Shares in Warpaint London (W7L:AIM) leapt 14% to 174p after the cosmetics supplier said it now expects results for the year to December 2021 to be ‘ahead of market expectations’.
Shore Capital analysts were quick out of the blocks, hiking their 2021 pre-tax profit forecast by 16% to £5.8 million and upping medium-term forecasts by double-digits to reflect management’s confidence as demand trends continue to improve.
The broker believes Warpaint looks ‘well set to deliver strong medium-term profit growth and net cash generation’.
EYE-CATCHING RECOVERY
The owner of the W7 and Technic brands, Warpaint also supplies white label cosmetics to high street retailers and sells cosmetics using its other brand names including Man’s Stuff, Body Collection, Very Vegan and Chit Chat.
In a surprise update triggered by better than expected second half trading, reflecting growth from new and existing customers alike, Warpaint insisted sales should recover to pre-pandemic levels in 2021.
In fact, management is looking for a similar result to 2019, when the business turned over the best part of £50 million. And this is despite Warpaint experiencing continued Covid-related disruption in 2021, notably those government-imposed lockdowns in the early part of the year.
Impressively, adjusted pre-tax profit will not only be better than current market expectations, but ahead of the £5.2 million delivered in pre-Covid 2019 and north of the £2.3 million generated in pandemic-disrupted 2020.
Warpaint said its gross margins are running ahead of those achieved in 2020 and 2019 despite increased supply chain costs, ‘particularly with freight’.
BROAD-BASED GROWTH
CEO Sam Bazini said Warpaint is continuing to see ‘particularly strong growth in the UK, significant growth elsewhere internationally and further increases in online sales’.
He added that Warpaint has ‘significant opportunities for further growth, both with our existing retailers, those such as Boots where we are expecting to launch soon, and with others that we are in discussions with.’
Shares highlighted the positive momentum behind Warpaint in our cover story here in September, arguing that the company looks a compelling play on the post-pandemic reopening of society.
Its brands are performing well in the UK, the growth in W7 UK sales assisted by a rollout into Tesco (TSCO) stores, and there’s enormous potential for growth across the pond, where Warpaint’s products are stocked in the likes of TJ Maxx and Five Below.
