Why has the Vita Group share price suddenly taken off?

Source: Telstra presentation

Shares in Telstra Shop operator Vita Group Limited (ASX: VTG) have rallied 11% on Friday after the group reported strong growth numbers in its interim profit result for the six months ending December 31.

Getting investors excited was the surprise result of earnings before interest, tax, depreciation and amortisation (EBITDA) coming in $2 million above the high end of the guidance range issued in December.

Here are the highlights:

  • Revenues grew 23% to $321 million; Telstra shop like-for-like sales grew 21%
  • Underlying EBITDA surged 465% to $30.4 million
  • The board has declared a 40% uplift in the fully franked interim dividend to 5.76 cents. Shares will trade ex-dividend on March 11 with payment on April 8
  • A net cash position of $10.6 million was recorded at the half

What happens now?

While much of the retail sector is struggling, a few select businesses have been performing well with JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) both reporting solid operating results this February.

With Vita Group having now completed the exit from its Next Byte business, management can focus more intently on its relationship with Telstra Corporation Ltd (ASX: TLS) and growing its Telstra Shops and Telstra Business Centres.

While guidance was not provided, the high-double digit revenue growth achieved in the first half across Vita’s retail, small-medium business (SMB) and enterprise segments sets the scene for a strong second half.

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