15th Mar 2024 10:52
(Alliance News) - Volution Group PLC on Friday predicted annual profit which will top consensus, with a growing margin and its strong cash position also grabbing analyst attention.
Volution shares rose 5.7% to 449.00 pence each in London on Friday morning.
The energy-efficient indoor air quality solutions firm said pretax profit in the six months to January 31 rose 28% to GBP29.0 million from GBP22.6 million. Revenue rose 6.3% to GBP172.5 million from GBP162.3 million.
In addition, it lifted its interim dividend by 12% to 2.8p per share from 2.5p.
Its UK residential-focused offering led the charge, amid weakness in a "difficult" UK original equipment manufacturer division, as well as in Continental Europe.
"We made strong progress in the first half of the year, against a backdrop of higher interest rates and weaker new build demand. UK residential was once again the standout performer, with tighter regulation and strong social housing demand continuing to drive activity levels. Our greater exposure to refurbishment supported organic revenue growth in the period, and inorganic growth was strong due to a good performance from our recent acquisitions," Chief Executive Officer Ronnie George said.
Volution expects full-year adjusted earnings per share to be "slightly ahead of consensus" of 26.1 pence. For the first half, its basic adjusted EPS rose 10% to 13.7p from 12.4p, while its adjusted diluted EPS climbed 11% to 13.5p from 12.2p.
Volution's adjusted operating margin grew to 22.4%, from 21.1% a year prior. Irish broker Davy said the margin performance "remains the stand-out".
"Volution has announced another impressive set of results. The results, which cover the six months to end-January, are likely to provide the platform for another modest upgrade to full year forecasts. Given this points to another year of earnings growth, it continues to position Volution as a positive outlier in a construction/building products sector context. Reasons for its outperformance include commercial agility, geographic diversity and concentrated exposure to the growth category that is ventilation," Davy analysts added.
German bank Berenberg lifted its full-year margin prediction for Volution to 21.7% from 21.4% previously. For the year ended July 31, 2023, Volution's margin expanded to 21.3% from 21.1%.
Berenberg analysts said: "Management noted that a combination of service, brands, portfolio management and pricing power supported improvements in gross and operating margins. UK margins in particular were up by 310bp year-on-year, at 24.3%, given procurement benefits and material input cost softening."
Also rising during the half-year, adjusted operating cash flow increased 27% to GBP38.8 million from GBP30.6 million a year prior. Cash and cash equivalents at period end amounted to GBP17.1 million, up 2.9% from GBP16.6 million a year earlier.
Analysts at Liberum and Jefferies said Volution's strong balance sheet footing means it can afford to fork out more on acquisitions.
By Eric Cunha, Alliance News news editor
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