Vita Group (ASX:VTG) share price up on results, despite Telstra woes

The Vita Group Ltd (ASX: VTG) share price is trading up today after the company announced its half-year results. Let's take a look.

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Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.

Published February 19, 2021 12:21 pm AEDT

The Vita Group Ltd (ASX: VTG) share price is moving upwards today on the back of the company's first-half results. This is despite Telstra Corporation Ltd (ASX: TLS) spelling the end of its current dealer agreement with Vita, disclosed last week.

A happy woman looks at her mobile phone and fist pumps, indicating a share price rise — Image source: Getty Images

What's moving the Vita Group share price today?

Profits buoyed by JobKeeper

Today's half-year results for Vita Group portray a challenging half for the company. Revenues dropped 25% to $323.7 million due to retail ICT and accessory volumes impacted by COVID-19.

On the other hand, the company's pivot towards its skin health and wellness (SHAW) segment showed strong organic growth. Artisan Aesthetic Clinics experienced a 37% lift in revenues compared to the prior period. This result stems from an increase in client visits and clinic numbers. Additionally, clients have increased their average spending per visitation.

Shareholders might have caught themselves cheering for the increase in earnings before interest, tax, depreciation, and amortisation (EBITDA). In contrast to the company's revenue, EBITDA increased by 23% to $32.6 million.

However, the result isn't all cheerful – a contributor to this increase was the inclusion of JobKeeper payments. To be precise, the group received net payments of $12 million from the federal government. Underlying EBIT, when excluding JobKeeper actually fell 27% to $16.1 million.

Telstra uncertainty in the mix

With the announcement of Telstra's intention to transition to a full ownership model for all of its stores, the future looks murky for Vita. Vita currently operates a total of 104 Telstra retail stores on behalf of the telco giant. The current agreement will conclude on 30 June 2025, so the clock is ticking for the next 4 years.

Vita continues to ensure it is in discussions with Telstra to facilitate a suitable transition arrangement. But a week has passed, and no further details have been provided on this front.

Currently, Vita has stipulated it will continue to manage its Telstra store network in the meantime. Shareholders are anxiously awaiting further information considering the large percentage of revenue derived through its partnership with Telstra.

CEO Maxine Horne commented on the result and outlook for the company:

We are pleased to have maintained profitability during a challenging period. Our progress in Artisan is strong and sustainable. The team has done an excellent job of managing our ICT channel and supporting Telstra customers despite COVID-19. We are about to embark on a new chapter. We have significant capability in running a national, dispersed network and delivering a premium experience, resulting in value for all. The Vita team are disciplined, focused and passionate about looking after our customers and I thank them for their hard work (historical and future) and willingness to adapt and evolve.

A dividend for your troubles

Vita Group also announced that it will pay a fully franked interim dividend of 5.6 cents per share. This time last year Vita skimped out on a dividend payment to take a conservative approach during the peak of the COVID-19 crash. Today's announced dividend represents a 7.7% increase on the interim dividend paid back in 2019.

At the time of writing, the Vita Group share price is sitting at 93 cents, up 6.29% in morning trade but down 25% on this time last year.

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