Volution Group plc

So I'm Ronnie George, Chief Executive of Ellucian. You know me really well by now, Andy O'Brien, Chief Financial Officer. Been with the group for nearly seven years now. So we've been doing this for some time. I thought about this this morning as I came in on the train, another set of half-year results, and we'll take you through it. But look, I think in... no uncertain terms, this is a really great set of results. I'm really proud, along with Andy, to be standing up here this morning taking you through it in what is no doubt an ongoing sort of challenging backdrop. So we'd like to take you through our results. I'll just sort of kick off with some headlines but it is a strong first half performance and not not surprising really we had revenue growth of you know just over 20 on a constant currency basis obviously benefiting from the acquisition that we made previously but we've had strong volume-led organic growth of 4.2 on a constant currency basis all three of our regions have grown organically very very pleased about that Adjusted operating profit margin is 22.6% and that's an organic margin improvement of 40 basis points on the prior year. We had some small dilution because of Fantech. But in actual fact, the dilution from Fantech is today far less than you would have expected when we first made that acquisition. So really delighted with our operating profit margin. And we'll spend a bit more time taking you through that in a little bit of detail. And good cash conversion, 98%. And this is at the half year. So typically, we would expect cash conversion to be stronger throughout the year. Second half is stronger. So 98% at the first half of the year, debt leverage 1.3 times. And look, one of our metrics around revenue is to talk about low carbon revenue. And that increased to 72.1% of the total. And that's because of good growth throughout our heat recovery ranges. And this is a sort of post-half-year result outcome, but we completed the acquisition of AC Industries in Australia at the beginning of February. We'll spend a little bit of time on this one as we move to the back of the presentation, but this is a super exciting new addition to the group that we completed at the beginning of February. Strengthens our position in Australasia. Very, very pleased about bringing that company into the group. So, look, good organic growth and further organic margin expansion. And... This slide here, I said to Andy, I won't do too much of it. In actual fact, I think it speaks for itself. These are our long-term sort of key financial targets. And in actual fact, if you look at each of them individually, I won't read them out, but we are either ahead or in line with each and every one of those targets. Very pleased about this. So, you know, as we go through in a little bit more detail, we'll elaborate. But look, it's a really good set of results. I'm going to try and elegantly move away now and hand over to Andy, who's going to take you through the financial review. I'll come back then afterwards and just go through each of our three geographic areas and just spend a little bit of time there. We think this presentation probably takes 25, 30 minutes, and then we'll leave the balance of the half an hour, if you like, the hour for Q&A. Okay. Which way are you going? I don't know. I'll go this way. Right.

Morning, everybody. As Ronnie said, it feels a bit strange standing up rather than sitting down. And, of course, the downside when you're five foot seven is people realise that when you sit down, it's not so obvious. So, look, Ronnie's already... The highlights for the period, in large part, was the financial performance. So, obviously, Ronnie's talked about a number of these pieces already. But we like to look at this, obviously, as I'm sure you do, over... not just a one-year basis, but over a long-term consistency basis. And I think if you follow all of those charts over the last five years, I think it's a really strong and consistent trajectory on all of the key things that we want to deliver. So it's not just about delivering well in this period, it's about delivering well consistently. I think I'll go into more depth on... on each of these key ones sort of as we go. On the margin one, we've shown you what the margin would have looked like organically as well as in totality. So this is where you can see that actually there was a nice organic margin improvement. And then, as Ronnie said, the Fantech margin is already moving in the right direction through some really good initiatives that we're driving. But there is a little bit of inevitable dilution from that. But look, overall, still a really, really strong margin outturn from the business. On the bottom right there, and I will do more detail, obviously, around cash flow as we move deeper into the slides, but the leverage there are 1.3 times. Full clarity, of course, this is before the completion of AC Industries, so we completed that transaction on the 2nd of February. If you had put that performer into our numbers at 31st of January, then that 1.3 times would have become 1.8 times, which is exactly what we'd signposted when we announced the transaction pre-Christmas. And I think what it does also still show is that 1.8 times is still in a very comfortable position in terms of future M&A optionality, particularly given how strong and consistent and reliable the cash generation of the business is. So this slide actually basically covers what we've already talked about. So maybe I'll just draw on a couple of the things that actually aren't there, but just to sort of, I guess, help the analysts with their modelling and with their numbers. So yeah, revenue, operating profit, we'll talk about some more as we go into subsequent slides. Finance costs were, of course, slightly elevated in this period because of the borrowings for Fantech. The actual interest rate on our debt was slightly down compared to the prior period, but in total terms, finance costs increased from £3.6 million in prior year first half to £5.1 million In this first half, I say due to the Fantech borrowing, our tax rate was up ever so slightly. And again, we'd indicated that this would happen. Australia and New Zealand have tax rates up at 30% versus low 20s for the group average before that. So our effective tax rate nudged up from 21.8% in full year 2025. to 22.5% this period. You'll also see reference there to the dividend, so interim dividend of 4 pence per share, so that's up almost 18%. So then breaking the revenue a little bit further, as usual, Ronnie will go through the regional colour and the regional details here. in subsequent slides. But I think, you know, what's really pleasing about that block in green is, you know, 4.2% constant currency. So, you know, above the midpoint of our 3% to 5% stated range, despite, you know, I'd say generally speaking, still unhelpful markets, which, you know, Ronnie said I've been doing this for seven years, he's been doing it for 18. I think for the seven years, I think I've been saying unhelpful markets for most of those seven years, but I think it's definitely the case this time around. But actually what's really pleasing, and we did talk a little bit about this at the year end, we said that the last couple of years we've had really strong organic growth, but there's been pockets of super strength and some pockets that have been tougher. And I think what we'd signposted was that we expected a bit more of a normalisation around that sort of 3% to 5% range. And indeed what you see there is... you know, all three of the regions really pleasingly delivering within, or in the case of Europe, slightly above that range. Bottom in the green strap line there, you'll see this is how we've analysed the 4.2% between volume and price. So it is very, very much... a volume-driven growth, price 0.6%, overall blended for the period. And of course, looking back to the margin, or indeed looking forward to the margin, that 0.6% price is still clearly, I think as this would demonstrate, correctly pitched because we've been able to continue to expand the organic margins, actually of all three regions. So if you look at the bottom middle bit there where you've got the regional breakdown of margins for this period. compared to half one of 2025. UK now up north of 26%, which is a fantastic margin. But Europe again, 120 basis points growth. And then in Australasia, of course, this is where the Fantech mix effect comes in. But if you looked at the organic margin, that was up again in the period. So look, a really, really pleasing set of numbers on all of the businesses there. If I move to the next slide. A little bit more detail maybe on this one. So cash conversion, as Ronnie said at the outset, we set ourselves a target of being 90% or above cash conversion on a full year basis. We generate cash reliably through the year, but generally speaking, our conversion might be slightly higher in the second half of a normal year than the first half. So actually... 98%, I think, in that context is a really, really pleasing outcome. You know, if you just look at the waterfall there on the left in terms of how and where we've used that cash over the period. So working capital, there was a small increase or small outflow of £4 million, but that's very much in line with activity growth. So I think, you know, actually our working capital is well managed. Our inventory, you know, over the previous couple of years, we'd seen a little bit of optimisation. So this was where perhaps... You know, two, three years ago when supply chains were particularly difficult, we had, as you'll remember, deliberately increased our inventory, which we think is absolutely the right thing to do for customer service perspective. But we then said that perhaps that had opened up a few opportunities to slightly optimise. And I think over the previous couple of years, we've done that. And I think now we've got working capital very much at the right level for the business. So I would expect that typically now to flow in line with activity, which I think is what you see there. Yeah. We spent 4.3 million on CapEx in the period. And we've always talked of a sort of 8, 9, 10 million pound full year spent. So it's very much... in that range. It's slightly higher than we spent in the equivalent first half of last year, which was 2.8 million. But I think, again, our capex is not a big number, but that's not because we hold it back. We're always keen to invest in things which support and grow the organic business. And so in the period, some continuing exciting investment around new products. So we spent just under a million pound on new product development projects and initiatives across the business. a similar number, so just under a million pounds in Reading. So a number of you have been around our Reading facility. Those who've been around more recently We'll have seen some of the big investment that we've done there in terms of injection moulding capacity, and that's all about efficiency, future-proofing capacity for further growth. And then we've also continued with programmes such as the capacity expansion in Eri in North Macedonia, which will take place over the next couple of years. The acquisition number there, so the £30.1 million... That is the deferred consideration for the Fantech acquisition. So you'll probably remember that when we completed that in 2024, there was a $60 million, £30 million deferred element of the consideration. So that went out in this period. And as I mentioned earlier, the leverage of 1.3x there is pre-DAC industries. So with that, it would have been 1.8 times. Return on invested capital, you know, again, really what we sort of said here is our target is 20% and above whilst continuing to invest in really attractive and value accretive acquisitions into the business. The methodology we use here is to have last 12 months of earnings and measure that against a three-point average on the balance sheet. So that's 12 months ago, six months ago, and now. So this is the first period where actually you see the complete effect of Fantech in that return on invested capital number there. So the fact that it only nudged down slightly from 25 to 24.6, I think, is having done by far the biggest acquisition we've ever done. I think that's sort of really supportive of the strength of this metric. And there, as we've said on the third bullet point, if we hadn't had that Fantech effect this time around, again, the organic returns for the business would have improved. I don't normally take this one. But in terms of sustainability, as Ronnie mentioned earlier, low carbon revenue percentage continuing to expand, in fact, quite meaningfully there from just under 68% to just over 72%. And we think this is the direction of travel. So whether this is, as we've said in the bullet point there, continued growth in heat recovery. And actually in the UK, it's also been the sort of continuous running solutions which the regulations have supported over recent years. Recycled plastics, we're now up at a very, very strong level, north of 80%. We're continuing to work on opportunities and new materials and new ways of nudging that number up, but it does get difficult. I mean, in this period, although we did increase, so we increased the tonnage of recycled plastics that we used across our facilities, but in terms of percentages, it's come off ever so slightly. There have been a few availability challenges, and this is where we continue to sort of trial and look to develop new sources. But, you know, north of 80% is a really strong number. And I think, you know, I'm sure when we come to the Q&A, we might talk a little bit about what's going on in the world right now. But I think, you know, with... oil price volatility, I think the benefit of recycled plastics, which are somewhat insulated from that effect, I think is definitely something that we think is important. Health and safety, slight worsening in the metric here, which is a disappointment. And so, you know, this is something which we continue to focus on very, very strongly as a group. So, you know, how can we share best practice? How can we support the smaller businesses and the um and improve continue to improve that culture and that methodology here we've had a new uk operations director who's joined us in this period and she's made a great start in terms of supporting the uk operations but she's also very very steeped in health and safety so i think she's going to be a really powerful advocate for continuing that and supporting some of our smaller businesses and how they move forward there as well so with that i'll pass back across from ronnie

Thanks, Andy, for that. As I said, it's a cracking set of numbers to go through. We're really very pleased about the performance in the first half, but a little bit about what's sort of been happening. So evolution at a glance, and not surprisingly, our proportion of total group revenue in Australasia has been growing. The important takeaway from this slide is geographic diversity. I think what we've talked about for some time when we've stood up in the past is we've had some really strong revenue growth in the UK, which I know has been sort of counterintuitive to some of you in terms of the overall performance of the market. And that was very much sort of regulatory, is regulatory led and benefiting from some share gains and some innovation that we brought to the market. And we're still, look, we're still super excited about the UK market, medium term, but we know that It's a little bit more challenging at the moment in terms of new-build housing activity, for example. But what we've got is this geographic diversity. And as much as Andy and I would love to be standing up here and saying every individual element across all three of our geographies is pointing up at the same time, the reality in life is that that's not always the case. But clearly what we've got at the moment is... some stronger performance in some of the other areas. And look, we're absolutely nailed to these three geographic areas. I'll talk a little bit about AC Industries towards the end of the presentation, but of course our proportion of total revenue in Australasia will grow further with that addition. And you can see it nicely here. We've been listed since 2014. I became chief executive in 2012, and this was all about... a classic buy and build international expansion strategy, and we've delivered that really well. So we're culminating now with a third of our revenue still in Europe. And not to spend too much time on the sort of M&A and the outlook and so forth, but by definition... we're underweight here and to a lesser extent here. And of course, that's where we continue to focus all of our time and attention in terms of future M&A opportunities. But just going through each of the sort of regional areas in a bit of detail, I remember probably, I think Andy joined in 2019, we had a UK operating profit margin that had been a little bit subdued through quite a big investment that we'd made in Reading, and we were talking about 18%, 19% operating profit margin. We've just landed at 26.3%. And it's a very established, mature UK operating structure here where we're getting huge economies of scale and running our brands really well into the market. And the way to think about this is our residential... ventilation grew 4.2% in the year, which we're actually really pleased about. We had a very strong residential performance throughout all of FY25. And if we look at the moment, we're still underpinned by regulatory changes. We still see opportunity for share gains. Tactically, we think there's an opportunity there, but we are clearly against the backdrop of you know, a little bit less certainty around house building. And I think by now we'd probably hope that house building was recovering at a faster rate. But nevertheless, we're delighted about the performance in the first half of the year and regulations will continue to be a theme. And of course, sticking with that, OWAB's law isn't so much a regulation, but an awareness issue in UK social housing. And we've seen, you know, ongoing strong social housing demand We think that's set to continue, but there is also the balance of affordability versus the demand. The demand for ventilation solutions in social housing refurbishment is strong. We see that sort of tailwind being there for many years into the future, but then you come back to the affordability for these housing associations and so forth. But look, these are areas where we consider ourselves to have a leadership position across residential new build, social housing refurbishment and private RMI by some considerable distance. And I think that's a good segue into commercial, down 7.3%. Tough market. We don't think the market's been particularly easy. We're not particularly happy about our performance in UK commercial. And it remains an opportunity. It remains an opportunity because we are subscale. We are smaller. And we made some investments in the year. We've taken on an additional facility in Dudley in the West Midlands. We've effectively grown our footprint two times. That's incorporated in the numbers. So our 26.3% operating profit margin includes the facility that we now have and that we're scaling up. And we remain ambitious in this UK commercial market, but I think it will take us some time tactically to actually start eking out share gains and so forth into the future. But it's absolutely an important priority for us. Export, it's a small number, grew really well, 20% revenue growth, a lot of that in Ireland. Ireland house building trajectory is what we would probably like to see from a UK perspective, but we're not there yet. Strong regulatory drivers, strong market position, quite a bit of innovation, perform really well, and I think the outlook is equally quite strong. I saw a statistic the other day about whether or not necessarily you believe it, but Irish house building getting up to 60,000 units in the year. into the future, and we're probably only running at about 40,000 units at the moment. We still think there's a strong market outlook. And just finally on the UK piece, OEM. This OEM revenue is third-party customers. A lot of our motorized impellers are increasingly used internally. We'd struggled with our OEM proposition a couple of years ago, done some tremendous work, closing two facilities into one, improving the quality of the business. And we're really delighted about the contribution in terms of organic and profit growth that the OEM part of the UK business has delivered in the year. So look, overall, 3.8% organic growth, good margin expansion, adjusted operating profit up 6.2%. Moving to Europe. I think in particular I'm pleased about the Nordics. For many years we've come to these presentations talking about the strength of our Nordic business and it's undoubtedly been really quite tough over the last few years but we've seen really good recovery in our Nordic business and I think it's fair to say that that recovery was more pronounced in Q2 rather than Q1 so the trajectory is definitely very encouraging and as we come into the more recent months. We're seeing that in the start of the second half of the year continue to go very well. In Central Europe, I think it's a little bit more of a mixed bag with some outstanding performance from Klimerad with our decentralised heat recovery ventilation. That's continued to perform very well. The outlook's positive. The order book's been growing. In Germany, we've probably seen some stabilisation and in energy recovery industries. Andy's already alluded to some of the investments that we have made and are making and our ambitions for that particular revenue stream as we grow it into the future. And actually much smaller from a revenue perspective inside our continental European business is Belgium. and France. But as we always say, it doesn't matter how small or immaterial it might be. We drive each of these individual areas equally well. And we think that the outlook there in the second half of the year is probably slightly better for us, in many respects, some of the self-help and the things that we're doing. Very significant margin expansion and 16% operating profit growth in the first half of the year. Operating margins up to 25.3%. So very pleased about our continental European activities. And as I say, Volusia is still relatively underweight in this market. There's still white spaces on the map that we would look to tackle into the future. And then finally, Australasia. Organic growth of 3.3%, but we split this now into residential and commercial across both Australia and New Zealand. New Zealand has been difficult. We've talked about that for some years, but it's certainly better. And I think clearly having a leadership position across multiple brands in both Australia and New Zealand tactically we're able to apply that to try and take share you know this is what it's about for us you know clearly the fantac acquisition was super exciting in terms of the size and the scale that it brings but it's also about having different routes to markets and brands that we can leverage to capture more of the opportunity so residential very good commercial a little bit more difficult but overall we've talked about an organic margin expansion and i'd like to think of our australian australasian model as being um the the sort of the the steps on the path are to follow into what we've established with that mature uk platform and certainly working with the local leadership team um i'm actually due to be out about three weeks but traveling through a slightly different route but it's about encouraging that team to follow what we've clearly done very well at in the UK. And there's a lot of sharing of knowledge and experience there. So look, operationally across the three areas, very pleased about the first half of the year. Sometimes I do feel when we turn up and talk about more challenging backdrops and markets, but they are challenging. And I think that the performance that we've had in the first half of the year is a credit to our local teams' dexterity and just picking out share gain opportunities and just being absolutely obsessive around... Customer service, a conversation I had with somebody in the UK more recently, and also that discipline around initiatives and how we track those initiatives that effectively underpin our margin expansion. Just quickly on AC Industries, we didn't have the opportunity to talk to you about this earlier. We announced it in December. We completed it at the beginning of February. This is an adjacency for us. It's ventilation systems in the mining sector. It's very exciting. We've had the first month of revenue in February, and that's performed really well. We're looking at an EBITDA margin here of 35%, so clearly it's above 30%. our 20% target, and we're in very good shape here and excited about what we can do. And we're spending a little bit of time now just helping the team think about the international growth. We're going through what we call a 200-day plan integration, and that's really important just to bring it inside of the group, and then we'll start working with the local team about how we can grow this proposition internationally outside of Australia where we have a very big market share. So summary and outlook, we had to get this slide in just quickly. We won't spend too much time on it. That's what we've talked about for the first half of the year. And as I say, sometimes you have to sort of pinch yourself when you turn up talking about 20% revenue growth and 19% improvement in earnings per share. These are sort of numbers that over the medium term we couldn't necessarily look to repeat in every half, but really outstanding first half performance. And just on to the outlook. And of course, we started drafting these papers and materials a few weeks back. And we've certainly had a sort of self-reflection on the current state of the world, as it were, and how that fits for us. And I think just not to read it all individually, but there are a couple of important points to pick out of here. And I think it's this one about being mindful of the heightened geopolitical risks. And of course, they are quite fluid. but remaining agile and proactive to these potentially changing conditions. And I hate to mention it, but through COVID, we had what we consider to be a good COVID, where from a supply chain and sort of operational customer service performance, it was very strong. And I think that experience that we had is hugely underpinning for whatever might happen next. And look, we think we're in really good shape. And as a result of that, the board now expects adjusted earnings per share for the year to be at the top end of the range of market expectations. And we think we're in good shape, notwithstanding the wider geopolitical risks. So I think we did manage to do the 30 minutes as usual. That is the sort of formal part of our... I think Andy and I will come and sit down now, but we'd just love to have your questions. I know we get some really interesting questions from the floor. Okay.