REG - Venture Life Group - Final Results for year ended 31 December 2023
09/04/2024 07:00
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RNS Number : 7608J Venture Life Group PLC 09 April 2024
9 April 2024
VENTURE LIFE GROUP PLC
("Venture Life", "VLG" or the "Group")
Final Results for year ended 31 December 2023
Venture Life (AIM: VLG), a leader in developing, manufacturing and
commercialising products for the international self-care market, announces its
audited results for the year ended 31 December 2023.
Strong growth driven by new products and wider distribution networks
· Group revenue increased 16.9% to £51.4m (2022: £44.0m), or
+5.4% on a proforma(1) basis Women's Health, Energy Management and Oncology
(3 out of 6 key therapeutic areas) achieved double-digit sales growth
· 18 news SKUs (Stock-keeping units) contributed 6.1% to Group
revenue, of which 9 SKUs for 3 VLG Brands(2), and 9 new SKUs for Customers
Brands(3)
· 28 new listings achieved across UK retail
· 9% YoY increase in UK distribution points (excluding Dentyl)
· Online revenue grew 40.7% to £4.3m (2022: £3.0m)
Enhanced operating profitability supported by improved operational leverage
and revenue mix
· Adjusted EBITDA(4) increased 28.9% to £11.6m (2022: £9.0m).
· Adjusted profit before tax(5) increased
to £7.3m (2022: £5.6m) and Profit before tax increased
to £1.1m (2022: £0.7m)
· Adjusted EPS(6) increased 28% to 5.21p (2022: 4.07p) and Basic
EPS increased 78% to 0.73p (2022: 0.41p)
· VLG Brands accounted for 59.2% of overall Group revenue (2022:
51.8%), representing a YoY growth of 32.0%, or 9.3% on a proforma(1) basis
· Pricing alignment across wholesalers achieved in Q4 2023 set to
enhance margin in 2024
Further and quicker debt reduction facilitated by strong cash generation
· Cash generated from operations increased 59.0%
to £9.8m (2022: £6.2m).
· Free cash flow increased 71% to £4.8m (2022: £2.8m)
· Group net leverage(7) reduction to 1.30x (2022: 1.65x).
Post period end
· Earol achieved over 45% unit sales growth YTD, owing to Tesco and
Amazon launch
· Average unit sales price across key VLG brands in UK retail
increased by 9.4% YoY by end of March, 2024, reflecting higher selling prices
from NPD (New product development) and stronger product positioning
· Further UK distribution gains secured with mainstream retailers
for the women's health portfolio
· Distribution agreement extended with an existing EU partner
broadening the supply of VLG products across the areas of women's health and
footcare.
· 5+ new key VLG brand products in the pipeline, ready for launch
across 2024
· Group net leverage(7) reduced further to 1.15x at 31 March 2024
Revenue by stream for the 12 months ended 2023:
Revenue (£m) Revenue change (%)
2023 2022 Actual Proforma(1)
VLG brands 30.5 23.1 32.0% 9.3%
Online(8) 4.3 3.0 40.7% 40.7%
Offline(9) 26.1 20.1 30.0% 6.5%
Customer brands 20.9 20.8 0.2% 0.2%
Group revenue 51.4 44.0 16.9% 5.4%
Starting from 2024, a new revenue segment called Private label will be
introduced to the Group, referring to products manufactured by VLG-owned
factories, which develop formulations for retailers, who will sell these
products through their own retail channels. This is aimed at providing a more
comprehensive understanding of our business performance by segregating these
revenues from the currently reported segments. As revenue from this segment
grows, the Group will consider reporting and disclosing performance separately
in future periods.
(1) Proforma basis i.e. if the acquisitions had been in place for the whole
of the prior year. This term is applied throughout the document.
(2) VLG Brands refers to products manufactured, distributed, and marketed by
VLG, which also owns the trademark and formulation of the products. This term
is applied throughout the document.
(3) Customer Brands refers to products manufactured by VLG-owned factories,
which co-develop formulations with customers, who will distribute and market
these products under their own brand names. This term is applied throughout
the document.
(4) Adjusted EBITDA is EBITDA before deduction of share based payments and
exceptional items (i.e. M&A, restructure and integration costs - see note
3 for breakdown of exceptional items). This term is applied throughout the
document (see note 11 for reconciliation of Adjusted EBITDA)
( )
(5) Adjusted profit before tax is profit before tax excluding amortisation
and exceptional items (i.e. M&A, restructure and integration costs - see
note 3 for breakdown of exceptional items)
(6) Adjusted EPS (earnings per share) is profit after tax excluding
amortisation, share-based payments and exceptional items (i.e. M&A,
restructure and integration costs - see note 3 for breakdown of exceptional
items)
(7) Group net leverage calculated as net debt (excluding finance leases) and
using proforma Adjusted EBITDA on a trailing 12-month basis (see note 11 for
reconciliation)
(8) Online refers to sales through Amazon & Lift website in the UK
(9) Offline refers to sales into brick-and-mortar retailers in the UK
(10) Net debt calculated as gross debt excl. finance leases less cash &
cash equivalents (see note 11 for reconciliation)
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed
in accordance with the company's obligations under Article 17 of MAR.
Jerry Randall, CEO of Venture Life commented: "I am delighted to announce
another successful year for Venture Life Group, marked by significant
commercial achievements and strengthened financial positions. Our strategic
emphasis on organic growth and cash generation led to a faster reduction in
net debt despite challenging market conditions. We have made notable inroads
in new product development, resulting in increased revenue and showcasing our
innovative in-house R&D capabilities. Furthermore, enhanced branding and
marketing efforts have expanded the reach of our 9 key brands to a broader
global audience, further propelling our growth trajectory. With a strong
commitment to improving EBITDA margins, successful new product launches, and
digital transformation initiatives, we are well-positioned for sustained
success in 2024 and beyond."
For further information, please contact:
Venture Life Group
PLC
+44 (0) 1344 578004
Jerry Randall, Chief Executive Officer
Daniel Wells, Chief Financial Officer
Cavendish Capital Markets Limited (Nomad and
Broker)
+44 (0) 20 7720 0500
Stephen Keys/Camilla Hume (Corporate Finance)
Michael Johnson (Sales)
About Venture Life (www.venture-life.com (http://www.venture-life.com/) )
Venture Life is an international consumer self-care company focused on
developing, manufacturing and commercialising products for the global
self-care market. With operations in the UK, Italy, and Sweden, the Group's
product portfolio includes some key products such as the Balance Active range
in the area of women's intimate healthcare, the Earol® product line in ENT
care, the Lift and Glucogel product ranges for energy and glucose management
and hypoglycaemia, the UltraDEX and Dentyl oral care product ranges, products
for fungal infections and proctology, and dermo-cosmetics for addressing the
signs of ageing. Its products are sold in over 90 countries worldwide.
The products, which are typically recommended by pharmacists or healthcare
practitioners, are available primarily through pharmacies and grocery
multiples. In the UK and The Netherlands these are supplied direct by the
company to retailers, elsewhere they are supplied by the Group's international
distribution partners.
Through its two Development & Manufacturing operations in Italy and
Sweden, the Group also provides development and manufacturing services to
companies in the medical devices and cosmetic sectors.
Chairman's Statement
In a year of significant macro-economic challenges, VLG Group's strategy,
flexibility, investment in a positive culture and ESG has yielded significant
growth of 17% in revenue, and 29% in Adjusted EBITDA(4). With no acquisitions
in 2023, this represented like- for- like organic revenue and Adjusted
EBITDA(4) growth of 5% and 8% respectively following the acquisition of HL
Healthcare Ltd in December 2022, showcasing the strength and quality of our
brands and focus on innovation for new product development. The positive
impact of our merger and acquisition activities in recent years became evident
in 2023. Notably, we achieved double-digit revenue CAGR for most of our
acquired brands since 2020, thanks to investment in new product development,
paving the way for further organic growth in the future. The impressive
performance has enabled strong cash conversion, the planned quicker debt
reduction from previous these acquisitions, strong cash conversion, and a
robust financial position as we look forward.
Our dedication to ESG principles remains strong. Biokosmes, our development
and manufacturing facility in Italy, is in the process of pursuing B Corp
certification, building on its previous achievement of an EcoVadis silver
medal. Recognizing the value of our human capital, we expanded our workforce
from 153 to 165, aiming to foster an increasingly capable team.
The Board would like to express thanks to the whole VLG team for their ongoing
enthusiasm, commitment, and professionalism, which is enabling the business to
deliver such consistent results despite market dynamics.
The strength of the team, an integrated business model with internal R&D,
best- in- class manufacturing, brand development, with a diversified sector
portfolio showing strong resilience provides the Board with robust confidence
in the Group's future success.
Paul McGreevy
Non-executive Chair
9 April 2024
Chief Executive Officer's Statement
The Group continued on its path of sustained consolidated growth in 2023, and
for the first time since 2019 this was based solely on organic growth, without
any M&A activity. A consistent theme in recent years has been that of
global challenges and disruption, and 2023 was no different. However, our
fantastic team, across all our locations continued to take this environment
head on and delivered strong growth across the whole business. I am delighted
to present these excellent results of our hard work in 2023 and give the
credit to our wonderful team who worked tirelessly to achieve them, as we
continue to work towards a more sustainable business for today and the future.
As was our plan, our focus for 2023 was organic growth, delivering strong cash
generation which in turn drove de-levering of our business. 2023 saw sustained
higher interest rates, and higher perceived risk of debt, so a key strategic
focus for the Group in 2023 was to reduce our net debt. We have achieved that
goal, with delivery of growth not only in our Venture Life Brands, but also
over delivering on our targets set for Customer Brands. A significant
milestone was reached in our distribution and digitisation efforts, with a
noteworthy 40% YoY growth in online revenue. The addition of 28 new listings
and a notable 9% YoY increase in UK distribution points (excluding Dentyl),
showcased a much stronger omni-channel retail presence from last year, laying
a solid foundation for our future results.
Our commitment to innovation was evident through the introduction of six new
products from VLG brands, translating into nine SKUs across three brands. On
top of that, we also brought nine new products to the market for our Customers
thanks to Biokosmes and its full service CDMO (Contract Development and
Manufacturing Operation) capability. The 18 new SKU's together contributed 6%
to Group revenue. Building momentum on this strong foundation, we are already
preparing a deep pipeline of new products in multiple therapy areas for market
launch in 2024, which is set to propel our growth in 2024 as our total
addressable market continues to expand thanks to our exciting new products.
We have also carved out a new revenue segment private label. Private label
products, in contrast to our Customer Brands products, are developed,
manufactured, and packaged specifically for retailers, who then distribute
them through their own retail channels. Exploring private label opportunities
allows us to successfully drive revenue and foster crucial relationships with
retailers. We have a small number of products in the private label space
already, with overall revenues from this area representing £2.4 million
(2022: £1.9 million), included in our VLG Brands revenues. In 2023 we
launched our first private label collaboration with Boots which yielded nearly
£0.4 million in revenue during 2023, and we have more exciting collaborations
in progress with this retailer and others, further enhancing our private label
business opportunities. Moving forward we will be reporting this revenue
stream separately from VLG Brands revenues.
Branding and marketing is key to organic growth, and has therefore been a
focus area during 2023, having significantly bolstered our in house brand
management team in late 2022. We are pleased to report that these initiatives
have been strategic and impactful. Leveraging social media, digital marketing,
and brick-and-mortar promotional activities, we have not only supported online
and offline revenue growth but also strengthened our market presence. Let me
move on to therapy area performance review to further explain how we hit our
revenue targets through a successful execution of our marketing schemes.
VLG brands revenue by therapy for the 12 months ended 2023:
Revenue (£m) Revenue change (%)
2023 2022
Actual Actual Proforma(1) Actual Proforma(1)
Women's Health 6.5 5.9 5.9 10.7% 10.7%
Energy Management 7.3 6.3 6.3 15.1% 15.1%
ENT 5.3 0.2 5.0 2,963.1% 6.5%
Oral Care 4.7 4.6 4.6 3.9% 3.9%
Oncology 3.5 2.8 2.8 25.4% 25.4%
Footcare 2.0 1.9 1.9 6.5% 6.5%
Dermatology & others 1.0 1.3 1.3 (21.0%) (21.0%)
VLG brands revenue 30.5 23.1 27.9 32.0% 9.3%
VLG Brands performance overview by therapeutical areas
1) Energy Management (Lift - Revenue £7.3m, +15.1% LFL)
Energy Management was the biggest contributor to Group growth in 2023, with
Lift revenues seeing a notable increase of 15.1% YoY, including a substantial
52% online revenue growth. This growth can be attributed to effective pharmacy
distribution and an active marketing campaign. The main contributors, Lift
Fast Acting Glucose Shots and Chews experienced impressive growth rates of
100% and 21%, respectively, alongside prudent advertising investment and
listing optimisation.
We have further established Lift in the sports energy market building on our
dominance in the energy management space for diabetes, particularly addressing
hypoglycemia. In 2023, we introduced Lift Activ Energy Boost, leveraging
Lift's expertise in glucose energy management. This product aims to carve out
a distinct consumer space within the casual sports and lifestyle energy
sector.
We increased advertising spend which led to improved online sales. On Facebook
and Instagram, Lift followers have grown by 359%, and the brand reached 2.6
million customers over the year through our PR activities. Noteworthy online
and offline marketing campaigns with major retailers like Sainsbury's and
Tesco gained traction, contributing to brand visibility. The launch of our own
new Lift e-commerce website reflects our commitment to enhancing the digital
customer experience and expanding our online presence, aligning with our
vision for sustained growth in a digital marketplace.
2) Women's Health (Balance Activ - Revenue £6.5m,
+10.7% LFL)
Balance Active witnessed over 10% revenue growth in the year, including a 17%
YoY growth in online revenue. Despite this positive performance, there's still
significant untapped potential, especially considering the introduction of new
channels and products that took place in the latter half of the year.
Notably, our newly launched Thrush cream (registered medical device) exceeded
expectations, prompting Superdrug to double the number of stores that
distribute this product. This success highlights our keen ability to address
consumer needs through innovative product development.
To further fortify our presence in women's health, we implemented a
comprehensive marketing strategy. We completed a very significant piece of
research during the year, the output of which we named the Big Vagina Report.
This significant research project canvassed 5,000 women and is a testament to
our commitment to health education and brand building. This insightful report
adds value to our consumers and positions us as a reliable source of
information in the field. Additionally, we organised expert webinars to
provide a platform for in-depth discussions on female intimate care and
engaging our audience. We also completed two specific campaigns to raise
awareness about Bacterial Vaginosis (BV) and menopause, showcasing our
commitment to a holistic approach in women's health.
Women's Intimate Health (WIH) is a £97 million market in the UK. Our
objective is to emerge as the leading brand in this segment, transforming
behaviours and extending care to women of all ages.
3) ENT (Earol, Earol Swim, Baby Earol, Sterinase -
Revenue £5.3m, +6.5% LFL)
ENT is a relatively new therapy area in the VLG brands portfolio, however we
have achieved much strategically with, Earol, a product for ear wax removal.
We introduced a new product Baby Earol, targeting a completely different
addressable market to attract new consumers and increase basket size of
existing one. Online revenue for Earol was around £0.2 million, entirely
incremental. HL Healthcare (which owns Earol, Earol Swim and Sterinase) was
acquired at the end of 2022, at which time the products had limited UK and
international distribution, and no direct distribution online. At the time of
acquisition 95% of revenues were from the main Earol product, and were split
approximately 50% into the UK and 50% into Scandinavia and some smaller EU
countries. During 2023 we have expanded its presence into a number of UK
retailers and launched the product through Amazon directly. Internationally we
are looking to take the product into more of the EU territories.
To date the Earol product has been manufactured at an external CMO (Contract
Manufacture Operation), but during 2024 we will transfer some of the
manufacturing into our facility at Biokosmes, with a consequent reduction in
cost of goods and working capital investment.
We have strong confidence in the quality of Earol products, especially since
Earol Olive Spray won the Natural Healthcare category for 2023 MVP Awards.
This accolade affirms its outstanding quality and contributes significantly to
Earol's positioning in the market, reinforcing its reputation as a superior
and valued product.
Earol has long been the No. 2 brand in the ENT market in the UK, gaining 1
percentage point of market share by volume to reach close to 14% throughout
2023. When looking at the top leader in the ear care segment, its product
application, which is a traditional drop, differs from ours. It also has more
SKUs than ours, hence our new products planned for 2024 are set to bring us
closer to the market leader.
4) Oral Care (Dentyl, UltraDex - Revenue £4.7m, +3.9%
LFL)
In the highly competitive Oral Care segment, we made a strategic decision to
steer clear of head-to-head competition with the leading triopoly, which
currently commands over 80% of the market share in the UK. Instead, our focus
has been on adopting innovative approaches to thrive in this challenging
landscape, and we are particularly pleased to see that in this environment our
initiatives have still delivered growth.
Our UltraDEX online revenue witnessed an impressive growth of 52% YoY.
Similarly, Dentyl experienced a significant online revenue increase of 42%
YoY. These excellent performances can be attributed to a stronger advertising
focus, higher average selling price, small strategic bulk buys and robust EPOS
growth.
In this highly competitive space it is important to actively rotate Dentyl
SKUs within retailers in order to retain listings and differentiate between
retailers. Additionally, recognising the need to explore untapped markets and
differentiate our approach in this competitive landscape, we are actively
exploring discounter channels.
Dentyl has a host of exciting updates lined up for 2024, encompassing new
packaging and ingredient modifications aimed at making the products both
environmentally friendly and more profitable.
UltraDex maintained its No.1 position in the halitosis market in the UK, with
close to 50% of market share. Our marketing strategy for this segment involves
collaborating with influencers, notably Dr. Says, a celebrity dentist, to
enhance brand visibility and resonate effectively with our target audience.
These efforts manifested our commitment to not only navigate the challenges of
a competitive market but also thrive through strategic innovation and market
differentiation.
5) Oncology Support (Gelclair, Pomi-T, Xonrid - Revenue
£3.5m, +25.4% LFL)
Oncology Support achieved notable growth, exceeding 25% over the past year,
mainly due to Gelclair. Factors contributing to this success include a growth
of approximately £0.4 million from a key customer returning to regular
ordering after low volumes in the previous year. New distribution agreements
in South America, aided by regulatory approval, resulted in first-time orders
of about £0.2 million. Additionally, other business development initiatives
contributed £0.1 million to the overall growth. However, regulatory delays in
obtaining the CE mark led to excess safety stock. Consequently, we have
doubled down efforts to expand into new markets, particularly the US and Latin
America.
Xonrid's performance was largely driven by our Mexican partner and
stock-building following regulatory constraints. Pomi-T's focus was on
business development activities in new markets, and we expect to yield results
in the upcoming year.
Customer Brands performance overview
Our Customer Brands segment consolidated the significant growth in 2022,
contributing £21 million, or 40% to our Group revenue of the year. Revenues
again came from a range of long standing as well as recent customers, and our
active business development function continued to attract new development
projects from new customers that will begin to deliver revenue in 2024.
Our Biokosmes team, in close collaboration with Customers, took the lead in
innovating new products and launching multiple initiatives aimed at reducing
waste and pollution from packaging. These efforts have garnered a 100%
satisfaction rate from customers. The consistent excellence in innovation and
execution helped Biokosmes consolidate long-term relationships with existing
Customers, while also establishing an impressive track record to facilitate
future business development.
Operational highlights
The prices of raw materials - crucial input costs for our operations - are
becoming much more stable, bringing an end to the marked upward trend
experienced in the past couple of years. It is important to note this is
stabilisation from the high inflationary environment we have experienced
recently, and we do not anticipate price reductions going forward, but rather
a return to a more normal level of year-on-year price inflation. the Group
continues to evaluate and enact initiatives for improving margin, which
include customer price increases, alternative sourcing and renegotiation of
existing supply arrangements. Coupled with increasing volumes and the benefits
of operational leverage, these initiatives are expected to deliver gross and
EBITDA margin increments in 2024 and beyond.
In 2023 we produced in total 28 million units of products, with a breakdown of
seven million for VLG Brands and 21 million for Customer Brands. At Venture
Life, we take pride in our in-house development and manufacturing capabilities
and state-of-the-art facilities located in Lecco, Italy, and Gnesta, Sweden.
That said, we still retain approximately 19% of product manufacturing through
third-party arrangements in certain circumstances where: 1) acquired products'
manufacturing has not yet been transferred in-house; 2) there is a cost
benefit; or 3) the product is in a format that we cannot manufacture in our
current facilities. For key products we also aim to have a second source of
manufacturing in place as both a risk mitigation measure and where it can be
beneficial in the reduction of our carbon footprint. Our aim is to transition
more products to in-house production, achieving higher margins and improved
operational leverage. This strategic shift is motivated by the pursuit of
enhanced margins, working capital benefits, increased utilisation rates, and
the efficient in-house production of specific products. We are still operating
with additional free capacity at both sites, with utilisation rate of 48% and
19% for Italy and Sweden respectively, ensuring flexibility for future growth
opportunities.
MDR compliance progress
We are making steady progress as planned in transitioning our 27 technical
files from MDD to MDR compliance. The MDR approval was obtained for Gelclair
during the year and a further nine technical files are due to be completed in
2024 following the investment made this year. To date, we have invested £1.5
million in this initiative, and expect to spend in the order of another £1.5
million over the next four years. During 2023 the Medical Device Regulator
announced a change to the transitional rules meaning that the deadline for
continuing to sell product under the existing MDD certification was extended
to 2028, and we will take advantage of this to spread the remaining cost of
MDR transition over the longer period to 2028.
2024 outlook
Going into 2024, we are committed to a trajectory of continuous improvement in
both revenue and profitability. This includes contributions from higher prices
that we have negotiated with customers during late 2023. Our New Product
Development pipeline is geared towards a much more sizeable total addressable
market, emphasising robust organic growth that aligns with evolving consumer
needs and market trends.
We are also focused on expanding our channels, increasing online
contributions, and consolidating relationships with key stakeholders such as
grocers, pharmacies, and retailers. The exploration of private label
opportunities will not only provide a new revenue stream but also serve as a
gateway to entering new markets. Our key geographical focuses are the UK and
EU, while actively looking for new partners in the APAC region.
Building on the success of our M&A track record, we remain open to
inorganically expanding our brand portfolio with compelling opportunities
focused on acquiring margin enhancing products and optimising our utilisation
rate, utilising our free cash flow and RCF. Prioritising acquisitions that
contribute to higher margins and operational efficiency positions us for
sustained growth and increased competitiveness in the market, aligning with
our overarching goal of creating long-term value for stakeholders.
Embracing a commitment to ESG principles, we are actively enhancing our
initiatives to create a richer and more impactful set of ESG activities. This
underscores our dedication to sustainability, social responsibility, and
ethical governance practices.
As we navigate the complexities of the business landscape, we remain resolute
in our pursuit of excellence and sustainable growth. These achievements
underscore our resilience, adaptability, and commitment to delivering value to
our stakeholders. I am confident that the strategic foundation we have laid
will propel us to even greater heights. Thank you for your continued support
as we forge ahead into a future full of promise and opportunity.
Jerry Randall
Chief Executive Officer
9 April 2024
Financial Review
Statement of Comprehensive Income
Results for the year
2023 2022 Change
£'000 £'000 %
Revenue 51,410 43,980 16.9%
Gross profit 20,150 17,665 14.1%
Gross margin 39.2% 40.2% (1.0)ppt
Administrative expenses (8,960) (8,926) 0.4%
Depreciation (2,128) (1,821) 16.9%
Amortisation (4,516) (3,564) 26.7%
Impairment of intangibles (760) - 100.0%
Exceptional costs (639) (1,278) (50.0)%
Operating profit 3,289 2,227 47.7%
Net finance expense (2,166) (1,521) 42.4%
Profit before tax 1,123 706 59.1%
Tax (202) (186) 8.6%
Net income 921 520 77.1%
Group revenue
The Group reported 2023 revenues of £51.4 million, an increase of 16.9% over
the £44.0 million reported in the previous period and benefited from the
annualisation of HL Healthcare Ltd following its acquisition on 1 December
2022. On a proforma basis(1) which treats new acquisitions as if they had been
in place for the whole of the comparative period, overall Group revenue was
5.4% ahead of the prior year and comprised volume growth of 4.2% and price of
1.2%.
The Group comprises of two segments: Venture Life Brands and Customer Brands.
The Venture Life Brands part of the business includes brands which are owned
by Venture Life and this segment reported growth of 32.0% to £30.5 million
(2022: £23.1 million) driven by the full-year impact of the HL Healthcare
acquisition referred above. On a proforma basis(1) the Venture Life Brands
grew 9.3% owing to strong performance of core brands and significant gains
made in bricks-and-mortar as well as online sales channels.
The Customer Brands business reported revenues of £20.9 million, an
improvement of 0.2% versus 2022. As well as developing and manufacturing the
majority of the Venture Life Brands, this part of the business is also focused
on the development and manufacture of products on behalf of third parties,
sold under their brands. Revenue from this segment over-delivered versus
management's expectation for a second successive year as revenues from a key
customer continued to perform strongly.
Gross profit
Gross profit for the year of £20.2 million increased 14.1% versus the
previous year (2022: £17.7 million) with a slight decline in the gross margin
percentage to 39.2% (2022: 40.2%). The absolute gross profit improvement was
driven by higher revenues and delivered a material margin improvement of
c.1.5% over the prior period. The material margin is the direct profit after
costs of materials and packaging but before allocation of other direct and
indirect costs such as production labour, transportation and facilities costs.
At a direct cost level, the online sales growth has an impact on the
percentage gross margin of the Group since these sales generate a higher
revenue per unit but incur additional variable costs in order to realise the
revenue. Importantly these sales generate a similar level of cash profit as
sales made through bricks & mortar channels however the percentage margin
is diluted by these additional variable costs. During the year, the Group has
reviewed the accounting treatment of these costs and reclassified commissions
payable from net revenue to cost of sales, resulting in an uplift to both
revenue and cost of sales by £0.5 million with nil impact on absolute profit
and an adverse impact of 0.5ppts on the Group's gross margin percentage.
The key factors behind the gross margin performance are outlined below:
Key Margin Factors Impact description % Impact Segment
Online sales growth The rapid growth of direct to consumer (D2C) sales has a dilutive effect on ↓ VLG Brands
the Group's percentage gross margin due to additional variable costs incurred
on each sale.
Input costs Temporary lag effect from passing on additional raw material and packaging ↓ Customer Brands
costs to customers after cost increases have been incurred - impact arises
from inputs procured at a premium in the prior year (to secure supply) whereby
costs unwound through the P&L in 2023 in advance of customer price
increases becoming effective.
License fee income Increased license fee income pertaining to regulatory obligations. ↑ Customer Brands
Sales mix Temporary margin dilution due to adverse sales mix from high growth of lower ↓ VLG Brands
margin brands.
Inventory management Additional stock write off and destruction costs incurred relating to ↓ VLG and Customer Brands
discontinued lines, including hand sanitiser gel and obsolete inventory for
the China geography.
FX impact The Euro strengthened against Sterling by 2.0% during 2023 (based on average ↑ VLG and Customer Brands
FX rates), which had an overall positive impact on the reported revenue and
operating profit of the Group as most of the Group's gross margins continue to
be Euro denominated.
Other Other factors include the unwind of fair value uplifts on inventory acquired ↓ VLG Brands
as part of the HL Healthcare Ltd acquisition in the prior year.
Administrative expenses
Administrative expenses before depreciation and amortisation were in line with
the previous period at £8.9 million (2022: £8.9 million). This comprised
cost increases from inflationary factors including an average 5% pay uplift
across the Group's workforce, however this impact was largely mitigated by the
rationalisation of the Executive Management team. Marketing expenditure was in
line with the previous period owing to increased online advertisement which
has driven growth through this this channel, this investment was offset by
reduced spend on the oral care brands attributable to the decline of Dentyl
sales in the UK following de-listings.
Gross R&D expenditure was up on the previous year due to investment in MDR
and increased focus in new product innovation and development. Net R&D
expenditure which resides within operating costs was down against the prior
year as a higher proportion of these costs were capitalisable.
Adjusted EBITDA
Continued tight control of our cost base ensured that the additional gross
margin over the prior year was passed through the P&L to deliver an
Adjusted EBITDA(4) of £11.6 million, an increase of 28.9% over the prior year
(2022: £9.0 million) at a margin of 22.5% (2022: 20.4%).
Non-cash administrative expenses
Non-cash costs for amortisation and depreciation increased by £1.0 million
and £0.3 million respectively, with the driver of the amortisation increase
being the full year impact of amortisation from the acquisition of HL
Healthcare Limited acquired on 1 December 2022. Depreciation charge increase
reflects growth capex invested into Biokosmes over the last two years as the
Group continues to seek opportunities to automate more of its activities and
enable internalisation of production from third party manufacturers.
Impairment of intangibles
During the year the Dentyl and Pharmasource intangible assets were impaired by
£0.8m collectively. Dentyl was impaired by £0.4m following
non-materialisation of sales from the China geography which had been
emphasised as a material uncertainty in the prior year accounts. Pharamsource
was impaired by £0.4m resulting from margin erosion from a key customer in
order to retain the business, coupled with expected business development
opportunities not materialising until after the year end, notably if this new
customer had been secured pre year end it would have avoided the need for an
impairment to arise.
Exceptional costs
Exceptional costs of £0.6 million (2022: £1.3 million) reduced substantially
during the period, with approximately half of the 2023 costs being related to
further integration work from previous year acquisitions, including costs
associated with evaluating an upgrade to the Group's ERP system and other IT
integration. The balance of exceptional items related to restructuring costs
incurred as part of a commercial team restructure.
Net finance expense
The Group is financed by a revolving credit facility established during 2021
in the committed sum of £30.0 million of which £16.5 million had been drawn
at 31 December 2023. The revolving credit facility bears interest at a fixed
rate of 2.5% plus SONIA on drawn funds as well as a commitment fee at the rate
of 1.0% on the balance of undrawn funds up to the facility limit.
Finance costs increased by £0.7 million to £2.2 million (2022: £1.5
million), wholly owing to increased interest payable following additional
drawdown from the facility at the end of the previous year to fund the
acquisition of HL Healthcare Ltd. The total finance expense of £2.2 million
includes significant non-cash elements amounting to £0.8 million related to
amortisation of commitment fees and FX impact on conversion of EUR borrowings.
Operating profit, PBT and net income
Operating profit was £3.3 million (2022: £2.2 million) with the profit
before tax for the Group of £1.1 million (2022: £0.7 million). The Group
reported net income of £0.9 million (2022: £0.5 million) which translated
into adjusted earnings per share(6) of 5.21 pence (2022: 4.07 pence). Adjusted
profit before tax(5) which adds back exceptional items, amortisation and share
based payments increased by 29.2% to £7.3 million (2022: £5.6 million).
Statement of Financial Position
2023 2022
£'000 £'000
Intangible assets 74,612 78,694
Property, plant and equipment 10,194 10,090
Deferred Tax 2,530 2,443
Non-Current Assets 87,336 91,227
Inventories 10,332 11,998
Trade and other receivables 16,205 16,433
Cash and cash equivalents 5,622 5,631
Current Assets 32,159 34,062
Trade and other payables 9,069 11,725
Taxation 269 891
Interest-bearing borrowings 20,342 3,867
Current Liabilities 29,677 16,483
Interest-bearing borrowings 4,050 22,979
Statutory employment provision 1,544 1,461
Deferred tax liability 7,970 8,707
Non-Current Liabilities 13,654 33,147
Net Assets 76,254 75,659
Non-current assets
Non-current assets including goodwill, reduced by £3.9 million during the
year to £87.3 million (2022: £91.2 million) reflecting amortisation of
intangible assets and the impairments charges recognised during the year on
the Dentyl and Pharmasource CGU's.
Current assets
As anticipated, the value of inventory holding was reduced by 14.0% to £10.3
million versus 2022. Despite the revenue growth of the business, this scale of
reduction was made possible by the easing supply chain situation which has
enabled the Group to regain purchasing power and return to normalised levels.
Trade and other receivables were broadly in line with the previous year at
£16.2 million (2022: £16.4 million) and as seen historically the seasonality
of revenue phasing was weighed towards the final quarter of the year.
Current liabilities
Trade and other payables reduced to £9.1 million (2022: £11.7 million)
following a peak at the end of the prior year which reflected the inventory
build at that time and payables related to professional fees and integration
costs associated with the HL Healthcare Ltd acquisition completed on 1
December 2022. Taxation liabilities at 31 December 2023 reduced by £0.6m
compared to the previous year and was attributable to prepaid taxes during
2023 in relation to estimated 2024 taxable profits for the Group's Italian
subsidiary. Interest bearing borrowings due within one year include deferred
consideration of £2.2m for the acquisition of HL Healthcare Ltd which becomes
payable in November 2024. Interest bearing borrowings also include the full
drawdown against the RCF which was due to expire in June 2024 and had not been
renewed at the balance sheet date - this was subsequently renewed post period
end (see note 31 of the financial statements).
Non-current liabilities
Interest bearing borrowings of £4.1 million (2022: £23.0 million) comprised
finance leases due after more than one year. As described above, the previous
year included deferred consideration and other interest bearing borrowings
which are reported as part of current liabilities at the end of 2023.
Statutory employment provisions, which relate solely to the Group's Italian
subsidiary, increased by 6% over the prior year due to increased headcount.
Cash performance
2023 2022 Change
£'000 £'000 %
Operating cash flow before movements in working capital 10,840 7,544 43.7%
Change in working capital (1,005) (1,357) -
Cash generated from operations 9,835 6,187 59.0%
Income taxes paid (1,615) (621) -
Net cash from operating activities 8,220 5,566 47.7%
Cash outflow from investing activities - acquisitions (2,933) (9,860) -
Cash outflow from investing activities - additions (2,407) (1,828) -
Cash (outflow) / inflow from financing activities (2,806) 6,922 -
Increase in cash and cash equivalents 74 800 -
Cash and cash equivalents at beginning of year 5,631 5,235 -
Effect of foreign exchange rates (83) (404) -
Cash and cash equivalents at end of year 5,622 5,631 (0.1)%
Cash generated from operations
Cash generated from operations increased 59.0% to £9.8 million (2022: £6.2
million) and is reported after an adverse working capital outflow of £1.0
million (2022: adverse £0.4 million) attributable to the normalisation of
trade payables and inventories. Operating cash conversion, calculated as cash
from operating activities as a proportion of Adjusted EBITDA(4), increased to
85.1% (2022: 69.0%) as the Group benefited from the full year inclusion of the
highly cash generative Earol brand.
Tax paid increased by £1.0 million to £1.6 million (2022: £0.6 million)
arising from a significant increase in taxable profits within the Group's
Italian subsidiary in 2022 and prepaid tax of £0.6 million based on estimated
2024 profits. Net cash from operating activities increased to £8.2 million
(2022: £5.6 million).
Cashflows from investing activities
Cash used in investing activities reduced by 54% to £5.3 million (2022:
£11.7 million) and comprised outflows of £3.0 million on deferred
consideration for the acquisition of HL Healthcare Ltd, plus £0.8 million of
capital investment into the manufacturing facilities in Italy and Sweden
(2022: £0.9 million), plus £0.3 million of intangible assets arising from
new product development (2022: £0.4 million), with the balance of £1.1
million put towards the Group's continued investment in upgrading its 27
medical devices to become MDR compliant ahead of the Medical Device
Regulator's deadline in May 2028 (2022: £0.5 million).
Free cash flow
Notwithstanding the Group's significant investment to upgrade its medical
devices, the free cash flow (FCF) generation of the Group has improved
considerably for a second successive year, free cash flow available for debt
service of £4.8 million was 71% up against the previous period (2022: £2.8
million) with a resulting Adjusted EBITDA(4) to FCF conversion of 42% (2022:
32%).
Free Cash Flow
Year-end Dec (£000) 2023 2022
Adjusted EBITDA(4) 11.6 9.0
Operating cash generation 9.8 6.2
Cash conversion % 85% 69%
Net Operating cash flow 8.2 5.6
CAPEX, PPE (0.8) (0.9)
CAPEX, intangibles (1.6) (0.9)
Lease repayments (1.0) (0.9)
Free Cash Flow 4.8 2.8
FCF to Adjusted EBITDA % 41.7% 31.7%
Cashflows from financing activities
Cash outflows from financing activities amounted to £2.8 million (2022:
inflow £6.9 million) and comprised interest payments of £1.4 million (2022:
£0.6 million) and lease payments of £1.0 million (2022: £0.9 million) with
the balance of £0.4 million used to repay interest bearing borrowings (2022:
net drawdown £8.2 million).
Net debt and leverage
Group net debt(10) excluding finance lease obligations was £13.7 million (31
Dec 22: £16.6 million) and equated to net leverage(7) of 1.30x at the period
end (31 Dec 22: 1.65x). With an overall available RCF facility of £30 million
(plus £20 million accordion), including an adjusted EBITDA(4) to gross debt
leverage limit of 2.5x, the Group retains access to meaningful funding.
Daniel Wells
Chief Financial Officer
9 April 2024
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Company number 05651130
Year ended Year
ended
31 December 31
December
2023 2022
Notes £'000 £'000
Revenue 5 51,410 43,980
Cost of sales (31,260) (26,315)
Gross profit 20,150 17,665
Administrative expenses
Operating expenses (11,189) (10,927)
Impairment losses of financial assets 16 101 180
Amortisation and impairment of intangible assets 13 (5,276) (3,564)
Total administrative expenses (16,364) (14,311)
Other income 142 151
Operating profit before exceptional items 3,928 3,505
Exceptional costs 6 (639) (1,278)
Operating profit 7 3,289 2,227
Finance income 15 1
Finance costs (2,181) (1,522)
Profit before tax 1,123 706
Tax 10 (202) (186)
Profit for the year 921 520
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss
Foreign exchange (loss) / gain / on translation of subsidiaries (551) 1,679
Total comprehensive profit for the year attributable to equity holders of the 370 2,199
parent
All of the profit and the total comprehensive income for the year is
attributable to equity holders of the parent.
Year ended Year ended
31 December 31 December
2023 2022
Earnings per share
Basic earnings per share (pence) 12 0.73 0.41
Diluted earnings per share (pence) 12 0.68 0.39
Consolidated Statement of Financial Position
at 31 December 2023
Company number 05651130
At 31 December At 31 December
2023 2022
Notes £'000 £'000
Assets
Non-current assets
Intangible assets 13 74,612 78,694
Property, plant and equipment 14 10,194 10,090
Deferred tax 2,530 2,443
87,336 91,227
Current assets
Inventories 15 10,332 11,998
Trade and other receivables 16 16,205 16,433
Cash and cash equivalents 17 5,622 5,631
32,159 34,062
Total assets 119,495 125,289
Equity and liabilities
Capital and reserves
Share capital 18 379 379
Share premium account 18 65,960 65,960
Merger reserve 19 7,656 7,656
Foreign currency translation reserve 20 1,014 1,565
Share-based payments reserve 21 1,034 812
Retained earnings 22 211 (713)
Total equity attributable to equity holders of the parent 76,254 75,659
Liabilities
Current liabilities
Trade and other payables 23 9,066 11,725
Taxation 269 891
Interest-bearing borrowings 24 20,342 3,867
29,677 16,483
Non-current liabilities
Interest-bearing borrowings 24 4,050 22,979
Statutory employment provision 25 1,544 1,461
Deferred tax liability 11 7,970 8,707
13,564 33,147
Total liabilities 43,241 49,630
Total equity and liabilities 119,495 125,289
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Company number 05651130
Foreign
Share currency Share-based
Share premium Merger translation payments Retained Total
capital account reserve reserve reserve earnings Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 377 65,738 7,656 (114) 856 (1,349) 73,164
Profit for the year - - - - - 520 520
Foreign exchange - - - 1,679 - - 1,679
on translation
Total comprehensive income - - - 1,679 - 520 2,199
Share-based payments charge - - - - 72 - 72
Share-based payments charge recycling - - - - (116) 116 -
Contributions of equity, net of transaction costs 2 222 - - - - 224
Transactions with 2 222 - - - - 224
Shareholders
Balance at
1 January 2023 379 65,960 7,656 1,565 812 (713) 75,659
Profit for the year - - - - - 921 921
Foreign exchange - - - (551) - - (551)
on translation
Total comprehensive income - - - (551) - 921 370
Share-based payments charge - - - - 225 - 225
Share-based payments charge recycling - - - - (3) 3 -
Transactions with - - - - 222 3 225
Shareholders
Balance at
31 December 2023 379 65,960 7,656 1,014 1,034 211 76,254
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
Company number 05651130
Year ended Year ended
31 December 31 December
2023 2022
Notes £'000 £'000
Cash flow from operating activities
Profit before tax 1,123 706
Finance expense 2,166 1,521
Operating profit 3,289 2,227
Adjustments for:
- Depreciation of property, plant and equipment 14 2,128 1,821
- Impairment losses of financial assets 16 (101) (180)
- Amortisation of intangible assets 13 4,516 3,564
- Impairment of intangible assets 13 760 -
- Loss on disposal of non-current assets 13 23 40
- Share-based payment expense 225 72
Operating cash flow before movements in working capital 10,840 7,544
Decrease / (increase) in inventories 1,481 (2,329)
Decrease / (increase) in trade and other receivables 104 (2,517)
(Decrease) / increase in trade and other payables (2,590) 3,489
Cash generated from operations 9,835 6,187
- Tax paid (1,615) (674)
- Tax receipt - 53
Net cash from operating activities 8,220 5,566
Cash flow from investing activities:
Acquisition of subsidiaries, net of cash acquired (2,933) (7,482)
Purchases of property, plant and equipment 14 (820) (860)
Expenditure in respect of intangible assets 13 (1,587) (3,346)
Net cash used in investing activities (5,340) (11,688)
Cash flow from financing activities:
Proceeds from issuance of ordinary shares 18 - 224
Drawdown of interest-bearing borrowings 24 3,165 14,985
Repayment of interest-bearing borrowings 24 (3,581) (6,728)
Leasing obligation repayments 24 (999) (922)
Interest paid (1,391) (637)
Net cash (used) / from financing activities (2,806) 6,922
Net increase in cash and cash equivalents 74 800
Net foreign exchange difference (83) (404)
Cash and cash equivalents at beginning of period 5,631 5,235
Cash and cash equivalents at end of period 17 5,622 5,631
Notes to the Consolidated Statements
for the year ended 31 December 2023
Company number 05651130
1. Basis of the announcement
The financial information of the Group set out above does not constitute
statutory accounts for the purposes of Section 435 of the Companies Act
2006. The financial information for the year ended 31 December 2022 has
been extracted from the Group's audited financial statements which were
approved by the Board of directors on 4 April 2023 and delivered to the
Registrar of Companies for England and Wales following the Company's 2023
Annual General Meeting.
The financial information for the year ended 31 December 2023 has been
extracted from the Group's financial statements for that period. The report
of the auditor on the 2023 financial statements was unmodified.
Whilst the financial information included in this preliminary announcement
has been prepared in accordance with UK adopted international accounting
standards, in conformity with the requirements of the Companies Act 2006, that
are relevant to companies that report under these standards, this announcement
does not itself contain sufficient information to comply with those standards.
This financial information has been prepared in accordance with the
accounting policies set out in the 2023 Report and Accounts.
Items included in the financial information of each of the Group's entities
are measured using the currency of the primary economic environment in which
the entity operates (the functional currency). The consolidated financial
information is presented in UK sterling (£), which is the Group's
presentational currency.
The Company is a public limited company incorporated and domiciled in England
& Wales and whose shares are quoted on AIM, a market operated by The
London Stock Exchange.
The principal activity of Venture Life Group plc and its subsidiaries is the
development and commercialisation of healthcare products, including food
supplements, medical devices and dermo-cosmetics for the ageing population,
and the manufacture of a range of topical products for the healthcare and
cosmetics.
2.1 Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable
segment:
Venture
Life Customer Consolidated
Brands Brands Group
£'000 £'000 £'000
Year ended 31 December 2023
Revenue
Sale of goods 32,629 27,331 59,960
Intercompany sales elimination (1,902) (6,647) (8,549)
Total external revenue 30,728 20,683 51,411
Results
Operating profit before exceptional items, amortisation of acquired 11,467 4,559 16,026
intangibles and excluding central administrative costs
Amortisation of acquired intangibles (4,755) (521) (5,276)
Depreciation incurred by segment (2,035) (536) (2,571)
Operating profit before exceptional items and excluding central administrative 4,677 3,502 8,179
costs
Year ended 31 December 2022
Revenue
Sale of goods 24,579 25,621 50,200
Intercompany sales elimination (1,444) (4,776) (6,220)
Total external revenue 23,135 20,845 43,980
Results
Operating profit before exceptional items, amortisation of acquired 8,637 4,606 13,243
intangibles and excluding central administrative costs*
Amortisation of acquired intangibles (3,043) (442) (3,485)
Depreciation incurred by segment* (1,795) (490) (2,285)
Operating profit before exceptional items and excluding central administrative 3,799 3,674 7,473
costs
* Prior year figures reanalysed to show segmental operating profit before
amortisation of acquired intangible assets
The reconciliation of segmental operating profit to the Group's profit before
tax is as follows:
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Operating profit before exceptional items and excluding central administrative 8,179 7,473
costs
Exceptional items (639) (1,278)
Central administrative costs (4,890) (3,968)
Finance costs (2,166) (1,521)
Profit before tax 1,123 706
One customer generated revenue of £8,346,036 which accounted for 10% or more
of total revenue (2022: one customer generated revenue of £8,327,607 which
accounted for 10% or more of total revenue).
2.2 Segmental assets and liabilities
At At
31 December 31 December
2023 2022
£'000 £'000
Assets
Venture Life Brands 100,642 102,295
Customer Brands 17,682 22,149
Central Group assets - 845
Consolidated total assets 118,324 125,289
Liabilities
Venture Life Brands 17,672 19,669
Customer Brands 7,757 10,839
Central Group liabilities 16,644 19,122
Consolidated total liabilities 42,073 49,630
2.3 Other segmental information
Depreciation Addition to
and non-current
Amortisation Assets
£'000 £'000
Year ended 31 December 2023
Venture Life Brands 6,790 2,077
Customer Brands 536 765
Central administration 78 -
7,404 2,842
Year ended 31 December 2022
Venture Life Brands 4,838 17,381
Customer Brands 490 811
Central administration 57 -
5,385 18,192
2.4 Geographical information
The Group's revenue from external customers by geographical location of
customer is detailed below:
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Revenue
UK 19,041 15,033
Italy 11,413 12,870
Switzerland 1,662 1,829
Germany 606 393
Netherlands 938 1,612
France 602 252
Rest of Europe 9,447 8,015
USA 564 466
Canada 990 441
Brazil 860 518
Ireland 1,250 1,230
Rest of the World 4,038 1,320
Total revenue * 51,412 43,980
* Prior year figures reanalysed for correction and to expand geographical
analysis
3. Exceptional items
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Costs incurred in the acquisition of HL Healthcare Ltd - 860
Prospective M&A costs 86 -
Integration of acquisitions 277 202
Restructure 276 216
Total exceptional items 639 1,278
During the period the Group incurred further integration costs in relation to
previous year acquisitions plus new costs in relation to prospective M&A.
Other exceptional items related to restructuring costs.
4. Income tax expense
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Current tax:
Current tax on profits for the year 1,038 1,195
Adjustments in respect of earlier years (25) 11
Total current tax expense 1,013 1,206
Deferred tax:
Origination and reversal of temporary differences (811) (1,020)
Total deferred tax credit (811) (1,020)
Total income tax charge / (credit) 202 186
Tax on the Group's profit before tax differs from the theoretical amount that
would arise using the weighted average tax rate applicable to profits and
losses of the consolidated entities as follows:
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Profit before tax 1,123 706
Profit before taxation multiplied by the local tax rate of 23.52% (2022: 19%) 264 134
Net (tax allowances not recognised in financial statements) / expenses not (155) 166
deductible for tax purposes
Current year losses for which no deferred tax asset has been recognised 31 117
Utilised losses - (112)
Other adjustments (70) -
Re-measurement of deferred tax balances (5) (281)
Higher rate on foreign taxes 162 151
Adjustments for current tax of prior periods (25) 11
Income tax charge 202 186
With effect from 1 April 2023 the UK corporation tax rate rose from 19% to 25%
on all profits in excess of £250,000. The standard corporation tax rate in
Italy is 24% and there is in addition a regional production tax of 3.9%.
Corporation tax rates in the Netherlands are 25.8% on profits in excess of
€395,000 and 15% on profits below this threshold. Corporation tax rates in
the Sweden are 20.6%. Deferred taxes at the balance sheet date have been
measured using these enacted tax rates and reflected in these financial
statements.
As at the reporting date, the Group has unused tax losses of £9,469,282
(2022: £9,867,000) available for offset against future profits generated in
the UK. A deferred tax asset has been recognised on the losses which the
company considers will be utilised against future profits in the UK however,
there remain further losses of £435,000 which a deferred tax asset has not be
recognised on due to the uncertainty of their recoverability.
The tax charge of the Group is mainly driven by tax paid on the profits of
Biokosmes S.r.l and PharmaSource B.V. as profits from the UK entities are
Group relieved against current year and prior year losses within the UK Group.
The group recognises a deferred tax asset in relation to losses carried
forward in the UK entities as the performance of these entities is expected to
become more profitable in future due to the introduction of new customers and
products from recent acquisitions and business development activities, as well
as cost rationalisation. The deferred tax liabilities generated on previous
years acquisitions are released to the income statement over time.
5. Earnings per share
A reconciliation of the weighted average number of ordinary shares used in the
measures is given below:
Year ended Year ended
31 December 31 December
2023 2022
For basic EPS calculation 126,498,197 126,257,101
For diluted EPS calculation 133,635,025 133,393,929
The dilution reflects the inclusion of the options and LTIPs that have been
issued, amounting to 10,194,015 stock options and 554,115 LTIPs.
A reconciliation of the earnings used in the different measures is given
below:
2023 2022
£'000 £'000
For basic and diluted EPS calculation 921 520
Add back: Amortisation 5,276 3,564
Add back: Exceptional costs 639 1,278
Add back: Share based Payments 225 72
For adjusted EPS calculation 7,061 5,434
The resulting EPS measures are:
Pence Pence
Basic EPS 0.73 0.41
Diluted EPS 0.68 0.39
Adjusted EPS 5.58 4.30
Adjusted diluted EPS 5.21 4.07
6. Intangible assets
Development costs Brands Patents and trademarks Goodwill Other intangible assets Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost or valuation:
At 1 January 2022 4,049 20,093 979 35,483 10,727 71,331
Acquired through business combinations - 9,282 - 3,407 2,628 15,317
Additions 923 - 45 - - 968
Disposals (84) - - - - (84)
Foreign exchange movements 231 - 35 762 168 1,196
At 31 December 2022 5,119 29,375 1,059 39,652 13,523 88,728
Additions 1,377 - 210 - - 1,587
Disposals (22) - - - - (22)
Foreign exchange movements (84) - (15) (305) (68) (472)
At 31 December 2023 6,390 29,375 1,254 39,347 13,455 89,821
Amortisation:
At 1 January 2022 2,112 822 511 - 2,807 6,252
Charge for the year 585 1,522 164 - 1,293 3,564
Disposals (46) - - - - (46)
Foreign exchange movements 129 - 18 - 117 264
At 31 December 2022 2,780 2,344 693 - 4,217 10,034
Charge for the year 869 1,917 144 - 1,586 4,516
Impairment charge - - - 760 - 760
Foreign exchange movements (45) - (9) 2 (49) (101)
At 31 December 2023 3,604 4,261 828 762 5,754 15,209
Carrying amount:
At 31 December 2022 2,339 27,031 366 39,652 9,306 78,694
At 31 December 2023 2,786 25,114 426 38,585 7,701 74,612
All Capitalised development costs are amortised over their estimated useful
lives, which is five years. All amortisation has been charged to
administrative expenses in the Statement of Comprehensive Income.
All trademark, licence and patent renewals are amortised over their estimated
useful lives, which is between five and ten years. All amortisation has been
charged to administrative expenses in the Statement of Comprehensive Income.
Other intangible assets currently comprise customer relationships and product
formulations acquired through the acquisition of Biokosmes Srl. and customer
relationships acquired through the acquisitions of Periproducts, the Dentyl
brand, the Pharmasource group, BBI Healthcare Ltd, the Helsinn Brands and HL
Healthcare Ltd. These assets were recognised at their fair value at the date
of acquisition and were being amortised over a period of between five and ten
years. The weighted average remaining amortisation period for other intangible
assets is 5.4 years (2022: 5.9 years)
Assets with indefinite economic lives as well as associated assets with finite
economic lives are tested for impairment at least annually or more frequently
if there are indicators that amounts might be impaired. The impairment review
involves determining the recoverable amount of the relevant cash-generating
unit, which corresponds to the higher of the fair value less costs to sell or
its value in use.
The key assumptions used in relation to the Biokosmes (Customer Brands
comprising one CGU), Periproducts, the Dentyl brand, Pharmasource group, BBI
Healthcare Ltd, the Helsinn brands and HL Healthcare Ltd (part of the Venture
Life Brands comprising six CGU's) impairment review are outlined below:
Biokosmes SRL
· In 2023, Biokosmes SRL achieved revenue growth of 0.2% versus the
previous year - being an above expectation result against the backdrop of
exceptional revenue growth of 34.0% during 2022. Subsequent period
expectations are for a marginal decline in this exceptional performance as
revenues stabilise into 2025, followed by strong organic growth thereafter.
Management have forecasted future revenue growths for the 5-year period ending
2028 of CAGR 4.1%.
· The group has valued Biokosmes SRL by discounting the associated
future cash flows across a five year period, and with a terminal value to
reflect future years. The discount rate is based upon the group pre-tax WACC
of 14.3% and is adjusted for specific segment, country and currency risk plus
local tax rates to derive a post-tax rate of 10.7%. These assumptions generate
a headroom over the assets current carrying value equivalent to £14.4
million.
· An increase in the post-tax WACC rate by 6.7ppt would have
resulted in no headroom over the assets of the business held at the balance
sheet date.
· Sensitivity analysis has been performed on Biokosmes by
restricting earnt margin on sales to 2023 levels, lowering it 0.7 ppts. Under
this scenario, headroom remains at £13.0 million.
Periproducts Ltd
· In 2023, PeriProducts Ltd achieved revenue growth of 3.0% versus
the previous year primarily owing to strong growth in the online sales of the
Ultradex product line. Management have forecasted future revenue growths for
the 5-year period ending 2028 of CAGR 4.3%.
· The group has valued PeriProducts Ltd by discounting the
associated future cash flows across a five year period, and with a terminal
value to reflect future years. The discount rate is based upon the group
pre-tax WACC of 14.3% and is adjusted for specific segment, country and
currency risk plus local tax rates to derive a post-tax rate of 10.7%. These
assumptions generate a headroom over the assets current carrying value
equivalent to £6.4m.An increase in the post-tax WACC rate by 10.6ppt would
have resulted in no headroom over the assets of the business held at the
balance sheet date.
· Sensitivity analysis has been performed to restrict growth in
non-core brands to inflationary levels of 2% per annum. This is a considerably
prudent scenario whereby Periproducts is engaging in significant marketing
activities to promote its brands during the coming year, with anticipation of
returns in 2025. Under this inflationary scenario future cashflows still
generate a headroom of £6.0 million over the assets of the business held at
the balance sheet date.
Dentyl Brand
· In 2023, revenues from the Dentyl Brand declined 8.8% versus the
previous year following product delistings within the UK wholesaler channel.
International revenues similarly underperformed particularly within the
Chinese geography where existing distribution arrangements materialised below
expectations. To appropriately reflect these adverse market conditions
management has opted to impair the brand by £389,000 and has restricted it's
forecasted 5-year revenue growth to a CAGR 1.7%. Primarily this restriction
owes to the disregarding of International distribution revenues except where
reasonably certain to materialise. The group remains committed to expanding
Dentyl into the APAC region however and notes considerable upside opportunity
with both existing and new partners.
· The group has valued the Dentyl Brand by discounting the
associated future cash flows across a five year period, and with a terminal
value to reflect future years. The discount rate is based upon the group
pre-tax WACC of 14.3% and is adjusted for specific segment, country and
currency risk plus local tax rates to derive a post-tax rate of 10.7%.
Post-impairment the brand assets current carrying value is equivalent to its
recoverable amount with no headroom.
· Sensitivity analysis has been performed on scenarios to
completely restrict international revenues to nil, which would result in
impairment of £0.4 million. Under this scenario, the Group would seek to
mitigate this impact and the Directors are satisfied that the forecasts
included in the original impairment assessment already apply a cautious
approach.
Pharmasource BV
· In 2023, PharmaSource BV achieved revenue growth of 7.0% driven
by strong performance in the international division. Outlook for 2024 and
beyond includes the discontinuation of a significant customer contract,
however minimum purchase obligations under post-year end secured business have
more than mitigated this reduction. Benefits from this new contract are
constrained by a negotiated price reduction with the groups largest footcare
customer, however aggregate forecasted future revenue growths for the 5-year
period ending 2028 retain a strong CAGR of 5.8%.
· The group has valued PharmaSource BV by discounting the
associated future cash flows across a five year period, and with a terminal
value to reflect future years. The discount rate is based upon the group
pre-tax WACC of 14.3% and is adjusted for specific segment, country and
currency risk plus local tax rates to derive a post-tax rate of 11.2%. Price
inelasticity has contributed to margin erosion across the forecast period and
an impairment has been recognised against the asset for £0.4m. The carrying
value of the attributable intangible assets is now £5.0m at 31 December 2023,
and the group is actively seeking new opportunities for the brand
internationally.
· During February 2024 a new distribution contract was signed for
footcare products with an existing customer with minimum purchase obligations
of approximately £0.2 million per annum. No impairment would have been
necessary had this contract been foreseeable at the point of valuation. This
contract is expected to generate revenues across a five year period and
minimum purchase obligations for the coming year have already been secured as
orders, providing comfort against the need for future impairment.
BBI Healthcare Ltd
· In 2023, BBI Healthcare Ltd achieved revenue growth of 10.0%
versus the previous year which is primarily driven by growth in the Lift brand
across both Online and Pharmaceutical channels. Management have forecasted
future revenue growths for the 5-year period ending 2028 of CAGR 9.7%, with
the largest driver being 16.9% and 11.3% cumulative growth in UK/EU sales of
Balance Activ and Lift brands respectively.
· The group has valued BBI Healthcare Ltd by discounting the
associated future cash flows across a five year period, and with a terminal
value to reflect future years. The discount rate is based upon the group
pre-tax WACC of 14.3% and is adjusted for specific segment, country and
currency risk plus local tax rates to derive a post-tax rate of 10.7%. These
assumptions generate a headroom over the assets current carrying value
equivalent to £27.8 million. An increase in the post-tax WACC rate by 6.5ppt
would have resulted in no headroom over the assets of the business held at the
balance sheet date.
· Sensitivity analysis has been performed to reduce anticipated
revenue growths by 10% as a prudent scenario and shows that the future
cashflows still generate a significant headroom of £27.1 million over the
assets of the business held at the balance sheet date.
Helsinn Brands
· In 2023, Helsinn Brands achieved revenue growth of 25.9% versus
the previous year primarily owing to exceptional 51.9% growth across
international revenues of the Gelclair brand. Management have forecasted
future revenue growths for the 5-year period ending 2028 of CAGR 10.0%.
· The group has valued Helsinn Brands by discounting the associated
future cash flows across a five year period, and with a terminal value to
reflect future years. The discount rate is based upon the group pre-tax WACC
of 14.3% and is adjusted for specific segment, country and currency risk plus
local tax rates to derive a post-tax rate of 10.5%. These assumptions generate
a headroom over the assets current carrying value equivalent to £15.0
million.
· An increase in the post-tax WACC rate by 18.0ppt would have
resulted in no headroom over the assets of the business held at the balance
sheet date.
· Sensitivity analysis has been performed to restrict forecasted
revenues to those from pre-existing customer relationships only as a prudent
scenario and shows that the future cashflows still generate a significant
headroom of £10.0 million over the assets of the business held at the balance
sheet date.
HL Healthcare Ltd
· In 2023, HL Healthcare Ltd achieved revenue growth of 5.4% versus
the previous year with core Earol brands growing 10.9%. Single year overall
growth was restricted by the discontinuation of the low-margin Sterinase
product line, with normalisation anticipated from 2024 onwards. Management
have forecasted future revenue growth for the 5-year period ending 2028 of
CAGR 10.1%.
· The group has valued HL Healthcare Ltd by discounting the
associated future cash flows across a five year period, and with a terminal
value to reflect future years. The discount rate is based upon the group
pre-tax WACC of 14.3% and is adjusted for specific segment, country and
currency risk plus local tax rates to derive a post-tax rate of 10.7%. These
assumptions generate a headroom over the assets current carrying value
equivalent to £7.2 million.
· An increase in the post-tax WACC rate by 3.7ppt would have
resulted in no headroom over the assets of the business held at the balance
sheet date.
· Forecasted revenues for HLH benefit from annualization following
product launch of Earol Baby at the tail end of 2023. Sensitivity analysis has
considered these new lines failing to generate any revenues versus the
forecasted £0.3m per annum, which results in a total headroom of £6.0
million over the assets of the business held at the balance sheet date.
The above impairment assessments of Biokosmes SRL, Periproducts Ltd, the
Dentyl brand, the Pharmasource group, BBI Healthcare Ltd, the Helsinn brands
and HL Healthcare Ltd have included assessment of all elements of intangible
value regardless of whether their economic lives are finite or indefinite, and
include Customer Relationships, acquired formulations, acquired Trademarks and
Goodwill.
Intangible assets with indefinite useful lives allocated to operating
segments:
Year ended 31 December 2023 Year ended 31 December 2022
£'000 £'000
Goodwill PeriProducts Ltd 3,337 3,337
Dentyl 2,711 3,100
Pharmasource BV 3,819 4,279
BBI Healthcare Ltd 13,252 13,252
The Helsinn brands 1,925 1,925
HL Healthcare Ltd 3,406 3,406
Venture Life Brands Total 28,450 29,299
Biokosmes SRL 10,135 10,351
Customer Brands Total 10,135 10,351
Total 38,585 39,652
Brands
The Helsinn brands 2,010 2,010
Venture Life Brands Total 2,010 2,010
Customer Brands Total - -
Total 2,010 2,010
The recoverable amount of each segment was determined based on value-in-use
calculations, covering a detailed five-year forecast and terminal value. The
present value of the expected cash flows of each segment is determined by
applying a suitable discount rate reflecting current market assessments of the
time value of money and risks specific to the segment.
Recoverable amount of each operating segment:
Year ended 31 December 2023 Year ended 31
December 2022
£'000 £'000
PeriProducts Ltd 12,173 7,719
Dentyl 4,935 6,370
Pharmasource BV 4,980 9,509
BBI Healthcare Ltd 62,540 36,553
The Helsinn brands 21,485 12,749
HL Healthcare Ltd 21,961 20,735
Venture Life Brands Total 128,074 93,635
Biokosmes SRL 34,556 28,501
Customer Brands 34,556 28,501
These assumptions are subjective and provide key sources of estimation
uncertainty, specifically in relation to growth assumptions, future cashflows
and the determination of discount rates. The actual results may vary and
accordingly may cause adjustments to the Group's valuation in future financial
years.
Sensitivity analysis has been performed on the impairment review of all other
operating segments and indicate sufficient headroom in the event of reasonably
possible changes in key assumptions and these are unlikely to result in an
impairment.
8. Cash and cash equivalents
At At
31 December 31 December
2023 2022
£'000 £'000
Available cash and cash equivalents 5,622 5,631
The Group holds sterling, Chinese renminbi and euro denominated balances in
the UK. The Group's subsidiaries hold US dollar, yen and euro accounts in
Italy, euro accounts in the Netherlands, a Swiss franc account in Switzerland
and Swedish Krona account in Sweden.
The Directors consider that the carrying value of cash and cash equivalents
approximates their fair value.
9. Share capital and share premium
All shares are authorised, issued and fully paid. The Group has one class of
ordinary shares which have full voting rights, no preferences and no
restrictions attached.
Ordinary shares of Ordinary shares of Share premium Merger reserve
0.3p each 0.3p each
Number £ £'000 £'000
At 31 December 2023 126,498,197 379,495 65,960 7,656
At 31 December 2022 126,498,197 379,495 65,960 7,656
The Company issued no new shares during 2023. (666,667 new shares were issued
during 2022 for total consideration of £224,667).
10. Interest-bearing borrowings
At At
31 December 31 December
2023 2022
£'000 £'000
Current
Invoice financing 616 -
Leasing obligations 1,044 920
Deferred contingent consideration - 2,947
Secured bank loans due within one year 16,467 -
Subordinated loan note (Deferred consideration) 2,215 -
Total 20,342 3,867
Non-current
Leasing obligations 4,050 3,651
Secured bank loans due after one year - 17,314
Subordinated loan note (Deferred consideration) - 2,014
Total 4,050 22,979
All bank loans are held jointly by Santander Bank and HSBC Innovation Bank and
comprise the Group's revolving credit facility, secured against the assets and
profits of most subsidiaries within the Group and with expiry in June 2024.
This facility was established during 2021 in the committed sum of £30.0
million of which £16.5 million has been drawn at 31st December 2023 (31st
December 2022: £17.3 million). Invoice financing includes the Italian RiBa
(or "Ricevuta Bancaria") facility which is a short-term facility. The balance
shown above of £0.6 million (2022: £nil) reflects the amount that had been
settled in Biokosmes' account under RiBa and drawn against invoices in the UK
as at the reporting date.
The revolving credit facility bears interest at a fixed rate of 2.5% plus
SONIA on drawn funds as well as commitment interest at the rate of 1.0% on the
balance of undrawn funds up to the facility limit. The RiBa invoice
financing balance bears interest at variable rates.
A summary showing the utilisation of the revolving credit facility shown
below:
2023 2023 2023 2022 2022 2022
GBP EUR All GBP EUR All
£'000 £'000 £'000 £'000 £'000 £'000
Opening balance at 1 January 11,900 5,757 17,657 4,000 5,039 9,039
Drawdown 2,250 303 2,553 10,400 4,585 14,985
Repayments (3,050) (531) (3,581) (2,500) (4,228) (6,728)
Impact of foreign exchange - (108) (108) - 361 361
Closing balance at 31 December 11,100 5,421 16,521 11,900 5,757 17,657
A summary showing the utilisation of the RIBa invoice financing is shown
below:
2023 2022
£'000 £'000
Opening balance at 1 January - -
Drawdown 612 -
Impact of foreign exchange 4 -
Closing balance at 31 December 616 -
A summary showing the contractual repayment of interest-bearing borrowings is
shown below:
At 31 December 2023 At 31 December 2022
Leasing Leasing
obligations Other 2023 obligations Other 2022
£'000 £'000 £'000 £'000 £'000 £'000
Amounts and timing of debt repayable:
Within 1 year 1,187 20,181 21,368 985 5,250 6,235
1-2 years 1,097 - 1,097 665 17,736 18,401
2-3 years 979 - 979 613 - 613
3-4 years 460 - 460 503 - 503
4-5 years 435 - 435 432 - 432
After more than 5 years 1,271 - 1,271 1,595 - 1,595
Total 5,429 20,181 25,610 4,793 22,986 27,779
The above amounts reflect the contractual undiscounted cash flows, which may
differ to the carrying values of the liabilities at the reporting date.
Net debt reconciliation:
Liabilities from Financing activities Other assets
Net cash /
Borrowings Leases Sub-total Cash (Net debt)
Net cash / (debt) at 1 January 2022 8,483 4,246 12,729 5,235 (7,494)
Net cashflow - - - 800 800
Finance lease repayments - (922) (922) - 922
Fees and Interest 240 - 240 - (240)
Drawdown 14,985 1,034 16,019 - (16,019)
(Repayments) (6,728) - (6,728) - 6,728
Deferred consideration arising on business combination 4,933 - 4,933 - (4,933)
Foreign exchange movements 362 213 575 (404) (979)
Net cash / (debt) at 31 December 2022 22,275 4,571 26,846 5,631 (21,215)
Net cashflow - - - 74 74
Finance lease repayments - (999) (999) - 999
Fees and interest 478 - 478 - (478)
Drawdown 3,165 1,602 4,767 - (4,767)
(Repayments) (3,581) - (3,581) - 3,581
Deferred consideration arising on business combination (2,933) - (2,933) - 2,933
Foreign exchange movements (106) (80) (186) (83) 103
Net cash / (debt) at 31 December 2023 19,298 5,094 24,392 5,622 (18,770)
Lease liability
In 2017 the Group adopted IFRS 16 which means that lease contracts that have
previously been recognised as operating leases are now being recognised as
finance leases. In the Statements of Financial Position additional lease
liabilities at 31 December 2023 of £5,094,000 (2022: £4,571,000) and
right-of-use assets of £5,007,000 (2022: £4,614,000) are recognised, giving
a net liability position of £87,000 (2022: asset £43,000).
11. Alternative Performance Measures (APM's)
The Group uses certain financial measures that are not defined or recognised
under IFRS. The Directors believe that these non-GAAP measures supplement GAAP
measures to help in providing a further understanding of the results of the
Group and are used as key performance indicators within the business to aid in
evaluating its current business performance. The measures can also aid in
comparability with other companies who use similar metrics. However as the
measures are not defined by IFRS, other companies may calculate them
differently or may use such measures for different purposes to the Group.
EBITDA and Adjusted EBITDA Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Operating profit 3,289 2,227
Add back:
Depreciation 2,128 1,821
Amortisation 4,516 3,564
Impairment of Intangible assets 760 -
EBITDA 10,693 7,612
Add back:
Share-based payments charge 225 72
Exceptional costs 639 1,278
Adjusted EBITDA 11,557 8,962
Net debt / (cash) Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Cash and cash equivalents (5,622) (5,631)
Interest bearing borrowings - Deferred contingent consideration - current - 2,947
Interest bearing borrowings - Bank Loans - current 16,467 -
Interest bearing borrowings - Bank Loans - non-current - 17,314
Interest bearing borrowings - Subordinated Loan (deferred consideration) - 2,215 -
current
Interest bearing borrowings - Subordinated Loan (deferred consideration) - - 2,014
non-current
Invoice financing 616 -
Net debt (excl finance leases) 13,676 16,644
Interest bearing borrowings - Leasing obligations - current 1,044 920
Interest bearing borrowings - Leasing obligations - noncurrent 4,050 3,651
Net debt (incl finance leases) 18,770 21,215
Net Leverage Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Net debt (excl finance leases) 13,676 16,644
Adjusted EBITDA 11,557 8,962
Adjustment to include mid year acquisition on trailing 12 month basis - 2,110
12 month trailing adjusted EBITDA 11,557 11,072
deduct:
Lease payments for 12 month period (999) (992)
Adjusted EBITDA for net leverage 10,558 10,080
Net leverage 1.30x 1.65x
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