Volution Group – A Fan Favourite?

Thursday of next week, 9 March, will see the interim results being announced by Volution Group (LON:FAN) the air quality solutions products specialist.

The AGM Trading Update in the middle of last December inferred that its sales and profits were tracking ahead of the same period in the previous year.

At that time CEO Ronnie George stated that:

“I am immensely proud of the excellent customer service we are maintaining across all of our markets and the considerable focus from our valued colleagues in delivering ‘Healthy Air, Sustainably’. 

Although the wider macro-economic backdrop remains uncertain, the regulatory, energy efficiency and indoor air quality drivers have never been stronger.

We are pleased with the start to the new financial year and in our ability to achieve our margin targets in the face of inflation.

With our geographic and end-market diversity, our ongoing focus on operational excellence, and our cash generation, we are well positioned to continue to capitalise on the many structural growth opportunities in the months ahead.”

The Business

Set up in 2002, the Crawley, Surrey-based group manufactures and supplies ventilation products to residential and commercial construction markets in the United Kingdom, Continental Europe, and Australasia.

The company offers unitary extractor fans for use in bathrooms and kitchens; mechanical ventilation with heat recovery and centralised mechanical extract ventilation systems; rigid, semi-rigid, and flexible ducting products and accessories; mechanical heat recovery units; air handling units, fan coils, and hybrid ventilation products; underfloor heating, heated towel rails, radiators, and storage and panel heaters; wall, box, and tower fans, as well as portable air conditioners; hand dryers and insect killers; and sensors, controllers, and ducting products.

It also manufactures blowers and motors for the heating and ventilation industry, such as direct and belt-drive fans, fan decks, double inlet centrifugal blowers, motorised impellers, and combustion blowers.

Operating under some 19 brand names, the company sells its products principally under the Vent-Axia, Manrose, Diffusion, Airtech, National Ventilation, Breathing Buildings, Torin-Sifan, Fresh, PAX, VoltAir, Kair, Air Connection, inVENTer, Ventil air, ClimaRad, ERI, Rtek, Simx, and Ventair brands.

Group Sales

In the year to end July 2022 the group’s sales were split up 97.9% in ventilation products, while its installation services accounted for the balance 2.1%.

On a sales per region basis the UK took 38.8%, Europe (bar Sweden and the UK) accounted for 36.7%, Australasia was 14.9%, while the Rest of the World took 1.7%.

The Equity

There are 199.86m shares in issue.

The larger holders include Baillie Gifford (5.81%), Capital Research & Management (5.14%), Fidelity Management & Research (5.02%), Franklin Templeton Fund Management (4.85%), PrimeStone Capital (4.79%), Aegon Asset Management (4.26%), BlackRock Investment Management (3.26%), Artemis Investment Management (3.08%), First Pacific Advisors (2.98%) and Abrdn Investment Management (2.97%).

Broker’s View – 450p Price Objective

Analyst Charlie Campbell at the group’s broker Liberum Capital rates the shares as a Buy, looking for 450p as his price objective.

For the full year to end July 2023 he estimates group revenues of £316m (£308m), while pre-tax profits may fall slightly to £60.0m (£60.9m), with earnings gently lower at 23.2p (24.0p), but still paying an increased dividend of 7.4p (7.3p) per share.

For the coming year his figures suggest £328m sales, £62.5m profits, 24.0p earnings and a 7.5p dividend.

My View – Possibly a Chart ‘Buy’

Ahead of next week’s results announcement the shares may well tread water in the 350p-370p range.

However, considering the recent strengthening of the price from the 348p level just a week ago and then taking a look at the share price graph, leads me to anticipate an early break above the 400p on the back of any good corporate news.

Last night they closed at 360p, valuing the group at just £715m.

(Profile 23.05.19 @ 174p set a Target Price of 250p*)

(Profile 25.01.21 @ 301.5p set a Target Price of 350p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)