Profits Rise At Victorian Plumbing

• Further profitable growth in market share despite a subdued trading environment, whilst investing for a transformational year.

Victorian Plumbing Group plc ("Victorian Plumbing", the "Group"), the UK's leading bathroom retailer⁽¹⁾, announces its half year results for the six months ended 31 March 2024 ("H1 2024").

Financial highlights

• Resilient H1 2024 revenue down 1% to £144.6m (H1 2023: £146.8m) or flat on a like-for-like ("LFL") basis(10) when adjusting for the impact of Easter timing.
  
  
• Gross profit up 8% to £72.3m (H1 2023: £66.8m); gross profit margin increased 4%pts to 50% (H1 2023: 46%), representing the highest gross margin since listing in 2021, underpinned by own brand sales.
  
  
• Gross profit margin improvement drove a 33% increase in adjusted EBITDA to £13.2m (H1 2023: £9.9m); adjusted EBITDA margin increased 2%pts to 9% (H1 2023: 7%).
  
  
• Adjusted PBT increased 40% to £11.5m (H1 2023: £8.2m); adjusted PBT margin increased 2%pts to 8% (H1 2023: 6%).
  
  
• Operating cash conversion remained robust at 65% (H1 2023: 66%), with free cash flow(11) up 32% to £8.6m (H1 2023: £6.5m).
  
  
• Net cash (excluding IFRS 16) of £36.1m (H1 2023: £40.9m, FY 2023: £46.4m), reflecting strong operating cash conversion, offset by dividend payment (£3.1m) and warehouse transformation spend (£15.2m).
  
  
• Adjusted diluted EPS of 2.7p (H1 2023: 1.9p), reflecting a 42% increase.

• Interim dividend of 0.52p per share (H1 2023: 0.45p per share), reflecting a 16% increase, in line with capital allocation policy. 

Operational and strategic highlights

• Total orders(12) increased 2% to 494,000 (H1 2023: 482,000) reflecting continued market share gains in a subdued trading environment(13).
  
  
• Customers continue to purchase proportionately more of our own brand products, reducing average order value ("AOV")(14) by 4% to £293 (H1 2023: £305); own brand products represented 79% of total revenue (H1 2023: 77%), which is supportive to gross margin.
  
  
• Further progress in strategic growth areas of 'trade' and 'expansion categories':
  
  o Trade revenue increased 9% to £32.3m (H1 2023: £29.6m) and now represents 22% of total revenue (H1 2023: 20%).
  
  o Expansion category revenue for tiles, lighting and décor increased 19% to £5.6m (H1 2023: £4.7m).

• Lower shipping costs and a shift to own brand products have contributed to improved gross margins.
  
  
• Marketing spend as a % of revenue broadly unchanged at 29%.
  
  
• Customer satisfaction increased with an average Trustpilot score(15) of 4.6 (H1 2023: 4.5, FY 2023: 4.5), whilst maintaining a Trustpilot rating of 'Excellent'.
  
  
• Fit-out of our new 544,000 square feet purpose-built distribution centre in Leyland, Lancashire (the "DC") is on time and within budget, with the DC set to be fully operational before the end of the financial year.

Investment in people, brand and technology:

• Bolstered our dedicated Trade team during H1 2024, helping us to attract new trade customers and to drive further growth in trade revenue.
  
  
• Our first foray into sports sponsorship, together with continued investment in brand across TV and outdoor advertising, has helped increase brand awareness(16).
  
  
• Ongoing development of our app will enhance efficiency and engagement for both trade customers and consumers.

Acquisition of Victoria Plum

As announced, the Group acquired Victoria Plum on 17 May 2024 for £22.5m on a cash free, debt free basis, subject to adjustment for normalised working capital (the "Acquisition"). The purchase price represents c.0.5x Victoria Plum's estimated annual revenue and reflects the significant strategic value of the Victoria Plum brand and associated intellectual property.

For the six months ended 31 March 2024, unaudited management accounts indicate that Victoria Plum held c.£10m of stock at provisional book value, cash of c.£3m, deposits with suppliers of c.£2m and tangible fixed assets of c.£1m.

Current trading and outlook

As customers continue to seek value, demand for 'big ticket' discretionary items is unchanged. The Group has continued to take market share organically; LFL revenue in April and the early part of May 2024 has been in line with H1 2024 trends, with order volume growth offset by lower AOVs.

The decline in AOV has shown early signs of levelling off, indicative of a slowdown in the shift by consumers to buy more of our own brand product range. Additionally, comparative shipping cost tailwinds have diminished over recent weeks, with both factors stabilising gross margin.

Looking forward, the Group will benefit from revenue growth as a result of further market share gains from the acquisition of Victoria Plum, albeit tempered by a continuation of recent trading trends in the market. While the ongoing Victoria Plum cost reduction programme is finalised, losses from the business will have a marginal impact on Group profitability in H2 2024, therefore adjusted EBITDA in FY 2024 is expected to be broadly in line with current consensus. The Acquisition is expected to be EPS accretive from FY 2025. Net cash (excluding IFRS 16) at the full year is expected to be in the range of £5m to £7m, reflecting the impact of the Acquisition and investment in the DC.

Source : Victorian Plumbing plc

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