Volution cancels dividends as markets begin to recover

(Sharecast News) - Ventilation company Volution Group said on Friday that full-year group revenues would be about 7% lower on a constant currency basis at £217m, with organic revenue down 11% year-on-year, as it confirmed the cancellation of its interim and final dividends for 2020.
The London-listed firm said revenues in the second half ended 31 July would be around £98m, making for an organic decline of 19% year-on-year.

It said activity had "steadily recovered" in each month since the impact of Covid-19 was first seen in April, with the board currently expecting the month of July to finish around 9% below July 2019, with some sectors of the group returning to organic revenue growth.

The company said its revenue streams in continental Europe and Australasia had held up strongly throughout the pandemic, and had underpinned its "resilient performance" in the second half.

Continental Europe revenue declined 4% in the second half, while its Australasian business was expected to deliver organic revenue growth of around 1% over the same period, supported by the recently-implemented healthy homes regulations in New Zealand, and the introduction of new products which helped Volution to gain market share in Australia.

Its Australasian activities were described as performing "very well", delivering organic growth in the fourth quarter of about 16% year-on-year.

Volution said its UK revenue, which suffered a "substantially more pronounced" impact than elsewhere in the group, was continuing to recover.

Activity levels, which in April were 70% behind the prior year, had improved "substantially", and exited the year at around 19% behind the prior year.

Revenues in the RMI category in the UK had recovered "particularly well", with activity in July about 9% down on the prior year.

Volution did confirm the "streamlining" of its UK business, aligning its workforce to current and anticipated levels of demand, with its headcount in the country falling from 1,070 full time employees in April to an expected 950 employees in the first quarter of the 2021 financial year.

The board said it was "confident" that no further reorganisation would be necessary in the foreseeable future, as it anticipated a "steady recovery" of activity.

It said the cost of the restructuring in the 2020 financial year was expected to be around £1.5m.

Volution noted that it had used the UK government's Coronavirus Job Retention Scheme (CJRS) between April and July, though at a reduced level each month as activity and employees returned.

"Whilst we do still envisage activity to be below normal for the first half of our financial year ending July 2021, and as such will continue to have some employees on furlough from August through to October 2020, we will no longer be making any CJRS claims for these employees in our new financial year, nor will we be claiming under the January 2021 Job Retention Bonus Scheme."

Looking at its financial position, Volution said it had continued to generate "very strong" operating cash flow through the second half of the year.

It said its net debt, which reduced by £14m in the first half, had continued to reduce during the second half, with the board expecting year-end leverage to be lower than at the end of the 2019 financial year.

The interim dividend for 2020, which it suspended on 24 March, would now be cancelled, and the group confirmed it did not intend to pay a final dividend.

It did, however, expect a return to a dividend in the new financial year.

"As we come to the end of our financial year 2020 there is no doubt it has been our most challenging since listing the company in 2014," said chief executive officer Ronnie George.

"We have however benefited from the substantial international diversity and breadth of our revenue streams, with many of our markets outside of the UK now finishing the year with trading at or close to normal levels.

"With an ever increasing awareness of air quality issues and the critical role ventilation solutions play, coupled with our considerable self-help operational excellence initiatives in focus, we are confident of making good progress with the strategy as we go into 2021."

At 0847 BST, shares in Volution Group were up 2.72% at 174.62p.