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Volution Group reports 47.0% Net Income decline in 2020 and 8.1% Revenue decline

08 Oct 2020 • About Volution Group ($FAN) • By InTwits

Volution Group reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Volution Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.7%. At the same time it's in pair with industry average of 2.7%
  • CAPEX is quite volatile: £4m in FY2020, £4m in FY2019, £3m in FY2018, £4m in FY2017, £1m in FY2016
  • The company has potentially unprofitable business model: ROIC is 6.5%
  • It operates with high leverage: Net Debt/EBITDA is 1.8x while industry average is 0.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue decreased on 8.1%. EBITDA Margin showed almost no change in FY2020.

Gross Margin decreased slightly on 1.3 pp from 47.1% to 45.8% in FY2020. Gross Margin declined at -0.80 pp per annum in the last 5 years. SG&A as a % of Revenue increased on 3.1 pp from 35.9% to 39.0% in FY2020.

Net Income margin decreased on 3.3 pp from 7.7% to 4.5% in FY2020.

Investments (CAPEX, working capital and M&A)

In FY2020 the company had CAPEX/Revenue of 1.3%. CAPEX/Revenue showed almost no change from FY2017 to FY2020. Average CAPEX/Revenue for the last three years was 1.8%.

Return on investment

The company operates at low ROIC (6.5%) and ROE (5.5%). ROIC decreased on 2.3 pp from 8.8% to 6.5% in FY2020. ROE decreased on 5.2 pp from 10.7% to 5.5% in FY2020.

Leverage (Debt)

Debt level is 1.8x Net Debt / EBITDA and 2.2x Debt / EBITDA. Net Debt / EBITDA surged on 0.1x from 1.7x to 1.8x in FY2020. Debt increased on 7.6% while cash surged on 60.2%.

Volution Group has no short term refinancing risk: cash is higher than short term debt (617.7%).

Valuation and dividends

The company's trades at EV/EBITDA 11.6x and P/E 41.6x.

Financial and operational results

Volution Group ($FAN) key annual financial indicators

mln. £201620172018201920202020/2019
Gross Profit75.491.096.6111.199.3-10.6%
Net Income15.613.913.318.29.7-47.0%
Balance Sheet
Short Term Debt0.
Long Term Debt51.251.194.685.489.24.5%
Cash flow
Revenue growth18.7%19.8%11.1%14.6%-8.1%
EBITDA growth11.1%11.0%-4.9%23.1%-8.1%

Gross Margin48.8%49.2%47.0%47.1%45.8%-1.3%
EBITDA Margin22.2%20.6%17.6%18.9%18.9%-0.0%
SG&A, % of revenue36.1%37.4%36.1%35.9%39.0%3.1%
Net Income Margin10.1%7.5%6.5%7.7%4.5%-3.3%
CAPEX, % of revenue1.9%1.3%2.3%1.8%1.3%-0.5%

Net Debt/EBITDA1.0x1.0x2.1x1.7x1.8x0.1x

Peers in Construction & Materials

Below you can find Volution Group benchmarking vs. other companies in Construction & Materials industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Aukett Swanke Group ($AUK)9.0%-12.7%-18.5%4.7%-
James Halstead ($JHD)-6.5%3.6%1.4%-5.7%
Kier Group ($KIE)-3.4%2.7%-6.8%-13.4%
Alumasc Group ($ALU)-13.6%-6.1%-8.4%-15.7%
Titon Hldgs ($TON)6.6%18.1%6.3%-8.8%-
Median (6 companies)7.7%6.9%5.0%-7.6%-14.5%
Volution Group ($FAN)-19.8%11.1%14.6%-8.1%

Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
James Halstead ($JHD)42.4%43.5%41.9%43.0%42.1%
Alumasc Group ($ALU)33.4%31.3%30.6%29.8%29.7%
Kier Group ($KIE)8.9%7.0%9.5%7.4%5.9%
Galliford Try ($GFRD)10.9%7.9%9.7%0.7%2.6%
Median (4 companies)29.7%25.9%26.2%29.8%17.8%
Volution Group ($FAN)48.8%49.2%47.0%47.1%45.8%

Top companies by EBITDA margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
James Halstead ($JHD)21.6%20.8%-20.3%21.1%
Titon Hldgs ($TON)9.8%8.8%9.0%8.8%-
Alumasc Group ($ALU)9.7%9.8%7.8%3.9%6.9%
Aukett Swanke Group ($AUK)6.6%-0.9%-18.2%1.3%-
Kier Group ($KIE)0.7%0.8%3.5%-4.0%-2.9%
Median (7 companies)9.8%8.9%7.8%1.3%2.3%
Volution Group ($FAN)22.2%20.6%17.6%18.9%18.9%

Top companies by CAPEX/Revenue, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Alumasc Group ($ALU)1.1%0.9%3.1%2.6%1.8%
Titon Hldgs ($TON)3.0%1.9%1.9%2.6%-
James Halstead ($JHD)2.1%1.8%1.4%1.7%1.8%
Aukett Swanke Group ($AUK)0.8%0.2%0.6%0.7%-
Kier Group ($KIE)0.4%0.4%0.5%0.3%0.1%
Median (7 companies)2.4%2.0%1.7%0.7%0.9%
Volution Group ($FAN)1.9%1.3%2.3%1.8%1.3%

Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
James Halstead ($JHD)47.1%46.5%39.9%36.7%32.3%
Titon Hldgs ($TON)13.3%12.0%12.2%9.5%-
Alumasc Group ($ALU)47.8%50.2%23.1%4.8%7.8%
Aukett Swanke Group ($AUK)9.6%-6.9%-41.3%-0.9%-
Galliford Try ($GFRD)12.7%4.5%8.9%-4.5%-5.2%
Median (8 companies)8.7%8.0%8.3%-2.7%1.3%
Volution Group ($FAN)9.0%9.2%6.9%8.8%6.5%

Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Alumasc Group ($ALU)-1.0x-0.6x0.6x1.5x1.9x
James Halstead ($JHD)-0.9x-1.0x--1.3x-1.2x
Titon Hldgs ($TON)-1.0x-1.3x-1.3x-1.9x-
Aukett Swanke Group ($AUK)-0.6x---3.0x-
Median (4 companies)-0.7x-0.2x-0.7x-1.6x0.4x
Volution Group ($FAN)1.0x1.0x2.1x1.7x1.8x