Volution Group plc

Good morning and welcome to our FY26 results presentation. I was just working out with Andy there, I think it's my 25th and Andy's 15th and we haven't got wear out, just be clear, that doesn't, it's just longevity not wear out. So we're really pleased to be here this morning and we'll take you through the story in a very similar format that we've done previously, so overview of I've got the relatively easy bit where I'll talk about the overview and what's been happening. Hand over to Andy for a little bit more detail on the financial review. I'll come back on the business review and then summary and outlook and we've got something a little bit different just at the end of the presentation so I'll keep you sort of guessing for that. But look it was another Thank you very much. Organic growth 2.8%, just slightly below the bottom end of our 3-5% range, but demonstrating the benefits of our diverse geographic end market exposure, and we'll cover that in a little bit more detail. Operating margin progression, 90 basis points, now 23.2%, good progress in the second half of the year. Leveraging our scale, our expertise in procurement, engineering and product range. And our second largest acquisition to date, AC Industries Inc. In Australia, that was in February, so that was in the financial year 26. And then right at the beginning of the financial year, first working day, actually second working day of FY27, Getair in Germany, a company that we've courted for many years, delighted to now have that inside our group. But look, continuing to deliver strong returns and compounding growth. A little bit about our clear growth focus. And we talk about organic growth. We believe we've got an agile, decentralized approach, very close, intimate focus on local markets, and organic growth of 2.8% on a constant currency basis in the year. Value-adding acquisitions, I talked about AC Industries, very excited about that proposition and how it performed in the year, delivering an 11% inorganic revenue growth and that was only for half the year. We only had that opportunity inside from the beginning of February, so at the second half of the year. and Operational Excellence. I think of this as about running the business well. So product cost leadership through sourcing, engineering and manufacturing, incremental efficiencies around process and operations and our people underpinning that significantly strong margin performance at 23.2% in the year. Investing in our compounding growth story. Why do we believe we're a compounding growth story? I'll come back to the chart at the bottom. But what's underpinning this? We're in growing markets supported by long-term structural tailwinds, and we could maybe cover that off in a little bit more detail. But if you look at AC industries acquired more recently, this is ventilation mining systems in copper and gold mining. I think the copper price very recently hit its all-time highest price ever. We see with the energy transition that's a very strong place to be. Increasing diversified geographic and end market exposure, that's really important for us. If I look at my early years in Volution, joined in 2008, it was a UK-centric residential play. If you look at where we are today, we're providing ventilation systems In mines in Australia, we've had our first data center order for ventilation and cooling for Australian data centers. We've got a huge wide breadth of end markets, products and different applications. We're pure play. We focus on ventilation and air. I've said this throughout. I've had it over the time. We're not looking at anything else. We want to be providing healthy air sustainably. It's about air quality. It's about leveraging scale, intimacy and expertise and scale benefits in a specific area that we believe we can be very good at. Continues to be a capital light model, strong margins, highly cash generative. I've talked to you about the metrics all being well over 15% in the year and disciplined capital allocation at M&A capability. We did two deals since the last time we sat in front of you. There's other deals that we haven't done and that's really to do with discipline. and not doing deals just for the sake of it. So if you look at the adjusted earnings per share over time, 15.4% growth in the year. That's absolutely at the high end of our expectations. We have a long-term target to be over 10%, but we've compounded now over 10 years at 11.7%, and that goes back further. We have a debate about how far back do we go, but if you look at 14 when we listed through to now, or indeed if you go back prior, as a private company, that compounding theme has been consistent throughout. We talk about our three Ps, although there's four here, but we talk about three Ps, product, planet, and people. Delivering our purpose around healthy air sustainably and just a little bit about what's happening So these are metrics that we put out so on revenue from low-carbon products It looks as if it's come down over the last couple of years but that's partly to do with the composition of the group and Fantech which is our largest acquisition that we made in December 2024 so on a like-for-like basis actually our low-carbon revenue is Thank you very much. We've moved to people. We've actually updated our internal values around customer excellence, collaboration, continuous improvement and ownership. But a disappointing number here. I'm not particularly happy about the fact that our Accident Frequency Rate increased in the year and we've been redoubling our efforts internally with a view of improving that. We had a downward trend through to 25 and then regrettably we've stepped up to 0.29 frequency rate in 2026 so more that we can do there and absolutely on that journey. And then finally, recycled plastics in our products. And this is really important. You'll remember that recycled plastics for us are a huge hedge to the higher costs of virgin plastics. Quite a few organisations coming out more recently over the last six to nine months talking about material cost inflation relative to virgin plastics we try to insulate ourselves here by having a recycled content although it dropped to 81.3 percent in absolute terms the amount of recycled plastic that we were using has increased but we are actually molding more in our facilities and the ratio dropped back to 81.3 it's still an outstanding achievement you know 80% of what we process in our facilities is from a recycled source but can go higher we're still committed to increasing that over time and as you can see there you know the 10-year increase is quite phenomenal and of course it's lower diminishing returns as we move forward but still more that we can do in the future So as I say, I had the easy bit. I think it's a really compelling set of results. I'm going to hand over to Andy now, take you through the financial review in a little bit more detail, and then I'll come back afterwards and just go through the three geographic areas in a little bit more detail.

Morning all, thank you Ronnie. I don't think this is the hard bit though if that was the easy bit so you know really positive set of numbers which I'm going to spend a few minutes walking you through. So starting with this slide and two words that Ronnie's used a few times in the introductory section were compounding and growth and look ultimately I make no apologies for using them again now that's what we're aiming to deliver and this is showing Thank you very much. continuing to improve on those key sort of quality of earnings and quality of returns metrics so you know I think a really powerful slide which which demonstrates in-year performance which we'll talk more about now but also I say that sort of consistency and compounding of the growth performance so looking in a little bit more detail at year-over-year 2026 versus 2025 you know we'll go through the breakdown and the analysis of the revenue the operating profit the cash etc in later slides so I won't I won't dwell on that too much here a couple of pieces to pick out so that leverage this shows you where we were on the 31st of July so 1.5 times leverage and I think you know probably important to to context that in the last two years we've done our two biggest acquisitions ever we've invested over 200 million pounds in in those two acquisitions and yet we still closed the year with a leverage at 1.5 times on a old money ex leases basis Full transparency, of course, this is pre the Getair transaction. Immediately post that, we'd have been more like 1.8 times. But as you know and as, again, we'll show later, that constant and consistent cash generation profile of the business means that we do still feel there's plenty of headroom and capacity on the M&A side of things. Finance costs, fourth bullet point down there, were higher in the year and that is a function of that investment in acquisitions. And then dividend, we're not a dividend stock, but I think really important to show that we can continue to have this sort of slightly dividend increasing fractionally ahead of earnings year by year whilst continuing to, as I say, deploy our capital to acquisitions. So revenue breakdown. So clearly on the left-hand side, how does our organic growth break down across the three regions? And look, if you were to glance back at the composition of that growth over the last two years, you'll see a very different picture. So you'd have seen perhaps UK in the lead and the others slightly behind. And this year, Ronnie will talk much more about the dynamics of the individual markets later. But you see a bit of a rotation. And look, would we love all of our regions to be Thank you very much. In terms of the breakdown of that organic growth between price and volume, it's roughly equal. So 2.8% organic growth, pretty evenly distributed between, say, price contribution and then volume. For once, actually, foreign exchange was helpful. I think that probably is the first in my seven years that it's been in our favor. and then the inorganic contribution there is the first six months of AC Industries which will have again a further six month contribution in 2027 but also the four months of Fantech through to December 2025. Operating profit, so again, we talked about this in the highlights earlier, the further nudging up, well I suppose 90 basis points is a bit more than a nudge, but the further improvement of the Group operating margin to say that 23.2% level, so 2.8% constant currency revenue growth coming through at 6.3% constant currency profit growth, if you want to think about it that way. Bottom left section of the chart there is really just to try and give this a bit of complexion and detail on a region by region basis. First and really, really important message is all three regions expanded their margins on an organic basis. The UK, I think that 230 basis points improvement on the back of a business where revenue was flat. So I think that is absolutely testament to the delivery that Ronnie talked about earlier in terms of Product Cost Initiatives, efficiencies, whether that's in the factories or the back office. And it's also continuing to push up the, you know, the premiumization, if you like, of the product range that we're selling. Continental Europe, pretty consistent year over year. There's obviously quite a spread and diversity of activities that we have in Continental Europe, but good to see that that margin nudging up slightly. And then in Australasia, we've given you this year and last year, but we've also in the slightly lighter shaded blue there, given you 2026 on an organic basis. So effectively that is essentially excluding the six months of AC Industries. AC Industries did come in at a premium to our group margin, which is unusual when we're at 23.2%, but this was a premium. But even if you take that out, that benefited us by about 60 basis points in the year, but there's still about 100 basis points of underlying margin improvement there, which is great to see. And the biggest element of that, we've talked over the last couple of years about how when Fantech came into the group, It had a good margin, a strong margin, but it wasn't quite at our group levels. And I think this, amongst other things, is early evidence and proof points of us doing what we said we would, which is to move that margin in an upward direction. Moving on to cash, so really, really strong cash generation performance again this year. So our cash conversion target of 90%. We delivered 107% this year. Good, good working capital control. Thank you very much. Thank you very much. we're going to continue spending of that magnitude on a capex side of things and then over on the right hand side of course the big bar there is the 105 million spend in the year on acquisitions so that is 75 million roughly speaking on AC Industries and then 30 million being the deferred element of the Fantech consideration because when we bought that in 2024 there was an obligation to pay the remaining 60 million Aussie dollars 12 months later But let's say the upshot of all of that is we've had one of our most exciting years on an M&A investment perspective, but we still end the year in a very, very healthy balance sheet position. Returns on invested capital, super important. and I suppose the bullets on the right probably capture the key takeaways I give you on this slide here. So overall, the ROIC improved by 20 basis points. Now, we've always said if we've got a return up in this 25% and above level, if we're buying businesses at 8, 9, 10 times trailing earnings, they will or should be dilutive. Actually, I think the fact that AC Industries was only a 40 basis points impact in the year Partly because it's half the year, but actually part of it is testament to the very low multiple that we paid for buying what is a high quality asset there. So 40 basis points dilution because of AC Industries, 20 basis points improvement on Fantech itself, and I think that is, again, coming back to that margin improvement during the course of the year, and then 40 basis points of other organic improvement outside of that. Really, really important metric to us and I think we're very pleased to still be north of 25% after the busy couple of years that we've had M&A wise. and I think there's probably not too much to say here because this really does just sort of wrap up what we've already covered but this is you know where we were in FY26 against those key financial metrics that we sort of pride so heavily. All of them at or above target with the slight exception of organic growth but you know again you know we'll talk more about that shortly but 2.8 percent very close to our sort of three to five percent target and all the others sort of looking very nicely ahead and so with that I'll hand over to Ronnie.

Thanks, Andy. A little bit more detail about the business. And I was listening to Andy taking you through the financial results. And they are, quite frankly, pretty outstanding results. I've been doing this for a long time, not just in volution, but in the industrial world. And when I look at the repeatability and consistency of our results over time, I thought, why do we have that level of confidence? We'll talk about some of the market difficulties in a moment. It's not easy. Then I was thinking to myself, how many of the last 10 years have been easy? The market being really quite punchy and supporting us and providing that additional strength. I guess the point I'm trying to make there is that it's the way in which we run our business, the choices we make about the markets that we want to be in, The decisions we make, and I was pleased to have some of the team along today. Martin, put your hand up there, but Martin's the Group Technical Director and Lee's put up with me for 19 years now, 18 years as the Business Development Director. But look, we're really confident about the outlook for our business, almost irrespective of the market. And even if the market is to be quite difficult in certain areas, it's about that agility and the choices that we make and the way in which we run business. Thank you very much. Thank you very much. and these are great markets. We go to the Australasian region and we talk to our team and they say, competition's really tough here. And I sort of smile about it. Lee spent a couple of years living in New Zealand. Competition is different in New Zealand than it is in the UK. We have a market leadership position. We're very respectful. and mindful of that position. But I think we've created a huge geographic and in-market diversity that gives us a high degree of confidence that the results that we've provided on a training basis can be repeated into the future. And so a little bit more detail on the performance in the year. UK revenue was flat, was up in the first half, it was down in the second half of the year. You know, if I was to stand up now and tell you the UK market's quite difficult, you'd be really surprised to hear me say that. But look, we're adjusting the way in which we run our UK business. The operating profit margin expansion in the year was huge. It was substantial. And we think we're not setting a new target, but we think that there's still more that we could do. I said to the team more recently, we had a perfect year. everything went exactly as it should do we didn't make any mistakes and we had every initiative delivered of course not so there's still more that we could do and what's happening in the market you know residential RMI public housing is is still quite strong but if I was to tell you that residential new build was more challenging you wouldn't be surprised to hear that look at what the house builders are telling us but nevertheless in the year we delivered a really compelling result notwithstanding the fact that the revenue didn't grow and we're positioning our UK business for the long term you know I actually believe in the UK market for the long term I think we will eventually start to build more houses the impact of building regulations is driving a more low-carbon product portfolio and we absolutely in the residential space lead on residential ventilation products and I think there's so much more that we could do there so that's Andy talked about premiumization, but it's about products that are helping our customers deal with their low-carbon challenges, and we're very good at that. On the commercial side, disappointing. We talk about this internally. It's an opportunity. We should be doing a lot more. We think we can do more, and we're continuing to invest in that space. But a disappointing decline in our commercial revenue in the year, but we can do better. During the year, we took on a new facility. and we've made some expansion changes at our Dudley facility we have a very considerable capacity headroom we're just not utilizing it yet but we intend to over time strong growth in export the Irish market is still from a new build perspective probably the complete opposite to what we might talk about in the in the in the UK at the moment but the Irish market is still very strong from a new build perspective and very much focused on low carbon products including what we call mechanical Ventilation with Heat Recovery. And then finally OEM. I think the really important part about OEM is that we are now using a very material quantity of our own produced motors in our products and that's again another initiative that helps expand our operating profit margin. So 28.3% operating profit margin higher in the second half of the year than in the first half despite the fact the revenue declined in the second half. So good trajectory on margin. As Andy said, there's been years that we've stood up here and sort of apologised for more anemic organic growth in continental Europe. 5.9% constant currency, we had some currency tailwinds there both in Europe and in Australasia. But 5.9% is above our long-term 3-5% range, operating profit margin 24.3%, small expansion. Nordics perform well. We've got a strong position in the Nordic market, particularly on the residential side. We're continuing to invest in our central systems and commercial proposition, and I think that's quite exciting about what we can do in future. Our KlimaRad activities in the Netherlands around decentralized heat recovery. There's a really important theme here. Decentralised heat recovery, from my perspective, I don't think I've got enough years left in Volution to see it fully vest, but decentralised heat recovery ventilation is the only way to deal with the existing stock of buildings in Europe. It's the only way to properly ventilate an existing building when you make it airtight. and we now own Klimorad in the Netherlands, Getair in Germany, Inventor in Germany, iVent in Slovenia and Croatia. We have a fantastic product portfolio and we're very excited about this. and we also own one of the largest producers of aluminium heat exchangers, Energy Recovery Industries based in North Macedonia where we've made quite a bit of investment over the last couple of years. Really great support from the board in terms of the investment for a new facility and the product range and the production capability and growing very nicely. So this heat recovery theme is very important to us. We talk about Belgium and France remaining challenging, and it was interesting because I had a comment back, I think, already this morning about, well, we're a little bit worried about France. It's de minimis for us. Whether France performs well or not this year will not change our results. But over time, there's a market in France where we believe we can have a much bigger market share. So this is only upside opportunity over time. We're talking about a small delta on its financial performance in the year. But it's more about the opportunity cost. It's about what we hope to do in France in the future. And we believe we're a challenger there and we can do much better. So sometimes talking about these challenges, they get overemphasized. It really is insignificant from a group perspective today. But how do we make it significant in the future? And as I say, probably the only way is up from our perspective in France, as much as that might feel counterintuitive. Our revenue is circa 10 million out of a total revenue in Central Europe of 150 million. You can get a sense of that. And we've improved the operating profit margin, we've improved the quality of the business, and we've made some really good investments. Martin and his team brought together a new mechanical extract ventilation product about 6-7 months ago now and that's starting to get really good traction. So we're excited about Europe and we think that Europe may be slightly further ahead of the curve in terms of new build recovery than where we might be in the UK at the moment. And finally, Australasia, 48.7% revenue growth. You understand why that was obviously the tailwind from the acquisitions. Organic revenue growth at 3.3%. And adjusted operating profit margin at 22.2%. So we are consistently making north of 20% operating profit margin in all three geographic areas. We have a strong market position in Australasia with the acquisition of Fantech. We're now busy with trying to bring this together and create a sort of scale benefit opportunity similar, I might add, to what we've been doing in the UK over the last 10 plus years. So if you think about the trajectory for the UK business over the last 10 years from a margin perspective, that's the blueprint. We had the team together a few weeks ago in Germany and We actually had the UK finance lead come and tell us about the back office transformation that we've delivered in the UK over the last seven or eight years as a model, a playbook that we have at our disposal to drive our Australasian margin over time. A couple of real big highlights in Australasia at the moment. AC Industries, I've gone on record saying I think it's probably going to be at this moment in time one of our best returning acquisitions yet. It's done phenomenally well since we've acquired it. It's in copper and gold mining, not just in Australia but more globally. We're looking at further international expansion there and how we can supply more into the other continents. And we've got a really good story. This is a product that performs, helps mines reduce their cost. Think about the cost of a mine. They're running ventilation. Those ventilation products are often run off of generators. Those generators are running off of diesel and other fuels. I don't know if you've noticed what's happened to the price of diesel over the last six months but energy reduction by having a super efficient ducting system in a mine is a very significant advantage for us and this is going well and we expect it to continue to go well. We're out in Sydney in about three weeks time and look forward to being with the team again. and we don't want to sort of set the hares running here but it is an opportunity and it will underpin our organic growth this year and we decided it'd be remiss not to talk about the fact that we've had quite a substantial order of about 12 million dollars first order that we're supplying now for ventilation and cooling fans that go into data centres and look our fan tech proposition in Australia is the leader it is the brand that you can trust it is a company that can deliver and when you're looking at large infrastructure projects like this that's why we think we can do quite well in this space so we're happy about that and that's probably a good segue into the outlook and why we feel despite the fact that the UK market is probably at best described as soggy why we still feel that the prospects for the group are really quite strong for the rest of this financial year. I won't repeat this. It was on the first slide. But I will just spend a little bit of time talking about the outlook. And what we're saying here is the year has started well. The Group is delivering organic growth alongside a positive revenue contribution from AEC. It's not organic yet, but it is growing within itself. So if we look at the comps pre our ownership, it's growing strongly, and that's really helpful. We completed the acquisition of Getair in Germany. That integration is underway now. We had another review on the 200-day plan with the team last night. Very pleased about Getair and the proposition that we've got in Germany and the fact that we've got the widest product portfolio and some really good innovation. They were very smart, have been very smart around innovation and Martin will be leading that opportunity and how we can sort of cross-sell, cross-percolate that technology into other areas of the group. We've talked about the UK and no doubt there'll be some questions on it. The UK is challenging but it's fully baked into our view. Okay, we're baking in that the UK will be challenging and will take whatever mitigating steps to deal with that. But there are still lots of opportunities for us to gain share, to innovate and bring new products to market and the way the building regulations are driving this, it's helpful. So we are still reasonably positive about what we can do in the UK despite a more benign, less positive outlook. and we see really good opportunities to build on this momentum, the recent orders for data centres, the strong ACI revenue stream and we have a really strong product portfolio and platform. So the output there is that as the board we're confident that we're delivering another year of good progress and delivering sustainable growth for all of our stakeholders. And what does that mean? I just ask you to have a look at the track record. Look at what we've been delivering over the last 12 years and we're standing up today saying we don't think there's any material difference in our outlook to what we've delivered in the past. So before we go to Q&A, one of the challenges that we have, just looking around the room, some of you have been to our Reading facility where we make about 3 million small plastic ventilation devices each year, 45 injection moulding machines, and then come away from it thinking, they make small plastic fans, that's what Volusion do. And you're right, we do. and then we'd like to take you to our facility in Dudley in the West Midlands over the next couple of months and show you where we make ventilation heat recovery systems but 65% of what we do in our group isn't in the UK and you haven't seen all of the UK and that's a challenge for us you know I guess if it was an all expenses paid trip to visit our factory in Melbourne we'd probably get takers but we need to protect our margins so we decided that the best route Air.