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Yep, an encouraging update. Nicely in line and no unpleasant surprises. The more and longer that VLG can churn out these solid reports the more quickly confidence will return and the rating will improve.
China's still in thrall to Covid so no surprises there, but huge potential once the fog clears.
Singer Capital Markets have reiterated their 65p target price. They forecast 2.9p EPS this year rising to 3.9p EPS next year.
1. Revenue run rate £37.8m (below forecast £40.5m however a H2 weighting makes this still achievable)
2. By my calculations a 4% improvement to EBITDA and 3% to adjusted EBITDA gives an EBITDA run rate of £8.9m (**WELL** ahead of the forecast £8.2m) (EBITDA margin improves from 19.5% in 2021 to 23.5% in H2 2022 ---> £37.8m*23.5% = £8.9m)
3. Cash flow positive well ahead of forecasts (£3m run rate vs £0m)
4. Order book strong and ahead of 2021!
5. Successful onboarding of acquisitions
6. Successful achievement of synergies "as expected"
7. Not least the achievement of progress despite what could be considered a "challenging period"
Less positives:
-> Reduction in net debt was less positive than forecast (however was going in the right direction)
-> suggestion that China sales aren't yet where we want them to be (zero covid lockdowns are well publicised p.s. hey Mr China - what we got locked in our containers in Shanghai can help with your Covid problem - here's a UK university study!!!!)
Overall lots to feel happy about - I expect we'll see a Simon Thompson article highlighting the above and perhaps other insights in IC this week.
GLA
Last year the trading update was on 13 august….
Any ideas on when the update is expected?
Interesting information agree with agricore lets see next months update before investing.
…. While people ponder, VLG retraces about 10% from its nadir.
Looking forward to next month’s trading update
Despite the management presentation the market has not reacted positively.
For those of a brave disposition now is a decent entry point….I don’t feel like committing more money until the recovery starts.
Hardly a vote of confidence….
I've been doing some further analysis and judging VLG based on a study of its 2021 accounts. One element that stood out for me was how the Operating Profit differed dramatically from the "Adjusted Earnings". There are 3 parts to this: Acquisition costs, share based payments and Amortisation.
1. Amortisation assumes all its brands are worthless within 5-10 years. My personal view here is that while it is a prudent perspective but not "real". In 5 years will be no longer use mouthwash? Will the brand suddenly become worthless? (Bearing in mind ongoing VLG sales and marketing). I don't think so.
2. Acquisition costs - by definition this is non-repeatable. So fair to exclude it to look at y-o-y trends.
3. Share based payments - Warren Buffett's view is that adjusted earnings shouldn't exclude this, so I've recalculated the 2020 and 2021 adjusted earnings ***including*** this.
The results are
2020 - EPS 3.68p/share
2021 - EPS 4.5p/share
An 18.2% yoy increase. And that's in a year where lots of bad stuff happened, covid, 2020 hand gel sales not repeating in 2021 due to market saturation, ineffective China distributor).
Can we extrapolate to 2022? Absolutely. If we take the Q4 2021 run rates of the acquired businesses, new (proven) Chinese distributor achieves same as 2020 Chinese sales), apply 2021 growth rates (1.4%) even though the 2022 order book is “comfortably ahead” then I conservatively arrive at adjusted 2022 EPS at 5.2p (deducting share based payments).
Plus its cash generative, has capacity to grow without further fixed asset investment, plus has capacity to acquire. Lots of reasons why adjusted EPS 5.2p could be higher.
Always an if or But somewhere.
Cheers Agricore, a good summary. A couple of extracts:
"If Venture delivers on analysts’ forecasts, then expect a material re-rating from the current valuation of 5.5 times cash profit estimates to enterprise valuation. That’s a hefty 60 per cent plus discount to sector peers, as I pointed out at the start of the year (‘Venture Life’s recovery potential revealed’, 10 January 2022). N+1 Singer’s 66p target price is not only double Venture’s current share price, but the directors are targeting further earnings accretive bolt-on acquisitions to utilise the £50mn low-cost credit facilities in place, another catalyst for earnings upgrades to support my 100p target. Buy."
"On this basis, expect underlying pre-tax profit (before amortisation charges, share based payments and exceptional costs) of £6.8mn, or 49 per cent higher than in 2021, to produce adjusted earnings per share (EPS) of 4.5p. This implies the shares are rated on a current year price/earnings (PE)ratio of 7.3. They are priced 43 per cent below book value, too."
Send your Qs to the Board this weekend so they can consider answering them in their presentation next week.
Simon Thompson bangs the VLG drum this evening:
https://www.investorschronicle.co.uk/ideas/2022/05/19/primed-for-bumper-profit-growth/
Boom-ba-boom-baba-boom
There is a lot of caution and talk about difficult Q1, logistics difficult and margin was down several % which is never good news.
The market is unconvinced and needs to see what VLG can do….
Can it realise the potential sales in the pipeline.
Does it have pricing power or will margins be further eroded by higher costs?
Plenty of potential….but management has promised alot in the past and then been caught out by events…..IMO there is another 12-18m of results to deliver before there will be a significant rerating.
Hi Rivaldo, really pleased with the results - and they were exactly along the lines of the trading update. Singer are also bullish in their update this morning and see an 85% upside from here.
The attraction here (apart from the obvious value) is its defensiveness. Even though it's growing, the business is quite defensive: The products are fairly impervious to the challenges of inflation (inelastic demand) - I mean do you even know how much a bottle of mouthwash is? Most people don't I would think. Let alone the price of some of the more esoteric treatments. If people need them they just buy them - simple as that.
GLA
Pleasantly surprised by the results, which were nicely ahead of broker expectations. The outlook is confident too.
Producing 4.65p adjusted diluted EPS in a pandemic-hit year when Chinese sales and hand sanitizer sales both reduced to almost nothing is pretty impressive.
Hopefully the new Samarkand distributorship agreement will kick in smoothly and quickly given SMK's already existing trade routes into Asia.
Cenkos have introduced what they call "conservative" forecasts of 4.52p adjusted EPS this year.
They summarise:
"FY21 results, positive outlook
Venture Life Group has reported its results for FY21A, with revenues and adjusted EBITDA coming in ahead of our forecasts. Revenues, supported by two acquisitions, grew 9% to £32.8m with the acquisitions more than offsetting lost FY20A COVID-related sales and significantly reduced shipments to China. The gross margin was also affected by these factors, though also supported by higher margin acquisitions. Adjusted EBITDA grew 8%.
Management have provided a positive outlook for FY22E, based on trading to date and the order book, which supports our forecasts and the introduction of FY23E expectations. We believe the company has set strong foundations for growth and maintain our Buy recommendation."
"Investment thesis – We believe the H2/21A performance demonstrates the potential within Venture Life. Looking forward, the company has a stronger and broader portfolio of Brands, a larger order book (vs the same point in 2021) and increased available manufacturing capacity to support organic Group level growth. With a strong balance sheet, we expect this organic growth to be supported by additional accretive acquisitions. We maintain our Buy rating."
Or maybe not
The results are underwhelming……but as flagged…..difficult Q1 does not bode well and these results are not rocket fuel for the sp.
Needs more director buys….a clear recovery in performance sales growth
Why the spare (inefficient) capacity in Sweden is trumpeted I don’t know…..it is an expensive country to operate in…..better consolidating in Italy? Or building a UK plant or Far East base.
The sales and marketing guys need to get out there, we need to be growing at 25-30% for a couple of years….
Ground hog month…..now clearly mid May not early May…..where are the audited results?
Just got a few more of these .... 60p all day long!
I wonder what Grant Thornton employees are doing at the office; smoking weed and playing video games? /s
I bought back in this morning after seeing the RNS. Hopefully we’ll get the results early next month. For some reason my buy counted as sell on the London South East trading board.
Now an unspecific early May.
The results can only be in The second half of April now. So much for early April.
Hope there is not a technical problem as well as the GT staffing issue.
Apologies. For some reason when I wrote the last post, I was thinking it was Wednesday. So there is actually two days of trading this week left.
I sold this morning. I still think Venture Life is great company (I've been using Dentyl and I think it's brilliant mouthwash) but this lack of communication about the results is frustrating. The results HAVE to be out by tomorrow because I believe there is no trading on Friday for Easter weekend, however, I don't have faith in that happening. Might buy back the shares down the line when the matter clears up. Good luck to everybody holding and I hope this rockets.