Warpaint London is a creative design-focused cosmetic brand proposition delivering high-quality cosmetics at affordable prices. Its focus is to develop its flagship brand, W7, while capitalising on the growth potential of e-commerce and international expansion. Consensus forecast revenue growth is underpinned by the implementation of the e-commerce strategy and broadening of international operations.
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Warpaint London |
World of Warpaint
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10 October 2017 |
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Warpaint London is a creative design-focused cosmetic brand proposition delivering high-quality cosmetics at affordable prices. Its focus is to develop its flagship brand, W7, while capitalising on the growth potential of e-commerce and international expansion. Consensus forecast revenue growth is underpinned by the implementation of the e-commerce strategy and broadening of international operations.
Fourfold strategy
Warpaint’s strategy to grow focuses on the continuing development of the W7 brand. The disruptive potential is the ability to move from idea to market in 3-5 months, which is beyond the capability of larger cosmetics houses. W7 is an innovative, design-focused brand proposition, predominantly selling to high street retailers and independent beauty shops. A global growth strategy sees it now in 56 countries, with key focus on the US and China. Additionally, the online channel is a growing contributor to revenue and highlights the scope for further sales growth. Management is also progressing opportunities for other brands such as Taxi.
International ambitions in colour cosmetics
The colour cosmetic market is valued at c $52bn according to a global industry study and forecasts suggest this will rise to $80bn by 2026, a CAGR of 4.8%. Warpaint aims to build internationally recognised brands, starting with W7. Exports of W7 are 58% of revenue as UK dependence reduces. By enhancing distribution and marketing platforms to incorporate social media and e-commerce, the offering should become more widely available to an international audience. W7 has recently launched a new range of ‘Very Vegan’ cosmetics, which has shown encouraging sales traction. In addition to other brands, including Outdoor Girl, it has a close-out division, which buys and sells close-out and excess stock of branded cosmetics.
Valuation
Warpaint’s joint CEOs have been working together for 25 years and have deep experience of their market. The own-brand division (83% of revenue) enjoyed over seven years of revenue growth before IPO, and consensus forecasts are for meaningful revenue and profit growth to continue. At interim, PBT before plc costs rose 6% but with a strong Christmas order book, consensus expects FY17 PBT to grow 13% inclusive of plc costs in 2017. Warpaint’s progressive dividend policy is reflected in the forecasts, with dividends per share increasing y-o-y from FY16 to FY18. Net cash of £3.5m in FY16 is expected to grow to £7.0m in FY17.
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Consensus estimates
Source: Company results, Stockdale Securities. Note: *Pro forma incl. CloseOut business. |
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Research: Healthcare
On 7 October 2017, Selvita announced that the FDA has placed a full clinical hold on the company’s open-label, dose escalation Phase I/II clinical trial with SEL24 (dual PIM/FLT3 kinase inhibitor) in patients with relapsed/refractory acute myeloid leukemia (r/r AML). The decision was based on a fatal haemorrhagic stroke after venous thrombosis in one patient enrolled in the last cohort 5 in part 1 of the study designed to establish the recommended dose. The adverse event was classified as possibly related to the study treatment, which prompted the FDA to issue the clinical hold.