RBC Capital reiterates ‘outperform’ rating on Volution

"We continue to see upside growth potential in FAN with its strong leadership team and dedicated workforce; disciplined approach to acquisitions; continuous improvement and lean manufacturing processes; expansive branded product range; and close customer relationships," the bank said.

"Given its solid performance in recently weaker markets, we expect FAN to continue to outperform as market conditions improve."

RBC said the company’s M&A strategy post Fantech now looks more likely to be bolt-on in nature.

It said there is still around £50m of firepower to potentially pursue additional acquisitions.

"We expect these to be focused more on EU markets to expand sales footprint/geographic reach; though unlikely to be anything immediate; and more likely to be bolt-on in nature," RBC said.

"FAN's leverage now sits at circa 1.5x and we could see it go as high as circa 2x if opportunities present themselves. Without additional acquisitions, we expect FAN to reduce leverage by about 0.5x/year, given average cash conversion of more than 90%."

RBC has a 700p price target on Volution.