Once bitten twice shy is something how it goes, and in relation to Venture Life Group (VLG) such an idiom could be considered apt.
That is because just over two years ago Directors at the company exercised options, whilst at the same time the company was in the process of raising new money for acquisitions.
Such actions leave for a nasty taste in the mouth, so where at the time of the event I was sitting on a very nice profit, I thus decided to take it, sell my shares and move on.
In hindsight, that proved a good move, as the company subsequently became derailed, sending the shares further southwards leaving the impression that it perhaps needed a good rinse of its own UltraDEX mouth wash.
Since then, I have kept the company on my radar as I had originally been attracted to the personal healthcare space it operated in and the prospects for growth on the back of its buy-build model, which if executed well, can deliver some excellent returns over time.
Having seen the shares hit a low point over the last year of just 23.5p, I last week bought back in to the story at 33p, driven by a number of reasons, not least improving prospects, despite the tough economic backdrop.
Additionally, given the span of time and the valuation currently being attributed to the business, I also concluded that management should be given another chance.
VLG, for anyone unfamiliar, is a company focused on developing, manufacturing and distributing a number of products aimed at the over-the counter self-care market, which are sold in both pharmacies and supermarket chains.
Its offerings span a number of end areas including oral healthcare, neurology and women’s healthcare, where it has recognisable brand names such as Dentyl, UltraDex and Myco Clear.
Its partners and customers include some big names, such as Boots, Sainsbury, Superdrug and Tesco, along with Pharmacy chains, but this isn’t confined to the UK, rather it is an increasingly global business.
Although sales had been increasing in successive years, organic growth was relatively poor from the longer standing existing brands, so the strategy of acquiring and integration was clearly a positive way to drive the business forward.
That has really come to fruition over the last eighteen months with successive bolt-on-buys being made, which although obviously being hit by supply chain issues and ongoing lockdowns in China, now appears to see the company in an altogether more positive spot for future growth. Â
The most recent trading update from VLG came at the beginning of last month which was accompanied by another acquisition and one which looks as though it could play a hugely significant part going forward.
The update on the trading, was reassuring in that it stated the company was on track to meet market expectations for the full year 2022, which is forecast, according to broker Singer, to see revenue of £40.8m with adjusted EBITDA of £8.3m, adj pre-tax profit of £3.5m and EPS of 2.22p.
The acquisition announcement at the same time concerned that of UK based HL Healthcare which has been growing strongly, is highly profitable and importantly enjoys decent margins.
Focused on the ear-nose-throat markets, HL has three approved and registered products that includes the very well known and popular Earol Olive oil spray for loosening ear wax. Â
Although, it can be argued that the company is operating at the discretionary end spend area which can be prone to consumer belt-tightening, equally, in this case it could prove resilient.
Given the difficulties in speaking to or visiting a GP, the public are being further encouraged to use Pharmacies and the like for more minor issues, which could prove beneficial to VLG given its expanding brands on offer.
Alongside this, given an ever-increasing awareness and concern on personal care, again, VLG’s products should be a beneficiary and this appears to have been born out by the Interim results and subsequent update.
Aside HL Healthcare, VLG also acquired during 2021 both BBIH and specific assets from Swiss player HICP, the latter of which opened the door to the oncology market for VLG. This saw three distinct products brought in for £6m, which included Gelclair, Pomi-T and Xonrid.
The first is an oral rinse gel to used reduce pain from specific cancer treatments relating to oral mucositis and it is a registered medical device.
Pomi-T serves the area of prostrate antigen levels as a food supplement and is currently partnered in 22 markets, whilst Xonrid is a topical gel used for the prevention of radiation induced dermatitis where it is also registered as a medical device being active across 21 countries.
These additions to the group already appear to be making their mark and just yesterday VLG announced further positive news for both Gleclair and Pomi-T with new licence and distribution agreements being signed in territories including Canada and Vietnam.
The news, according to broker Singer provides for underpinning of full year 2023 growth forecasts which sees it looking for revenue of £50.4m with adjusted EBITDA at £11.8m with adj EPS of 4.1p on the back of expected pre-tax profits at £6.6m.
Cenkos also covers VLG, where it has more or less identical forecast numbers save for the EPS figure, which is a 6p figure pencilled in.
Either way - in conjunction with the outlook, prospects, and strategy - the shares look attractive enough for me to have bought in, where it also looks very comfortable on the balance sheet despite a current net debt position due to the purchases and where the forward PER sees the shares standing on a figure of little more than 8.
That is based on the lower Singer number, but if we look at the Cenkos figure the rating falls to under 6, but both suggest to me the shares are very good value and could well rerate positively.
The company is due a pre-close update in the coming weeks and investors will hear more of how the year concluded, along with more importantly prospects for full year 2023 now commenced.
With a global reach and China now opening up, the company appears to have a major opportunity to leverage its products through existing and new channels and partnerships and the future could prove a healthy one.
Additional positive news also revealed yesterday was that of VLG’s licencing a number of internally developed oral products to a long- standing partner which is worth around £1.148m over the next two years, which demonstrates an ability to generate revenue streams from within.
Arguably also worthy of note, is the impressive list of Institutional shareholders with sizeable holdings, these include Slater Investments on 15%, JO Hambro at 8% and Business Growth Fund with 7.6% Â whist River and Mercantile is also present on 7.5%.
As mentioned in my weekend piece on the blog, I am hoping to set something up with management in the coming weeks where I will hopefully pen something further.