Ventilation products maker Volution (FAN) topped the FTSE 250 mid-cap leader board on Wednesday, gaining 6% to 423p after upping full year earnings guidance.

Despite challenging conditions in the new build market, the company said its refurbishing activities continue to benefit from ‘strong’ regulatory drivers.

Over two-thirds of Volution's revenue is derived from the refurbishment market.

A strong start to the new financial year saw revenue for the four months to 30 November increase 8% year-on-year to £121 million driven by organic growth of 2.9% and 7.7% from acquisitions made earlier in the year.

Adverse foreign exchange movements lopped-off 2.6% from revenue growth.

INCREASED GUIDANCE AND ANALYST UPGRADE

Consequently, the board said it was confident of delivering earnings ahead of the current range of market expectations which call for adjusted earnings of between 25.3p and 26.3p per share.

Over the last year analysts have revised up their 2024 earnings estimates by around 7% to 25.8p per share and 2025 estimates by a similar magnitude to 27.6p per share, according to LSEG data. If delivered, this would represent growth of 28.6% and 7% respectively.

Why Volution deserves a valuation in line with high quality industrial peers

Berenberg analyst Robin Chantry increased his earnings estimates by 1% to 2% across the forecast period.

Chantry said: ‘Despite some weakness in the original equipment market sub-division given the new-build exposure, we expect UK volumes to be strong through H1 of FY July 2024, with this continuing into H2, albeit year-on-year comparables will start to toughen.

‘We now expect a 3.0% like for like number in the UK in FY 2024, from circa 1.0% previously.

‘Management noted today that a combination of service, brands, portfolio management and pricing power have supported gross and operating margins improving on FY 2023 levels so far in FY 2024.

‘As such, we increase our FY 2024 assumption to 21.4%, from 21.0% previously.’

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