Volution : Financial Reporting Document

Embargoed until 07:00 on:

Thursday 6 October 2022

VOLUTION GROUP PLC

Preliminary Full Year Results for the year ended 31 July 2022

Delivering strong growth, sustainably

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 audited financial results for the 12 months ended 31 July 2022.

RESULTS SUMMARY

	2022	2021	Movement
Revenue (£m)	307.7	272.6	+12.9%
Adjusted operating profit (£m)	64.9	56.9	+13.9%
Adjusted operating margin (%)	21.1%	20.9%	+0.2pp
Adjusted profit before tax (£m)	60.9	53.2	+14.5%
Adjusted EPS (pence)	24.0	21.0	+14.3%
Reported operating profit (£m)	50.8	34.2	+48.5%
Reported profit before tax (£m)	47.2	30.0	+57.2%
Reported basic EPS (pence)	18.1	10.5	+72.4%
Adjusted operating cash flow (£m)	50.4	56.9	(11.4)%
Net debt (£m)1	85.8	79.2	+6.6
Total dividend per share (pence)	7.3	6.3	+15.9%

1 2022 includes lease liabilities of £25.0 million (2021: £25.4 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 25 to the condensed consolidated financial statements. A reconciliation from reported profit after tax to adjusted profit after tax, adjusted profit before tax and adjusted operating profit, is set out in note 2 to the condensed consolidated financial statements.

Financial highlights

• Revenue up 12.9% consisting of 6.6% organic growth at constant currency (cc) and inorganic growth of 8.5% at cc, offset by adverse currency impact of 2.2%
• Good organic revenue growth in all three regions, UK, Continental Europe and Australasia, delivered through both volume and price
• Geographic diversification strategy continues: revenue from non-UK customers increases from 58.7% to 61.6% in the year
• Adjusted operating margin up 20bps to 21.1% (2021: 20.9%) underpinned by effective pricing actions and supply chain management
• Adjusted EPS of 24.0 pence, up 14.3%, delivering a compounded annual growth rate of 13.4% since IPO in 2014. Reported basic EPS up 72.4%
• Strong second half cash generation resulting in a full year adjusted operating cash flow of £50.4 million (2021: £56.9
  million), a full year cash conversion of 76% (2021: 97%)
• Total dividend for the year increased by 15.9% to 7.3 pence per share (2021: 6.3 pence)

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Operational highlights

• Investment in additional inventory and agile supply chain management ensured good customer service levels maintained throughout the year
• Acquisition of Energy Recovery Industries (ERI) completed in September 2021 for an initial consideration of €20 million, gives the Group a leading position in the manufacture of energy efficient heat exchangers, an integral component in all heat recovery devices
• €2 million investment commenced in capacity expansion and automation at ERI to support what we anticipate to be a strong growth area, as well as an expansion programme for our energy efficient EC3 motorised impellers in our Torin- Sifan business
• Successful first full year of operation of new Nordics facility in Växjö

Healthy air, sustainably

• Good progress against our key sustainability targets:
• • 67.2% of plastic used in own manufacturing facilities from recycled sources (2021: 59.7%)
  • 66.1% of revenue from low-carbon, energy saving products (2021: 62.1%)
• Commencement of Group Sustainability Committee as of September 2021, with attendance by our Senior Independent Director at each of the three meetings to date
• Continued investment and innovation in heat recovery categories, now over 30% of Group revenue
• Group carbon reduction targets aligned with 2040 net zero objective
• Signatories to both the CEO Water Mandate and UN Global Compact in the year

Commenting on the Group's performance, Ronnie George, Chief Executive Officer, said:

"We have again achieved a strong performance, with good organic revenue growth across all three of our geographies and maintaining our operating margin in the face of challenging operating conditions. We further increased the Group's product and geographic diversification in the year, with non-UK customers now representing 61.6% of our revenue. Our strategic investment in higher levels of component and finished goods inventory, a decision taken over one year ago, has helped underpin excellent service levels and we are delighted with the progress we have made in delivering "Healthy air, sustainably". I am proud of the results our committed employees have delivered in the year.

"Progress with sustainability has been equally strong. Recycled plastics content in our facilities is now up to 67.2% and low carbon content of sales, additionally boosted by the acquisition of Energy Recovery Industries, is now at 66.1%. The energy crisis has focused customers' minds on the importance of heat recovery ventilation and this category now accounts for over 30% of Group revenue. This desire to reduce heating bills, a tightening of regulations relating to carbon reduction in buildings, as well as heightened awareness of the importance of air quality to health, continues to drive demand for our innovative solutions."

Outlook

The new financial year has started well, delivering revenue and profit ahead of the same period last year. Whilst we are mindful of macroeconomic challenges, the regulatory, air quality and energy efficiency agenda throughout Europe has never been more supportive.

With our excellent levels of customer service, agile manufacturing and supply chain capability and strong balance sheet position, coupled with significant geographic revenue diversity, we are well placed to make further progress in the year ahead.

-Ends-

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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 9.30am today, Thursday 6 October 2022, at the offices of Berenberg, 60 Threadneedle Street, London EC2R 8HP. Please contact [e-mail] 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.comfrom 9.00 am on Thursday 6 October 2022.

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.

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Chairman's Statement

I am pleased to report that Volution has made further significant progress in the year ended 31 July 2022, both in respect of its financial performance and delivering against our ESG targets and objectives. As demonstrated by these results, the resilience of Volution's business model and strategy continues to be highly effective, despite the unpredictable trading environments, supply chain challenges, and inflationary pressures experienced across our operations.

Performance and results

This strong set of results reflects the resilience and responsiveness of the business and its people, through the challenges of recent times, with the Group's revenue increasing to £307.7 million (2021: £272.6 million). Adjusted operating profit was up by 13.9% at £64.9 million (2021: £56.9 million), representing margins of 21.1% (2021: 20.9%). Reported profit before tax increased to £47.2 million (2021: £30.0 million).

Basic earnings per share for the year was 18.1 pence (2021: 10.5 pence). Our adjusted earnings per share was 24.0 pence representing a 14.3% increase over the adjusted earnings per share for the prior year of 21.0 pence. The compound annual growth rate of adjusted earnings per share since IPO in 2014 was 13.4%, demonstrating consistent delivery of double-digit earnings growth over the period.

Adjusted operating cash flow was £50.4 million (2021: £56.9 million) and net debt at the year end was £85.8 million (2021: £79.2 million), despite spending £16.5m on acquisitions during the year.

Dividends

We aim to deliver shareholder value through organic and inorganic revenue growth and reward shareholders through a progressive dividend policy. We paid an interim dividend of 2.3 pence per share in May 2022 and based on our results and financial position, the Board has recommended a final dividend of 5.0 pence per share, giving a total dividend for the financial year of 7.3 pence per share (2021: 6.3 pence per share), an increase of 15.9% on the previous year. As a consequence of this recommendation, the resulting adjusted earnings dividend cover for the year was 3.3x (2021: 3.3x). Subject to approval by shareholders at the Annual General Meeting on 14 December 2022, the final dividend will be paid on 20 December 2022 to shareholders on the register at 25 November 2022.

Strategy

The three strategic pillars of the Group are organic growth, value-adding acquisitions and operational excellence. These strategic pillars, together with our focus on sustainability, provide the platform for the implementation of the Group's purpose, to provide "healthy air, sustainably", and support the creation of long-term value for all our stakeholders.

Good progress was made during the year with organic growth, whilst the acquisition of ERI, based in North Macedonia, and Bera, based in Germany, has further strengthened the Group's geographic and product diversification. On behalf of the Board, I am delighted to welcome our new colleagues at ERI and Bera to the Group.

Environmental, social and governance (ESG) objectives

Volution is committed to high standards of corporate responsibility, sustainability and employee engagement and continues to focus on its contribution to a more sustainable world through its operations, culture and ventilation solutions. We aim to give full consideration to the long-term impact of all business operations, which means that, where feasible, our products and services are sustainably sourced.

Board Changes

As previously announced, Tony Reading, who had been a Director of Volution since the IPO in June 2014, retired at the conclusion of the Annual General Meeting in December 2021. We were very appreciative of Tony's contribution to Board discussions over his seven-year tenure. Following Tony's stepping down, a search process was instigated to find a successor and, on 10 March 2022, we were pleased to welcome Dr. Margaret Amos to the Board as an Independent Non-Executive Director, who has close to 30 years of experience at Rolls-Royce plc, and expertise in a wide range of fields including finance, business strategy, international M&A, and sustainability.

In addition, we announced the appointment of Amanda Mellor to the role of Senior Independent Director with effect from 9 December 2021. Amanda has been a Board member since March 2018 and is also the Board representative for ESG matters, attending the Management Sustainability Committee meetings of the Group.

Chairman Succession

At the end of June 2023, I will have been on the Volution Board for nine years and it will be time to step down. Amanda Mellor, our Senior Independent Director, will lead the process to find my successor and further announcements will be made in due course. On a personal note, it has been a pleasure to serve on the Volution Board and enjoy a front row seat to the continued development, progress and evolution of the Group. Long may its success continue.

Governance

The Group continues to be committed to high levels of corporate governance, in line with its status as a company with a premium listing on the Main Market of the London Stock Exchange and as a member of the FTSE 250. We are fully compliant with the 2018 edition of the UK Corporate Governance Code.

During the year, a formal performance evaluation of the Board and Committees took place to assist in their development, assisted by external evaluator Independent Audit. The results of the evaluation confirmed that the Board and Committees were functioning well in terms of effective chairing, quality of discussion, and focus areas, and that there are no significant concerns among the Directors about their effectiveness.

Summary

As a Board we continue to believe that Volution is in a strong position to offer customers ventilation solutions which enhance our indoor environments. Although many of our products already demonstrate high levels of sustainability, we continue to work hard to increase the sustainability of all our products and our Annual Report sets out the strategy and actions we have set to achieve this.

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This ongoing successful performance of the business is only possible due to the commitment, abilities, and drive of our people. On behalf of the Board, I would like to thank all our dedicated employees at Volution, for their continued efforts and allegiance, especially given the difficult environment of recent years due to the Covid-19 pandemic. I also want to thank Ronnie George and his executive team for steering the Group so well through what have been some very testing and turbulent times.

Whilst economic and political uncertainty prevails across the globe, Volution's performance has demonstrated the strength and resilience of its business model, helped by our geographic and product diversity.

Paul Hollingworth

Chairman

5 October 2022

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