Why we are keeping faith with Volution
Volution (FAN) 165p
Loss to date: 8.6%
Original entry point: Buy at 180.5p, 9 July 2020
Our positive call on ventilation products specialist Volution (FAN) is off to a bit of a shaky start after a mixed trading update (30 Jul) but we still thing its long-term prospects are good.
While there was no really bad news in the announcement, the continuing lack of medium-term guidance and some pressure on margins thanks to the hit to activity levels from Covid-19
led to a bit of a sour response from the market.
The flagged 7% drop in revenue for the 12 months to July reflected an extremely weak latter part of the year but trading levels have picked up significantly in recent weeks and the company has benefited from its geographic diversification with business in the UK, Europe, Australia and New Zealand.
Cash generation has also remained strong and the company is reorganising the business, including making some job cuts, to become a leaner outfit heading out of the crisis.
It is the longer term potential we are interested in as one of the lasting impacts of the pandemic is likely to be greater focus on air quality.
SHARES SAYS: Still a worthy long-term investment.