Venture Life Group (LSE:VLG) — Investor Update

0:02 Good morning, ladies and gentlemen, and welcome to the VENTURE LIFE PLC investor presentation. Throughout today's recorded presentation, investors will be in listen only mode. I'd now like to hand over to Jerry Randall, CEO and Daniel Wells, CFO. Good morning to you both. Good morning, everybody. I'm Jerry Randall, founder and CEO of VENTURE LIFE GROUP, and I'm joined by my chief financial officer, Danny Wells, to share with you today. So today, we announced the significant acceleration of the simplification of VENTURE LIFE GROUP to drive future profitable

0:32 growth. We divested of the CDMO operations of the group, that's in Italy and Sweden, and some peripheral brands at the same time. This significantly simplifies our structure along with other activities that we're doing and makes us lean for growth. Takes away the capital intensive nature of the CDMO. We become a pure play branded consumer health care platform, and we're recycling that cash from the sale of this low margin, mature, lower growth product business into a higher margin, high growth products. Now that's the ones you got at the moment. We'll invest in and also ones we'll acquire. And these products have pricing power, enable to grow our existing core brands. We're becoming horizontally integrated with a focus on strategic customer relationships and strategic vision to be the partner of choice for what we phrase as proactive, healthy, longevity, or health span.

1:26 So to achieve this simplified, less capital intensive business approach, we've divested the CDMO. We've that's the Bicosons business and the Nesta business in Sweden with some small peripheral brands. And we've received a payment of €62,000,000 for that disposal. When I say received, we're exchanging contracts today, and then we'll complete in a few months' time subject to some regulatory filings. The purchaser is a company called BioDue, private equity backed Italian manufacturing business. And that group will become our biggest supplier. We we will enter into a long term manufacturing agreement, which will maintain a surety of supply and pricing and then include strategic partnership with its group for better ways of working to unlock additional mutual value in the future through NPD in our chosen proactive healthy longevity categories.

2:20 We're also gonna have a short term, what's called a transitional service agreement from completion over a number of months while various contracts are handed over and that transition takes place. So moving on to the next slide. These are the power brands that will remain within the VENTURE LIFE group. So which we have done product portfolio expansion, distribution expansion, new product development. And collectively, these brands delivered about 45,000,000 of revenues or will deliver about 45,000,000 of revenues this year. What's really important as well in retaining these brands is we retain our key strategic customer relationships in these brands, for example, with Bayer Consumer Healthcare.

3:10 And just to emphasize here, these are the brands, small peripheral brands that we're disposing off. So these are smaller brands, which are only generate a small amount of revenue. 2024, they contributed about £800,000 of revenue, about one and a half percent of overall turnover. They're lower EBITDA contribution because they're smaller brands, smaller products, and it's less efficient to manage the partners for us in customers of this size. So we've disposed of those to the same purchaser. So as Jerry as Jerry just explained, our objective has been to simplify and optimize the business. This so that we can enable more focus on the growth of our our own brands, our VLG brands.

3:59 The divestments has provided an opportunity to significantly accelerate that plan. We were already working on a business optimization plan as we've talked about over the last eighteen months, and that's progressing well. So this has accelerated that plan significantly and and enabled us to realize an attractive valuation for the CDMO operation and and peripheral brands. The €62,000,000 proceeds is the equivalent of around 11 times the reported EBITDA from the target entities for 2024.

4:34 So these proceeds, they'll be recycled into our more profitable VLG brands. These are the brands that were higher margin. They have greater pricing power. They are market leaders in their space, and they provide for greater innovation opportunity. So we want to grow these brands out faster with more focus. This will be done as a combination of more marketing support behind the brands plus utilizing significant available funds for future m and a, so using the proceeds we've generated today. We will look to use those proceeds in m and a at multiples in our trend range of five to seven times EBITDA. That's the multiple under VLG stewardship post synergy. So so realizing cash proceeds at upwards of ten, eleven times EBITDA and redeploying into assets with greater opportunity, greater growth potential, greater margins at lower multiples, as I say.

5:30 The other advantages of this divestments, key reasons behind it, is it will lighten the capital incentive structure of the business going forward. Specifically, no machinery to maintain, less property to upkeep, lower spend investing and maintaining the technical files behind our medical devices as all of those costs will transfer over to the buyer. This means that our future investment can be focused on our VLG brands, and and that entails not only the the marketing support I talked about a moment ago and and the m and a opportunity, but also investing in the systems that we have in our business and our digital capability. These are key things that we we need to become leaders in the space so that we can, almost invest ahead of our time ensuring that we have a scalable m and a playbook for our plans in future. When we do acquisitions, we can slot them into our existing operations and our systems quickly and easily.

6:30 Additionally, this divestment provides for some great benefits to our cash flow conversion on the back of lower capital intensive nature to the business. We'll also remove some significant warehousing costs from the business, specifically the leases that we have in in in Italy with BioCosmos and ultimately dropping 2,000,000 of finance costs off the p and l. So we're drawn at around just over 20,000,000 on our RCF prior to paying down that that drawing in full as part of the completion fund. So significant costs that we have been incurring over the last couple of years through our m and a strategy, that will be coming off the p and l. So there'll be a greater conversion of the EBITDA to free cash flow as a result of these factors.

7:19 So this simplified portfolio is allowing us to focus on our power brands, do faster execution of the product innovation behind those brands. Our target, as you can see on the screen, is to generate up to 20% of revenues from new product development over the coming years. We'll measure that through, clear measures such as the vitality index. We operate at around seven to 8% of group revenues come from new products today, so that's a significant increase in that contribution from innovation. And, ultimately, all of these factors will allow us to become a pure play consumer health care platform, which should attract higher valuations, for the business and interest in the business going forward, which is important for our shareholders.

8:07 So to be clear, we will use the cash to pay down our existing RCF in full. As I say, that's just over 20,000,000 today, But we will keep the RCF, the revolving credit facility in place to the group. That gives us an ability to draw up to 50,000,000 of cash. So we'll have around 40,000,000 of cash in our bank plus 50,000,000 available to us through the RCF, giving us significant firepower for that m and a. And and that facility also allows us to borrow up to 2.5 times our last twelve month EBITDA, including the full year impact of any assets we acquire.

8:48 So to summarize, the divestment gives us significant cash resources to invest in the development and growth of the branded group of VLG brands. That's to be achieved through investment in our a and p, data insights, innovation to drive NPD, to grow ahead of our peers. We want to build a pure play platform attracting high multiples for for VLG. As I said, this will improve the quality of our earnings and that drop through of EBITDA to the cash flow free cash flow conversion. And you can see there that we've got listed some key markets on the screen. We already have a huge amount of opportunity in The UK for our existing brands. We've got distribution gaps still. We've got increased brand awareness opportunity.

9:35 We're increasing our value proposition to our shoppers. The Health and Her acquisition at the end of last year is a great example on the distribution gaps point. We've acquired a business which has a foothold in key some key retailers, but we've got sort of an existing relationship in other retailers, and we're continuing to fill out those gaps, so that we can provide full self care product opportunity to those customers. In The US, we have a platform on the back of that acquisition as well, on the back of the Health and Air acquisition to accelerate our expansion plans in that market. We already have now, distribution in over 6,000 stores in The US, and this is giving us a that platform, as I say, to go and put in our other core existing brands into that market where we only have a small presence today on some of the existing brands as an online presence. So it's giving us opportunity to now get a brick and mortar presence in The US as well in addition to the the existing presence that our recently acquired Health and Her products have.

10:36 A note on that with regards to tariffs is that, we are able to manage The US tariff impact as part of that plan because as we're entering this market now in a big way, we're able to factor that into our pricing. We're not locked into preexisting tariff change prices. So that's within our control to manage and make sure that our margins don't deteriorate as a result of Donald Trump's announcements. And and and then I think worth mentioning as well is that we've recently begun setting up an infrastructure in The US. So we have in preparation for this, we have warehousing already there. We've got agencies and advisers on the ground. And more recently, we more recently, we've also, registered a legal entity in The US to facilitate trading in this market. So we've got an opportunity now with all the platform in and infrastructure in place to now go and invest in that market, continue to build out that infrastructure, and we've got significant ample funds to be able to do that.

11:44 So our vision is built on insight. Data driven insights fundamental to product development, product selection, and commercialization. And there's a real significant prevention and treatment opportunity going forward as people look to have this longer healthier life to increase their health span. There are eight risks and behaviors that drive the 15 chronic conditions accounting for over eighty percent of chronic illness globally in heart disease, stroke, and cost in The US healthcare systems over 250,000,000,000 a year, 160,000,000,000 lost productivity. So a healthier world requires increasing attention and investment in health and proactive prevention as we go forward. So preventative bias in treatment is fundamental to achieving this, and that's where we see our business and developing. And it's fundamental to individuals who want to proactively achieve a greater health span.

12:37 In fact, interestingly, recently, the World Health Organization commented that at least 20 to 30% of health care budgets should be invested in prevention. And that's crucial to reducing the long term costs of chronic treatment and improving overall public health. So this is the space we sit in, and this is where we see the the continued and expanding opportunity for us.

13:01 If you look at the global wellness economy, it's a huge market, and we already operate in some of those areas. But the opportunity will be to continue to grow as the population aspire to healthier outcomes and longer health spans. We're ideally placed in women's health and men's health, as you can see from a number of products I've got here already. So we can ideally place there to grow significantly these sectors and categories today and tomorrow. And now we have an agile, lighter structure and the funds to support our insights to grow these and realize this ambition.

13:36 So elaborating further on this strategic rationale of this divestments, we've got a growing trends in the preventative self care space through empowering and enabling. We see that data driven insight is going to be fundamental to this strategy, and we're already making significant investments in our ability to gather data and use it quickly. Our insights will ultimately drive our m and a and innovation decisions, which will become of an increased focus. We're already doing that, but this will now allow us to do it in a more focused and rapid way to execute on those decisions quickly. And we'll find the right niche opportunities within women's and men's health, and it's important to highlight the word niche there where we think we can provide effective products to meet their needs as we have been doing with the VLG brands for for many years, but building out and expanding on that much further.

14:32 This process is already underway, as I touched upon there, with a number of existing and exciting m and a opportunities in the space and a pipeline of NPD opportunities in front of us, which we are working towards at the moment to build out on that plan.

14:52 On the next few slides, we're going to talk through our strategy in a bit more detail. To to give an overview of this to begin with, we've come up with five strategic pillars in VENTURE LIFE, which will become focused everything we do and the VLG team do on a day to day going forward. You can see here that, first of all, acquiring and transforming our core brands, making sure that they have a clear runway for profitable growth, having the number one brands brand mindset when we are thinking about our brands and what we want to do with them, making sure we have an omnichannel, go to market strategy tailored to where the shoppers shop and how they buy. Touching on the data point, ensuring we have great integrated tech digital capability, giving us an opportunity to have advanced AI and robust data to drive the insights both for m and a and our new product developments.

15:45 And underpinning all of that is making sure that we've got a team who have a mentality of winning ways of working, core entrepreneurial competencies within the team, and bridging that culture through everything everything that we do.

16:03 Driving down a little bit further into each of those strategic pillars, we can just see how we've already been doing this within our business. If you see here, you know, acquiring and transferring brands into a number one space for profitable growth. So Eero, recent acquisition, Balance Active, Health and Her, Health and Him, and LIFE, all brands we've recently acquired and that are growing very well within our portfolio. And we see our knowledge and expertise in achieving this continuing to support us as we go forward in acquiring and developing more brands as well as continuing to develop the ones we have, growing revenues and growing profits. So we've got a good track record of acquiring and transforming brands, and we're gonna continue to do this as part of our growth strategy. If you move on to the number one brand mindset.

16:51 So a number of our brands are already in number one positions in their market space. Health and Hair is the leading menopause brand in The UK. Balance Active is the number one bacterial vaginosis brand in The UK. Eero, the number one olive oil

17:05 wax spray in The UK. And LIFE is the number one glucose supplement in The UK for type one diabetic. So we're used to bringing our niche effective products into number one spaces, and that will again be a focus of how we grow our business going forward. Moving on, looking at the omnichannel approach. Omnichannel is really important because, ultimately, we need to be where the shopper shops. It's not about so much the consumer these days. It's where is the shopper because we're a b to b business, so we need to make sure our products are where the shopper shops and having a go to market strategy that's tailored to that and how people buy. So as you can see here, these are all retailers that we are in and that we use and channels that we use today, and we'll continue to exploit those and push those forward.

17:51 We're pushing out, obviously, in The UK, we

17:53 have a great position already, but we're starting to launch in The US, and we're focusing much more on The EU as well across all of those four channels. So that is health and beauty, grocery, pharmacy, and online. And we're in all of those channels already, and we'll continue to supply into all those channels to make sure we're always where the shopper shops.

18:15 Diving into a bit more detail on the integrated digital capability, AI, and data piece. We have a first class app that's available in our business today, coming over from the recently acquired Health and Her business. We have an app that is giving real patient benefits and monitoring trends and daily habits in our in our consumers' lives. This technology is is first class first in class, and it is a platform for what we would like to do across all of our other brands. So having this technology on the left hand side of the screen, you can see that to track, learn, and build upon, build positive habits, personalize your goals. We want to be able to have this technology available to all of our core brands to hit all of our target consumers so that they can rep we can replicate and lift and shift this capability that we've recently acquired in VENTURE LIFE across our other key category areas in which our core brands play.

19:14 Further to that, we are also, as touched upon over the last twelve months or so, investing and implementing a new ERP system at VENTURE LIFE. That is the Microsoft Dynamics three six five, ERP. Within that, we are have been investing in key modules to manage our finance and supply chain operations and ensure that all of our systems are using a common ERP that can talk to each other quickly and that we can gather data and insights from cross functional operations within those systems. So to give you an example of that, we've got a core finance and supply chain model, but with the investment proceeds we're on this divestment, we're also to roll this out across all of our c r CRM space, marketing modules, HR.

20:01 These things are allowing us to have one ERP where all the different operational functions and data from those parts of the business can talk to one another and allow us to get information quicker, make decisions faster, and have insights that we may not already realize are in the data at the moment. So these are investments that are already underway and, capabilities that we already have in the business, I e the app I'm talking about there. And we've got an opportunity here to now roll these out in a in a more widely across VLG and across all of our brands. And this is really important to being able to have that fundamental data in place, which has got the data integrity so that we can introduce AI into this to help us gain those insights quickly and accurately to make rapid decisions.

20:56 And finally I'm sorry, Danny. Go ahead. And finally, on in regards to the the fifth pillar there about underpinning all of this, as I said at the start, is having that winning way of workings and core entrepreneurial competencies within the team. Agility is key to this to be ensure that we can make fast, impactful decision making. It's what some of the big players lack. This is giving us an opportunity to have speed to market, And we've got an energized and aligned team with delegated authority to do their job. And, and ultimately, retaining that core entrepreneurial spirit is vital to all of this and ensuring that we have got people in the team who are going to drive this forward. And we we've got that. We're very lucky with the people we have at VENTURE LIFE and their engagement in this. We've been working on this since the beginning of 2025, so we're able to hit the ground running with this announcement today with renewed focus and and clarity.

21:55 And underpinning all of this is driving our core focus activities. So coming from this strategy where we've got the team involved and aligned is addressing large and attractive preventative needs. Obviously, women's and men's health is a place where we are. There's premium pricing opportunities in that space. Obsessing over the consumers and shoppers. So where where where they constantly need to be delivering to, the needs and insight, looking at data driven insight to to deliver opportunity, to deliver new products, and deliver channel expansion, and be where our shoppers shop, and partner with strategic customers. And like we mentioned already, Bayer are a big are a big part of ours, but other larger partners in that space will continue to form strategic alliances with to grow our product offering and our portfolio.

22:44 And and the importance of that, again, is having that bold entrepreneurial mindset drive it driven driving us helping us to drive agility rather, innovation, inclusive leadership to empower our team, make sure we can communicate openly on issues, opportunities, challenges, overcome those together, make sure that we seize the opportunities, execute those with speed and creativity so that we can stay ahead of the competition. And aiding all of that is making sure that we've got that faster insight led decisions across our business, having strong governance around our data, where those decisions are being made on, continuous investment in our people and our technology to give us a greater ROI with clear measures to to form those decisions on what is acceptable to us and where we want to focus our resources and ultimately ensure sustainable, profitable growth in an accelerated way.

23:41 So so, really, the message of today is, you know, we've simplified the VENTURE LIFE group for growth. Divesting of the CDMO activities and smaller brands has given us a lighter capital structure. We'll maintain a long term manufacturing arrangement with those same facilities. They'll be our biggest supplier. The relationships that we've worked on for many years will continue in place and continue to help us grow and develop our brands and our products. We'll have a brand focus, high margins, number one mindset. Data driven insight is fundamental. We've got a significant amount of data in the women's health space, and we'll be using that to to generate new product development insight and growth of our businesses of our products. Excuse me. Omnichannel approach, as I said before, got to be whether shop or shop Digitally integrated, that's not just in how we operate, but also how we interact with our customers and our suppliers and how we look at the market and achieve growth greater than our peers within the marketplace.

24:34 A pure play consumer health care platform, that's really important to our shareholders. That attracts much higher valuations and, ultimately, long term benefit for shareholders. Remain that retain, excuse me, that entrepreneurial spirit that's driven us to this place. Since we started the business, that's what's got us to grow, be agile, nimble, and move quickly, and we're retaining that with the way we're growing the business and have a core geographic market focus, particularly around, as you said, UK, mainly new markets, and into The US.

25:06 So just wanted to thank you for your attention today. We're very excited about this opportunity. We we've had a great and long relationship with Vicosmos and the Nesta sites, and that relationship will continue. We're still working with those and with all the people we've worked with for a long time, but working as a third party supplier rather than part of our group. We see this as fantastic opportunity for acceleration of our business and simplifying the business in the way we have allows allows us to move more quickly, more nimbly, and allow us to generate greater returns going forward. So thank you for your time. We're not taking live questions today, but any questions you submit into the platform, we will reply in writing. So thank you for your time today. Jerry, Daniel, thank you very much indeed for updating investors this morning. If I could please ask investors not to close the sessions, we'll now automatically redirect you for the opportunity for you to provide your feedback in order that the company can better understand your views and expectations.

26:02 This may take a few moments to complete. I'm sure it'll be greatly valued by the company. On behalf of the management team of VENTURE LIFE PLC, we'd like to thank you for attending today's presentation, and good morning to you all.