Volution Group plc

OK, brilliant. Thank you. So warm welcome to Volusion full year 2025 results. Nice full room. So look, we're really delighted and excited to be here this morning to take you through our last 12 months. Pretty much similar format for us a quick a quick overview I'll be quite brief with that hand over to Andy to talk about the financial review for the year I'll come back on business review and in summary and outlook and then Q&A and I think our sort of view here is that probably 20-25 minutes on the presentation and just from past experience And we know there's always a good appetite to sort of go through the Q&A. So we'd like to allow some really good time to go through the Q&A. But look, for us, I've been doing this for some time now. So this was a strong year for us, revenue up. 20.6% or just under 22% on a constant currency basis and delighted with organic revenue at 5.7% on a constant currency basis. And obviously the inorganic benefit in the year was exclusively from the Fantech acquisition. Our organic growth was largely sort of volume-led rather than price-led, and Andy can get into a little bit more detail on that later on. But highest revenue growth was in the UK, 9.5% revenue growth in the UK, so very strong growth. revenue growth in the UK, and come back on that in a moment and just take you through some of the detail, but certainly supported by regulations. Evolution is a regulatory underpinned story. I think this is a really good example of it, and also made share gains in the market, and we can talk about that as well. Adjusted operating profit margin, small reduction, 22.3% versus 22.5% in the prior year, solely attributable to the Fantech dilution. And in actual fact, the organic margin expanded 50 basis points in the year. Again, very pleased about that performance. Quite a bit of headwinds in the market, particularly in the UK, around inflation on payroll and national insurance and such. So very, very pleased. with the adjusted operating profit margin. And then the cash conversion, 109%. That's an absolute essential ingredient of the mix for us if we're going to continue to deploy capital to grow inorganically and leverage down to 1.2 times, in spite of the fact that during the year we made our largest acquisition to date. A robust return on invested capital, 25.2%. And we did, as I say, make our largest acquisition to date. And really good progress on ESG. And we've got some detail on that. And just one other one. This isn't new. We talked about it at the half year. But I've established a sort of more regional structure to run the group. And it's inevitable over time. If we're going to continue to grow at the rate that we have been, we need to have the management bandwidth and capability to underpin that as we go forwards. So this slide, we can't help but put this slide into the deck, but I think just to draw out a couple of important ingredients here. We listed in 2014, I became chief executive at the beginning of 2012, But it's really the sort of trajectory that we've been on. And I won't go into each of them individually, but roughly across revenue, profit, EPS, and cash flow, plus minus 12% compounding growth over that period. And it shows the change in the complexion of the group from four countries where we had a local presence. So that's a local presence, not where we make sales, but where we have a local operating company presence. But we've gone from 30% of our revenue from non-UK customers in 2014 to 63% today, five brands to 29 brands, and we have a presence in 17 countries. And that's sort of what's happened to us over the last 10 years. Strategic progress and priorities, three strategic pillars, organic growth, inorganic growth, and operational excellence. And just a little bit under each of these, and we will spend a bit more time later on, but 5.7% organic revenue growth and we're continuing to invest in products and facilities to underpin this organic growth revenue proposition. Value-add acquisition 16.2% in organic revenue growth coming from the Fantech acquisition and also as I've talked about sort of fully embedding that more regional leadership structure that I've talked about already and then operational excellence as I said there 22.3% operating profit margin but an organic operating profit margin improvement in the year. Sustainability, again, I don't want to go through each of these individually, but what I was pleased about is pretty much every metric on the page has improved. Should just explain on low carbon sales there. Low carbon sales, 71.2% of Volution's total revenue is in low carbon. I said that it improved. It has improved organically to 77.3. But Fantech, as a proposition, has less of its revenue today in what we would call the low-carbon product bucket. So that created some dilution in the year. And, of course, going forwards, we'll report the inclusive of Fantech number, which is the 71.3. And the same story with heat recovery. The dilution is, because of Phantech, actually organically we improved from 31.7% to 32.5%. And on the recycled plastics, I mean, some would say that we missed because we did set ourselves a 90% target. But we set that target when we were at 40%. And I remember shareholders saying to us, how are you going to get there? And we said, we don't know. But we're setting a stretching target. We've got close. It's 83.9%. And in actual fact, the sort of drag on that improvement was more around the Nordics, where in actual fact, more recently, we've made some really strong progress. And just one other one I'd like to just pick out on the slide there is the accident frequency rate that improved in the year and ultimately Volution is a place where we want everybody to come in in the morning and go home at night. So delighted to see that with the extra effort we're raking around health and safety and so forth that our frequency rate improved in the year. So that was a very quick overview from me. I'll hand over to Andy to take you in a little bit more detail now.

Thanks, Ronnie. Morning, everybody. So just to kick off, you saw the sort of 10-year progression on some of the key metrics earlier. This is adding a couple more and doing it over five years. Actually, it's quite nice because for the first time now, we can drop the COVID year off the five-year comp. So the lines all make sense. And look again, at risk of repeating the earlier slide, I think... What stands out the most for this for us and hopefully for you as well is that sort of consistency of performance year over year, the continued improvement on all the key metrics. And actually you see the sort of the steepness on those top two, their revenue and operating profit growing faster this year than any prior year as a result of both some really strong organic growth, which Ronnie is going to come on to when he starts to unpick the individual markets. So 5.7% organic growth. Our target range, you'll remember, is sort of three to five that we stated at. And then supplementing that, obviously, with Fantech, our largest acquisition to date, which has gone really, really well. So I will then, in the subsequent slides, and then, let's say, in the market, we'll go into a little bit more around some of these key pieces. But I guess the other one that I'd sort of draw out, having done the top left, if you go to the bottom right, really, really strong cash performance in the year. And that's always at the heart of the business model, because that is how we fuel M&A, and obviously that is how we deliver our returns, but actually to do that this year was even more important than normal years and then to end the year at 1.2 times leverage having spent 220 million Aussie dollars, 110 million pounds on the Fantech acquisition. Plus of course we did also complete the buyout of the balance 25% of KlimaRad in the year, so a meaningful amount of expenditure on on on on m a but still ending with the balance sheet in very good shape there at 1.2 times leverage um so this next slide um just showing a little bit more detail year over year comparatives there revenue operating profit i'll unpick a bit more on the next couple of slides i guess just to sort of help the analysts out and again they will probably have read this in in in going through the more detailed statement but a couple of the pieces that then to go below operating profit. So we obviously had a higher financing cost charge in the year as a result of the borrowings that we took on to do the Fantech acquisition and the Klimrad purchase. So our finance costs were up about 40% year over year to just over £9 million. Tax rate was basically unchanged. In fact, it was exactly unchanged year on year. It was 21.8%. Now, what should have happened is Australasia being higher tax rates than the rest of our group. So Australia is 30%. So we should have actually seen that bump up slightly. But offsetting that, our growth in the UK, particularly UK residential, is very much in patented products. We talk a lot about the fact that Actually, it's regulations that have moved forward, and we've developed some really compelling propositions to service those regulations, some of which then benefit from being patented. So we then have leveraged that UK patent box opportunity, and that's meant that effectively the tax rate has stayed exactly unchanged. Return on invested capital, again, I'll come back to later with a more detailed slide, but actually really, really pleased that that still came out at just above 25%. And that's got two thirds of the Fantech balance sheet in it because of our three point methodology on the balance sheet. And then dividends up 20%. So slightly ahead of the rate of growth of the earnings per share. So dividends up 20% to 10.8 pence. Revenue, so I won't go through the individual regions too much because obviously Ronnie will do that in more depth in the next section. But really pleasing that actually within that 5.7% constant currency organic growth, all three regions grew. Yes, the UK grew strongest. Europe grew nicely. Australasia, very, very small bit of growth, but it was growth. And that's despite the fact that, as we have talked about for the last couple of years, the New Zealand market has been a really, really tough market. Won't steal the thunder, but hopefully starting to show some signs of of recovery. But still, we were able to show organic growth in all three. FX was against us. I think I've said that pretty much every year for the last few years. So one of these years, FX will sort of flip in our favor. That was, again, mainly in Australia and New Zealand, that 4 and 1 half million of adverse revenue impact and about one million of profit impact sort of comes through from translation. Fantech obviously then, you know, coming in with the inorganic growth piece and then just in the sort of the strap at the bottom there, just again, we always sort of try to unpick how much of the constant currency growth is volume stroke mix, so those two things effectively come together, so that's volume and it's also upselling of the proposition, how much is from that and how much is from pure like-for-like price, and the like-for-like price is now back to very much a normalised level of just over 1%, so 4.5% is what we estimate to be the volume stroke mix component of that revenue growth. Operating margin, as Ronnie mentioned in the intro slide, the fact that, bottom left there, group margins nudged down ever so slightly by 20 basis points, but we'd already long trailed that Fantech was coming into the group at a good margin relative to the wider market, but at a margin that nonetheless is lower than Fantech. the margin that we trade at as a group. So to get to that 22.3, you've got effectively a 50 basis points improvement in the organic margins of the business, offset then by a slight dilution from Fantech. And then you see, I guess, in that sort of bottom middle graph, you see how that organic margin improvement comes through region by region. So UK and Europe, there's no inorganic effect. So those comps are exactly as they would be. So really nice 100 basis points improvement in the UK, 20 in Europe. And interestingly, for those that have sort of followed us for many, many years, I remember my first couple of sets of results being asked, well, why is the UK margin the laggard relative to the rest of your group. And actually, look, I think this is testament to some really, really strong results from the UK over many, many years now. I guess we always said, look, we've got a really good infrastructure in the UK. We've got a very broad proposition. There is no reason why it won't be at or above. And indeed, that's what you now see. And then on the Australasia graph, we've given you three data points there. So as reported, 24 and 25, but then also showing what the 25 organic was. So actually, if you compare that 22.7 to the 23.8, a nice organic margin improvement in Australasia as well. Jumping onto the balance sheet and the cash flow. So a very, very strong cash conversion, 109%. We talk about a target of above at or above 90%. And as you see on that sort of top right graph there, we've hit that pretty much every year bar. 2022 was when we made a sort of material increase in our inventory levels. to bolster customer service. But aside from that, essentially, the 90% and above. 109 is particularly strong. I'm not going to promise that's going to keep repeating, but it does just show how robust the model actually is. And inside that, investing nicely in facilities and infrastructure. So you'll see when you get the annual report in a couple of weeks' time, we showed a little bit about where we've been investing, whether that's further capacity and automation in Reading in the UK, for example, whether it be the early bits of our expansion in North Macedonia that we've talked about for a number of years, and in the Nordics where we've been adding additional metal production capability. So we spent about £8.4 million on capex in the year, which was up £1.3 million from the year before. So still continuing to invest nicely in the organic business where it's compelling as well. then you know i've already mentioned this return on invested capital so this is this is you know really really important metric for us um we've said that you know we are confident that we can carry on delivering returns of 20 and above um whilst continuing to invest materially in acquisitions well and as i said the fact that we're 25.2 um with having brought fantech into the group is is fantastic so there was a very nice organic ROIC improvement coming about through that working capital and balance sheet management coming about through that organic margin improvement. And again, that means that we're able to bring these nice acquisitions in and still deliver very, very strong returns to investors. I don't think I need to, this is a risk of repetition a little bit. This is basically showing in the dark blue, our key financial metrics for FY25. In the light blue, the average over the last five years. So actually what you see with all of them, the organic one there does still include the 21 versus 2020 comp, which is COVID impacted. But really, you know, relative to our green metrics, numbers there which are the the long-term financial targets if you like of the business you know continuing to deliver on all of those metrics which obviously is you know really really pleasing and important for us so with that i'll pass back to ronnie to go through the business

Great. Thanks very much, Andy. So we talked about this already, Volution, in 2014 and today. And of course, the Australasia only includes eight months of Fantech. So the way to sort of think about the group now in terms of its geographic disposition is 40%, 30%, 30%. So quite a nice... split and look what we've said throughout is that over time we expect the percentage of group revenue in the UK to get smaller as we continue to bulk up with more obviously more opportunities in continental Europe and in Australasia. And this, again, is our increasing geographic diversity. So you see from, as I say, my tenure started in 12. We started to acquire in Europe and then the first acquisition in New Zealand in FY18. And, of course, this year we'd expect, again, that light blue box to get much bigger as we see 12 months participation from Fantech. So a little bit of detail about the local geographic areas. So look, specifically in the UK, very pleased with the 9.5% revenue growth. And if you look at the residential, we've had a consistent period of growth now. We talk about strong comps and they were strong comps in 2024. for the UK but the UK residential ventilation increased by 9.7% and that was the growth was most significant in residential new build which I know is counterintuitive when we think about house builders and the volume of activity but we saw a big change in the impact from regulations and we're moving towards what we call more continuous ventilation and continuous ventilation with heat recovery And we made some account gains along the way there. So that was a particularly pleasing step up in residential. I think it's fair to say that public housing RMI is still attractive for us and private residential RMI has been probably a little bit more challenging. Then as you work down commercial, look, we're still very small in commercial. We've only got £30 million of revenue. in a much bigger uk commercial ventilation market so in the year the 6.9 revenue growth was particularly um buoyed by the second half of the year and we had good strength in the second half of the year and i'll come on to some of the investments and focus that we're making in that area because we still see that as a runway of opportunity for us into the future export you 29.4 percent revenue growth so very strong mainly in Ireland we've got a good partnership in Ireland again around residential heat recovery systems the Irish market is probably one of the best examples about where regulations have really quite seriously driven that sort of home of the future that very energy efficient home of the future and our technology lends itself really well to the regulations and we've benefited hugely and we still think there's a runway of opportunity to continue there and as Andy's already talked about you know 100 basis points operating profit margin improvement and we did suffer quite a substantial national insurance increase and wage related increase from April and also some facilities cost increase around leasing and so forth but delighted that we were able to in spite of that improve adjusted operating profit margins. And then it's about future proofing. We're not just about delivering in this year. We've made investments in most of our facilities in the UK, but in particular in Reading with new injection moulding, some additional machine monitoring, some robot control. Quite a big investment in Dudley in the West Midlands. In actual fact, we took on an additional 50,000 square feet facility that we're equipping right now as we speak. But it's about future-proofing our facilities to be able to have capacity headroom to grow into the future. In continental Europe... The European story's been a little bit more challenging for us over time, but in actual fact, 3.1% constant currency growth, adjusted operating profit, increase of 2.5%. But what it would draw out there is that we had in in our central european activities we had strong performance from our klima rad brand in the netherlands which is mainly focused on structural refurbishment and that's a heat recovery proposition a business that we bought in 2020 in actual fact during the year we completed the balance 25 acquisition that that took place in december and we talked about that in march if you remember, but very pleased about the proposition in the Netherlands. We're seeing good organic revenue growth from our heat recovery counterflow cell manufacturing in North Macedonia, in Bitola, where again we've made some investments. As Andy said, a lot of content in the annual report coming up, but substantial investment. We've effectively doubled the size of our factory footprint in North Macedonia, We're refurbishing a building at the moment and putting in additional investment, but with strong sort of organic growth plans in that facility in the years ahead. The disappointments for us were probably in Germany. The market continues to be quite weak. I think we mitigated some of that weakness so as to have a less profound impact on profitability. It's still a very profitable business and we still believe in the long term prospects of heat recovery ventilation, particularly in refurbishment in Germany. And the Nordics again have been quite challenging but actually showing some signs of recovery and I think this is largely to do with the fact that we've had interest rates roll over more quickly in Europe and I think our outlook for Europe is certainly a little bit more positive as we go forwards. Finally, Australasia, these numbers that you look at here, they struggle a little bit with a big inorganic growth addition. So when you look at, for example, the commercial revenue decline of 11.3%, I really do need to pick this out, this is an 11.3% decline on the only 3.1 million of organic commercial revenue that we had in the region prior to acquiring Fantech. So just to remind you, prior to acquiring Fantech, Volusion's proposition in Australia and New Zealand was almost exclusively residential. So if we look back at the prior year, 52 million of revenue, 3.1 million of it. So let's say circa 5 or 6% of our total revenue in the region was in commercial. That materially changes as we've acquired Fantech. So Fantech is in actual fact the reverse. That's why the complementarity of these two propositions is really quite attractive. We've taken a strong residential presence, complemented it with an additional residential presence, and then overlaid a market-leading commercial proposition. So overall, when you look at the adjusted operating profit increase of 83.5%, Andy's already talked about the organic component, But Fantech's going really well. I'm very proud of the fact that we brought the company into the group. The chairman had the opportunity to visit the team locally a couple of months ago. This is an amazing proposition for us, integrating very well and plenty of opportunities now for us to cross-sell more, to cross-reduce products and to improve the organic margin, if you like, as we go forwards in Fantech to and beyond our 20% operating profit target. So very pleased about Fantech, delighted that we were able to get this over the line in December last year and going really well. In actual fact, I've told you all of that. I've jumped ahead. So, there we are. So, yeah, I don't think there's anything new there. New regional leadership established. Anthony Lamaro was in Fantech for 18 years before we promoted him to be the regional leader. Very well respected, experienced leader. And I think it's fair to say that Not surprisingly, when we buy a company that's much larger than us with our original presence, we've actually acquired a very strong management team. And so there's quite a lot of extra coverage now and strength in that team to help us improve the business as we go forward. We could spend an age on... Fantech and the proposition. Maybe there'll be some questions later on, but going really well and in itself growing on its prior year. I know we don't talk about that as organic, but what we should consider is that Fantech has improved over its prior year, both from a revenue and profit perspective and expanding margins. So as I said, we wouldn't be too long on basically half the presentation time allocated to this. I'm not going to go over these again. It's just repeating what we said earlier on. But just on the outlook, look, for us, it's only a couple of months in. We've had August and September and six trading days of October. But look, the new year has started well. We do have the benefit of the inorganic drag from Fantech for the next four months. And we are growing organically. And maybe just a caveat, that the end markets are not as helpful as we would like. They could be more helpful. But notwithstanding those challenges, we're still very optimistic about another year of good progress for the group. So that's sort of the formal presentation. We'd love to have your questions. OK. Tanya, hi.