• Revenues increased 6% to £8.3 million (H1 2017: £7.8 million)
• EBITDA increased to £0.7 million (H1 2017: £0.5 million)
• Profit before tax, amortisation and exceptional items increased to £0.1 million (H1 2017: loss of £0.1 million)
• Adjusted loss per share* reduced to 0.4p (H1 2017: adjusted loss of 0.9p)
• Cash at period end of £1.5 million (31 December 2017: £1.4 million)
*Adjusted loss per share is calculated using loss after tax excluding amortisation and share-based payments
• Listings of UltraDEX in the UK increased by 37% from June 2017 to June 2018
• Launch of the new UltraDEX One GO single use sachet in Boots, Sainsbury's and Superdrug
• Launch of the new UltraDEX Fresh Breath Starter Kit in Boots
• Lloyds Pharmacy launch UltraDEX in the UK
• Extension of the partnership with Alliance Pharma, adding €1.6 million of annualised revenues and extending the agreement term to 2025
• Six new international partnering deals signed, on products including UltraDEX, Mycoclear and Procto-eze
Post-period end highlights:
• Acquisition of the Dentyl mouthwash brand for £4.2 million in cash
• Placing at 40p per share to raise gross proceeds of £18.75 million (£17.5 million net of expenses)
• Proceeds of the placing used to fund:
• the acquisition of the Dentyl brand;
• repayment of £3.7 million of debt; and
• strengthen balance sheet to support growth of business and strategic M&A
• Sainsbury's, Amazon and Ocado to launch the new UltraDEX One Go single use sachets
• Partner agreement with La Brosse et Dupont extended into Spain, Portugal and Belgium - UltraDEX now partnered in 15 countries
Commenting on the results, Jerry Randall, CEO of Venture Life, said:
"Whilst the first half of 2018 has been a period of continued organic growth for the business, the placing and acquisition which completed in August have been a transformational event for the Group. The acquisition of the well-known Dentyl brand is a perfect fit for our business, building on the strong oral care expertise that the Group has both in the UK and internationally, and using the significant operational leverage that we have. Our success with UltraDEX has enabled us to develop a strong internal team to exploit this area of the market, and the team is already hard at work on this new brand. The placing we undertook also enabled us to significantly de-gear and hence de-risk our balance sheet, and leaves us in a significant net cash position, with substantial funds at our disposal for both organic growth and further M&A. The profitable, cash generative nature of the Dentyl brand, coupled with the meaningful saving in interest costs from the loan repayments, will add significant profitability and positive cash flow to our already profitable business.
"I am delighted with the continued development of UltraDEX, with significant listings added in the UK, including the launch of the new UltraDEX One Go sachet. Internationally, we have already seen re-orders from the launches in H1 2018, as well as further international deals on some key brands within the business.
"We go into the second half of 2018 with a significantly stronger order book than the same time last year, aside from any contribution from Dentyl, a stronger balance sheet, and a solid share register courtesy of the many significant new, high quality, institutional investors who supported our Placing. I would like to take this opportunity to thank both our existing shareholders who participated in the Placing, and the new shareholders who joined our register through the Placing, for their support in this transformational transaction. I believe the second half of 2018 will evidence the continued development of the Group and the Board looks forward to the rest of 2018 and beyond with confidence."
For further information please contact:
Venture Life Group PLC
Jerry Randall, Chief Executive Officer
Adrian Crockett, Chief Financial Officer
+44 (0) 1344 742870
Northland Capital Partners Limited (Nominated Adviser and Joint Broker)
Matthew Johnson / Edward Hutton (Corporate Finance)
Vadim Alexandre (Corporate Broking)
+44 (0) 20 3861 6625
Cenkos Securities plc (Joint Broker)
Mark Connelly (Corporate Finance)
Russell Kerr / Michael Johnson (Sales)
+44 (0) 207 397 8900
Anna Dunphy / Paul McManus
+44 (0) 7876 741 001 / +44 (0) 7980 541 893
email@example.com or + 44 (0) 20 7933 8780
Non-Executive Chair's and Chief Executive Officer's Statement
The first half of 2018 has been another period of revenue growth for the Group, building on the momentum of 2017. Revenues grew organically by 6% to £8.3 million (H1 2017: £7.8 million), which is encouraging to see. As a result of the positive commercial news we announced in the first half of the year, we are expecting the second half revenues and profitability to be higher than the first half. The Group order book at the end of the August was more than 20% ahead of the same time last year, pointing to a strong second half for the business and coupled with the integration of the newly acquired Dentyl business, is expected to result in a record H2 revenue for the Group.
In the first half, we have experienced a slightly lower gross margin percentage of 36% (H1 2017: 39%) due to product mix and operational gearing effect. We had a significant amount of international sales into China, that are at lower than average gross margin, and having increased our capacity in our Italian facility, we have a slightly higher level of fixed production related costs - so in the second half, with higher revenues, the gross margin to be delivered from Italy is expected to be higher. We therefore expect this gross margin to return to levels similar to those achieved in 2017. We have also grown EBITDA for the first half of 2018 to £0.7 million (H1 2017: £0.5 million). The acquisition of the Dentyl brand and the repayment of £3.7 million of convertible debt and vendor loan notes, all of which occurred post period end, will substantially increase the profitability and cash generation of the business going forward.
Placing, Acquisition of Dentyl brand, repayment of convertible debt and vendor loan notes
On 20 July 2018, the Group announced an equity placing of £18.75 million (gross of expenses) at 40p per share with new and existing shareholders. This raising was undertaken by our new joint broker, Cenkos Securities, and the use of the net proceeds of £17.5 million were as follows:
· to pay the purchase consideration of £4.2 million to acquire the Dentyl brand business
· to repay £3.7 million of convertible loans and vendor loan notes
· the balance of £9.6 million is to fund transaction costs, some working capital growth, and to provide significant funds for further M&A activity
In addition to the cash raised for the Group, the equity placing also introduced a number of significant new institutional shareholders onto the share register. These new shareholders have significantly broadened our share register, and are supportive of our strategy to acquire further strategically interesting brands. We believe further brand acquisitions can be integrated into our business and utilise the significant operating leverage and unused capacity in our manufacturing facilities.
The acquisition of this well-known brand has brought another historic brand asset into the Group, which we believe we can revitalise in the same way as UltraDEX. The Dentyl brand comprises a series of bi-phase mouthwash products designed to remove plaque from the teeth and gums. The product is presented in 100ml, 250ml and 500ml sizes, with 500ml being by far the biggest volume of sales. The two main flavours are Fresh Clove and Smooth Mint. The brand has been on sale in the UK since 1996, and its novel presentation and mode of action have given it a strong shelf presence and opportunity for growth. Net sales in the 2017 calendar year for the acquired brand were £2.9 million, of which £2.7 million was generated in the UK. Profit before tax for the same period was £1.2 million. We believe that the brand was not a core asset for the vendor, and in recent years has received little investment, resulting a small annual reduction in revenues from those achieved in 2016. In 2017, a Chinese partner was appointed by the vendor and 2018 is showing interesting growth from this partner.
As we have already demonstrated with UltraDEX, we believe we can revitalise the Dentyl brand and return it to growth through:
· engaging with new and existing UK retailers to increase listings
· internationalising the brand more widely
· making improvements to the cost of goods
· bringing innovation into the brand
· improving the marketing of the brand
In addition to the core mouthwash product, the Dentyl acquisition also brings the UK rights to a fresh breath bead product, namely BB mints, licensed from a Thai partner. This product was launched in Tesco in April of this year and is currently on sale in a number of those stores. Initially launched under this brand name, we will be rebranding to align more with the Dentyl brand. Whilst small in revenue terms at the moment, these fresh breath beads are a very suitable product for wider distribution in the convenience channel.
We plan to fully integrate the Dentyl brand into our Group operations and stabilise the slightly falling revenues, and then look to implement a progressive marketing initiative to relaunch the brand. We see significant opportunity for new products within the Dentyl brand, accessing new markets and customers, as well as reducing the cost of goods.
Venture Life brands
The Venture Life brands business revenues for the first half of 2018 were £2.3 million, 30% up over the first half of 2017. Of this, £1.4 million was derived from UltraDEX UK and the balance was international brands.
In the first half of 2018, the only brand sold in the UK was UltraDEX, where revenues for the first half were £1.4 million (H1 2017: £1.4 million). The brand faced some headwinds at the start of 2018, with some unwinding of over stocking in Boots from H2 2017, and a significant reduction in price from its main competitor. Despite this, the brand managed to retain its revenues in the first half and achieved a significant increase in its UK listings in pharmacies and grocery multiples, which we expect to begin to positively impact revenues in H2 and beyond. Whilst this price competition had a significant impact on the brand, we are still expecting UltraDEX to outperform the sector and its direct competitors in 2018 in key retailers.
The brands business saw a number of distribution gains in the first half resulting from a combination of increasing listings of existing products, as well as listing some of the new products developed. The listing increase is stated on a net basis, and despite the new gains we have been notified post period end that we have lost our listing in Waitrose. This is down purely to range rationalisation in the stores - this is one of the smaller distributors of UltraDEX, with the product listed in only 182 stores, equating to 428 points of distribution.
In June 2018, the Group launched two new UltraDEX products, both of which are designed to encourage new users into the brand:
· UltraDEX One GoÔ - this is a pack of ten single use UltraDEX sachets, and
· UltraDEX Fresh Breath Starter Kit - a box containing 250ml mouthwash, 100ml spray, dental floss and 100ml toothpaste.
The One Go sachets were launched in all Superdrug stores in June 2018, and were subsequently launched in a large number of Boots stores. The UltraDEX Fresh Breath Starter Kit was launched in Boots in July 2018. These new products have been priced keenly to attract new users, and whilst these earn us a slightly lower gross margin than the main product, over time we expect this to be outweighed by incremental sales. In addition to the new listings in Boots and Superdrug, Lloyds Pharmacy, the second largest pharmacy chain in the UK, has launched UltraDEX, starting in a small number of stores. The overall level of store listings for UltraDEX is now the largest it has been in the life of the product.
The international brands business has delivered revenues in the first half of 2018 of £0.9 million an increase of 160% on H1 2017. A significant proportion of this first half revenue has come from our partner in China who sells the Lubatti brand. Good sell out in H2 2017 meant that the partner placed a number of orders with us for this first half. Whilst these sales into China are a good source of revenue, the gross margin is lower than we would expect for international partners and this has reduced the overall H1 gross margin for the Group.
In the first half of the year, we signed additional new long-term partner deals, in particular the continued expansion of UltraDEX across Europe. As well as the UK, the brand is now partnered in 15 countries including France, Italy, Spain, Portugal, Belgium and Scandinavia. The partnerships in Spain, Portugal and Belgium were signed post period end with our French partner, La Brosse et Dupont - we extended our agreement with them to sell the products into the grocery multiples channels in these markets. In addition, this same partner has extended the range it is selling, launching the UltraDEX Sensitive toothpaste and the One Go products in France in H2 2018.
During the period, a new long term partnering agreement was also signed for MycoClear with Jaba Recordati S.A. for Portugal.
We continue with further clinical efficacy studies for marketing purposes for both NeuroAge and Mycoclear, which we expect to complete in H1 2019 and H2 2019, respectively. We will update shareholders on the results of these studies in due course.
We have received a further patent grant in this period for the UltraDEX sensitive range, which contains additional components to help users with sensitive teeth. The patent has now been granted in Canada, so the patent over this product is now granted in nine territories including the EU, USA and Japan.
Development and Manufacturing
The first half of 2018 saw revenues from development and manufacturing of £6.0 million, slightly lower than the previous year (H1 2017: £6.1 million). This is due to the timing and phasing of various customer orders, which is beyond our control. However as mentioned earlier, the Group order book, the larger part of which relates to this segment of the business, was, at the end of August, over 20% higher than the same time last year, demonstrating a stronger second half is expected than in 2017. We still expect year on year growth from this segment of our business in 2018.
In May 2018 we announced both the expansion and extension of our partnership with Alliance Pharma plc ("Alliance"), the UK specialty pharma business, for which we already manufacture a number of products. Under the revised agreement we have achieved:
· an extension of the existing agreement between the two companies up to the end of 2025. The existing agreement covers the products currently manufactured by us for Alliance, and was due to expire at the end of 2019 and;
· additional manufacturing business of at least €1.6 million per annum was added to the agreement, under which we will manufacture additional products sold by Alliance. We would expect a small contribution from this new business before the end of 2018, and a full contribution in 2019.
The facility in Italy also continues to undertake new development and manufacturing work for both existing and new customers, in particular in the area of medical devices. This is becoming a significant revenue generator for the development centre as well as building long term manufacturing revenues for us. As the majority of the costs in the facility are fixed, the majority of gross margin generated from additional revenues will largely fall straight to the bottom line.
In the first half of 2018 we increased the production capacity at the plant by reorganising the space that we have. This has released additional capacity for the secondary packing operations, and in due course we will add further primary filling lines into this space. In 2017 we manufactured approximately 17 million units of finished goods at the plant, and once we have added three more filling lines, which we will finance out of operating cashflow, we will be able to produce 34 million units of finished goods. Further reorganisation opportunities would take us to 50 million units of capacity, and physically extending the buildings could take us to 70 million units, over 4 times our production in 2017. There are also additional buildings nearby that could be leased to further increase capacity. So as a business, we are not capacity constrained and have significant operating leverage.
About Venture Life (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 both the UK and Italy, the Group's product portfolio includes some key products such as the UltraDEX and Dentyl oral care product ranges, food supplements for lowering cholesterol and maintaining brain function, medical devices for women's intimate healthcare and proctology and dermo-cosmetics for addressing the signs of ageing.
The products, which are typically recommended by pharmacists or healthcare practitioners, are available primarily through pharmacies and grocery multiples. In the UK these are supplied direct by the company, outside of the UK they are supplied by the Group's international distribution partners.
Through its Development & Manufacturing business in Italy, Biokosmes, the Group also provides development and manufacturing services to companies in the medical devices and cosmetic sectors.