Warpaint dented by exchange rates but UK and US/China growth proves strong
Chairman Clive Garston talked up its “significant growth and achievement” and said that the new financial year has “had a promising start.”
So let’s look at the numbers. Proforma revenue, which excludes the Retra business acquired in November (and costs linked to its purchase), rose 15.6% to £31.2 million. Meanwhile reported revenue with Retra included was up 44.4% to reach £32.5 million.
On a proforma basis, adjusted profit from operations rose 11.8% to £7.6 million and adjusted pre-tax profit rose 10.3% to £7.5 million. With Retra included in the figures, adjusted profit from operations was up 24.2% to £7.7 million and pre-tax profit rose over 24% to £7.7 million.
But the proforma adjusted operating margin fell to 24.4% from 25.2%, dented by the US dollar-British pound exchange rate. In fact, the margin would have been almost 3% higher if exchange rates had been kinder.
The company’s Gen Z and Millennial-targeted W7 make-up brand was its portfolio star and W7 brand sales in the UK were up 17.1% while they rose 16.8% internationally last year, illustrating the importance of growth outside of the UK market.
China and the US remain of particular focus for its international W7 expansion and it’s targeting these countries with focused e-commerce sites, along with social media activities and marketing activities. During the year it launched its Chinese and US e-tail sites with the functionality to transact in local currencies.
Warpaint’s primary focus on its own brands like W7 made sense as they represented 79% of overall revenue (17% of revenue came from its much smaller close-out business). But W7 wasn’t the end of the story.
It launched its Very Vegan range during the second half of the year and “has been very encouraged by the sales" seen in the period. For 2017, the range included 15 Stock Keeping Units (SKUs) and for 2018 it’s adding another six SKUs.
And it’s increasing SKUs more widely too. The Outdoor Girl brand now has 11 in its range and the star W7 brand is being grown in accordance with its position as Warpaint’s top label. The W7 Christmas range has now grown to 75 SKUs and the everyday range includes 687 live SKUs.
And what about that acquisition of Retra Holdings last year? This UK colour cosmetics business has a significant focus on the gifting market, principally for high street retailers and supermarkets including Boots, Superdrug and Asda. Retra owns three major brands, Technic, Body Collection and Man'stuff, in addition to supplying ‘white label’ cosmetics for major retailers including Asda and Matalan.
The company seems upbeat about the purchase and also said Wednesday that the acquisition of this division is likely to push Warpaint’s second-half sales and profits much higher than the first half given the weighting of the product offer towards events like Christmas.
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