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Ventilation maker Volution boosted by acquisitions

Volution remains on the acquisition trail and is highly cash generative.
October 11, 2016

A string of acquisitions helped Volution (FAN) to boost adjusted operating profit by 10.3 per cent to £32.5m in the year to July. As a supplier of ventilation products, the group is better known for its brand names including Vent-Axia, and last year it sold more than 22m ventilation products.

IC TIP: Buy at 172p

Sales in the UK residential new-build sector grew by 15 per cent to £19.8m, assisted by additional revenue from Diffusion, acquired in December 2015. Even without this, organic growth here was decent at 7 per cent. However, the repair, maintenance and improvement market continues to be tough, mainly as a result of austerity measures cutting back expenditure in the rental sector.

Sales in the group's Nordic operation grew by 16 per cent on a constant currency basis to £25.5m, and following the acquisition of Welair last year management expects to launch an extended range of heat recovery units in the Nordic region this autumn.

Acquisitions costs pushed net debt up from £21.2m to £36.1m, making it roughly equal to adjusted cash earnings. But the company is highly cash generative, with a cash conversion rate of 95 per cent, and chief financial officer Ian Dew said he would feel comfortable with a net debt reaching double cash profit.

Analysts at Canaccord Genuity are forecasting adjusted pre-tax profit for the year to July 2017 of £33.2m and EPS of 13.1p, compared with £31.3m and 12.6p the previous year.

VOLUTION (FAN)
ORD PRICE:172pMARKET VALUE:£344m
TOUCH:172-175p12-MONTH HIGH:204pLOW: 133p
DIVIDEND YIELD:2.2%PE RATIO:22
NET ASSET VALUE:77p*NET DEBT:24%

Year to 31 JulTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201289-11.8nanil
2013102-4.2-2.3nil
2014121-15.5-14.0nil
201513015.55.93.3
201615418.47.83.8
% change+19+18+32+15

Ex-div: 17 Nov

Payment: 14 Dec

*Includes intangible assets of £174m, or 87p a share