Hello. Good morning, and welcome to Volusia Group FY 2021 results presentation. I'm delighted to be here this morning. It's probably George as Chief Executive and over on my right is Andy Oberon.
So good morning, everybody.
So we're delighted to be here. Unfortunately, it's a virtual presentation. I remain optimistic that we'll certainly have an opportunity maybe next time around at the half year to talk to you in person. But what we'd like to do this morning is I'll start with the introduction and strategy. I'll hand over to Andy to take you through the financial review.
I'll come back on the business review and summary and outlook, and then we'll be delighted at the end to hand over and talk about sort of any questions that you might have. If we move on to the next slide. So from a Volition perspective, our energy efficient indoor air quality solutions are part of the global Green Economy. And what I'd like to start with on the next slide today is just talk to you a little bit about sustainability. And We announced this in our previous financial year in FY 2020, and it's what we refer to as our 3 Ps: product, Planet and People.
And so from a product perspective, our ambition is to champion the energy saving potential of our products and solutions and support the net zero ambitions of the countries in which we operate. And we'll talk a little bit more about that and some of the metrics later on. From a planning perspective, we absolutely want to reduce our environmental impact. And for us, that's very much focused on the application of recycled materials, materials, if you like, from the circular economy. And from a people perspective, We want to continue to develop and engage in an inclusive workforce where our employees feel valued and reach their full potential.
We think we've made Tremendous progress with that in the year and in terms of how our employees are absolutely embracing what we're doing around sustainability and driving our low carbon revenue streams. On the next slide, we've got some KPIs and we announced these KPIs in FY 'twenty and we've set out across product, planet and people some stretching targets delivery by FY 'twenty five. What I'd like to do now is just give you a sense of how we're doing with those targets. So the first is around product. This is committed to a 0 carbon future.
And I think it's clear to say that since we announced these targets in FY 2020. We've seen a considerable increase in the focus on reducing carbon emissions from across the world. And so we think this ambition that we have to increase the proportion of our revenue that is a low Carbon solution is a hugely virtuous and rewarding KPI to have. In FY 'twenty, 59% of our revenue was from a low carbon product set. We've increased that to 62.1% in the year in FY 'twenty one.
We think we're in really good shape to deliver the 70% target by the end of FY 'twenty five. And indeed, some of the acquisitions that we've made in year will potentially help us sort of accelerate the delivery of that target. From a planet perspective, it was about reducing our environmental impact. We've got a huge ambition here that the plastics that we utilize in our own facilities, but predominantly in the U. K.
And in the Nordics, will be from a 90% recycled source. That's a huge ambition. And of course, We've gone from 56% to 59.7% in the year. So we're clearly going to have to accelerate the application of those materials to deliver the 90% by 2025. 2021 was difficult in some respects in terms of the availability of some of these materials.
I feel as if we had, particularly in the latter part of the year, a bit of a breakthrough in the application of materials. We use recycled PBC, PIPs and ABS. And what we were able to do, and we've been running some trials more recently, is to get to almost 100% application of recycled hips. And we're moving awards, a very significant application of recycled ABS. So whilst we only moved up, let's say, 4% along the curve as it were to 60%, that the remaining 30% is a big challenge.
I know that the breakthroughs that we made, particularly in the last couple of months in terms of applying these materials and having the right mechanical properties in the final solution, give us a high degree of confidence in terms of delivering on these on the 90% over the next 4 years. From a people perspective, we targeted to have our ambition is to have 0 accidents. And regrettably, in the year, we had 6 lost time accidents. And what we felt that we needed a more meaningful measure that could be benchmarked against other companies. And so We've introduced a frequency rate.
It's a frequency rate showing reportable accidents as a frequency rate per 100000 hours work. And that frequency rate was at 0.2 accidents per 100000 hours worked. And what we've looked at is an industry average frequency rate of 0.17. So we're looking to provide more color on that as we go forward. And certainly when we look at the annual report for this year, there's quite a bit of detail.
But look, delighted about progress with sustainability. Low carbon revenue is on a great trajectory. The recycled material content is really important for us, not just because of our sustainability objectives, but also from a cost perspective, and we've got some really exciting breakthroughs that we're delivering on there. If we go to Slide 6 and just to talk about very quickly the summary, and I certainly don't want to talk about this too much Now I'd like Andy to take you through in more detail. But look, it was a strong revenue growth.
We expanded our operating margin to our 20% target and completed it 6 months earlier than we expected. 3 acquisitions completed in the year, a 4th completed early in the new financial year. Just a couple of headlines because I know that referring to our prior financial year that was quite impacted by COVID. It's not necessarily a good comparator. But if we look at FY 'nineteen, which absolutely was a COVID unaffected year, We delivered 12% revenue growth against 'nineteen and a very compelling 31.5% growth in our adjusted EPS at 31.5 percent over the 2 years.
So very strong revenue and profit growth. Operating margin increased to 20.9%. On the next slide, Slide 7, delivering well against our strategy. Our strategy has been largely the same since we listed in 2014. We want to grow well organically, and we delivered very strong organic growth against the prior year, but nevertheless, a good organic growth against 'nineteen.
We completed 3 acquisitions in the year. I'd like to talk in a moment a little bit about the 4th one. And from an operational excellence perspective, that really did help us underpin an operating margin of greater than 20%. So that was really exciting. And look, we'll talk about a little bit more later on with respect to current trading, but we have successfully mitigated the cost pressures in the second half of the year, and we're confident about how the group is positioned in terms of those inflationary headwinds that everybody is seeing at the moment.
On the next slide, there's quite a bit of detail here. I don't propose to go through each of the acquisitions in detail. Klimarad, Klimat, Fabrica and Airtech all completed in the year. That's 2 in the Nordics and 1 in the Netherlands and predominantly low carbon solutions. But ERI Corporation, this is a manufacturing facility in North Macedonia providing energy efficient heat recovery cells to a whole raft of ventilation customers and indeed inside Volition across the European market.
That was completed in September. We're busy integrating that acquisition now and really excited about the potential. ERI is one of the leading producers of heat recovery cells in Europe. And heat recovery ventilation will be really well underpinned in all markets as we go forward as we drive reduced carbon emissions from buildings in the months and years ahead. On Slide 9, which is our business model and Volutian's purpose is to provide healthy air sustainably.
And we think our business model is relatively simple and straightforward, not necessarily easy to execute, But it's really important that we understand where we think we create value. We understand and shape our markets. We understand intimately the regulations and the drivers in each of our markets. And each of our markets intrinsically is different. There is an overarching principle around regulations, but each individual market range differently and we think we understand those intimacies really well locally.
We leverage our scales. Volution is now one of the largest ventilation providers, particularly in the residential space in Europe. And that scale benefit is starting to shine through. We saw our operating margin improvement in the year, but it gives us cross selling potential that is very exciting. It gives us economies of scale and scale benefits that quite frankly we didn't have to the same degree that we have now when we listed 7 years ago.
We support our companies to grow And we've had some fantastic examples of that. I'd like to talk to you about Australasia a little bit later on in the presentation. But it's cross selling and innovation that we're able to then extrapolate across many different routes to market. And we drive sustainability and sustainability is something that Andy and I believe in passionately. It's in our DNA.
It's something that our employees have embraced and it's how we go to market. We provide low carbon products to help save energy and reduce carbon emissions from buildings and that is absolutely essential. So So that was a very, very quick high level summary of the year that we've just had. Clearly, we're delighted about our record results. And what I'd like to do now is hand over to Andy O'Brien just to take you through the financial review and the financial results in a little bit more detail.
Thank you, Ronny. Good morning, everybody. Yes, Slide 11, please. So first slide here are financial highlights. And as we said, obviously, what this shows is our key metrics and how they developed over the last 5 years.
So And I guess my key takeaway from this slide, we'll go into more detail on each of the constituents later. But yes, it's unsurprising that there's a very strong banks back and recovery from financial year 2020 and the COVID impacted year that we had then. But I think what this chart really does Demonstrate is the consistent and indeed accelerating progress on all these key metrics if you look back over the last 5 years, so whether revenue, operating margin, earnings and indeed cash generation. All of those lines show really good consistent progression and SAD acceleration, which we're very pleased and excited about. Next slide, please.
So this slide here, apologies, there's rather a lot of data and numbers on here, but I thought normally we would just show comparative to the prior year, but to the point just then, we thought it was helpful to just remind people how financial year 2021 stacks up, not just against 2020, but against This is a pre COVID 2019 year. And I think as you see down the movement column there, again, really good progression across all of the key metrics. So revenue will unpick the sort of the geographical and market sector makeup in the slides to come. But over 2020, a 25.8 percent revenue growth, 22% constant currency organic growth and some acquisition support and benefit from, in particular, Klimarad, which came in, in December of the year. Operating margins.
We've obviously talked a lot about our operating margin ambition and aspiration over the last couple of years and the 20% target that we set ourselves. And we set ourselves that target back in 2019 when as you see from the chart there, Our margins were 17.8% as a group. So we've expanded those margins in the last 2 years by at 310 basis points. And what you have got also on this slide, of course, is the gross margin as well as the operating margin. So you can see that, That 310 basis points has come from an array of factors.
It's come from gross margin, I. E, product cost actions, scale, New product innovation has come from work we've done on indirect costs, in particular around restructuring of our U. K. Organization to take advantage of the fact that we now have scale across multiple brands and it's come from operating leverage as the group Continues to grow and expand in scale. If I look also down that chart there, I So draw your attention to the cash generation metrics and in particular leverage.
So we closed the year 2021 on a leverage basis. Now this of course is excluding leases. So this is pre IFRS 16. So a leverage of 0.9x compared to 1.3 12 months ago and 1.6 2 years before that and that's notwithstanding a really Exciting year where we spent just over £42,000,000 on acquisitions. What that means is we entered a new financial year with balance sheet and debt in a very, very healthy and robust position.
Next slide please. Not much to dwell on this slide. This is the movement between our adjusted earnings and our audited earnings and effectively it all relates to acquisitions. I guess the one line I'd probably Allude to here is the £3,300,000 charge for contingent consideration in the year. And what that is, is our Ventev business in Australia.
So this was its measurement year for earnout purposes. And we were delighted to see The hugely strong performance of that business in the year, meaning that it's hit and exceeded its maximum earnout targets. And Whilst I don't mind getting the checkbook out, probably writing a check for achievement of earn out is one of the most pleasing checks that we can write as a business because it means that the acquisitions have done what we expected them to do and hopefully more besides. Next slide please. So this is just laying out the revenue progression organically by our 3 geographies, The contribution from inorganic and the impact of foreign exchange in
the year. So we had
a small foreign exchange benefit as all of the Principal currencies were slightly weaker than it was certainly slightly weaker against our currencies in the year just gone. That is expected to revert back based on where the rates are now in 2022. In terms of the regions, Ronnie will go into more detail later. But again, probably Good percentage growth across all three, but probably the one that jumps off the page is Australasia at the 31.5% constant currency growth there, which I say we'll Talk some more about insights to come. Next slide please.
So I've already mentioned our 20% operating margin target, which is where we set basis the 17.8% that we set out financial year 2019 as a group. And it was really pleasing to us to get to that target early to maintain the delivery of that target through what's been a pretty turbulent last 6, 8 months in terms of supply chain and input cost pressures. And so emerging from the year with a margin of 20.9% is very pleasing. All three businesses the right side of that target line. And as you see on the right there, in terms of the expansion of margins compared to last year, Really strong and fairly similar levels of margin expansion in all three of our geographies.
Next slide please. So here you see our sort of cash performance over the year. And really we set ourselves a 90% target for cash conversion. So 97% this year, again, nicely above it. And indeed, I think over the 7 years Since listing, we've exceeded that 90% target in every single year of TEFL 1.
And as I've already referenced, leverage ending the year at 0.9 times. And that is with you see the large acquisition block there of £42,000,000 a little bit of additional investment in working capital in the year and in particular in the second half of the year. And of course, that is activity returning, but it's also a conscious decision and strategic intent to hold more inventories where we can to try and give ourselves some buffer and some protection Again, to be able to resolve the supply chain. So we have increased our inventories, excluding acquisitions by about £11,000,000 compared to where we were 12 months ago, as they still end up with 97% conversion and a very healthy leverage position. Next slide, please.
So this slide now talks to our returns on acquisition and this is A metric that we introduced for the first time 12 months ago and this is setting ourselves a target of within 3 full years of ownership delivering an 18% return on our acquisition spend. And it's a high part to set, but I think hopefully this slide provides some color and some context as to why we feel confident in setting that target. So on the left hand side there, you'll see by geography where we are respectively on our U. K, Nordic, Central Europe and Australasian segments and all of them at or above The 18%, clearly the ones where we've held acquisitions for longer and therefore been able to continue to expand the operating results out of Nordics, out of Central Europe, you see the highest rates, but really pleasing that all of them are basically at or above the 18% and as a group We're at 25%. Then what I've done on the right hand side of the chart here is to focus as I said, we set ourselves a 3 year Horizon to reach the 18% mark.
So here you've got the 3 acquisitions that we completed in our financial year 2018. So the 3 that are now newly part of this metric. And without going into too much detail, so the big one there obviously is the Cymex acquisition in New Zealand. And we're delighted with the way New Zealand's developed over the years since our ownership. At the point of entry, point of acquisition, that number would have been about 11% and it's now showing 17.5%.
If you solely look at the result of New Zealand itself, the little gray bit on top of both the And what that represents is that these are businesses and this is again a core part of our acquisition strategy. These are businesses which we supply the product into that market in house from our facilities in the U. K. And of course, therefore, as we've developed and expanded The businesses in New Zealand and indeed in Denmark with Air Connection as well as pulling through the profits and the earnings in New Zealand itself, What we also do is generate additional incremental intercompany sales and margins in the U. K.
And so if I value that into the acquisition, and Cymex moves from 17.5% to 19.7% and Air Connection in Denmark from just under 16% to sort of 22.5%. And on the slide below the line as of last year is our Pam on acquisition in Finland. And really that is largely a result of Finland being more impacted than our other Nordic markets by COVID-nineteen restrictions. What we're seeing in the latter part of 2021 and certainly the 1st couple of months of 2022 and supported by the acquisition of Artech recently and therefore the integration benefits that brings. We're seeing really strong earnings development in Pam On, which is moving us above that line.
But yes, hopefully that gives a little bit more, say, detail on the new ones and a bit more reassurance as to why we think this is an important target and how we're going about it. So with that, I'm going to and back to Ronny to go into
a little bit more detail on our respective markets. Brilliant. Well, look, thank you, Andy. I mean, what a great set of results for Andy to present there. He joined the group 2 years ago and of course the 1st year was very difficult with COVID.
But Clearly, what we did in that year is set the foundations for the strong year that we've just had. And that was essentially about this slide, which is geographic diversity. The group has moved from being a U. K. Leader.
We are absolutely a leader in the U. K, but we're growing very nicely in Continental Europe and Australasia. And this slide covers it off really well. You see that More than half of our revenue last year was from outside of the U. K.
We still love the U. K. Market. It's very important to us, but it clearly The diversification is really important. And of course, think about the acquisitions that we made in the year and how we further diversify away from the U.
K. As it were or we grow more quickly outside the U. K. But we're still expecting great things in the U. K.
Market as well. And that's really covered off on the next slide. This presentation is now available on the Volusia Group website. And I don't propose to go through this in detail, but it is a quite explicit view of the different markets that we serve. And this geographic diversity, this not relying on one single market for our revenue stream is really important.
The next slide, Slide 21, I'd just like to take you through each of the individual areas here. So we'll start with the U. K. And of course, It would have been very difficult not to grow against 2020. And so I will refer to 'nineteen as we go along.
And What we've got here in the UK, for example, is operating margins of 20.4%. That was 17.8% in the year before COVID impacted our result when we did a bit 14% in the year 2020. So a substantial uplift in our margin in the U. K. Last year, we saw strong residential RMI demand.
And we believe that that's coming from a number of different areas. Upselling, which is hugely important for us, is going very well. Ventilation doesn't have to be noisy in residential refurbishment. We have leading solutions when it comes to quiet, silent, innovative solutions, including app controls. And that portfolio grew really well last year and is set to continue to grow.
We've also got, not just in the U. K, but of course globally, a heightened awareness around how ventilation can improve indoor air quality and indoor air quality is inextricably linked to health. COVID-nineteen is a pandemic is a respiratory disease, a very respiratory virus and good indoor air quality will reduce health risks. So That's not a new statement, but it's one that I think people are hugely aware of. And look, the runway of opportunity in residential RMI, not just in the U.
K, but in all of our markets, it's very substantial. Residential newbuild and commercial, they all grew well in the year. We were disappointed with residential newbuildingcommercial last year and we've alluded to strong order books, particularly in the commercial space. And we've had a good start to the new year. And indeed, we're seeing those areas continue to perform very well And across the business overall in the U.
K, we grew 21.8% in the year and particularly in residential refurbishment, which was substantially up on 'nineteen, 12% residential RMI growth in 'twenty one over 'nineteen. On to the Continental Europe area. Continental Europe was on Slide 22, if you may. Continental Europe was far less impacted in '20 than elsewhere, than in the U. K, I should say.
And so therefore, the comparative with 'twenty one and 'twenty is a good one. Operating margin was 21.4% in 'nineteen, 20.5% in 'twenty, 26.6% in 21. That's a combination of quite a few things. The acquisition of Plimmoran, a very profitable company with a market leading decentralized recovery proposition, the strong growth that we had in the Nordics and indeed in Germany and the high levels of profitability that we generate in those areas. So the revenue growth is 25.3%, but it was still 22% up on 'nineteen.
You can see that actually 'twenty as a sort of delta on 'nineteen wasn't as severe as we had in the UK. We look absolutely delighted with the 26.6 percent operating margin. We've got leading positions now in the Nordics, Belgium, Netherlands and Germany. And more recently, we acquired DRI, which, of course, doesn't feature in these numbers, but will act as a huge tailwind for revenue growth in FY 'twenty two. And then finally, if we move on to Slide 23, Australasia.
It's a long way away and I know when we acquired in New Zealand that was the comment we got from maybe some more nervous shareholders. But these propositions. These strong brands with Cymex and Ventair, New Zealand and Australia respectively, strong management teams, very well run activities and delighted 21.7 percent operating margin, up from 17.7% in 'nineteen. Organic growth of 31.5 percent. Our revenue in Australia, Inventor, 70% higher and when we acquired the business in March 2019.
We're a market leader in New Zealand. We have an ambition to be one of the leading cancellation companies in Australia and it's growing very well. In Australia, draw you to our attention to the last bullet on the page there. New sizable account win in Australia in FY 'twenty one to commence in half 1, FY 'twenty two. We've seen no revenue yet.
It actually kicks off in earnest through October. We're in the process now of stocking out many hundreds of DIY stores in that Australian market. We have a great proposition and we're very, very excited as you can tell about our Australasian activities. So look overall, really good organic growth across all three areas, operating margins improving. And what I'd just like to say, just to echo what Andy said earlier on, I'm sure it will come back in Q and A.
We believe in Volution that we saw most of the inflation that we're likely to see throughout FY 'twenty two. In the second half of our FY 'twenty one. We've been on the front foot with price increases and we believe we've got strong propositions and strong brands. The U. K.
Came a little bit later with price increases basically through April, July October, quite a significant increase going in now. And so we've actually got this sort of further improvement in pricing, but we're managing our input costs and mitigating some of those input cost inflation really well, not least of which is recycled materials, which actually not only help with our sustainability calls and we're really committed to that, but also help reduce our input costs. So if we just jump a couple of pages now and go to Slide 24, The summary, strong revenue growth, 24.4 percent at constant currency, operating margins of 20.9%. The group's target is 6 months earlier than anticipated. 3 acquisitions in the year, all really high quality attractive propositions and a 4th transaction completed early in the new financial year.
And the pipeline remains full. We're very excited about M and A. We did 4 transactions in a period where it's undoubtedly more difficult to do M and A when it's hard for us travel. It took us a month of planning to travel to the ERI facility in North Macedonia in June. It's going to get easier.
We don't have to plan a month in advance now thankfully to travel around Europe. Excellent progress with our key sustainability metrics. It's embedded into our business. It's part of our DNA. And we have mitigated most of the supply chain and input cost inflation through selling price increases.
And look, I believe we flagged it earlier on. We were concerned that people might see it as negative that we were holding more inventory in our facilities. But we believe that deploying that capital into more inventory to mitigate these inevitable supply chain disruptions that have been well publicized for nearly 12 months now was the right deployment of capital and we'll continue with that strategy until we see an easing, but it will protect us as we go forward. Everybody is aware of indoor air quality. There's not a day go by that I don't hear about ventilation, ventilation, ventilation and That's not going away.
That's a nice underpinning trend for all of our markets for the long term. Cash conversion is strong, very strong, and we know what to do with it. And a return to pay dividend at 6.3p per share, reflecting a strong performance in the year. So just to finish, and I know there'll be questions there. The outlook, the financial year has started well, delivering organic revenue ahead of the same period in the prior year.
Our marketing products and brands, our implementation and proactiveness around price, We believe agile approach to product assembly and supply and the benefit of the 4 acquisitions that we have executed in the last 12 months since we presented FY 2020 results. We expect to make further good progress in the year ahead. So look, with that, that Takes us to the end of the sort of fall presentation. And we'd like to hand over to the audience now to see if there are any questions, but glad to thank you for your time. Okay.
I think the moderator is going to help us
with questions. I am. Perfect. No, we do. The first Question, the username is Lush M.
Okay. So Lush at Berenberg, good morning. We can't see you there, but hopefully, you can hear us. Far away.
You can see me now. Hi, guys. Thanks for the presentation. Three questions, please. The first one, just a bit more detail on sort of the latest Pricing inflation situation, I guess, what's the quantum of price increase that you're putting through?
Are they generally being accepted by the market? And I guess, they're the sort of tightest pinch points from a supply chain perspective. The second question is on commercial. You flagged your order book is improving. Are there specific end markets that are doing well?
And I'm just interested to hear Hospitality, leisure sector in particular, I guess, are perhaps improving their ventilation post COVID in particular. And the final question is just on cross selling. Just reading for the statement, it looks like you're going to be Increasing some of the climate rubrican products into the UK, I guess, how big an opportunity could that be? And where else do you see a similar sort of cross selling potential? Thank you very much.
Yes. I'll let me take the first one, Alicia, and then, Roy
will briefly pick up the commercial and
the cross selling. The last 6, 9 months, I think the word unprecedented has probably been used too often in the last 6, 9 months, but it still is unprecedented. And I hate to try and speculate, but the way we feel so what we believe is we are absolutely not thinking or expecting that Input costs will revert back to where they were pre sort of 6, 9 months ago. So we're not expecting an unwind of what we've seen. But what it does feel like over the last few weeks is that it's sort of leveled off.
So the rates so we're not seeing price we're not seeing costs drop back down, but we're not seeing The rate of new cost increases coming into the system that we were seeing for the sort of 4, 5, 6 months before that. Our price response and Ronny alluded to this earlier. We've got at different times in different markets. In the U. K, which probably bore the brunt of The inflation because it's our main manufacturing center, we implemented our price increases a little bit later, so in April, July and now indeed October.
So you don't see the full benefits on the price side of things in 2021. We're expecting that to come through in 2022. And I say where our assumption is at the moment, the costs stay sort of where they are. There are probably going to be a few more pressures coming through, but not the rate that we've seen in the last 6 months. In terms of are they accepted, I mean, I think that nobody would choose to receive a price increase, but they're understood.
I think in the context of what else is going on in the economy, in the market, in the building materials sector, I think our rates of increased are certainly not eye watering. I think possibly the fact that we've done it in a few stages Actually shows people that we have been doing our best to try and mitigate and manage it. And so and actually, we also feel that, Frankly, customers are more focused on can you serve them and can you deliver rather than necessarily arguing a percent either way on price increase. So for us, we think the most important thing is keeping a really good service proposition and service delivery, which which we believe we are doing.
I don't know if that answers that question sufficiently, Volition. Okay. Just to echo what Andy said there, I think in the U. K, you said our operating margin in half 2 is that We I think we're a little bit lighter than we should have been, and we've had an April, July October increase that's going in. And look, some of the price I think if we're selling upselling really well, the difference in an upsell RMI solution is significantly greater in terms of value than the price increase.
And I think it's just how we position it. But look, we are we've got strong brands and strong position, So we need to be leveraging that. We invest to provide innovative products with good levels of support and we're not shy about recovering the inflation in our price. And yes, there is a risk. Of course, there is a risk that this continues.
But we think from the limited time horizon that we can see in terms of inflation that we're certainly getting ahead of things with what we've implemented. So look, we're Really pleased about that. And I know there's a high level of nervousness, but we are in the less nervous camp of price versus inflation. And we've always argued that we've got strong pricing power. And I think now is the time that we'll demonstrate that.
The 2 other questions you had, commercial. Commercial, we're not a strong player in the U. K. Commercial. Our market share is smaller than it is in residential, but we have some very strong niches.
And in particular, fan coil ventilation into commercial buildings, We've done very well. The 1st couple of months of the new year has been strong in commercial. We knew that would be the case. We've taken orders for some very large and exciting projects over the last 6 months and that's now coming through in terms of our supply. So we expect that to continue.
We're very pleased about the commercial rebound that we're seeing in terms of revenue. And then the third question Your answer is around cross selling. And look, cross selling is something that it's actually harder to do, that has been harder to do through COVID because we can't get our respective teams together face to face. But I think we've done really well with it. We've cleaned out Fabrica, which is just a small example.
I mean, we had a small acquisition in the Nordics. There's a very nice product portfolio there, and we launched one of the products into the U. K. Under our National Ventilation brand more recently and it provides them with a high end solution to take into distribution. But Some of our cross selling success is in Germany where we're the leader, the decentralized seat recovery.
We supplemented that with some high end Solutions in the Nordics. They're going well. And indeed, the products in Germany, the high end decentralized heat recovery are doing very well in the Nordics. We have to make this part and parcel of what we do as we grow our geographies by M and A and we have more routes into market. This is a huge opportunity for us.
And what we do internally really well is we share the success stories. We pinpoint success story and tell everybody this is what we've done, this is what worked well. And I think it becomes really inspirational for everyone else to take the lead on. Okay. Great.
Next I can't see any of the questions. So we'll hand over to the moderator.
David Farrell, please.
Hi, David.
Hi. Good morning, Andy. Good morning, Ronny. A couple of questions for me, please. Firstly, in terms of just the current trading, You say organic revenue is ahead of 2021.
Could you quantify that potentially? And following on from that, Is that the case across all regions? Or is one region kind of a particular standpoint? I'll come back with my second question, I guess.
I mean, we haven't actually said exactly what our organic growth is, but it's gone well. It has gone well. And I'd also point out that the 1st 2 months of the prior year were probably the they were very strong organic growth. So fact that we're growing well over a 2 month comparative period last year that was strong, I think probably says it all. So we're really very pleased about things.
In terms of the distribution, I think we've got to be careful with just 2 months looking at how did each individual area do. But look, I think our confidence level in terms of what we're seeing activity and so forth. We expect to grow well organically in all three regions. There's been a very well publicized lockdown in New Zealand, And we saw that with Level 43 in Auckland through August September. But in spite of it, that region has still performed very well.
And what we believe is that there will be an element of sort of pent up demand that couldn't be serviced as New Zealand starts to roll out the vaccine in earnest. And our local intel from our team is that as that's done by the end of this calendar year, We are less likely to see New Zealand going into further lockdowns in future. So look, it's been a really positive start. I think where Andy and I are mindful at the moment is the market is maybe overall a little bit less positive about things at the moment, but We are, but clearly only a couple of months into the New Year.
Okay, great. My second question comes back to kind of the use of recycled plastics. Interesting to hear that you think that's going to be kind of a lower cost solution. I walked into Tesco the other day, and perhaps you're telling me they're using Recycled plastic for their bottles. As kind of the world try to move towards using more recycled plastic, do you remember that there might actually be a shortage Which actually Indigy getting to your target?
The reason not you're absolutely right. It's perfectly sensible, and we had some of that in the second half of twenty twenty one where people were using more recycled materials or moving some of the materials that we were using to substitute virgin because there was a lack of availability. What we've tried to do achieved Virgin because there was a lack of availability. What we try to do is to utilize materials that others I don't think can. And there's a couple of specific examples that I'm not going to go into in detail because it's quite proprietary to us.
And of course, it's an advantage that we believe intrinsically Volution has over its competitors. But in summary, We believe that some of the materials that we're using, the alternative for it is landfill. And we're able to process this material whether it go on 100 on a blended basis that enables us to make high quality products. Some of these are not seen if you're providing ducting as part of a solution that's installed in a ceiling void, then aesthetically it's not so important, the mechanical properties are. And of course, our house builder clients are delighted about the fact that providing them a fully circular economy solution.
So that's where we are. And I talk quite confidently on the KPI slide about delivering against our 90% target. And clearly, we're only at 60% now. There's a long way to go. But no, it is a risk.
But I think with the partnerships, and that's the issue for us, long term partnerships that we want to set up and we'll be here to utilize those materials for many, many years into the future, not just because there's a lack of something else short term. So I think that's how we'll mitigate it, but it's a good question. You're on mute there. Yes.
Next, Could we go to Clyde Lewis, Peel Hunt, please?
Good morning, both.
Couple of questions, if I may. 1, I suppose, around housing renovation. I mean, Ron, you sort of flagged that Being the strongest part of the UK business in the year, how did that vary private to social? Because I The social side of things is still very much lagging in the private sector. So I'm just wondering how you're starting to see the sort of social renovation market start to sort of evolve.
The second one I had was around conversations with house builders around sort of the Part L and the Part F changes. And I suppose I'm intrigued as to what they're talking to you about in terms of their thoughts because every time I talk to them, they're still not sure what So have they managed to narrow anything down with you in terms of the sort of products that they are thinking about using going forward?
Got it. Got it. Sort of social private, I think social did lag in the first half of the year. There's a big problem in social housing and it's getting a lot of airtime pun intended. And so we see the demand outlook in social as well as private is robust, and we're confident about that.
And so I think that second half of last year. Certainly, things came back. It was a lot more conservative in the first half of 'twenty one because of access to properties and so forth. So no, I think we're equally positive about private and public. And it's understood that landlords in that sector have a duty to provide good indoor air quality and good living conditions for the tenants.
There's so many horror stories quite often on the news at 10 and so forth that show you just how much of a catch up is required. When When you look at house builds and part F and L, the thing that I like is that is happening now. And you could look at some of the announcements that the house builders are making and indeed some big ones in the last few weeks are talking about the premium that they believe house buyers are prepared to pay for energy efficiency. And they're starting to catch on to the fact that they don't have to be dragged kicking and screaming because of regulations to improve energy efficiency and indoor air quality, but actually it could be a differentiator. We've got a number of house builders now who are actively talking to us about indoor air quality, mechanical ventilation with heat recovery and the benefit that it can do.
And let's not forget, our solutions, when properly installed in an airtight dwelling, substantially reduce heating loads. And if we think about what we're going to be bearing over the next couple of years in the U. K. With energy costs, people are going to start thinking about the running cost of the dwelling when they buy it, not just the initial purchase price. So I think there's so much in our favor now.
We're starting to look the penetration of heat recovery in the U. K. Is still only about 40%. I've been in this industry now for 13 years. I was told it would be 0 carbon homes in 2016.
So we've got a long way to go, We have to deal with it. And I think house builders are catching on to the fact the cost of this technology versus the benefit. And let's go back to sustainability. And why don't we want to sell homes with decent good quality indoor air quality? I think we do.
So there's some additional drivers. It won't be a gold rush, but it's certainly going to help. It's helpful. I think we've got time for maybe one more question. Have we got many more questions there?
We have 3 more. Do you if we make some quick do you want to do okay. So Charlie Campbell from Liberum has a question.
Morning. Yes, I'll try and keep it quick. Just a couple then. So in terms of raw materials, you've talked a
lot about kind of costs and recovering costs. Just wonder about kind of physical availability, what you've done to kind of mitigate that problem and how confident you are of availability going forward.
And then secondly, which is kind of Going forward. And then secondly, which is kind of related, is just to get an idea of what you think the price rise might be sort of 'twenty two over 21 across the whole group, just to give us an idea
of the order of magnitude of where
you think kind of achieved prices might be Yes,
for the whole group. Thank you. It's not a straightforward, Charlie, because of course, we delivered increases in half twenty twenty one to mitigate what we were seeing in 2021. So you sort of the way I've described it, it's a trough to peak. So from where we started to where we finish, you're probably of the order across the group of maybe 6%, 7%, 8% by the time we finish.
And that's where we from pre price increase to where we expect to finish. But of course, it plays out through maybe 2 financial years, 2021 to 2022.
And on the materials question, Charlie, I mean, I think in terms of availability, the things that we've done and we will continue to do, we talked about Holding our inventory, so over the last sort of 6, 9 months, we've deliberately said to our teams where you have the opportunity to add Good inventory of key components do so. We try to have alternatives of supply. So in case there's a Specific interruption from one of our suppliers. We've got an alternative either of something that's exactly the same or something that could be substituted for it. We've worked with the engineering team to do some quite innovative tweaks so that we can adjust what components go in and use what is available.
But I think that it's not easy, but I think the fact that we have the inventory holdings, the fact that we have the in house assembly. So, therefore, we've got stock of finished goods and we've got stock of raw materials and we've got supply alternatives. I think that gives us Yes, that is a good position relative to where others might find themselves from an availability perspective.
Okay. Sorry, go on.
Please could we go to Graeme Kyle, Shaw Capital. Thank you.
Good morning, Scott. How are you doing? Just very quickly, just two questions from me. 20 percent operating margin target. Now that's conservative.
Is there a plan to raise this, especially as gross margins Moving up strongly, European contribution is moving up. And the second question is, Are there any imminent changes to building regulations in any jurisdictions outside the U. K. That may catalyze volume growth in that region?
I'll do the second one first. So fit for 55 and so forth, the ambition in Europe to refurbish 3% of the sort of public building stock across Europe, where we'll, I think, drive an additional catalyst. I think if we look at sensibly the carbon emission reduction targets over time. We're not going to arrive based on the legislation that exists at the moment. So there needs to be an acceleration on that.
I thought specifically about the U. K. We see the regulations in New Zealand still being a tailwind. We've seen the green sort of Green Grant Fund in Europe help stimulate more refurbishment demand, particularly in places like Germany, also in the Netherlands. So there's a whole raft of quite detailed regulations that continue to help us.
Yes. And I mean, Graeme, on
the other one, and actually, I should have guessed this one was coming. So hopefully the answer is fairly prep. No, I mean, we set the 20% target 2 years ago. We're now 90 basis points above that target, which is great. We've got absolutely no intention of losing that 90 basis points advantage.
And indeed, if we take it Business by business, we expect each of our businesses to grow. We expect each of our businesses to carry on upselling, to carry on driving efficiencies. And therefore, when we set targets and objectives with each one, we would expect them to carry on improving branch. Now the big stuff has already been done. So there's no big levers out there, but we would expect good discipline and good vigilance, meaning that each business should target to carry on inching its margin upwards.
The 2 reasons for not well, three reasons for not resetting a group target. Number 1, we don't think it would drive any different behavior because we think that behavior of vigilance and discipline and focus is absolutely ingrained in what we do. And therefore, if we certainly turn around to our teams and say the target is 2022 or 2023, it's not that that's going to certainly unearth things that they wouldn't have done anyway. Secondly, we talked about this in the past, the sort of M and A optionality and sometimes M and A will be dilutionary when it comes in. So Not always, but more often than not, we're going to expect M and A to come in at margins below the group.
And therefore, the buffer above the 20% allows Some of that dilution without going below target. And I guess, but thirdly, right now would be a very strange time to change margin targets given the supply chain challenges and issues that are out there. But rest assured, we want to carry on moving them in a forward direction.
That's all the questions. Thank you very much.
Okay. Well, look, thank you very much. Waiting for the camera to come back to me. Thank you very much for your time this morning. I'm really sorry that we're not getting a chance to see Some of you in person, it's certainly a little bit more difficult presenting the first part of the presentation to a screen with No sort of feedback from anyone, but we are delighted about our record results in 'twenty one.
We are confident about further good progress.
We're not under estimating by any degree how
challenging our markets are. We're demating by any degree how challenging our markets are with respect to inflation and supply chain. But That's what we're here for. We think we've anticipated all of these challenges very well, and we're excited about what lies ahead. So look, thank you very much, and Look forward to seeing some of you in person over the next week or so.
Thank you.