Shares in Warpaint London (W7L:AIM) slumped 15% to 69p on Friday as the colour cosmetics supplier warned on profits and said it would split the roles of its current joint chief executives (CEOs).
Currency swings have generated a considerable headwind for the seller of affordable cosmetics to supermarkets, discounters and overseas distributors, which is finally dispensing with a boardroom structure that is often unpopular with investors.
EARNINGS GUIDANCE SLAP-DOWN
Revenue for the year to December 2019 is seen at around £50m, in line with previous guidance and indicating very modest growth on 2018’s £48.5m top line haul.
However the lipstick, eyeliner and face creams seller warned adjusted pre-tax profits will be in the £5.1m-to-£5.5m range, a significant downgrade from earlier guidance of £6m-to-£7m.
The owner of the W7 and Technic brands bemoaned a number of factors for impinging on profitability, including the geographic mix of sales, adverse currency movements and also having to absorb investment costs to drive future growth, particularly in the vast US market.
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Since September’s first half results, the translation impact of exchange rate movements alone has wiped £250,000 from the bottom line.
Attempting to apply some gloss to the warning, Warpaint’s chairman Clive Garston commented: ‘Whilst the unprecedented volatility in exchange rates in recent months has had a negative impact on the profits of the company, both from a translational and margin perspective, I am pleased by our overall trading performance.’
DOING THE SPLITS
Garston also explained that following a review of the roles of Joint CEOs Sam Bazini and Eoin Macleod, the board had decided to formally split the role with Bazini retaining the chief executive role and Macleod becoming Managing Director.
‘Sam and Eoin have always split the chief executive role so that they have distinct responsibilities within the company, but with the company’s growth and diversification since admission to AIM we think these new positions are now an appropriate way to formally reflect this,’ continued Garston.
As Shares explained here, having more than one CEO is unusual and can draw criticism from investors because of the potential for clashes at the top over strategy. There is also the cost of having two people at the top, which is even more of a burden for smaller companies such as Warpaint.
