13th Dec 2023 14:38
(Alliance News) - Volution Group PLC received rave reviews on Wednesday after the energy-efficient indoor air quality solutions firm said it expects an annual earnings beat, shaking off a difficult backdrop.
The West Sussex-based company said revenue in the four months ended November 30 was about GBP121 million, up 8.0% from a year ago.
Gross and operating margins have improved compared to the financial year 2023 that ended on July 31, Volution said. It cited "strong pricing discipline, an ongoing focus on our operational excellence programme, including material value engineering initiatives, and the introduction of new products."
Volution added that organic growth at constant currency was 2.9% and inorganic growth was 7.7%.
Recent acquisitions in France, Slovenia and New Zealand are progressing well, it said.
Looking ahead, Volution said its "strong" start to the financial year, paired with the tailwind from the three acquisitions completed in the calendar year, has given the board confidence in delivering earnings ahead of the current range of market expectations for the financial year.
The company said it believes that current market forecasts for financial 2024 are adjusted earnings per share between 25.3 pence and 26.3p, compared to 25.8p in financial 2023.
German bank Berenberg noted Volution has suffered from weakness in European markets.
"The European business was more mixed and has continued to be subdued in recent months. This weakness has been seen across Germany and the Nordics given the new-build contraction there, although the German market is arguably more challenging given the greater proportion of new-build exposure in the end-market mix. However, the company continues to point to regulatory drivers supporting broader demand for higher-value energy-efficient products across its markets, and recent acquisitions in the region have been doing well," Berenberg analysts commented.
Berenberg rates Volution at 'buy' with a 500 pence price target. The stock traded 4.5% higher at 416.10p each in London on Wednesday afternoon.
Liberum is also a buyer of the stock. It raised its price target to 470p from 460p.
Analysts at the broker commented: "Management is confident that the group will deliver EPS ahead of the range of consensus estimates. Our analysis is that this has been driven by margins, which continue to improve, mostly through self-help. We raise our 2024 EPS forecast by 2%; consensus may rise by 3%. The market is starting to appreciate Volution's qualities and its differentiators against UK building materials once again. This re-rating should continue, helped by today's upgrades."
By Eric Cunha, Alliance News news editor
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