Victorian Plumbing Group plc (LON:VIC)was the topic of conversation when DirectorsTalk interviewed Gervais Williams, Co-Fund Manager of The Diverse Income Trust plc (LON:DIVI) on what’s driven the Trust’s strong performance and the outlook for a number of its portfolio holdings.
DirectorsTalk asked: Victorian Plumbing has grown strongly as an online bathroom retailer and made some notable strategic moves recently. How do you see these developments supporting the company’s growth and long-term outlook?
Gervais said:What’s been interesting about Victorian Plumbing is it’s got a very strong brand, a very strong customer culture of delivery. Since it came to market, it’s been operating out of up to six different warehouses. What they’ve done over the last two years is they’ve actually built a new single warehouse and closed all the others; they’ve moved everything into this one warehouse.
In terms of customer service, they can now deliver very high levels of next-day delivery, even in the busiest periods so that’s brilliant. We’re tremendously upbeat about the potential for this company to really take advantage of their extra capacity.
What’s happened alongside it is they actually acquired Victoria Plum, which used their name but was a competitor and went into receivership. They bought it from the receiver along with the MFI brand name. They’ve set up the MFI brand name and got some extra capacity in their delivery plant, so they can start experimenting in terms of delivering MFI products as well.
Investors haven’t liked this actually, the share price has come back, it’s going to cost a bit of money in the short term. If they generate loads more cash in the long term, that’s great. We like people taking options on the future. So, the share price has come down, even though the company is fundamentally in a much stronger position than it would’ve been two years ago with its new warehouse. Actually, the share price is low, but the potential for the company is much greater, even with MFI potentially being loss-making in the first year.
So, we’re tremendously upbeat, albeit the share price is coming from a slightly lower base than it was previously.
