- Positive momentum continues
- Record first quarter sales
- 10% earnings upgrade implied
Affordable colour cosmetics supplier Warpaint London’s (W7L:AIM) stunning cycle of upgrades continues.
The company, which supplies its wares to the likes of Tesco (TSCO), Boots and Superdrug, has raised its year-to-December 2024 outlook after experiencing continued rapid growth in the first quarter, sending shares in the owner of the W7 and Technic brands 11% higher to 415p.
EYE-CATCHING QUARTER
In an unscheduled update, Warpaint said the strong trading witnessed in 2023’s final quarter continued into the first quarter of 2024.
For the three months to 31 March 2024, sales shot up 28% to roughly £23.5 million, a record first quarter for the group.
Margins remained ‘robust’ and ahead of those achieved in 2023, helped by weaker freight rates, new product launches and Warpaint’s growing scale. Given this strong start to the year, Warpaint said the outlook for full year 2024 is expected to be ahead of current market expectations.
Shore Capital observed that its 2024 forecasts, pointing to pre-tax profits of £19.1 million and earnings per share of 18.6p, are ‘at least 10% too low’, although the house broker will wait for the annual results on 24 April before ratcheting up its estimates.
Earlier this year, Iver-based Warpaint revealed that sales and pre-tax profits for 2023 had breezed past previous expectations.
BROAD-BASED GROWTH
Shore Capital was pleased to see Warpaint’s outperformance has been ‘broad-based’, reflecting the strong momentum already in the business, with Warpaint ‘undertaking more revenue with a greater number of customers, across additional stores and with an expanding number of SKUs (stock keeping units)’.
The broker also pointed out that the value-oriented player, which sells online via its own website and through Amazon and Chinese platform Tmall, hasn’t implemented a price increase since January 2022, so all the growth is being driven by volume.
Warpaint also highlighted its strong balance sheet, unfettered by debt and flush with £7.5 million in cash even after investment in a significant increase in stock to satisfy expected demand later in the year.
IMMATURE & MODESTLY VALUED
‘We have written on many occasions that Warpaint is in the foothills of its growth and that with annual revenue of circa £100 million and a large market opportunity, it is not beholden to modest changes to market growth in any particular geography,’ enthused Shore Capital.
‘Still very immature with strong capital-light growth, sustained cash generation and a growing net cash position, we view the Warpaint investment case as compelling.’
