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Volution – “in line with the board's expectations”… or not?

By Steve Moore | Friday 10 August 2018


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Ventilation products group Volution (FAN) has updated on its year ended 31st July 2018, emphasising “revenue in the 12 month period was £206 million, an 11.3% increase (11.2% on a constant currency basis) compared with the prior year” and “our increasing market and geographical diversity, together with significant investment in new product innovation, gives us confidence for the year ahead”. Do the shares thus merit a higher price than the circa 200p they were also at as long ago as early 2016?

I note though that the revenue increase only “comprised 2.9% organic growth (2.5% on a constant currency basis), with 8.4% the result of new acquisitions”. It is stated that results are anticipated to “be in line with the board's expectations” - but then also that transition to a new injection moulding and fan assembly facility in Reading “has taken longer than anticipated and has caused additional cost to be incurred”“which will be reported separately in the full year results”. So, overall, not in line with expectations then!

Broker to the company Liberum updates “we have left our underlying EPS estimates unchanged for July 2018E and July 2019E (14.5p and 16.0p)” - but it has also added £2.5 million to anticipated ‘exceptionals’ (‘clean’ pre-tax profit forecast: £36.7 million, also more than £81 million of net debt).

I also note, despite the stated “confidence for the year ahead”, it also included “continuing uncertainty in the UK economy”. Thus I look forward to an 11th October-scheduled results announcement with interest, but re. the shares currently avoid.


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