Analyst comment on Venture Life Group

Paul Hill
Vox Newswire
08:07, 17th May 2022

With the global economy being buffeted by the war in Ukraine, lingering Covid lockdowns (China), the cost of living crisis & tightening monetary conditions – where can investors generate 'relatively safe' positive returns?

One naturally defensive sector to consider is OTC, consumer healthcare. Particularly those stocks trading at attractive valuations, with strong niche positions, secular growth trends and pricing power.

Enter Venture Life (VLG Follow | VLG), who today released ‘in line’ 2021 results, adding that it is also on track to achieve 2022 consensus expectations (Singer Capital Markets for turnover & EBITDA of £40.5m & £8.2m respectively).

It’s easy to see why too, given last year’s earnings enhancing & successfully integrated BBI Healthcare & Helsinn acquisitions, which are “performing well”.

In fact, VLG exited 2021 on a H2 proforma EBITDA run-rate of £7.9m (20% margin) on sales of £37.8m. More than underpinning analyst forecasts for this year, despite having to manage “unprecedented” supply chain challenges (eg RMs, packaging, etc).

Sure it may take a little while before things fully normalise - yet equally, customers are ordering much further ahead, providing VLG with robust visibility & margin protection.

What’s more the balance sheet remains robust. Sporting net debt (pre IFRS16) of only £3.2m (0.4x EBITDA) as at Dec’21 - which this set to reverse to £0m by yearend, reflecting the VLG’s favourable cash generation, attractive unit economics (40%+ GMs) & capex-lite model (re spare manufacturing capacity).

Indeed the Board’s aim going forward is to continue its “buy & build” strategy. Augmenting new products to the portfolio (re now 59%+ own brands vs 41% 3rd party), alongside delivering 10% pa LFL growth & another 10% from M&A. Here the company has access to a £50m RCF, available until Jun’24 subject to a 2.5x EBITDA drawdown limit.

Finally wrt valuation, at 35p the stock trades on an extremely cheap 5.4x 2022 EBITDA compared to typical OTC consumer firms at often >15x. Plus in Jan’22, Unilever offered GSK £50bn (equivalent to 20x EBITDA) for its much bigger, yet slower growing consumer healthcare division.

Not surprisingly therefore, astute investor Simon Thompson of Investors' Chronicle recognises the attractions - particularly vs his 100p price target & Singer Capital Markets' of 66p.

CEO Jerry Randall adding: "We enter 2022 with an order book comfortably ahead of that at the same time last year, on a like for like basis, which gives us confidence for the year ahead in how our customers will be performing. "

AGM in June.

Stock Chart | VLG

 

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The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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