Venture Life jumps on strong organic growth in FY23
The 'secret sauce' for many great investments is not only a scalable model that generates organic growth, healthy profit margins, and positive cashflows - but also that the company hits its numbers and trades at an attractive valuation.
Consumer healthcare products firm () fits the bill. Indeed in Jan'23, house broker Cavendish was forecasting that FY23 EBITDA would come in at £11.6m on turnover of £50.7m.
Twelve months on, these targets have been achieved. Today, reported that FY23 sales and adjusted EBITDA would be in line with expectations. Not a bad achievement either, considering what's happened across the wider global economy (eg mini banking crisis, Middle East conflict, China slowdown), underlying the business’ resilience.
In fact, 's FY23 revenues rose 5% LFL to £51m (£27.5m H2 vs £23.5m H1), whilst EBITDA margins climbed approx. 2% year-on-year thanks to higher demand and improved operating efficiency.
Elsewhere, supply chains have largely normalised too (re lower inventory levels), in turn helping generate an estimated £11.6m (£7.2m H2 vs £4.4m H1) of EBITDA (or £10.5m pre IFRS16) and £9.5m in cash flow - whilst equally reducing net bank debt to approx. £13.1m, representing c. 1.25x EBITDA and 1.1x in Jan'24, compared to 1.65x Dec'22 and 1.47x Jun'23. This also came after paying the final £3.0m instalment for its £13m HL Healthcare acquisition.
But that’s not all.
Most of the top line growth was impressively driven by volume and market share gains, reflecting increased retailer shelf-space and promotional activity - particularly relating to its own brands (eg Balance Activ, Lift and Earol) which were up +8% LFL to £30m (59% of group).
Moreover, selling prices were nudged up in Q4'23, online sales (eg Amazon) leapt +40% to £3.8m, and recent new products (eg Ice-cherry flavoured Dentyl) are performing well.
Meaning altogether, 2024 is setting up to be another year of progress. Here I’m pencilling in FY'24 sales and EBITDA of £55.0m and £11.1m (pre IFRS 16) respectively - after incorporating an extra £1m of marketing spend which should further accelerate growth in 2025.
This means the stock at 34p trades on a 5.1x EV/EBITDA and a bumper 15%+ free cashflow yield, which to me looks cheap, especially vs my 60p/share fair value based on a (still modest) 8x EBITDA multiple.
CEO Jerry Randall commenting: "The increase in revenue is primarily due to heightened sales volume, with some price increases passed on to the customers in H2. This growth, combined with ongoing efforts to improve efficiency and strengthen partnerships, positions the Company well for sustained future growth and profitability. I look forward to presenting the FY23 results to shareholders in April."
shares moved 9.8% higher on the update.
Follow News & Updates from Venture Life:
Disclaimer & Declaration of Interest
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.