Home » Q & A » Warpaint London PLC Q&A: Interim Results for the six months to 30 June 2018 (LON:W7L)
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Warpaint London PLC Q&A: Interim Results for the six months to 30 June 2018 (LON:W7L)

Warpaint London PLC (LON:W7L) Chief Executive Officer Samuel Bazini and Chief Financial Officer Neil Rodol caught up with DirectorsTalk for an exclusive interview to discuss their interim results for the six months to 30th June 2018.

 

Q1: First off, congratulations on yet another period of growth for Warpaint London. Neil, can you talk us through the highlights for the first half of the year?

A1: I thought I would start with some important facts and figures or the half year, with some financial highlights.

Starting with sales, sales are up 39% for the first half of the year on the previous year, that does include the Retra business we acquired on the 30th November 2017. It’s important to note that like-for-like sales on the core business, if we exclude Retra, sales were 7% up year-on-year which is good growth for the first half. In our own brands, overall if we look at the business at brands and close-out now, the own brand business is 36% up on the year before including Retra and the close-out business had a good first half, it’s grown 33% year-on-year although we expect this business to be flat mainly because it’s opportunity-based.

Looking at margins, gross profit for the business, Retra has contributed £6.7 million. When we look at the adjusted profit for operations line, if we talk about that before exceptional items, amortisation and depreciation, we delivered £2.8 million of adjusted profit which you would compare against £3.1 million in the previous year. If we strip out Retra, who historically have made a loss in the first half of the year PBT level, because they’re an all-year round business, it’s not dominant, it’s a gift business which 75% of their turnover comes in the second half of the year, if we strip them out we’ve actually achieved a like-for-like adjusted profit from operations at £3.3 million. So, we’ve got good growth there of about 9% in the underlying adjusted profit from operations.

Net cash was up £2.1 million in the year demonstrating our strong cash conversion cycle and that enables us to provide a progressive dividend policy which is 7% up at the interim at 1.5p.

Some operational highlights, perhaps to put some more meat onto the good growth of the first half of the year.

The W7 brand, particularly, was up in the EU at 35% and US, in dollar terms, was up 15% and the UK is now 44% of total business so this is all fits into the strategic target for the business over a 3-year period. We’ve got a strategy put in place by the Board now that we’re following to deliver the growth that’s required.

The Christmas order book significantly increased by 14% and in the US our e-commerce strategy has been soft launched with local fulfilment. Our acquisition, the Retra business, has been successfully integrated and we’ve wo the Queen’s Award for Enterprise recently for international trade.

Just after the half-year, we acquired our US distributor, Leeds Marketing, this will help deliver on our US strategy for the business. Finally, following the determination of the profits of Retra, we received a payment of £500,000 against the purchase price we paid in November 2017.

So, to summarise all of that, we continue to build our brands internationally, we remain focussed on growth and net margin, we aim to be debt-free again once we repay debt required at Retra, £0.9 million, and we continue to be cash generative enabling a progressive dividend policy.

To conclude with a strong balance sheet of £40 million, prospects are encouraging, we’re well placed to deliver increased shareholder value in 2018 and beyond and the outlook for Warpaint London remains positive.

 

Q2: Sam, you acquired your distributor just after period end which allows you to further your penetration of the US market, what opportunities do you actually see in the States?

A2: First of all, I’d like to say the acquisition, we feel, was a smart move. By buying a distributor in the US, it gave us instant access and control over our brands in the biggest cosmetics market in the world.

We also know that the America companies prefer to buy from US companies rather than have to import and go through the whole rigmarole of clearing things through customs.

We’ve hired new people and taken on larger offices including a showroom in the heart of New York city, it’s opposite the Empire State building, and this will enable customers to visit us and see hour full; range of W7 and Technic products which they’ve never been able to do before.

We’ve hired a New York-based PR company to build recommission of the W7 and Technic brands, I’m in fact going to New York next week, the PR company is introducing us to various magazines to help us start to promote the brand in the USA.

We’re now running our e-commerce site, fully up and running, in the US along with the fulfilment house, we feel this will start to increase web sales. By having a US-based website, we’ll able to reduce delivery times, cost of transport taxes etc. for the consumer and we’re sure it’ll make them more inclined to buy from the site.

Over the last few months, we’ve managed to open some new accounts, Century 21, Macys Backstage, Forever 21, just to name a few., and we’re particularly excited about Forever having in excess of 600 stores and their first order is being delivered in October. We’re also in discussions with some of the large retail chains with a view to them stoking our W7 and Technic brands in the future and we hope we’ll be able to update you further on our progress next year.

 

Q3: Talking about next year, what is Warpaint London’s strategy for near and long term for your brands?

A3: The strategy for the UK is to expand our brands across all of the retail sectors. Currently, we’re concentrated in the discount area and the online area and although these are the fastest growing sectors, they only represent about 25% of the UK market. So, the strategy for the UK is to go after the other 75% which is pharmacies and the grocery trade with supermarkets. We’ve brought someone who’s an expert in this field, he knows a lot of the pharmacy chains and we’re starting to put product into these areas and getting trials from some of the big pharmacy chains.

We are continuing with our current social media strategy of using reality stars; bloggers and vloggers; to promote the brands which is helping to increase brand awareness in the UK and worldwide.

With regards to our export strategies for the brands, we’ll continue to expand all of our geographies and we’re doing this by exhibiting at numerous trade shows overseas and I’m happy to say this is working very well for us. Our brands our now sold in over 60 countries.

We’re also starting to use PR and media companies overseas to help promote our brands as well as taking on a PR company in the US, which I previously mentioned. We’ve also engaged services of a PR company in Spain and this has paid huge dividends for us, Spain is now our fastest growing market in Europe and because all the content is Spanish speaking, we’re able to use this content for the South America market as well.