Excellence in Ventilation
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Volution Group plc Group Volution Annual Report 2019 Annual Report Excellence in ventilation Volution Group plc Annual Report 2019 Our purpose Volution Group plc is a leading supplier of ventilation products to the residential and commercial construction markets in the UK, the Nordics, Central Europe and Australasia. We aim for our products to enhance our customers’ experience of ventilation by reducing energy consumption, improving indoor air quality and design and making them easier to use. Monsoon Silence range: Complete home ventilation: The Monsoon Silence range is our latest innovative The political and social drive to become more energy domestic ventilation solution, providing high extraction efficient has made our homes more air tight meaning rates, low energy use and exceptionally quiet running the problem of poor indoor air quality has become levels. This bathroom fan has a long-life ball bearing harder to ignore. This increases the importance motor and a silent back draft shutter. of the vital role ventilation products have to play in maintaining a healthy indoor environment. See residential indoor air quality on page 20 Annual Report 2019 Our Recent History Strategic Report > AAC Capital and Management Team acquires Highlights Volution Holdings 2 2006 4 At a Glance 6 Our Investment Case 7 Our Growth Story > Cable Management division sold 8 Chairman’s Statement 2007 > Manrose Manufacturing acquired 10 Chief Executive Officer’s Review 14 Our Refreshed Strategy 16 Our Recent Acquisitions > Ronnie George joins Volution Holdings as 18 Our Business Model Managing Director 20 Excellence in Ventilation 2008 22 Key Performance Indicators 26 Risk Management and Principal Risks > TowerBrook acquires Volution Holdings 34 Sustainability 38 Operational Review 2012 > Fresh AB acquired 43 Financial Review > PAX AB acquired Governance Report 2013 48 Introduction to Governance 50 Board of Directors 52 Corporate Governance > inVENTer GmbH acquired 62 Nomination Committee Report 65 Audit Committee Report 2014 > Volution Group plc is formed and listed on the London 72 Directors’ Remuneration Report Stock Exchange 91 Directors’ Report > Torin-Sifan opens new Manufacturing and Technology 94 Directors’ Responsibility Statement Centre in Swindon, UK Financial Statements > Brüggemann Energiekonzepte GmbH acquired 95 Independent Auditor’s Report 102 Consolidated Statement of 2015 > Ventilair Group International BVBA acquired Comprehensive Income 103 Consolidated Statement of Financial Position > Weland AB acquired 104 Consolidated Statement of Changes in Equity > Energy Technique plc (trading as Diffusion) acquired 105 Consolidated Statement of Cash Flows 106 Notes to the Consolidated Financial Statements 151 Parent Company Statement of Financial Position > NVA Services Limited acquired 152 Parent Company Statement of Changes in Equity 153 Parent Company Statement of Cash Flows 2016 > Breathing Buildings Limited acquired 154 Notes to the Parent Company Financial Statements Additional Information > VoltAir System AB acquired 160 Glossary of Technical Terms 2017 IBC Shareholder Information > Simx Limited acquired 2018 > Oy Pamon Ab acquired > Air Connection ApS acquired > AirFan B.V. (rebranded Vent-Axia Netherlands) acquired Find out more online www.volutiongroupplc.com > New facility in Reading, UK, opened 2019 > Ventair Pty Limited acquired 1 Strategic Report Volution Group plc Highlights Strong results: revenue growth of 14.6% and adjusted EPS up 10.3% Financial Strategic and operational > Revenue growth of 14.6% (15.7% Ventilation at constant currency): Organic growth > organic revenue growth of 2.6% > Highlights in the UK include a return to growth for the UK Public (3.5% at constant currency); and RMI sector and another period of good growth for UK New Build > inorganic revenue growth of 12.0% Residential Systems. (12.2% at constant currency). > As previously reported, operational difficulties at our Reading > Adjusted operating profit increased by facility adversely impacted profitability in the first half of the 13.3% to £42.1 million (14.9% at constant financial year; however, there was a significant improvement in currency), assisted by acquisitions. production levels and efficiency in the second half of the financial > Adjusted operating profit margin of 17.8% year. The Reading facility is now fully commissioned. (2018: 18.0%), an improving trend through > Good sales of our new Xenion range of decentralised heat recovery the year: ventilation in Germany with an associated increase in gross > H1 17.6%, impacted by Reading and margin in the region. Torin-Sifan operational issues; and > The launch of the first application software controlled ventilation > H2 18.1%, finalised commissioning of extract fan in New Zealand, Genius, under the Manrose brand sold Reading facility; strong performance by our company Simx, further demonstrating our capability in Central Europe. to launch Volution products into newly accessed markets. > Reported profit before tax increased by Acquisitions £6.4 million to £23.1 million (2018: £16.7 million); > On 1 March 2019, we acquired Ventair Pty Limited, a market exceptional costs significantly reduced leading residential ventilation product supplier, in Australia, for to £1.8 million (2018: £6.4 million). an initial cash consideration of AUD19.2 million (approximately > Adjusted operating cash inflow of £10.4 million). A further amount of deferred cash consideration £36.9 million (2018: £34.4 million). of up to AUD7.7 million (approximately £4.3 million) may be payable, contingent on Ventair achieving an EBITDA target > Net debt of £74.6 million was £2.6 million lower in the financial year ending 31 July 2020. than at 31 July 2018 after £10.4 million spent on the acquisition of Ventair Pty Limited and > The acquisition of Ventair Pty Limited has further increased our contingent consideration paid relating to Oy geographic diversity, product offer and market access. The Pamon Ab of £0.6 million. acquisition is integrating and performing well under the management of our Australasian team. > Full year dividend of 4.90 pence per share, up 10.4% (2018: 4.44 pence). > Including the pro-forma effect of the Ventair acquisition, our revenue from customers outside the UK now represents 53.0% of total Group revenue. OEM (Torin-Sifan) > OEM (Torin-Sifan) has continued to see a good take-up of its new, high-efficiency, Revolution 360 range of EC fans (EC3), with further capacity investment underway to support the growth in sales. > Operations in OEM (Torin-Sifan) were adversely impacted during the year by procurement issues which manifested in higher input costs. However, we are confident these issues have now been resolved. 2 Annual Report 2019 Strategic Report Strategic Progress against strategy > Cumulative operating cash flow generation in the five years This strong set of results for the year maintains our consistent track since listing in 2014 of £165.9 million; and. record of revenue and earnings growth in the five years since listing > Excellent track record of innovative product introductions; strong in 2014 and continues to validate our strategy: development pipeline. > Organic revenue growth of 3.5% (at constant currency) in the UK leaving the EU year, an average of 3.2% over the five years since listing in 2014; In the context of the considerable uncertainty surrounding the > Acquisition strategy delivering inorganic revenue growth of outcome of the Brexit process, we have analysed the potential risks 12.2% (at constant currency) in the year, providing access to new and operational challenges to our business in the event of a no-deal markets, resulting in non-UK revenues increasing from 36.5% in exit from the European Union. We have reviewed potential tariffs 2014 to 53.0% on a pro-forma basis; which we do not consider to represent a significant impact, and on the supply side we have increased inventory levels of faster moving > Strong earnings growth; EPS increased by 82% in the five years items in certain locations. We see the principal risk and potential since listing in 2014 (13% CAGR); impact to be that of a broader downturn in confidence and activity levels in the UK, albeit noting that the UK does now represent just under half of Volution’s revenues. Revenue £m Adjusted operating profit and adjusted Reported profit before tax £m operating profit margin £235.7m £m (% of revenue) £23.1m £42.1m (17.8%) 235.7 42.1 23.1 205.7 37.1 18.4 35.6 (17.8%) 17.9 16.7 185.1 32.5 15.5 29.4 (18.0%) 154.5 (19.3%) 26.5 (21.0%) 120.7 130.2 (22.6%) (22.0%) (15.5) 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 Adjusted operating cash flow £m Net debt £m Adjusted EPS p £36.9m £74.6m 16.0p 35.9 36.9 16.0 34.4 14.5 31.1 13.6 27.6 12.6 11.0 22.8 8.8 77.2 74.6 42.9 36.1 37.0 21.2 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 Reported EPS (basic and diluted) p Dividend per share p The Group uses some alternative performance measures to track and assess the underlying performance of the business. These measures include adjusted operating 9.2p 4.90p profit, adjusted profit before tax, adjusted EPS and adjusted operating cash flow. For a definition of all the adjusted and non-GAAP measures, please see the glossary of terms in note 34. A reconciliation 9.2 4.90 to reported measures is set out in note 2. 7.8 7.0 6.7 4.44 5.9 4.15 3.80 3.30 (14.0) Nil 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 Key Performance Indicators on page 22 3 Strategic Report Volution Group plc At a Glance Leading in residential and commercial markets across two business segments We aim for our products to enhance our customers’ experience of ventilation by reducing energy consumption, improving indoor air quality and design and making them easier to use.