportive,
and inflationary pressures and supply chain challenges are
easing.
With our excellent levels of customer service, agile
manufacturing, a well-developed M&A pipeline and strong balance
sheet position, coupled with significant geographic revenue
diversity, we are well placed to make further progress."
-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 10:00am GMT today,
Thursday 9 March 2023, 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
on Thursday 9 March 2023.
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 19 key brands across three
regions:
UK: Vent-Axia, Manrose, Diffusion, National Ventilation,
Airtech, Breathing Buildings, Torin-Sifan.
Continental Europe: Fresh, PAX, VoltAir, Kair, Air Connection,
inVENTer, Ventilair, ClimaRad, rtek, ERI
Australasia: Simx, Ventair, Manrose.
For more information, please go to: www.volutiongroupplc.com
Cautionary statement regarding forward-looking statements
This document may contain forward-looking statements which are
made in good faith and are based on current expectations or
beliefs, as well as assumptions about future events. You can
sometimes, but not always, identify these statements by the use of
a date in the future or such words as "will", "anticipate",
"estimate", "expect", "project", "intend", "plan", "should", "may",
"assume" and other similar words. By their nature, forward-looking
statements are inherently predictive and speculative and involve
risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. You should not place
undue reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to factors that
could cause our actual results to differ materially from those
expressed or implied by these statements. The Company undertakes no
obligation to update any forward-looking statements contained in
this document, whether as a result of new information, future
events or otherwise.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
We have reported a strong performance in the first half of the
year, and I want to congratulate our valued colleagues in
delivering these results. Our end market activity continues to be
characterised by a greater proportion of revenue in providing
refurbishment solutions for buildings with, approximately 70% of
our revenue being RMI and 30% being in new build applications. A
growing focus on decarbonising buildings, the impact that poorly
heated and ventilated dwellings can have on our health and a
greater awareness post Covid-19 of the inextricable link between
good ventilation and healthy homes, is providing a structural
underpinning to the long-term revenue trends across our Group.
Despite the uncertain global macroeconomic environment, we continue
to see a widespread willingness and funding support to invest in
good quality ventilation for buildings.
During the first half, our teams successfully navigated supply
chain interruptions and inflationary pressures and our customer
service levels have been exemplary across all areas of the
Group.
I am immensely proud of the progress we have made, not just with
our financial performance but also with the key sustainability
initiatives that our colleagues champion daily. Progress with
recycled content in our production, the proportion of our revenue
that is from low carbon products and our improving health and
safety performance are some of the highlights of the first half of
the year. Well done and thank you to the Volution team.
The strategic investment we made in component inventory in the
last two financial years has helped us not only deliver excellent
levels of customer service but also allowed us to respond more
quickly to some encouraging demand growth opportunities, most
notably in the UK refurbishment market. The inventory investments
made in prior years have now normalised and we expect inventory
levels to remain reasonably constant, relative to revenues in
future, well positioned to support our organic growth
initiatives.
Our pricing discipline and relentless pursuit of improving
efficiency, coupled with tight cost control and initiatives to
reduce our material costs have resulted in an adjusted operating
margin of 21.1%, in a period when inflationary pressures have been
significant.
Across our Group we have started to see material cost inflation
pressures subsiding, although facilities and labour cost inflation
pressures remain. The impact of these costs has largely been
mitigated through higher selling prices, higher factory volumes and
improving levels of efficiency, in several cases underpinned by
investment in new plant, tooling and equipment.
With excellent levels of customer service across our group, and
our supply chains now in good shape, our innovation and product
development teams have been focused on the launch of several new
products planned for the second half of the year including new MVHR
(mechanical ventilation with heat recovery) solutions for both
residential and commercial.
Results
Adjusted operating margin was consistent with the last two full
financial years at 21.1% (H1 2022: 21.3%).
Revenue grew by 8.5%, 7.5% at constant currency, with revenue
growth in all three of our geographic regions enabling the Group to
deliver organic growth of 6.3% on a constant currency basis.
Our adjusted operating profit increased 7.1% to GBP34.2 million
in H1 2023 from GBP31.9 million in the prior period. Reported
operating profit was GBP27.8 million (H1 2022: GBP23.3
million).
Adjusted operating cash inflow increased to GBP30.6 million (H1
2022: GBP16.2 million) as inventory levels normalised with a cash
conversion rate of 88% (H1 2022: 50%). Our balance sheet is strong,
with leverage (ex-leases) at 0.8x, giving ample headroom to make
earnings accretive acquisitions.
In the first half of financial year 2023 we acquired the
remaining shares of ERI Corporation UK Limited for consideration of
GBP0.4 million. Our pipeline of potential acquisition opportunities
is encouraging, and with our balance sheet strength and headroom,
we are optimistic of being able to add further earnings accretive
acquisitions to the Group.
Focus on sustainability
Our purpose, to deliver "Healthy Air, Sustainably" is hugely
important to us and we made strong progress with our key
sustainability initiatives in the first half of the year.
The proportion of our revenue from low carbon, energy saving
products increased to 69.4% versus our long term target of 70% by
end of FY25 (H1 FY22: 66.1%). This was aided by the growth in heat
recovery ventilation which now represents 32.2% of the total
revenue of the Group. Our new product innovation team developments
are focused on adding innovative new low carbon product solutions
to our portfolio.
Continuing the excellent progress we made in H2 2022, where
breakthroughs were made in applying alternative types of recycled
materials to our injection moulding processes, the proportion of
recycled plastics used in our manufacturing increased to 76.4%
versus our long term target of 90% by end of FY25 (H1 2022: 67.2%).
I would like to thank our technical and operational teams in the UK
for delivering this significant progress.
We are also pleased that our continued focus on 'keeping
everyone safe' has led to a significant reduction in our accident
frequency rate, at 0.15 per 100,000 hours worked compared to 0.25
last year. As always, our ambition remains that all of our
colleagues should go home safely every day.
We are well positioned to make further good progress with these
important KPIs in the second half of the year.
Regulatory Drivers and indoor air quality
Following the changes to Part F and Part L of the Building
Regulations in the UK, we are now seeing a greater transition to
continuous ventilation solutions among housebuilders. This
increases our average sales value per house and this trend is
expected to continue. We await the Future Homes Standard public
consultation from Government due later this year which we expect to
further support energy efficient ventilation in new build.
Following several widely reported cases of health issues and
fatalities linked to exposure to mould, we are seeing an increased
urgency and focus on air quality in social housing. We also await
the publication of the Decent Home Standard for the Private Rented
sector after the consultation completed in October 2022.
In Continental Europe, The Industry, Research and Energy
Committee adopted its position on the proposed revision of the
Energy Performance of Buildings Directive (EPBD). According to the
text, residential buildings would have to achieve at least energy
performance class E by 2030, and D by 2033. Non-residential and
public buildings would have to achieve the same classes by 2027 and
2030 respectively. These changes support further air tightness
improvements to buildings and therefore the requirement for energy
efficient ventilation solutions.
Interim dividend
The Board has declared an interim dividend of 2.5 pence per
share, up 8.7% (H1 2022: 2.3 pence), reflecting the strong first
half performance and demonstrating the Board's confidence in the
performance of the Group. The interim dividend will be paid on 2
May 2023 to shareholders on the register at the close of business
on 24 March 2023.
Outlook
Looking ahead, although mindful of the cautious sentiment in
some of our segments, residential refurbishment demand remains
supportive, and inflationary pressures and supply chain challenges
are easing.
With our excellent levels of customer service, agile
manufacturing, a well-developed M&A pipeline and strong balance
sheet position, coupled with significant geographic revenue
diversity, we are well placed to make further progress.
Ronnie George
Chief Executive Officer
8 March 2023
MARKET BY MARKET
United Kingdom
6 months to 31 Jan 2023 6 months to 31 Jan 2022 Growth
Market sector revenue GBPm GBPm %
-------------------------------------- ------------------------ ------------------------ -------
UK
Residential 41.4 35.8 15.7
Commercial 14.3 15.8 (9.3)
Export 5.3 5.6 (5.9)
OEM 12.7 12.6 0.2
-------------------------------------- ------------------------ ------------------------ -------
Total UK Revenue 73.7 69.8 5.5
-------------------------------------- ------------------------ ------------------------ -------
Adjusted operating profit 15.6 13.9 12.5
-------------------------------------- ------------------------ ------------------------ -------
Adjusted operating profit margin (%) 21.2 19.9 1.3pp
-------------------------------------- ------------------------ ------------------------ -------
Reported operating profit 13.4 9.2 45.7
-------------------------------------- ------------------------ ------------------------ -------
UK revenue grew by 5.5% (5.3% at constant currency) to GBP73.7
million with adjusted operating profit at GBP15.6 million, an
increase of GBP1.7 million on the prior year. Adjusted operating
profit margin was 21.2% compared to the first half of 2022 of
19.9%, an increase of 1.3 percentage points. This brings the UK
operating profit margin close to our other two market sector areas,
Continental Europe, and Australasia.
A year ago, we made some changes to the UK's organisational
structure to strengthen the performance of the region. The
development of the leadership team focusing on our three key areas
of UK residential RMI, UK residential new build and commercial
ventilation has enabled us to more closely focus and support each
of these areas. The residential growth of 15.7% in the first half
of the year is an outstanding performance and offsets the more
difficult commercial end market.
Pricing discipline, cost reduction and efficiency initiatives
and a growing mix shift towards higher value, higher gross margin
low carbon and innovative solutions has been a key driver of
performance. Excellent customer service and stock availability
across the UK business have also enabled us to make further share
gains in the residential market.
Revenue in our Residential sector was up 15.7% to GBP41.4
million (H1 2022: GBP35.8 million). The detail of our key
residential end markets is as follows.
Social housing refurbishment demand has delivered the strongest
revenue growth in our UK residential market. On 19 November 2022,
Housing Secretary Michael Gove, wrote a letter to all providers of
social housing, headed, "Ensuring Quality in Social Housing." This
letter was in response to the tragic death of Awaab Ishak, a
two-year-old boy, with the Coroner citing mould and poor-quality
ventilation in his home as the direct reason attributable to his
death. Amendments have since been tabled to the Social Housing
Regulation Bill to introduce 'Awaab's law' which will require
social housing landlords to fix reported health hazards within
specified timeframes.
Alongside this issue we are witnessing a winter period where
fuel bills have been the highest on record. As some households
understandably reduce their heating use, the lower temperatures
drive a higher incidence of mould and condensation. These factors,
as well as an accelerated approach to delivering the net zero
carbon targets for the future, have driven strong demand for our
low carbon ventilation solutions. Our Vent-Axia brand is the first
in the UK to launch a fully PAS2035 compliant decentralised heat
recovery solution fully suitable for retrofit.
We have also achieved strong revenue growth in our private RMI
market with similar demand drivers as public housing. Homeowners as
well as private landlords and their tenants are increasingly aware
of the dangers of damp, mould and indoor pollutants, and are
turning to ventilation products as part of the solution. Whilst
wider discretionary building products purchases have been under
pressure in the last twelve months, we continue to believe that
ventilation refurbishment in our dwellings is being seen as an
increasingly necessary and worthwhile investment required to
maintain the health of both the building and its occupants.
Sales in our UK New Build Residential Systems sector were also
strong in the first half of the year with revenue considerably up
on the same period last year. Building regulations changes in June
2022 will move the market to a "systems only" approach soon, where
all new build housing will incorporate higher value, whole building
ventilation systems, and we predict that very few new developments
will utilise traditional, less energy efficient single exhaust fans
in the future. We have been pleased to work closely with our trade
association and house builders in helping define an energy
efficient and cost-effective ventilation strategy for the homes of
the near future.
Order intake levels remain encouraging, but we are mindful of
the significant reduction in sales rates across the housebuilder
community since the "mini budget" late in 2022. We expect unit
revenue rates per new dwelling to continue to increase as newer,
more energy efficient products, including heat recovery system
solutions, are applied. This will help to offset any potentially
weaker volumes in the period ahead.
UK Commercial market revenue declined by 9.3% in the period to
GBP14.3 million (H1 2022: GBP15.8 million). Commercial
refurbishment was more challenged in the first half of the year.
The prior year comparator period was a strong post-Covid-19 restart
for many retailers, restaurants and offices, whilst we witnessed
weak demand for our refurbishment solutions in the first half. Our
solutions for the new build education sector also performed weakly
although a further enhancement to the product range was added at
the end of the period with expectations to recover market share in
the months ahead. The better performer in our commercial revenue
stream was our range of energy efficient fan coils where the order
book remains strong and there is a further range enhancement
planned for the second half of the year.
UK Export market revenue was GBP5.3 million, down 5.9% (6.7% at
constant currency). Weaker demand in the period from the Republic
of Ireland market notably in December and January was exacerbated
by some customer destocking over the calendar year end to meet
reducing demand. However, we have already seen this demand return
at the start of the second half of the financial year.
OEM revenue was GBP12.7 million, an increase of 0.2% (decline
0.7% at constant currency). Whilst overall this is a disappointing
revenue performance, we have seen a continuation of the revenue mix
trend away from older, less energy efficient technology towards
newer, leading low carbon EC3 range of products. The shift in
demand has been so pronounced in the period that our existing EC3
production capacity is largely full, and we have now added new
capacity. This investment commenced in early FY23 and, became
operational at the beginning of March 2023. The shift away from
older technology products will continue, but the reducing
significance of this category lessens the impact of the decline,
whilst we are optimistic about the continued growth of our EC3
ranges.
Continental Europe
6 months
6 months to 31 Jan 2023 to 31 Jan 2022 Growth
Market sector revenue GBPm GBPm %
-------------------------------------- ------------------------ ---------------- --------
Continental Europe
Nordics 26.6 27.0 (1.4)
Central Europe 37.7 30.4 23.9
-------------------------------------- ------------------------ ---------------- --------
Total Continental Europe revenue 64.3 57.4 12.0
-------------------------------------- ------------------------ ---------------- --------
Adjusted operating profit 15.4 14.8 4.0
-------------------------------------- ------------------------ ---------------- --------
Adjusted operating profit margin (%) 24.0 25.8 (1.8)pp
-------------------------------------- ------------------------ ---------------- --------
Reported operating profit 12.1 11.6 4.3
-------------------------------------- ------------------------ ---------------- --------
Revenue in Continental Europe was GBP64.3 million, with growth
of GBP6.9 million, an increase of 12.0% (11.4% at constant
currency). Organic revenue grew by 8.9% (8.2% at constant currency)
and adjusted operating profit was GBP15.4 million, up from GBP14.8
million, in the same period in the prior year. The margin reduction
year-on-year in Continental Europe is primarily due to business
mix, although European margins remain the highest in the Group.
ERI, our heat exchanger business acquired in September 2021 grew
strongly, as did ClimaRad in the Netherlands, with the Nordics
broadly flat and a decline in Germany after three and a half years
of exceptionally strong revenue growth.
Revenue in the Nordics was GBP26.6 million (H1 2022: GBP27.0
million), a decrease of 1.4% (growth 0.4% at constant currency).
Sales in the Nordics have been challenging in the first half of the
year. The weakness is predominantly across the new build market in
Sweden, Denmark, and Finland. Our DIY and trade routes to market
for refurbishment solutions meanwhile have performed well over the
period and our disciplined approach to pricing has enabled us to
maintain our adjusted operating margins.
We continued to make strong progress in Central Europe,
delivering revenue of GBP37.7 million and growth of 23.9% (21.2% at
constant currency) compared to the previous period, helped by the
acquisition of ERI. Organic revenue grew by 18.0% (15.2% at
constant currency).
Our InVENTer brand in Germany had a weaker performance in the
first half of the year as activity and sentiment in the market was
much softer. The local nervousness over gas supplies during the
winter period and higher interest rates impacting new build demand
made for a challenging backdrop in the period. InVENTer has
delivered strong organic growth over the last three and a half
years, and we see the most recent period as a temporary setback.
Quote levels remain high, supply chain difficulties have eased and
we are optimistic about the long-term growth drivers for
decentralised heat recovery ventilation products in this
market.
The trend towards decentralised heat recovery solutions,
particularly for major refurbishments, is demonstrated by the
strong performance delivered by our ClimaRad brand in the
Netherlands. The project order pipeline is also strong, and we are
confident about the direction of travel for the second half of the
year. The investment payback for decentralised heat recovery is now
much shorter than before due to higher energy costs.
In Belgium the late launch of our new and upgraded range of
mechanical ventilation with heat recovery held back revenues in the
first half but we have now launched our upgraded range of products
into the market. The project, whilst delayed by Covid-19 and our
own electronics development, is now available to the market and
enables us to access areas of the market previously unavailable to
us.
ERI continues to deliver strong growth and our investment to
substantially increase capacity remains on track to deliver
benefits in the balance of FY23 and into the following year. We
continue to develop new, innovative, and more efficient product
solutions and have had some success in developing the North
American market for additional business. The long-term structural
underpinning of the demand for aluminium cross counterflow heat
exchangers remains exciting and we will add additional capacity
headroom to grow in the coming months.
Australasia
6 months
6 months to 31 Jan 2023 to 31 Jan 2022 Growth
Market sector revenue GBPm GBPm %
-------------------------------------- ------------------------ ---------------- -------
Total Australasia revenue 24.3 22.4 8.9
-------------------------------------- ------------------------ ---------------- -------
Adjusted operating profit 5.5 4.9 11.3
-------------------------------------- ------------------------ ---------------- -------
Adjusted operating profit margin (%) 22.6 22.1 0.5pp
-------------------------------------- ------------------------ ---------------- -------
Reported operating profit 4.9 4.4 12.4
-------------------------------------- ------------------------ ---------------- -------
Revenue in Australasia was GBP24.3 million, and grew by 8.9%
(4.5% at constant currency). Adjusted operating profit increased by
11.3% to GBP5.5 million, with our adjusted operating margin
increasing to 22.6% (H1 2022: 22.1%).
We continue to develop our product portfolio for both the New
Zealand and Australian markets and despite the slower activity in
the new build construction market we are confident about our
opportunities for further growth and are capturing further market
share in our key area of residential refurbishment. Delivering a
22.6% operating profit margin, with excellent levels of customer
service and the widest offering of residential product solutions in
the Australasian market, we are delighted about the continuing
progress made in the first half of the year.
FINANCIAL REVIEW
Trading performance summary
Group revenue for the six months ended 31 January 2023 was
GBP162.3 million (H1 2022: GBP149.6 million), an increase of 8.5%.
On a constant currency basis revenue grew by 7.5%, of which 6.3%
was organic and 1.2% inorganic due to the prior year acquisition of
ERI, with a favourable 1.0% impact from foreign exchange.
Adjusted operating profit increased by 7.1% (6.4% at constant
currency) to GBP34.2 million (H1 2022: GBP31.9 million). The strong
adjusted operating margin of 21.1% remained in line with the prior
two full financial years (H1 2022: 21.3%). On a regional level, UK
adjusted operating margin increased to 21.2% (H1 2022: 19.9%) with
strong price discipline, good progress in terms of product mix, and
good operational performance. European margins remain the highest
in the Group at 24.0% albeit slightly down on the prior year period
(H1 2022: 25.7%) due principally to business mix. Reported
operating profit increased by 19.6% to GBP27.8 million (H1 2022:
GBP23.3 million), of which GBP2.3 million was attributable to the
increase in adjusted operating profit and a further GBP2.3 million
was due to a reduced amortisation charge as a number of intangibles
assets reached the end of their amortisation life.
Adjusted earnings per share increased by 6.0% to 12.4p, compared
with 11.7p in H1 2022. This is despite an adverse impact on our
finance costs (up 21.6%) due to the marked increase in global bank
base rates. Our reported basic earnings per share also increased by
4.9% to 8.6 pence (H1 2022: 8.2 pence).
Reported Adjusted(2)
---------------------------------- ----------- ----------- --------
6 months 6 months 6 months 6 months
to to to to
31 January 31 January 31 January 31 January
2023 2022 Movement 2023 2022 Movement
--------------------------- ----------- ----------- -------- ----------- ----------- --------
Revenue (GBPm) 162.3 149.6 8.5% 162.3 149.6 8.5%
EBITDA (GBPm) 38.6 36.1 6.7% 38.7 36.3 6.8%
Operating profit (GBPm) 27.8 23.3 19.6% 34.2 31.9 7.1%
Net finance costs (GBPm) 3.5 0.9 280.2% 2.0 1.6 21.6%
Profit before tax (GBPm) 22.6 21.4 5.6% 31.8 30.0 6.0%
Basic EPS (p) 8.6 8.2 4.9% 12.4 11.7 6.0%
Interim dividend per share
(p) 2.50 2.30 8.7% 2.50 2.30 8.7%
Operating cash flow (GBPm) 30.4 16.1 88.4% 30.6 16.2 88.1%
Net debt (GBPm)1 79.2 104.0 24.8 79.2 104.0 24.8
--------------------------- ----------- ----------- -------- ----------- ----------- --------
(1) H1 2023 includes lease liabilities of GBP23.3 million (H1
2022: GBP24.8 million)
(2) The reconciliation of the Group's reported profit before tax
to adjusted measures of performance is summarised in the table
below and in detail in note 2 to the 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 condensed consolidated financial statements.
Revenue growth - H1 2022 to H1 2023 (GBPm)
Adjusted operating profit growth - H1 2022 to H1 2023 (GBPm)
Reported and adjusted results
The Board and key management use some alternative performance
measures to manage and assess the underlying performance of the
business. These measures include adjusted operating profit,
adjusted profit before tax, adjusted basic EPS, adjusted operating
cash flow and net debt. These measures are deemed more appropriate
to track underlying financial performance as they exclude income
and expenditure that is not directly related to the ongoing trading
of the business. A reconciliation of these measures of performance
to the corresponding reported figure is shown below and is detailed
in note 2 to the condensed consolidated financial statements.
Adjusted profit before tax of GBP31.8 million was 6.0% higher
than H1 2022 (GBP30.0 million). Reported profit before tax GBP22.6
million was 5.6% higher than H1 2022 (GBP21.4 million).
6 months ended 31 January 6 months ended 31 January
2023 2022
------------------------------- -------------------------------
Adjusted Adjusted
Reported Adjustments results Reported Adjustments results
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- ----------- -------- -------- ----------- --------
Revenue 162.3 -- 162.3 149.6 -- 149.6
---------------------------------- -------- ----------- -------- -------- ----------- --------
Gross profit 76.9 -- 76.9 71.3 -- 71.3
Administration and distribution
costs excluding the costs
listed below (42.7) -- (42.7) (39.4) -- (39.4)
Amortisation of intangible
assets acquired through
business combinations (6.2) 6.2 -- (8.5) 8.5 --
Acquisition costs(1) (0.2) 0.2 -- (0.1) 0.1 --
---------------------------------- -------- ----------- -------- -------- ----------- --------
Operating profit 27.8 6.4 34.2 23.3 8.6 31.9
Re-measurement of financial
liability (0.4) -- (0.4) (0.3) -- (0.3)
Re-measurement of future
consideration(2) (1.3) 1.3 -- (0.7) 0.7 --
Net loss on financial instruments
at fair value(3) (1.5) 1.5 -- 0.7 (0.7) --
Other net finance costs (2.0) -- (2.0) (1.6) -- (1.6)
---------------------------------- -------- ----------- -------- -------- ----------- --------
Profit before tax 22.6 9.2 31.8 21.4 8.6 30.0
Income tax (5.7) (1.7) (7.4) (5.1) (1.7) (6.8)
---------------------------------- -------- ----------- -------- -------- ----------- --------
Profit after tax 16.9 7.5 24.4 16.3 6.9 23.2
---------------------------------- -------- ----------- -------- -------- ----------- --------
(1) GBP0.2 million acquisition costs relate to professional fees
and expenses for acquisitions. (H1 2022: GBP0.1 million)
(2) GBP1.3 million revaluation relating to the re-measurement of
future consideration in ClimaRad and ERI (H1 2022: GBP0.7
million)
(3) GBP1.5 million loss due to the fair value of financial
derivatives (H1 2022: GBP0.7 million gain)
Currency impact on reported revenue and profit
The Group's key trading currencies, other than Sterling, are the
Euro, Swedish Krona, New Zealand Dollar and Australian Dollar.
Average exchange rates are used to translate results in the Income
Statement. During the six months, the movement of Sterling against
our four principal non-Sterling trading currencies were as follows:
Euro weakened by 2.3%, Swedish Krona strengthened by 4.4%, New
Zealand Dollar weakened by 1.6% and Australian Dollar weakened by
6.0%.
If we had translated the H1 2023 performance of the Group at our
H1 2022 exchange rates, the reported revenue would have been GBP1.5
million lower at GBP160.8 million, and adjusted operating profit
would have been GBP0.2 million lower at GBP33.9 million.
We do not hedge the translational exchange risk arising from the
conversion of the results of overseas subsidiaries, although we do
denominate some of our bank borrowings in both Euro and Swedish
Krona, which offsets some of the translation risk relating to net
assets. At 31 January 2023 we had borrowings denominated in Swedish
krona of GBPnil million (31 July 2022: GBP2.4 million), and
Euro-denominated bank borrowings of GBP72.5 million (31 July 2022:
GBP71.9 million). The Sterling value of our foreign
currency-denominated loans, net of cash, increased by GBP4.4
million (H1 2022: decreased by GBP0.9 million) as a consequence of
exchange rate movements.
Finance costs
Reported net finance costs were GBP3.5 million (H1 2022: GBP0.9
million) including GBP1.5 million of net loss on the revaluation of
financial instruments (H1 2022: gain GBP0.7 million). Adjusted
finance costs were GBP2.0 million (H1 2022: GBP1.6 million), the
increase compared to prior year reflecting higher interest rates
across our areas of operation.
Taxation
Our underlying effective tax rate, on adjusted profit before
tax, was 23.2% (H1 2022: 22.6%). The increase of 0.6 percentage
points in our adjusted effective tax rate compared to the prior
period was primarily a result of part year impact of the change in
the UK rate from 19% to 25%.
Our reported effective tax rate for the period was 25.0% (H1
2022: 23.8%).
We expect our medium term underlying effective tax rate to be in
the range of 23% to 25% of the Group's adjusted profit before
tax.
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 88% (H1 2022: 50%). With the Group's
typical cash seasonality profile weighted slightly more towards the
second half of the year, this is well on track to exceed our stated
financial target of 90% for the full year 2023.
Working capital increased by GBP5.0 million in the period (H1
2022: GBP17.5 million), within which inventory increased by GBP2.5
million (H1 2022: GBP8.3 million). Approximately GBP0.5 million of
the increase in inventory was due to movements in foreign exchange
rates, with receipt of components ahead of the lunar New Year
holiday period and a small amount of revaluation due to increased
input costs also being factors.
Capital expenditure in the period of GBP4.1 million (H1 2022:
GBP3.6 million), included GBP1.0 million in product development
across the Group and GBP1.0 million on plant and equipment in the
UK, as well as investment to expand the EC3 motorised impeller
production capacity in our OEM business and on continuing the
capacity expansion investment in ERI in North Macedonia.
Dividend payments in the period were GBP9.9 million (H1 2022:
GBP8.7 million), whilst tax payments were also higher at GBP6.5
million (H1 2022: GBP6.3 million).
Acquisition spend of GBP0.4 million (H1 2022: GBP24.4 million)
related to the acquisition of the remaining 49% share purchase of
ERI Corporation UK Limited (see note 9).
Net debt at 31 January 2023 was GBP79.2 million (H1 2022:
GBP104.0 million), comprised of bank borrowings of GBP72.5 million
(H1 2022: GBP94.4 million), net of cash and cash equivalents of
GBP16.6 million (H1 2022: GBP15.2 million) and including lease
liabilities of GBP23.3 million (H1 2022: GBP24.8 million). Net debt
(excluding leased liabilities) of GBP55.9 million (H1 2022: GBP79.2
million) represents leverage of 0.8x adjusted EBITDA (H1 2022:
1.2x).
6 months 6 months
to to
31 January 31 January
2023 2022
GBPm GBPm
---------------------------------- ----------- -----------
Opening net debt at
1 August (85.8) (79.2)
---------------------------------- ----------- -----------
Movements from normal
business operations:
Adjusted EBITDA 38.7 36.3
Movement in working
capital (5.0) (17.5)
Share-based payments 1.0 1.0
Capital expenditure (4.1) (3.6)
Adjusted operating
cash flow: 30.6 16.2
- Interest paid net
of interest received (1.5) (1.4)
- Income tax paid (6.5) (6.3)
- Business combination
related operating
costs (0.2) (0.1)
- Dividend paid (9.9) (8.7)
- Purchase of own
shares by the Employee
Benefit Trust (0.9) --
- FX on foreign currency
loans/cash (4.4) 0.9
- Issue costs of new
borrowings (0.3) --
- Lease liabilities 1.7 0.7
- Payments of lease
liabilities (1.6) (1.7)
Movements from acquisitions:
- Acquisition of non-controlling
interest (0.4) --
- Contingent consideration
relating to the acquisition
of Ventair from operating
activities -- (3.2)
- Contingent consideration
relating to the acquisition
of Ventair from investing
activities -- (0.9)
- Acquisition consideration
net of cash acquired
and debt repaid -- (20.3)
---------------------------------- ----------- -----------
Closing net debt at
31 January (79.2) (104.0)
---------------------------------- ----------- -----------
6 months 6 months
to to
31 January 31 January
2023 2022
GBPm GBPm
--------------------------------- ----------- -------------
Bank Debt (72.5) (94.4)
Cash 16.6 15.2
--------------------------------- ----------- -------------
Net Debt (excluding
leased liabilities) (55.9) (79.2)
Lease liabilities (23.3) (24.8)
--------------------------------- ----------- -------------
Closing net debt at
31 January (79.2) (104.0)
--------------------------------- ----------- -------------
Reconciliation of adjusted operating cash flow
6 months 6 months
to to
31 January 31 January
2023 2022
GBPm GBPm
----------------------------- ----------- -----------
Net cash flow generated
from operating activities 28.0 10.2
----------------------------- ----------- -----------
Capital expenditure (4.1) (3.6)
UK and overseas tax
paid 6.5 6.3
Contingent consideration
relating to the acquisition
of Ventair from operating
activities -- 3.2
Cash flow relating
to business combination
costs 0.2 0.1
----------------------------- ----------- -----------
Adjusted operating
cash flow 30.6 16.2
----------------------------- ----------- -----------
Bank facilities, refinancing and liquidity
In December 2022, the Group exercised the option to extend its
GBP150 million multicurrency "Sustainability Linked Revolving
Credit Facility", together with an accordion of up to GBP30
million, by a further period of twelve months. The maturity date of
the facility is now 2 December 2025.
At 31 January 2023, the Group had GBP77,544,000 (31 July 2022:
GBP75,649,000) of the facility unutilised.
Employee Benefit Trust
During the period a GBP0.9 million loan was made to the Volution
Employee Benefit Trust for the purpose of purchasing shares in
Volution Group plc in order to partly fulfil the Company's
obligations under its share incentive plans (H1 2022: GBPnil). In
the period 162,542 shares (H1 2022: 305,024) were exercised and
released by the trustees with a value of GBP533,000 (H1 2022:
GBP845,000). The Volution Employee Benefit Trust has been
consolidated into our results and the shares purchased have been
treated as treasury shares deducted from shareholders' funds.
Going concern
After reviewing the Group's current liquidity, net debt,
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 2024 and these condensed consolidated financial statements
have therefore been prepared on a going concern basis. Please refer
to Note 1 Basis of preparation.
Andy O'Brien
Chief Financial Officer
8 March 2023
Principal Risks and Uncertainties
The Directors have reviewed the principal risks and
uncertainties which could have a material impact on the Group's
performance and have concluded that they has been no material
change from those described in Volution's Annual Report 2022, which
can be found at 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 2022 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
8 March 2023 8 March 2023
Independent Review Report to Volution Group plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 January 2023 which comprises the interim
condensed consolidated statement of comprehensive income, the
interim condensed consolidated statement of financial position, the
interim condensed consolidated statement of changes in equity, the
interim condensed consolidated statement of cash flows and the
related explanatory notes 1 to 16. We have read the other
information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
January 2023 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. 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.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
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 of conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management 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 this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company'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 company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
8 March 2023
Interim Condensed Consolidated Statement of Comprehensive
Income
For the period ended 31 January 2023
2023 2022
Unaudited Unaudited
Notes GBP000 GBP000
-------------------------------------------------- ----- ---------- ----------
Revenue from contracts with customers 3 162,287 149,574
Cost of sales (85,378) (78,284)
-------------------------------------------------- ----- ---------- ----------
Gross profit 76,909 71,290
Administrative and distribution expenses (48,904) (47,910)
-------------------------------------------------- ----- ---------- ----------
Operating profit before separately disclosed
items 28,005 23,380
Costs of business combinations (187) (126)
-------------------------------------------------- ----- ---------- ----------
Operating profit 27,818 23,254
Finance revenue 33 695
Re-measurement of financial liability 11 (428) (292)
Re-measurement of future consideration 11 (1,336) (691)
Finance costs (3,531) (1,615)
-------------------------------------------------- ----- ---------- ----------
Profit before tax 22,556 21,351
-------------------------------------------------- ----- ---------- ----------
Income tax 5 (5,639) (5,082)
-------------------------------------------------- ----- ---------- ----------
Profit for the period 16,917 16,269
-------------------------------------------------- ----- ---------- ----------
Attributable to the shareholders 16,908 16,240
Attributable to non-controlling interests 9 29
Other comprehensive (expense)/income
Items that may subsequently be reclassified
to profit or loss:
Exchange differences arising on translation
of foreign operations 2,934 (3,751)
(Loss)/Gain on hedge of net investment in foreign
operations (3,805) 2,104
-------------------------------------------------- ----- ---------- ----------
Other comprehensive expense for the period (871) (1,647)
-------------------------------------------------- ----- ---------- ----------
Total comprehensive income for the period 16,046 14,622
-------------------------------------------------- ----- ---------- ----------
Attributable to the shareholders 16,037 14,593
Attributable to non-controlling interests 9 29
Earnings per share
Basic earnings per share 6 8.6 8.2
Diluted earnings per share 6 8.5 8.1
-------------------------------------------------- ----- ---------- ----------
Interim Condensed Consolidated Statement of Financial
Position
At 31 January 2023
31 January 31 July
2023 2022
Unaudited Audited
Notes GBP000 GBP000
-------------------------------------- ----- ---------- ---------
Non-current assets
Property, plant and equipment 10 29,108 28,235
Right-of-use assets 23,184 23,567
Intangible assets - goodwill 7 145,182 142,661
Intangible assets - others 8 81,884 87,592
-------------------------------------- ----- ---------- ---------
279,358 282,055
-------------------------------------- ----- ---------- ---------
Current assets
Inventories 59,392 57,151
Right of return assets 296 -
Trade and other receivables 53,563 57,526
Other financial assets 11 - 1,091
Cash and short-term deposits 16,604 13,543
-------------------------------------- ----- ---------- ---------
129,855 129,311
-------------------------------------- ----- ---------- ---------
Total assets 409,213 411,366
-------------------------------------- ----- ---------- ---------
Current liabilities
Trade and other payables (42,333) (48,837)
Refund liabilities (10,305) (10,268)
Income tax (6,517) (5,564)
Other financial liabilities 11 (661) -
Interest-bearing loans and borrowings 12 (1,888) (3,599)
Provisions (1,556) (1,684)
-------------------------------------- ----- ---------- ---------
(63,260) (69,952)
-------------------------------------- ----- ---------- ---------
Non-current liabilities
Interest-bearing loans and borrowings 12 (102,957) (104,433)
Other financial liabilities 11 (15,896) (14,132)
Provisions (465) (319)
Deferred tax liabilities (12,474) (14,222)
-------------------------------------- ----- ---------- ---------
(131,792) (133,106)
-------------------------------------- ----- ---------- ---------
Total liabilities (195,052) (203,058)
-------------------------------------- ----- ---------- ---------
Net assets 214,161 208,308
-------------------------------------- ----- ---------- ---------
Capital and reserves
Share capital 2,000 2,000
Share premium 11,527 11,527
Treasury shares (1,467) (3,574)
Capital reserve 93,855 93,855
Share-based payment reserve 4,647 5,058
Foreign currency translation reserve 2,228 3,099
Retained earnings 101,371 96,247
-------------------------------------- ----- ---------- ---------
Total shareholders' equity 214,161 208,212
-------------------------------------- ----- ---------- ---------
Non-controlling interest - 96
-------------------------------------- ----- ---------- ---------
Total equity 214,161 208,308
-------------------------------------- ----- ---------- ---------
The consolidated financial statements of Volution Group plc
(registered number: 09041571) were approved by the Board of
Directors and authorised for issue on 8 March 2023.
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 2023
Foreign
Share-based currency
Share Share Treasury Capital payment translation Retained Shareholder's Non-Controlling Total
capital premium shares reserve reserve reserve earnings equity Interest Equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
At 31 July 2021
(Audited) 2,000 11,527 (3,739) 93,855 4,090 2,899 74,658 185,290 -- 185,290
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
Profit for the
period -- -- -- -- -- -- 16,240 16,240 29 16,269
Other
comprehensive
expense -- -- -- -- -- (1,647) -- (1,647) -- (1,647)
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
Total
comprehensive
income -- -- -- -- -- (1,647) 16,240 14,593 29 14,622
Acquisition of
businesses -- -- -- -- -- -- -- -- 34 34
Exercise of
shares
options -- -- 2,064 -- (1,129) -- (792) 143 -- 143
Share-based
payment
including tax -- -- -- -- 892 -- -- 892 -- 892
Dividend paid -- -- -- -- -- -- (8,719) (8,719) -- (8,719)
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
At 31 January
2022
(Unaudited) 2,000 11,527 (1,675) 93,855 3,853 1,252 81,387 192,199 63 192,262
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
Profit for the
period -- -- -- -- -- -- 19,370 19,370 33 19,403
Other
comprehensive
income -- -- -- -- -- 1,847 -- 1,847 -- 1,847
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
Total
comprehensive
income -- -- -- -- -- 1,847 19,370 21,217 33 21,250
Purchase of own
shares -- -- (1,900) -- -- -- -- (1,900) -- (1,900)
Exercise of
share
options -- -- 1 -- -- -- 43 44 -- 44
Share-based
payment
including tax -- -- -- -- 1,205 -- -- 1,205 -- 1,205
Dividends paid -- -- -- -- -- -- (4,553) (4,553) -- (4,553)
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
At 31 July 2022
(Audited) 2,000 11,527 (3,574) 93,855 5,058 3,099 96,247 208,212 96 208,308
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
Profit for the
period -- -- -- -- -- -- 16,908 16,908 9 16,917
Other
comprehensive
expense -- -- -- -- -- (871) -- (871) -- (871)
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
Total
comprehensive
income -- -- -- -- -- (871) 16,908 16,037 9 16,046
Purchase of own
shares -- -- (911) -- -- -- -- (911) -- (911)
Exercise of
share
options -- -- 3,018 -- (1,379) -- (1,639) -- -- --
Share-based
payment
including tax -- -- -- -- 968 -- -- 968 -- 968
Dividend paid -- -- -- -- -- -- (9,881) (9,881) -- (9,881)
Acquisition of
non-controlling
interest
(note 9) -- -- -- -- -- -- (264) (264) (105) (369)
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
At 31 January
2023
(Unaudited) 2,000 11,527 (1,467) 93,855 4,647 2,228 101,371 214,161 -- 214,161
---------------- ------- ------- -------- ------- ----------- ----------- -------- ------------- --------------- -------
Treasury shares
The treasury shares reserve represents the cost of shares in
Volution Group plc purchased in the market and held by the Volution
Employee Benefit Trust to satisfy obligations under the Group's
share incentive schemes.
Capital reserve
The capital reserve is the difference in share capital and
reserves arising from the use of the pooling of interest method for
preparation of the financial statements in 2014. This is a
non-distributable reserve.
Share-based payment reserve
The share-based payment reserve is used to recognise the value
of equity-settled share-based payments provided to key management
personnel, as part of their remuneration.
Foreign currency translation reserve
Exchange differences arising on translation of the Group's
foreign subsidiaries into GBP are included in the foreign currency
translation reserve. The Group hedges some of its exposure to its
net investment in foreign operations; foreign exchange gains and
losses relating to the effective portion of the net investment
hedge are accounted for by entries made to other comprehensive
income. No hedge ineffectiveness has been recognised in the
statement of comprehensive income for any of the periods
presented.
Retained earnings
The parent company of the Group, Volution Group plc, had
distributable retained earnings at 31 January 2023 of
GBP111,793,000 (31 January 2022 GBP116,822,000).
Interim Condensed Consolidated Statement of Cash Flows
For the period ended 31 January 2023
2023 2022
Unaudited Unaudited
Notes GBP000 GBP000
------------------------------------------------------- ----- ---------- ----------
Operating activities
Profit for the period after tax 16,917 16,269
Adjustments to reconcile profit for the period
to net cash flow from operating activities:
Income tax 5,639 5,082
Gain on disposal of property, plant and equipment (2) (4)
Acquisition related operating costs 187 126
Cash flows relating to acquisition costs (187) (126)
Re-measurement of financial liability 428 292
Re-measurement of future consideration 1,336 691
Finance revenue (33) (695)
Finance costs 3,531 1,615
Share-based payment expense 968 1,035
Depreciation of property, plant and equipment 10 1,974 1,854
Depreciation of right of use assets 1,870 1,801
Amortisation of intangible assets 8 6,892 9,229
Working capital adjustments:
Decrease/(Increase) in trade receivables and other
assets 3,963 (3,060)
Increase in inventories (2,537) (8,282)
Decrease in trade and other payables (6,467) (5,960)
Movement in provisions 18 (153)
------------------------------------------------------- ----- ---------- ----------
Cash generated by operations 34,497 19,714
------------------------------------------------------- ----- ---------- ----------
UK income tax paid (2,320) (1,000)
Overseas income tax paid (4,170) (5,264)
Contingent consideration relating to the acquisition
of Ventair 9 -- (3,211)
------------------------------------------------------- ----- ---------- ----------
Net cash flow generated from operating activities 28,007 10,239
------------------------------------------------------- ----- ---------- ----------
Investing activities
Payments to acquire intangible assets 8 (1,622) (595)
Purchase of property, plant and equipment 10 (2,513) (3,075)
Proceeds from disposal of property, plant and
equipment 19 80
Acquisition of subsidiaries, net of cash acquired 9 -- (16,466)
Contingent consideration relating to the acquisition
of Ventair 9 -- (952)
Interest received 33 1
------------------------------------------------------- ----- ---------- ----------
Net cash flow used in investing activities (4,083) (21,007)
------------------------------------------------------- ----- ---------- ----------
Financing activities
Repayment of interest-bearing loans and borrowings (18,700) (12,237)
Repayment of ERI debt acquired -- (3,285)
Repayment of ClimaRad vendor loan -- (504)
Proceeds from new borrowings 13,000 35,428
Acquisition of non-controlling interest 9 (369) --
Issue costs of new borrowings (300) --
Interest paid (1,554) (1,371)
Payment of principal portion of lease liabilities (1,584) (1,657)
Dividends paid (9,881) (8,719)
Purchase of own shares (911) --
------------------------------------------------------- ----- ---------- ----------
Net cash flow (used)/generated in financing activities (20,299) 7,655
------------------------------------------------------- ----- ---------- ----------
Net increase/(decrease) in cash and cash equivalents 3,625 (3,113)
Cash and cash equivalents at the start of the
year 13,543 19,456
Effect of exchange rates on cash and cash equivalents (564) (1,183)
------------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at the end of the period 16,604 15,160
------------------------------------------------------- ----- ---------- ----------
Notes to the Interim Condensed Consolidated Financial
Statements
For the period ended 31 January 2023
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 preliminary results were authorised for issue by the Board
of Directors on 8 March 2023. The financial information set out
herein does not constitute the Group's statutory consolidated
financial statements for the 6 months ended 31 January 2023 and is
unaudited.
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 2022. The financial information
for the half years ended 31 January 2023 and 31 January 2022 do not
constitute statutory accounts within the meaning of Section 434(3)
of the Companies Act 2006 and is 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 2022 included within this report does not constitute the
full statutory accounts for that period. The Annual Report 2022 has
been filed with the Registrar of Companies. The Independent
Auditor's Report on the Annual Report 2022 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 and 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
2024.
The financial position remains robust with committed facilities
totalling GBP150 million, and an accordion of a further GBP30
million, maturing in December 2025 (having been extended by 12
months during the period as set out in note 12). 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 2022.
We have then applied a severe but plausible downside scenario in
order to model the potential concurrent impact of:
- a significant economic slowdown reducing revenue by 20% in
FY23 and a further 10% year-on-year in FY24 compared to plan;
- supply chain difficulties or inflationary cost increases
reducing gross profit margin by 10%; and
- significant acquisitions increasing debt but with no positive cash flow contribution.
A reverse stress test scenario has also been modelled which
shows a revenue contraction of >35% in FY23 and a further 10%
year-on-year reduction in FY24 with no mitigations would be
required to breach covenants or compromise liquidity, which is
considered an extremely remote scenario.
Mitigations available within the control of management include
reducing discretionary capex, discretionary indirect costs, and
dividends. Over the short period of our climate change assessment
published in the Annual report 2022 (aligned to our going concern
assessment) we have concluded that there is no material adverse
impact of climate change and hence have not included any impacts in
either our base case or downside scenarios of our going concern
assessment.
The Directors have concluded that the results of the scenario
testing combined with the significant liquidity profile available
under the revolving credit facility confirm that there is no
material uncertainty in the use of the going concern
assumption.
Non-Controlling interest
Non-Controlling Interests are identified separately from the
Group's equity. Non-Controlling Interests consist of the amount of
those interests at the date of the acquisition and the
Non-Controlling's share of changes in equity since that date.
Non-Controlling Interests are measured at the Non-Controlling
Interest's share of the fair value of the identifiable net
assets.
Where there is an obligation to purchase the Non-Controlling
Interest at a future date, the Non-Controlling Interest will be
recognised on acquisition, and subsequently when the obligation to
purchase liability is recognised the amount is reclassified from
equity to a financial liability and the Non-Controlling Interest is
derecognised. Any difference between the carrying value of
non-controlling interest and the liability is adjusted against
retained earnings.
The financial liability for the Non-Controlling interest is
subsequently accounted for under IFRS 9, with all changes in the
carrying amount, including the Non-Controlling interest share of
profit, recognised as a re-measurement in the income statement.
When the obligation or 'put liability' is exercised, the carrying
amount of the financial liability at that date is extinguished by
the payment of the exercise price.
Employee Benefit Trust
The Company has an Employee Benefit Trust (EBT) which is used in
connection with the operation of the Company's Long Term Incentive
Plan (LTIP), Deferred Share Bonus Plan and Sharesave Plan. The
Company's own shares held by the Volution EBT are treated as
treasury shares and deducted from shareholders' funds until they
vest unconditionally with employees.
At 31 January 2023, a total of 2,321,123 (31 July 2022:
2,183,665) ordinary shares in the Company were held by the Volution
EBT, all of which were under option to employees. During the period
300,000 ordinary shares in the Company were purchased by the
trustees (H1 2022: none), and 162,542 shares (H1 2022: 305,024
shares) were exercised.
The Volution EBT has agreed to waive its rights to
dividends.
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 2022.
New standards and interpretations
Any new standards or interpretations in issue, but not yet
effective, are not expected to have a material impact on the
Group's net assets or results.
The following new standards and amendments became effective as
at 1 January 2022 and have been adopted for the financial year
commencing 1 August 2022. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but not
yet effective.
- Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
- Covid-19-Related Rent Concessions beyond 30 June 2021
Amendment to IFRS 16
These have not had an impact on these condensed consolidated
financial statements.
2. Adjusted earnings
The Board and key management personnel use some alternative
performance measures to track and assess the underlying performance
of the business. These measures include adjusted operating profit
and adjusted profit before tax. These measures are deemed more
appropriate as they remove income and expenditure which is not
directly related to the ongoing trading of the business. Such
alternative performance measures are not defined terms under IFRS
and may not be comparable with similar measures disclosed by other
companies. Likewise, these measures are not a substitute for IFRS
measures of profit. A reconciliation of these measures of
performance to the corresponding reported figure is shown
below.
6 months 6 months
to to
31 January 31 January
2023 2022
GBP000 GBP000
-------------------------------------------------------------- ----------- -----------
Profit after tax 16,917 16,269
Add back:
Costs of business combinations 187 126
Re-measurement of future consideration relating to the
business combination of ClimaRad 1,336 691
Net loss/(gain) on financial instruments at fair value 1,535 (694)
Amortisation and impairment of intangible assets acquired
through business combinations 6,174 8,520
Tax effect of the above (1,729) (1,697)
-------------------------------------------------------------- ----------- -----------
Adjusted profit after tax 24,420 23,215
Add back:
Adjusted tax charge 7,368 6,779
-------------------------------------------------------------- ----------- -----------
Adjusted profit before tax 31,788 29,994
Add back:
Interest payable on bank loans, lease liabilities and
amortisation of financing costs 1,996 1,615
Re-measurement of financial liability relating to acquisition
of ClimaRad 428 292
Finance revenue (33) (1)
-------------------------------------------------------------- ----------- -----------
Adjusted operating profit 34,179 31,900
Add back:
Depreciation of property, plant and equipment 1,974 1,854
Depreciation of right-of-use asset 1,870 1,801
Amortisation of development costs, software and patents 718 709
-------------------------------------------------------------- ----------- -----------
Adjusted EBITDA 38,741 36,264
-------------------------------------------------------------- ----------- -----------
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 6 months
to to
31 January 31 January
2023 2022
GBP000 GBP000
-------------------------------------------- ----------- -----------
Sale of goods 158,751 146,466
Installation services 3,536 3,108
-------------------------------------------- ----------- -----------
Total revenue from contracts with customers 162,287 149,574
-------------------------------------------- ----------- -----------
6 months 6 months
to to
31 January 31 January
2023 2022
Market sectors GBP000 GBP000
-------------------------------------------- ----------- -----------
UK
Residential 41,423 35,813
Commercial 14,284 15,757
Export 5,277 5,609
OEM 12,658 12,628
-------------------------------------------- ----------- -----------
Total UK 73,642 69,807
-------------------------------------------- ----------- -----------
Nordics 26,649 27,023
Central Europe 37,673 30,405
-------------------------------------------- ----------- -----------
Total Continental Europe 64,322 57,428
-------------------------------------------- ----------- -----------
Total Australasia 24,323 22,339
-------------------------------------------- ----------- -----------
Total revenue from contracts with customers 162,287 149,574
-------------------------------------------- ----------- -----------
4. Segmental analysis
Continental Central
UK Europe Australasia / Eliminations Consolidated
6 months ended 31 January 2023 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------- ----------- ----------- --------------- ------------
Revenue from contracts with customers
External customers 73,642 64,322 24,323 -- 162,287
Inter-segment 11,668 19,168 116 (30,952) --
---------------------------------------- ------- ----------- ----------- --------------- ------------
Total revenue from contracts with
customers 85,310 83,490 24,439 (30,952) 162,287
---------------------------------------- ------- ----------- ----------- --------------- ------------
Gross profit 34,119 30,776 12,014 -- 76,909
---------------------------------------- ------- ----------- ----------- --------------- ------------
Results
Adjusted segment EBITDA 17,649 16,982 6,141 (2,031) 38,741
Depreciation and amortisation of
development costs, software and
patents (2,013) (1,554) (655) (340) (4,562)
---------------------------------------- ------- ----------- ----------- --------------- ------------
Adjusted operating profit/(loss) 15,636 15,428 5,486 (2,371) 34,179
Amortisation of intangible assets
acquired through business combinations (2,249) (3,338) (587) -- (6,174)
Acquisition related operating costs -- -- -- (187) (187)
---------------------------------------- ------- ----------- ----------- --------------- ------------
Operating profit/(loss) 13,387 12,090 4,899 (2,558) 27,818
Net finance cost -- -- -- (1,963) (1,963)
Loss on financial instruments -- -- (214) (1,321) (1,535)
Re-measurement of future consideration -- -- -- (1,336) (1,336)
Re-measurement of financial liability -- -- -- (428) (428)
---------------------------------------- ------- ----------- ----------- --------------- ------------
Profit/(loss) before tax 13,387 12,090 4,685 (7,606) 22,556
---------------------------------------- ------- ----------- ----------- --------------- ------------
Continental Central
UK Europe Australasia / Eliminations Consolidated
6 months ended 31 January 2022 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------- ----------- ----------- --------------- ------------
Revenue from contracts with customers
External customers 69,807 57,428 22,339 -- 149,574
Inter-segment 9,617 12,483 70 (22,170) --
---------------------------------------- ------- ----------- ----------- --------------- ------------
Total revenue from contracts with
customers 79,424 69,911 22,409 (22,170) 149,574
---------------------------------------- ------- ----------- ----------- --------------- ------------
Gross profit 29,645 30,713 10,982 (50) 71,290
---------------------------------------- ------- ----------- ----------- --------------- ------------
Results
Adjusted segment EBITDA 15,725 16,425 5,537 (1,423) 36,264
Depreciation and amortisation of
development costs, software and
patents (1,828) (1,591) (609) (336) (4,364)
---------------------------------------- ------- ----------- ----------- --------------- ------------
Adjusted operating profit/(loss) 13,897 14,834 4,928 (1,759) 31,900
Amortisation of intangible assets
acquired through business combinations (4,708) (3,244) (568) -- (8,520)
Acquisition related operating costs -- -- -- (126) (126)
---------------------------------------- ------- ----------- ----------- --------------- ------------
Operating profit/(loss) 9,189 11,590 4,360 (1,885) 23,254
Net finance cost -- -- -- (1,614) (1,614)
Gain on financial instruments -- -- 211 483 694
Re-measurement of future consideration -- -- -- (691) (691)
Re-measurement of financial liability -- -- -- (292) (292)
---------------------------------------- ------- ----------- ----------- --------------- ------------
Profit/(loss) before tax 9,189 11,590 4,571 (3,999) 21,351
---------------------------------------- ------- ----------- ----------- --------------- ------------
5. Income tax
Our underlying effective tax rate, on adjusted profit before
tax, was 23.2% (H1 2022: 22.6%). The increase of 0.6 percentage
points in our adjusted effective tax rate compared to the prior
period was primarily a result of part year impact of the change in
the UK rate from 19% to 25%.
Our reported effective tax rate for the period was 25.0% (H1
2022: 23.8%).
We expect our medium term underlying effective tax rate to be in
the range of 23% to 25% of the Group's adjusted profit before
tax.
6. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on conversion of any dilutive
potential ordinary shares into ordinary shares. There are 3,465,898
dilutive potential ordinary shares at 31 January 2023 (H1 2022:
2,966,484).
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
6 months 6 months
ended ended
31 January 31 January
2023 2022
GBP000 GBP000
-------------------------------------------------------------- ----------- -----------
Profit attributable to ordinary equity holders 16,917 16,269
-------------------------------------------------------------- ----------- -----------
Number Number
-------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for basic earnings
per share 197,146,809 197,605,520
Weighted average number of ordinary shares for diluted
earnings per share 199,811,338 200,256,594
-------------------------------------------------------------- ----------- -----------
Earnings per share
Basic 8.6p 8.2p
Diluted 8.5p 8.1p
-------------------------------------------------------------- ----------- -----------
6 months 6 months
ended ended
31 January 31 January
2023 2022
GBP000 GBP000
-------------------------------------------------------- ----------- -----------
Adjusted profit attributable to ordinary equity holders 24,420 23,215
-------------------------------------------------------- ----------- -----------
Number Number
-------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for adjusted
basic earnings per share 197,146,809 197,605,520
Weighted average number of ordinary shares for adjusted
diluted earnings per share 199,811,338 200,256,594
-------------------------------------------------------- ----------- -----------
Adjusted earnings per share
Basic 12.4p 11.7p
Diluted 12.2p 11.6p
-------------------------------------------------------- ----------- -----------
The weighted average number of ordinary shares has declined as a
result of treasury shares held by the Volution Employee Benefit
Trust (EBT) during the period. The shares are excluded when
calculating the reported 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
Total
Goodwill GBP000
------------------------------------------- -------
Cost and net book value
At 31 July 2021 137,710
On acquisition of ERI and its subsidiaries 5,134
Net foreign currency exchange differences (183)
------------------------------------------- -------
At 31 July 2022 142,661
Net foreign currency exchange differences 2,521
------------------------------------------- -------
At 31 January 2023 145,182
------------------------------------------- -------
8. Intangible assets - other
Total
2023 GBP000
------------------------------------------ -------
Cost
At 1 August 2022 236,437
Additions 1,622
Net foreign currency exchange differences 888
------------------------------------------ -------
At 31 January 2023 238,947
------------------------------------------ -------
Amortisation
At 1 August 2022 148,845
Charge for the period 6,892
Net foreign currency exchange differences 1,326
------------------------------------------ -------
At 31 January 2023 157,063
------------------------------------------ -------
Net book value
At 31 January 2023 81,884
------------------------------------------ -------
9. Business combinations and acquisitions of non-controlling
interests
Acquisitions in the half year ended 31 January 2023
Acquisition of additional interest in Energy Recovery Industries
Corporation Ltd (UK)
On 14 October 2022, the Group acquired the additional 49%
interest in the voting shares of Energy Recovery Industries
Corporation Ltd (UK), increasing its ownership to 100%. Cash
consideration of GBP369,000 was paid to the non-controlling
shareholder. The following is a schedule of additional interest
acquired in Energy Recovery Industries Corporation Ltd (UK):
GBP000
--------------------------------------------------------- ------
Cash consideration paid to non-controlling shareholder 369
Carrying value of the non-controlling interest in Energy
Recovery Industries Corporation Ltd (UK) (105)
----------------------------------------------------------- ------
Difference recognised in retained earnings 264
----------------------------------------------------------- ------
Cash outflows arising from business combinations and
acquisitions of non-controlling interests are as follows
6 months 6 months
ended ended
31 January 31 January
2023 2022
GBP000 GBP000
------------------------------------------------------- ------------ -----------
Operating activities
Ventair
Deferred cash consideration paid -- 3,211
------------------------------------------------------- ------------ -----------
Total contingent consideration in operating activities -- 3,211
------------------------------------------------------- ------------ -----------
Investing activities
ERI
Cash consideration -- 16,892
Less: cash acquired with the business -- (902)
------------------------------------------------------- ------------ -----------
-- 15,990
-------------------------------------------------------------------- -----------
Air Connection
Deferred cash consideration paid -- 476
------------------------------------------------------- ------------ -----------
Total Acquisition of subsidiaries -- 16,466
------------------------------------------------------- ------------ -----------
Ventair
Deferred cash consideration paid -- 952
Total contingent consideration in Investing activities -- 952
------------------------------------------------------- ------------ -----------
Financing activities
ERI
Cash consideration paid to non-controlling shareholder 369 --
Total acquisition of non-controlling interest 369 --
------------------------------------------------------- ------------ -----------
10. Property, plant and equipment excluding right-of-use
assets
Total
2023 GBP000
------------------------------------------ -------
Cost
At 1 August 2022 47,425
Additions 2,513
Disposals (211)
Net foreign currency exchange differences 270
--------------------------------------------- -------
At 31 January 2023 49,997
--------------------------------------------- -------
Depreciation
At 1 August 2022 19,190
Charge for the period 1,974
Disposals (194)
Net foreign currency exchange differences (81)
--------------------------------------------- -------
At 31 January 2023 20,889
--------------------------------------------- -------
Net book value
At 31 January 2023 29,108
--------------------------------------------- -------
Commitments for the acquisition of property, plant and equipment
as of 31 January 2023 are GBP524,000 (31 July 2022:
GBP730,000).
11. Other financial assets and liabilities
Other financial assets:
31 January 31 July
2023 2022
GBP000 GBP000
----------------------------------- ----------- -------
Foreign exchange forward contracts - 1,091
Total - 1,091
----------------------------------- ----------- -------
Other financial liabilities:
Foreign Contingent
exchange consideration Contingent
forward ClimaRad consideration
contracts BV ERI Total
2023 GBP000 GBP000 GBP000 GBP000
--------------------------------------- ---------- -------------- -------------- -------
At 1 August 2022 - 7,052 7,080 14,132
Re-measurement of financial liability - 428 - 428
Re-measurement of future consideration - 1,326 10 1,336
Foreign exchange forward contracts 661 - - 661
At 31 January 2023 661 8,806 7,090 16,557
--------------------------------------- ---------- -------------- -------------- -------
Analysis
Current 661 - - 661
Non-current - 8,806 7,090 15,896
Total 661 8,806 7,090 16,557
--------------------------------------- ---------- -------------- -------------- -------
The financial liability to purchase the non-controlling interest
in ClimaRad BV is sensitive to the estimation of the expected
future performance of ClimaRad which is used to calculate the
future amount payable - based on an EBITDA multiple. If EBITDA for
the calendar year ended 31 December 2024 is 10% higher than
expected, contingent consideration would be GBP1,600,000 higher,
discounted to present value.
The financial liability to pay contingent consideration relating
to the acquisition in the period of ERI is sensitive to the
estimation of the expected future performance of ERI which is used
to calculate the future amount payable - based on an EBITDA
multiple. If EBITDA for the calendar year ended 31 December 2024 is
10% higher than expected, contingent consideration would be
GBP1,400,000 higher, discounted to present value.
Ventair Nordiska
Air Connection Pty ClimaRad Klimatfabriken Energent
ApS Limited BV AB Ab ERI Total
2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- -------------- -------- -------- --------------- -------- ------- -------
Contingent consideration
At 1 August 2021 483 4,070 5,514 251 256 - 10,574
Contractual liability
to purchase remaining
non-controlling interest - - 983 - - - 983
Contingent consideration - - - - - 7,678 7,678
Consideration paid during
the year (476) (4,163) - - (256) - (4,895)
Foreign exchange (7) 93 - (11) - - 75
-------------------------- -------------- -------- -------- --------------- -------- ------- -------
At 31 January 2022 - - 6,497 240 - 7,678 14,415
-------------------------- -------------- -------- -------- --------------- -------- ------- -------
Analysis
Current - - - 240 - - 240
Non-current - - 6,497 - - 7,678 14,175
-------------------------- -------------- -------- -------- --------------- -------- ------- -------
Total - - 6,497 240 - 7,678 14,415
-------------------------- -------------- -------- -------- --------------- -------- ------- -------
12. Interest-bearing loans and borrowings
31 January 2023 31 July 2022
-------------------- --------------------
Current Non-current Current Non-current
GBP000 GBP000 GBP000 GBP000
----------------------------------------------- ------- ----------- ------- -----------
Unsecured - at amortised cost
Borrowings under the revolving credit facility
(maturing 2025) -- 72,456 -- 74,351
Cost of arranging bank loan -- (968) -- (843)
----------------------------------------------- ------- ----------- ------- -----------
-- 71,488 -- 73,508
----------------------------------------------- ------- ----------- ------- -----------
ClimaRad vendor loan -- 10,061 -- 9,557
Lease liabilities 1,888 21,408 3,599 21,368
----------------------------------------------- ------- ----------- ------- -----------
Total 1,888 102,957 3,599 104,433
----------------------------------------------- ------- ----------- ------- -----------
In December 2022, the Group exercised the option to extend its
GBP150 million multicurrency "Sustainability Linked Revolving
Credit Facility", together with an accordion of up to GBP30 million
by a period of twelve months. The maturity date is now 2 December
2025.
Revolving credit facility - at 31 January 2023
Amount
outstanding Termination Repayment
Currency GBP000 date frequency Rate %
-------------- ------------ ----------- ----------- -----------------
2 December
GBP -- 2025 One payment Sonia + margin%
2 December
Euro 72,456 2025 One payment Euribor + margin%
2 December
Swedish Krona -- 2025 One payment Stibor + margin%
-------------- ------------ ----------- ----------- -----------------
Total 72,456
-------------- ------------ ----------- ----------- -----------------
Revolving credit facility - at 31 July 2022
Amount
outstanding Termination Repayment
Currency GBP000 date frequency Rate %
-------------- ------------ ----------- ----------- -----------------
2 December
GBP -- 2024 One payment Sonia + margin%
2 December
Euro 71,932 2024 One payment Euribor + margin%
2 December
Swedish Krona 2,419 2024 One payment Stibor + margin%
-------------- ------------ ----------- ----------- -----------------
Total 74,351
-------------- ------------ ----------- ----------- -----------------
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 2023, Group leverage was below 1.0:1 and
therefore the margin remains at 1.25% in H2 2023.
At 31 January 2023, the Group had GBP77,544,000 (31 July 2022:
GBP75,649,000) of its multicurrency revolving credit facility
unutilised.
13. Fair values of financial assets and financial
liabilities
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
-- Level 1 - quoted (unadjusted) prices in active markets for
identical assets or liabilities;
-- Level 2 - other techniques for which all inputs that have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
-- Level 3 - techniques which use inputs which have a
significant effect on the recorded fair value that are not based on
observable market data.
Financial instruments carried at fair value comprise the
derivative financial instruments and the contingent consideration
in note 11. For hierarchy purposes, derivative financial
instruments are deemed to be Level 2 as external valuers are
involved in the valuation of these contracts. Their fair value is
measured using valuation techniques, including a DCF model. Inputs
to this calculation include the expected cash flows in relation to
these derivative contracts and relevant discount rates.
Contingent consideration is deemed to be Level 3. Contingent
consideration is based on the level of EBITDA achieved during the
earn-out period. The contingent consideration has been recognised
in line with management's best estimate of the level of EBITDA
expected to be achieved during the earn-out period. Whilst the
level of EBITDA to be achieved is as yet unobservable, management's
estimate has been based on the available budget and forecasts.
Contingent consideration has not been discounted when the payment
is expected to be made within 1 year as the impact is considered to
be immaterial.
14. Dividends paid and proposed
The Board has declared an interim dividend of 2.50 pence per
ordinary share in respect of the half year ended 31 January 2023 (6
months to 31 January 2022: 2.30 pence per ordinary share) which
will be paid on 2 May 2023 to shareholders on the register at the
close of business on 24 March 2023. 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 related party balances exist at 31 January 2023 or 31 January
2022.
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.
16. Glossary of terms
Adjusted basic and diluted EPS: calculated by dividing the
adjusted profit/(loss) for the period attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the adjusted net profit/(loss) attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the period plus the weighted average
number of ordinary shares that would be issued on conversion of any
dilutive potential ordinary shares into ordinary shares. There are
3,465,898 dilutive potential ordinary shares at 31 January 2023 (H1
2022: 2,966,484).
Adjusted EBITDA: adjusted operating profit before depreciation
and amortisation.
Adjusted finance costs: finance costs before net gains or losses
on financial instruments at fair value and the exceptional write
off of unamortised loan issue costs upon refinancing.
Adjusted operating cash flow: adjusted EBITDA plus or minus
movements in operating working capital, less net investments in
property, plant and equipment and intangible assets less the
operating activities part of the contingent consideration.
Adjusted operating profit: operating profit before adjustments
to re-measurement of contingent consideration, costs of business
combinations, amortisation of acquired inventory fair value
adjustments and amortisation of assets acquired through business
combinations.
Adjusted profit after tax: profit after tax before adjustments
to re-measurement of contingent consideration, net gains or losses
on financial instruments at fair value, costs of business
combinations, amortisation of acquired inventory fair value
adjustments, amortisation of assets acquired through business
combinations and the tax effect on these items.
Adjusted profit before tax: profit before tax before adjustments
to re-measurement of contingent consideration, net gains or losses
on financial instruments at fair value, costs of business
combinations, amortisation of acquired inventory fair value
adjustments and amortisation of assets acquired through business
combinations.
Adjusted tax charge: the reported 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 2023
at the average exchange rate for the period ended 31 January 2022.
In addition, we have converted the UK operating companies' sale and
purchase transactions in the period ended 31 January 2023, which
were denominated in foreign currencies, at the average exchange
rates for the period ended 31 January 2022.
EBITDA: profit before net finance costs, tax, depreciation and
amortisation.
Net debt: bank borrowings 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.
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END
IR FVLLBXXLLBBK
(END) Dow Jones Newswires
March 09, 2023 02:00 ET (07:00 GMT)
Grafico Azioni Volution (LSE:FAN)
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Da Apr 2024 a Mag 2024
Grafico Azioni Volution (LSE:FAN)
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Da Mag 2023 a Mag 2024
