Making that decision as when to actually invest isn't always the easiest of calls to make.
I never attempt to call the bottom as it is really a futile exercise and I believe the only occasions that I have actually managed to achieve it has been with SDI and FDEV.
In relation to Venture Life Group, for sometime last year I had it on my watch list, waiting for that all important entry point, as the shares had been coming off a bit at the time.
I finally took the leap at circa 36p and added further at under 30p sometime later as the shares continued to drift.
That is always a concern, a would be seller in the market which leads to you questioning your decision and whether a stop loss should be triggered.
In this case, I had been fortunate enough to speak with the Management and believed that the story and fundamentals were intact, so despite the shares at one point earlier this year slumping to just 21p, I stuck with it, hard hat intact!
As it is, VLG has been a great performer for me, the shares today up at £1.03p a 7% rise after delivering excellent interim results.
I have added my original piece from last year here for background and reasoning on my highlighting it, followed by my thoughts from this morning's news:
8 June 2019
The name Venture Life Group probably won't strike a chord with the vast majority of people, although many will perhaps have unknowingly come across its products.
VLG is very much an international business focused on and operating in, the self-care health market where it serves consumers across the world.
In the UK the company provides its products to a number of well known retailers including Boots, Superdrug, Tesco and Morrison's, although much of its revenue is generated from other territories.
Last week I was fortunate enough to catch up with CEO Jerry Randall to learn a bit more about the business and the longer term prospects which may provide for an increasingly positive looking investment case.
Having recently reported its full year results for 2018, VLG delivered revenues of £18.7m, EBITDA of £2.7m and a pre-tax profit of £0.7m.
Whilst that level of profit may not exactly prove particularly enticing, delve a little deeper and this business certainly looks well placed to accelerate and build on its current position.
Randall says that the company uses a partnering model where long term arrangements with big names are already in place which provides for positive organic growth.
“We are now targeting organic growth of between 5 and 10% per annum derived from selling into 40 countries around the world and which takes in many markets”. Going on the CEO adds, ”a third of our revenue comes from products where we own the brand, whilst two thirds are sold as other customer brands”.
With a manufacturing plant in Italy VLG continues to work on new products to assist an already impressive portfolio that covers areas such as oral healthcare, dermatology, neurology and Women's healthcare.
Ranges such as Ultradex and Dentyl which provide for the likes of fresh breath and the treatment of plaque appear to be strong brands with the former enjoying some 19,000 listings in the UK alone.
Despite already seemingly making decent progress Randall says that the business is currently operating at below 60% of its capacity, providing for plenty of scope going forward and where with a fixed cost base operational gearing would kick in on increased orders.
Aside organic growth the company has its eyes on further acquisitions to assist and has the funds in place to take advantage of any suitable opportunities should they arise.
Randall says that last September they took a close look at a prospect but eventually walked away as it didn't meet their full and obviously strict criteria.
However, he says that he does expect to conclude something during the current year, which would provide for another building block in the operation.
Last year the company raised a significant £17.7m via an equity placing which saw it acquire a dental brand dual action mouthwash for £4.2m and pay down existing debt which subsequently left it with a net cash position of £5.8m providing for a strong base on which to further build.
The market in which it operates looks to offer both growth and some defensive qualities where with an ageing population and an increasingly more personal health conscious younger generation suggests the shares are well worth a closer look.
China is also increasingly on the agenda as VLG looks to expand its footprint further, through new partnerships and digital marketing where alongside traditional banner ads the company embraces the likes of youtube and instragram.
Speaking of new products coming through to launch, Randall talks of an interesting nail treatment that is due to hit the market later this year.
“The product will treat discoloured nails that may have been impacted by fungal infections and works by clinically etching colour onto the affected nail.
Clearly there is plenty going on with VLG and obvious prospects for growth and cash generation where broker Cenkos is now expecting revenue for the current year to hit £21.9m providing for a significantly improved pre-tax profit of £2.3m. This should then move to £23.7m and £3.1m next year which also sees net cash building from £7.2m to £9m.
As with many businesses VLG could also be adversely affected by its supply chain with the EU in event of any serious Brexit related issues, but on a risk/reward basis the shares look worth following.
At a current 48.5p they trade on a PER of 15 falling to 12, which looks attractive given the future prospects and which could be open to an upgrade as new territories come on stream with additional products and further earning accretive acquisitions.
VLG Interim Results 24 September 2020
Although I wasn't able to catch up again with Management today, I thought it worth adding some comment on what has been not only an excellent period for the business, but equally for the shares.
For the six month period concerned the company has reported an impressive 80% jump in revenues as operational gearing drove a 100% rise in gross profit.
This saw significant EBITDA growth which came out at £3.5m whilst cash at the period end stood at £6.6m.
The results did of course include a contribution from the previous acquisition of PharmaSource along with strong sales in China, marking an excellent overall performance given that early on in the Italian lockdown there had been concerns regarding the continued functioning of the company's manufacturing facility close to Milan.
As it was, there was no disruption and the facility fell under the area of prioritised areas of manufacturing, thus ensuring that the supply chain kept running.
The VLG line of own brands making up an increasing chunk of revenue scored positively with a highly significant 230% growth recorded, whilst new agreements during the period amounted to an impressive figure of eleven.
Clearly the company is in a good spot and the increased need and awareness of personal health and hygiene has done no harm to its business and future prospects.
Looking at the companies various offerings, it appears to be in a sound space with the very real prospect of further growth and positive momentum looking likely.
Amongst its products, Ultradex which includes an oral mouthwash increased by some 25%, but at £1.7m of group revenues looks to have plenty to go for, whilst the Dentyl brand put in an even more marked performance with a 160% sales surge taking that up to £2.8m.
Again, this too has excellent ongoing growth prospects as evidenced by the major order from a Chinese partner approaching £4m for delivery in the current financial year.
Also worth mentioning is VLG's supporting a clinical study with the University of Cardiff relating to the effectiveness of specific mouthwashes in reducing or neutralizing coronavirus orally.
As a result of the Pandemic the company earlier this year launched its own product titled Disinplus that includes a hand sanitising gel and an anti-bacterial spray and with the range now up to six products there could be sizeable sales momentum here too.
So, it has been much as hoped for at VLG and where it looks set to deliver on strong full year numbers given the prevailing situation, that isn't ending any time soon and will no doubt lead to significant ongoing changes around personal healthcare moving forward.
Broker Cenkos is currently forecasting full year revenue of £30.3m with EBITDA of £6m and pre-tax profits of £3.3m giving EPS of 5.3p.
The PER of 19 may now look up with events and the shares have enjoyed a stonking run from the low points of earlier this year, so perhaps the shares will pause for a time or flatline.
However next year, assuming there is not another acquisition, revenue is expected to increase to £33.3m with pre-tax profits moving to a more notable £4.6m with EPS up to 6p and net cash swelling to £4.2m.
That sees the forward PER falling to 17 where with a strong and growing cash pile the shares are worth holding and should they fall back, may provide for an opportunity to add.
The company has some very strong relationships with routes to market that are increasing geographically and that bodes well for the future, where the board appears to have a good steer on where it is heading.
Having put in such an excellent first half there could also well be scope for an upgrade further down the line, which would no doubt provide for further impetus on the share price front.
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