The Vita Group Limited (ASX: VTG) share price has been a very strong performer on Friday.
In morning trade the Telstra Corporation Ltd (ASX: TLS) store operator's shares stormed as much as 16% higher to $1.49.
Why is the Vita Group share price storming higher?
During the first half of FY 2020, Vita reported record interim revenues of $431.6 million. This was a 14% increase on the prior corresponding period.
This was driven by a 13% increase in revenue from its key ICT segment to $420 million and a 65% lift in Skin-Health and Wellness (SHAW) segment to $11 million. The ICT segment's growth came from device and accessories, which offset a reduction in connectivity revenue. The latter was an expected outcome of Telstra's recent shift towards casual plans.
Earnings before interest and tax (EBIT) increased 11% to $22.1 million and net profit after tax (NPAT) increased by 3% to $14.5 million. The slower earnings growth was due largely to weaker gross profit margins. Vita's gross profit margin fell from 30.7% to 27.2%.
But this didn't stop the Vita board from increasing its interim dividend. It lifted it by 2% to 5.3 cents per share.
Chief Executive Officer, Maxine Horne, commented: "We are pleased to deliver yet another strong result, which continues to reflect the talent, energy, resilience and commitment of all of our team members. Despite facing challenges in our ICT channel, we once again demonstrated our ability to adapt and evolve, leveraging our consultative selling capabilities to out-perform."
"Our SHAW channel is gaining momentum and we have made considerable progress in building a leadership position in the premium segment of the market. We will continue to build profitable scale, adding clinics and talent to the network as we strengthen the presence of the Artisan brand in the skin-health and wellness category. We are on track to execute our strategy, which is to operate a scaled network of Artisan branded clinics nationally," she added.
Outlook.
Looking ahead, management warned that there would be continued margin pressure in connectivity. However, it sees further device and accessory opportunities in the second half which could offset this.
It also provided an update on the impact of the coronavirus outbreak on its operations. It advised that there is some potential short-term or timing risk to its business. It notes that Apple devices are constrained, but Samsung supply is unaffected. Further, there is a possible impact to its accessories supply, but this is being actively managed.
