Warpaint London – ahead of its Finals tomorrow, its shares are very much on the up again, now 385p while brokers’ average TP is 667p

28.04.2025

Tomorrow morning, 29th April, Warpaint London (LON:W7L) will be announcing its 2024 results.

This cosmetics group is on a growth momentum that could be reflected in an improving share price following the results.

The Business

The £311m-capitalised company sells branded cosmetics under the lead names of W7 and Technic.

W7, which represents 64% of branded revenue, is a design-focused cosmetic brand with a focus on the 16-34 age range, delivering high-quality cosmetics at affordable prices.

It is sold in the UK primarily to major retailers such as Tesco, Boots and Superdrug, and internationally to local distributors or retail chains such as Normal (DK), Five Below, CVS, Walmart, and Sally's Beauty (US).

W7 is also available online via its own website, Amazon (US), Tmall and Xiaohongshu (China).

The Technic brand, which represents 36% of revenue, is sold in the UK and continental Europe with a significant focus on the gifting market, principally for high street retailers and supermarkets.

In addition, Warpaint supplies own brand white-label cosmetics produced for several major high street retailers, which represents around 4% of group revenue.

The group also sells cosmetics using its other brand names of Man'stuff, Body Collection, and Chit Chat, each targeting a different demographic.

The company is geographically diverse, with the UK representing 36% of revenue, continental Europe 52%, the US 8% and its products were sold in a further 43 markets, representing 4% of revenue (FY 2023).

Trading Update

In early February the group announced its Trading Update for the 2024 year, declaring that it had shown a strong trading performance for the year as a whole.

What is more, it also stated that it had made a positive start to the current year.

Revenue for the year to end-December 2024 is expected to be approximately £102.0m (£89.6m) and profit before tax to be some £24.0m (£18.1m).

It declared that the strong trading performance had continued into January 2025, with revenue approximately 15% ahead of January 2024, at an improved margin.

Management Comment

At that time CEO Sam Bazini stated that:

"I am pleased with the Group's performance in 2024 and the strong start to 2025, despite ongoing consumer spending headwinds.

It was also pleasing that improved margins were maintained throughout the year.

We expect to see continued growth across the Group in 2025 and we look forward to completing the acquisition of Brand Architekts later this month and integrating the business into the Group."

The Equity

There are 80.79m shares in issue, with some 43% in institutional hands.

The larger holders include Samuel Bazini, CEO (19.80%), Eoin Macleod, MD (19.80%), Schroder Investment Management (11.69%), JP Morgan Asset Management (7.70%), BI Asset Management (4.37%), Rathbones Investment Management (4.06%), GAM International Management (2.86%), Charles Stanley Investment Management (2.18%), FIL Investments International (1.91%) and Close Asset Management (1.84%).

Analyst Views

At Shore Capital Markets, its analysts Darren Shirley and Clive Black considered that the share price weakness following the Trading Update was an over-reaction.

Accordingly, they saw the sell-off as a significant opportunity to access cash-generative double-digit growth alongside very attractive margins, and a prospective dividend yield of 3.4%.

Their estimates for 2024 are for £102.0m revenues, while adjusted pre-tax profits could have risen 30% to £24.0m, lifting earnings 25.5% higher to 23.1p (18.4p), with its dividend almost 28% higher at 11.5p (9.0p) per share.

Including benefits from this February’s acquisition of Brand Architekts, the analysts look for the current year revenues to rise to £128.5m, with £29.0m profits, 27.0p earnings and paying a 13.5p per share dividend.

For the year to end-December 2026 they have pencilled in £147.5m sales, £33.5m of profits, 31.0p earnings and a dividend per share of 15.5p.

They stated that:

“We remain of the view that Warpaint remains immature across its expanding number of markets, with considerable whitespace opportunities across the UK and Northern Europe, whilst significant global markets are still very much in their embryonic phases.”

In My View

Despite the abrupt pull-back in the group’s shares in February, this group is still very much on a growth path.

Tuesday’s results and the accompanying statement could well help to engender more interest in the stock, which I consider offers some good upside from the current 385p.