Venture Life Group delivers strong UK brand growth in H1, expands market presence
When investors hit the panic button as occurred yesterday (re Nikkei225 fell -12%) due to the unwinding of the Yen carry trade and fears of a US recession - then it's nice to hold some defensive stocks in order to add stability and resilience to one's portfolio.
To me, consumer healthcare products firm () fits the bill - releasing a confident and in-line H1'24 trading update this morning.
Sure, revenues came in flat at £23.5m. Yet equally, 's higher-margin own brands climbed 5% to £13.8m (£13.1m LY) and now represent 59% of the group (56% LY). Indeed, this growth (split 4% volume and 1% price) entirely offset the temporary impact from strong YoY comparatives and destocking across its 3rd party brands (-7% to £9.6m vs £10.4m LY).
More importantly, from a profits perspective, Balance Activ, Lift and Earol all performed well in the UK, delivering sales growth of 14%, 30% and 13% respectively - thanks to new retail listings, enhanced promotional spend and a 50% jump in online activity (eg Amazon) to £2.5m vs £1.6m LY.
Better still, due to the favourable product mix (eg Ultradex +23%) and easing input cost inflation, gross margins ticked up 1% to 38% (37% LY), in turn helping to reduce net debt (pre IFRS 16) to £10.7m (£13.7m Dec'23), with leverage anticipated to fall below 0.8x by Dec'24 (1.3x LY).
Ok, so what's in store for the rest of the year?
Well, as usual FY'24 results are set to be H2-weighted, underpinned by robust visibility, a strong orderbook and YTD trading that is consistent with analyst estimates. Here house broker Cavendish (target price 68p/share) are forecasting turnover, EBITDA, PBT and adjusted EPS of £55m (£51.4m LY), £11.7m (£11.6m), £3.1m (£1.8m) and 5.5p (5.3p) respectively.
Thus putting the stock on modest multiples of 5.9x EV/EBITDA and 8.6x PER, alongside delivering a 10% free cashflow yield and net debt closing the period at £9.2m, equivalent to a comfortable 0.8x EBITDA. In comparison, consumer healthcare peers Haleon and Kenvue trade on much richer PERs of 20.4x and 16.3x.
CEO Jerry Randall commenting: "I am thrilled by the performance of VLG's Brands within the UK; we have launched some great new products over the last year and continued to grow our distribution points, most significantly across core brands, including Lift, Balance Activ and Earol. The increased investment in focused marketing activity, plus the strengthening of relationships with major retailers, is delivering evident results and has put us well placed to quickly build-out further, with exciting potential collaborations also under discussion within Europe. Further, we have taken steps to internalise production of the recently acquired Earol brand and have begun manufacturing these products from Biokosmes during H2 which will deliver further gross margin improvement."
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