Venture Life PLC (LON:VLG) is set for its best year yet, says chief executive Jerry Randall.
“We are now a proper company starting to generate proper cash flow and profits,” he told Proactive.
“In 2017, we will report underlying profit EBITDA growing, but in 2018 the market is expecting we will generate our first pre-tax profits.”
Foundations in place
Moreover, Randall believes the foundations are in place for profits to grow far into the future.
Venture Life is one of those smaller companies following the buy and build methodology.
The strategy is to establish a manufacturing base and distribution network through which it can push more and more products (and revenue) to maximise margins.
In the early stages that requires a lot of effort to get everything in place but Randall believes the tipping point has been reached.
“The platform is ready and every product that we buy or introduce from now on will drop the majority of gross margin straight through to the bottom line.”
Acquisitions will play a major part in the plan from here on and Randall is very clear he wants products that Venture Life can grow and develop.
Make manufacturing assets sweat
Making better use of the company’s Biokosmes manufacturing facility in Italy, again to boost margins, is another key plank.
Currently, this plant is running at about 50% capacity, following recent improvements to capacity in 2018, but Randall believes revenue can double without having to invest significantly.
At the moment, the portfolio comprises a range of off-the shelf products that can be bought in chemists shops and pharmacies without a prescription.
Most are for the elderly or ageing: Food supplements for lowering cholesterol using Benecol and maintaining brain function (NeuroAge) for instance; haemorrhoid relief (Procto-eze); dermo-cosmetics (Bioscalin) and feminine products (vonalei).
But the profile is changing. Breath freshener UltraDex, for example, appeals to all ages, says Randall, and has been hitting record sales recently.
In the UK, Venture distributes and markets through chains such as Boots and Day Lewis, though overseas it generally uses a local firm or multi-national.
Revenues comprise roughly 1/3 own brands and 2/3 customer brands. Margins are better on its products but volumes on the customer brands tend to be greater.
Around 95% of all of the products are manufactured by Venture Life.
Ducks in a row
A trading update in January indicated things pointing in the right direction, especially the performance of UltraDEX.
Group revenues hit £16mln in 2017, 12% up on the previous year, with doubled underlying EBITDA profitability of over £1.7mln (£0.8mln).
Stock market enthusiasm though has muted and Randall admits to a degree of puzzlement.
There was talk of a financing six months ago, but this was for a specific opportunity that had arisen, Randall says, and not for general working capital, and they will not be coming back to the market on that opportunity.
“We don’t need money for working capital, we are self-sustaining now.”
A bond due for repayment early next year will also either be re-financed (or rolled over) well before time, he adds.
Indeed, if it hasn’t already, Venture Life might soon start to appear on the radar of value investors.
A key yardstick for such type of portfolios is undervalued sales and on a ratio of revenues to market value of less than one currently, Venture Life certainly qualifies on that front, especially if Randall can add a couple more products to the portfolio.
There looks to be plenty of opportunities. The US, for example, is an untapped territory, but Randall hopes to launch a product there in the next couple of years.
Even without, there should be enough going on to get the dial moving north again.
“With growing earnings and cashflow, the plan for next three years is to build on the fixed cost base.”