Excellence in Ventilation Volution Group Plc Annual Report 2017 Excellence in Ventilation
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Volution Group plc Annual Report 2017 Excellence in ventilation Volution Group plc Group Volution Annual Report 2017 Excellence in ventilation Volution Group plc is a Strategic Report 02 Highlights leading supplier of ventilation 04 At a Glance 06 Chairman’s Statement products to the residential 09 Chief Executive Officer’s Review 12 Excellence in Ventilation and commercial construction 16 Our Business Model markets in the UK, the 18 Our Strategy 20 Innovation in Action Nordics and Central Europe. 22 Scale in Action 24 People in Action 26 Brands in Action 28 Key Performance Indicators 32 Risk Management and Principal Risks 38 Corporate Social Responsibility 40 Operational Review 42 Financial Review Governance Report 46 Board of Directors 48 Introduction to Governance 50 Corporate Governance 58 Nomination Committee Report 60 Audit Committee Report 67 Directors’ Remuneration Report 85 Directors’ Report 88 Directors’ Responsibility Statement Financial Statements 89 Independent Auditor’s Report 98 Consolidated Statement of Comprehensive Income 99 Consolidated Statement of Financial Position 100 Consolidated Statement of Changes in Equity 101 Consolidated Statement of Cash Flows 102 Notes to the Consolidated Financial Statements 142 Parent Company Statement of Financial Position 143 Parent Company Statement of Changes in Equity 144 Parent Company Statement of Cash Flows 145 Notes to the Parent Company Financial Statements Additional Information Front cover: 151 Glossary of Technical Terms 152 Shareholder Information The Pulsar fan launched in Germany under the inVENTer brand based on a Group fan platform developed Find out more online jointly by Sweden and the UK. www.volutiongroupplc.com We aim for our products to enhance our customers’ experience of ventilation by reducing energy consumption, improving air quality and design and making them easier to use. Our acquisition strategy over the last year has increased the number of our key brands from twelve to fourteen. Strategic Report Total locations Locations Acquisitions 21 in FY2017 UK & Ireland Ten locations Seven brands Central Europe Four locations Four brands Nordics Seven locations Four brands Volution Group plc Annual Report 2017 01 Strategic Report Highlights Strong revenue growth of 20% and adjusted EPS up 8%. Recent acquisitions integrating well, supplementing continued organic growth. Financial > Strong revenue growth of 19.8% > Reported profit before tax declined by 2.5% (14.5% at constant currency): to £17.9 million (2016: £18.4 million), resulting predominantly from the increased amortisation > organic revenue growth of 7.3% of acquired intangible assets and a movement (2.1% at constant currency); and in the fair value of derivative financial instruments. > inorganic revenue growth of 12.5% > Adjusted operating cash flow was very strong (12.4% at constant currency). at £35.9 million (2016: £31.1 million). > Adjusted operating profit increased by 9.6% to > Net debt to adjusted EBITDA ratio of 0.9x after £35.6 million (4.2% at constant currency). two acquisitions completed in the year. > As anticipated, adjusted operating profit margin > Adjusted basic and diluted EPS growth of 7.9% declined by 1.7 percentage points, partly as a to 13.6 pence (2016: 12.6 pence). consequence of new acquisitions. > Reported basic and diluted EPS declined by 10.3% to 7.0 pence (2016: 7.8 pence). > Full year dividend of 4.15 pence per share, up 9.2%. Strategic > Two acquisitions completed during the year, > Acquisition of VoltAir System AB completed in strengthening our position in existing geographies, May 2017. VoltAir System has a strong presence in with all integration activity for recent acquisitions the residential and commercial new build ventilation progressing well. markets in Sweden in the growing market for energy‑efficient air handling units. The business > Acquisition of Breathing Buildings Limited is highly complementary to our strong position completed in December 2016. Breathing Buildings in the Nordic residential refurbishment ventilation has been pioneering natural and hybrid ventilation products market. systems since 2006, with which it has become very successful within the new build education > OEM (Torin‑Sifan) launched its new high‑efficiency sector. The acquisition has widened our capability Revolution 360 range of EC fans into volume with a leader in natural and hybrid ventilation for production during the year, which offers benefits in commercial buildings, strengthened our product both high efficiency and low noise to the European range and broadened our channel to market. heating, ventilation and air conditioning industry. Volution Group plc 02 Annual Report 2017 Revenue £m Adjusted operating profit and Reported profit before tax £m Strategic Report adjusted operating profit margin £185.1m £m (% of revenue) £17.9m £35.6m (19.3%) 185.1 35.6 18.4 17.9 32.5 15.5 154.5 29.4 (19.3%) 130.2 26.5 120.7 (21.0%) 102.3 (22.6%) 22.2 (22.0%) (15.5) (21.7%) (4.2) 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Adjusted operating cash flow £m Net debt £m Adjusted EPS (basic and diluted) p £35.9m £37.0m 13.6p 35.9 172.7 13.6 31.1 12.6 27.6 11.0 22.8 8.8 20.9 42.9 21.2 36.1 37.0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2014 2015 2016 2017 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 7.0p 4.15p include adjusted operating profit, adjusted profit before tax, adjusted basic and diluted EPS and adjusted operating cash flow. For a definition of 7.8 7.0 4.15 5.9 3.80 all the adjusted and non‑GAAP measures, please see the glossary of terms in note 34. A reconciliation 3.30 to reported measures is set out in note 2. (14.0) Nil Nil 2014 2015 2016 2017 2013 2014 2015 2016 2017 Volution Group plc Annual Report 2017 03 Strategic Report At a Glance Excelling in residential Ventilation Group The Ventilation Group consists of 13 key brands, focused and commercial primarily on the UK, Swedish, Norwegian, German, Belgian and markets across two Dutch ventilation markets: In the UK: Vent‑Axia, Manrose, Breathing Buildings, business segments. Diffusion, National Ventilation and Airtech In the Nordics: Fresh, PAX, VoltAir System and Welair Ventilation Group, which primarily In Central Europe: Ventilair, inVENTer, Brüggemann and Vent‑Axia supplies ventilation products for The Ventilation Group has sector‑leading positions in the UK, residential and commercial construction Sweden, Germany and Belgium. applications in the UK, the Nordics and During the year, we completed the following acquisitions, Central Europe. enhancing and widening the Group’s capability: > Breathing Buildings: a leader in natural and hybrid ventilation OEM (Torin-Sifan), which manufactures for commercial buildings. and supplies motors, motorised impellers, > VoltAir System: a strong player in the residential and fans and blowers to OEMs of heating, commercial new build ventilation markets in Sweden in the ventilation and air conditioning products growing market for energy‑efficient air handling units. for both residential and commercial construction markets worldwide. OEM (Torin-Sifan) Torin‑Sifan is a leading supplier of motors, motorised impellers, fans and blowers for the heating, ventilation and air conditioning industry worldwide. The majority of Torin‑Sifan’s products are sold into the residential and commercial heating and ventilation products markets. % of Volution Group revenue (by segment) 2017 88.1% Ventilation Group 2016 86.8% 2017 11.9% OEM (Torin-Sifan) 2016 13.2% % of Ventilation Group revenue (by sector) 2017 37.9% UK Residential 2016 41.2% 2017 20.1% UK Commercial 2016 16.2% 2017 6.3% UK Export 2016 5.8% 2017 18.9% Nordics 2016 19.0% 2017 16.8% Central Europe 2016 17.8% Find out more online > www.volutiongroupplc.com Volution Group plc 04 Annual Report 2017 Our business model Our recent history We have four key differentiators that are our pivotal Volution was formed in December 2002 through focus: Innovation, Scale, People and Brands. the buy‑out from Smiths Group plc of its air movement and cable management divisions. > AAC Capital and Management Team 2006 Strategic Report Innovation acquires Volution Holdings > Cable Management division sold 2007 > Manrose Manufacturing acquired > Ronnie George joins Volution Holdings 2008 Brands Scale as Managing Director > TowerBrook acquires Volution Holdings 2012 > Fresh AB acquired People 2013 > PAX AB acquired > Assets and business of Öko‑Haustechnik Our Business Model 2014 inVENTer GmbH acquired > page 16 > Volution Group plc is formed and listed on the London Stock Exchange > Torin‑Sifan opens new Manufacturing and Technology Centre in Swindon, UK Our strategy > Brüggemann Energiekonzepte 2015 Our strategy continues to focus on three key pillars: GmbH acquired > Ventilair Group International BVBA acquired > Weland Luftbehandling AB Organic growth in our core markets (renamed Welair AB) acquired > Energy Technique plc (trading as Diffusion) acquired Growth through a disciplined and value‑adding acquisition strategy 2016 > NVA Services Limited (trading as National Ventilation and Airtech) acquired Further develop Torin‑Sifan’s FY2017 range and build customer 2017 > Breathing Buildings Limited acquired preference and loyalty > VoltAir System AB acquired Our Strategy Find out more online > page 18 > www.volutiongroupplc.com Volution Group plc Annual Report 2017 05 Strategic Report Chairman’s Statement Peter Hill, CBE Strong results created through excellence in ventilation. Summary Dear shareholder, I am pleased to present our Annual Report and Accounts for the > A further set of strong results in line with year ended 31 July 2017, a year in which we have continued to our expectations make strong progress in building a more valuable Volution Group. This was despite the vote for the UK to leave the European Union > Completed two value‑adding acquisitions, and the resulting devaluation of Sterling against both the US Dollar enhancing our strategic positioning and the Euro.