Victorian Plumbing Group plc (LON:VIC) was the topic of conversation when DirectorsTalk interviewed Gervais Williams, Co-Fund Manager of Diverse Income Trust plc (LON:DIVI)
DirectorsTalk asked: I am keen to get your thoughts on Victorian Plumbing. In our last interview, you were very positive on their acquisition of the MFI brand and digital assets. In their year-end results just before Christmas, they posted a 5% increase in revenues, strong margin expansion, rising free cash flow and a materially higher dividend, while investing in a new distribution centre. What makes the MFI acquisition such an attractive growth lever for Victorian Plumbing as it looks ahead to the next phase of growth?
Gervais noted: The MFI brand name came with the acquisition of Victoria Plum, which was a competitor out there, which obviously got into financial difficulty, and they just bought it for a low price from the receiver.
Most particularly, it’s that new warehouse which is important. In the past, it’s really been slightly held back by having three or four different warehouses and having to juggle its logistics to supply customers next day. With its new giant warehouse, now, of course, it’s got great operational efficiency and that means it can put new products through that warehouse. So, it’s got the MFI brand and that will bring furniture.
If anything, I am even more excited by the opportunity to do tiles. This tiling market, often when you are buying a bathroom or a kitchen, you have tiles and often you have to wait several weeks for those tiles. The whole point about Victorian Plumbing is that they will be able to supply tiles next day, immediately on return, and that will allow you to actually choose your tiles. So, I think it is about service levels, and I think Victorian Plumbing is outstanding in service levels. I think it is well positioned now to take full advantage of those service levels by taking market share with its new warehouse. MFI may be part of that, but I think it is just the core operation of the group, which we think will improve.
Its market cap is relatively modest, and it is only £262 million at the moment. As it gets more recognition, as the share price rises, as its market cap becomes more mainstream and more investors look at it, we think this is the kind of stock where you can see the share price total return, capital appreciation and income, come through really strongly.
That’s really the nature of the Diverse Income Trust. We’ve got a huge range of these kinds of companies in all sorts of different industries, which we think over time cannot just produce a good and growing income to shareholders, but actually ultimately produce a lot of capital appreciation as well.
