Shares in cosmetics maker Warpaint London (W7L:AIM) soared 14.4% to 160.2p after flagging ‘encouraging’ UK sales growth in the first five months of 2021.

The firm, which owns the W7 and Technic brands, said sales in the first five months of this year were up 64% compared to the same period in 2020 and up 18% for the same period in 2019.

Online sales of the company’s W7 brand in first five months of 2021 were triple the ‘modest’ sales of the same period last year.

Warpaint chairman Clive Garston, speaking at the firm’s annual general meeting, highlighted the importance of its partnership with supermarket Tesco (TSCO) in boosting sales.

SUPERMARKET SHIFT

From this June, the company’s W7 brand is available in 1,300 Tesco stores compared to just 56 this time last year, while further expansion of the W7 cosmetics displays in Tesco stores is planned for later this year.

The company shifted focus to its online sales and essential retailers, such as supermarkets, after the pandemic affected sales in 2020.

In April, Warpaint reported 2020 revenue fell 18% to £40.3 million, resulting in a pre-tax loss of £1.1 million compared to a pre-tax profit of £1.8 million in 2019.

As previously announced the firm declared a final dividend of 3p per share, pending shareholder approval, bringing the total for 2020 to 5.8p per share. That’s up from 1.5p per share for 2019, when there was no final dividend because of the outbreak of the pandemic.

Garston added: ‘I am optimistic that these positive trends will continue and with cash today of approximately £6.6 million and no debt, I believe we are well placed to deliver profitable future growth.’

ANALYST VIEW

Shore Capital analyst Darren Shirley has left forecasts for the company unchanged, but said there is ‘growing scope for upgrades if the current momentum can be sustained’ into the second half of 2021, and ‘if significant additional Covid disruption can be avoided.’

He forecasts a dividend yield of 3.4% from the stock and added: ‘We reiterate our expectation of strong medium-term profit growth and net cash generation, and a sustainable and attractive dividend yield, supported by a robust balance sheet which also provides strategic optionality over time.’

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Issue Date: 11 Jun 2021