Volution Group plc

Volution Group half-year results. We're delighted to be here this morning and great to see so many familiar faces. Format's going to be largely similar to what we've done in the past, so quick overview. In actual fact, I'll spend a little bit less time on the overview. I'm looking forward to giving Andy a little bit more time. talk about the financial results and then I'll come back on the business review summary and outlook and then Q&A if we get this right we're looking to spend about half our time taking you through the results we think they're reasonably self-explanatory and then experience from last time we've had quite a lot of Q&A a lot of interest around you know in many respects what happens next so we'll try and reserve a little bit more time for Q&A. Key takeaways here. Look, our group revenue is up 8.9% at the half year and good organic growth of 4% on a constant currency basis. Adjusted operating profit is up just over 10% to 42.6 million. of course we acquired fantec 280 million australian dollar acquisition our largest acquisition to date we'll talk a little bit more about what's happening there and look really good momentum with fy 25 earnings and we we're expecting to be ahead of consensus and we can talk a little bit more about that but look fantec and i'm mindful that This sort of completed in December. But as you can see on the slide there, we're very excited about Fantech. It is the leading position in Australia and New Zealand. So we've consolidated an overall leadership position. It was fully funded through cash and RCF. And so if you look at the post deal leverage, it's still very, very manageable. We've been much closer to the business more recently and we knew this beforehand but there's no substitute for being inside. I spent a bit of time there a couple of weeks ago and it is, as we expected, a very high quality local management team and it will effectively form our local leadership for the region. It's the larger business that we've acquired and that's really helpful. And look, our trading post-completion has started really well, particularly in Australia. We'll talk about New Zealand and the New Zealand market later on, but particularly strong in Australia and a little bit more difficult in New Zealand, but in aggregate. very pleased with how things are going. And typical to what we normally do, we're working on cross-selling and new product introduction initiatives. There's significant procurement opportunities, quite a few common suppliers and opportunities there. And over time, we just think there's an ability to be more efficient with the way that we manage our resources locally to leverage the opportunity. I mean, I always talk about Australia and those that have spent time there, it's a big country and logistically we're very well positioned in all of the major areas to service our customers very well. Just one for us that's important and that's focusing on sustainability, healthy air sustainably, this underpins what we do with our customers. Our low carbon revenue in the year was about the same as the prior year. It was 70.4%, 70.5% in the prior year. So actually no progress there underlyingly. And actually some dilution as we bring Phantech into the group. The Phantech proposition has a much, well today, a much lower low carbon content than we have across the wider group. But look, that's an opportunity over the coming years. UK and Europe is decarbonising. Australia and New Zealand may be a little bit further behind, but inevitably will decarbonise as we go into the future. And then our recycled plastics initiative. We've set ourselves an extremely stretching 90% target, 90%. target. So only 10% of our material in our facilities will be from a virgin source. To move to 84.6%, you know, I still don't know how we get to that 90% target. It's stretching and we believe in it and that's been largely driven by UK business with good progress in the nordics more recently but your credit to the team there fantastic job getting up from 77 last year to 84.6 and this is so important for our customers our customers are looking for recycled content in their projects we get asked in tenders to how much of the content of your product is from a recycled source and this is very helpful And then lastly on sustainability, SBTI. So we've had our targets assessed and approved. We're very pleased about that. We can talk probably a little bit more detail at the full year, but very pleased now that we've got targets out there that have been assessed and approved. Developing our people, keeping our people safe, pleased about our accident frequency rate. It reduced to 0.15 from 0.2 in the prior year. I'm very pleased to witness firsthand the sort of health and safety culture that we have in Phantech is similarly strong as with our wider group. And I think there's some sort of cross fertilisation and learning there. An important point to draw out now, we continue to grow very well if you look at the sort of 10 year now, 11 year history and sort of our 12% compounding of revenue and earnings. Clearly there's a leadership bandwidth challenge there that we have to address and what we've tried to do is to be ahead of the curve there. So delighted that in the period there was some internal promotions to create what I would call regional leaders, so two regional leaders for our European area, a regional leader designate for the Australasian business and that will come from within the Fantech acquisition and also just bringing in, attracting some high quality people to look at some of the opportunities internally. new operations leader in OEM and we'll talk about OEM and what we've been doing there to turn around that proposition and also additional support in our technical teams to complement the new group technical director who joined us early last year and last but not least fourth group-wide management development program completed in October last year and we'll kick off management development program five later this year And there'll be a greater participation of people from the Australasian region for obvious reasons. So I'm going to hand over to Andy now. I know he's quite looking forward to taking you through the numbers.

Thanks, Ronnie. And just to put your minds at rest, I'm not going to be waxing on for an hour because I am looking forward to the numbers, but I will make sure there's plenty of time for Q&A. So just as an opener slide reminder, these are our... longstanding six key financial KPIs. And against each one, the little green block is our target number and the little lighter blue above it is where we came out for the half year. And again, I will go through some more of them in more detail in subsequent slides, but I guess really, really pleasing to see us ahead of the target on all of those key metrics. If we just pull out a couple of them and just where there's a little bit of additional colour here to help you. So revenue growth, Ronnie will obviously go into more detail around the regional picture in the next section of the presentation. In organic, our target of 3% to 5% per year. You may recall, those of you who would have seen our last statement, which was the four-month statement that we put out early December at the time of the AGM, then we were talking about a 2.5% For the first four months, constant currency, organic growth, that's nudged up to 4% at the half year. So really, 4% is a number that we're very, very pleased with. It's slap bang in the middle of our range in, frankly, what still remain mixed markets at best, and in some places, quite difficult markets. So to start with a four is great. And of course, from a trajectory perspective, that slight uptick in the second period of the half sets us up well going into the balance of the year. I always get asked volume and price. I always give you volume and price, but normally I don't write it down. So I thought just in case you didn't hear, rather than waiting for Q&A, let's just put it out there. This is approximate, but we're saying, look, it's about 1% of that four is price and about three is volume. And really that's the normal, when we think of why we set a three to five strategy, circa 1% on a like-for-like price basis is really, if you like, normal behaviour. So compared to the last few years where each period where we've been dealing with inflation and therefore previously going slightly bigger on price, I would say that's now very, very much back in a sort of normal modus operandi. Top right there, I think really pleased with that cash conversion performance there. So we set ourselves a 90% target across the full year. And ordinarily, half two might tend to be slightly stronger than half one. So a 90% number is good for half one. 110% is therefore a really, really pleasing number. And I guess it's doubly pleasing because as we'll talk about later on the cash flow slide, We obviously had a lot of money going out this half for very, very positive reasons, both in terms of Fantech and then also acquiring the remaining 25% of Klimorad. And so cash generation for us is always super, super important as the engine to fuel our M&A strategy. But the result of that half one performance is that we ended the period at one and a half times proforma leverage. So still very, very comfortable balance sheet wise. despite a really active period on the M&A front. And then bottom right there, adjusted EPS up almost 12%. And those of you that remember the 10-year compounding graph slide that we put in our results back in October, 12% is what we've been delivering for the last 10 years. And it's great to keep that trajectory going in this period. A bit of repetition here, because obviously, again, we're largely talking about the same indicators and the same KPIs. But I think showing it on the five-year basis is helpful. Because again, if you look at the year-by-year progression on all of those graphs, we are very, very proud of this consistency of delivery, this sort of compounding performance on both the revenue and operating profit growth there you'll see that we've also quoted constant currency against each and it's funny it seems to be the case every single time that currency is not our friend but there's about a two just under two percent adverse headwind on both of those metrics so you know eight point nine revenue was actually ten point six constant currency and profit 10.4 reported, 12 constant currency. All of the currencies got a little bit tougher for us versus sterling, particularly profound in Australia and New Zealand. And I think that at the moment, we're sort of broadly speaking, as of today, same as we were in the first half of last year. Euro has got a little bit more helpful to us. Aussie and Kiwi have got a little bit worse again. So it's probably not unreasonable to think that that carries on for the next few months. But who knows? I'm not a currency trader. Operating margins up to 22.7%. So really, really pleased to see that continuing to nudge forward. despite a tiny bit of dilution. And I say tiny because it's two months that we had Fantech in. And I would also say that, yes, the Fantech margins are lower than our group margins at the point of entry. But actually, the gap is not quite as significant as we thought it might have been when we acquired in September, October. So it's a really, really strong margin business. And they're already executing well. And hopefully, we can help them continue to improve that. And then bottom middle there operating cash flow up 23%. So that again is back to that sort of cash generation leverage point. I don't think there's too much to pull out here that I haven't already covered. Perhaps just briefly mentioning the dividend. So we've nudged the dividend up to three, the interim up to 3.4 pence per share. 2.8 pence was the equivalent last year, so that's up just over 20%. Don't worry, it's not a change of our strategy, but hopefully that's just a reflection of the confidence that the board and the management have in the business. So, Ronnie, I say we'll go into more detail on the geographic breakdown in the next section. But, you know, 4% currency organic, very, very pleased with that. UK, again, our sort of strongest, so just over 7% in the UK. 2.4% in Europe, which was a bit of a tale of two halves. So the Nordics remaining challenging, particularly where we operate in the more new-build parts of that market, so places like Denmark and Finland. But I would say Central Europe, so for us, Central Europe, quite loosely defined geographically, is everything apart from the Nordics actually had a really, really good second half. And I think, to be fair, pretty much all of the businesses contributed to that. I think Klimerad, particularly strong. Germany getting better, still not where it was a few years ago, but definitely getting better. France developing well along the strategy that we've set out there. I say, generally speaking, a positive and encouraging picture in Europe. Very, very small organic reduction in Australasia, so 1.7% constant currency. Australia holding up very nicely. New Zealand, as Ronnie's already trailed, tough. And then you see the impact, obviously, of two months here of Fantech coming in. And of course, it's not two of their strongest months in Australia because it's Christmas season, which tends to be the longest holiday period. But that's two months of Fantech and then the adverse of currency we've already touched on. On the margin front, so I guess the thing I'd probably zoom in on here is the bottom left and bottom middle charts. So the bottom left, continuing that half on half progression at a group level, which we're really, really pleased about. And no, we're not resetting the target. And then in the middle, how that breaks down geographically by region. So good, I mean, UK margins now up at almost 26%. You know, I remember sort of three, four, five years ago, we were, if you like, having to almost explain away why the UK margins were not on par with the rest of the group, particularly Europe. And, you know, there were reasons at the time, but candidly, we said there's no reason why it shouldn't be the case. And I'm delighted with the execution there that the UK team is delivering. You know, continental Europe flat. There's always a business mix effect there. And I say, you know, Nordic's not easy, and that's one of our higher margin businesses. So I think to hold the margin there is, again, a good performance. And in Australasia, just to help you out with... How does Fantech impact on that regional level? You've got three bars there. So you've got last year's half one. You've got half one this year as reported. And then on the right, you've got half one this year if you just looked at the organic businesses. So I think, to be fair, credit to the organic businesses, particularly actually the team in New Zealand, a really, really difficult revenue situation, but performing and delivering very well on a margin perspective. So the organic margin in Australasia was actually up slightly. And as I say, Fantech, slightly dilutive, but still a good, strong margin that we enjoy there. I definitely won't go through the full detail of this slide because there's quite a lot of numbers in here, but just to help lay out a bit more detail for the analysts, the sort of the cash performance in the period. So look, for me, the key points, leverage is a one and a half times having completed the Fantech deal and the Klima ad transaction. I think when we announced it back in December, we said that we would guide to a likely landing at between 1.5 and 1.7 times post the transaction, so obviously we're right at the bottom of that range. As a reminder, we would think of ourselves typically as de-levering about half a turn per year, absent any acquisitions. So if you apply half a year of that to your 1.5, By the end of the year, we're in a very, very, I mean, we already are, but we're in a super comfortable position leverage wise. And that's not a promise that there's something coming immediately, but it just means that we're definitely, definitely very well placed to be able to capitalise on acquisition opportunities as and when they arise. Return on invested capital, 25% versus 27.5% a year ago. Clearly, as we've always said, acquisitions will be dilutive at the point of entry because if we're acquiring at a 9, 10 times multiple or, of course, don't forget Fantech was 8.5, which was a really, really good multiple, but it is not a 25%. return on entry. So actually, I think that's very, very encouraging still. And we've said organically, if we hadn't done Fantech, we would have increased the returns by about 100 basis points. So again, the recipe here is hopefully continuing to acquire. There's an acquisition dilution. Improve the acquisitions. Continue to drive the organic business. And what we're saying is we're still confident of maintaining above 20% over the medium term while continuing to to invest and grow in the business. So with that, I'll hand back across to Ronnie.

Thank you very much. Thank you. Thank you, Andy. So on the business review, and maybe a little bit less detail, but bigger picture stuff. So this is sort of Volution. And if you think about our market exposure, so top left, new build about a third, 35%, and then RMI, two thirds. and then this sort of commercial residential split. But this is actual half one, so only includes two months of Fantech. We will see that sort of split resi commercial change over the fullness of time. So we probably move to 40, 60 commercial resi. And we've already signalled that from an M&A perspective, we're always interested in expanding our position in the residential markets. And we'd said for some time, commercial niches. I guess, is Fantech a commercial niche? Well, probably not, probably more than that. But we remain interested in both areas of the market. Residential, definitely. Commercial, more niche. And the reason I say more niche is that the commercial market opportunity is bigger. It's a much bigger opportunity. available market but we're choosing to play in certain parts of it certain certain areas where we believe that the returns are acceptable to us in volution and we'll demonstrate that to you over the fullness of time through fan tech there is some entry dilution there is there is plenty of improvement potential but the the opportunity in that local market in Australia New Zealand is hugely compelling I was thinking about this in terms of the success of our group over time and the recipe, if you like, and why do we believe that we can continue to outperform the wider market and deliver this 12% plus minus compounding revenue and earnings growth? And I think this slide shows it really well. We have three geographic areas. So this on the right hand side is pro forma the revenue that came into the group basis FY24. And it's a very nice symmetry there. It's almost a third each between the UK, continental Europe and Australasia. And as Andy's already taken you through, and I'll go into a little bit more detail in a moment, not all of our markets go up at the same time, but we do believe that pretty much all of the markets that we operate in have this sort of regulatory driver that we can exploit through innovation, technology and tactical execution. And so having this geographic diversity is actually a huge help to us through the fullness of time. We're complaining about the New Zealand economy at the moment, but I also remind myself of four or five years ago where we talked about healthy homes and some of the tailwinds that we had in that market. And I think it would be unreasonable for us, although we can be unreasonable with our demands, but unreasonable for us to expect that every one of our geographic areas will be pointing upwards all at the same time. So a little bit more detail here, but I don't really want to go into lots of detail it may be repetitive with Andy there I mean the UK operational performance is outstanding you know a call out to the team exceptional team delivering great results and you know very proud of what the team have been doing I know some of them will be listening in this morning so they should hear it from me because it is an outstanding result and If you look at it, residential performance, our outstanding performance there is in residential new build, which is really counterintuitive. I've seen some statements, even over the last couple of days, calling out how far the volumes have come off in residential new build. So why is this our strongest area of performance? And it's a relatively simple recipe. We've brought some new products to market that are capturing that regulatory opportunity and we've gained share. and so i look forward to this residential new build recovery in the uk market because we will absolutely benefit from that if we build more houses in the uk and maybe maybe we do start to see some of that as we go down the track and you know calling out some of the areas that were less you know less well performing seven percent growth in the uk but that's in spite of a disappointing it is a disappointing five and a half percent commercial decline but in actual fact the leading indicators that we've got there in actual fact we had the commercial representative gave a little bit of an update to the board on tuesday about what we're doing in commercial and we've got good momentum We've spent the last five years improving our product portfolio and bringing new solutions to market and the order intake in the first half of the year. And it's predominantly a project business, but the order intake was actually quite strong. And that's a really good indicator of what comes next and the direction of travel for half two. And in OEM, the 5.7% decline is actually off the back of a much more severe decline that we talked about in the prior periods. And we've done a lot of work in OEM, consolidating into one facility, quite a lot of indirect cost reduction, much stronger platform now and more optimistic about the value that the OEM proposition can add to the group. going forwards. This is third party revenue. It's worth pointing out that OEM is now contributing about one third of the production in our facility goes into our own products, into our own production, and that of course is a margin enhancement. Coming back to how do we put 160 basis points of margin on, We've had headwinds. We've got inflation. We're not dissimilar to others in the market. We've got some further inflation to come around national insurance and national minimum wage increases and so forth. But we think with the initiatives, product mix and sort of self-help levers that we're pulling on, we don't have any undue concerns about maintaining margins as we go forward in the UK. And it is the highest growth number on the page there, although a relatively smaller part of our revenue. But 20% growth in export, of course, is a very strong performance in the half year. Continental Europe, again, don't want to duplicate what Andy's already said. Nordics has been tough, but our RMI business is actually performing better in the Nordics. We've got some probably better growth momentum in some of the other areas in Europe. Germany have been really hard for us over the last few years. And some of the regional management changes, I think, are helping bring a little bit more focus into what we're doing there and aid some of our cross-selling. So, we're actually a little bit more optimistic about our continental European performance, in spite of the fact that it didn't actually add that much to the result in the first half of the year. But still, 24% operating profit margins. Klima Rad was probably the standout performance there, offsetting some of the weakness that we had in the Nordics. And then finally, into Australasia. And I talked about Phantech, and no doubt there'll be some questions from the floor when we finish now. Australia's going very well for us. New Zealand has been really tough and been tough for a couple of years. The economy has been tough. And we've sort of got this lens now across a lot of different brands. We have our Symex brand through distribution. We have DVS, which installs direct-to-consumer selling. We have Fantech, which is predominantly a commercial proposition. We have another brand called NCS Acoustics, which is a specialist acoustics play in New Zealand. And when I look at those read-across, if you like, from those different brands, we know how tough market is and I'm not necessarily calling out New Zealand as being necessarily much stronger in the next six months but we have more to play with now with the addition of fan tech and how can we take additional share utilizing those brands and those products to benefit and what we've done this is the first time that we've done it here is and oops, sorry, I'm on the wrong slide, is split the, I'm not keeping up, is to split the residential and commercial revenue. So previously all you saw for Australasia was one number. Now we're splitting it out into residential and commercial. And of course the 576% growth is because we had a very small existing organic commercial position and Fantech is largely commercial. These numbers will make more sense once you've had a full year of Fantech but just I already said it there I was there a couple of weeks ago it only just takes me about a week now to get over my jet lag so second week back isn't too bad but an absolute pleasure to be to be with the team you know I know quite often we're asked about you know investor trips out to see facilities it's Probably just pushing the envelope, but it's an amazing, amazing facility. I was there a couple of weeks ago. Group technical director had the first occasion to be there, and it was busy. You know, I walked around the facility. I've seen it now four or five times. You get a sense of the busyness, and it was really busy. And the product breadth... And the way we service that Australian market is very exciting. So very reassuring for us. There's only so much you can do in due diligence before you get inside. You write the cheque. There is a bit of a leap of faith, but one that we have complete confidence in. So very, very pleased about Fantech. So that was a sort of whistle stop tour of what's going on, repeating ourselves here. But good revenue growth, 8.9% supported by the Fantech acquisition. Of course, we get more support from the Fantech acquisition in half two. This was two months out of six. Good organic growth at 4%, Andy talked about the 2.5% to December, but look, we've had a good momentum over the last couple of months, and certainly February, which is the first month of half two, has continued that trend. The Fantech acquisition, we're super excited about, but that's not the end. We talk to potential suitors. We are serial acquirers. That's what we do. We will continue to acquire. We're continuing to cultivate other opportunities and our ambition is you know, exactly the same as it was prior to the Fantech opportunity. Andy's talked about the headroom that we have to deploy and so we're excited about that. And look, good momentum. You know, we're ahead of consensus, pleased to be sort of upgrading our view for the full year with a high degree of confidence. So that's the presentation, really. I think we're absolutely on the half hour almost. So we've managed to achieve our bit. So over to you guys now for questions. We'll go with Tanya first, sorry.