The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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The tide can turn quickly with these v small cap companies.
Pre covid there was a steady self care business with excess manufacturing capacity.
They opportunistically started making hand sanitising gel (like many) for which there is now no margin (who cares), they also naively hyped a long term sales deal with China that could not be delivered (selling a western made chemical in China against local and copycat competition was alsways going to be a difficult task), the new China deal promises that VLG will be paid for what they sell which is a much sounder business. The core f the pre covid business is still there plus the two add ons.
We will need to see how the new products go…..I would prefer they don’t white label as that must mean a lot of value passes to the own brand and cannibalises the full price brand sales.
Market has probably overshot today by going over 50p…..but if your time horizon is several years it is probably a bargain.
...to sell.
It's a funny old company this one. When I compare the awful trading update of just 2 months ago against this one... it's bizarre... and I feel sorry for those who felt compelled in December.
looks very good this morning, 44p to buy
Indeed - great to see VLG updating and trading nicely in line, without any nasty surprises and everything appearing to be returning to a smoother path forward.
Good to see "the order book for the Group is significantly ahead of the same time last year".
And lots of progress product-wise:
"We are also pleased to report that a leading UK health and beauty retailer has confirmed they will launch our in-house developed product for rosacea in the UK and Ireland later in H1 2022 with the product being marketed under their own brand. This marks the first product launch under this retailer's own brand and paves the way for future collaboration. Furthermore, another key UK health and beauty retailer will launch our Wart & Verruca Pen and Women's Intimate Gel in H2 2022 under their own brand; finally, other new agreements have been recently completed for other products in other territories.
Following the successful integration of BBI Healthcare and Helsinn acquisitions, one of these new agreements has been signed for Pomi-T in Germany, which marks the start of the expansion plan of this product into key markets around the world, in another of the 5 major EU markets."
Brilliant result:
£32.6m revenue vs £32m guided. £600k ahead of expectations.
Run rate (extrapolating H2) is £37.5m revenue.
Adjusted Earnings £6.3m (?)
"Order book significantly ahead."
FY2021 result confirms this is trading on a PE of 8 in a growing company with outlook for 2022 where peers are on a PE of 20. It's safe to say this isn't gonna stay at 36p a share.
It's been delicious bargain buying today but I was lucky; I was in the process of moving funds from one SIPP provider to another so had dry powder through that.....
Once things settle down about the Ukraine we'll see a bounce in the market
Very good, thank you, but the market doesn't want to know.
I wish I had spare cash to take advantage of the carnage out there today, but sadly I'm fully invested. Another lesson for me to learn. What I certainly won't do is sell any of my holdings in this turmoil. Tin hats on.
Given the recent fall I went back over the recent interview on Vox Markets to write down the key points of the interview.
1. Brand strength in their niche areas (60% of revenue). Products are staples.
2. Customer Brands (40% of revenue) opportunity for new opportunities, additional sale of VLG products (white labelling)
3. Vertically integrated - helps offer better levels of service to customers
4. BBI - Balance Active Diabetes products - growing, 2 new areas of therapeutics - women's health; additional Swedish manufacturing capacity
5. Helsinn - Oncology products - help reduce side effects of cancer treatment - profitable and growing
6. Majority of sales are European. Looking to grow US presence. For now use Amazon. Good relationship with Amazon. In the future looking to acquire a US presence.
7. Chinese distributor strong until early 2020 (é7m sales in 2020). Hit with lockdown, large inventory, never recovered. Samarkand now in place who specialise taking European brands to China. VLG now deal with the UK people of Samarkand.
8. Overstocking. Hand sanitiser - over ordered during covid.
9. Margins. 3% hit to gross margin due to cost increases e.g. shipping costs. Now passed on customers as higher prices in 2022. Will we see margins above 40%? MD replies YES YES
10. Dentyl has ingredient called CPC. The research will be peer reviewed in 2022.
11. New product development. Innovating on existing products. More acquisitions around women’s health. Acquire weak brands and rebrand them using VLG’s brands e.g. Balance Active
Four levers to achieve synergies in acquisitions. 1. Strip costs out e.g. admin costs (+5% margin) 2. internalise manufacturing (+5% margin) 3. International Markets 4. New products. Leverage “substantial benefits”
12. Debt capacity in Jan 2022 - £5.5m includes lease obligations FRS16 – net debt is “considerably lower”. Scope for £50m inc accordian… can buy 2.5xPBT + what they’re buying.
13. "Expect 10% growth"
14. Existing manufacturing capacity to grow sales to £60-70m
Agricore, lol, small mercies...;)
Maybe we can convince ULVR that its a better buy than that Glaxo thing they're chasing! ;-).........
-
LONDON (dpa-AFX) - In a planned update released on Monday, Unilever (UN, ULVR.L, UL) stated that GSK Consumer Healthcare would be a strong strategic fit for the company. Unilever believes this would be an attractive and synergistic combination for the shareholders of Unilever, which would also deliver value and certainty for the shareholders of GSK (GSK.L, GSK) and Pfizer.
Following an extensive process to review strategic pathways, the Board of Unilever has concluded that future strategic direction lies in materially expanding its presence in Health, Beauty, and Hygiene. The Board of Unilever also noted that major acquisitions should be accompanied by the accelerated divestment of intrinsically lower growth brands and businesses.
Also, Unilever said it plans to move away from existing matrix to an operating model that will drive greater agility, improve category focus, and strengthen accountability. The company will announce a major initiative later in the month.
Unilever stated that the company is committed to strict financial discipline to ensure that acquisitions create value for shareholders. Following any acquisition, Unilever would target a return to current levels of gearing over the short to medium term.
I agree but at least he’s not constantly talked over by Paul Hill - I call that progress.
Watched it.
Bit rampy, but that's Vox Markets - they give everybody an easy ride.
Positive nonetheless.
Thanks for posting the video Agricore, will watch later.
And (again) for your thoughtful analysis. Last I understood was that margins were being squeezed and it would take time to clear the debt, so if they've made that much progress, that would be great!
I worry more than you about their acquisition trail. Now is not necessarily the time to be again adding to debt. On the other hand, if they can pick up suitable assets for a song.... I don't know... i need to see more before I'm convinced they're superb capital allocators. Maybe the video will help.
https://youtu.be/KV-zPUZL6Zg
No "news" but provides context of the events of 2021 and where they're going for 2022. Interesting too that they are once again on the acquisition trail and not standing still. All very positive in my opinion and am looking to next month's update. Describes their non-IFRS16 debt to be negligible which is interesting also..... reading between the lines that means cash flow in H2 2021 has reduced its acquisitions debt to negligible levels ("much less than £5.5m excluding lease commitments" said Jerry). That in turn means the cash flow positive indicates to me potential for a good level of earnings. I appreciate cash is only one current asset so it depends on a few other timings and aspects like destocking - but it's more evidence that this will surprise the market and at 45p it's still good value. Interesting, too, that Cenkos report that peer business Science in Sport has a EV/EBITDA 5x higher than that of VLG.