21.01.2025
The Final Results for the year to end-September 2024 reported last Wednesday, 15th January, by the UK’s largest retailer of bathroom products and accessories, the Victorian Plumbing Group (LON:VIC), looked very interesting to me, certainly enough to dig a bit deeper.
What I found was a business that is determined to grow and make bigger profits, which in turn will take its shares a lot higher than the current 98p.
The Business
Victorian Plumbing, which is based in Leyland, employs over 600 staff across several locations in Lancashire, Manchester and Birmingham.
The £322m capitalised group is the UK's leading bathroom retailer, offering a wide range of over 36,000 products to business-to-consumer and trade customers.
The business provides a one-stop shop solution for the entire bathroom with more than 150 own and third-party brands, across a wide spectrum of price points.
Its product design and supply chain strengths are complemented by its creative and brand-focused marketing strategy to drive significant and growing traffic to its platforms.
The market is highly competitive, with Victorian Plumbing being the largest retailer in the bathroom market, followed by B&Q, Wickes, and Homebase.
The 2024 Finals
Last Wednesday’s statement reported a 4% improvement in revenues to £295.7m (£285.1m) for the year to end-September, with a 14% increase in adjusted pre-tax profits to £23.1m (£20.3m) and a 13% generated boost of its earnings to 5.3p (4.7p), while its 15% improvement in its dividend to 1.61p (1.40p) per share was a confident measure.
The group ended the year with a robust, debt-free balance sheet with a closing cash position of £11.2m (£46.4m), following investment in acquiring Victoria Plum for consideration of £22.2m and warehouse transformation spend of £26.4m.
The business transitioned into its new 544,000 sq ft distribution centre in Leyland, Lancashire and, by the end of December 2024, were dispatching all orders from its new warehouse infrastructure.
The company stated that the gross profit margin improvement continued as the benefits of the closure of Victoria Plum and its new warehouse infrastructure were starting to come through.
This year will see its Management prioritising its expansion category growth plans and more confidently spend on efficient marketing to drive more volume.
Management Comment
Founder and CEO Mark Radcliffe stated that:
"We have successfully delivered on two strategic priorities, firstly completing our warehouse transformation on time and in line with budget and, secondly, to accelerate growth through the acquisition of our namesake Victoria Plum, which reduces considerable brand marketing confusion for our customers.
2024 has been a year of transformation against a subdued trading backdrop and continued uncertainty in UK consumer behaviour.
Despite this, our clearly defined strategy and unique business model have resulted in increased order volumes and resilient average order values, with customers continuing to appreciate the choice of great value products that we offer across our ranges.
As a highly cash generative business with a strong balance sheet, we continue to invest in the business; across people, technology and infrastructure.
Our new purpose-built 544,000 square feet distribution centre, now fully operational, will enable further growth in the core bathroom category, as well as unlocking strategic category expansion.
We are confident that Victorian Plumbing's profitable growth strategy will continue to deliver long-term value to all stakeholders."
The Equity
There are some 327m shares in issue.
The larger holders include CEO Mark Radcliffe (47.56%), Martin Stewart (2.94%), Kayne Anderson Rudnick Investment Management (2.93%), BlackRock Investment Management (2.75%), and Amati Global Investors (2.54%).
What The Broker’s Say
At Deutsche Bank, its analyst Benjamin Yokyong-Zoega has a Hold rating on the group’s shares, with a Price Objective of 110p.
The analyst considers that the group’s ‘pipes are unclogged’ following its year of operational change, with 2024 classed as a year of ‘operational change’ culminating in a busy November with the closure of the Victoria Plum brand as well as the new warehouse transition completing.
The analyst reckons that these changes have left the group better placed to pursue growth in the year ahead, with key capacity constraints having been removed and with the new infrastructure improving operating leverage.
“Confusion between the two brands has also been removed and should help to improve return on marketing spend, which we see stepping up in full-year 2025.”
Over at Canaccord Genuity Capital Markets, analyst Karl Burns rates the group’s shares as a Buy, with a 132p Price Objective.
His estimates for the current year to end September 2025 look for sales of £326.0m (£295.7m), with adjusted pre-tax profits of £26.4m (£23.1m), lifting earnings to 6.0p (5.3p) and a dividend of 1.8p (1.6p) per share.
For the coming year to end-September 2026, he sees £352.9m in revenues, £33.4m profits, 7.7p earnings and a 2.3p per share dividend.
My View
I like the feel of this expanding group and reckon that its shares are well worth taking a position in with a medium-term view.
They touched 270p in September 2021, prior to falling to a 48p Low six months later.
At the end of last November, the shares were up to 124p since when they eased back to 88.40p two Friday’s ago but are now edging better again at 98.60p, which is a good level at which to take the plunge.
I initiate my coverage of this company setting a Target Price of 123p.
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