Victorian Plumbing Falls, Dunelm Loans and Parties

I commented negatively on Victorian Plumbing (VIC) back in June soon after it launched an IPO at 262p. After an initial spurt upwards in the share price it’s now at less than 100p. It has recently published it’s annual results which look positive if you take them at face value – revenue up 29% and adjusted EBITDA up 53%. But in reality the story is more complex with reported pre-tax profit down 17% and there are mixed messages about future prospects. It should remind everyone of the danger of investing in new IPOs.

Another item of news today was from Dunelm (DNLM) who have negotiated a new bank facility and the odd thing is that it has various “sustainability” conditions. Does this mean that banks will not lend you money in future unless you commit to reducing your greenhouse gas emissions, source your cotton products from responsible sources, reduce your plastic packaging and provide a customer “take-back” service. These are all commitments made by Dunelm which will be verified by an independent third party.

As an investor in Dunelm, I consider it quite unreasonable that banks should be trying to interfere in the management of companies in this way. Some of the objectives may be meritorious but it is surely for the company to decide on such matters, not bankers.

I don’t normally comment on the trivia of political grandstanding but the recent media publicity about alleged parties at No.10 Downing Street and redecoration of the Prime Minister’s flat is exasperating. Have politicians not got more important things to argue about?

And why should we put up with media being dominated by such stories when they should be covering more important news?

Attacking Boris Johnson for events he did not even attend and neither did other Ministers makes no sense. The alleged party happened a year ago so it’s ancient history in political terms and perhaps some junior staff should be warned not to do it again if there is real evidence of wrong-doing (which is unclear). But the Prime Minister should not be wasting his time on such trivia. Allegations he was being untruthful make no sense either as clearly he was relying on information given to him by others.

Roger Lawson (Twitter:  )

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It’s Important to Read the Prospectus!

I am never very keen to invest in new IPOs of which there are plenty launching into the market of late. They tend to be launched on a wave of enthusiastic promotion while the company’s management gets distracted by their new wealth and responsibilities. But I do look at some of them. One I have just reviewed is Victorian Plumbing (VIC) which joined AIM last week.

The company sells plumbing accessories through to complete bathroom and toilet suites (see ). The company has been growing rapidly by focussing on internet ordering and deliveries direct to consumers or to fitters. It only has one showroom in the country.

The valuation looks quite high but not ridiculous bearing in mind that it is profitable and growing rapidly. But the information provided on page 48 of the prospectus is enough to put me off.

This is what it says: “While the Directors are not aware of any current third party claims, the Group’s competitors, or other entities and individuals, may claim to own or have exclusive rights to intellectual property or other proprietary rights used in the Group’s business. From time to time, third parties may claim that the Group is infringing their intellectual property rights, and the Group may be found to in fact be infringing such rights. Conversely, the Group may be sued by third parties for alleged infringement of their proprietary rights. In a case brought by one of the Group’s competitors, Victoria Plum, the High Court in England and Wales ruled in November 2016 that both the Group and Victoria Plum’s activity of bidding on certain Google keywords amounted to passing off and the Group was found to have been infringing certain of Victoria Plum’s trade marks in bidding on certain Google keywords including its name. The Group is subject to an undertaking not to bid on such terms. Under the same court order, Victoria Plum is subject to an undertaking not to bid on the term “Victorian Plumbing”, which amounted to passing off of Victorian Plumbing”.

So far as I can see the business named Victoria Plum is very similar if somewhat smaller in size. They are also focussed on internet sales and sell very similar products, possibly even from the same suppliers.

If you type in “Victoria Plumbing” into Google you get Victorian Plumbing listed first followed by Victoria Plum – I guess Victorian Plumbing are paying more for Google adwords.

“Victorian Plumbing” is a registered trade mark of Victorian Plumbing Ltd but it’s still very messy that there is a similar business with a very similar name. This potential confusion should have been sorted out before the company chose to do an IPO in my opinion.

The failure to have clear ownership of associated intellectual property such as brand names is enough to me off investing in the shares.

Roger Lawson (Twitter:  )

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