Volution : Financial Report

Volution Group plc Annual Report 2022

Healthy air,

sustainably

Our energy efficient indoor air quality solutions help contribute to the global green economy

Strategic Report	Governance Report
1	Our Sustainable Growth Model	74	Chairman's Introduction
2	2022 Highlights	76	Board of Directors
4	Our Purpose and Values	78	Governance Framework
5	Our Investment Case	81	2022 Board Activities
6	At a Glance	83	Governance Report
89	Nomination Committee Report
8	Our Growth History
92	Audit Committee Report
10	ESG Summary
100 Directors' Remuneration Report
12	Chairman's Statement
122	Directors' Report
14	Chief Executive Officer's Review
126	Directors' Responsibility Statement
24	Our Business Model

1. Market Overview

1. Our Strategy

1. Stakeholders

1. Sustainability

1. Finance Review

1. Key Performance Indicators

1. Risk Management and Principal Risks

1. Non-FinancialInformation Statement

Financial Statements

127 Independent Auditor's Report

136 Consolidated Statement of Comprehensive Income

137 Consolidated Statement

of Financial Position

138 Consolidated Statement

of Changes in Equity

139 Consolidated Statement of Cash Flows

140 Notes to the Consolidated Financial Statements

180 Parent Company Statement of Financial Position

181 Parent Company Statement of Changes in Equity

182 Parent Company Statement of Cash Flows

183 Notes to the Parent Company Financial Statements

Additional Information

189 Glossary of Technical Terms

190 Shareholder Information

www.volutiongroupplc.com

Our Sustainable

A healthy net zero carbon future

The elements of our sustainable growth model work together to deliver our unique value proposition. Combined, they deliver high returns and long-term value for stakeholders whilst ensuring we continue to deliver on our environmental and social objectives.

Report Strategic

Our purpose

Our purpose is to provide healthy indoor air, sustainably. This

commitment is integral to everything we do and impacts every decision that

we make. We encourage our team to centralise our purpose in their thinking.

  See more page 4

Our strategy

We aim to achieve our goals through a combination of three strategic objectives: organic growth, selective value-adding acquisitions and operational excellence.

  See more page 28

Our values

Our values form the basis for our behaviour and our culture. These values

guide the way that we work, communicate and deal with each other and

form an important part of our success.

  See more page 4

Our business model

We are committed to building on the strength of our successful business model; we continue to develop these differentiators that are central to making us

a successful organisation.

  See more page 24

Underpinned by our

investment case

We aim to continue to deliver value for our investors with reliable, strong and consistent development in financial results whilst minimising our impact on the environment and helping deliver the net zero carbon goals of the geographies in which we operate.

More page 5

Annual Report 2022 Volution Group plc

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Strategic Report

2022 Highlights

Excellent progress in both financial performance and delivering against our ESG initiatives, enabling us to provide "healthy air, sustainably"

Financial highlights

• Revenue up 12.9% consisting of 6.6% organic growth at constant currency (cc) and inorganic growth of 8.5%

at cc, offset by adverse currency impact of 2.2%

• Good organic revenue growth in all three regions, UK, Continental Europe and Australasia, delivered through both volume and price
• Geographic diversification strategy continues: revenue from non-UK customers increases from 58.7% to 61.6% in the year
• Adjusted operating margin up 20bps to 21.1% (2021: 20.9%) underpinned by effective pricing actions and supply chain management
• Adjusted EPS of 24.0 pence, up 14.3%, delivering a compounded annual growth rate of 13.4% since IPO in 2014. Reported basic EPS up 72.4%
• Strong second half cash generation resulting in a full year adjusted operating cash flow of £50.4 million (2021: £56.9 million), a full year cash conversion of 76% (2021: 97%)
• Total dividend for the year increased by 15.9% to 7.3 pence per share (2021: 6.3 pence)

Operational highlights

• Investment in additional inventory and agile supply chain management ensured good customer service levels maintained throughout the year
• Acquisition of Energy Recovery Industries (ERI) completed in September 2021 for an initial consideration of €20 million, gives the Group a leading position in the manufacture of energy efficient heat exchangers, an integral component in all heat recovery devices
• €2 million investment commenced in capacity expansion and automation at ERI to support what we anticipate to be a strong growth area, as well as an expansion programme for our energy efficient EC3 motorised impellers in our Torin-Sifan business
• Successful first full year of operation of new Nordics facility in Växjö

Healthy air, sustainably

• Good progress against our key sustainability targets:
• • 67.2% of plastic used in own manufacturing facilities from recycled sources (2021: 59.7%)
  • 66.1% of revenue from low- carbon, energy saving products (2021: 62.1%)
• Commencement of Group Sustainability Committee as of September 2021, with attendance by our Senior Independent Director at each of the three meetings to date
• Continued investment and innovation in heat recovery categories, now over 30% of Group revenue
• Group carbon reduction targets aligned with our 2040 net zero objective
• Signatories to both the CEO Water Mandate and UN Global Compact in the year

2 Volution Group plc Annual Report 2022

Report Strategic

											Adjusted operating profit and adjusted
Revenue £m											operating profit margin £m (% of revenue)	Reported profit before tax £m
£307.7m		£64.9m (21.1%)	£47.2m
2022	307.7		2022						64.9	21.1%	2022	47.2
2021	272.6			2021						56.9		20.9%	2021	30.0
2020	216.6							2020	33.7		15.6%					2020	14.6
2019	235.7					2019	42.1		17.8%				2019	23.1
2018	205.7								2018	37.1	18.0%				2018	16.7
Adjusted operating cash flow £m		Net debt £m										Adjusted EPS pence
£50.4m		£85.8m					24.0p
2022	50.4				2022	60.82				85.81	2022	24.0
2021	56.9		2021	53.82					79.21	2021	21.0
2020	43.4						2020	51.12					74.21	2020	12.1
2019	36.9									2019						74.6				2019	16.0
2018	34.4										2018						77.2			2018	14.5

1. IFRS 16 basis.
2. Excluding lease liabilities.

Reported EPS pence

Dividend per share pence

18.1p

2022	18.1
2021	10.5
2020	4.9
2019	9.2
2018	6.7

Key performance indicators pages 58 to 61

7.3p

2022

2021

2020 0

2019

2018

7.30 The Group uses some alternative performance measures to track and assess the underlying

6.30performance of the business. These measures include adjusted operating profit, adjusted profit before tax, adjusted EPS, adjusted operating cash flow and net debt. For a definition of all the adjusted

4.90	and non-GAAP measures, please see the glossary of
terms in note 34. A reconciliation from reported profit
	after tax to adjusted profit after tax, adjusted profit
4.44	before tax and adjusted operating profit is set out in
	note 2.

Annual Report 2022 Volution Group plc

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