- 2023 revenue up 17 per cent to £51.4mn
- Adjusted operating profit rises 12 per cent to £3.9mn
- Underlying EPS of 5.2p
- Net debt cut 17 per cent to £13.7mn
Annual results from Aim-traded Venture Life (VLG:37p), a developer, manufacturer and distributor of products for the self-care market, highlight that the group has not only returned to growth, but improving free cash flow (up from £2.8mn to £4.8mn) is reducing debt, too.
A key driver has been enhancing branding and marketing efforts to expand the reach of the group’s owned brands to a broader audience. On a proforma basis, the segment delivered 9.3 per cent like-for-like revenue growth to account for 59 per cent of group revenue. Energy brand Lift was a notable performer, reporting 15 per cent higher revenue and 52 per cent growth in online sales, buoyed by more effective marketing campaigns and pharmacy distribution.
Women’s health brand, Balance Activ, reported double-digit growth in revenue and online sales, too. The improvement reflects better marketing and the benefit of a better-than-expected launch of a thrush cream that prompted Superdrug to double the number of stores distributing the product. In the ear, nose and throat category, expansion of the UK retail network and launch on Amazon propelled sales of Earol, which is now the number one brand in the UK market with a 14 per cent market share.
The three brands account for a third of group revenue, highlighting the potential for profit progression driven by stronger product positioning, enhanced distribution and pricing. Indeed, in the first quarter of 2024, Earol achieved 45 per cent unit sales growth and the unit sales price increased 9.4 per cent across the key Venture brands in UK retail. Moreover, the group has five new brand products in the pipeline, ready for launch this year.
Double-digit profit growth forecast
For the year ahead, house broker Cavendish expects adjusted operating profit margins to increase one percentage point to 8.5 per cent, which on 7 per cent higher revenue of £55mn could drive up operating profit 20 per cent to £4.7mn. Furthermore, estimated free cash flow of £6.1mn (2024) and £7.8mn (2025) is predicted to slash net debt from £13.7mn to £9.2mn (2024) and £1.9mn (2025). In other words, the £47mn market capitalisation company is on course to be almost debt free next year when it is forecast to deliver underlying operating profit of £6.1mn on revenue of £59.4mn.
The operational improvement in the business and balance sheet deleveraging were key bull points when I suggested buying the shares, at 30.5p (‘Investors are too cautious with this cash-generative company’, 26 September 2023). That’s still the case. Cavendish’s fair valuation of 68p a share is not unreasonable, representing a target forward price/earnings (PE) ratio of 10 for 2025. Buy.
