The Vita Life Sciences Limited (ASX: VLS) share price has today rocketed higher following impressive half year results. The Vita Life share price is currently up 26.76% to 90 cents, representing a new 52 week high for the company.
What does Vita Life do?
Vita Life is an Australian and Asia Pacific based pharmaceutical and healthcare company that provides over-the-counter vitamins and supplements. It is involved in the formulation, packaging, distribution and sale of three major consumer retail brands and over 700 products. Its three major brands are:
- Herbs of Gold: sold in Australia, Malaysia and Singapore
- VitaHealth: sold in pharmacies, clinics and health food stores throughout Southeast Asia
- VitaScience: sold through Blooms The Chemist stores exclusively in Australia
The company has been listed on the ASX since 2007 and employs over 400 people in seven countries worldwide.
Why is the Vita Life share price on the move?
The Vita Life share price has soared this morning following the company’s release of its half year results. Vita Life reported sales of $22.0 million, up 11% on the prior corresponding period (pcp). The Vita Life share price was also spurred on by an impressive EBIT result. EBIT increased to over $4 million representing an increase of almost 200% on the pcp. However, it was noted that this growth reflects substantial, one-off investment in advertising and promotion undertaken in 2019.
The result is particularly pleasing for the group given it commenced a strategic plan in 2018 with the objective of growing revenues by increasing the channels of distribution in its core markets. It recognised at that time, this would involve investment in both advertising and promotions, which would negatively impact its profits. The first half results reflect the increase in revenues from this strategy and, with the heavy investment in advertising not recurring, net profits have increased.
Vita Life also benefitted from the increased demand for immunity support products across key markets such as Australia and Malaysia, which helped to underpin the first half performance. Nonetheless, the company acknowledges that the COVID-19 pandemic continues to be an evolving situation, which has the potential to disrupt traditional selling channels.
Vita Life’s balance sheet remains strong with equity of $23.4 million and a net cash balance of $11.5 million. However, this is after bank borrowings that will need to be repaid.
Dividend
Directors have declared the payment of a fully franked interim dividend of 1.5 cents per ordinary share. The company’s dividend reinvestment plan (DRP) has been suspended and shall not apply.
What’s next for the Vita Life share price?
The Vita Life share price has been buoyed by today’s announcement, with investors clearly impressed by the group’s results. Results from the company’s 3-year strategy of increasing channels of distribution are positive and further growth is anticipated. However, retail conditions are expected to be mixed in the foreseeable future due to uncertainties surrounding the pandemic.
As such, Vita Life’s directors remain cautious over the medium term and were unable to provide any guidance for the remainder of the year.
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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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