Trendy make-up supplier Warpaint London (W7L:AIM) will smash previous full-year guidance thanks to stronger-than-expected trading in the second half of 2020. The company behind the W7 and Technic cosmetics brands also revealed an extension of trials in Tesco (TSCO) stores for its W7 range.

Warpaint stock jumped more than 10% in trading on Monday to  92.5p, its highest since before the Covid-19 pandemic struck.

POSITIVE UPDATE

In a positive update for the year to December, the company behind the W7 and Technic cosmetics brands highlighted stronger than anticipated second half trading and guided to annual 2020 sales of ‘not less than £40 million’, representing an 8% beat to the £37 million house broker Shore Capital was looking for.

Stripping out a foreign exchange-related accounting charge, Warpaint’s adjusted profit from operations for 2020 is now expected to be in excess of £2.6 million.

That is around 30% ahead of management’s previous guidance and reflects a better than expected autumn trading period delivered in spite of the Covid-19 restrictions that have heavily disrupted the retail sector.

TESCO TRIAL EXTENDED

Warpaint also highlighted a year-end net cash position of £4.9 million, up from £1.5 million a year earlier thanks to robust cash generation.

Though ongoing virus-related restrictions are having an impact on revenues, Warpaint now has a presence in both Tesco and Wilko, two designated essential retailers which remain very much open for business.

Following a successful initial trial of a range of 15 W7 cosmetics products in 209 Tesco Express stores from November 2020, these products will now be stocked in a further 469 Tesco Express stores starting at the end of next month.

‘This is in addition to, as previously announced, the core range of 190 of the group’s W7 products being sold in 56 Tesco Extra stores and the four new lines currently being introduced by Tesco into 605 Tesco Extra stores and Tesco supermarkets, together with a further four new lines which will be shortly stocked in 96 of these stores,’ enthused Warpaint.

THE SHORE CAPITAL VIEW

In the view of Shore Capital, Warpaint has ‘shown agility to navigate the Covid headwinds of full year 2020 with a beat to our forecasts across the key revenue, earnings and net cash position.

‘Warpaint is now a broader business having trialled and extended business wins with Tesco and Wilko, which bodes well for the future alongside its international partners.’

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Issue Date: 18 Jan 2021