10.12.2024
The Crawley, West Sussex-based Volution Group (LON:FAN) is a leading international designer and manufacturer of energy efficient indoor air quality solutions.
It is a leading supplier of ventilation products, catering to primary markets in the UK, Continental Europe, and Australasia.
It aims to enhance its customers’ experience of ventilation by reducing energy consumption and improving indoor air quality and comfort.
The Business
The group’s purpose is ‘to provide healthy air, sustainably’.
Its product portfolio includes residential ventilation, commercial ventilation, other products, and original equipment manufacturers (OEM), which includes motors and heat exchangers.
Its residential products encompass a range of products designed to suit a variety of budgets and applications, ranging from unitary extractor fans (including for use in bathrooms and kitchens) to mechanical ventilation with heat recovery (MVHR) systems.
Its commercial products encompass a variety of extractor fans, as well as mechanical heat recovery units (including both fixed volume and demand systems, which incorporate counter-flow heat recovery cells for energy efficiency), air handling units, fan coils and hybrid ventilation solutions.
Its other products include non-ventilation products, including heating products, cooling products, hygiene products, lighting, door chimes and a range of sensors, and others.
Residential Ventilation – sales £105.0m (£89.7m)
The group’s residential products encompass a broad range of solutions designed to suit a variety of budgets and applications, ranging from unitary extractor fans for use in bathrooms and kitchens to significantly higher value, low-carbon, energy efficient whole building ventilation systems with heat recovery.
Commercial Ventilation – sales £28.2m (£30.2m)
Its commercial products encompass a variety of extractor fans, as well as mechanical heat recovery units, including both ‘fixed volume’ and ‘demand’ systems, some of which also incorporate high efficiency counter-flow heat recovery cells for energy efficiency, air handling units, fan coils and hybrid ventilation solutions.
Export – sales £12.1m (£12.1m)
OEM – sales £15.5m (£24.1m)
The Group Operations And Brands
The Volution Group comprises 22 key brands across three regions:
UK: 6 locations, 1,026 employees, brands - Vent-Axia, Manrose, Diffusion, National Ventilation, Airtech, Breathing Buildings, and Torin-Sifan, all contributing £160.8m revenues, adjusted operating profit £40.2m, and an adjusted operating profit margin of 25.0%.
Continental Europe: 15 locations, 692 employees, brands - Fresh, PAX, VoltAir, Kair, Air Connection, Rtek, inVENTer, Ventilair, ClimaRad, ERI Corporation, VMI, and I-Vent, all contributing £134.4m sales, £32.1m adjusted operating profits, and an adjusted operating profit margin of 23.9%.
Australasia: 27 locations, 151 employees – brands - Simx, Ventair, Manrose, and DVS, all contributing £52.4m revenues, £11.9m adjusted operating profits, and an adjusted operating profit margin of 22.7%.
Management Comment
CEO Ronnie George stated that:
"Volution has delivered another strong set of results and made further good progress against our strategic and financial priorities in the year that we celebrated our tenth year as a listed company.
I am incredibly proud of how, during this time, we have moved from being a largely UK centric ventilation leader to having a broad-based presence across the UK, Continental European and Australasian ventilation markets.
The further enhanced operating profit margin delivered in the year, against continuing challenging markets, is a testament to our scale, diversification, and strong cohesion between the local operating areas, as well as our group-wide technical, procurement and product management functions.
We continue to be equally focused on converting profitability into cash, and I was delighted to see another year of excellent cash conversion, well above our 90% target.
The new financial year has started as anticipated, with both revenue and adjusted operating profit ahead of the same period last year.
Also, in an exciting post year-end development, we have announced an agreement to acquire Fantech's ventilation activities in Australia and New Zealand, which would represent our largest acquisition to date by some considerable distance.
This, along with the momentum we have across many parts of the business, provides the Board with confidence of another year of good progress across the Group."
The Equity
There are some 200.18m shares in issue.
The larger holders include BlackRock (5.71%), ODIN Forvaltning AS (5.62%), Aegon Asset Management (4.99%), Capital Research & Management (5.08%), JP Morgan Asset Management (4.94%), Baillie Gifford (4.82%), PrimeStone Capital (4.78%), The Vanguard Group (4.27%), Abrdn Investment Management (3.28%), Artemis Investment Management (3.07%) and Norges Bank Investment Management (3.00%).
Brokers Views
There are some eight analysts following the group, three rate Buy, one rates Outperform, while the balance four rate Hold.
In late October, on the Final Results being announced Davy downgraded its view on the shares from Outperform to Neutral and increased its Price Objective to 615p (493p).
Peel Hunt downgraded from Buy to Hold, but also raised its Price Aim to 600p (495p).
The consensus average is for 646p, the highest for 700p, while the lowest is for 600p a share.
My View
In late September this year the group’s shares hit a five-year High of 624.32p, before subsequently falling back to trade around the current 564p level.
This column has done very well with its previous Profiles on the group, with all Target Prices having been achieved – which is very pleasing.
We now await this week’s AGM Trading Update to see just how well the group is faring now, while also having some future prospects identified too.
We can see a set of upcoming catalysts that can reset expectations and prompt a re-rating of the global business.
A very good Hold.
(Profile 23.05.19 @ 174p set a Target Price of 250p*)
(Profile 03.03.23 @ 348p set a Target Price of 400p*)
(Profile 19.07.23 @ 361.20p set a Target Price of 450p*)
(Asterisks * denote that previous Target Prices have been achieved since Profile publication).
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