LONDON (ShareCast) - (Sharecast News) - Self-care products commercialisation company Venture Life Group announced the acquisition of PharmaSource - a Netherlands-based development and distribution business - on Thursday, and updated the market on its trading for the year ending 31 December.
The AIM-traded firm said it had agreed to acquire the entire issued share capital of PharmaSource for an initial consideration of €5.23m, and deferred contingent consideration of up to €1.27m.

It said those payments would be funded entirely from its existing cash resources, with the acquisition expected to be immediately earnings accretive.

The acquisition was also subject to conditions and price adjustment for cash and debt.

PharmaSource owns a number of medical device products in key therapeutic areas including fungal nail infections, wart removal and women's health.

Those products are distributed both through retail pharmacies in the Netherlands and through key international distribution partners outside of the Netherlands, including the UK, Germany, the Nordics, Belgium and France, Venture Life said.

Strategically, the acquisition would enable the company to broaden its product range and extend its global reach, by providing additional retailers and distribution partners to its existing partner network.

PharmaSource was a growing business, and revenues for the year ending 31 December were expected to be more than €2.5m, up from €1.8m year-on-year, with profit before tax in excess of €0.9m, rising from €0.5m.

It was expected to have gross assets of around £0.6m at completion.

PharmaSource owns various medical device registrations for products marketed under several brand names.

Once the post-completion integration process is underway, Venture Life said there were expected to be "strong synergistic benefits" of the acquisition for the group going forward, to enable the acquired business assets to continue to grow both revenues and profitability under its stewardship.

Completion of the acquisition remained, among other matters, conditional on the receipt of some regulatory documentation from the notified body in relation to one of the PharmaSource products, which was expected to be received shortly.

Looking at its group trading, Venture Life said it expected its revenues for the year ending 31 December to be at least £20m, and adjusted EBITDA to be at least £3.2m, before non-recurring operating costs of approximately £0.2m primarily relating to the restructuring of the company's finance team.

As mentioned in its half year results, the company's distribution partners in China experienced some difficulties, which impacted sales in the first half of 2019.

While the causes of that had been rectified, it had not been possible to catch up on orders fully from those partners in the second half, with a consequent knock-on effect to the firm's expected full-year performance.

However, the board said it expected orders from its Chinese distribution partners to grow in 2020.

The company already had an overall order book in hand for the first quarter of 2020 that was more than €1m, and more than 40%, ahead of the same time last year.

Those factors, together with completion of the PharmaSource acquisition on an earnings-accretive basis, provided what the directors called "an excellent platform" for the Venture Life Group to continue to grow into 2020 and beyond.

"We are delighted to acquire this high quality, growing and profitable business, which gives us our first European footprint directly into the retailer market," said chief executive officer Jerry Randall.

"Once completed, the acquisition should be immediately earnings enhancing for Venture Life, is being funded totally from our existing cash resources and will benefit from the operational leverage we can bring.

"The acquisition brings an excellent range of products and customer relationships to Venture Life, which we expect to be able to leverage through our existing products and relationships further."

Randall said the company saw the transaction as "another excellent add-on" to its existing business, that it could further grow and develop within its existing structure.

"We expect to finish the year with revenues and profits ahead of 2018.

"Despite some one-off costs in the first half, we have been pleased with the performance of the wider group, which has delivered good growth against a complex macro-economic backdrop.

"This performance, when enhanced by completion of this excellent acquisition opportunity on an earnings accretive basis in our profit and loss account for 2020, provides us with confidence for the year ahead, and makes us very well positioned for continued growth."

At 1041 GMT, shares in Venture Life Group were up 2.71% at 29.99p.

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