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A breath of fresh air from Volution

Volution only floated earlier this year, but is already making strong progress
October 23, 2014

Ventilation specialist Volution (FAN) floated as recently as June on the London Stock Exchange, so figures for the year to 31 July were badly distorted by a string of one-off items totalling £7.8m. Adjust for these and operating profit rose nearly 20 per cent to £26.5m.

IC TIP: Buy

Better known through operating brand names such as Vent-Axia, the group is ideally placed to exploit European initiatives to reduce the carbon footprint in new housing. This has seen a move towards centralised heating and ventilation systems, and sales in this area grew by over 11 per cent. That also includes a contribution from innovative heat-recovery systems, whereby the heat from extracted air is used to warm up fresh air being pumped back in.

The group's business model is highly cash generative, and some of this has been used to fund a number of acquisitions in what remains a fragmented market. In August last year it bought Swedish ventilation group PAX for £11.5m, and in April it bought Germany-based inVENT.

There is no dividend yet, but the target is to pay around 30 per cent of adjusted net income, starting with the six months to January 2015. Broker Canaccord Genuity expects adjusted pre-tax profit of £27.2m for the current year, giving adjusted EPS of 10.5p (from £25.5m and 9.7p in 2014). Based on these estimates, the annual dividend will be 3.2p a share.

VOLUTION (FAN)
ORD PRICE:137pMARKET VALUE:£274m
TOUCH:135-142p12-MONTH HIGH:161pLOW: 130p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:67p*NET DEBT:32%

Year to 31 JulTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2011885.3nanil
201289-11.8nanil
2013102-4.2-2.3nil
2014121-15.5-14.0nil
% change+18---

*Includes intangible assets of £164m, or 82p a share