TIDMFAN
RNS Number : 1782G
Volution Group plc
16 March 2020
Embargoed until 07:00 on:
Monday 16 March 2020
VOLUTION GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHSED 31 JANUARY 2020
Results in line with expectations, good progress on margin
expansion and cash conversion
Volution Group plc ("Volution" or "the Group" or "the Company",
LSE: FAN), a leading supplier of ventilation products to the
residential and commercial construction markets, today announces
its unaudited interim financial results for the 6 months ended 31
January 2020.
RESULTS SUMMARY
6 months to 6 months to
31 January 31 January Movement (constant
2020 2019 Movement currency)
Revenue (GBPm) 118.8 114.8 3.4% 5.0%
Adjusted operating profit (GBPm) 21.8 20.2 7.6% 9.1%
Adjusted profit before tax (GBPm) 20.5 19.1 7.2%
Adjusted EPS (pence) 8.2 7.7 6.5%
Reported operating profit (GBPm) 14.0 11.3 24.4%
Reported profit before tax (GBPm) 11.9 10.2 16.7%
Reported basic EPS (pence) 4.7 4.1 14.6%
Adjusted operating cash flow (GBPm) 22.3 15.5 43.5%
Reported net debt (GBPm) 80.9 74.4 6.5
Like-for-like net debt (IAS 17 basis)
(GBPm) 60.5 74.4 (13.9)
Interim dividend per share (p) 1.71 1.60 6.9%
-------------------------------------- ----------- ----------- -------- ------------------
The Group uses some alternative performance measures to track
and assess the underlying performance of the business. These
measures include adjusted operating 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 18. A reconciliation to reported
measures is set out in note 2. The results for the six months to 31
January 2020 are presented on an IFRS 16 basis, the prior period
has not been restated. The impact of applying IFRS 16 can be seen
in note 1 of the interim financial statements.
FINANCIAL HIGHLIGHTS
-- Revenue growth of 3.4% (5.0% at constant currency):
* organic revenue decline of 2.8% (1.4% at constant
currency) mainly due to UK Commercial and Nordics
markets; and
* inorganic revenue growth of 6.2% (6.4% at constant
currency) as a result of the acquisition of Ventair
Pty Limited in Australia in March 2019.
-- Adjusted operating profit increased by 7.6% to GBP21.8 million (9.1%
at constant currency) due to revenue growth and margin expansion.
-- Adjusted operating profit margin improvement of 0.7pp (1.3pp organic)
to 18.3% (H1 2019: 17.6%) assisted by Reading improvement and a range
of initiatives.
-- Reported profit before tax increased by 16.7% to GBP11.9 million (H1
2019: GBP10.2 million) with no exceptional costs in the period (H1
2019: GBP1.2 million).
-- Adjusted operating cash inflow of GBP22.3 million (H1 2019: GBP15.5
million) with strong cash conversion of 99.5% (H1 2019: 74.5%).
-- Net debt restated for IFRS 16 of GBP80.9 million:
* Like-for-like reduction of GBP13.9 million due to
strong cash conversion;
* Leverage on a like-for-like basis under IAS 17
reduced to 1.3x (H1 2019: 1.7x); and
* GBP20.4 million increase as a result of adopting IFRS
16 in the period.
-- Interim dividend of 1.71 pence per share, up 6.9% (H1 2019: 1.60 pence),
reflecting strong profitability and free cash generation.
STRATEGICAL AND OPERATIONAL HIGHLIGHTS
* The integration of Ventair in Australia is
progressing well. The planned extension of their
product range is taking shape and will introduce a
significant range of new products in to the
Australian market.
* The new products launched in to the UK Residential
Public refurbishment market are being well received
by customers and assisting with gaining new accounts.
* The Xenion range of upgraded decentralised heat
recovery products in Germany has performed strongly
in the period with further enhancements to the range
launching in the second half of this financial year.
* The Operational Excellence programme is progressing
well with wide ranging initiatives being implemented
to expand operating margins.
* Our injection-moulding, extrusion and fan assembly
facility in Reading, UK is underpinning our ambitious
plans to introduce additional refurbishment products
in a number of our markets.
Commenting on the Group's performance, Ronnie George, Chief
Executive Officer, said:
"Volution has again delivered a good overall performance with
continued strong cash conversion and an increase in the operating
margin despite challenges in the UK Commercial and Nordic Projects
markets. Aside from these areas we are pleased with how our revenue
developed and the focus on our Operational Excellence programme has
delivered organic margin expansion in all three geographic regions.
The regulatory and consumer demands for ventilation are becoming
more stringent and we continue to innovate bringing new products to
market to take advantage of these exciting trends.
Our highest priority at Volution is for the safety and wellbeing
of our employees. We are carefully and continually monitoring
guidance relating to COVID-19 from the authorities in the countries
in which we operate, implementing any necessary steps, and ensuring
that we communicate clearly and frequently with our employees. On
behalf of the Board I would like to thank all of our teams for the
way they have responded and for their continuing hard work and
dedication throughout the first half-year."
Outlook
The rapidly evolving Coronavirus pandemic and measures taken by
governments to control the virus is creating significant
uncertainty and is very likely to have a material impact on the
global economy. Whilst it is hard to forecast the direct impact on
our business at this point there is clearly potential for adverse
impacts on both supply and demand. However we continue to take
actions to monitor and secure our supply chain and have limited
sales exposure to some of the most affected countries to date
(China, Italy and South Korea). As at the date of this report
trading in the second half of the financial year has continued on a
similar basis to the first half performance. We continue to focus
on cash generation and on Operational Excellence to underpin the
expansion in our adjusted operating profit margin. We also have a
number of new product launches planned in the coming months. Medium
term we continue to see favourable regulatory drivers as
increasingly supportive of energy-efficient ventilation
solutions.
-Ends-
For further information:
Enquiries:
Volution Group plc
+44 (0) 1293
Ronnie George, Chief Executive Officer 441501
+44 (0) 1293
Andy O'Brien, Chief Financial Officer 441536
+44 (0) 207
Tulchan Communications 353 4200
James Macey White
David Allchurch
Giles Kernick
A conference call for analysts will be held at 9.30am today,
Monday 16 March. Please contact volutiongroup@tulchangroup.com to
register and for instructions on how to connect to the conference
facility.
A copy of this announcement and the presentation given to
analysts will be available on our website www.volutiongroupplc.com
from 7.00 am on Monday 16 March.
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) prior to its release as part of this
announcement.
Volution Group plc Legal Entity Identifier:
213800EPT84EQCDHO768.
Note to Editors:
Volution Group plc (LSE: FAN) is a leading supplier of
ventilation systems and products to both the residential and
commercial construction markets in the UK, Continental Europe and
Australasia.Volution Group comprises 16 key brands across the three
regions:
UK: Vent-Axia, Manrose, Diffusion, National Ventilation,
Airtech, Breathing Buildings & Torin-Sifan;
Continental Europe: Fresh, PAX, VoltAir, Kair, Air Connection,
inVENTer, & Ventilair; and
Australasia: Simx & Ventair.
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.
CHIEF EXECUTIVE OFFICER'S REVIEW
Volution continued to make good progress with its strategy in
the first half of the financial year. The renewed focus on
Operational Excellence has delivered good results in the period.
Adjusted operating profit margin increased to 18.3% versus 17.6% in
the prior year, with an organic margin improvement of 1.3pp.
Revenue grew by 3.4%, 5.0% at constant currency. Organic revenue
declined by 1.4% on a constant currency basis reflecting the
short-term difficult conditions in our project markets in the
Nordics as well as the expected softer demand in the UK Commercial
market, we had good organic revenue growth in almost all other
areas.
The benefits from our operational excellence initiatives
assisted our increased adjusted operating margin with adjusted
operating profit of GBP21.8 million up from GBP20.2 million in the
prior year (7.6% growth, 9.1% growth at constant currency). The
focus on operational excellence also underpinned a strong cash
generation in the period, with adjusted operating cash inflows of
GBP22.3 million (H1 2019: GBP15.5 million) and a cash conversion
rate of 99.5% (H1 2019: 74.5%).
REGIONAL PERFORMANCE REVIEW
Change of reported Operating Segments
On listing in June 2014, Volution was present in three countries
(UK, Sweden and Germany) and generated 77% of its revenue from the
UK. Our subsequent growth strategy has seen us acquire ten market
leading brands across eight countries since listing, providing
greater geographic diversity and moving the Group to one which now
generates 54% of its revenue outside of the UK (see Geographic
information within note 4).
We have therefore decided to move to a reporting structure based
around our three core geographies of the UK, Continental Europe and
Australasia, commencing with these interim results.
We believe this new segmental reporting provides improved
performance visibility across the Group, as we continue to focus on
delivering our strategy. An analysis of results by segment can be
found in note 4 'Segmental analysis' to the interim financial
statements.
Group Results by Operating Segment
United Kingdom
Constant currency
---------------------------------------------
6 months to 6 months to 6 months to
31 January 2020 31 January 2020 31 January 2019 Growth
Market sector revenue GBPm GBPm GBPm %
-------------------------------------- ----------------- ----------------- ----------------- -------
UK
Residential RMI 20.0 20.0 19.7 1.4
New Build Residential Systems 13.1 13.1 13.1 0.0
Commercial 15.3 15.3 17.3 (11.6)
Export 4.8 4.9 4.5 7.4
OEM 11.3 11.4 12.0 (5.2)
Total UK Revenue 64.5 64.7 66.6 (3.0)
-------------------------------------- ----------------- ----------------- ----------------- -------
Adjusted operating profit 12.2 12.2 11.6 5.0
-------------------------------------- ----------------- ----------------- ----------------- -------
Adjusted operating profit margin (%) 18.9 18.9 17.4 1.5pp
-------------------------------------- ----------------- ----------------- ----------------- -------
The UK's revenue declined by 3.3% (3.0% at constant currency)
mainly as a result of the anticipated weaker sales in our
Commercial projects market. Adjusted operating profit was GBP12.2
million an increase of 5.0%. Adjusted operating profit margin
increased to 18.9% compared to a prior period of 17.4% assisted by
the operational and efficiency improvements in our Reading
facility, upselling to higher value product ranges in our RMI
market as well as other initiatives to improve both our product
cost and indirect cost efficiency.
Sales in our UK New Build Residential Systems sector were flat
on the prior period at GBP13.1 million (H1 2019: GBP13.1 million),
with a noticeable slowdown in activity leading up to the UK General
Election in December 2019. The medium and longer term outlook for
our New Build Residential Systems market remains very positive,
driven by demand for more energy efficient and airtight homes.
During the period there was also a noticeable increase in public
awareness of the effects on health and wellbeing resulting from
poor indoor air quality. We continue to innovate to bring market
leading heat recovery and system ventilation products to this
market and our decentralised mechanical ventilation product range
has been further upgraded in the period. We continue to benefit
from regulatory drivers aimed at reducing the carbon emissions from
all new residential dwellings. These regulations, not just in the
UK but across all of our markets, are expected to become more
supportive of our energy-efficient ventilation solutions.
The UK Residential Public RMI market performed well in the
period with total revenue of GBP7.8 million, up 4.5% compared to
the prior period. Over the last two years we have completely
refreshed and improved the performance, quietness and aesthetics of
the product range sold in this market. We are particularly pleased
to deliver 4.5% organic growth in the period and there are further
new product range extensions planned during this financial year. In
particular we have improved our range of Positive Input Ventilation
(PIV) products and a new "PIV Compact" unit has delivered
significant new sales in the first half of the year.
The UK Residential Private RMI market revenue of GBP12.2 million
represented a decrease of 0.5% compared to the previous period.
Whilst revenue was broadly flat we have been successful in
enhancing our sales mix with considerable emphasis on upselling to
more "higher value" and "silent" ventilation ranges. This
initiative will continue to underpin a further improvement in gross
margin and during the latter part of the period there have been
several new product ranges launched that will increase the
functionality and performance of our offer, all of which attract a
higher price point and deliver increased margin. Our understanding
from the Construction Products Association statistics as well as
the considerable market intelligence at our disposal is that this
market suffered a small volume decline in the period and we are
confident that our comprehensive and market leading range of
products, sold by our three proprietary distribution brands,
continue to gain share.
UK Commercial market revenue declined by 11.6% in the period to
GBP15.3 million (H1 2019: GBP17.3 million). Our revenue decline was
exclusively in the new commercial build market for fan coils and in
the new school build market. This trend has been evident since the
latter part of the second half of FY19 and we have seen a
flattening out of revenues over the last few months. Market
sentiment has improved since the UK General Election in December
2019 and we are working on a number of new projects expected to
materialise in the second half of our financial year. We have
mitigated the impact of the revenue shortfall via a number of
efficiency improvements and a reorganisation at our West Molesey
facility.
UK Export market sales were GBP4.8 million, growth of 5.4% (7.4%
at constant currency) as we introduce a number of new products to
our export customers, and continue to benefit from favourable
regulations in the new build residential market in Eire.
OEM revenue was GBP11.3 million, a decline of 6.0% largely as a
result of the mild, wet winter in the UK reducing demand for our
higher margin boiler spares. This is a continuation of a trend that
was exhibited in FY19 and information from our key boiler spares
customers, coupled with our contractual supply agreements, suggest
that customer stock levels are now generally much lower and we
expect a higher volume of supply in the second half of this
financial year. Sales of our EC3 motor are growing well both with
external customers and also included inside our own mechanical
ventilation and mechanical ventilation with heat recovery product
ranges.
Continental Europe
Constant currency
---------------------------------------------
6 months to 6 months to 6 months to
31 January 2020 31 January 2020 31 January 2019 Growth
Market sector revenue GBPm GBPm GBPm %
-------------------------------------- ----------------- ----------------- ----------------- -------
Nordics 21.4 22.3 25.4 (12.0)
Central Europe 17.0 17.4 14.6 19.3
Total Continental Europe revenue 38.4 39.7 40.0 (0.5)
-------------------------------------- ----------------- ----------------- ----------------- -------
Adjusted operating profit 8.4 8.7 8.4 3.6
-------------------------------------- ----------------- ----------------- ----------------- -------
Adjusted operating profit margin (%) 22.0 21.9 21.1 0.8pp
-------------------------------------- ----------------- ----------------- ----------------- -------
Revenue in Continental Europe was GBP38.4 million, GBP39.7
million on a constant currency basis, a decline of GBP0.3 million
(0.5% constant currency decline) whilst adjusted operating profit
was flat at GBP8.4 million with an underlying improvement in profit
on a constant currency basis. Adjusted operating profit margins
increased from 21.1% to 22.0% as a result of an improved mix of
sales and ongoing operational excellence initiatives reducing
product costs.
Sales in the Nordics were GBP21.4 million (H1 2019: GBP25.4
million), a decrease of 15.5% (12.0% at constant currency) due to
contraction in both the Swedish and Finnish new build market. In
the case of Sweden the market backdrop for new commercial buildings
and our customisable heat recovery ventilation system has been
weaker for some time. We experienced weaker revenues in this market
during FY19 and a very weak period during the first half of the
year. The project order book in Sweden for the second half of the
year is significantly better than the first half and revenues are
expected to be stronger in the coming months. Further upgrades are
planned to improve our product selection tools which will enable
consultants to more easily specify our solutions in new projects.
In Finland, our Kair brand performed very well in FY19 with
significant revenue growth over the prior period. In the first half
of the year the new build project market has been quite weak
coupled with a strong comparator period throughout FY19. Since the
start of the calendar year we have introduced an extended range of
heat recovery solutions in Finland as well as improving the
internal systems to facilitate the movement of products from our
various Nordic heat recovery production units in to the different
geographies.
Our Nordic trade and DIY distribution revenues were broadly flat
with stronger performance in Norway and Finland and slightly weaker
in Sweden. The trend improved slightly through the first half.
Sales of the Intellivent Sky, the leading, silent, app controlled
premium fan continue to develop very well and there has been a good
response to the introduction of higher added value "kitting"
solutions where we are providing the DIY customer with a
ventilation pack providing all of the ventilation products and
accessories required for a standard refurbishment. Organisational
changes in the Nordics with a further strengthening of our product
management teams will enable us to take advantage of the
considerable pipeline of new innovation. Product launches of a
wirelessly controlled de-centralised heat recovery range and an
extended range of products for residential refurbishment are
scheduled to take place in the second half of the financial
year.
We continue to make strong progress with our strategy in Central
Europe, delivering sales of GBP17.0 million, growth of 16.6% (19.3%
at constant currency) compared to the previous period, with Germany
the standout performer. Our inVENTer brand in Germany has made
significant share gains in the period capitalising on the previous
launch of our Xenion product range. Continuing innovation and new
product development is an essential ingredient in all of our
markets and we have been particularly successful in Germany.
Following on from this we have a full wireless and improved
functionality solution to be launched in the second half of the
financial year as well as a super quiet extension to the range
utilising noise cancelling technology to provide an enhanced
solution for consumers. Once successfully launched in Germany these
products will be rolled out in the Nordics and also other areas of
the Group.
In both Belgium and the Netherlands our ongoing strategy to
increase coverage of the wholesaler and distributor market is
working well. In 2018 we launched a range of residential
refurbishment products in the Netherlands utilising the Vent-Axia
brand selling to distributors and electrical wholesalers. This
range has been further enhanced and additional products will be
added later this year. Our share gains have been considerable and
we will continue to focus on improving our market coverage in this
key market. In Belgium we are consolidating our position as one of
the leading residential and commercial heat recovery ventilation
providers. The market in Belgium is predominantly a system
ventilation market and coupled with our proprietary Uniflex plus
ducting and accessories we have seen good growth in the period.
Australasia
Constant currency
----------------------------------------------
6 months to 6 months to 6 months to
31 January 2020 31 January 2020 31 January 2019 Growth
Market sector revenue GBPm GBPm GBPm %
-------------------------------------- ----------------- ----------------- ----------------- --------
Total Australasia revenue 15.9 16.2 8.2 97.6
Adjusted operating profit 2.3 2.4 1.3 84.7
-------------------------------------- ----------------- ----------------- ----------------- --------
Adjusted operating profit margin (%) 14.9 14.9 15.9 (1.0)pp
-------------------------------------- ----------------- ----------------- ----------------- --------
Sales in Australasia were GBP15.9 million, growing by 92.7%
(97.6% at constant currency) driven by the acquisition of Ventair
in Australia in March 2019. Organic revenue grew by 6.1% (7.4% at
constant currency) with a particularly strong finish to the period.
Adjusted operating profit increased to GBP2.3 million from GBP1.3
million in the prior period, assisted by both the acquisition of
Ventair in Australia and the organic growth and margin expansion in
New Zealand. Whilst our adjusted operating margin reduced from
15.9% in the first half of FY19 to 14.9% in the first half of FY20
this was solely as a result of the acquisition, with our organic
margin increasing from 15.9% in the prior period to 19.0% (18.0% on
a like-for-like IAS 17 basis) in the period.
We now have a leading market position for residential
ventilation in our Australasian market and have the opportunity to
continue to launch many new products in both Australia and New
Zealand. With the acquisition of Ventair it is our ambition to
become one of the leading providers of residential ventilation to
the Australian market, complementing our position as the market
leader in the residential refurbishment trade supply market in New
Zealand. Since acquiring Simx in New Zealand in March 2018 we have
introduced many new products to the market. That pace of new
introduction has stepped up in the last six months and coupled with
the forthcoming change in regulations for ventilation in rental
properties, we believe our enlarged and more sophisticated product
portfolio will enable us to make further gains and upsell
advantages in the future.
In Australia the revenue has grown since the prior period, a
period in which we did not own the business and therefore not
classified as organic growth. As with Simx, in New Zealand, our
objective is to widen the product portfolio taking us from one of
the leading providers of ventilation sweep fans to also cover the
residential exhaust fan market. We are expecting to gain further
momentum over the coming months as we introduce new products from
across the Group.
Focus on sustainability
Since reporting our results for the financial year 2019 we have
renewed our focus on long term sustainability. We continue to focus
on reducing our carbon emissions and waste and have instigated an
internal review of our production processes to help reduce our
impact on the environment. We have new initiatives maximising the
use of recycled materials and lower impact packaging with the aim
of reducing single use plastic within our supply chains.
Regulatory Drivers and indoor air quality
Particularly in our UK and Continental European markets, but
also beginning to emerge in Australasia, the regulatory pathway to
carbon reduction for new buildings continues. Improvements to
thermal efficiency and reduced heating load requirements mean
further tightening of air permeability in new buildings which
increases the importance of energy efficient and healthy
ventilation. Whilst the large majority of carbon emissions from the
built environment come from existing buildings, we are seeing an
increasing emphasis on new building regulations in all of our
markets. These changes in regulations over the next five to ten
years will increase demand for more sophisticated, more energy
efficient, better controlled and quieter ventilation systems.
However, if we are to deliver sustainable buildings over time, we
believe that a more fundamental approach will be necessary for the
existing housing and commercial building stock.
We are deeply committed to continuing our innovation and new
product development to meet the changing needs of our markets. Over
time we believe that a more fundamental approach will be necessary
for the existing housing and commercial building stock, if we are
to see the individual and collective targets for carbon reduction
being achieved. As well as the carbon reduction agenda consumers
are becoming more aware of the need to have good indoor air quality
for both health and wellbeing. These regulatory and consumer trends
are driving and will drive more demand for our solutions.
Risks and Uncertainties
The Group's activities are affected by a number of risks and
uncertainties including; economic conditions, ability to identify
and complete acquisitions, foreign exchange volatility, customer
relationships and reputation, legal and regulatory changes,
recruitment and retention of key personnel, supply chain risk and
cyber security.
We continue to carefully monitor the potential impacts of the
UK's departure from the European Union as negotiations continue
regarding the shape of relations post the end of the transition
period on 31 December 2020. Potential risks and our mitigating
actions were set out in pages 26 to 33 of our 2019 Annual Report
and Accounts.
Coronavirus risk
The Coronavirus pandemic is a specific and rapidly developing
risk that we are monitoring on a daily basis. Our three principal
areas of focus are: ensuring the safety and wellbeing of our
employees, ensuring the continuity of our supply chain and
manufacturing processes, and monitoring and responding to any
changes in demand patterns from our customers.
As regards our staff, we are carefully and continually following
guidance from the authorities in the countries in which we operate,
implementing any necessary steps, and ensuring that we communicate
clearly and frequently with our employees. We have mapped out our
key concentrations of staff and the protocols that would be
followed in the event of anyone being diagnosed with the virus. We
have curtailed international and inter-location travel and will
make increased use of remote working where appropriate.
We have been working closely with our Chinese supply chain
partners over the past two months to ensure continuity of supply
(predominantly small motors and PCBs). Through a combination of
standard holdings of buffer stock, deliveries in transit prior to
the Chinese New Year, and the subsequent return to work and
production of our key suppliers post Chinese New Year, we have been
able to maintain continuity of supply with no significant impacts
to date.
As regards demand risk, second half trading has started in a
similar basis to that observed during the first half. Government
measures and guidelines to date would not appear to have any direct
bearing on demand, but there is clearly potential for adverse
impacts as this escalates.
Interim dividend
The Board has declared an interim dividend of 1.71 pence per
share, which represents growth of 6.9 % compared to H1 2019
demonstrating the Board's continuing confidence in the performance
of the Group. The interim dividend will be paid on 5 May 2020 to
shareholders on the register at the close of business on 27 March
2020.
Board
As announced on 20 January 2020, after completing almost six
years as Non-Executive Chairman, Peter Hill retired on 31 January
2020 and was succeeded on 1 February 2020 by Paul Hollingworth who
also stepped down as Chairman of the Audit Committee. On behalf of
the Board, I would like to thank Peter for his leadership and the
contribution he made as Chairman. Tony Reading, Senior Independent
Director, was appointed as Interim Chairman of the Audit Committee
with effect from 1 February 2020, to serve until a permanent
successor is appointed. A search for a new Non-Executive Director
to Chair the Audit Committee is progressing and an update will be
provided in due course.
Ronnie George
Chief Executive Officer
16 March 2020
FINANCIAL REVIEW
Trading performance summary
Adjusted (1,2)
----------- ----------- ------------------------
6 months 6 months 6 months 6 months
to to to to
31 January 31 January 31 January 31 January
2020 (2) 2019 Movement 2020 2019 Movement
------------------------- ----------- ----------- -------- ----------- ----------- --------
Revenue (GBPm) 118.8 114.8 3.4% 118.8 114.8 3.4%
EBITDA (GBPm) 25.4 21.2 19.7% 25.6 22.4 14.0%
Operating profit (GBPm) 14.0 11.3 24.4% 21.8 20.2 7.6%
Finance costs (GBPm) 2.1 1.1 100.5% 1.3 1.1 18.0%
Profit before tax (GBPm) 11.9 10.2 16.7% 20.5 19.1 7.2%
Basic EPS (p) 4.7 4.1 14.6% 8.2 7.7 6.5%
Interim dividend per
share (p) 1.71 1.60 6.9% 1.71 1.60 6.9%
Operating cash flow
(GBPm) 22.1 14.3 54.4% 22.3 15.5 43.5%
Net debt (GBPm) 80.9 74.4 6.5 80.9 74.4 6.5
Like-for-like net debt
(GBPm) 60.5 74.4 (13.9) 60.5 74.4 (13.9)
------------------------- ----------- ----------- -------- ----------- ----------- --------
Note
1. The Group uses some alternative performance measures to track
and assess the underlying performance of the business. These
measures include adjusted operating 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 18. A reconciliation to reported
measures is set out in note 2.
2. The results for the 6 months to 31 January 2020 are prepared
on an IFRS 16 basis. The 6 months to January 2019 have not been
restated and continue to be presented on an IAS 17 basis. The
impact of adopting IFRS 16 can be seen in note 1 of the interim
financial statements.
Group Results
Group revenue for the 6 months ended 31 January 2020 was
GBP118.8 million (H1 2019: GBP114.8 million), an increase of 3.4%
(5.0% at constant currency). Challenging conditions in our UK
Commercial markets and our Swedish and Finnish new build and
project businesses were offset by particularly strong progress in
Central Europe and good growth in UK Public RMI.
Inorganic growth of 6.2% (6.4% at constant currency) was as a
result of the acquisition of Ventair Pty Limited in Australia in
March 2019, which will become part of our "organic" result during
the second half.
Group adjusted operating profit, increased by 7.6% (9.1% at
constant currency) to GBP21.8 million (H1 2019: GBP20.2 million).
Adjusted operating margins expanded to 18.3% (H1 2019: 17.6%)
despite the dilutive impact of the Ventair acquisition. On an
organic basis excluding Ventair, we delivered an expansion of 1.3pp
underpinned by Reading facility performance improvements, with all
of our three geographical segments recording expanded organic
operating margins.
Reported profit before tax increased by GBP1.7 million to
GBP11.9 million (H1 2019: GBP10.2 million). There were no
exceptional costs recorded in the period (H1 2019: GBP1.2 million),
though we did incur a loss of GBP0.8 million (H1 2019: nil) on the
measurement of fair value of financial derivatives.
Reconciliation of statutory measures to adjusted performance
measures
The Board and key management personnel use some alternative
performance measures to track and assess the underlying performance
of the business. These measures include adjusted operating profit,
adjusted profit before tax, adjusted EPS and adjusted operating
cash flow. These measures are deemed more appropriate to track
underlying financial performance as they exclude income and
expenditure which is not directly related to the ongoing trading of
the business. A reconciliation of these measures of performance to
the corresponding reported figure is shown below and is detailed in
note 2 to the consolidated financial statements.
6 months ended 31 January
6 months ended 31 January 2020 2019
---------------------------------- -------------------------------
Adjusted Adjusted
Reported Adjustments results Reported Adjustments results
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------- ------------- -------- -------- ----------- --------
Revenue 118.8 -- 118.8 114.8 -- 114.8
Gross profit 56.8 -- 56.8 53.3 -- 53.3
-------------------------------- --------- ------------- -------- -------- ----------- --------
Administration and distribution
costs excluding the
costs listed below (35.0) -- (35.0) (33.1) -- (33.1)
Amortisation of intangible
assets acquired through
business combinations (7.6) 7.6 -- (7.7) 7.7 --
CFO succession costs (0.2) 0.2 -- -- -- --
Exceptional operating
costs -- -- -- (1.2) 1.2 --
-------------------------------- --------- ------------- -------- -------- ----------- --------
Operating profit 14.0 7.8 21.8 11.3 8.9 20.2
Net loss on financial
instruments at fair
value (0.8) 0.8 -- -- -- --
Other net finance costs (1.3) -- (1.3) (1.1) -- (1.1)
-------------------------------- --------- ------------- -------- -------- ----------- --------
Profit before tax 11.9 8.6 20.5 10.2 8.9 19.1
Income tax (2.6) (1.7) (4.3) (2.1) (1.8) (3.9)
-------------------------------- --------- ------------- -------- -------- ----------- --------
Profit after tax 9.3 6.9 16.2 8.1 7.1 15.2
-------------------------------- --------- ------------- -------- -------- ----------- --------
The following are the items excluded from adjusted measures:
-- Amortisation of acquired intangibles
On acquisition of a business, where appropriate, we value identifiable
intangible fixed assets acquired such as trademarks and customer base
and recognise these assets in our consolidated statement of financial
position; we then amortise these acquired intangible assets over their
useful lives. In the period the amortisation charge of these intangible
assets reduced to GBP7.6 million (H1 2019: GBP7.7 million). We exclude
this accounting adjustment in the calculation of our adjusted earnings
because it is a cost associated with acquisitions, not the underlying
trading of the businesses.
-- Exceptional operating costs
Exceptional operating costs, by virtue of their size, incidence or
nature, are disclosed separately in order to allow a better understanding
of the underlying trading performance of the Group. During the period,
exceptional operating costs were GBPnil (H1 2019: GBP1.2 million)
which included costs relating to acquisitions of GBPnil (H1 2019:
GBP0.1 million) and the UK Ventilation re-organisation including factory
relocation of GBPnil (H1 2019: GBP1.1 million).
-- CFO succession costs
These costs relate to the costs incurred during the period for the
outgoing CFO and amounted to GBP0.2 million (H1 2019: GBPnil).
-- Fair value adjustments
At the end of each reporting period we measure the fair value of financial
derivatives and recognise any gains or losses immediately in finance
cost. During the period, we recognised a loss of GBP0.8 million (H1
2019: GBPnil). We exclude these gains or losses from our measures
of adjusted earnings because they are accounting adjustments which
will reverse in future periods and do not reflect the underlying trading
of the business.
Finance costs
Reported net finance costs were GBP2.1 million (H1 2019: GBP1.1
million) including GBP0.8 million of net loss on the revaluation of
financial instruments (H1 2019: GBPnil). Adjusted finance costs
were GBP1.3 million (H1 2019: GBP1.1 million), with a like-for-like
reduction of GBP0.1 million offset by an adjustment of GBP0.3
million relating to the interest expense arising from the
transition to IFRS 16.
Taxation
Our underlying effective tax rate, on adjusted profit before
tax, was 20.8% (H1 2019: 20.5%). The increase of 0.3 percentage
points in our adjusted effective tax rate, over the prior period,
was as a result of higher tax rates applicable to profits in
recently acquired businesses in Australasia. Our reported effective
tax rate for the period was 21.5% (H1 2019: 21.1%).
The UK Finance (No. 2) Act 2015, which was enacted on 18
November 2015, introduced a reduction in the UK headline rate of
corporation tax to 19% and 18% from 1 April 2017 and 1 April 2020
respectively. A further reduction in the headline rate to 17% from
1 April 2020 was included in the UK Finance Act 2016, enacted on 15
September 2016.
Whilst the March 2020 Budget confirmed the planned UK
corporation tax reduction from 19% to 17% will not go ahead, this
amended legislation has yet to be 'substantively enacted',
therefore the impact of the reduction has not been reflected in the
effective tax rate for the 6 months ended 31 January 2020.
The Group's medium-term adjusted effective tax rate is expected
to be approximately 21% of the Group's adjusted profit before tax,
as a result of the full year effect of profits from recently
acquired businesses in countries with higher tax rates.
Operating cash flow
The Group continues to be highly cash generative, and delivered
a strong cash performance in the first half with adjusted operating
cash inflows of GBP22.3 million (H1 2019: GBP15.5 million) at a
cash conversion rate of 99.5% (H1 2019: 74.5%). Net Group operating
working capital stood at GBP28.5 million at 31 January 2020,
compared with GBP31.9 million at the prior period end and GBP27.0
million at the prior half year date. Excluding our Ventair
business, organic net working capital was GBP26.6 million (H1 2019:
GBP27.0 million). Our focus on inventory optimisation across the
Group manifested in a reduction of GBP1.5 million in inventory
levels during the first half with continued improvements
anticipated in the second half. Capital expenditure of GBP2.4
million (H1 2019: GBP3.4 million) included further new product
development and enhancements to IT systems.
See the glossary of terms in note 18 to the consolidated
financial statements for a definition of adjusted operating cash
flow and cash conversion.
Reconciliation of adjusted operating cash flow
6 months 6 months
to to
31 January 31 January
2020 2019
GBPm GBPm
-------------------------------------------------- ----------- -----------
Net cash flow generated from operating activities 21.7 13.4
-------------------------------------------------- ----------- -----------
Net capital expenditure (2.4) (3.4)
UK and overseas tax paid 4.5 4.5
Income tax refund (1.7) --
CFO succession costs 0.2 --
Cash flow relating to exceptional items -- 1.0
-------------------------------------------------- ----------- -----------
Adjusted operating cash flow 22.3 15.5
-------------------------------------------------- ----------- -----------
Impact of IFRS 16
IFRS 16 results in almost all leases being recognised on the
balance sheet as the distinction between operating leases and
finance leases is removed. Under the new standard, a right-of-use
asset and a financial liability for the future lease payments are
recognised.
The Group adopted the new standard from 1 August 2019, applying
the modified retrospective transition approach and not restating
comparative amounts for the year ended 31 July 2019. On adoption
the Group recognised right-of-use assets of GBP24.3 million, a
deferred tax asset of GBP0.2 million and lease liabilities of
GBP25.4 million, with the cumulative effect arising from the new
leasing standard of GBP0.9 million recognised within retained
earnings.
Within the Income Statement, the application of IFRS 16 resulted
in a decrease in other operating expenses of GBP1.7 million and an
increase in depreciation of GBP1.5 million for the 6 months ended
31 January 2020. The interest expense increased by GBP0.3 million
due to additional lease interest. An analysis of results by segment
can be found in note 4 'Segmental analysis' to the interim
financial statements.
Net debt
Net debt at 31 January 2020 was GBP80.9 million (H1 2019:
GBP74.4 million), comprised of bank borrowings of GBP74.8 million
(H1 2019: GBP83.7 million), offset by cash and cash equivalents of
GBP14.3 million (H1 2019: GBP9.3 million) and a long term liability
adjustment for recognition of IFRS 16 of GBP20.4 million. The net
debt of GBP80.9 million represents leverage of 1.6x adjusted
EBITDA. Like-for-like net debt under IAS17 of GBP60.5 million
represents leverage of 1.3x adjusted EBITDA (H1 2019: 1.7x).
Movements in net debt position for the 6 months period ended 31
January 2020
6 months 6 months
to to
31 January 31 January
2020 2019
GBPm GBPm
---------------------------------------------------------- ----------- -----------
Opening net debt at 1 August (74.6) (77.2)
---------------------------------------------------------- ----------- -----------
Movements from normal business operations:
Adjusted EBITDA 25.6 22.4
Movement in working capital (1.1) (4.0)
Share-based payments 0.2 0.5
Capital expenditure (2.4) (3.4)
Adjusted operating cash flow: 22.3 15.5
- Interest paid net of interest received (1.1) (0.9)
- Income tax paid (4.5) (4.5)
- Income tax refund 1.7 --
- Exceptional operating costs -- (1.0)
- CFO succession costs (0.2) --
- Dividend paid (6.5) (5.9)
- Purchase of own shares (0.8) (1.2)
- FX on foreign currency loans/cash 4.6 1.6
- Issue costs of new borrowings -- (0.2)
- IFRS 16 long term lease liabilities adjustment (20.4) --
- IFRS 16 payments of lease liabilities (1.4) --
Movements from acquisitions:
- Acquisition consideration net of cash acquired and debt
repaid -- (0.6)
---------------------------------------------------------- ----------- -----------
Closing net debt at 31 January (80.9) (74.4)
---------------------------------------------------------- ----------- -----------
Employee Benefit Trust
During the period GBP0.8 million of loans were made to the
Volution Employee Benefit Trust for the exclusive purpose of
purchasing shares in Volution Group plc in order to partly fulfil
the Company's obligations under its share incentive plans (H1 2019:
GBP1.2 million). The Volution Employee Benefit Trust acquired
400,000 shares at an average price of GBP2.00 per share in the
period (2018: 650,000) and 265,900 shares (H1 2019: 19,981) were
exercised and released by the trustees with a value of GBP643,478
(H1 2019: GBP36,000). At 31 January 2020, a total of 1,876,796 (31
July 2019: 1,759,884) ordinary shares in the Company were held by
the Volution Employee Benefit Trust. The Volution Employee Benefit
Trust has been consolidated into our results and the shares
purchased have been treated as treasury shares deducted from
shareholders' funds.
Foreign exchange
The Group is exposed to the impact of changes in the foreign
currency exchange rates on transactions denominated in currencies
other than the functional currency of our operating businesses. We
have significant euro income in the UK which is mostly balanced by
euro expenditure in the UK. We have little US dollar income but
significant US dollar expenditure. In advance of the 2020 financial
year we limited our transactional foreign exchange risk by
purchasing the majority of our forecast US dollar requirements for
the 2020 financial year.
We are also exposed to translational currency risk as the Group
consolidates foreign currency-denominated assets, liabilities,
income and expenditure into sterling, the Group's reporting
currency. We hedge the translation risk of the net assets
denominated in Swedish krona with GBP22.2 million of borrowings
denominated in Swedish krona (31 July 2019: GBP24.0 million). We
have partially hedged our risk of translation of the net assets
denominated in euros by having euro-denominated bank borrowings in
the amount of GBP37.6 million as at 31 January 2020 (31 July 2019:
GBP40.6 million). The sterling value of our foreign
currency-denominated loans, net of cash, decreased by GBP4.6
million (H1 2019: decreased by GBP1.6 million) as a consequence of
exchange rate movements. We do not hedge the translational exchange
rate risk relating to the results of overseas subsidiaries.
During the six months, movements in foreign currency exchange
rates have had an unfavourable effect on the reported revenue and
profitability of our business. If we had translated the H1 2020
performance of the Group at our 2019 exchange rates, the reported
revenue would have been GBP120.6 million, GBP1.8 million higher,
and adjusted operating profit would have been GBP22.1 million,
GBP0.3 million higher.
At the end of the half year, the weakening of sterling increased
the value of foreign currency-denominated working capital by GBP1.1
million compared to the foreign exchange rates applying at the
beginning of the half year.
Bank facilities, refinancing and liquidity
The Group has in place a GBP120 million multicurrency revolving
credit facility and in addition an accordion facility of up to
GBP30 million with a maturity date of 15 December 2022.
As at 31 January 2020, we had GBP45.2 million of undrawn,
committed bank facilities and GBP14.3 million of cash and cash
equivalents on the consolidated statement of financial
position.
Earnings per share
Our reported basic earnings per share grew by 14.6% to 4.7 pence
(H1 2019: 4.1 pence).
Our adjusted basic earnings per share grew by 6.5% to 8.2 pence
(H1 2019: 7.7 pence).
Andy O'Brien
Chief Financial Officer
16 March 2020
PRINCIPAL RISKS AND UNCERTANTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The principal and evolving change since the publication of the
Annual Report for the year ended 31 July 2019 has been the
emergence of risks associated with the Coronavirus (COVID-19)
pandemic. These risks are summarised below, and how the Group seeks
to mitigate these risks is set out on pages 26 to 33 of the Annual
Report 2019 which can be found at www.volutiongroupplc.com .
A summary of the nature of the risks currently faced by the
Group is as follows:
Economic risk including the UK trade negotiations with the EU
and impacts of Coronavirus
A decline in general economic activity and/or a specific decline
in activity in the construction industry, including, but not
exclusively, an economic decline caused by the UK leaving and
negotiating a trade deal with the European Union, could result in a
decline in demand for our products serving the residential and
commercial construction markets. This would result in a reduction
in revenue and profitability. Please refer to page 7 for specific
reference to Coronavirus risk.
Foreign exchange risk
The exchange rates between currencies that we use may move
adversely. The commerciality of transactions denominated in
currencies other than the functional currency of our businesses
and/or the perceived performance of foreign subsidiaries in our
sterling denominated consolidated financial statements may be
adversely affected by changes in exchange rates.
Acquisitions
We may fail to identify suitable acquisition targets at an
acceptable price or we may fail to complete or properly integrate
the acquisition. The impact could include: revenue and
profitability which may not grow in line with management's
ambitions and investor expectations or a failure to properly
integrate a business may distract senior management from other
priorities and adversely affect revenue and profitability.
Innovation
We may fail to innovate commercially or technically viable
products to maintain and develop our product leadership position.
Scarce development resource may be misdirected and costs incurred
unnecessarily. Failure to innovate may result in an ageing product
portfolio which falls behind that of our competition.
Supply chain and raw materials including potential impacts of
Coronavirus
Raw materials or components may become difficult to source
because of material scarcity or disruption of supply. Sales and
profitability may be reduced during the period of constraint.
Prices for the input material may increase and our costs may
increase. The Coronavirus (COVID-19) pandemic and the associated
potential for disruption to supply chains, especially relating to
products and materials sourced from China, is a specific risk that
we are monitoring very closely. Potential impacts could include
inability to service customer demand due to non-availability of
products, as well as input cost increases due principally to
expediting and potential need to air freight. Please refer to page
7 for specific reference to Coronavirus risk.
IT systems including cyber breach
We may be adversely affected by a breakdown in our IT systems or
a failure to properly implement any new systems. Failure of our IT
and communication systems could affect any or all of our business
processes and have significant impact on our ability to trade,
collect cash and make payments.
Customers
A significant amount of our revenue is derived from a small
number of customers and from our relationships with heating and
ventilation consultants. We may fail to maintain these
relationships. Any deterioration in our relationship with a
significant customer could have a significant adverse effect on our
revenue from that customer.
Legal and regulatory environment
Changes in laws or regulation relating to the carbon efficiency
of buildings or the efficiency of electrical products may change.
The shift towards higher value-added and more energy-efficient
products may not develop as anticipated resulting in lower sales
and profit growth. If our products are not compliant and we fail to
develop new products in a timely manner we may lose revenue and
market share to our competitors. Failure to manage certain
compliance risks adequately could lead to death or serious injury
of an employee or third party, and/or penalties for non-compliance
in health and safety, anti-bribery, data protection or competition
law.
People
Our continuing success depends on retaining key personnel and
attracting skilled individuals. Skilled and experienced employees
may decide to leave the Group, potentially moving to a competitor.
Any aspect of the business could be impacted with resultant
reduction in prospects, sales and profitability. The Coronavirus
(COVID-19) pandemic has increased the risk to the health and
wellbeing of our employees and we have taken appropriate steps
across our business to minimise this risk. Please refer to page 7
for specific reference to Coronavirus risk.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge:
The condensed consolidated set of financial statements has been
prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting' as adopted by the European Union and
that the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements, and a description of
the principal risks and uncertainties for the remaining six months
of the financial year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or the performance of
the Group during that period; and any changes in the related party
transactions described in the Annual Report 2019 that could do
so.
The full list of current Directors can be found on the Company's
website at www.volutiongroupplc.com.
By order of the Board
Ronnie George Andy O'Brien
Chief Executive Officer Chief Financial Officer
16 March 2020 16 March 2020
INDEPENT REVIEW REPORT TO VOLUTION GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 January 2020 which comprises the interim
condensed consolidated statement of comprehensive income, the
interim condensed consolidated statement of financial position, the
interim condensed consolidated statement of changes in equity, the
interim condensed consolidated statement of cash flows and the
related explanatory notes 1 to 18. We have read the other
information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
January 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
16 March 2020
Interim Condensed Consolidated Statement of Comprehensive
Income
For the period ended 31 January 2020
2020 2019
Unaudited Unaudited
Notes GBP000 GBP000
--------------------------------------------- ----- ---------- ----------
Revenue from contracts with customers 3 118,750 114,847
Cost of sales (61,993) (61,507)
--------------------------------------------- ----- ---------- ----------
Gross profit 56,757 53,340
Administrative and distribution expenses (42,717) (40,838)
--------------------------------------------- ----- ---------- ----------
Operating profit before exceptional items 14,040 12,502
Exceptional operating costs 5 -- (1,216)
--------------------------------------------- ----- ---------- ----------
Operating profit 14,040 11,286
Finance revenue 40 8
Finance costs 6 (2,137) (1,066)
--------------------------------------------- ----- ---------- ----------
Profit before tax 11,943 10,228
Income tax 7 (2,568) (2,155)
--------------------------------------------- ----- ---------- ----------
Profit for the period 9,375 8,073
--------------------------------------------- ----- ---------- ----------
Other comprehensive income/(expense)
Items that may subsequently be reclassified
to profit or loss:
Exchange differences arising on translation
of foreign operations (9,070) (1,021)
Gain on hedge of net investment in foreign
operations 4,890 1,640
--------------------------------------------- ----- ---------- ----------
Other comprehensive income/(expense) for the
period (4,180) 619
--------------------------------------------- ----- ---------- ----------
Total comprehensive income for the period 5,195 8,692
--------------------------------------------- ----- ---------- ----------
Earnings per share
Basic earnings per share 8 4.7 4.1
Diluted earnings per share 8 4.7 4.1
--------------------------------------------- ----- ---------- ----------
Interim Condensed Consolidated Statement of Financial
Position
At 31 January 2020
31 January 31 July
2020 2019
Unaudited Audited
Notes GBP000 GBP000
-------------------------------------- ----- ---------- ---------
Non-current assets
Property, plant and equipment 11 44,688 23,758
Intangible assets - goodwill 9 113,418 118,183
Intangible assets - others 10 86,049 95,126
-------------------------------------- ----- ---------- ---------
244,155 237,067
-------------------------------------- ----- ---------- ---------
Current assets
Inventories 34,187 35,585
Right of return assets 3 284 430
Trade and other receivables 38,316 42,199
Other financial assets 12 22 907
Cash and short-term deposits 14,303 11,547
-------------------------------------- ----- ---------- ---------
87,112 90,668
-------------------------------------- ----- ---------- ---------
Total assets 331,267 327,735
-------------------------------------- ----- ---------- ---------
Current liabilities
Trade and other payables (36,440) (38,807)
Refund liabilities 3 (7,817) (7,529)
Income tax (1,864) (279)
Other financial liabilities 12 (893) (318)
Provisions (1,340) (1,398)
-------------------------------------- ----- ---------- ---------
(48,354) (48,331)
-------------------------------------- ----- ---------- ---------
Non-current liabilities
Interest-bearing loans and borrowings 13 (94,522) (85,391)
Other financial liabilities 12 (472) (1,501)
Provisions (375) (384)
Deferred tax liabilities (14,041) (16,019)
-------------------------------------- ----- ---------- ---------
(109,410) (103,295)
-------------------------------------- ----- ---------- ---------
Total liabilities (157,764) (151,626)
-------------------------------------- ----- ---------- ---------
Net assets 173,503 176,109
-------------------------------------- ----- ---------- ---------
Capital and reserves
Share capital 2,000 2,000
Share premium 11,527 11,527
Treasury shares (2,404) (2,030)
Capital reserve 93,855 93,855
Share-based payment reserve 1,581 1,745
Foreign currency translation reserve (673) 3,507
Retained earnings 67,617 65,505
-------------------------------------- ----- ---------- ---------
Total equity 173,503 176,109
-------------------------------------- ----- ---------- ---------
The consolidated financial statements of Volution Group plc
(registered number: 09041571) were approved by the Board of
Directors and authorised for issue on 16 March 2020.
On behalf of the Board
Ronnie George Andy O'Brien
Chief Executive Officer Chief Financial Officer
Interim Condensed Consolidated Statement of Changes in
Equity
For the period ended 31 January 2020
Foreign
Share-based currency
Share Share Treasury Capital payment translation Retained
capital premium shares reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
At 1 August 2018 (Audited) 2,000 11,527 (1,962) 93,855 1,836 1,507 56,450 165,213
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Profit for the period -- -- -- -- -- -- 8,073 8,073
Other comprehensive expense -- -- -- -- -- 619 -- 619
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Total comprehensive income -- -- -- -- -- 619 8,073 8,692
Purchase of own shares -- -- (1,199) -- -- -- -- (1,199)
Vesting of shares -- -- 1,131 -- (1,043) -- (88) --
Share-based payment including
tax -- -- -- -- 459 -- -- 459
Dividends paid -- -- -- -- -- -- (5,912) (5,912)
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
At 31 January 2019 (Unaudited) 2,000 11,527 (2,030) 93,855 1,252 2,126 58,523 167,253
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Profit for the period -- -- -- -- -- -- 10,154 10,154
Other comprehensive expense -- -- -- -- -- 1,381 -- 1,381
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Total comprehensive income -- -- -- -- -- 1,381 10,154 11,535
Purchase of own shares -- -- -- -- -- -- -- --
Vesting of shares -- -- -- -- -- -- -- --
Share-based payment including
tax -- -- -- -- 493 -- -- 493
Dividends paid -- -- -- -- -- -- (3,172) (3,172)
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
At 31 July 2019 (Audited) 2,000 11,527 (2,030) 93,855 1,745 3,507 65,505 176,109
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Adjustment on initial
application
of IFRS 16 -- -- -- -- -- -- (869) (869)
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
At 01 August 2019 2,000 11,527 (2,030) 93,855 1,745 3,507 64,636 175,240
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Profit for the period -- -- -- -- -- -- 9,375 9,375
Other comprehensive expense -- -- -- -- -- (4,180) -- (4,180)
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Total comprehensive income -- -- -- -- -- (4,180) 9,375 5,195
Purchase of own shares -- -- (801) -- -- -- -- (801)
Vesting of shares -- -- 427 -- (563) -- 136 --
Share-based payment including
tax -- -- -- -- 399 -- -- 399
Dividends paid -- -- -- -- -- -- (6,530) (6,530)
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
At 31 January 2020 (Unaudited) 2,000 11,527 (2,404) 93,855 1,581 (673) 67,617 173,503
------------------------------- -------- -------- -------- -------- ----------- ------------ --------- -------
Treasury shares
The treasury shares reserve represents the cost of shares in
Volution Group plc purchased in the market and held by the Volution
Employee Benefit Trust to satisfy obligations under the Group's
share incentive schemes.
Capital reserve
The capital reserve is the difference in share capital and
reserves arising from the use of the pooling of interest method for
preparation of the financial statements in 2014. This is a
non-distributable reserve.
Share-based payment reserve
The share-based payment reserve is used to recognise the value
of equity-settled share-based payments provided to key management
personnel, as part of their remuneration.
Foreign currency translation reserve
Exchange differences arising on translation of the Group's
foreign subsidiaries into GBP are included in the foreign currency
translation reserve. The Group hedges some of its exposure to its
net investment in foreign operations; foreign exchange gains and
losses relating to the effective portion of the net investment
hedge are accounted for by entries made to other comprehensive
income. No hedge ineffectiveness has been recognised in the
statement of comprehensive income for any of the periods
presented.
Retained earnings
The parent company of the Group, Volution Group plc, had
distributable retained earnings at 31 January 2020 of
GBP84,425,000.
Interim Condensed Consolidated Statement of Cash Flows
For the period ended 31 January 2020
2020 2019
Unaudited Unaudited
Notes GBP000 GBP000
--------------------------------------------------- ----- ---------- ----------
Operating activities
Profit for the period after tax 9,375 8,073
Adjustments to reconcile profit for the period
to net cash flow from operating activities:
Income tax 2,568 2,155
Gain on disposal of property, plant and equipment (47) (20)
Exceptional operating costs 5 -- 1,216
Cash flows relating to exceptional items -- (1,003)
Finance revenue (40) (8)
Finance costs 6 2,137 1,066
Share-based payment expense 270 459
Depreciation of property, plant and equipment 11 3,182 1,615
Amortisation of intangible assets 10 8,144 8,300
Working capital adjustments:
Decrease/(increase) in trade receivables
and other assets 2,248 (298)
Decrease/(increase) in inventories 194 (60)
Decrease in trade and other payables (3,578) (3,885)
Movement in provisions 17 253
--------------------------------------------------- ----- ---------- ----------
Cash generated by operations 24,470 17,863
UK income tax paid (1,450) (2,050)
UK income tax refund 1,657 --
Overseas income tax paid (3,000) (2,410)
--------------------------------------------------- ----- ---------- ----------
Net cash flow generated from operating activities 21,677 13,403
--------------------------------------------------- ----- ---------- ----------
Investing activities
Payments to acquire intangible assets 10 (930) (886)
Purchase of property, plant and equipment 11 (1,619) (2,593)
Proceeds from disposal of property, plant
and equipment 161 102
Acquisition of subsidiaries, net of cash
acquired -- (586)
Interest received 40 8
--------------------------------------------------- ----- ---------- ----------
Net cash flow used in investing activities (2,348) (3,955)
--------------------------------------------------- ----- ---------- ----------
Financing activities
Repayment of interest-bearing loans and borrowings (11,000) (13,067)
Proceeds from new borrowings 4,500 3,000
Issue costs of new borrowings -- (180)
Interest paid (1,132) (942)
Payments of lease liabilities (1,384) --
Dividends paid (6,530) (5,912)
Purchase of own shares (801) (1,199)
--------------------------------------------------- ----- ---------- ----------
Net cash flow used in financing activities (16,347) (18,300)
--------------------------------------------------- ----- ---------- ----------
Net increase/(decrease) in cash and cash
equivalents 2,982 (8,852)
Cash and cash equivalents at the start of
the year 11,547 18,221
Effect of exchange rates on cash and cash
equivalents (226) (65)
--------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at the end of the
period 14,303 9,304
--------------------------------------------------- ----- ---------- ----------
Notes to the Interim Condensed Consolidated Financial
Statements
For the period ended 31 January 2020
Volution Group plc (the Company) is a public limited company and
is incorporated and domiciled in the UK (registered number:
09041571). The share capital of the Company is listed on the London
Stock Exchange. The address of its registered office is Fleming
Way, Crawley, West Sussex RH10 9YX.
The preliminary results were authorised for issue by the Board
of Directors on 16 March 2020. The financial information set out
herein does not constitute the Group's statutory consolidated
financial statements for the 6 months ended 31 January 2020 and is
unaudited.
1. Basis of preparation
These condensed consolidated financial statements have been
prepared in accordance with IAS 34, 'Interim Financial Reporting',
as adopted by the European Union. They do not include all
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the
Annual Report 2019. The financial information for the half years
ended 31 January 2020 and 31 January 2019 do not constitute
statutory accounts within the meaning of Section 434(3) of the
Companies Act 2006 and is unaudited.
The annual financial statements of Volution Group plc are
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union. The
comparative financial information for the year ended 31 July 2019
included within this report does not constitute the full statutory
accounts for that period. The Annual Report 2019 has been filed
with the Registrar of Companies. The Independent Auditors' Report
on the Annual Report 2019 was unqualified, did not draw attention
to any matters by way of emphasis, and did not contain a statement
under section 498(2) and 498(3) of the Companies Act 2006.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the interim condensed consolidated financial
statements.
The financial statements of subsidiaries are prepared for the
same reporting periods using consistent accounting policies. All
intercompany transactions and balances, including unrealised
profits arising from intra-group transactions, have been eliminated
on consolidation.
Employee Benefit Trust
The Company has an Employee Benefit Trust (EBT) which is used in
connection with the operation of the Company's Long Term Incentive
Plan (LTIP), Deferred Share Bonus Plan and Sharesave Plan. The
Company's own shares held by the Volution EBT are treated as
treasury shares and deducted from shareholders' funds until they
vest unconditionally with employees.
At 31 January 2020, a total of 1,876,796 (31 July 2019:
1,759,884) ordinary shares in the Company were held by the Volution
EBT, all of which were under option to employees. During the period
400,000 ordinary shares in the Company were purchased by the
trustees (H1 2019: 650,000), and 239,378 shares (H1 2019: 642,392
shares) vested and became exercisable. The market value of the
shares at 31 January 2020 was GBP4,541,846 (31 July 2019:
GBP3,202,989).
The Volution EBT has agreed to waive its rights to
dividends.
In the application of the Group's accounting policies,
management is required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical accounting judgements and key sources of estimation
uncertainty
The following are the critical judgements (apart from those
involving estimations), that management has made in the process of
applying the entity's accounting policies and that have the most
significant effect on the amounts recognised in the financial
statements:
Exceptional items
The Group discloses exceptional items by virtue of their nature,
size or incidence to allow a better understanding of the underlying
trading performance of the Group. The Group identifies an item of
expense or income as exceptional, when in management's judgment,
the underlying event giving rise to the exceptional item is deemed
to be non-recurring in its nature, materiality or incidence such
that the Group results would be distorted without specific
reference to the event in question.
To enable the full impact of an exceptional item to be
understood, the tax impact is disclosed and they are presented
separately in the statement of cash flows. The following categories
are deemed to be exceptional in the current or comparative period:
acquisition costs; restructuring and factory consolidation, release
of contingent consideration and write off of unamortised loan issue
costs upon refinancing. See note 5 for details of the amounts
included in the above categories.
Development costs
Development costs that are directly attributable to the
development of a product are capitalised using management's
assessment of the likelihood of a successful outcome for each
product being released to market, this is based on management's
judgement that the product is technologically, commercially and
economically feasible in accordance with IAS 38 'Intangible
assets'.
We have technical departments which are involved in activities
such as operational support, marketing support, research and new
product development. Management exercise judgement to determine
whether the expenditure during the development phase of an internal
project satisfies the recognition criteria set out in IAS 38.
During H1 2020 there were a number of projects of sufficient
size and importance to the business which, in management's
judgement, satisfied the recognition criteria set out in IAS 38 to
be capitalised. The total cost of the Group's technical departments
in the period was GBP2,591,000, of which GBP630,000 was capitalised
(H1 2019: GBP2,785,000, of which GBP658,000 was capitalised).
Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of the assets and liabilities within the next financial
year, are described below. The Group has based its assumptions and
estimates on parameters available when these financial statements
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
Impairment of goodwill and other intangible assets
The Group's impairment test for goodwill is based on a value in
use calculation using a discounted cash flow model. The cash flows
are derived from the budget for the following five years. The
recoverable amount is most sensitive to the discount rate used for
the discounted cash flow model as well as the expected future
cash-inflows and the growth rate used for extrapolation
purposes.
The Group records all assets and liabilities acquired in
business acquisitions, at fair value. Intangible assets are
reviewed for impairment annually if events or changes in
circumstances indicate that the carrying amount may not be
recoverable.
Details of the impairment review process are described more
fully in the Annual Report 2019.
See notes 9 and 10 for details of the carrying values of
goodwill and other intangible assets.
Refund liabilities arising from retrospective volume rebates
The Group provides retrospective volume rebates to certain
customers once the quantity of products purchased during the period
exceeds a threshold specified in the contract. To estimate the
variable consideration for the expected future rebates, the Group
applies the expected value method for contracts with more than one
volume threshold. The Group then applies the requirements on
constraining estimates of variable consideration and recognises a
liability for the expected future rebates.
Before including any amount of variable consideration in the
transaction price, the Group considers whether the amount of
variable consideration is constrained. The Group determined that
the estimates of variable consideration are not constrained, other
than with respect to volume rebates, based on its historical
experience, business forecast and the current economic conditions.
In addition, the uncertainty on the variable consideration will be
resolved within a short time frame.
Provisions for warranties and inventory obsolescence
The Group typically provides warranties for general repairs of
defects that existed at the time of sale. These assurance-type
warranties are accounted for under IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
Provisions for inventory obsolescence are made with reference to
the ageing of inventory balances and the view of management as to
whether amounts are recoverable. Warranty provisions will be
determined with consideration to recent customer trading and
management experience, and provision for inventory obsolescence to
sales and usage history and to latest sales forecasts.
The total warranty provision at 31 January 2020 is GBP1,340,000
(31 July 2019: GBP1,398,000). The total provision for inventory
obsolescence at 31 January 2020 is GBP3,947,000 (31 July 2019:
GBP4,200,000).
New standards and interpretations
The following standards and interpretations are new or amended
and have been effective for the first time in the half year ended
31 January 2020.
IFRS 16 Leases
IFRS 16, Leases, issued in January 2016 by the IASB replaces IAS
17, Leases, and related interpretations. The standard sets out the
principles for the recognition, measurement, presentation and
disclosure of leases and requires lessees to account for most
leases under a single on-balance sheet model.
IFRS 16 will result in almost all leases being recognised on the
balance sheet as the distinction between operating leases and
finance leases is removed. Under the new standard, a right-of-use
asset and a financial liability for the future lease payments are
recognised.
The Group has adopted IFRS 16 using the modified retrospective
approach, with the date of initial application of 1 August 2019.
Under this method, the impact of the standard is calculated
retrospectively, however, the cumulative effect arising from the
new leasing rules is recognised in the opening balance sheet at the
date of initial application. Accordingly, the comparative
information presented for 2019 has not been restated.
The Group have adopted the following available practical
expedients:
-- To "grandfather" the Group's assessment of contracts that were previously
identified as leases under IAS 17 and IFRIC 4 at the date of initial
application.
-- To not apply the new lessee accounting model to short-term (lease
ending within 12 months of the reporting date) or low-value leases,
for which we will continue to recognise the related lease payments
as an expense on a straight line basis over the lease.
-- To exclude initial direct costs from the measurement of the right-of-use
asset.
-- Used hindsight in determining the lease term if the contract contains
options to extend or terminate the lease.
The Group leases a range of assets including property, plant and
equipment and vehicles.
As a lessee, the Group previously classified leases as operating
or finance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards of
ownership. Payments made under operating leases (net of any
incentives received from the lessor) were charged to profit or loss
on a straight-line basis over the period of the lease. Under IFRS
16, the Group applies a single recognition and measurement approach
for all leases, except for short-term and low-value assets, and
recognises right-of-use assets and lease liabilities.
Under IFRS 16, a contract is, or contains a lease if the
contract conveys a right to control the use of an identified asset
for a period of time in exchange for consideration. The Group
recognises a right-of-use asset and a lease liability at the lease
commencement date.
At transition, for leases classified as operating leases under
IAS 17, lease liabilities were measured at the present value of the
remaining lease payments, discounted at the lessee's incremental
borrowing rate as at 1 August 2019. Right-of-use assets were
measured at their carrying amount as if IFRS 16 had been applied
since the commencement date, discounted using the lessee's
incremental borrowing rate at the date of initial application.
The Group's weighted average incremental borrowing rate applied
was 2.13%.
For leases previously classified as finance leases under IAS 17,
the carrying amount of the right-of-use asset and the lease
liability at 1 August 2019 were determined as the carrying amount
of lease asset and lease liability under IAS 17 immediately before
that date.
The effect of adopting IFRS 16 is as follows:
Impact on the consolidated statement of financial position as at
1 August 2019:
31 July 2019
audited IFRS 16 adjustments 1 August 2019
GBP000s GBP000s GBP000s
Non-current assets
Property, plant and equipment (right-of-use
assets) 23,758 24,307 48,065
Deferred tax assets -- 211 211
Total assets 327,735 24,518 352,253
-------------------------------------------- ------------ ------------------- -------------
Liabilities
Long-term lease liabilities (85,391) (22,534) (107,925)
Trade and other payables (short-term
lease liabilities) (38,807) (2,853) (41,660)
Total liabilities (151,626) (25,387) (177,013)
-------------------------------------------- ------------ ------------------- -------------
Equity
Retained earnings 65,505 (869) 64,636
Total equity 176,109 (869) 175,240
-------------------------------------------- ------------ ------------------- -------------
Impact on the consolidated statement of profit or loss as for
the six months ending 31 January 2020:
31 January 31 January
2020 2020 Unaudited
Unaudited IFRS 16 adjustments (revised)
GBP000s GBP000s GBP000s
Depreciation expense (included in Cost
of sales) (739) (957) (1,696)
Depreciation expense (included in Administrative
expenses) (983) (531) (1,514)
Operating profit 13,844 196 14,040
Net finance costs (1,828) (269) (2,097)
Profit for the period 9,448 (73) 9,375
Impact on the consolidated statement of cash flows for the six
months ending 31 January 2020:
31 January 31 January
2020 2020 Unaudited
Unaudited IFRS 16 adjustments (revised)
GBP000s GBP000s GBP000s
Net cash flows from operating activities 20,031 1,646 21,677
Net cash flows from financing activities (14,701) (1,646) (16,347)
The lease liabilities as at 1 August 2019 can be reconciled to
the operating lease commitments as at 31 July 2019 as follows:
GBP000's
Operating lease commitments at 31 July 2019 31,325
Discounted using the incremental borrowing rate 25,673
Add: Finance lease liabilities recognised as at 31 July 2019 612
Less: Adjustments as a result of treatment of termination options (185)
Less: Short-term leases recognised on a straight-line basis as
an expense (67)
Less: Low value leases recognised on a straight-line basis as
an expense (34)
Lease liability recognised at 1 August 2019 25,999
------------------------------------------------------------------ --------
Analysis
Current 3,465
Non-current 22,534
Lease liability recognised at 1 August 2019 25,999
------------------------------------------------------------------ --------
Summary of new accounting policies
Set out below are the new accounting policies of the Group upon
adoption of IFRS 16, which have been applied from the date of
initial application:
Right-of-use assets
The right-of-use asset is initially measured at cost, and
subsequently at cost less any accumulated depreciation and
impairment losses and adjusted for certain re-measurements of the
lease liability. The cost of right-of-use assets includes the
amount of lease liabilities recognised, initial direct costs
incurred, restoration costs and lease payments made at or before
the commencement date less any lease incentives received. The
right-of-use asset is depreciated on a straight-line basis over the
shorter of its estimated useful life and the lease term.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating a lease, if the
lease term reflects the Group exercising the option to
terminate.
2. Adjusted earnings
The Board and key management personnel use some alternative
performance measures to track and assess the underlying performance
of the business. These measures include adjusted operating profit
and adjusted profit before tax. These measures are deemed more
appropriate as they remove income and expenditure which is not
directly related to the ongoing trading of the business. Such
alternative performance measures are not defined terms under IFRS
and may not be comparable with similar measures disclosed by other
companies. Likewise, these measures are not a substitute for IFRS
measures of profit. A reconciliation of these measures of
performance to the corresponding reported figure is shown
below.
6 months
to 6 months
31 January to
2020 31 January
IFRS 16 2019
GBP000 GBP000
---------------------------------------------------------- ----------- -----------
Profit after tax 9,375 8,073
Add back:
Exceptional operating costs (note 5) -- 1,216
CFO succession costs 198 --
Net loss on financial instruments at fair value 885 5
Amortisation and impairment of intangible assets acquired
through business combinations 7,540 7,732
Tax effect of the above (1,725) (1,777)
---------------------------------------------------------- ----------- -----------
Adjusted profit after tax 16,273 15,249
Add back:
Adjusted tax charge 4,293 3,932
---------------------------------------------------------- ----------- -----------
Adjusted profit before tax 20,566 19,181
Add back:
Interest payable on bank loans, lease liabilities and
amortisation of financing costs 1,252 1,061
Finance revenue (40) (8)
---------------------------------------------------------- ----------- -----------
Adjusted operating profit 21,778 20,234
Add back:
Depreciation of property, plant and equipment 3,182 1,615
Amortisation of development costs, software and patents 604 568
---------------------------------------------------------- ----------- -----------
Adjusted EBITDA 25,564 22,417
---------------------------------------------------------- ----------- -----------
For definitions of terms referred to above see note 18, Glossary
of terms.
3. Revenue from contracts with customers
Accounting policy
Revenue from contracts with customers is recognised when the
control of goods or services are transferred to the customer at an
amount that reflects the consideration to which the Group expects
to be entitled in exchange for those goods and services.
Sale of ventilation products
Revenue from the sale of ventilation products is recognised at
the point in time when control of the asset is transferred to the
buyer, usually on the delivery of the goods.
The Group considers whether there are other promises in the
contract that are separate performance obligations to which a
portion of the transaction price needs to be allocated (e.g.,
warranties and volume rebates). In determining the transaction
price for the sale of ventilation products, the Group considers the
effects of variable consideration (if any).
Volume rebates
The Group provides retrospective volume rebates to certain
customers once the quantity of products purchased during the period
exceeds a threshold specified in the contract. To estimate the
variable consideration for the expected future rebates, the Group
applies the expected value method for contracts with more than one
volume threshold. The Group then applies the requirements on
constraining estimates of variable consideration and recognises a
liability for the expected future rebates.
Before including any amount of variable consideration in the
transaction price, the Group considers whether the amount of
variable consideration is constrained. The Group determined that
the estimates of variable consideration are not constrained, other
than with respect to volume rebates, based on its historical
experience, business forecast and the current economic conditions.
In addition, the uncertainty on the variable consideration will be
resolved within a short time frame.
Warranty obligations
The Group typically provides warranties for general repairs of
defects that existed at the time of sale. These assurance-type
warranties are accounted for under IAS 37 Provisions, Contingent
Liabilities and Contingent Assets
Installation services
The Group provides two performance obligations, installation
services together with the sale of equipment to a customer.
Contracts for the installation services and sale of equipment to
a customer are comprised of two performance obligations because the
promises to transfer equipment and provide installation services
are capable of being distinct and separately identifiable.
Accordingly, the Group allocates the transaction price based on the
relative stand-alone selling prices of the equipment and the cost
plus margin approach for installation services.
The Group recognises revenue from installation services at a
point in time after the service has been performed, this is because
installation of the ventilation equipment is generally over a small
timeframe. Revenue from the sale of the ventilation equipment is
recognised at a point in time, generally upon delivery of the
equipment.
Contract balances
Contract assets
A contract asset is the right to consideration in exchange for
goods and services transferred to the customer. A contract asset is
recognised when the Group transfers goods or services to the
customer before the customer pays consideration. There is no
contract asset included within the Statement of Financial Position
as revenue is recognised at a point in time, after installation.
Consideration is recognised immediately as a receivable and is
unconditional (only the passage of time is required before payment
of consideration is due).
Contract liabilities
There are no contract liabilities recognised in the comparative
period or in the financial period ending 31 January 2020.
Revenue recognised in the statement of comprehensive income is
analysed below:
6 months 6 months
to to
31 January 31 January
2020 2019
GBP000 GBP000
-------------------------------------------- ----------- -----------
Sale of goods 115,470 111,087
Installation services 3,280 3,760
-------------------------------------------- ----------- -----------
Total revenue from contracts with customers 118,750 114,847
-------------------------------------------- ----------- -----------
6 months 6 months
to to
31 January 31 January
2020 2019
Market sectors GBP000 GBP000
-------------------------------------------- ----------- -----------
UK
Residential RMI 19,959 19,691
Residential New Build 13,086 13,088
Commercial 15,283 17,285
Export 4,792 4,546
OEM 11,324 12,049
-------------------------------------------- ----------- -----------
Total UK 64,444 66,659
-------------------------------------------- ----------- -----------
Nordics 21,419 25,357
Central Europe 17,027 14,599
-------------------------------------------- ----------- -----------
Total Continental Europe 38,446 39,956
-------------------------------------------- ----------- -----------
Total Australasia 15,860 8,232
-------------------------------------------- ----------- -----------
Total revenue from contracts with customers 118,750 114,847
-------------------------------------------- ----------- -----------
6 months
to
31 January 31 July
2020 2019
Right of return assets and refund liabilities GBP000 GBP000
---------------------------------------------- ----------- --------
Right of return assets 284 430
---------------------------------------------- ----------- --------
Refund liabilities
Arising from retrospective volume rebates 7,220 6,482
Arising from rights of return 597 1,047
---------------------------------------------- ----------- --------
7,817 7,529
---------------------------------------------- ----------- --------
4. Segmental analysis
Volution Group plc has made consistent operating segment
disclosures in its past six annual and interim reports, from 31
July 2014 to 2019. The Group has grown significantly during that
period, both organically and by acquisition, and as a result
management have conducted a process to assess whether the level of
operating segments disclosure currently provided remains
appropriate.
We have considered both the requirements of IFRS 8 and the
desire to provide the users with more useful information.
We previously reported under two operating segments:
-- Ventilation Group
-- OEM (Torin-Sifan)
From the 31 January 2020 interim reporting onwards, we will
report these operating segments:
-- UK
-- Continental Europe
-- Australasia
The previously reported Ventilation Group has been split in to
three regional segments, with OEM (Torin-Sifan) included within the
UK segment.
Accounting policy
The method of identifying reporting segments is based on
internal management reporting information that is regularly
reviewed by the chief operating decision maker, which is considered
to be the Chief Executive Officer of the Group.
In identifying its operating segments, management follows the
Group's market sectors. These are Ventilation UK including OEM
(Torin-Sifan), Ventilation Europe and Ventilation Australasia.
Operating segments that provide ventilation services have been
aggregated as they have similar economic characteristics, assessed
by reference to the gross margins of the segments. In addition, the
segments are similar in relation to the nature of products,
services and production processes, type of customer, method for
distribution and regulatory environment.
The measure of revenue reported to the chief operating decision
maker to assess performance is total revenue for each operating
segment. The measure of profit reported to the chief operating
decision maker to assess performance is adjusted operating profit
(see note 18 for definition) for each operating segment. Gross
profit and the analysis below segment profit is additional
voluntary information and not "segment information" prepared in
accordance with IFRS 8.
Finance revenue and costs are not allocated to individual
operating segments as the underlying instruments are managed on a
Group basis.
Total assets and liabilities are not disclosed as this
information is not provided by operating segment to the chief
operating decision maker on a regular basis.
Transfer prices between operating segments are on an arm's
length basis on terms similar to transactions with third
parties.
Continental Central
UK Europe Australasia / Eliminations Consolidated
6 months ended 31 January 2020 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------- ------- ----------- ----------- --------------- ------------
Revenue
External customers 64,444 38,446 15,860 -- 118,750
Inter-segment 8,139 5,298 43 (13,480) --
----------------------------------------- ------- ----------- ----------- --------------- ------------
Total revenue 72,583 43,744 15,903 (13,480) 118,750
----------------------------------------- ------- ----------- ----------- --------------- ------------
Gross profit 28,682 20,739 7,336 -- 56,757
----------------------------------------- ------- ----------- ----------- --------------- ------------
Results
Adjusted segment EBITDA 13,996 9,588 2,895 (915) 25,564
Depreciation and amortisation of
development costs, software and patents (1,798) (1,146) (527) (315) (3,786)
----------------------------------------- ------- ----------- ----------- --------------- ------------
Adjusted operating profit/(loss) 12,198 8,442 2,368 (1,230) 21,778
Amortisation of intangible assets
acquired through business combinations (5,378) (1,595) (567) -- (7,540)
CFO succession costs -- -- -- (198) (198)
----------------------------------------- ------- ----------- ----------- --------------- ------------
Operating profit/(loss) 6,820 6,847 1,801 (1,428) 14,040
Unallocated expenses
Net finance cost -- -- -- (2,097) (2,097)
----------------------------------------- ------- ----------- ----------- --------------- ------------
Profit/(loss) before tax 6,820 6,847 1,801 (3,525) 11,943
----------------------------------------- ------- ----------- ----------- --------------- ------------
Continental Central
UK Europe Australasia / Eliminations Consolidated
6 months ended 31 January 2019 (restated) GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------ ------- ----------- ----------- --------------- ------------
Revenue
External customers 66,659 39,956 8,232 -- 114,847
Inter-segment 6,225 5,085 -- (11,310) --
------------------------------------------ ------- ----------- ----------- --------------- ------------
Total revenue 72,884 45,041 8,232 (11,310) 114,847
------------------------------------------ ------- ----------- ----------- --------------- ------------
Gross profit 28,632 20,136 4,572 -- 53,340
------------------------------------------ ------- ----------- ----------- --------------- ------------
Results
Adjusted segment EBITDA 12,732 9,108 1,376 (799) 22,417
Depreciation and amortisation of
development costs, software and patents (1,120) (685) (67) (311) (2,183)
------------------------------------------ ------- ----------- ----------- --------------- ------------
Adjusted operating profit/(loss) 11,612 8,423 1,309 (1,110) 20,234
Amortisation of intangible assets
acquired through business combinations (5,379) (1,971) (382) -- (7,732)
Exceptional items -- -- -- (1,216) (1,216)
------------------------------------------ ------- ----------- ----------- --------------- ------------
Operating profit/(loss) 6,233 6,452 927 (2,326) 11,286
Unallocated expenses
Net finance cost -- -- -- (1,058) (1,058)
------------------------------------------ ------- ----------- ----------- --------------- ------------
Profit/(loss) before tax 6,233 6,452 927 (3,384) 10,228
------------------------------------------ ------- ----------- ----------- --------------- ------------
Geographic information
6 months 6 months
ended ended 31
31 January January
2020 2019
Revenue from external customers by customer destination GBP000 GBP000
-------------------------------------------------------- ----------- ---------
United Kingdom 54,455 56,550
Europe (excluding United Kingdom and Sweden) 35,878 35,230
Sweden 10,569 13,063
Australasia 15,948 8,298
Rest of the world 1,900 1,706
-------------------------------------------------------- ----------- ---------
Total revenue from contracts with customers 118,750 114,847
-------------------------------------------------------- ----------- ---------
6 months 6 months
ended ended
31 January 31 January
2020 2019
Non-current assets excluding deferred tax GBP000 GBP000
---------------------------------------------- ----------- -----------
United Kingdom 139,999 138,007
Europe (excluding United Kingdom and Nordics) 25,427 25,961
Nordics 28,495 31,042
Australasia 50,234 37,010
---------------------------------------------- ----------- -----------
Total 244,155 232,020
---------------------------------------------- ----------- -----------
Information about major customers
Annual revenue from no individual customer accounts for more
than 10% of Group revenue in either the current or prior year.
5. Exceptional items
Accounting policy
The Group discloses exceptional items by virtue of their nature,
size or incidence to allow a better understanding of the underlying
trading performance of the Group. Exceptional items include, but
are not limited to, significant restructuring costs, acquisition
and related integration and earn-out costs, fair value adjustments
as a result of acquisitions and material gains or losses on
disposal of property, plant and equipment.
6 months 6 months
ended ended
31 January 31 January
2020 2019
Exceptional items GBP000 GBP000
------------------------------------------------------------ ------------ -----------
Acquisition-related costs, including inventory fair value
adjustments -- 149
UK Ventilation re-organisation including factory relocation
costs -- 1,067
------------------------------------------------------------ ------------ -----------
Exceptional operating costs -- 1,216
------------------------------------------------------------ ------------ -----------
Total tax relating to exceptional items for the period -- (199)
------------------------------------------------------------ ------------ -----------
-- 1,017
------------------------------------------------------------------------- -----------
UK Ventilation re-organisation including factory relocation
costs
We have previously reported the cost of a factory relocation
project, which related to rationalising of some of our
manufacturing capacity in the UK and commenced in 2017, as
exceptional. The affected UK manufacturing locations are Reading,
Slough and Lasham. During FY2018 we extended the factory relocation
project to be a wider re-organisation and management
rationalisation of our UK Ventilation business.
A breakdown of the costs is as follows:
6 months 6 months
ended ended
31 January 31 January
2020 2019
GBP000 GBP000
---------------------------- ------------ -----------
Legal and professional fees -- 290
Project manager -- 43
Dual running costs -- 89
Start-up costs -- 645
---------------------------- ------------ -----------
Total -- 1,067
---------------------------- ------------ -----------
6. Finance costs
6 months 6 months
ended ended
31 January 31 January
2020 2019
GBP000 GBP000
------------------------------------- ----------- -----------
Finance costs
Interest payable on bank loans 965 1,037
Revaluation of financial instruments 885 5
IFRS 16 related interest 269 --
Other interest 18 24
------------------------------------- ----------- -----------
Total finance expense 2,137 1,066
------------------------------------- ----------- -----------
The net loss or gain on financial instruments at each period-end
date relates to the measurement of fair value of the financial
derivatives and the Group recognises any finance losses or gains
immediately within net finance costs.
7. Income tax
The reported effective tax rate for the six months was 21.5% (H1
2019: 21.1%). Our adjusted effective tax rate, on adjusted profit
before tax, was 20.8% (H1 2019: 20.5%). The increase of 0.3
percentage points in our adjusted effective tax rate was partly due
to the greater impact of higher rates in overseas regions.
8. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on conversion of any dilutive
potential ordinary shares into ordinary shares. There are 791,195
dilutive potential ordinary shares at 31 January 2020 (H1 2019:
257,340).
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
6 months 6 months
ended ended
31 January 31 January
2020 2019
6 months ended 31 January GBP000 GBP000
------------------------------------------------------- ----------- -----------
Profit attributable to ordinary equity holders 9,375 8,073
------------------------------------------------------- ----------- -----------
Number Number
------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for basic
earnings per share 198,136,601 198,699,637
Weighted average number of ordinary shares for diluted
earnings per share 198,816,260 199,133,077
------------------------------------------------------- ----------- -----------
Earnings per share
Basic 4.7p 4.1p
Diluted 4.7p 4.1p
------------------------------------------------------- ----------- -----------
6 months 6 months
ended ended
31 January 31 January
2020 2019
6 months ended 31 January GBP000 GBP000
-------------------------------------------------------- ----------- -----------
Adjusted profit attributable to ordinary equity holders 16,273 15,249
-------------------------------------------------------- ----------- -----------
Number Number
-------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for adjusted
basic earnings per share 198,136,601 198,699,637
Weighted average number of ordinary shares for adjusted
diluted earnings per share 198,816,260 199,133,077
-------------------------------------------------------- ----------- -----------
Adjusted earnings per share
Basic 8.2p 7.7p
Diluted 8.2p 7.7p
-------------------------------------------------------- ----------- -----------
The weighted average number of ordinary shares has declined as a
result of treasury shares held by the Volution Employee Benefit
Trust (EBT) during the period. The shares are excluded when
calculating the reported and adjusted EPS. Adjusted profit
attributable to ordinary equity holders has been reconciled in note
2, Adjusted earnings.
See note 18, Glossary of terms, for an explanation of the
adjusted basic and diluted earnings per share calculation.
9. Intangible assets - goodwill
Total
Goodwill GBP000
------------------------------------------ -------
At 31 July 2018 112,682
------------------------------------------ -------
On acquisition of Ventair Pty Limited 4,230
Net foreign currency exchange differences 1,271
------------------------------------------ -------
At 31 July 2019 118,183
------------------------------------------ -------
Net foreign currency exchange differences (4,765)
At 31 January 2020 113,418
------------------------------------------ -------
10. Intangible assets - other
Total
2019 GBP000
------------------------------------------ -------
Cost
At 1 August 2019 197,207
Additions 930
Disposals (1)
Net foreign currency exchange differences (4,780)
------------------------------------------ -------
At 31 January 2020 193,356
------------------------------------------ -------
Amortisation
At 1 August 2019 102,081
Charge for the period 8,144
Disposals --
Net foreign currency exchange differences (2,918)
------------------------------------------ -------
At 31 January 2020 107,307
------------------------------------------ -------
Net book value
At 31 January 2020 86,049
------------------------------------------ -------
11. Property, plant and equipment
Fixtures,
fittings,
tools,
Property, plant and equipment excluding Land and Plant and equipment
right-of-use assets buildings Machinery and vehicles Total
2019 GBP000 GBP000 GBP000s GBP000
------------------------------------------ ---------- ---------- ------------- -------
Cost
At 1 August 2019 13,791 11,613 11,834 37,238
Additions 143 272 1,204 1,619
Disposals -- (38) (331) (369)
Net foreign currency exchange differences (523) (243) (760) (1,526)
------------------------------------------ ---------- ---------- ------------- -------
At 31 January 2020 13,411 11,604 11,947 36,962
------------------------------------------ ---------- ---------- ------------- -------
Depreciation
At 1 August 2019 3,698 4,378 5,404 13,480
Charge for the period 248 463 983 1,694
Disposals -- (27) (235) (262)
Net foreign currency exchange differences (102) (148) (421) (671)
------------------------------------------ ---------- ---------- ------------- -------
At 31 January 2020 3,844 4,666 5,731 14,241
------------------------------------------ ---------- ---------- ------------- -------
Net book value
At 31 January 2020 9,567 6,938 6,216 22,721
------------------------------------------ ---------- ---------- ------------- -------
Fixtures,
fittings,
tools,
Land and Plant and equipment
Right-of-use assets buildings Machinery and vehicles Total
2019 GBP000 GBP000 GBP000s GBP000
------------------------------------------ ---------- ---------- ------------- -------
Cost
IFRS 16 leases at transition 23,885 193 229 24,307
Additions 42 10 84 136
Net foreign currency exchange differences (1,011) (7) (7) (1,025)
At 31 January 2020 22,916 196 306 23,418
------------------------------------------ ---------- ---------- ------------- -------
Depreciation
Charge for the period 1,395 35 58 1,488
Net foreign currency exchange differences (32) (1) (4) (37)
At 31 January 2020 1,363 34 54 1,451
------------------------------------------ ---------- ---------- ------------- -------
Net book value
At 31 January 2020 21,553 162 252 21,967
------------------------------------------ ---------- ---------- ------------- -------
Total net book value
At 31 January 2020 31,120 7,100 6,468 44,688
------------------------------------------ ---------- ---------- ------------- -------
12. Other financial assets and liabilities
Current Non-current Current Non-current
31 January 31 January 31 July 31 July
2020 2020 2019 2019
GBP000 GBP000 GBP000 GBP000
-------------------------- ------------ ------------ --------- ------------
Financial assets
FX forward contracts 22 -- 907 -
-------------------------- ------------ ------------ --------- ------------
Financial liabilities
Contingent consideration 893 472 318 1,501
-------------------------- ------------ ------------ --------- ------------
The non-current contingent consideration of GBP472,000 relates
to the contingent consideration payable in relation to Air
Connection ApS which is based on its EBITDA performance achieved
during the twelve months to 31 July 2021. The current contingent
consideration of GBP893,000 relates to the contingent consideration
payable to Ventair Pty Limited based on its EBITDA performance
achieved during the twelve months to 31 July 2020. GBP318,000 of
contingent consideration was paid in the period in relation to the
acquisition of Oy Pamon Ab.
13. Interest-bearing loans and borrowings
31 January 2020 31 July 2019
-------------------- --------------------
Current Non-current Current Non-current
GBP000 GBP000 GBP000 GBP000
----------------------------------------------- ------- ----------- ------- -----------
Unsecured - at amortised cost
Borrowings under the revolving credit facility
(maturing 2022) - 74,756 - 86,146
Cost of arranging bank loan - (642) - (755)
- 74,114 - 85,391
----------------------------------------------- ------- ----------- ------- -----------
IFRS 16 long term lease liabilities - 20,408 - -
Interest-bearing loans and borrowings under
IFRS 16 - 94,522 - 85,391
----------------------------------------------- ------- ----------- ------- -----------
Bank loans at 31 January 2020 comprised a revolving credit
facility from Danske Bank A/S, HSBC and the Royal Bank of Scotland
with HSBC acting as agent and are governed by a facilities
agreement. The outstanding loans are set out in the table below. No
security was provided under the facility.
Revolving credit facility - at 31 January 2020
Amount
outstanding Termination Repayment
Currency GBP000 date frequency Rate %
-------------- ------------ ----------- ----------- -----------------
15 December
GBP 15,000 2022 One payment Libor + margin%
15 December
Euro 37,572 2022 One payment Euribor + margin%
15 December
Swedish Krona 22,184 2022 One payment Stibor + margin%
-------------- ------------ ----------- ----------- -----------------
Total 74,756
-------------- ------------ ----------- ----------- -----------------
Revolving credit facility - at 31 July 2019
Amount
outstanding Termination Repayment
Currency GBP000 date frequency Rate %
-------------- ------------ ----------- ----------- -----------------
15 December
GBP 21,500 2022 One payment Libor + margin%
15 December
Euro 40,640 2022 One payment Euribor + margin%
15 December
Swedish Krona 24,006 2022 One payment Stibor + margin%
-------------- ------------ ----------- ----------- -----------------
Total 86,146
-------------- ------------ ----------- ----------- -----------------
As at 31 July 2018 the margin was 1.40% due to the acquisition
of Simx Limited which increased leverage to 1.7:1; this rate
continued throughout the year ended 31 July 2019 and H1 2020. At 31
January 2020 like-for-like leverage decreased to 1.3:1 which will
reduce the margin to 1.15% in H2 2020.
At 31 January 2020, the Group had GBP45,244,000 (31 July 2019:
GBP33,854,000) of its multicurrency revolving credit facility
unutilised.
14. Fair values of financial assets and financial
liabilities
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
-- Level 1 - quoted (unadjusted) prices in active markets for identical
assets or liabilities;
-- Level 2 - other techniques for which all inputs that have a significant
effect on the recorded fair value are observable, either directly
or indirectly; and
-- Level 3 - techniques which use inputs which have a significant effect
on the recorded fair value that are not based on observable market
data.
Financial instruments carried at fair value comprise the
derivative financial instruments and the contingent consideration
in note 12. For hierarchy purposes, derivative financial
instruments are deemed to be Level 2 as external valuers are
involved in the valuation of these contracts. Their fair value is
measured using valuation techniques, including a DCF model. Inputs
to this calculation include the expected cash flows in relation to
these derivative contracts and relevant discount rates.
Contingent consideration is deemed to be Level 3. Contingent
consideration is based on the level of EBITDA achieved during the
earn-out period. The contingent consideration has been recognised
in line with management's best estimate of the level of EBITDA
expected to be achieved during the earn-out period. Whilst the
level of EBITDA to be achieved is as yet unobservable, management's
estimate has been based on the available budget and forecasts. The
contingent consideration has not been discounted as the impact is
considered to be immaterial.
15. Dividends paid and proposed
The Group paid a final dividend of 3.30 pence per ordinary share
during the period in respect of the year ended 31 July 2019. The
Board has declared an interim dividend of 1.71 pence per ordinary
share in respect of the half year ended 31 January 2020 (6 months
to 31 January 2019: 1.60 pence per ordinary share) which will be
paid on 5 May 2020 to shareholders on the register at the close of
business on 27 March 2020. The total dividend payable has not been
recognised as a liability in these accounts. The Volution EBT has
agreed to waive its rights to all dividends.
16. Related party transactions
Transactions between Volution Group plc and its subsidiaries,
and transactions between subsidiaries, are eliminated on
consolidation and are not disclosed in this note. No related third
party loan note balances exist at 31 January 2020 or 31 January
2019.There were no material transactions or balances between the
Company and its key management personnel or members of their close
family. At the end of the period, key management personnel did not
owe the Company any amounts.
17. Events after the reporting period
There have been no material events between 31 January 2020 and
the date of authorisation of the consolidated financial statements
that would require adjustments of the consolidated financial
statements or disclosure.
18. Glossary of terms
Adjusted basic and diluted EPS: calculated by dividing the
adjusted profit/(loss) for the period attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the adjusted net profit/(loss) attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the period plus the weighted average
number of ordinary shares that would be issued on conversion of any
dilutive potential ordinary shares into ordinary shares. There are
791,195 dilutive potential ordinary shares at 31 January 2020 (H1
2019: 257,340).
Adjusted EBITDA: adjusted operating profit before depreciation
and amortisation.
Adjusted finance costs: finance costs before net gains or losses
on financial instruments at fair value and the exceptional write
off of unamortised loan issue costs upon refinancing.
Adjusted net debt: bank borrowings plus long term lease
liabilities less cash and cash equivalents.
Adjusted operating cash flow: adjusted EBITDA plus or minus
movements in operating working capital, less net investments in
property, plant and equipment and intangible assets.
Adjusted operating profit: operating profit before exceptional
operating costs, release of contingent consideration and
amortisation of assets acquired through business combinations.
Adjusted profit after tax: profit after tax before exceptional
operating costs, release of contingent consideration, exceptional
write off of unamortised loan issue costs upon refinancing, net
gains or losses on financial instruments at fair value,
amortisation of assets acquired through business combinations and
the tax effect on these items.
Adjusted profit before tax: profit before tax before exceptional
operating costs, release of contingent consideration, exceptional
write off of unamortised loan issue costs upon refinancing, net
gains or losses on financial instruments at fair value and
amortisation of assets acquired through business combinations.
Adjusted tax charge: the reported tax charge less the tax effect
on the adjusted items.
CAGR: compound annual growth rate.
Cash conversion: is calculated by dividing adjusted operating
cash flow by adjusted EBITA.
Constant currency: to determine values expressed as being at
constant currency we have converted the income statement of our
foreign operating companies for the 6 months ended 31 January 2020
at the average exchange rate for the period ended 31 January 2019.
In addition, we have converted the UK operating companies' sale and
purchase transactions in the period ended 31 January 2020, which
were denominated in foreign currencies, at the average exchange
rates for the period ended 31 January 2019.
EBITDA: profit before net finance costs, tax, depreciation and
amortisation.
Like-for-like net debt: bank borrowings less cash and cash
equivalents
Like-for-like leverage: like-for-like net debt divided by
adjusted EBITDA for the relevant 12 month period
Operating cash flow: EBITDA plus or minus movements in operating
working capital, less share-based payment expense, less net
investments in property, plant and equipment and intangible
assets.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
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END
IR FLFSDVTIVLII
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