TIDMFAN
RNS Number : 8741Z
Volution Group plc
20 March 2017
Monday 20 March 2017
VOLUTION GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHSED 31 JANUARY 2017
Strong results with revenue growth of 26% and adjusted EPS up
14%.
Continued execution of our strategy: organic growth with
strategic acquisitions.
Volution Group plc ("Volution" or "the Group" or "the Company",
LSE: FAN), a leading supplier of ventilation products to the
residential and commercial construction markets, today announces
its unaudited interim financial results for the 6 months ended 31
January 2017.
6 months 6 months Movement
to January to January in Constant
Financial Results 2017 2016 Movement Currency
Revenue (GBP000) 88,478 70,142 26.1% 19.3%
Adjusted operating
profit (GBP000) 17,134 15,207 12.7% 7.7%
Adjusted profit before
tax (GBP000) 16,535 14,597 13.3% 8.0%
Reported profit before
tax (GBP000) 8,815 8,040 9.6% 0.2%
Adjusted basic and
diluted EPS (pence) 6.54 5.73 14.1% 7.4%
Reported basic and
diluted EPS (pence) 3.61 3.64 (0.8)% (11.4)%
Adjusted operating
cash flow (GBP000) 16,414 11,439 43.5%
Interim dividend
per share (pence) 1.35 1.20 12.5%
Net debt (GBP000) 40,621 38,988
The Group uses some alternative performance measures to track
and assess the underlying performance of the business. These
measures include adjusted operating profit, adjusted profit before
tax, adjusted basic and diluted EPS and adjusted operating cash
flow. For a definition of all the adjusted and non-GAAP measures,
please see the glossary of terms in note 20, a reconcilation to
reported measures set out in note 8.
Financial highlights
-- Strong revenue growth of 26.1% (19.3% at constant
currency):
-- Organic revenue growth of 8.9% (2.3% at constant
currency); and
-- Inorganic revenue growth of 17.2% (17.0% at constant
currency).
-- Ventilation Group revenue grew organically by 10.0%
(3.1% at constant currency) underpinned by strong
results in the Nordics, Central Europe, Residential
New Build in the UK and Exports from the UK.
-- UK Residential RMI revenue grew by 11.3% helped
by acquisitions; an organic decline of 4.5%.
-- OEM (Torin-Sifan) revenue grew by 3.0% (decline
of 2.7% at constant currency).
-- Adjusted operating profit increased by 12.7% to
GBP17.1 million (7.7% at constant currency).
-- As anticipated, adjusted operating profit margin
declined by 2.3 percentage points, mainly as a
consequence of new acquisitions.
-- Reported profit before tax of GBP8.8 million (H1
2016: GBP8.0 million).
-- Adjusted operating cash inflow was very strong
at GBP16.4 million (H1 2016: GBP11.4 million).
-- Interim dividend of 1.35 pence per share, up 12.5%
compared to H1 2016.
-- Adjusted basic and diluted EPS growth of 14.1%
to 6.54 pence (H1 2016: 5.73 pence).
-- Reported basic and diluted EPS declined by 0.8%
to 3.61 pence (H1 2016: 3.64 pence). The decline
of 0.8% is mainly the result of increased amortisation
of acquired intangible assets, a loss on fair valuing
financial instruments of GBP0.2 million (H1 2016:
a gain of GBP0.7 million) and a change in the rate
of deferred tax.
Strategic highlights
-- The acquisition of Breathing Buildings was completed
in December 2016, widening Volution's capability
with a market leader in natural and hybrid ventilation
for commercial buildings, in particular focusing
on new construction for Education. All integration
activity is progressing in line with our internal
plans.
-- The acquisition of National Ventilation and Airtech,
in May 2016, increased our share of the UK Residential
RMI market. Integration is progressing very well
with the introduction of new products from the
wider Volution Ventilation Group in to their offering.
-- The introduction of the new range of "Sentinel
Kinetic Advance" heat recovery systems to the UK
and Continental Europe is gaining traction and
the development of higher airflow products to the
range is underway.
-- OEM (Torin-Sifan) has commenced sales, while later
than planned, of the new three phase, Electronically
Commutated (EC3) motors, with further momentum
in sales expected in H2 2017.
Commenting on the Group's performance, Ronnie George, Chief
Executive Officer, said:
"We have delivered another strong set of results with excellent
cash generation continuing to support our strategy to grow
organically and by acquisitions. Nordic and Central Europe sectors'
organic growth was very pleasing and the integration of our recent
acquisition of Breathing Buildings is proceeding well.
We continue to focus on developing our wide product portfolio
across our increasing market reach; including our application
software-controlled fan now being sold successfully in the Nordics,
UK and Central Europe, and our "Sentinel Kinetic Advance" heat
recovery unit is selling in both the UK and Central Europe."
Outlook
"The second half of 2017 has started in line with our
expectations, and despite the uncertainty in the UK following the
decision to leave the European Union and the continuing weakness in
UK Public Residential RMI, we remain confident in delivering
further good growth in 2017 in line with our strategy."
-Ends-
For further information:
Enquiries:
Volution Group plc
Ronnie George, Chief Executive Officer +44 (0) 1293 441501
Ian Dew, Chief Financial Officer +44 (0) 1293 441536
Tulchan Communications +44 (0) 207 353 4200
James Macey White
Matt Low
A presentation will be held for analysts at 9.30 am today,
Monday 20 March, at the offices of Tulchan Communications, 85 Fleet
Street, London, EC4Y 1AE.
A copy of this announcement and the presentation given to
analysts will be available on our website www.volutiongroupplc.com
from 7.00 am on Monday 20 March.
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) prior to its release as part of this
announcement.
Note to Editors:
Volution Group plc (LSE: FAN) is a leading supplier of
ventilation products to the residential and commercial construction
markets in the UK, the Nordics and Central Europe.
The Volution Group operates through two divisions: the
Ventilation Group and the OEM (Torin-Sifan) division. The
Ventilation Group consists of 12 key brands - Vent-Axia, Manrose,
Diffusion, National Ventilation, Airtech, Breathing Buildings,
Fresh, PAX, Welair, inVENTer, Brüggemann and Ventilair, focused
primarily on the UK, the Nordic and Central European ventilation
markets. The Ventilation Group principally supplies ventilation
products for residential and commercial ventilation applications.
The OEM (Torin-Sifan) division supplies motors, fans and blowers to
OEMs of heating and ventilation products for both residential and
commercial construction applications in Europe.
For more information, please go to: www.volutiongroupplc.com
Cautionary statement regarding forward-looking statements
This document may contain forward-looking statements which are
made in good faith and are based on current expectations or
beliefs, as well as assumptions about future events. You can
sometimes, but not always, identify these statements by the use of
a date in the future or such words as "will", "anticipate",
"estimate", "expect", "project", "intend", "plan", "should", "may",
"assume" and other similar words. By their nature, forward-looking
statements are inherently predictive and speculative and involve
risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. You should not place
undue reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to factors that
could cause our actual results to differ materially from those
expressed or implied by these statements. The Company undertakes no
obligation to update any forward-looking statements contained in
this document, whether as a result of new information, future
events or otherwise.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
Volution continued to make good progress on its growth strategy
in the first half of the year. As well as reporting further organic
growth, we completed the acquisition of Breathing Buildings, in
December 2016 which extended our reach in to the new-build
education market in our UK commercial sector.
Our results for the six months were ahead of expectations with
both organic and inorganic growth in revenue and the additional
benefit of currency tailwinds. Revenue increased to GBP88.5
million, up by 26.1% (19.3% at constant currency) compared to H1
2016. Adjusted operating profit grew in the first six months, by
12.7% (7.7% at constant currency) to GBP17.1 million, representing
19.4% of revenue.
The acquisition of Breathing Buildings was completed in December
2016 and its integration is going very well and progressing to
plan. Next steps include an extension of its product range now that
it can access the wider Volution product portfolio.
Our organic growth was pleasing, with continuing growth in the
Nordics, Central Europe, UK Export and UK Residential New Build.
This was offset by the disappointing performance of the UK
Residential RMI market. UK Commercial was broadly flat in the first
half of the year which represents an improving trend compared to
the organic decline in FY 2016.
The recent acquisitions of NVA Services ("NVA", trading as
National Ventilation and Airtech), acquired in May 2016, and Energy
Technique (trading as "Diffusion"), acquired in December 2015, have
contributed to our inorganic growth by increasing our market share
in the UK. Both businesses have grown organically compared with the
corresponding pre-acquisition period, although we do not recognise
this in our organic growth measure until after the first
anniversary of the acquisition.
OEM (Torin-Sifan) grew in the period by 3.0% due to favourable
foreign exchange rates, at constant currency OEM (Torin-Sifan)
declined by 2.7% due to lower sales of residential ventilation
products. OEM (Torin-Sifan) has been increasing the sales of its
products inside Volution since a number of the newly acquired
businesses are now sourcing motorised impellers from within the
Group. We expect this insourcing to gather further momentum in the
second half of 2017.
Ventilation Group
Revenue: GBP77.7 million, 87.8% of Group
revenue (GBP73.5 million at constant
currency)
(H1 2016: GBP59.7 million, 85.1%
of Group revenue)
Adjusted operating GBP16.3 million, 94.9% of Group
profit: adjusted operating profit
(H1 2016: GBP14.3 million, 94.0%
of Group adjusted operating profit)
Constant currency
---------------------------
2017 2017 2016 Growth
Market sectors GBP000 GBP000 GBP000 %
-------------------------- -------- -------- -------- -------
Ventilation Group
UK Residential RMI 18,929 18,929 17,011 11.3%
UK Residential New Build 10,222 10,222 8,333 22.7%
UK Commercial 15,044 15,044 8,246 82.4%
UK Export 4,717 4,283 2,816 52.1%
Nordics 15,478 13,460 12,433 8.3%
Central Europe 13,328 11,590 10,858 6.7%
-------------------------- -------- -------- -------- -------
Total Ventilation Group 77,718 73,528 59,697 23.2%
-------------------------- -------- -------- -------- -------
The Ventilation Group's performance was strong, with a 30.2%
increase in revenue compared to H1 2016 (23.2% at constant
currency). Organic growth was 10.0% (3.1% at constant currency) due
to strong growth in UK Residential New Build, UK Export, Nordics
and Central Europe, offset by the declining revenue in the UK
Residential RMI market, primarily public.
United Kingdom
Sales in our UK Residential RMI sector were GBP18.9 million (H1
2016: GBP17.0 million), growth of 11.3% assisted in the six months
by the additional revenues from NVA. Organic revenues in this
sector remained weak, as private refurbishment revenue declined by
1.8% and public refurbishment revenue declined by 8.5%. The
difficulties with the public market were expected and the outlook
remains weak. Our new product, "Revive", is now starting to get
some sales traction and we expect further improvement in the
revenues of this product in H2 2017. The integration of Airtech,
has also helped us increase our market share in this sector. New
products have been developed, exclusively for use by Airtech to
support their growth, and although not yet included in our organic
growth measure, Airtech has been achieving growth, on the prior
year pre-acquisition sales.
Private UK Residential RMI demand has been weak although the
long term dynamics of this market are very good. Increasing
awareness of indoor air quality (IAQ) issues is apparent and
despite our organic decline in H1 2017, sales of quieter, more
aesthetic and energy efficient products are improving. The
acquisition of National Ventilation has also increased our market
share in this sector, with this extra coverage enabling us to reach
in to other areas of the market, previously harder to access prior
to this acquisition.
Sales in our UK Residential New Build sector were GBP10.2
million (H1 2016: GBP8.3 million), growth of 22.7%, assisted in the
six months by the additional revenues from Diffusion, acquired in
December 2015. Organic growth achieved was 7.7%. The new "Sentinel
Kinetic Advance" is starting to gain sales traction and has been
specified for a number of new projects. We were delighted that this
product recently won the prestigious award for "Energy Efficient
Product of the Year" from the Chartered Institution of Building
Services Engineers, with the Breathing Buildings' "NVHR" (Natural
Ventilation with Heat Recycling) product also nominated in the
category.
Sales in our UK Commercial sector grew by 82.4% in the six
months to GBP15.0 million (H1 2016: GBP8.2 million) as a result of
the acquisition of Diffusion, NVA and Breathing Buildings. The
organic revenue was broadly flat, an improving trajectory compared
to FY 2016. Since the acquisition of Diffusion, sales have
performed very strongly with a number of notable project wins for
the supply of fan coils, requiring us to increase the manufacturing
capacity of the business to support the increasing demand.
UK Export sales were GBP4.7 million (H1 2016: GBP2.8 million),
strong growth of 67.5% (52.1% at constant currency), benefiting
from the additional export sales from Diffusion and a very strong
organic like-for-like growth of 38.1% (22.5% organic growth at
constant currency). UK Export sales continue to grow strongly with
the supply of central systems to New Zealand, Eire and a number of
continental European customers.
The Nordics
Sales in the Nordics sector were GBP15.5 million (H1 2016:
GBP12.4 million), an increase of 24.5% (8.3% at constant currency)
with ongoing organic revenue growth of 19.4% (3.8% growth at
constant currency). The introduction of new wall inlet grilles and
the first application software controlled fan have underpinned the
organic growth in the Nordics.
Central Europe
Sales in the Central Europe sector were GBP13.3 million (H1
2016: GBP10.9 million), an increase of 22.7% (6.7% at constant
currency). The improvement and introduction of new products in
Germany have supported our organic growth. Improved product
aesthetics in FY 2016 were delivered through new wall grilles and
recently in FY 2017 we have improved the range of wall mounted
controllers, with a number of other exciting developments coming to
market in FY 2018. The investment in expanding our sales network in
Germany under the inVENTer brand is also complete, the benefits
being seen in H1 2017.
In Belgium and the Netherlands we have launched an extended
range of products under the Vent-Axia brand. This roll out, through
the wholesaler distribution channel, is also starting in Germany
and is an example of where Volution can use its greater market
access to leverage the sales of our comprehensive product
portfolio. Further investment in our sales force is underway in
Belgium and the Netherlands and whilst we expect to see further
improvement in the second half of the year, this is a long term
plan to grow in these markets over the coming years.
OEM (Torin-Sifan)
GBP10.8 million, 12.2% of Group
revenue (GBP10.2 million at constant
Revenue: currency)
(H1 2016: GBP10.4 million, 14.9%
of Group revenue)
Adjusted operating GBP2.1 million, 12.5% of Group adjusted
profit: operating profit
(H1 2016: GBP1.9 million, 12.7%
of Group adjusted operating profit)
Constant currency
---------------------------
2017 2017 2016 Growth
Market sectors GBP000 GBP000 GBP000 %
---------------- -------- -------- -------- -------
OEM 10,760 10,159 10,445 (2.7%)
---------------- -------- -------- -------- -------
Total OEM 10,760 10,159 10,445 (2.7%)
---------------- -------- -------- -------- -------
Our OEM (Torin-Sifan) segment revenue was GBP10.8 million (H1
2016: GBP10.4 million), an increase of 3.0% (2.7% decline at
constant currency). Sales of highly efficient Electrically
Commutated (EC) technology products have been launched later than
originally anticipated and sales volumes of traditional, less
efficient, Alternating Current (AC) technology products reduced;
however, price increases for these AC products supported revenue.
The first deliveries of EC3 products have commenced across several
new projects with a number of UK & Continental European
customers. EC3 sales development activities will continue over the
coming months in the UK & Europe. Sales of single phase EC
fandecks and motors have performed well due to good demand from
both new and existing customers. Demand for EC technology products
continues to be driven by ever tighter European legislation driving
the continued migration of sales from traditional AC technology to
energy saving EC solutions.
Three strategic pillars
Our strategy continues to focus on three key pillars:
-- Organic growth in our core markets (which has been extended
to include a leading position in the UK education sector since the
acquisition of Breathing Buildings);
-- Growth through a disciplined and value-adding acquisition strategy; and
-- Further development of OEM (Torin-Sifan's) range, to build
customer preference and loyalty.
These markets, as well as the original core markets for
Volution, provide the Group with the long term growth opportunities
driven by a favourable regulatory backdrop that focuses on reducing
carbon emissions from buildings (in particular new buildings) as
well as the need to improve energy efficiency and indoor air
quality.
The European market remains highly fragmented and we will
continue to pursue acquisition opportunities leveraging the Group
capabilities in operations, procurement, distribution and finance,
which we have invested in over recent years. Our Research and
Development function, as well as our recently expanded procurement
function, including our own sourcing team in China, which is
assisting greatly with existing and new procurement projects,
should enable us to deliver significant synergies from both
existing and potential new acquisitions.
The investment we have made in Torin-Sifan, both in new product
development and a new production facility, has established a strong
base for future revenue growth and profit improvement. The launch
of the new EC3 motorised impeller range, whilst later than planned,
is now starting to gain approval and we have started to make sales
in the first half of FY 2017.
Operations - factory rationalisation
We have commenced a project to rationalise part of our UK
manufacturing footprint into one location. Between now and mid 2018
the injection moulding facility in Reading, the fan assembly at
Slough and the administration for a subsidiary operation, Manrose
Manufacturing, will all have been relocated to Suttons Business
Park in Reading. The project has commenced and we anticipate the
total cost of the relocation will be approximately GBP1.75 million
over the life of the project, which we have and will continue to
treat as an exceptional item in the financial statements.
Dividend
The Board has declared an interim dividend of 1.35 pence per
share, which represents growth of 12.5% compared to H1 2016. The
interim dividend will be paid on 4 May 2017 to shareholders on the
register at the close of business on 31 March 2017.
UK leaving the European Union
The weakness of sterling following the referendum to leave the
EU has persisted and has led to increasing cost pressures in the UK
primarily from the direct import of components. Our exposure to US
dollar denominated purchases from Asia is partially hedged for the
balance of the year and we continue to mitigate the effect on costs
by implementing price increases and product cost reduction.
People
Our second internal Management Development Programme (MDP) will
conclude in April 2017. This programme, which has been running for
just under one year has visited many of the Volution Group
locations. We place considerable value on this programme which has
significantly assisted in the integration of new acquisitions as
our high potential managers are made to feel part of a wider group
network and assist in the formation of the overall Group culture.
Such is the success of this programme we are already in the
planning stages for the third programme which will commence early
in 2018, with the selection process taking place in the autumn of
this year.
During the financial year 2016, we completed four acquisitions,
and have already completed one acquisition so far in FY 2017. I
continue to be impressed with how quickly the newly acquired
businesses become integrated into the Group. Having completed nine
acquisitions since September 2012 we are building up, not just at
the senior management level, but company-wide, a competence and
skill of integration which will underpin our future successes.
Ronnie George
Chief Executive Officer
20 March 2017
FINANCIAL REVIEW
Trading Performance Summary
Reported Adjusted (1)
----------------------- --------------------
6 months 6 months 6 months 6 months
to 31 to to 31 to 31
January 31 January January January
2017 2016 Movement 2017 2016 Movement
------------------ --------- ------------ --------- --------- --------- ---------
Revenue
(GBP000) 88,478 70,142 26.1% 88,478 70,142 26.1%
Operating
profit (GBP000) 9,634 7,945 21.3% 17,134 15,207 12.7%
Finance
costs (GBP000) (829) (621) 33.5% (609) (621) (1.9)%
Profit before
tax (GBP000) 8,815 8,040 9.6% 16,535 14,597 13.3%
Basic and
diluted
EPS (p) 3.61 3.64 (0.8)% 6.54 5.73 14.1%
Interim
dividend
per share
(p) 1.35 1.20 12.5% 1.35 1.20 12.5%
Operating
cash flow
(GBP000) 15,656 10,267 52.5% 16,414 11,439 43.5%
Net debt
(GBP000) 40,621 38,988 40,621 38,988
------------------ --------- ------------ --------- --------- --------- ---------
(1) The Group's reported profit before tax and adjusted measures
of performance are reconciled in note 8. For a definition of all
adjusted measures see the glossary of terms in note 20.
Revenue
Group revenue during the six months ended 31 January 2017 was
GBP88.5 million (H1 2016: GBP70.1 million), a 26.1% increase (19.3%
at constant currency). Growth was achieved both organically, 8.9%
(2.3% at constant currency), and inorganically from acquisitions,
17.2% (17.0% at constant currency). The inorganic growth was a
result of the full period effect of the three acquisitions, Welair
in December 2015, Diffusion in December 2015 and NVA in May 2016,
as well as the acquisition of Breathing Buildings in December
2016.
Profitability
Our underlying result, as measured by adjusted operating profit,
was GBP17.1 million (H1 2016: GBP15.2 million), representing 19.4%
of revenue (H1 2016: 21.7%), a GBP1.9 million improvement compared
to H1 2016. At constant currency our adjusted operating profit grew
by 7.7% (GBP1.2 million) a margin of 18.5%. At constant currency
the adjusted operating profit margin of 18.5% represents a 3.2
percentage point decline in the period as a consequence of the
acquisition of businesses that currently have a profit margin lower
than the Group average, as well as the adverse product mix
resulting from a decline in organic revenue in our UK Residential
RMI sector. The Group's profitability benefited from the full
period effect of the acquisitions made during the last financial
year and the acquisition of Breathing Buildings in December 2016.
Like-for-like adjusted operating profit margin declined by 0.7
percentage points to 21.0%.
The Group's reported operating profit in the six months was
GBP9.6 million compared to GBP7.9 million in H1 2016, growth of
GBP1.7 million, 21.3%. The reconciliation between reported and
adjusted operating profit can be found in note 8.
Acquisitions
The Group's trading benefited in the six months from one
acquisition completed in the period, which was financed from our
existing cash reserves and bank facilities:
-- On 16 December 2016 we completed the acquisition of Breathing
Buildings Limited, based in the UK. The consideration was GBP11.9
million (GBP11.6 million net of cash acquired).
For further details please refer to note 14.
The Group's trading also benefited in the six months from the
acquisitions completed in the second half of the prior year, which
were financed from our existing cash reserves and bank
facilities:
-- On 10 May 2016 we completed the acquisition of NVA Services
Limited (trading as National Ventilation and Airtech), based in the
UK. The consideration was GBP6.7 million (GBP6.5 million net of
cash acquired).
The Group's trading benefited from the full period effect of the
acquisitions completed in the first half of the prior year, which
were financed from our existing cash reserves and bank
facilities:
-- On 21 December 2015 we completed the acquisition of Energy
Technique plc (trading as Diffusion, based in the UK. The
consideration was GBP9.4 million (GBP8.2 million net of cash
acquired);
-- On 1 December 2015 we completed the acquisition of Welair AB,
based in Sweden. The consideration was SEK 7.8 million
(approximately GBP0.6 million).
Exceptional items and adjusted performance measures
Exceptional items, by virtue of their size, incidence or nature,
are disclosed separately in order to allow a better understanding
of the underlying trading performance of the Group. During the
period ended 31 January 2017 exceptional items were GBP0.8 million
(H1 2016: GBP1.0 million). Details of these exceptional items can
be found in note 6.
The Board and key management personnel use some alternative
performance measures to track and assess the underlying performance
of the business. These measures include adjusted operating profit,
adjusted profit before tax, adjusted basic and diluted EPS and
adjusted operating cash flow. These measures are deemed more
appropriate as they remove income and expenditure which is not
directly related to the ongoing trading of the business. A
reconciliation of these measures of performance to reported profit
before tax is detailed in note 8. In addition to exceptional items,
the following are also excluded from adjusted measures:
-- Amortisation of acquired intangibles: on acquisition of a
business, where appropriate, we value identifiable intangible fixed
assets acquired such as trademarks and customer base and recognise
these assets in our consolidated statement of financial position;
we then amortise these acquired intangible assets over their useful
lives. In the six months the amortisation charge of these
intangible assets was GBP6.7 million (H1 2016: GBP6.1 million). We
exclude this accounting adjustment in the calculation of our
adjusted earnings because it is a cost associated with
acquisitions, not the underlying trading of the businesses.
-- Fair value adjustments: at each reporting period end date, we
measure the fair value of financial derivatives and recognise any
gains or losses immediately in finance cost. During the six months
we recognised a loss of GBP0.2 million (H1 2016: gain of GBP0.7
million). We exclude these gains or losses in our measures of
adjusted earnings because they are accounting adjustments which
will reverse in future periods and do not reflect the underlying
trading of the business.
Finance costs and finance revenue
Finance costs were GBP0.8 million (H1 2016: GBP0.6 million)
including GBP0.2 million of net losses on revaluation of financial
instruments (H1 2016: GBPnil).
Finance revenue was negligible (H1 2016: GBP0.7 million)
including GBPnil net gains on revaluation of financial instruments
(H1 2016: GBP0.7 million).
Taxation
The UK Finance (No. 2) Act 2015, which was enacted on 18
November 2015, introduced a reduction in the UK headline rate of
corporation tax to 19% and 18% from 1 April 2017 and 1 April 2020
respectively. A further reduction in the headline rate to 17% from
1 April 2020 was included in the UK Finance Act 2016 which was
enacted on 15 September 2016.
Our adjusted effective tax rate, before the effect of this
adjustment to deferred tax liabilities, was 21.3% (H1 2016: 21.6%).
The Group has large UK deferred tax liabilities on its consolidated
statement of financial position and the liabilities have been
recalculated as a consequence of these tax rate changes. As a
result the UK deferred tax liability has decreased, with a one off
credit of GBP0.4 million recognised in the income statement in the
period to 31 January 2017. This has reduced our effective tax rate
in the period to 18.5% (H1 2016: GBP1.1m exceptional deferred tax
credit reducing the effective tax rate to 9.6%).
The Group's medium-term adjusted effective tax rate is expected
to remain around 21% of the Group's adjusted profit before tax.
Operating cash flow
The Group continued to be strongly cash generative in the
period, with adjusted operating cash inflow of GBP16.4 million (H1
2016: GBP11.4 million). This represents a cash conversion, after
capital expenditure and movement in working capital, of 94.0% (H1
2016: 74.6%). The Group continues to manage its working capital
efficiently with operating working capital representing 22.3% of
half year revenue (H1 2016: 27.5%). See the glossary of terms in
note 20 for a definition of adjusted operating cash flow and cash
conversion.
Employee Benefit Trust
The Trustees of the Volution Employee Benefit Trust did not
purchase any shares during the period (H1 2016: 528,000) and no
shares (H1 2016: no shares) were released from the Trust to satisfy
the Company's obligations under its Long Term Incentive Plan and
Deferred Share Bonus Plan. As at 31 January 2017 the Employee
Benefit Trust held 916,878 shares (31 July 2016: 916,878). The
Employee Benefit Trust has been consolidated into our results and
the shares purchased have been treated as treasury shares deducted
from shareholders' funds.
Foreign exchange
The Group is exposed to the impact of changes in the foreign
currency exchange rates on transactions denominated in currencies
other than the functional currency of our operating businesses. We
have significant Euro income in the UK which is mostly balanced by
Euro expenditure in the UK. We have little US dollar income but
significant US dollar expenditure. We have limited our
transactional foreign exchange risk by purchasing the majority of
our forecast US dollar requirements for, and in advance of, the
2017 financial year.
We are also exposed to translational currency risk as the Group
consolidates foreign currency-denominated assets, liabilities,
income and expenditure into sterling, the Group's functional
currency. We hedge the translation risk of the net assets in Fresh
and PAX with GBP16.4 million of borrowings denominated in Swedish
krona (31 July 2016: GBP15.9 million). We have partially hedged our
risk of translation of the net assets of inVENTer, Brüggemann and
Ventilair by having Euro-denominated bank borrowings in the amount
of GBP22.4 million as at 31 January 2017 (31 July 2016: GBP22.0
million). The sterling value of our foreign currency-denominated
loans, net of cash, increased by GBP0.8 million (H1 2016: GBP2.6
million) as a consequence of exchange rate movements. We do not
hedge the translational exchange rate risk to the results of
overseas subsidiaries.
During the six months, movements in foreign currency exchange
rates have had a favourable effect on the reported revenue and
profitability of our business. If we had translated the H1 2017
performance of the Group at our 2016 exchange rates, the reported
Group revenues would have been GBP83.7 million, GBP4.8 million
lower, and adjusted operating profit would have been GBP16.4
million, GBP0.7 million lower.
At the end of the half year the weakening of sterling increased
the value of foreign currency-denominated working capital by GBP0.2
million compared to the foreign exchange rates applying at the
beginning of the half year.
Net debt
Net debt as at 31 January 2017 was GBP40.6 million (H1 2016:
GBP39.0 million), comprised of bank borrowings of GBP54.3 million
(H1 2016: bank borrowings of GBP54.9 million), offset by cash and
cash equivalents of GBP13.7 million (H1 2016: GBP15.9 million). The
net debt of GBP40.6 million represents leverage of 1.1x adjusted
EBITDA on a trailing 12 month basis.
Movements in net debt position for the six months ending 31
January 2017
2017 2016
GBPm GBPm
Opening net debt 1 August (36.1) (21.2)
-------------------------------------------------- ------- -------
Movements from normal business operations:
Adjusted EBITDA 18.9 16.5
Movement in working capital (0.9) (2.5)
Share-based payments 0.3 -
Capital expenditure (1.9) (2.6)
-------------------------------------------------- ------- -------
Adjusted operating cash flow 16.4 11.4
- Interest paid net of interest received (0.6) (0.5)
- Income tax paid (2.3) (2.1)
- Exceptional items (0.4) (0.3)
- Other - 0.3
- Dividend paid (5.2) (4.5)
- FX on foreign currency loans/cash (0.8) (2.6)
- Purchase of own shares - (1.0)
Movements from acquisitions:
- Acquisition consideration net of cash acquired (11.6) (18.5)
-------------------------------------------------- ------- -------
Closing net debt 31 January (40.6) (39.0)
-------------------------------------------------- ------- -------
Bank facilities, refinancing and liquidity
The Group's bank facilities, at 31 January 2017, consisted of a
GBP90 million revolving credit facility, maturing in April
2019.
As at 31 January 2017, the Group had GBP35.7 million of undrawn,
committed bank facilities and GBP13.7 million of cash and cash
equivalents on the consolidated statement of financial
position.
UK leaving the European Union
Since the UK referendum on EU membership the weakness of
sterling against foreign currencies has persisted. The positive and
negative effects of this weakness in sterling on our trading are
described elsewhere in this report. Other than these currency
effects, the business has seen no other effects on trading that can
be attributed to the decision to leave the EU. We continue to
monitor our business closely for any such effects but believe that
the decision to leave the EU will not have any material near-term
impact on demand for our products.
Earnings per share
Our adjusted basic and diluted EPS grew by 14.1% to 6.54 pence
(H1 2016: 5.73 pence).
The basic and diluted earnings per share for the six months
ended 31 January 2017 was 3.61 pence (H1 2016: 3.64 pence) a
decline of 0.8%. The decline is mainly the result of increased
amortisation of acquired intangible assets, a loss on fair valuing
financial instruments of GBP0.2 million (H1 2016: a gain of GBP0.7
million) and a change in the rate of deferred tax which resulted in
an unusually low tax charge in H1 2016. A reconciliation of
reported profit after tax to adjusted profit after tax is set out
in note 8.
Ian Dew
Chief Financial Officer
20 March 2017
PRINCIPAL RISKS AND UNCERTANTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The Directors do not consider that the principal risks and
uncertainties have changed since the publication of the Annual
Report for the year ended 31 July 2016. These risks are summarised
below, and how the Group seeks to mitigate these risks is set out
on pages 30 to 35 of the Annual Report 2016 which can be found at
www.volutiongroupplc.com.
A summary of the nature of the risks currently faced by the
Group is as follows:
Economic risk
A decline in general economic activity and/or a specific decline
in activity in the construction industry, including, but not
exclusively, an economic decline caused by the result of the UK
referendum on EU membership, would result in a decline in demand
for our products serving the residential and commercial RMI and new
build markets. This would result in a reduction in revenue and
profitability.
Foreign exchange risk
The exchange rates between currencies that we use may move
adversely. The commerciality of transactions denominated in
currencies other than the functional currency of our businesses
and/or the perceived performance of foreign subsidiaries in our
sterling denominated consolidated financial statements may be
adversely affected by changes in exchange rates.
Acquisitions
We may fail to identify suitable acquisition targets at an
acceptable price or we may fail to consummate or properly integrate
the acquisition. The impact could include: revenue and
profitability which may not grow in line with management's
ambitions and investor expectations; a failure to properly
integrate a business may distract senior management from other
priorities and adversely affect revenue and profitability;
financial performance by failure to integrate acquisitions and
therefore not secure possible synergies.
Innovation
We may fail to innovate commercially or technically viable
products to maintain and develop our product leadership position.
Scarce development resource may be misdirected and costs incurred
unnecessarily. Failure to innovate may result in an ageing product
portfolio which falls behind that of our competition.
Supply chain and raw materials
Raw materials or components may become difficult to source
because of material scarcity or disruption of supply. Sales and
profitability may be reduced during the period of constraint.
Prices for the input material may increase and our costs may
increase.
IT systems
We may be adversely affected by a breakdown in our IT systems or
a failure to properly implement any new systems. Failure of our IT
and communication systems could affect any or all of our business
processes and have significant impact on our ability to trade,
collect cash and make payments.
Customers
A significant amount of our revenue is derived from a small
number of customers and from our relationships with heating and
ventilation consultants. We may fail to maintain these
relationships. Any deterioration in our relationship with a
significant customer could have an adverse significant effect on
our revenue from that customer.
Legal and regulatory environment
Changes in laws or regulation relating to the carbon efficiency
of buildings or the efficiency of electrical products may change.
The shift towards higher value-added and more energy-efficient
products may not develop as anticipated resulting in lower sales
and profit growth. If our products are not compliant and we fail to
develop new products in a timely manner we may lose revenue and
market share to our competitors.
People
Our continuing success depends on retaining key personnel and
attracting skilled individuals. Skilled and experienced employees
may decide to leave the Group, potentially moving to a competitor.
Any aspect of the business could be impacted with resultant
reduction in prospects, sales and profitability.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge:
The condensed consolidated set of financial statements has been
prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting' as adopted by the European Union and
that the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period; and any changes in the related party
transactions described in the Annual Report 2016 that could do
so.
The Directors of Volution Group plc are listed in the Company's
Annual Report for the year ended 31 July 2016 and can also be found
on the Company's website at www.volutiongroupplc.com.
By order of the Board
Ronnie George Ian Dew
Chief Executive Officer Chief Financial Officer
20 March 2017 20 March 2017
INDEPENT REVIEW REPORT TO VOLUTION GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 January 2017 which comprises the interim
condensed consolidated statement of comprehensive income, the
interim condensed consolidated statement of financial position, the
interim condensed consolidated statement of changes in equity, the
interim condensed consolidated statement of cash flows and the
related notes 1 to 20. We have read the other information contained
in the half yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
January 2017 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
20 March 2017
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
for the six months ended 31 January 2017
2017 2016
Unaudited Unaudited
Notes GBP000 GBP000
Revenue 4 88,478 70,142
Cost of sales (44,885) (35,521)
----------- -----------
Gross profit 43,593 34,621
Distribution costs (13,333) (9,679)
Administrative expenses (19,868) (16,021)
----------- -----------
Operating profit before exceptional items 10,392 8,921
Exceptional items 6 (758) (976)
----------- -----------
Operating profit 9,634 7,945
Finance revenue 7 10 716
Finance costs 7 (829) (621)
----------- -----------
Profit before tax 8,815 8,040
Income tax 9 (1,629) (769)
----------- -----------
Profit for the period 7,186 7,271
Other comprehensive income:
Items that may subsequently be reclassified to profit or loss:
Exchange differences arising on translation of foreign operations 661 1,708
Loss on hedge of net investment in foreign operation (493) (832)
----------- -----------
Other comprehensive income for the period 168 876
----------- -----------
Total comprehensive income for the period 7,354 8,147
=========== ===========
Earnings per share
Basic and diluted, pence per share 10 3.61 3.64
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
as at 31 January 2017
31 January 2017 31 July 2016
Unaudited Audited
Notes GBP000 GBP000
Non-current assets
Property, plant and equipment 11 19,034 19,130
Intangible assets - goodwill 12 75,216 68,228
Intangible assets - other 13 103,991 105,361
Deferred tax assets 655 450
---------------- -------------
198,896 193,169
---------------- -------------
Current assets
Inventories 21,563 20,156
Trade and other receivables 32,448 32,935
Other current financial assets 15 694 914
Cash and short term deposits 13,672 15,744
---------------- -------------
68,377 69,749
---------------- -------------
Total assets 267,273 262,918
================ =============
Current liabilities
Trade and other payables (34,271) (35,090)
Income tax (3,595) (2,472)
Provisions (1,202) (1,268)
Deferred tax Liabilities - (2,395)
---------------- -------------
(39,068) (41,225)
---------------- -------------
Non-current liabilities
Interest bearing loans and borrowings 16 (53,775) (51,235)
Provisions (683) (671)
Deferred tax liabilities (17,710) (16,242)
---------------- -------------
(72,168) (68,148)
---------------- -------------
Total liabilities (111,236) (109,373)
================ =============
Net assets 156,037 153,545
================ =============
Capital and reserves
Share capital 2,000 2,000
Share premium 11,527 11,527
Capital reserve 93,855 93,855
Treasury shares at cost (1,533) (1,533)
Share-based payment reserve 963 649
Foreign currency translation reserve 1,630 1,462
Retained earnings 47,595 45,585
---------------- -------------
Total equity 156,037 153,545
================ =============
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
for the six months ended 31 January
Foreign
Treasury Share-based currency
Share Share Capital shares at payment translation Retained
capital premium reserve cost reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 August
2015
(Audited) 2,000 11,527 92,325 - 181 (463) 36,876 142,446
----------- ----------- ----------- ----------- ------------ ------------ ----------- --------
Profit for the
period - - - - - - 7,271 7,271
Other
comprehensive
income - - - - - 876 - 876
----------- ----------- ----------- ----------- ------------ ------------ ----------- --------
Total
comprehensive
income - - - - - 876 7,271 8,147
Purchase of
own shares - - - (987) - - - (987)
Share-based
payment - - - - 185 - - 185
Dividends paid - - - - - - (4,500) (4,500)
----------- ----------- ----------- ----------- ------------ ------------ ----------- --------
At 31 January
2016
(Unaudited) 2,000 11,527 92,325 (987) 366 413 39,647 145,291
=========== =========== =========== =========== ============ ============ =========== ========
Profit for the
period - - - - - - 8,336 8,336
Other
comprehensive
income - - - - - 1,049 - 1,049
----------- ----------- ----------- ----------- ------------ ------------ ----------- --------
Total
comprehensive
income - - - - - 1,049 8,336 9,385
Fair value
adjustment(1) - - 1,530 - - - (4) 1,526
Purchase of
own shares - - - (546) - - - (546)
Share-based
payment - - - - 283 - - 283
Dividends paid - - - - - - (2,394) (2,394)
----------- ----------- ----------- ----------- ------------ ------------ ----------- --------
At 31 July
2016
(Audited) 2,000 11,527 93,855 (1,533) 649 1,462 45,585 153,545
----------- ----------- ----------- ----------- ------------ ------------ ----------- --------
Profit for the
period - - - - - - 7,186 7,186
Other
comprehensive
income - - - - - 168 - 168
----------- ----------- ----------- ----------- ------------ ------------ ----------- --------
Total
comprehensive
income - - - - - 168 7,186 7,354
Share-based
payment - - - - 314 - - 314
Dividends paid - - - - - - (5,176) (5,176)
----------- ----------- ----------- ----------- ------------ ------------ ----------- --------
At 31 January
2017
(Unaudited) 2,000 11,527 93,855 (1,533) 963 1,630 47,595 156,037
=========== =========== =========== =========== ============ ============ =========== ========
Note
1. The adjustment related to a correction to the deferred tax on
fair value adjustments made on acquisitions in prior years.
Capital reserve
The capital reserve is the difference in share capital and
reserves arising at the time of the IPO from the use of the pooling
of interest method for preparation of the 2014 financial statements
following a group re-organisation. This is a non-distributable
reserve.
Treasury shares at cost
The treasury shares reserve represents the cost of shares in
Volution Group plc purchased in the market and held by the Volution
Employee Benefit Trust to satisfy obligations under the Group's
share incentive plans.
Share based payment reserve
The share based payment reserve is used to recognise the value
of equity-settled share-based payments provided to key management
personnel, as part of their remuneration.
Foreign currency translation reserve
Exchange differences arising on translation of the Group's
foreign subsidiaries into sterling are included in the foreign
currency translation reserve. The Group hedges some of its exposure
to its net investment in foreign operations, foreign exchange gains
and losses relating to the effective portion of the net investment
hedge are accounted for by entries made directly to the foreign
currency translation reserve. No ineffectiveness has been
recognised in the statement of comprehensive income for any of the
periods presented. These two items are the only items in other
comprehensive income.
Retained earnings
The parent company of the Volution Group, Volution Group plc,
had distributable retained earnings at 31 January 2017 of
GBP66,400,000.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 January
2017 2016
Unaudited Unaudited
Notes GBP'000 GBP'000
Operating activities
Profit for the period after tax 7,186 7,271
Adjustments to reconcile profit for the period to net cash flow from operating
activities:
Income tax 1,629 769
Gain on disposal of property, plant and equipment (53) (6)
Exceptional items 6 758 976
Cash flows relating to exceptional items (414) (92)
Finance revenue (10) (716)
Finance costs 829 621
Share based payment expense 314 185
Depreciation of property, plant and equipment 1,464 1,199
Amortisation of intangible assets 7,075 6,209
Working capital adjustments:
Decrease in trade and other receivables 2,487 153
Increase in inventories (750) (1,038)
Exceptional costs: fair value of inventories (81) (333)
Decrease in trade payables and other payables (2,532) (1,321)
(Decrease)/increase in provisions (54) 29
UK income tax paid (1,284) (1,400)
Overseas income tax paid (1,025) (653)
----------- -----------
Net cash flow from operating activities 15,538 11,853
=========== ===========
Investing activities
Payments to acquire intangible assets (832) (891)
Purchase of property, plant and equipment (1,097) (1,750)
Proceeds from disposal of property, plant and equipment 83 71
Acquisition of subsidiaries, net of cash acquired 14 (11,631) (18,513)
Interest received 10 11
----------- -----------
Net cash flow used in investing activities (13,467) (21,072)
=========== ===========
Financing activities
Repayment of interest bearing loans and borrowings (10,000) (1,436)
Proceeds from new borrowings 11,540 20,622
Interest paid (609) (463)
Dividends paid (5,176) (4,500)
Purchase of own shares - (987)
----------- -----------
Net cash flow (used in) / from financing activities (4,245) 13,236
=========== ===========
Net (decrease)/increase in cash and cash equivalents (2,173) 4,017
Cash and cash equivalents at the start of the period 15,744 11,565
Effect of exchange rates on cash and cash equivalents 101 366
----------- -----------
Cash and cash equivalents at the end of the period 13,672 15,948
=========== ===========
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENT
1. Corporate Information
The Company is a public limited company and is incorporated and
domiciled in the UK (registered number: 09041571). The share
capital of the Company is listed on the London Stock Exchange. The
address of its registered office is Fleming Way, Crawley, West
Sussex, RH10 9YX.
The interim results were authorised for issue by the Board of
Directors on 20 March 2017. The financial information set out
herein does not constitute the statutory accounts and is
unaudited.
2. Accounting policies
Basis of preparation
These condensed consolidated financial statements have been
prepared in accordance with IAS 34, 'Interim Financial Reporting',
as adopted by the European Union. They do not include all
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the
2016 annual report. The financial information for the half years
ended 31 January 2017 and 31 January 2016 do not constitute
statutory within the meaning of Section 434(3) of the Companies Act
2006 and is unaudited.
The annual financial statements of Volution Group plc are
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union. The
comparative financial information for the year ended 31 July 2016
included within this report does not constitute the full statutory
accounts for that period. The Annual Report 2016 has been filed
with the Registrar of Companies. The Independent Auditors' Report
on the Annual Report 2016 was unqualified, did not draw attention
to any matters by way of emphasis, and did not contain a statement
under section 498(2) and 498(3) of the Companies Act 2006.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the half-yearly condensed consolidated financial
statements.
The same accounting policies, presentation and methods of
computation are followed in these condensed consolidated financial
statements as were applied in the Group's latest annual audited
financial statements. No new accounting standards and amendments
have been adopted during the period. The Group has not early
adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
Employee Benefit Trust
The Company has an Employee Benefit Trust (EBT) which is used in
connection with the operation of the Company's Long Term Incentive
Plan (LTIP) and Deferred Share Bonus Plan. The Company's own shares
held by the Volution EBT are treated as treasury shares and
deducted from shareholders' funds until they vest unconditionally
with employees.
At 31 January 2017, a total of 916,878 (31 July 2016: 916,878)
ordinary shares in the Company were held by the Volution EBT, all
of which were under option to employees for nil consideration.
During the period no ordinary shares in the Company were purchased
by the trustees (H1 2016: 528,000), and no shares (H1 2016: no
shares) were disposed of by the trustees. The market value of the
shares at 31 January 2017 was GBP1,595,000 (31 July 2016:
GBP1,421,000).
The Volution EBT has agreed to waive its rights to
dividends.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies,
management is required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Judgements
The following are the critical Judgements (apart from those
involving estimations), that management has made in the process of
applying the entity's accounting policies and that have the most
significant effect on the amounts recognised in financial
statements:
Exceptional items
The Group discloses exceptional items by virtue of their nature,
size or incidence to allow a better understanding of the underlying
trading performance of the Group. The Group identifies an item or
expense of income as exceptional, when in management's judgment,
the underlying event giving rise to the exceptional item is deemed
to be non-recurring in its nature, size or incidence such that the
Group results would be distorted without specific reference to the
event in question. To enable the full impact of an exceptional item
to be understood, the tax impact is disclosed and they are
presented separately in the statement of cash flows. The following
categories of expenditure are deemed to be exceptional in the
period: acquisition costs, including inventory fair value
adjustments; restructuring and factory consolidation. See note 6
for details of the amounts included in the above categories.
Development costs
Development costs that are directly attributable to the
development of a product are capitalised using management's
assessment of the likelihood of a successful outcome for each
product being released to market, this is based on management's
judgement that the product is technologically, commercially and
economically feasible in accordance with IAS 38 'Intangible
assets'.
Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of the assets and liabilities within the next financial
year, are described below. The Group based its assumptions and
estimates on parameters available when these financial statements
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
Fair value of assets acquired during business combinations
Judgements and estimates are required in assessment of fair
value of the net assets acquired. In valuing certain intangible
assets management has made assumptions about the retention rate of
customers and cash flow forecasts used to determine the fair value
of the assets at the date of acquisition.
Impairment of goodwill and other intangible assets
The Group's impairment test for goodwill is based on a value in
use calculation using a discounted cash flow model. The cash flows
are derived from the budget for the following five years. The
recoverable amount is most sensitive to the discount rate used for
the discounted cash flow model as well as the expected future
cash-inflows and the growth rate used for extrapolation
purposes.
The Group records all assets and liabilities acquired in
business acquisitions, at fair value. Intangible assets are
reviewed for impairment annually if events or changes in
circumstances indicate that the carrying amount may not be
recoverable.
See notes 12 and 13 for details of the carrying values of
goodwill and other intangible assets.
Rebates payable and receivable
The Group has a number of customer and supplier rebate
agreements that are recognised as a reduction from sales or a
reduction of cost of sales as appropriate (collectively referred to
as rebates). Rebates are based on an agreed percentage of revenue
or purchases, which will increase with the level of revenue
achieved or purchases made. These agreements typically run to a
different reporting period to that of the Group with some of the
amounts payable and receivable being subject to confirmation after
the reporting date.
At the reporting date, the Directors make estimates of the
amount of rebate that will become both payable and due to the Group
under these agreements based upon their best estimates of volumes
and product mix that will be bought or sold over each individual
rebate agreement period. Where the respective customer or supplier
has been engaged with the Group for a number of years, historical
settlement trends are also used to assist in ensuring an
appropriate estimate is recorded at the reporting date and that
appropriate internal approvals and reviews take place before
rebates are recorded. The total customer rebate provision, included
in trade and other payables, at 31 January 2017 is GBP5,885,000 (31
July 2016: GBP5,414,000), the total supplier rebate due is an
immaterial balance at both 31 January 2017 and 31 July 2016.
Provisions for warranties, bad debts and inventory
obsolescence
Provisions for warranties are made with reference to recent
trading history and historic warranty claim information, and the
view of management as to whether warranty claims are expected.
Provisions for bad debts and inventory obsolescence are made
with reference to the ageing of receivables and inventory balances
and the view of management as to whether amounts are recoverable.
Bad debt and warranty provisions will be determined with
consideration to recent customer trading and management experience,
and provision for inventory obsolescence to sales history and to
latest sales forecasts.
The total warranty provision at 31 January 2017 is GBP1,885,000
(31 July 2016: GBP1,957,000). The total provision for bad debts at
31 January 2017 is GBP1,293,000 (31 July 2016: GBP893,000). The
total provision for inventory obsolescence at 31 January 2017 is
GBP3,040,000 (31 July 2016: GBP2,884,000).
4. Revenue
Revenue recognised in the statement of comprehensive income is
analysed below:
For the six months ended 31 January For the six months ended 31 January
2017 2016
GBP000 GBP000
Sale of goods 87,332 68,831
Rendering of services 1,146 1,311
-------------------------------------- --------------------------------------
Total revenue 88,478 70,142
====================================== ======================================
For the six months ended 31 January For the six months ended 31 January
2017 2016
Market Sectors GBP000 GBP000
Ventilation Group
UK Residential RMI 18,929 17,011
UK Residential New Build 10,222 8,333
UK Commercial 15,044 8,246
UK Export 4,717 2,816
Nordics(1) 15,478 12,433
Central Europe(2) 13,328 10,858
-------------------------------------- --------------------------------------
Total Ventilation Group 77,718 59,697
Original Equipment Manufacturer (OEM
(Torin Sifan))
OEM (Torin-Sifan) 10,760 10,445
-------------------------------------- --------------------------------------
Total revenue 88,478 70,142
====================================== ======================================
Notes
1. Represents revenue of Fresh AB and its subsidiaries, PAX AB,
Volution Norge AS and Welair AB.
2. Represents revenue of inVENTer GmbH, Brüggemann
Energiekonzepte GmbH, Ventilair Group International and its
subsidiaries.
5. Segmental analysis
In identifying its operating segments, management follows the
Group's product markets. The Group is considered to have two
reportable segments: Ventilation Group and OEM (Torin-Sifan). Each
reportable segment is managed separately as they require different
marketing approaches.
Operating segments that provide ventilation services have been
aggregated as they have similar economic characteristics, assessed
by reference to the gross margins of the segments. In addition, the
segments are similar in relation to the nature of products,
services, production processes, type of customer, method for
distribution and regulatory environment.
The measure of revenue reported to the chief operating decision
maker to assess performance is total revenue for each operating
segment. The measure of profit reported to the chief operating
decision maker to assess performance is adjusted operating profit
(see note 20 for definition) for each operating segment. Gross
profit and the analysis below segment profit is additional
voluntary information and not 'segment information' prepared in
accordance with IFRS 8.
Finance revenue and costs are not allocated to individual
operating segments as the underlying instruments are managed on a
group basis.
Total assets and liabilities are not disclosed as this
information is not provided by operating segment to the chief
operating decision maker on a regular basis.
Transfer prices between operating segments are on an arm's
length basis on terms similar to transactions with third
parties.
OEM
Ventilation (Torin-Sifan) Unallocated Total segments Eliminations Consolidated
Six months ended 31
January 2017 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
External customers 77,718 10,760 - 88,478 - 88,478
Inter-segment 8,002 465 - 8,467 (8,467) -
------------ --------------- ------------ --------------- ------------- -------------
Total revenue 85,720 11,225 - 96,945 (8,467) 88,478
============ =============== ============ =============== ============= =============
Gross profit 39,987 3,606 - 43,593 - 43,593
============ =============== ============ =============== ============= =============
Adjusted segment EBITDA 17,560 2,436 (1,065) 18,931 - 18,931
============ =============== ============ =============== ============= =============
Depreciation and
amortisation of
development costs,
software and patents (1,304) (287) (206) (1,797) - (1,797)
------------ --------------- ------------ --------------- ------------- -------------
Adjusted operating
profit/(loss) 16,256 2,149 (1,271) 17,134 - 17,134
------------ --------------- ------------ --------------- ------------- -------------
Amortisation of assets
acquired through
business combinations (6,063) (679) - (6,742) - (6,742)
Exceptional items - - (758) (758) - (758)
Other non-recurring items
not meeting the
definition of exceptional - - - - - -
------------ --------------- ------------ --------------- ------------- -------------
Operating profit/(loss) 10,193 1,470 (2,029) 9,634 - 9,634
Unallocated expenses:
Net finance cost - - (819) (819) - (819)
------------ --------------- ------------ --------------- ------------- -------------
Profit/(loss) before tax 10,193 1,470 (2,848) 8,815 - 8,815
============ =============== ============ =============== ============= =============
A portion of Group overhead costs, GBP1,065,000 (H1 2016:
GBP997,000), are not allocable to individual operating segments.
Likewise, exceptional costs incurred by the holding companies have
not been allocated to individual operating segments.
OEM
Ventilation (Torin-Sifan) Unallocated Total segments Eliminations Consolidated
Six months ended 31
January 2016 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
External customers 59,697 10,445 - 70,142 - 70,142
Inter-segment 7,648 436 - 8,084 (8,084) -
------------ --------------- ------------ --------------- ------------- -------------
Total revenue 67,345 10,881 - 78,226 (8,084) 70,142
============ =============== ============ =============== ============= =============
Gross profit 31,265 3,356 - 34,621 - 34,621
============ =============== ============ =============== ============= =============
Adjusted segment EBITDA 15,319 2,203 (997) 16,525 - 16,525
============ =============== ============ =============== ============= =============
Depreciation and
amortisation of
development costs,
software and patents (1,023) (267) (28) (1,318) - (1,318)
------------ --------------- ------------ --------------- ------------- -------------
Adjusted operating
profit/(loss) 14,296 1,936 (1,025) 15,207 - 15,207
------------ --------------- ------------ --------------- ------------- -------------
Amortisation of assets
acquired through
business combinations (5,411) (679) - (6,090) - (6,090)
Exceptional items - - (976) (976) - (976)
Other non-recurring items
not meeting the
definition of
exceptional - - (196) (196) - (196)
------------ --------------- ------------ --------------- ------------- -------------
Operating profit/(loss) 8,885 1,257 (2,197) 7,945 - 7,945
Unallocated income:
Net finance income - - 95 95 - 95
------------ --------------- ------------ --------------- ------------- -------------
Profit/(loss) before tax 8,885 1,257 (2,102) 8,040 - 8,040
============ =============== ============ =============== ============= =============
For the six months ended 31 January For the six months ended 31 January
Geographic information 2017 2016
GBP000 GBP000
Revenue from external customers (by
destination):
United Kingdom 49,754 39,279
Europe (excluding United Kingdom and
Sweden) 26,627 19,997
Sweden 10,411 9,724
Rest of the world 1,686 1,142
-------------------------------------- --------------------------------------
Total revenue 88,478 70,142
====================================== ======================================
31 January 2017 31 July 2016
GBP000 GBP000
Non-current assets:
United Kingdom 157,503 151,389
Europe (excluding United Kingdom &
Nordics) 27,600 27,970
Nordics 13,138 13,360
-------------------------------------- --------------------------------------
Total 198,241 192,719
====================================== ======================================
Non-current assets exclude deferred tax.
6. Exceptional items
The Group discloses exceptional items by virtue of their nature,
size or incidence to allow a better understanding of the underlying
trading performance of the Group. Exceptional costs are summarised
below:
For the six months ended 31 January For the six months ended 31 January
2017 2016
GBP000 GBP000
Acquisition related costs, including
inventory fair value adjustments 563 976
Factory relocation 195 -
758 976
Total tax credit relating to the
items above (92) -
-------------------------------------- --------------------------------------
666 976
====================================== ======================================
Acquisition related costs, including inventory fair value
adjustments
The acquisition related costs in the period are:
-- Professional fees incurred in respect of the acquisition of
Breathing Buildings Limited, completed on the 16 December 2016, of
GBP218,000. The acquisition costs in the prior period relate to the
acquisitions of Energy Technique plc (GBP552,000), Ventilair Group
International (GBP58,000) and Weland Luftbehandling AB
(GBP33,000).
-- Inventory fair value adjustments relate to the requirement to
uplift the finished goods of the acquired entities on acquisition
by the addition of value not ordinarily considered when accounting
for inventory. When these goods are subsequently sold the
additional expense to the statement of comprehensive income is
classified as exceptional. The cost of GBP81,000 in the period
relates to Breathing Buildings Limited. Inventory fair value
adjustments in the prior period were GBP333,000.
-- Acquisition related restructuring costs relating to two of
the senior management team within Diffusion who have decided to
leave the business. Within the terms of their employment, at
acquisition, there was a clause which provided that, on a change of
ownership, they could leave the business on enhanced terms. Both
have now tendered their resignation and therefore triggered the
clause at a cost of GBP264,000.
Factory relocation
The costs for the factory relocation relate to a project to
combine manufacturing locations.
With the assistance of Colliers International (commercial estate
agents) an extensive year long search has produced a suitable site
- the business has now set-up a relocation project team and has
recruited the expertise of a professional project manager with
experience in managing industrial relocations. A breakdown of the
cost is as follows:
For the six months ended 31 January 2017
GBP000
Colliers - finders fee 75
Legal fees 49
Consultancy fees 22
Project manager 49
-----------------------------------------
195
=========================================
The project to relocate the factories to the new facility will
last until mid 2018 when we expect to finalise the production move.
It is our intention that all costs associated with the project will
similarly be treated as exceptional. We anticipate that the project
will cost, in aggregate, c. GBP1.75 million.
The costs associated with this project have been and will
continue to be deemed as exceptional given their size in aggregate
and the unusual (one-off) nature of the project.
7. Net Finance Costs
Finance costs were GBP0.8 million (H1 2016: GBP0.6 million)
including GBP0.2 million of net losses on revaluation of financial
instruments (H1 2016: GBPnil).
Finance revenue was negligible (H1 2016: GBP0.7 million)
including GBPnil net gains on revaluation of financial instruments
(H1 2016: GBP0.7 million).
8. Adjusted earnings
The Board and key management personnel use some alternative
performance measures to track and assess the underlying performance
of the business. These measures include adjusted operating profit,
adjusted profit before tax, adjusted basic and diluted EPS and
adjusted operating cash flow. These measures are deemed more
appropriate as they remove income and expenditure which is not
directly related to the ongoing trading of the business. For a
definition of all the adjusted and non-GAAP measures, please see
the glossary of terms in note 20.
For the six months ended 31 January For the six months ended 31 January
2017 2016
GBP000 GBP000
Profit after tax 7,186 7,271
Add back:
Exceptional items 758 976
Other non-recurring items not meeting
the definition of exceptional - 196
Net loss/(gain) on financial
instruments at fair value 220 (705)
Amortisation of other intangible
assets on acquisition (customer base
and trademarks) 6,742 6,090
Tax effect of the above (1,895) (2,378)
-------------------------------------- --------------------------------------
Adjusted profit after tax 13,011 11,450
Add back:
Adjusted tax charge 3,524 3,147
-------------------------------------- --------------------------------------
Adjusted profit before tax 16,535 14,597
Add back:
Interest payable on bank overdraft
and bank loans 609 621
Finance income (10) (11)
-------------------------------------- --------------------------------------
Adjusted operating profit 17,134 15,207
Add back:
Depreciation of property, plant and
equipment 1,464 1,199
Amortisation of development costs,
software and patents 333 119
-------------------------------------- --------------------------------------
Adjusted EBITDA 18,931 16,525
====================================== ======================================
For an explanation of the adjusted terms used above please see
the glossary of terms at note 20.
9. Income taxes
The estimated average annual adjusted tax rate for the period
ending 31 July 2017 is approximately 23.2% (H1 2016: 23.5%). The
Finance Act (No. 2) 2015 was enacted on 18 November 2015 and
introduced a reduction in the headline rate of UK corporation tax
to 19% and 18% to apply from 1 April 2017 and 1 April 2020
respectively. A further reduction in the headline rate to 17% to
apply from 1 April 2020 was included in the Finance Act 2016 which
was enacted on 15 September 2016.
The Group has large UK deferred tax liabilities on its
consolidated statement of financial position and the liabilities
have been recalculated as a consequence of these tax rate changes.
As a result the UK deferred tax liability has decreased, with a one
off credit of GBP0.4 million recognised in the income statement in
the period to 31 January 2017. This has reduced our effective tax
rate in the period to 18.5% (H1 2016: GBP1.1m exceptional deferred
tax credit reducing the effective tax rate to 9.6%).
The Group's effective tax rate in respect of adjusted earnings,
as defined in note 8, is 21.3% (HY 2016: 21.6%).
The Group's medium-term adjusted effective tax rate is expected
to remain around 21% of the Group's adjusted profit before tax.
10. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the profit attributable to ordinary equity holders of the parent by
the weighted average number of ordinary shares outstanding during
the period plus the weighted average number of ordinary shares that
would be issued on conversion of any dilutive potential ordinary
shares into ordinary shares. There are no dilutive potential
ordinary shares for the periods ended 31 January 2017 and 31
January 2016.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
For the six months ended 31 January For the six months ended 31 January
2017 2016
GBP000 GBP000
Profit attributable to ordinary
equity holders 7,186 7,271
No No.
Weighted average number of ordinary
shares for basic earnings per share
and diluted earnings
per share 199,083,122 199,736,000
Earnings per share:
Basic and diluted 3.61p 3.64p
For the six months ended 31 January For the six months ended 31 January
2017 2016
GBP000 GBP000
Adjusted profit attributable to
ordinary equity holders 13,011 11,450
No. No.
Weighted average number of ordinary
shares for adjusted basic earnings
per share and diluted
earnings per share 199,083,122 199,736,000
Adjusted earnings per share:
Basic and diluted 6.54p 5.73p
See note 20, glossary of terms for an explanation of the
adjusted basic and diluted earnings per share calculation.
11. Property, plant and equipment
Total
GBP000
Cost
At 31 July 2016 27,516
Additions 1,097
Disposals (529)
On acquisition 159
Net foreign currency exchange differences 313
--------
As 31 January 2017 28,556
--------
Depreciation
At 31 July 2016 8,386
Depreciation expense 1,464
Disposals (499)
Net foreign currency exchange differences 171
--------
As 31 January 2017 9,522
--------
Net book value
At 31 January 2017 19,034
========
At 31 July 2016 19,130
========
12. Intangible assets - goodwill
Total
GBP000
Cost and net book value:
At 31 July 2016 68,228
On acquisition of Breathing Buildings 6,688
Net foreign currency exchange differences 300
--------
As 31 January 2017 75,216
========
13. Intangible assets - other
Total
GBP000
Cost
At 31 July 2016 160,146
Additions 832
On acquisition 4,372
Net foreign currency exchange differences 733
--------
As 31 January 2017 166,083
--------
Amortisation
At 31 July 2016 54,785
Amortisation expense 7,075
Net foreign currency exchange differences 232
--------
As 31 January 2017 62,092
--------
Net book value
At 31 January 2017 103,991
========
At 31 July 2016 105,361
========
14. Business combinations
Acquisitions in the six months ended 31 January 2017
Breathing Buildings Limited
On 16 December 2016, Volution Ventilation Group Limited acquired
the entire issued share capital of Breathing Buildings Limited. The
transaction was funded from the Group's existing revolving credit
facility. The Group acquired Breathing Buildings as it extended
Volution's capability with a leader in natural and hybrid
ventilation for commercial buildings, in particular focusing on new
construction for education.
Total consideration for the transaction was cash consideration
of GBP11,881,000.
Transaction costs associated with the acquisition in the period
ended 31 January 2017 were GBP218,000 and have been expensed.
The provisional fair value of the net assets acquired is set out
below:
Book value Fair value adjustments Provisional fair value
GBP000 GBP000 GBP000
Intangible assets 54 4,318 4,372
Deferred tax 444 (240) 204
Property, plant and equipment 147 12 159
Inventory 734 61 795
Trade and other receivables 2,208 (10) 2,198
Trade and other payables (1,917) (86) (2,003)
Deferred tax liabilities - (780) (780)
Cash and cash equivalents 250 - 250
----------- ----------------------- -----------------------
Total identifiable net assets 1,919 3,275 5,194
----------- ----------------------- -----------------------
Goodwill on acquisition 6,688
Consideration payable 11,881
=======================
Discharged by:
Consideration satisfied in cash 11,881
Goodwill of GBP6,688,000 reflects certain intangible assets that
cannot be individually separated and reliably measured due to their
nature. These items include the value of expected synergies arising
from the acquisition and the experience and skill of the acquired
workforce. The fair value of the acquired tradename and customer
base was identified and included in intangible assets including the
deferred tax therein.
The gross amount of trade and other receivables is
GBP2,208,000.The amounts for trade and other receivables not
expected to be collected are GBP10,000.
Breathing Buildings generated revenue of GBP952,000 and
generated a profit after tax of GBP78,000 in the period from
acquisition to 31 January 2017 that is included in the consolidated
statement of comprehensive income for this reporting period.
If the combination had taken place at 1 August 2016, the Group's
revenue would have been GBP91,932,000 and the profit before tax
from continuing operations would have been GBP8,997,000.
15. Other financial assets and liabilities
Current Current
31 January 2017 31 July 2016
GBP000 GBP000
Financial assets
---------------- -------------
FX forward contracts 694 914
================ =============
16. Interest bearing loans and borrowings
Non-current Non-current
31 January 2017 31 July 2016
GBP000 GBP000
Secured at amortised cost
Borrowings under the revolving credit facility 54,293 51,869
Unamortised finance costs (518) (634)
---------------- -------------
53,775 51,235
================ =============
Interest bearing borrowings comprise a revolving credit facility
from Danske Bank A/S, HSBC and The Royal Bank of Scotland with HSBC
acting as agent and are governed by a facilities agreement. No
security is provided under the facility.
During the period an additional GBP11,540,000 was drawn down
from the revolving credit facility to fund the acquisitions in the
period, GBP10,000,000 was subsequently repaid from cash flows
generated through operating activities.
17. Fair values of financial assets and financial
liabilities
Derivative financial instruments are deemed to be level 2 in the
fair value hierarchy as they are valued using techniques for which
all inputs that have a significant effect on the recorded fair
value are observable, either directly or indirectly. Their fair
value is measured using valuation techniques including the
discounted cash flow model. Inputs to this calculation include
expected cash flows in relation to these derivative contracts and
relevant discount rates.
18. Related party transactions
Transactions between Volution Group plc and its subsidiaries,
along with transactions between subsidiaries, are eliminated on
consolidation and are not included within these financial
statements.
There have been no related party transactions in the period to
31 January 2017 apart from compensation of key management
personnel.
19. Dividends
The Group paid a final dividend of 2.60 pence per ordinary share
during the period in respect of the year ended 31 July 2016. The
Board has declared an interim dividend of 1.35 pence per ordinary
share in respect of the half year ended 31 January 2017 (6 months
to 31 January 2016: 1.20 pence per ordinary share) which will be
paid on 4 May 2017 to shareholders on the register at the close of
business on 31 March 2017. The total dividend payable has not been
recognised as a liability in these accounts. The Volution EBT has
agreed to waive its rights to all dividends.
20. Glossary of terms
Adjusted basic and diluted EPS - is calculated by dividing the
adjusted profit/(loss) for the period attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the adjusted net profit/(loss) attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the period plus the weighted average
number of ordinary shares that would be issued on conversion of any
dilutive potential ordinary shares into ordinary shares. There are
no dilutive potential ordinary shares for the periods ended 31
January 2017 and 31 January 2016.
Adjusted EBITDA - EBITDA removing exceptional items and other
non-recurring items not meeting the definition of exceptional.
Adjusted finance costs - finance costs removing net gains or
losses on financial instruments at fair value.
Adjusted operating cash flow - adjusted EBITDA plus or minus
movements in operating working capital, less net investments in
property, plant and equipment and intangible assets.
Adjusted operating profit - operating profit removing
exceptional items, other non-recurring items not meeting the
definition of exceptional, amortisation of intangible assets
associated with the customer base, trademarks and patents.
Adjusted profit after tax - profit after tax removing
exceptional items, other non-recurring items not meeting the
definition of exceptional, net gains or losses on financial
instruments at fair value, amortisation of intangible assets
associated with the customer base, trademarks and patents and the
tax effect on these items.
Adjusted profit before tax - profit before tax removing
exceptional items, other non-recurring items not meeting the
definition of exceptional, net gains or losses on financial
instruments at fair value and amortisation of intangible assets
associated with the customer base, trademarks and patents.
Cash conversion - is calculated by dividing adjusted operating
cash flow by adjusted EBITDA less depreciation.
Constant currency - to determine values expressed as being at
constant currency we have converted the income statement of our
foreign operating companies for the period ended 31 January 2017 at
the average exchange rate for the period ended 31 January 2016. In
addition we have converted the UK operating companies' sale and
purchase transactions in the period ended 31 January 2017, which
were denominated in foreign currencies, at the average exchange
rates for the period ended 31 January 2016.
EBITDA - profit before tax, net finance costs, depreciation and
amortisation.
Like-for-like - like-for-like is the performance of the Group as
though the position of the Group was the same as it was in the
comparative period.
Net debt - bank borrowings less cash and cash equivalents.
Operating cashflow - EBITDA plus or minus movements in operating
working capital, less net investments in property, plant and
equipment and intangible assets.
Other non-recurring items not meeting the definition of
exceptional - these are items of expense incurred by the Group
which are non-recurring but do not meet the IFRS definition of
exceptional items; they have been adjusted for to give a fairer
representation of the underlying performance of the business.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFVTVRIDLID
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