Directors’ Deals: Victorian Plumbing directors unblock

It’s been just over a year since Victorian Plumbing completed the biggest ever listing on London’s Aim, raising £297.5mn in a debut that valued the online seller of bathroom products at abut £850mn. 

Much of its valuation has since disappeared down the drain. Shares in the company currently trade around 53p, an 80 per cent drop from its 262p listing price in June 2021.

Its half-year results for the six months to March were by no means terrible — revenue of £134mn was 5 per cent lower than a tough comparator last year, but 39 per cent ahead of its pre-pandemic trading period. Its bottom line crumbled, though, with pre-tax profit falling by 81 per cent to £2.7mn and free cash flow generation of £1.4mn, down 92 per cent as the company increased inventory to mitigate supply chain problems.

Victorian Plumbing made its debut when valuations were much higher, particularly for anything technology-adjacent — the company lauded its “proprietary technology platform and data-driven ecosystem” as part of its prospectus. The 262p debut valuation equated to about 49x last year’s earnings per share, indicating that some investors saw it as a high-growth tech play. So the marketwide re-rating of such businesses has done it no favours, and neither has the unwinding of the post-pandemic DIY boom as cost-of-living pressures weaken discretionary spending on big-ticket items like new bathrooms.

So how much could be read into the sales by chair Philip Bowcock and finance director Paul Meehan of £72,900 and £40,500 worth of shares, respectively? Both were subject to a 12-month lock-in period, so this presented an early opportunity to cash in shares. And the amounts are relatively small — Bowcock’s were less than 10 per cent of his stake and Meehan’s less than 5 per cent of his.

However, selling shares in a company of which you are a director, that lost so much of their value over the past 12 months, is hardly an indicator that one thinks an immediate bounceback is on the cards.

Supreme owner sees through dark days

Shares in consumables distributor Supreme took a knock this month as it warned investors that revenue and earnings for its current financial year will be lower than expected. Customers of its lighting division, which sells branded bulbs and fittings, had been overstocking, it said.

Although its lighting arm only made up 21 per cent of its £131mn revenue in its debut set of results as a public company, it is one of Supreme’s more profitable divisions. It generated 25 per cent of gross profit before foreign exchange charges for the year ending in March and a gross margin of 31 per cent, compared with less than 10 per cent for its larger batteries division.

Lighting sales fell by about 25 per cent in the weeks ahead of its results announcement on July 5, with some customers halting orders completely until they clear stocks. House broker Berenberg cut its earnings per share forecast for the current financial year by one-third to 9.53p, leading to a 32 per cent one-day decline in its share price to 86p. 

Supreme also revised its dividend policy, halving its payout ratio from 50 per cent to 25 per cent as it believes it can generate better returns from acquisitions.

In June, it bought vaping brand Liberty Flights for £7.75mn and during its full-year presentation chief financial officer Suzanne Smith said its current pipeline of potential deals is “busier and more exciting than it has been”.

“There’s a lot we want to explore and we want to have the means to be able to do that,” she added.

The shares bottomed out on July 7 at 71p before a rally in which chief executive Sandy Chadha participated, buying 500,000 shares at 83.2p on July 12. This took his stake in the company, which was founded by his father in 1975, above 57 per cent.

Supreme’s shares have continued to edge back up to 94p but remain below the 134p placing price they were pegged at for its initial public offering last year.

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