The beauty of investing in consumer healthcare stocks like Venture Life Group (VLG) is their predictability, brand loyalty, attractive margins, and cash generation.
Similarly, after metronomically hitting its financial targets over the past 2 years, the company said today that it was again 'trading in line' with expectations.
Indeed, after posting strong FY'23 results in March with turnover up +5.4% LFL to £51.4m and 2% higher adjusted EBITDA margins of 22.5%, house broker Cavendish (target price 68p/share) anticipates FY'24 sales, EBITDA, and adjusted EPS to further increase to £55m, £11.7m, and 5.5p respectively.
Thus putting the stock on modest multiples of 5.6x EV/EBITDA and 7.5x PER, alongside delivering a double digit free cashflow yield and closing Dec'24 with est net debt of £9.2m (vs £13.7m Dec'23 pre IFRS 16), equivalent to a comfortable 0.8x EBITDA.
Additionally, most of this growth is being driven by volume gains (+4.2% vs price 1.2%) - particularly relating to its own brands (eg Balance Activ, Lift and Earol) which in 2023 climbed +9.3% LFL to £30.5m and represent 59% of the group.
Elsewhere there are lots of other opportunities, such as retail listing expansion, new product development, online (FY23 revs +40.7% to £4.3m), private label (FY23 revs +26% to £2.3m), factory utilisation, and continued tight cost control.
Sure, this will involve greater marketing spend in 2024, which will temporarily compress margins as new products are launched. Yet equally, this investment should accelerate growth and profitability in the years ahead.
Non exec chairman Paul McGreevy commenting: "The business continues to perform well and our increased focus on promoting the #VLG owned brands is delivering pleasing results, with an additional 35 new listings secured within UK retail since the beginning of the year. We remain confident about the outlook for the year ahead and our ability to deliver full year performance in line with management's expectations. Further commentary over first half trading will be provided as part of our usual business update in July."
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