Underlying 2021 pre-tax profit rises 5% to £4.56m on revenue up 9% to £32.8m
2021 reported pre-tax profit of £0.95m after £1.3m of exceptional costs and amortization charge of £2.3m
Net debt at closing of £3.2m (excluding lease obligations of £4.2m)
Contribution from last summer’s acquisitions significantly supports 2022 earnings forecast
Lens exchanged corporate life (VLG:33p), a developer, manufacturer and distributor of products for personal care markets, is well positioned to make a dramatic shift in earnings this year as it reaps the full benefits of summer’s add-on brand acquisitions. last: BBI Healthcare, a market-leading women’s health and highly profitable diabetes/energy management company; and oncology support products company, Helsinn.
After being successfully integrated into the group, Venture’s own brands accounted for two-thirds of group sales in the second half of last year. These are also sales of higher-margin products, which is why analysts at Cenkos Securities estimate that gross margin will rise nearly three percentage points to 42.4% this year.
In addition, with current year revenue expected to increase by a quarter to £41.3m, gross profit and cash profit are expected to increase by almost a third to £17.5m respectively. of pounds sterling and £8.7 million, to produce £7.3 million of net operating cash. , a result that would completely deleverage the balance sheet (excluding £4.2m of lease liabilities).
On this basis, expect underlying profit before tax (before depreciation charges, share-based payments and exceptional costs) of £6.8m, 49% higher than in 2021, to produce adjusted earnings per share (EPS) of 4.5 pence. This implies that the shares are rated on a price-earnings (PE) ratio of 7.3 for the current year. Their price is also 43% below their book value.
Admittedly, investors may be skeptical of these heady earnings forecasts given past disappointments. It should therefore be noted that the group’s revenues would have been £37.8m on a pro forma basis had BBI and Helsinn been part of the group for the whole of last year. Additionally, Venture entered 2022 with a comparable backlog well ahead of the same point last year, driving underlying sales growth. Customers are also ordering further upstream to secure supply, a factor that supports revenue growth estimates, as does the launch of 18 products to market through the group’s international distribution partners and the rise of 11 new distribution agreements signed last year.
Additionally, Venture parted ways last December with its former Chinese partner who failed to meet minimum contractual obligations for two of the group’s leading oral care brands – Dentyl and UltraDEX. New distribution partner Samarkand Global is expected to significantly exceed annual sales of £0.3m in China, given its expertise in connecting UK brands such as Omorovicza, Temple Spa and Philip Kingsley to the Chinese consumer.
Importantly, Venture management has handled supply chain issues well, successfully pushing through product price increases this year to mitigate higher input costs such as transportation to protect the Gross margin.
If Venture meets analysts’ forecasts, expect a significant revaluation from the current valuation of 5.5 times cash earnings to company valuation estimates. This is a significant discount of more than 60% compared to industry peers, as I pointed out at the start of the year (“Venture Life’s recovery potential revealed”, January 10, 2022). N+1 Singer’s 66p target price is not only double Venture’s current share price, but the directors are eyeing other accretive add-on acquisitions to utilize low-cost $50m credit facilities. pounds up, another catalyst for improving earnings to support my 100p target. To buy.
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