Warpaint London Plc (LON:W7L) Chief Executive Officer Sam Bazini caught up with DirectorsTalk to discuss audited results for 2024, record revenues, international expansion, and the integration of Brand Architekts.
Q1: Sam, could you just start off by walking us through the key highlights from 2024?
A1: I think the biggest highlight for us was reaching revenues of over £100 million, that was a big milestone for us from where we come from when we floated in 2016 with revenues of £27/28 million. We were delighted with the record profits as well of £24 million PBT and again managing to have no debt.
Other highlights in 2024, we’ve had some strong growth in the UK, 8%, Europe’s up 22% and the US is up 22%. Our online grew by 34% so we’re £8.4 million in revenues, which now represents over 8% of the group’s revenues.
We had further expansion into Boots, Superdrug and Tesco in the UK, as well as further growth and expansion into Five Below, who are in the US, Etos, who are a large group in the Netherlands, as well as Normal Apps, which is a big customer of ours in Scandinavia that actually span right across Europe. We also had launches into Morrison’s 220 stores, as well as putting product into Walmart, which was a big target for us.
Q2: How has the integration of the acquisition of Brand Architekts gone so far? What impact will their additional brands have on Warpaint London going forward?
A2: We’re very pleased with the acquisition, in fact, the more we see of it, the more we like about it. We have only had the business for eight weeks, but we’ve taken immediate steps to make sure that going forward, the business is profitable.
Some of the steps that we’ve taken:
The first thing was to eliminate the PLC costs. Actually, this isn’t a step that we took, it’s a consequence of the acquisition. Obviously, the board disappears and some of the PLC costs and that was about £400,000/£500,000, this is a significant saving there.
They had an office ten miles from us, which we’ve closed down, all their staff are now coming into our offices, it’s a saving of about £70,000/£80,000. We also found that they were completely over resourced in certain departments, so we have shed some staff, which is never a pleasant thing to do, but it was essential for the viability of the business going forward.
We’re also looking to reduce our logistic costs, which we’ve given notice for some of our ???, and this is something that will kick in next year as we bring all the logistics in-house.
Things that will drive the growth:
We’re introducing all the Brand Architekts brands to our customers, both in the UK and abroad. We do around £60 million abroad every year, Brand Architekts currently do about £3.5 million so there’s a great potential for growth there.
Sourcing of the products, where there’s going to be significant saving in sourcing Brand Architekts products. Some of their cost of goods at the moment are eye-watering, so there’ll be some big savings there. What we’re doing, we’re discontinuing, clearing out unprofitable brands and products and we’re going to focus on five main brands that bring in 90 odd percent of their revenue.
We expect to be profitable this year. We’ve always said that we’ll make a profit this year but next year, 2026, is when we’ll really see all the actions that we’ve taken start to come through. We’ll have savings from new product development, savings from resourcing, and savings from logistics. So that’s when we’ll really feel the benefit of all these changes we’ve made.
Very exciting for us, this acquisition.
Q3: With the significant growth in direct online sales, how does the group plan to further capitalise on this trend in the upcoming year?
A3: Well, there’s really not too much to say about online. For us, it’s always been an add-on, and we try and grow it steadily and profitably. We’re not looking to set the world alight by creating growth for the sake of growth. Could we grow faster? Could we get to revenues of £20 million this year? We probably could, but we burn a lot of cash doing it and that’s never really been our strategy just to grow for the sake of growing in all parts of the business.
So really, with the online business, we expect to grow again this year. Last year, I believe, I mentioned it earlier, I think about 34%/35% growth last year. We expect good growth this year, but it will be sustainable and profitable.
Q4: What strategies are in place to continue expanding the group’s presence or brand presence, particularly with the new retailer partnerships and expanding with those you already service?
A4: If you look at this year, it’s more of the same, we’re targeting the large retailers.
So, if we’re looking at this year, we announced this morning that we’re going to be going into Superdrug, a further 140 stores with our full range of cosmetics and we’ve also got some travel sizes going into all stores, which is very exciting for us because it will give us a presence across all the Superdrug stores. It is very, very good for brand building.
Tesco confirmed an additional 150 stores in our impulse offering that we do till points, which is also is very exciting because all this again is very is very good for building the brands.
Boots are taking gifting products for the first time this year into 350 stores, and we’ve also got accessories going in later on in the year into 250 stores. So, again, we’re building our brands.
In the U.S. We’ve been given another 399 stores by CVS that will go in later this year, early next year. So, from that point of view, it’s obviously working. We’re in about 600 stores, we’re getting another nearly 400 so the brand is working with CVS, which is very encouraging.
Italy, we’ve we’re going to launch into a new retailer called Tigota. We’ve got our full range of 200 products of W7 products, going into 200 of their stores and we’ve got an additional 400 stores with a small capsule range.
Q5: So, just looking ahead then, how does Warpaint London plan to manage challenges such as increased U.S. tariffs while maintaining its growth trajectory and profit margins for 2025?
A5: Regarding the tariffs, as you can imagine, we’ve been asked about this a lot over the last few weeks and obviously, it’s not helpful but the U.S. literally represents about 8% of our business currently and last year, it represented 3% of the profit. So, it’s not material, it’s not damaging to the business, not catastrophic. We also do 40% of our business in the U.S. online so we’re able to control the prices and tick them up if we need to. It’s not that you have to have discussions with retailers.
Tariffs do make it more difficult to plan ahead but we’ll continue to trade and try and grow the U.S. as much as we can. We want to stay in the game. However, as a business, the management has taken a decision. We’re not going to indulge in any loss-making business in the U.S, we’re only going to take business where we’re not going to make a loss and we’re going to take opportunities to grow.
In the other regions, we’re confident that we can grow and therefore, we will grow this year. The board’s expectations remain unchanged, as does the house broker’s forecast, which is revenues of £128.5 million with an adjusted PBT of £29 million.
So, we’re confident for the year ahead.
