Victorian Plumbing Group PLC (AIM:VIC) said it is launching a standalone online business under the MFI brand, with the investment set to depress profits analysts heralded as "big news".
The online plumbing products group reported first-half results that analysts said were "solid", with sales up 6% in a weak UK repair and maintenance market, with adjusted pre-tax profit rising 3%.
Sales trends improved in the second quarter to 9% from 3% in the first as new warehouse infrastructure bedded in and marketing activity was restarted.
Analysts at Peel Hunt said the launch of a homewares business is "big news".
The brand, originally founded in the 1960s, was revived by Victoria Plum, and absorbed as part of the acquisition last year, and the group has now put in place a dedicated management team with the intention of launching MFI as a standalone, online homewares business.
MFI is targeting a launch date during the first half of next financial year, initially focused on drop-shipping to get the business up and running, while the team builds out own-brand, stocked product for a later launch.
Analysts at Panmure Liberum noted that homewares is a £20 billionn total addressable market, upwards of 12 times higher than Victorian’s core bathroom category and at least 12 times bigger than the tiles and décor categories.
The company expects circa £3 million of investment in people and property costs this year as part of launch, with no corresponding revenue, and will target a similar level of loss at MFI in the 2026 year as it looks to grow the business.
PanLib's view was that Victorian’s growth "remains impressive in the current RMI market environment", with the half-year result "in line with our view that consensus sales expectations were too bullish".
On the company’s ambition to enter into the much larger homewares market, the PanLib comment was that "the company’s strategy of outbidding competition in performance marketing may not be easy to implement in the homewares market dominated by highly profitable and well established players like Dunelm, Ikea, DFS and Next".
"Growth may cost a lot more than the company currently expects, and Google may be the one banking the biggest benefit."
Peel Hunt downgraded its full-year EBITDA by £2 million and PBT by £3 million to reflect the MFI launch costs and also its recommendation from 'buy' to 'hold' "to pause for breath to see the MFI offer take shape and recovery gain traction".