TIDMW7L
RNS Number : 9833M
Warpaint London PLC
20 September 2023
20 September 2023
Warpaint London PLC
("Warpaint", the "Company" or the "Group")
Interim Results for the six months ended 30 June 2023
Record performance driven by significant growth in all
regions
Warpaint London plc (AIM: W7L), the specialist supplier of
colour cosmetics and owner of the W7 and Technic brands is pleased
to announce its unaudited interim results for the six months ended
30 June 2023.
Financial Highlights
-- Strong growth in sales during the period across all geographic
regions, to achieve a record first half, reflecting the focus
on growing sales of the Group's branded products
-- Group sales increased by 46% to GBP36.7 million in H1 2023
(H1 2022: GBP25.2 million)
-- UK revenue increased by 28% to GBP13.3 million (H1 2022:
GBP10.4 million)
-- International revenue increased by 58% to GBP23.4 million
(H1 2022: GBP14.8 million)
-- Gross profit margin increased to 39.1% (H1 2022: 39.0%), due
to successful management of continued supply side inflation
-- Adjusted EBITDA of GBP7.9 million (H1 2022: GBP4.4 million)*
-- Statutory profit from operations of GBP6.3 million (H1 2022:
GBP3.5 million)
-- Cash of GBP7.1 million as at 30 June 2023 (30 June 2022: GBP4.3
million) and no debt
-- Statutory basic EPS was 6.22p (H1 2022: 3.54p)
-- The board has declared an increased interim dividend of 3.0p
per share (2022 interim dividend 2.6p per share)
-- Consistent with previous years due to Christmas gifting orders
and its momentum, the Group's sales are expected to again
be second half weighted
* Adjusted for foreign exchange movements, share based payments
and exceptional items. Adjusted numbers are close to the underlying
cash flow performance of the business which is regularly monitored
and measured by management.
Operational Highlights
-- Significant growth in all geographic areas: sales in the UK
increased 28%, Europe by 56%, the US by 83% and the rest of
the world by 53% in H1 2023, compared to H1 2022.
-- W7 brand sales increased by 67% and Technic brand sales increased
by 37% in H1 2023, compared to H1 2022
-- A range of 158 Technic products have launched in an initial
four Asda superstores on a trial basis ahead of Asda's cosmetic
range review undertaken in Q4 2023
-- Significant further expansion in the US with H-E-B stores,
CVS BIRL stores, where initial sales have been ahead of expectations,
as well as launching in Sallys and Nordstrom Rack
-- Online sales continue to accelerate in the UK, EU, China and
the US, increasing by 212% to GBP2.0 million in H1 2023, compared
to H1 2022
Post-Period End Highlights
-- Continued positive business momentum post period end, with
unaudited Group sales for the eight months to 31 August 2023
of GBP54.5 million (8 months to 31 August 2022: GBP37.5 million)
-- After an initial trial of W7 products in 20 New Look stores,
the Group is now rolling out W7 product to a further 200 New
Look stores in the UK during 2023
-- The W7 brand has been launched in an initial 73 Superdrug
stores in September 2023
-- The Group's expansion strategy continues, with further planned
launches in H2 2023 and 2024 with new major retailers and
the expansion of the range of products stocked with certain
existing customers, particularly in the UK and the US
Commenting, Sam Bazini Chief Executive, said:
"I am delighted with the Group's continuing strong performance
in the first half of 2023, with a record level of sales and profits
delivered. I believe the Group is very well positioned to achieve
further growth and I remain confident that margins can be
maintained going forward.
"Warpaint is a global business with the capacity, expertise and
strategy, coupled with balance sheet strength, to drive future
growth from both our existing and new customers. Whilst we continue
to experience good growth in the UK, I am particularly pleased with
the growth we are seeing in Europe and the US. As in previous
years, the Group's sales are expected to remain second half
weighted, reflecting Christmas seasonal sales as well as ongoing
momentum.
"We look forward to updating further as the year progresses, and
with significant opportunities for continued growth, both already
secured with our existing retailers and in discussion with
additional major retailers globally, I am confident that the Group
will continue to perform well for the remainder of the year and
beyond."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 which is part of UK law
by virtue of the European Union (Withdrawal) Act 2018
Enquiries:
Warpaint London c/o IFC
Sam Bazini - Chief Executive Officer
Eoin Macleod - Managing Director
Neil Rodol - Chief Financial Officer
Shore Capital (Nominated Adviser & Broker)
Patrick Castle, Daniel Bush - Corporate
Advisory
Fiona Conroy - Corporate Broking 020 7408 4090
IFC Advisory (Financial PR & IR)
Tim Metcalfe, Graham Herring, Florence
Chandler 020 3934 6630
Warpaint London plc
Warpaint sells branded cosmetics under the lead brand names of
W7 and Technic. W7 is sold in the UK primarily to retailers and
internationally to local distributors or retail chains. The Technic
brand is sold in the UK and Europe with a significant focus on the
gifting market, principally for high street retailers and
supermarkets. The Group also sells cosmetics using its other brand
names of Man'stuff, Body Collection and Chit Chat.
CHIEF EXECUTIVE'S REVIEW
I am delighted to report that in H1 2023 the Group achieved a
record level of first half sales and profits, reflecting the
success of the Group's strategy of focusing on growing sales of its
branded products globally. Over 95% of Group sales in the first
half (H1 2022: 88%) were from the sale of the Group's branded
products as we focused on our core W7, Technic, Body Collection,
Man'stuff and Chit Chat brands. These brands encompass a wide range
of high-quality cosmetics and toiletries at an affordable price,
with each brand having its own unique offering.
In H1 2023, Group sales increased by 46% to GBP36.7 million (H1
2022: GBP25.2 million), at an increased gross margin of 39.1% (H1
2022: 39.0%), despite continued supply side inflation, and resulted
in statutory profit from operations of GBP6.3 million (H1 2022:
GBP3.5 million) .
Our strategy remains to grow sales through our existing
customers' outlets and winning new customers with significant sales
footprints, both in the UK and internationally, together with
continuing to grow our online sales. In H1 2023, we saw significant
growth in all our geographic regions with sales in the UK
increasing by 28%, in Europe by 56%, in the US by 83% and in the
rest of the world by 53%, compared to H1 2022. Direct online sales
also continue to be an important growth area, with a 212% increase
online sales in H1 2023 versus H1 2022, and they now represent over
5% of total Group sales.
The global cosmetics market continues to see customers
transferring to more value orientated brands, such as those
produced by the Group, and I believe we are very well placed with
our high-quality focused offering to capture further market share
and to continue to grow sales and profits. The Group is in active
discussions with new major retailers globally and with certain
existing customers regarding expansion of the range of the Group's
products stocked.
W7
The Group's lead brand remains W7, with W7 sales in H1 2023
increasing by 67% to GBP24.2 million (H1 2022: GBP14.5 million),
accounting for 66% of total Group revenue (H1 2022: 57%).
Strong growth was seen in all sales regions, with W7 sales in
the UK increasing by 51% to represent 31% of W7 sales in the period
(H1 2022: 34%), as even stronger growth was experienced in regions
outside of the UK. W7 sales in the UK continue to see substantial
growth and will be furthered following the launch of W7 products in
an initial 73 Superdrug stores earlier this month, alongside growth
with existing retailers, including Tesco, Boots and New Look.
W7 sales to Europe grew by 77% in H1 2023, to represent 54% of
W7 sales in H1 2023(H1 2022: 51%). The sales growth in Europe was
assisted by additional sales to existing customers, particularly as
they expanded the size of their estates, and to new customers.
W7 sales in the US grew by 87% in H1 2023, to represent 8% of W7
sales, driven by growth with H-E-B stores and CVS BIRL stores,
where initial sales have been ahead of expectations, as well as
launching in Sallys and Nordstrom Rack.
Sales of W7 in the rest of the world grew by 51% in H1 2023
compared to H1 2022, to represent 6% of overall W7 sales.
Technic
In H1 2023 sales of Technic (which includes Technic and the
other Retra brands, including Body Collection and retailer own
brand white label cosmetics) grew by 37% to GBP10.9 million (H1
2022: GBP7.9 million), with sales growth seen in all geographic
regions.
In H1 2023, UK revenues from the Technic brands were up 38% on
H1 2022, with strong growth also seen in Europe, with sales up
31%.
Sales of the Technic brands in the US and the rest of the world
remain small in the context of the Group as a whole, representing
approximately 2% of Group revenues, although the Technic brands
continue to gain traction outside their traditional markets, with
US sales increasing by 334% and rest of the world sales growing by
58% in H1 2023, compared to H1 2022.
Overall sales of the Technic brands were 30% of total Group
revenue in H1 2023 (H1 2022: 31%).
E-commerce
Online sales grew in all regions in H1 2023 to reach GBP1.97
million (H1 2022: GBP0.63 million), an increase of 212%, at a
similar margin to other Group sales. Direct online sales, as a
proportion of the Group's overall sales, have grown significantly,
to represent 5.4% of Group sales in H1 2023 (H1 2022: 2.5%).
The Group continues to focus on growing sales through the W7 and
Technic brands' own bespoke e-commerce sites, and in the UK, Europe
and the US on Amazon, and in China through official W7 brand stores
owned by the Group on Taobao Mall (Tmall), the most visited B2C
online retail platform in China and Xiaohongshu (Red), one of
China's foremost social media, fashion and luxury shopping
platforms. Growth in online sales continued post period-end. For
the eight months to 31 August 2023 online sales were up by 200% to
GBP2.7 million, compared to the same period in 2022 (eight months
to 31 August 2022: GBP0.9 million).
Close-out
Close-out sales are not a core focus for the Group, although
advantage is taken of profitable close-out opportunities as they
become available, and they continue to provide a significant and
profitable source of intelligence in the colour cosmetics market.
In H1 2023, close-out division sales reduced by 42% to GBP1.6
million (H1 2022: GBP2.8 million) and represented only 4% of the
overall revenue of the Group (H1 2022: 11%).
Customers & Geographies
The largest markets for sales of the Group's brands are in
Europe and the UK, with a growing presence in the US, as well as
significant sales to Australia, coupled with global online sales.
In H1 2023 the Group's top ten customers represented 67% of
revenues (H1 2022: 66%).
UK
Sales in the UK accounted for 36% of Group sales in H1 2023 (H1
2022: 41%). Overall, UK sales grew by 28% in H1 2023, with
increased sales of both the Group's lead brand W7, up 51%, and the
Technic brands, up by 38% compared to H1 2022.
The top ten UK Group customers accounted for 73% of UK sales in
H1 2023 (H1 2022: 80%).
Strong growth was seen during the period with many UK retailers.
Additionally, after an initial trial of W7 product in 20 New Look
stores, the Group is now rolling out W7 products to a further 200
New Look stores during 2023. We are also in continued talks with
other major UK retailers who stock W7 product to increase the W7
offering in their stores and anticipate further expansion across
their estates this year and into 2024.
Europe
Europe has grown in recent years to become the largest sales
area for the Group, accounting for 51% of sales in H1 2023 (H1
2022: 48%). During the first half, European sales increased by 56%
compared to H1 2022, with growth seen both through existing
customers and those new to the Group. Sales for the Group's brands
into Europe are mainly to Denmark, Spain and Sweden.
US
Sales in the US in H1 2023, in Sterling terms, increased by 83%,
accounting for 7% of Group sales (H1 2022: 5%). The Group has
significantly widened its presence in the US, including the recent
additions of H-E-B stores and CVS BIRL stores, where initial sales
have been ahead of expectations, as well as launching in Sallys and
Nordstrom Rack during the period. Additionally, there is continued
focus on growing US online sales via Amazon FBA.
In the US, 97% of sales in H1 2023 (H1 2022: 88%) were from the
sale of the Group's brands.
Rest of the World
Sales in the rest of the world for the Group in the period
increased by 53%, to account for 6% of overall Group sales (H1
2022: 6%). The focus continues to be on Australia, China and other
countries where profitable sales in appropriate volumes can be
made.
The Group has no suppliers in either Russia or Ukraine, and no
significant historic sales to either country.
Dividend
In accordance with the Group's policy to continue to pay
appropriate dividends, the board is pleased to declare an increased
interim dividend of 3.0p per share (2022 interim dividend: 2.6p per
share) which will be paid on 24 November 2023 to shareholders on
the register at 10 November 2023. The shares will go ex-dividend on
9 November 2023.
Summary and Outlook
I am delighted with the Group's continuing strong performance in
the first half of 2023, with a record level of sales and profits
delivered. I believe the Group is very well positioned to achieve
further growth and I remain confident that margins can be
maintained going forward.
Warpaint is a global business with the capacity, expertise and
strategy, coupled with balance sheet strength, to drive future
growth from both our existing and new customers. Whilst we continue
to experience good growth in the UK, I am particularly pleased with
the growth we are seeing in Europe and the US. We have put in place
a robust supply chain and distribution network to ensure that we
are able to supply our retailer's outlets on time with the product
that their customers are demanding.
As in previous years, the Group's sales are expected to remain
second half weighted, reflecting Christmas seasonal sales and
ongoing sales momentum. We anticipate updating further on trading
later in the year, and with significant opportunities for continued
growth, both already secured with our existing retailers and in
discussion with additional major retailers globally , I am
confident that the Group will continue to perform well for the
remainder of the year and beyond.
Sam Bazini
Chief Executive Officer
20 September 2023
CHIEF FINANCIAL OFFICER'S REVIEW
The first half of 2023 was a record for the Group and
significantly ahead of the first half of 2022, with improved sales,
gross margin and profit before tax. The Group continues its
strategy of building the W7 and Technic brands in the UK and
internationally, and we remain focused on margin, being debt free,
and generating cash.
Headline results, shown below, represent the performance
comparisons between the consolidated statements of income for the
half years ended 30 June 2023 and 30 June 2022. Adjusted numbers
are closer to the underlying cash flow performance of the business
which is regularly monitored and measured by management, the
adjustments made to the statutory numbers are as follows:
Statutory Results 6 Months ended 6 Months ended
30 June 2023 30 June 2022
Revenue GBP36.7m GBP25.2m
--------------- ---------------
Earnings before interest, corporation GBP7.3m GBP5.4m
tax, depreciation and amortisation
("EBITDA")
--------------- ---------------
Profit from operations GBP6.3m GBP3.5m
--------------- ---------------
Profit margin from operations 17.1% 14.0%
--------------- ---------------
Profit before tax ("PBT") GBP6.2m GBP3.5m
--------------- ---------------
Earnings per share ("EPS") 6.2p 3.5p
--------------- ---------------
Cash and cash equivalents GBP7.1m GBP4.3m
--------------- ---------------
Adjusted Statutory Results 6 Months ended 6 Months ended
30 June 2023 30 June 2022
Adjusted EBITDA GBP7.9m* GBP4.4m*
--------------- ---------------
Adjusted EPS 6.5p* 5.2p*
--------------- ---------------
6 Months ended 6 Months ended
30 June 2023 30 June 2022
Statutory profit from operations GBP6.3m GBP3.5m
--------------- ---------------
Depreciation GBP0.9m GBP0.8m
--------------- ---------------
Amortisation GBP0.1m GBP1.1m
--------------- ---------------
EBITDA GBP7.3m GBP5.4m
--------------- ---------------
Foreign exchange movements GBP0.6m -GBP1.1m
--------------- ---------------
Exceptional items GBPnil GBP0.1m
--------------- ---------------
Share based payments GBP0.1m GBP0.1m
--------------- ---------------
*Adjusted EBITDA GBP7.9m GBP4.4m
--------------- ---------------
Statutory profit attributable GBP4.8m GBP2.7m
to equity holders
--------------- ---------------
Exceptional items GBPnil GBP0.1m
--------------- ---------------
Amortisation GBP0.1m GBP1.1m
--------------- ---------------
Share based payments GBP0.1m GBP0.1m
--------------- ---------------
Adjusted profit attributable GBP5.0m GBP4.0m
to equity holders
--------------- ---------------
Weighted number of ordinary
shares 76,802,439 76,751,187
--------------- ---------------
*Adjusted EPS 6.5p 5.2p
--------------- ---------------
Note: numbers rounded to the nearest GBP0.1 million.
Revenue
Total revenue increased by 46% from GBP25.2 million in H1 2022
to GBP36.7 million in H1 2023.
Company branded sales were GBP35.0 million in the first half of
the year (H1 2022: GBP22.1 million). Our W7 brand had sales in the
first half of the year of GBP24.2 million (H1 2022: GBP14.5
million). Our Technic brand, excluding sales of retailer own brand
white label cosmetics, contributed sales of GBP10.8 million in the
first half of the year (H1 2022: GBP7.6 million).
Our Retra subsidiary business had sales of retailer own brand
white label cosmetics of GBP0.05 million in the first half of the
year (H1 2022: GBP0.33 million). The white label business is
traditionally cost competitive and Retra chooses which projects to
undertake based on commercial viability, in particular margin.
The close-out business had sales in the first half of the year
of GBP1.6 million (H1 2022: GBP2.8 million), as the Group, in line
with its strategy, continued to reduce its focus on close-out
opportunities.
In the UK, sales increased by 28% to GBP13.3 million (H1 2022:
GBP10.4 million). Internationally, revenue increased by 58%, from
GBP14.8 million in H1 2022 to GBP23.4 million in H1 2023. In
Europe, Group sales increased by 56% to GBP18.9 million (H1 2022:
GBP12.1 million). In the US, Group sales increased by 83% to GBP2.4
million (H1 2022: GBP1.3 million). In the rest of the world, Group
sales increased by 53% to GBP2.1 million (H1 2022: GBP1.4
million).
E-commerce sales continued to grow in the first half of the year
and now represent 5.4%, or GBP2.0 million, of Group revenue (H1
2022: 2.5% / GBP0.6 million).
Product Gross Margin
Gross margin was 39.1% for the half year, compared to 39.0% in
H1 2022.
Our management teams across the Group were swift to recognise
and navigate cost headwinds that started in 2021 and continued into
2022. New product development, sourcing product from new factories
and falling freight rates, have all helped achieve a slight gross
margin improvement in the first half of 2023, without the need for
an inflationary price increase to customers at the start of the
year.
The cost of freight from the Far East is a significant cost of
goods throughout the Group. Container freight rates which increased
dramatically in 2021, started to slowly fall in 2022. As we end the
first half of 2023, freight rates have fallen to record lows, which
will help to improve our gross margin for the full year.
We remain focused on improving gross margin where possible in
all our businesses and are making good use of our Hong Kong buying
office to ensure this happens. To counter currency pressure, we
continue to move production to new factories of equal quality to
retain or improve margin and have a natural hedge from our US
dollar revenue which is growing.
Towards the end of 2022 we purchased various currency options to
help protect the Group's gross margin in 2023, these included
traditional forward purchase foreign exchange options for US$3
million at US$1.2146, and more complex forward purchase foreign
exchange options which will now deliver in 2023 a minimum of US$27
million to a maximum of US$36 million at an average rate for 2023
of $1.1984/GBP. Since the start of this year we have purchased more
forward options to help protect our gross margin in 2023 and into
2024.
The currency options we have for the current year, the low
container rates, new product development, sourcing, and growing
sales in the US, will all help to protect our margin in 2023.
Operating Expenses
Total operating expenses before exceptional items, amortisation
costs, depreciation, foreign exchange movements and share based
payments, increased at a lower rate than the growth in sales,
increasing by 20.2% to GBP6.5 million in the first half of the year
(H1 2022: GBP5.4 million). Operating costs as a percentage of sales
reduced from 21% to 18%.
The overall increase of GBP1.1 million year on year was
necessary to support the growth of the business and was made up of
increases in wages and salaries, the spend on PR and marketing as
e-commerce sales continue to grow, travel costs, and a small
increase in office costs of GBP0.03 million in relation to utility
charges.
Warpaint remains a business with most operating expenses
relatively fixed and evenly spread across the whole year. We
continue to monitor and examine significant costs to ensure they
are controlled and strive to reduce them. In addition, the
increased scale of the business has given the Group increased
buying power.
Adjusted EBITDA
The board considers Adjusted EBITDA (adjusted for foreign
exchange movements, share based payments and exceptional items) a
key measure of the performance of the Group and one that is more
closely aligned to the success of the business. Adjusted EBITDA for
the half year to 30 June 2023 was GBP7.9 million (H1 2022: GBP4.4
million).
Profit Before Tax
Group profit before tax for the half year to 30 June 2023 was
GBP6.2 million (H1 2022: GBP3.5 million). The material changes in
profitability between 30 June 2022 and 2023 were:
Effect on Profit
GBP4.5 million
* Gross margin on increase in sales in H1 2023
(GBP1.1) million
* Increase in operating expenses
(GBP1.7) million
* FX loss in H1 2023 of GBP0.55 million (gain in H1
2022: GBP1.13 million)
GBP1.0 million
* Decrease in the charge for amortisation costs on
acquisition*
*Acquisition costs are amortised over five years. The reduction
in 2023 reflects the end of the write off period since the purchase
of Retra in November 2017.
Exceptional Items
Exceptional costs in H1 2023 of GBPnil (H1 2022 included a
GBP0.11 million provision for content use and associated legal
fees).
In 2022 the Group agreed a settlement regarding a dispute with a
third party relating to the historic use of content on the Group's
social media platforms in the period from 2018 through to early
2021. The total settlement including associated legal costs was
GBP0.52 million, of which GBP0.37 million was provided for in the
year to 31 December 2021. The payment and the restriction of
content use will not affect the ongoing operations of the Group's
businesses.
Earnings Per Share
The statutory interim basic and diluted earnings per share were
6.22p and 6.20p respectively in H1 2023 (H1 2022: 3.54p and
3.53p).
The adjusted interim basic and diluted earnings per share before
exceptional items, amortisation costs and share based payments were
6.46p and 6.44p respectively in H1 2023 (H1 2022: 5.18p and
5.16p).
LTIP, EMI & CSOP Share Options
On the 9 May 2023 a block listing of 385,633 ordinary shares of
25p each ("Ordinary Shares") was made to satisfy the future
exercises of options granted over Ordinary Shares at an exercise
price of 49.5p on 20 May 2020 under the Warpaint London plc Company
Share Option Plan ("CSOP").
The LTIP, EMI & CSOP share options had an immaterial
dilutive impact on earnings per share in the period. The
share-based payment charge of the LTIP, EMI and CSOP share options
for the half year to 30 June 2023 was GBP0.06 million (H1 2022:
GBP0.09 million) and has been taken to the share option
reserve.
Cash Flow and Cash Position
Net cash flow generated from operating activities was GBP1.9
million compared to GBP(0.4) million in H1 2022. The Group's cash
balance increased by GBP2.8 million to GBP7.1 million as at 30 June
2023 (30 June 2022: GBP4.3 million).
We expect capital expenditure requirements of the Group to
remain low, however as part of our strategy to grow market share in
the UK and US there will be occasions where investment in store
furniture is required to secure that business.
In H1 2023, GBP0.3 million (H1 2022: GBP0.4 million) was spent
on store furniture, on new computer software and equipment,
warehouse racking, and other general office fixtures and fittings
and plant upgrades.
As the Group continues to grow it is both necessary and prudent
to have bank facilities available to help fund day to day working
capital requirements. Accordingly, the Group maintains a GBP9.5
million invoice and stock finance facility which is used to help
fund imports in our gifting business during the peak season. At 30
June 2023 the balance outstanding on the invoice and stock finance
facility was GBPnil (30 June 2022: GBP1.4 million). In addition, in
February 2023 the Group added a new "general purpose" facility of
GBP3.0 million, the balance at 30 June 2023 was GBPnil. These
facilities, together with the Group's positive cash generation and
the growing cash balance held, ensure that future growth can be
funded.
Balance Sheet
Inventories at 30 June 2023 were GBP25.7 million (30 June 2022:
GBP21.9 million). The rise in inventory is a function of growth in
the business and to ensure delivery disruption is avoided for our
customers. One of the Group's unique selling propositions is that
it can deliver a full range of colour cosmetics to its customers,
in good time all year round. Having appropriate inventory levels is
vital to providing that service.
The provision for old and slow inventory was GBP0.4 million/1.4%
at 30 June 2023 (30 June 2022: GBP0.4 million/1.9%). Across the
Group we have worked hard in the last year to sell through older
stock lines, allowing our provision for old and slow inventory to
fall 0.5% in percentage terms. Our Group policy is to provide for
50% of the cost of perishable items that are over two years old.
However, we remain comforted by the fact that many such items in
the normal course of business are eventually sold through our
close-out division without a loss to the Group.
Trade receivables are monitored by management to ensure
collection is made to terms, to reduce the risk of bad debt and to
control debtor days, which have improved on the prior half year.
Trade receivables, excluding other receivables, at 30 June 2023
were GBP10.7 million (30 June 2022: GBP7.4 million). The provision
for bad and doubtful debts carried forward at 30 June 2023 is
GBP0.15 million/1.4% of gross trade receivables (30 June 2022:
GBP0.12 million/1.6%).
At 30 June 2023 the Group has no borrowings ( 30 June 2022:
borrowings outstanding on the invoice and stock finance facility of
GBP1.4 million) or lease liabilities outstanding (30 June 2022:
GBPnil), apart from those associated with right-of-use assets as
directed by IFRS 16 (see below). The Group was therefore debt free
at 30 June 2023.
Working capital increased by GBP8.6 million from 30 June 2022 to
30 June 2023. The main components were an increase in inventory of
GBP3.8 million, an increase in trade and other receivables of
GBP3.2 million, an increase in cash of GBP2.8 million, an increase
in trade and other payables of GBP2.6 million, and a decrease in
the invoice and stock finance facility of GBP1.4 million.
The Group's balance sheet remains in a very healthy position.
Net assets totalled GBP42.9 million at 30 June 2023, with the
majority made up of liquid assets of inventory, trade receivables
and cash.
Included in the balance sheet is GBP7.3 million of goodwill and
GBP0.2 million of intangible fixed assets arising from acquisition
accounting.
Goodwill represents the excess of consideration over the fair
value of the Group's share of the net identifiable assets of the
acquired business / cash generating units at the date of
acquisition. The carrying value at 30 June 2023 of GBP7.3 million
included Treasured Scents Limited (Close-out business) of GBP0.5
million, Retra Holdings Limited of GBP6.2 million and Marvin Leeds
Marketing Services, Inc. of GBP0.6 million. Management have
performed a mid-year review at 30 June 2023 and have concluded that
no impairment is indicated for Treasured Scents Limited, Retra
Holdings Limited or Marvin Leeds Marketing Services, Inc. as the
recoverable amount exceeds the carrying value.
The balance sheet also includes GBP5.1 million of right-of-use
assets, this is the inclusion of the Group leasehold properties,
now recognised as right-of-use assets as directed by IFRS 16. An
equivalent lease liability is included of GBP5.4 million at the
balance sheet date.
Foreign Exchange
The Group imports most of its finished goods from China, paid
for in US dollars, which are purchased throughout the year at spot
as needed, or by taking forward purchase foreign exchange options
when rates are deemed favourable, and with consideration for the
budget rate set by the board for the year. Similarly, foreign
exchange options are taken to sell forward our expected Euro income
in the year to ensure our sales margin is protected.
We started 2023 with various options in place to help protect
our gross margin in 2023, these included traditional forward
purchase foreign exchange options for US$3 million at US$1.2146,
and more complex forward purchase foreign exchange options known as
Window Barrier Accruals and Counter TARFs which will now deliver a
minimum of US$27 million to a maximum of US$36 million (depending
on the dollar rate at maturity of each option) at an average rate
for 2023 of US$1.1984/GBP. We also sold forward EUR3.8 million at
EUR1.1340. (1 January 2022: US$27 million @ US$1.3849/GBP, and
EUR3.9 million @ EUR1.1558/GBP).
We have a natural hedge from sales to the US which are entirely
in US dollars; in H1 2023 these sales were US$3.0 million (H1 2022:
US$1.7 million).
Together with sourcing product from new factories where it makes
commercial sense to do so, new product development, and by buying
US dollars when rates are favourable, we are able to mitigate the
effect of a strong US dollar against sterling.
Dividend
The board is pleased to have declared an increased interim
dividend of 3.0p per share which will be paid on 24 November 2023
to shareholders on the register at 10 November 2023. The shares
will go ex-dividend on 9 November 2023.
Neil Rodol
Chief Financial Officer
20 September 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 31 December
Notes 30 June 30 June 2022
2023 2022
GBP'000 GBP'000 GBP'000
------------------------------------ -------- ------------------- ------------------- -------------
Revenue 36,685 25,197 64,058
Cost of sales (22,331) (15,359) (40,724)
------------------------------------ -------- ------------------- ------------------- -------------
Gross profit 14,354 9,838 23,334
Administrative expenses 3 (8,089) (6,305) (15,367)
Analysed as:
Adjusted profit from operations(1) 6,445 4,791 10,307
Amortisation (118) (1,063) (1,995)
Exceptional items 3 - (109) (152)
Share based payments (62) (86) (193)
------------------------------------ -------- ------------------- ------------------- -------------
Profit from operations 6,265 3,533 7,967
------------------------------------ --------
Finance expenses 4 (101) (79) (277)
------------------------------------ -------- ------------------- ------------------- -------------
Profit before tax 3 6,164 3,454 7,690
Tax expense 5 (1,384) (737) (1,440)
------------------------------------ -------- ------------------- ------------------- -------------
Profit for the period attributable
to equity holders of the
parent company 4,780 2,717 6,250
Other comprehensive income
(net of tax):
Exchange gain on translation
of foreign subsidiary 64 54 (135)
Total comprehensive income
for the period attributable
to equity holders of the
parent company 4,844 2,771 6,115
=================== =================== =============
Basic earnings per share
(pence) 6 6.22 3.54 8.14
------------------- ------------------- -------------
Diluted earnings per share
(pence) 6 6.20 3.53 8.11
------------------- ------------------- -------------
Note 1 - Adjusted profit from operations is calculated as
earnings before interest, taxation, amortisation, impairment costs,
share based payments and exceptional items .
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------- -------------- -------------- -------------
ASSETS
Non-current assets
Goodwill 7,274 7,274 7,274
Intangible assets 159 1,188 277
Property, plant and
equipment 1,338 1,409 1,432
Right-of-use assets 5,147 5,382 5,659
Deferred tax assets 352 580 429
-------------- -------------- -------------
14,270 15,833 15,071
Current assets
Inventories 25,720 21,944 18,715
Trade and other receivables 13,439 10,203 11,693
Cash and cash equivalents 7,066 4,313 5,865
Derivative financial
instruments - 1,158 8
--------------
46,225 37,618 36,281
-------------- -------------- -------------
Total assets 60,495 53,451 51,352
-------------- -------------- -------------
LIABILITIES
Current liabilities
Trade and other payables 9,876 6,100 5,988
Borrowings and lease
liabilities 1,005 2,184 1,015
Corporation tax payable 1,295 999 943
Derivative financial
instruments 938 - 600
--------------
13,114 9,283 8,546
Non-current liabilities
Borrowings and lease
liabilities 4,350 4,803 4,847
Deferred tax liabilities 160 355 180
--------------
4,510 5,158 5,027
-------------- -------------- -------------
Total liabilities 17,624 14,441 13,573
-------------- -------------- -------------
NET ASSETS 42,871 39,010 37,779
============== ============== =============
EQUITY
Share capital 19,282 19,188 19,188
Share premium 19,452 19,360 19,360
Merger reserve (16,100) (16,100) (16,100)
Foreign exchange reserve 14 139 (50)
Share option reserve 1,980 1,896 2,003
Retained earnings 18,243 14,527 13,378
-------------- -------------- -------------
Total equity attributable
to
shareholders 42,871 39,010 37,779
============== ============== =============
CONSOLIDATED STATEMENT OF CASH FLOW
Unaudited Unaudited Audited
6 Months ended 6 Months ended Year ended
30 June 2023 30 June 2022 31 December
Notes 2022
GBP'000 GBP'000 GBP'000
---------------------------------- ------- --------------- --------------- ------------
Profit before tax for the
period 6,164 3,454 7,690
Adjusted by:
Interest paid 4 101 79 278
Depreciation of property,
plant and equipment 3 357 393 761
Depreciation on right of
use assets 512 377 965
Loss on disposal of property,
plant, and equipment - - 1
Amortisation of intangible
assets 3 118 1,077 1,995
Share based payment 62 86 193
Movement in inventories (7,005) (3,805) (576)
Movement in trade and other
receivables (1,746) 39 (1,370)
Movement in trade and other
payables 3,888 (561) (981)
Movement in derivative financial
instruments 346 (613) 1,139
Foreign exchange translation
differences 24 54 (117)
--------------- --------------- ------------
Cash inflow generated from
operations 2,821 580 9,978
Income tax paid (935) (990) (1,546)
Cash flows from operating
activities 1,886 (410) 8,432
Purchase of property, plant
and equipment (263) (417) (831)
Purchase of intangible assets - (6) (12)
Cash flows used by investing
activities (263) (423) (843)
Proceeds from issued share
capital 186 - -
Principal elements of lease
payments (507) (279) (836)
Increase in stock and invoice
finance facilities - 1,432 -
Interest paid (101) (79) (278)
Dividends - - (4,682)
--------------- --------------- ------------
Cash flows used by financing
activities (422) 1,074 (5,796)
Net change in cash and cash
equivalents 1,201 241 1,793
Cash and cash equivalents
at beginning of period 5,865 4,072 4,072
--------------- --------------- ------------
Cash and cash equivalents
at end of period 7,066 4,313 5,865
=============== =============== ============
Cash and cash equivalents
consists of:
Cash and cash equivalents 7,066 4,313 5,865
--------------- --------------- ------------
7,066 4,313 5,865
=============== =============== ============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Merger Foreign Share Retained
capital Premium reserve exchange option earnings Total
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------- -------- --------- -------
As at 1 January 2022 19,188 19,360 (16,100) 85 1,810 11,810 36,153
On translation of foreign
subsidiary - - - 54 - - 54
Profit for the period - - - - - 2,717 2,717
---------------------------- -------- -------- -------- --------- -------- --------- -------
Total comprehensive income
for the period - - - 54 - 2,717 2,771
---------------------------- -------- -------- -------- --------- -------- --------- -------
Transactions with owners
Share based payments - - - - 86 - 86
Total transactions with
owners - - - - 86 - 86
---------------------------- -------- -------- -------- --------- -------- --------- -------
As at 30 June 2022 19,188 19,360 (16,100) 139 1,896 14,527 39,010
---------------------------- ======== ======== ======== ========= ======== ========= =======
As at 1 January 2022 19,188 19,360 (16,100) 85 1,810 11,810 36,153
Equity shares issued - - - - - - -
On translation of foreign
subsidiary - - - (135) - - (135)
Profit for the year - - - - - 6,250 6,250
Total comprehensive income
for the year - - - (135) - 6,250 6,115
---------------------------- -------- -------- -------- --------- -------- --------- -------
Transactions with owners
Share based payments - - - - 193 - 193
Dividends paid - - - - - (4,682) (4,682)
Total transactions with
owners - - - - 193 (4,682) (4,489)
---------------------------- -------- -------- -------- --------- -------- --------- -------
As at 31 December 2022 19,188 19,360 (16,100) (50) 2,003 13,378 37,779
---------------------------- -------- -------- -------- --------- -------- --------- -------
As at 1 January 2023 19,188 19,360 (16,100) (50) 2,003 13,378 37,779
Equity shares issued 94 92 - - - - 186
On translation of foreign
subsidiary - - - 64 - - 64
Transfer to the profit or
loss reserve - - - - (85) 85 -
Profit for the period - - - - - 4,780 4,780
Total comprehensive income
for the period 94 92 - 64 (85) 4,865 5,030
---------------------------- -------- -------- -------- --------- -------- --------- -------
Transactions with owners
Share based payments - - - - 62 - 62
Total transactions with
owners - - - - 62 - 62
---------------------------- -------- -------- -------- --------- -------- --------- -------
As at 30 June 2023 19,282 19,452 (16,100) 14 1,980 18,243 42,871
============================ ======== ======== ======== ========= ======== ========= =======
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The consolidated interim financial information for the 6 months
to 30 June 2023 has been prepared in accordance with the
measurement and recognition principles of UK adopted international
accounting and accounting policies that are consistent with the
Group's Annual report and Accounts for the year ended 31 December
2022 and that are expected to be applied in the Group's Annual
Report and Accounts for the year ended 31 December 2023. They do
not include all of the information required for the full financial
statements and should be read in conjunction with the 2022 Annual
Report and Accounts which were prepared in accordance with UK
adopted international accounting standards.
The comparative financial information for the year ended 31
December 2022 in this interim report does not constitute statutory
accounts for that period under section 435 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2022 have
been reported on by the Group's auditors and delivered to the
Registrar of Companies.
The auditors' report on the accounts for the year ended 31
December 2022 was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
2. Changes in significant accounting policies
The accounting policies applied in these interim financial
statements are the same as those applied in the Group's
consolidated financial statements as at and for the year ended 31
December 2022.
3. Profit from operations
Profit from operations is arrived at after charging/
(crediting):
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------ ---------------- ---------------- -------------
Depreciation of property,
plant and equipment 357 393 761
Amortisation of right-of-use
assets 512 377 965
Amortisation of intangible
assets 118 1,077 1,995
Write down inventories at
net realisable value (8) (90) (151)
Exchange differences 545 (1,126) (133)
Exceptional costs - 109 152
================ ================ =============
4. Finance expenses
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
-------------------------- ---------------- ---------------- -------------
Lease liability interest 94 63 185
Other interest 7 16 92
---------------- ---------------- -------------
Finance expenses 101 79 277
================ ================ =============
5. Tax expenses
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------------ ---------------- ---------------- -------------
Current tax expense
Current income tax charge 1,121 939 1,817
Adjustment in respect of 206 - -
previous periods
---------------- ---------------- -------------
1,327 939 1,817
Deferred tax expense
Relating to original and
reversal of temporary differences (20) (202) (377)
Adjustment in respect of 77 - -
previous periods
---------------- ---------------- -------------
Total tax in income statement 1,384 737 1,440
================ ================ =============
6. Earnings per share
Profit for the period used in the calculation of the basic and
diluted earnings per share:
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
-------------------------- ---------------- ---------------- -------------
Profit after tax for the
period 4,780 2,717 6,250
================ ================ =============
The weighted average number of shares for the purposes of
diluted earnings per share reconciles to the weighted average
number of shares used in the calculation of basic earnings per
share as follows:
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2023 2022 2022
--------------------------------- ---------------- ---------------- -------------
Weighted average number
of shares
Weighted number of ordinary
shares for the purpose of
basic earnings per share 76,802,439 76,751,187 76,752,355
Potentially dilutive shares
awarded 253,678 278,693 296,256
----------------
Weighted number of ordinary
shares for the purpose of
diluted earnings per share 77,056,117 77,029,880 77,048,611
---------------- ---------------- -------------
Basic Earnings per share
(pence) 6.22 3.54 8.14
Diluted earnings per share
(pence) 6.20 3.53 8.11
================ ================ =============
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IR FLFVTAFIALIV
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