Excellence in Ventilation
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Volution Group plc Annual Report 2016 Excellence in ventilation Volution Group plc Group Volution Annual Report 2016 Strategic Report Governance Report Financial Statements Additional Information 02 Highlights 44 Board of Directors 81 Independent Auditor’s Report 143 Glossary of Technical Terms 04 At a Glance 46 Introduction to Governance 90 Consolidated Statement 144 Shareholder Information 06 Chairman’s Statement 47 Corporate Governance of Comprehensive Income 08 Chief Executive Officer’s Review 54 Nomination Committee Report 91 Consolidated Statement of Financial Position 12 Our Business Model 56 Audit Committee Report 92 Consolidated Statement 14 Our Strategy 61 Directors’ Remuneration Report of Changes in Equity 16 Brands in Action 77 Directors’ Report 93 Consolidated Statement 18 Innovation in Action 80 Directors’ Responsibility of Cash Flows 20 Scale in Action Statement 94 Notes to the Consolidated 22 People in Action Financial Statements 24 Technology Highlight 132 Parent Company Statement 26 Key Performance Indicators of Financial Position Find out more online 30 Principal Risks and Uncertainties 133 Parent Company Statement 36 Corporate Social Responsibility of Changes in Equity www.volutiongroupplc.com 38 Operational Review 134 Parent Company Statement 40 Financial Review of Cash Flows 135 Notes to the Parent Company Financial Statements Volution Group plc is a leading supplier of ventilation products to the residential and commercial construction markets in the UK and northern Europe. We aim for our products to enhance our customers’ experience of ventilation by reducing energy consumption, improving design and making them easier to use. Our acquisition strategy has increased the number of our key brands from seven to twelve during the year. Locations Acquisition in FY16 Strategic Report Highlights Strong results with revenue growth of 19% and EPS up 15% Financial Strategic > Four acquisitions completed in the year broadening > We saw an increase in sales of high end products our geographic range and routes to market. such as quiet, silent and energy-efficient fans and the launch of a range of app-controlled fans in the Group, > Revenue growth of 18.7% (18.6% at constant driving organic growth. currency) comprised: > Four acquisitions completed during the year with all > organic revenue growth of 3.0% integration activity progressing as anticipated: (3.1% at constant currency); and > Ventilair provides the Group with access to markets > inorganic revenue growth of 15.7% (15.5% at in both Belgium and the Netherlands. constant currency) as a result of acquisitions. > Energy Technique (trading as Diffusion) complements > Adjusted operating profit growth of 10.4% the Group’s leading position in the UK with its to £32.5 million (10.3% at constant currency). strong position in the niche market of fan coils > As anticipated, adjusted operating profit margin for heating and cooling of both commercial declined by 1.6% as a consequence of new and residential buildings. Diffusion sells mainly acquisitions. Like-for-like adjusted operating profit into the new build market. margin improved by 0.2 percentage points to 22.8%. > NVA Services (trading as National Ventilation and > Reported profit before tax of £18.4 million Airtech) provides the Group with additional brands (2015: £15.5 million). and routes to the UK market. It supplies ventilation products for both residential > Net debt increased as a result of four acquisitions and commercial applications. made in the year; adjusted EBITDA ratio of 1.0x. > Welair, a small heat recovery manufacturer in > Full year dividend of 3.80 pence per share, up 15.2%. Sweden, provides the Nordic business with a > Adjusted EPS growth of 14.5% to 12.6 pence wider product portfolio and greater exposure (2015: 11.0 pence). to the new build market. > OEM (Torin-Sifan) revenue growth was assisted by growth in the Electronically Commutated (EC) motor sales category in both the heating and ventilation markets. The Group uses some alternative performance measures to track and assess the underlying performance of the business. These measures include adjusted EBITDA, adjusted operating profit, adjusted profit before tax and adjusted operating cash flow. Notes 1. Details of adjusted operating profit and adjusted profit before tax can be found in note 10 to the consolidated financial statements. 2. For a definition of all adjusted measures see the glossary of terms in note 36 to the consolidated financial statements. Volution Group plc 02 Annual Report 2016 Revenue £m Adjusted operating profit and adjusted operating Strategic Report profit margin £m (% of revenue) £154.5m £32.5m 154.5 (21.0%) 32.5 29.4 130.2 120.7 26.5 (21.0%) 102.3 22.2 (22.6%) (22.0%) (21.7%) Governance Report 2013 2014 2015 2016 2013 2014 2015 2016 Adjusted basic and diluted EPS p Adjusted operating cash flow £m 12.6p £31.1m 12.6 31.1 11.0 27.6 Financial Statements 22.8 8.8 20.9 2014 2015 2016 2013 2014 2015 2016 Net debt £m Reported profit before tax £m Additional Information £36.1m £18.4m 172.7 18.4 15.5 (15.5) (4.2) 21.2 42.9 36.1 2013 2014 2015 2016 2013 2014 2015 2016 Dividend per share p 3.80p 3.80 3.30 Nil Nil 2013 2014 2015 2016 Volution Group plc Annual Report 2016 03 Strategic Report At a Glance Volution Group plc is a leading supplier of ventilation products to the residential and commercial construction markets in the UK and northern Europe. We operate through two segments: the Ventilation Group and OEM (Torin-Sifan). Ventilation Group segment OEM (Torin-Sifan) segment The Ventilation Group consists of eleven key brands, focused Torin-Sifan is a leading supplier of motors, motorised impellers, primarily on the UK, Swedish, Norwegian, German, Belgian fans and blowers for the European heating, ventilation and and Dutch ventilation markets: air conditioning (HVAC) industry. The majority of Torin-Sifan’s products are sold into the residential and commercial heating In the UK: Vent-Axia, Manrose, Diffusion, and ventilation products markets. National Ventilation and Airtech In the Nordics: Fresh, PAX and Welair In Central Europe: Ventilair, inVENTer and Brüggemann % of Volution Group revenue (by sector) 2016 86.8% The Ventilation Group has market-leading positions in the UK Ventilation Group residential ventilation products market, the Swedish residential 2015 85.6% refurbishment ventilation products market and the German 2016 13.2% OEM (Torin-Sifan) decentralised heat recovery residential ventilation systems market. 2015 14.4% During the year, we completed acquisitions which have: % of Ventilation Group revenue (by sector) > strengthened our position in UK residential ventilation with the acquisition of NVA Services, adding the National Ventilation 2016 41.2% UK residential and Airtech brands; 2015 48.2% 2016 16.2% > broadened our geographic spread into the Belgian and Dutch UK commercial residential ventilation markets with the addition of Ventilair; 2015 14.5% 2016 5.8% > strengthened our exposure to the UK new build commercial UK export 2015 7.5% market with the addition of the Diffusion fan coil brand, 2016 19.0% through the acquisition of Energy Technique; and Nordics 2015 20.0% > expanded our product capability in the Nordics into the rotary 2016 17.8% wheel heat recovery market with the acquisition of Welair. Central Europe 2015 9.8% Volution Group plc 04 Annual Report 2016 Strategic Report Our business model Our recent history Governance Report We have four key differentiators that are our pivotal The Volution Group was formed in focus: Brands, Innovation, Scale and People. December 2002 through the buy-out from Smiths Group plc of its air movement and cable management divisions. > AAC Capital and Management Team Brands 2006 acquires Volution Holdings Financial Statements > Cable management division sold 2007 > Manrose Manufacturing acquired People Innovation > Ronnie George joins Volution Holdings 2008 as Managing Director > TowerBrook acquires Volution Holdings 2012 > Fresh AB acquired Additional Information Scale 2013 > PAX AB acquired Our Business Model > Assets and business of Öko-Haustechnik > page 12 2014 inVENTer GmbH acquired > Volution Group plc is formed and listed on the London Stock Exchange Our strategy > Torin-Sifan opens new Manufacturing and Technology Centre in Swindon Our strategy continues to focus on three key pillars: > Brüggemann Energiekonzepte 2015 GmbH acquired Organic growth in our core markets FY16 > Ventilair Group International BVBA acquired > Weland Luftbehandling AB Growth through a disciplined and (renamed Welair AB) acquired value-adding acquisition strategy > Energy Technique plc (trading as Diffusion) acquired Further develop Torin-Sifan’s range and > NVA Services Limited (trading as National build customer preference and loyalty 2016 Ventilation and Airtech) acquired Our Strategy Find out more online > page 14 > www.volutiongroupplc.com Volution Group plc Annual Report 2016 05 Strategic Report Chairman’s Statement Peter Hill, CBE Dear shareholder, Summary I am proud to announce another year of strong performance. The Group has recorded another year of revenue and underlying > Strong results in line with operating profit growth, making this the fifth consecutive year our expectations of growth. > Continued to deliver on all three Our strategy remains unchanged. Organic growth, combined with strategic pillars selective value-adding acquisitions, has supported the achievement of another year of strong performance and growth in revenues > Completed four value-adding and and profitability. You can find further details on the Group’s three strategically important acquisitions strategic pillars on pages 14 to 15. > Strong cash generation supporting Results ambition to grow through acquisition The strong set of results reflects the strong growth achieved, both > Full year dividend increased by 15.2% organically and through acquisitions, with Group revenue increasing by 18.7% to £154.5 million. Adjusted operating profit was £32.5 million, representing 21.0% of revenue and a £3.1 million improvement compared to the prior year. The basic and diluted earnings per share for the year was 7.8 pence (2015: 5.9 pence).