- Cosmetics supplier reports record sales
- Gross margin is up year-on-year
- Value credentials leave Warpaint well placed for tougher times
Shares in Warpaint London (W7L:AIM) leapt 11.5% to 126p after the colour cosmetics supplier defied the cost of living crisis to deliver yet another positive trading update.
Warpaint said sales for the first half to 30 June 2022 are now expected to top £24 million, implying head-turning year-on-year growth of at least 30%.
Not only is that a record level for the owner of the W7 and Technic brands, it is also ahead of management’s expectations at the start of the year and is all the more impressive considering the wider industry pressures that have seen global cosmetics brand Revlon (REV:NYSE) enter Chapter 11 bankruptcy.
AFFORDABLE PRICE ADVANTAGE
Clive Garston, chairman, said Warpaint has experienced ‘strong trading in 2022 to date with the group’s brands’ proposition of delivering high quality cosmetics at affordable prices resonating with customers, both in the UK and internationally.’
During the year to date, Warpaint, which supplies retailers including Tesco (TSCO), Boots and Wilko, has enjoyed strong growth in sales of its branded products in the UK and ‘particularly in continental Europe, with other regions performing in line with the board’s expectations’.
RISING MARGINS
Crucially, Garston stressed that this sales growth is being achieved with rising margins despite inflationary headwinds and ongoing high transport costs.
In fact, Warpaint’s gross margin for the year to date is ‘in excess’ of the 33.8% achieved for the 2021 full year.
Warpaint’s sales are expected to remain second half weighted given the importance of Christmas seasonal sales, but given a strong order book, ‘ahead of the level at this time last year’, Garston is confident Warpaint ‘will continue to perform well’ for the remainder of the year.
THE SHORE CAPITAL VIEW
Having already upgraded its estimates for 2022 twice already, Shore Capital has left its forecasts unchanged, at least for the time being.
For the year to December 2022, the broker is looking for growth in pre-tax profits from £6.9 million to £8.3 million, for a rise in earnings per share from 7.8p to of 8.8p, with Warpaint forecast to close the year with £6.2 million net cash in the coffers.
Shore Capital has also introduced a first half of 2022 pre-tax profit forecast of £2.5 million, though it believes ‘this may prove too cautious. We believe Warpaint’s value credentials leave the group well placed for the current tougher economic times and see excellent medium-term growth potential both in the UK and overseas.’
