TIDMW7L
RNS Number : 5232M
Warpaint London PLC
22 September 2021
22 September 2021
Warpaint London PLC
("Warpaint", the "Company" or the "Group")
Interim Results for the six months ended 30 June 2021
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 2021.
Financial Highlights
-- Strong growth in sales, profitability and cash generation
during the period reflecting the focus on growing sales of
the Group's branded products
-- Group sales increased by 36% to GBP18.4 million in H1 2021
(H1 2020: GBP13.5 million, H1 2019: GBP18.9 million)
-- UK revenue increased by 31% to GBP8.9 million (H1 2020:
GBP6.8 million, 2019: GBP7.8 million)
-- International revenue increased by 41% to GBP9.5 million
(H1 2020: GBP6.7 million, 2019: GBP11.1 million)
-- Gross profit margin of 34.5% (H1 2020: 35.1%, H1 2019: 34.9%),
against the backdrop of supply side price inflation and significant
increases in freight costs
-- Adjusted EBITDA of GBP2.1* million (30 June 2020: GBP0.4*
million, 30 June 2019: GBP2.1* million)
-- Adjusted profit from operations of GBP1.6** million (H1 2020:
GBP0.4** million, H1 2019: GBP1.3** million). Statutory profit
from operations of GBP0.3 million (H1 2020 loss of GBP1.4
million, H1 2019 loss of GBP0.1 million)
-- Cash generated from operating activities of GBP2.8 million
(H1 2020: GBP2.3 million, H1 2019: 1.3 million)
-- Cash of GBP6.7 million at 30 June 2021 (30 June 2020: GBP3.8
million, 30 June 2019 GBP3.7 million)
-- The Company is now debt free with the remaining loans and
HP contracts totaling GBP0.3 million having been repaid in
full in April 2021
-- The board has declared an increased interim dividend of 2.5p
per share (2020 interim dividend 1.5p per share***)
-- The Group's financial performance is expected to continue
to be second half weighted
Comparatives have been included for both the prior year period
and H1 2019, a period not impacted by the Covid-19 pandemic.
* Adjusted for foreign exchange movements, share based payments
and exceptional items.
** Adjusted for exceptional costs of which there were GBP5,000
in the period (H1 2020: GBP0.2 million, H1 2019 nil), GBP1.2
million of amortisation of intangible assets (H1 2020: GBP1.2
million, H1 2019 GBP1.2 million), and share based payments of
GBP0.1 million (H1 2020: GBP0.3 million. H1 2019 GBP0.1 million).
Adjusted numbers are close to the underlying cash flow performance
of the business which is regularly monitored and measured by
management.
*** The 2020 interim dividend declared comprised an interim
dividend of 1.5p per share plus a one off additional 1.3p per share
to reflect that no final dividend was declared for 2019
Operational Highlights
-- Further expansion in the number of Tesco stores stocking the
Group's products and the stocking of additional W7 product
lines. W7 branded products now sold in over 1,300 Tesco stores
in the UK, up from 56 in June 2020
-- Further product expansion in the US with W7 products now being
stocked in over 1,000 Five Below stores
-- As at 30 June 2021 the Group had a significant Christmas order
book for the Group's brands of GBP8.7 million (30 June 2020:
GBP7.7 million), with further Christmas orders taken post
period end and additional white label Christmas orders
-- Online sales continue to accelerate in the UK and the US,
with an increase of 115% in e-commerce sales in H1 2021 compared
to H1 2020
-- The Group's expansion strategy continues with active discussions
being held with additional major retailers in the UK and overseas
Post-Period End Highlights
-- Agreement with Boots to stock a range of approximately 80
W7 products in an initial 84 stores from February 2022
-- Further expansion of online sales presence with the launch
in China of 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
-- For the eight months to 31 August 2021 the Company had unaudited
sales of GBP27.0 million (8 months to 31 August 2020: GBP22.8
million, 8 months to 31 August 2019: GBP27.7 million)
Commenting, Sam Bazini Chief Executive, said: "Following a
difficult 2020 for everyone, it is pleasing to report a
significantly improved performance from Warpaint in the first half
of 2021. Prior to the impact of Covid-19 the business was trading
well. Despite the continued effect of the pandemic, with lockdowns
in many parts of the world, including the UK, for much of the first
half, we have seen a return to the level of Group sales achieved in
the first half of 2019, a period before the pandemic hit.
"We have seen particularly strong growth in the UK, with sales
increasing beyond the level achieved in the first half of 2019,
aided by the growing sales of our W7 brand through Tesco and of our
Technic and Body Collection brands through wilko . In June 2020 W7
was being sold in 56 Tesco stores, today it is in over 1,300 , with
a further expansion of the W7 range in Tesco planned for later this
year. In addition, W7 products will be launched in Boots early in
2022. There has also been a much improved performance in the US,
strong growth elsewhere internationally and a rapid increase in
online sales.
"Warpaint is a global business with the capacity, expertise and
strategy, coupled with balance sheet strength, to drive future
growth. We are working in partnership with our existing retailers
to grow sales further and are in active discussions with additional
major retailers in the UK and overseas. We have significant
opportunities for further growth and I look forward to the
remainder of the year and into 2022 with confidence."
Investor Webinar
Warpaint's management will be hosting an online presentation and
Q&A session at 5.30 p.m. BST today, Wednesday 22 September
2021. This session is open to all existing and prospective
shareholders. Those who wish to attend should register via the link
below and they will be provided with access details:
https://us02web.zoom.us/webinar/register/WN_lh7Ytv7ASkuDJClO9rrqSQ
Participants will have the opportunity to submit questions
during the session, but questions are welcomed in advance and may
be submitted to: warpaint@investor-focus.co.uk .
Enquiries:
Warpaint London c/o IFC
Sam Bazini - Chief Executive Officer
Eoin Macleod - Managing Director
Neil Rodol - Chief Finance Officer
Singer Capital Markets (Nominated Adviser
& Joint Broker) 020 7496 3000
Shaun Dobson, Tom Salvesen, Jen Boorer,
Alex Bond - Investment Banking
Shore Capital (Joint Broker) 020 7408 4090
Patrick Castle, Daniel Bush - Corporate
Advisory
Fiona Conroy - Corporate Broking
IFC Advisory (Financial PR & IR) 020 3934 6630
Tim Metcalfe
Graham Herring
Florence Chandler
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 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.
The Group also sells cosmetics using its other brand names of
Man'stuff, Body Collection, Very Vegan, and Chit Chat.
Chief Executive's Review
The first half of 2021 was a period of strong growth for the
Group as most of Warpaint's markets emerged from the worst of the
Covid-19 pandemic and certain strategic initiatives started to bear
fruit. However, continuing issues relating to the pandemic were
seen in a number of markets, with lockdowns remaining and a number
of operational challenges being faced, particularly with regard to
supply side price inflation, and freight availability and cost.
Against this background we are very pleased to have achieved
Group sales broadly in line with those of H1 2019, a period not
impacted by the Covid-19 pandemic, with significant growth in the
UK and strong cash generation.
In the first half of 2021 sales of our branded colour cosmetics
accounted for 88% of revenue (H1 2020: 82%) as we continued to
reduce the focus on close-out. Our strategy of producing a wide
range of high quality cosmetics at an affordable price remains our
key focus, growing 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.
W7
The Group's lead brand remains W7, with sales in H1 2021
accounting for 57% of total Group revenue (H2 2020: 50%). In the
UK, W7 revenues were up 54% in H1 2021 compared to H1 2020. W7
revenues were also up 34% in the UK in H1 2021 compared to H1 2019,
a period not impacted by the Covid-19 pandemic. The growth in W7 UK
sales has been assisted by the roll out into Tesco, together with a
growth in sales from the Group's other larger customers in the UK.
In June 2020 the Group's W7 products were in 56 Tesco stores, today
they are in over 1,300 across the various store formats, with a
planned further expansion of the W7 full cosmetic displays in
Tesco, together with an increased online presence.
Additionally, we are pleased to announce that we have reached
agreement with Boots to stock a range of approximately 80 W7
products in an initial 84 stores from February 2022.
Internationally W7 sales were up on H1 2020 in all of the
Group's reported regions. In Europe sales increased by 27% compared
to H1 2020, in the US sales increased by 94% compared to H1 2020,
and in the rest of the world sales increased by 124% compared to H1
2020.
Technic
Since the acquisition of Retra Holdings Limited ("Retra") and
its Technic brand in November 2017, we have continued to focus on
improving the sales of all year round cosmetics sold under the
Technic brand, and to ensure the Retra business is profitable
throughout the whole year, not only in the second half when
Christmas gifting is delivered.
Sales of Technic in H1 2021 were 31% of total Group revenue (H1
2020: 30%). In H1 2021, UK revenues of Technic were up 33% on H1
2020, returning to similar a similar level seen in H1 2019, aided
by the growing sales of Technic and Body Collection branded
products in wilko.
Sales increased in Europe by 34% compared to H1 2020 and in the
rest of the world sales also increased by 94% compared to H1 2020.
In the US, sales increased by 2% compared to H1 2020, albeit that
US sales remained small in the context of the Group as a whole.
The Retra business also produces and sells own brand white label
cosmetics for several major high street retailers, with such sales
being 1% of Group revenue (H1 2020: 2%).
Close-out
In line with the strategy to reduce the focus on close-out
sales, particularly in the US, the close-out division was a reduced
proportion of Group sales in the first half of 2021, representing
11% of the overall revenue of the Group (H1 2020: 18%). Whilst not
a core focus, this side of the business continues to provide a
significant and profitable source of intelligence in the colour
cosmetics market and access to new market trends. We will continue
to take advantage of profitable close-out opportunities as they
become available.
e-Commerce
In addition to growing sales through the W7 and Technic brands'
own bespoke e-commerce sites, focus has continued on growing sales
of our brands in the UK and the US on Amazon, which has helped
further accelerate our online sales. In H1 2021 online sales were
GBP0.44 million (H1 2020: GBP0.20 million), an increase of
115%.
Further expansion of the Group's online sales presence has been
implemented post period end with the launch of 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.
Brands
As previously announced, in 2020 we undertook a review of all
our brands, removing from sale those small number of brands that
were sub-scale and did not have a compelling market position. This
exercise has enabled the Group to concentrate on its core W7,
Technic, Body Collection, Man'stuff, Chit Chat and Very Vegan
brands during the period with an improved focus. The development of
Body Collection as a key brand continues, with a view to unlocking
the untapped potential it has, given it is currently sold in only
one UK retailer. Discussions are ongoing with further retailers
with a view to them stocking Body Collection and we anticipate
rolling out the brand through additional outlets in due course.
Customers & Geographies
The largest markets for sales of our Group brands are in the UK,
Australia and Europe. In H1 2021 our top ten customers represented
55% of revenues (H1 2020: 50%). Group sales are now made in 45
countries.
UK
Group sales in the UK were up by 31% in H1 2021 compared to H1
2020, led by the growth in sales of our lead brand W7, which
increased by 54%. Group sales in H1 2021 in the UK were also 19%
higher than the level achieved in H1 2019, despite continued
lockdowns in the UK for much of the period.
The top ten UK Group customers accounted for 74% of UK sales in
H1 2021 (H1 2020: 66%). Particularly strong growth was seen during
the first half with B&M Retail (up 34%), The Range (up 270%)
and Tesco (up 353%).
As of 30 June 2021, the Group had an order book for Christmas
gifting for the Group's brands of GBP8.7 million already secured
(30 June 2020: GBP7.7 million), which will be delivered during H2
2021. This will be a significant driver of revenues being weighted
to the second half of the year, with most of it being in the UK. We
have continued to take further significant orders post the period
end as the market continues to recover and customers regain further
confidence.
Europe
Prior to the onset of the Covid-19 pandemic in March 2020,
Continental Europe was for some time an area of excellent growth
for the Group. Following significantly reduced demand caused by
country wide lockdowns in 2020, the gradual opening up in H1 2021
boosted Group sales in Europe by 28% compared to the same period in
2020. Sales for the Group's brands into Europe are mainly to
France, Denmark, Spain and Sweden and during the period strong
growth was seen particularly in sales to customers in
Scandinavia.
US
Sales in US dollars in H1 2021 were up 58% to US$1.7 million (H1
2020: US$1.1 million), aided by the new relationship with store
group Five Below. Following a successful trial with Five Below, W7
products are now being stocked in over 1,000 of their stores in the
US. A good performance was also seen from the Group's other major
customers in the US, including Macys Backstage, Marshalls, and TJ
Maxx.
Additionally, we completed a trial launch of W7 products in 50
Francesca's stores in the US during the first half, where sales
exceeded management expectations. We expect to continue to roll out
product across a significant portion of their 444 store estate
during the remainder of the year.
The focus in the US is to increase the sales of the Group's
brands as the emphasis on close-out in our business reduces. In the
US 79% of sales in H1 2021 were from the sale of the Group's
brands. Additionally, we continue to focus on growing our US online
sales via Amazon FBA.
Rest of the World
Sales in the rest of the world for the Group in the period were
up by 119% to GBP1.7 million, compared to the corresponding period
last year. In Australia, which is a key country for Warpaint in the
rest of the world region, sales increased by 211% in H1 2021 to
GBP1.4 million. Since the easing of the Covid-19 lockdowns in the
rest of the world region we have seen a steady sales recovery for
our brands, though sales in some countries remain constrained and
volatile as further lockdowns are imposed.
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 2.5p per share (2020 interim dividend 1.5p per
share plus a one off additional 1.3p per share to reflect that no
final dividend was declared for 2019) which will be paid on 26
November 2021 to shareholders on the register at 12 November 2021.
The shares will go ex-dividend on 11 November 2021.
Board and People
The pandemic has dramatically impacted the personal and working
lives of everyone and continues to do so. At Warpaint we quickly
made the required changes to working practices and have continued
to adapt and modify these as appropriate. I am delighted with the
way in which everyone has met these challenges and I would like to
offer my thanks in particular to the Group's employees for their
exceptional efforts.
Post period end we were pleased to announce the appointment of
John Collier as an independent non-executive director of the
Company with effect from 1 September 2021. John is a Canadian
national, based in New York, USA, who has spent nearly 30 years in
the consumer goods industry, primarily at Revlon, the multinational
cosmetics, skin care, fragrance, and personal care company. He
brings with him a wealth of experience in the cosmetics sector that
will be particularly beneficial as we seek to grow our North
American business.
Summary and Outlook
The first half of 2021 has seen a strong performance, with a
significant recovery across the Group, following a difficult 2020
for everyone. Prior to the impact of Covid-19 the business was
trading well. Despite the continued impact of the pandemic, with
lockdowns in many parts of the world, including the UK, for much of
the first half, we have seen a return to the level of Group sales
achieved in the first half of 2019, a period before the pandemic
hit.
We have seen particularly strong growth in the UK, with sales
increasing beyond the level achieved in the first half of 2019,
aided by the growing sales of our W7 brand through Tesco and of our
Technic and Body Collection brands through wilko, with a further
expansion of the W7 range in Tesco planned for later this year.
Additionally, the planned launch of W7 into Boots provides a
further significant opportunity. We have also seen a much improved
performance in the US, strong growth elsewhere internationally and
are seeing a rapid increase in online sales.
Warpaint is a global business with the capacity, expertise and
strategy, coupled with balance sheet strength, to drive future
growth. We are working in partnership with our existing retailers
to grow sales further and are in active discussions with additional
major retailers in the UK and overseas.
I anticipate updating further on our progress later in the year
and with significant opportunities for further growth I look
forward to the future with confidence.
Sam Bazini
Chief Executive Officer
22 September 2021
Chief Financial Officer's Review
In 2020 results were adversely impacted by the Covid-19
pandemic, however the first half of 2021 has seen the Group achieve
results ahead of the first half of 2020 and in line with the first
half of 2019. 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, generating cash and
safeguarding the business and the jobs of our employees.
Headline results, shown below, represent the performance
comparisons between the consolidated statements of income for the
half years ended 30 June 2021 and 30 June 2020.
Revenue
Total revenue increased by 36% from GBP13.5 million in H1 2020
to GBP18.4 million in H1 2021 (H1 2019: GBP18.9 million).
Company branded sales were GBP16.1 million in the first half of
the year (H1 2020: GBP10.5 million, H1 2019 GBP15.2 million). Our
W7 brand had sales in the first half of the year of GBP10.5 million
(H1 2020: GBP6.6 million, H1 2019: GBP10.3 million). Our Technic
brand contributed sales of GBP5.5 million in the first half of the
year (H1 2020: GBP3.9 million, H1 2019: GBP4.9 million).
The close-out business had sales in the first half of the year
of GBP2.1 million (H1 2020: GBP2.4 million, H1 2019: GBP3.3
million).
Our Retra subsidiary business had sales of retailer own brand
white label cosmetics of GBP0.2 million in the first half of the
year (H1 2020: GBP0.3 million, H1 2019: GBP0.4 million). The white
label business is traditionally cost competitive and Retra chooses
which projects to undertake based on commercial viability, in
particular margin.
In the UK sales increased by 31% to GBP8.9 million (H1 2020:
GBP6.8 million, H1 2019: GBP7.8 million). Internationally, revenue
increased 41% from GBP6.7 million in H1 2020, to GBP9.5 million in
H1 2021 (H1 2019: 11.2 million). In Europe Group sales increased by
28% to GBP6.5 million (H1 2020: GBP5.1 million, H1 2019: GBP7.8
million). In the rest of the world Group sales increased by 116% to
GBP1.7 million (H1 2020: GBP0.8 million, H1 2019: GBP1.2 million).
In the US Group sales increased by 45% to GBP1.2 million (H1 2020:
GBP0.8 million, H1 2019: GBP2.2 million).
Product Gross Margin
Gross margin was 34.5% for the half year compared to 35.1% in H1
2020 (H12019: 34.9%). Since the start of 2021 we have noticed
slight price increases in US dollars coming from our supply base in
China and container freight rates have increased dramatically, both
these cost increases have been partly offset by a weakening dollar
compared to 2020. We also noticed an increase in outbound freight
costs to deliver goods to our European customers. Gross margin has
decreased slightly because of these cost increases.
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.
At 31 December 2020 options were in place for the purchase of
US$18 million at US$1.3260/GBP (31 December 2019: US$15 million at
US$1.3142/GBP), this has helped to protect our margin in the
turbulent foreign exchange markets. Since the start of this year we
have purchased more forward options as the dollar continued to
weaken to protect our gross margin through to the end of 2021 and
the start of 2022.
Operating Expenses
Total operating expenses decreased by GBP0.1 million from H1
2020 to H1 2021. Excluding amortisation of intangibles,
depreciation charges, exceptional items, share based payments,
foreign exchange movements, and finance costs operating expenses
decreased by GBP0.1 million from H1 2020 to H1 2021. This decrease
was made up of a reduction in spend on travel, PR and marketing
totalling GBP0.1 million, an increase in wages and salaries of
GBP0.2 million, and a decrease in the provision for bad debts of
GBP0.2 million.
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 2021 was GBP2.1 million (30 June 2020:
GBP0.4 million, 30 June 2019: GBP2.1 million).
Profit Before Tax
Group profit before tax for the half year to 30 June 2021 was
GBP0.2 million (H1 2020: GBP1.5 million loss, H1 2019: GBP0.2
million loss). The material changes in profitability between 30
June 2020 and 2021 were:
Effect on
Profit
GBP1.6 million
* Gross margin on increase in sales in H1 2021
GBP0.1 million
* Decrease in operating expenses (see above heading)
(GBP0.5)
* FX gain in H1 2021 GBP0.16 million (H1 2020: GBP0.64 million
million)
GBP0.3 million
* Decrease in the cost of share option schemes
GBP0.2 million
* Decrease in exceptional costs
Exceptional Items
Exceptional costs in H1 2021 included GBP0.005 million of legal
costs (H1 2020 included GBP0.13 million of staff restructuring
costs and GBP0.06 million of legal costs).
Earnings Per Share
The statutory interim basic and diluted profit per share was
0.18p in H1 2021 (1.68p loss in H1 2020, 0.22p loss in H1
2019).
The adjusted interim earnings per share before exceptional items
and amortisation costs was 1.80p in H1 2021 (0.16p in H1 2020,
1.37p in H1 2019).
LTIP, EMI & CSOP Share Options
On 25 May 2021 CSOP share options were granted over a total of
400,000 ordinary shares of 25p each in the Company under the
Warpaint London PLC Company Share Option Plan and the Warpaint
London plc Enterprise Management Incentive Scheme. The options
provide the right to acquire 400,000 ordinary shares at an exercise
price of 122.0p per ordinary share.
The LTIP, EMI & CSOP share options had no 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
2021 was GBP0.07 million (H1 2020: GBP0.33 million) and has been
taken to the share option reserve.
Cash Flow and Cash Position
Net cash flow generated from operating activities was GBP2.8
million compared to GBP2.3 million in H1 2020 (GBP1.3 million H1
2019). The Group's cash balance increased by GBP2.9 million to
GBP6.7 million as at 30 June 2021 (30 June 2020: GBP3.8 million, 30
June 2019: GBP3.7 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 2021, GBP0.1
million (H1 2020: GBP0.5 million, H1 2019: GBP0.2 million) was
spent on store furniture, on new computer software and equipment,
and other general office fixtures and fittings and plant
upgrades.
Balance Sheet
The Group's balance sheet remains in a very healthy position.
Net assets totalled GBP35.3 million at 30 June 2021, 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 GBP3.4 million of intangible fixed assets arising from
acquisition accounting.
The balance sheet also includes GBP3.2 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 GBP3.3 million at the
balance sheet date.
Trade receivables, excluding other receivables, at 30 June 2021
were GBP6.2 million (30 June 2020: GBP5.6 million, 30 June 2019:
GBP7.6 million). Collection times have improved on the prior half
year and H1 2019, allowing for a reduction in the provision for bad
and doubtful debts carried forward to GBP0.06 million/1.0% of gross
trade receivables (30 June 2020: GBP0.26 million/4.4%, 30 June
2019: GBP0.03 million/0.4%).
Inventories at 30 June 2021 were GBP16.7 million (30 June 2020:
GBP18.9 million and 30 June 2019: GBP18.7 million). The fall in
inventory was due to the action taken to reduce inventory across
the Group in response to Covid-19, and our strategy of exiting the
sale of locally sourced close-out brands in the US to focus on our
best-selling brand lines. The provision for old and slow inventory
was GBP0.7 million/4.2% at 30 June 2021 (30 June 2020: GBP0.5
million/2.7%, 30 June 2019: GBP0.2 million/0.9%). The increase in
provision arises from the Group's policy of providing for 50% of
the cost of perishable items that are over two years old. However,
we remain comforted by the fact that, in reality, many such items
are eventually sold in the normal course of business through our
close-out division without a loss to the Group.
Included within borrowings and lease liabilities is an invoice
and stock finance facility used to help fund imports in our gifting
business, and term loans and HP contracts. At 30 June 2021 the
outstanding balance on the invoice and stock finance facility was
GBPnil (30 June 2020: GBP1.0 million, 30 June 2019: GBP1.0
million). At 30 June 2021 the outstanding balance on the term loans
and HP contracts was GBPnil, having been repaid early in full in
April 2021 (30 June 2020: GBP0.4 million, 30 June 2019: GBP0.7
million).
Working capital decreased by GBP2.5 million from 30 June 2020 to
30 June 2021. The main components were a decrease in inventory of
GBP2.2 million, a decrease in trade and other receivables of GBP1.0
million, an increase in cash of GBP2.9 million, and an increase in
trade and other payables of GBP2.2 million.
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 2021 with options in place for the purchase of US$18
million at US$1.3260, and the sale of EUR5.1 million @ EUR1.1077 (1
January 2020: US$15 million @ US$1.3142/GBP, and EUR4.4 million @
EUR1.1402/GBP; 1 January 2019: US$nil, and EUR1.1 million @
EUR1.1289/GBP).
We have a natural hedge from sales to the US which are entirely
in US dollars, in H1 2021 these sales were US$1.7 million (H1 2020:
US$1.1 million, H1 2019: US$2.8 million). Together with sourcing
product from new factories where it makes commercial sense to do so
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 interim dividend of
2.5p per share which will be paid on 26 November 2021 to
shareholders on the register at 12 November 2021. The shares will
go ex-dividend on 11 November 2021.
Neil Rodol
Chief Financial Officer
22 September 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 Months 6 Months Year ended
ended ended 31 December
Notes 30 June 2021 30 June 2020 2020
GBP'000 GBP'000 GBP'000
----------------- ------------ ------------------------------ ---------------------------- -----------------------
Revenue 18,417 13,531 40,286
Cost of sales (12,064) (8,780) (27,742)
----------------- ------------ ------------------------------ ---------------------------- -----------------------
Gross profit 6,353 4,751 12,544
Administrative
expenses 3 (6,039) (6,120) (13,807)
Other operating
income - - 361
Analysed as:
Adjusted profit
from
operations(1) 1,588 380 2,514
Amortisation (1,204) (1,221) (2,443)
Exceptional
items 3 (5) (193) (317)
Share based
payments (65) (335) (656)
----------------- ------------ ------------------------------ ---------------------------- -----------------------
Profit/(loss)
from operations 314 (1,369) (902)
----------------- ------------
Finance expenses 4 (148) (107) (212)
----------------- ------------ ------------------------------ ---------------------------- -----------------------
Profit/(loss)
before tax 3 166 (1,476) (1,114)
Tax expense 5 (31) 189 111
----------------- ------------ ------------------------------ ---------------------------- -----------------------
Profit/(loss)
for the period
attributable to
equity holders
of the parent
company 135 (1,287) (1,003)
Other
comprehensive
income
(net of tax):
Exchange gain on
translation
of foreign
subsidiary 14 (4) 53
Total
comprehensive
income/(loss)
for the period
attributable
to equity
holders of the
parent company 149 (1,291) (950)
================= ============ ============================== ============================ =======================
Earnings/(loss)
per share
- Basic and
diluted 6 0.18 (1.68) (1.31)
----------------- ------------ ------------------------------ ---------------------------- -----------------------
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 30 June As at 30 June As at 31
2021 2020 December
2020
GBP'000 GBP'000 GBP'000
----------------------------- ----------------- ----------------- ------------
ASSETS
Non-current assets
Goodwill 7,274 7,274 7,274
Intangible assets 3,434 5,871 4,651
Property, plant and
equipment 1,198 1,006 1,149
Right-of-use assets 3,205 4,197 3,799
Deferred tax assets 569 396 581
------------------------------ ----------------- ----------------- ------------
15,680 18,744 17,454
Current assets
Inventories 16,687 18,853 14,413
Trade and other receivables 7,898 8,895 9,187
Cash and cash equivalents 6,723 3,819 4,875
Derivative financial
instruments 41 251 40
------------------------------ -----------------
31,349 31,818 28,515
----------------------------- ----------------- ----------------- ------------
Total assets 47,029 50,562 45,969
------------------------------ ----------------- ----------------- ------------
LIABILITIES
Current liabilities
Trade and other payables 7,244 4,957 3,121
Borrowings and lease
liabilities 625 1,989 914
Derivative financial
instruments - - 400
Corporation tax payable 413 255 119
8,282 7,201 4,554
Non-current liabilities
Borrowings and lease
liabilities 2,695 3,409 3,045
Deferred tax liabilities 771 1,095 1,000
------------------------------ -----------------
3,466 4,504 4,045
----------------------------- ----------------- ----------------- ------------
Total liabilities 11,748 11,705 8,599
------------------------------ ----------------- ----------------- ------------
NET ASSETS 35,281 38,857 37,370
============================== ================= ================= ============
EQUITY
Share capital 19,187 19,187 19,187
Share premium 19,359 19,359 19,359
Merger reserve (16,100) (16,100) (16,100)
Foreign exchange reserve 103 32 89
Share option reserve 1,698 1,312 1,633
Retained earnings 11,034 15,067 13,202
------------------------------ ----------------- ----------------- ------------
Total equity attributable
to
shareholders 35,281 38,857 37,370
============================== ================= ================= ============
CONSOLIDATED STATEMENT OF CASH FLOW
Unaudited Unaudited Audited
6 Months ended 6 Months ended Year ended
30 June 2021 30 June 2020 31 December
Notes 2020
GBP'000 GBP'000 GBP'000
------------------------------------- ------- --------------- --------------- ------------
Profit/(loss) before tax
for the period 166 (1,476) (1,114)
Adjusted by:
Interest paid 4 148 107 212
Depreciation of property,
plant and equipment 683 628 1,252
Amortisation of intangible
assets 1,204 1,221 2,443
Net interest expense
Loss on disposal of property,
plant and equipment and intangible
assets - - 2
Share based payment 65 335 656
Movement in inventories (2,274) (2,659) 3,437
Movement in trade and other
receivables 1,290 3,729 1,781
Movement in trade and other
payables 2,174 1,002 (812)
Movement in derivative financial
instruments (401) (212) 399
Foreign exchange translation
differences 15 (4) 53
------------------------------------- ------- --------------- --------------- ------------
Cash inflow generated from
operations 3,070 2,671 8,309
Income tax paid (310) (333) (853)
Cash flows from operating
activities 2,760 2,338 7,456
Purchase of property, plant
and equipment (122) (462) (869)
Purchase of intangible assets (3) (10) (12)
Sale of property, plant and
equipment proceeds - - 21
------------------------------------- -------
Cash flows used by investing
activities (125) (472) (860)
Principal elements of lease
payments (591) (424) (810)
Repayment of borrowings (48) (45) (90)
Decrease in stock and invoice
finance facilities - (202) (1,191)
Interest paid (148) (107) (212)
Dividends - - (2,149)
------------------------------------- ------- --------------- --------------- ------------
Cash flows used by financing
activities (787) (778) (4,452)
Net change in cash and cash
equivalents 1,848 1,088 2,144
Cash and cash equivalents
at beginning of period 4,875 2,731 2,731
------------------------------------- ------- --------------- --------------- ------------
Cash and cash equivalents
at end of period 6,723 3,819 4,875
===================================== ======= =============== =============== ============
Cash and cash equivalents
consists of:
Cash and cash equivalents 6,723 3,819 4,875
------------------------------------- ------- --------------- --------------- ------------
6,723 3,819 4,875
===================================== ======= =============== =============== ============
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 2020 19,187 19,359 (16,100) 36 977 16,354 39,813
On translation of foreign
subsidiary - - - (4) - - (4)
Loss for the period - - - - - (1,287) (1,287)
-------------------------------- -------- -------- -------- --------- -------- --------- -------
Total comprehensive income
for the period - - - (4) - (1,287) (1,291)
-------------------------------- -------- -------- -------- --------- -------- --------- -------
Transactions with owners
Share based payments - - - - 335 - 335
Total transactions with owners - - - - 335 - 335
-------------------------------- -------- -------- -------- --------- -------- --------- -------
As at 30 June 2020 19,187 19,359 (16,100) 32 1,312 15,067 38,857
-------------------------------- -------- -------- -------- --------- -------- --------- -------
As at 1 January 2020 19,187 19,359 (16,100) 36 977 16,354 39,813
On translation of foreign
subsidiary - - - 53 - - 53
Loss for the year - - - - - (1,003) (1,003)
Total comprehensive income
for the year - - - 53 - (1,003) (950)
-------------------------------- -------- -------- -------- --------- -------- --------- -------
Transactions with owners
Share based payments - - - - 656 - 656
Dividends paid - - - - - (2,149) (2,149)
Total transactions with owners - - - - 656 (2,149) (1,493)
-------------------------------- -------- -------- -------- --------- -------- --------- -------
As at 31 December 2020 19,187 19,359 (16,100) 89 1,633 13,202 37,370
-------------------------------- -------- -------- -------- --------- -------- --------- -------
As at 1 January 2021 19,187 19,359 (16,100) 89 1,633 13,202 37,370
On translation of foreign
subsidiary - - - 14 - - 14
Loss for the period - - - - - 135 135
Total comprehensive income
for the period - - - 14 - 135 149
-------------------------------- -------- -------- -------- --------- -------- --------- -------
Transactions with owners
Share based payments - - - - 65 - 65
Dividends paid - - - - - (2,303) (2,303)
Total transactions with owners - - - - 65 (2,303) (2,238)
-------------------------------- -------- -------- -------- --------- -------- --------- -------
As at 30 June 2021 19,187 19,359 (16,100) 103 1,698 11,034 35,281
================================ ======== ======== ======== ========= ======== ========= =======
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The accounts have been prepared in accordance with accounting
policies that are consistent with the Group's Annual Report and
Accounts, the Group's Annual Report and Accounts for the year ended
31 December 2020 have been prepared in accordance with
international accounting standards in compliance with the Companies
Act of 2006 and Group's Annual Report and Accounts for the year
ending 31 December 2021 will be prepared in accordance with the UK
adopted international accounting standards.
The comparative financial information for the year ended 31
December 2020 in this interim report does not constitute statutory
accounts for that period under 435 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2020 have been
delivered to the Registrar of Companies.
The auditors' report on the accounts for 31 December 2020 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 2020.
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 2021 30 June 2020 31 December
2020
GBP'000 GBP'000 GBP'000
------------------------------ ---------------- ---------------- -------------
Depreciation of property,
plant and equipment 344 279 385
Amortisation of right-of-use
assets 339 365 867
Amortisation of intangible
assets 1,204 1,221 2,443
Write down inventories at
net realisable value 167 291 312
Exchange differences (163) (641) 420
Exceptional costs 5 193 317
4. Finance expenses
Unaudited Unaudited Audited
6 Months ended 6 Months ended Year ended
30 June 2021 30 June 2020 31 December
2020
GBP'000 GBP'000 GBP'000
-------------------------- ---------------- ---------------- -------------
Interest on loans 64 10 18
Lease liability interest 43 87 143
Other interest 41 10 51
-------------------------- ---------------- ---------------- -------------
Finance expenses 148 107 212
========================== ================ ================ =============
5. Tax expenses
Unaudited Unaudited Audited
6 Months ended 6 Months ended Year ended
30 June 2021 30 June 2020 31 December
2020
GBP'000 GBP'000 GBP'000
------------------------------------ ---------------- ---------------- -------------
Current tax expense
Current income tax charge 248 40 429
Adjustment in respect of - - -
previous periods
------------------------------------ ---------------- ---------------- -------------
40 429
Deferred tax expense
Relating to original and
reversal of temporary differences (217) (229) (544)
------------------------------------ ---------------- ---------------- -------------
Total tax in income statement 31 (189) (111)
==================================== ================ ================ =============
6. Earnings/(loss) per share
(Loss)/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 2021 30 June 2020 31 December
2020
GBP'000 GBP'000 GBP'000
----------------------------- ---------------- ---------------- -------------
Profit/(loss) after tax for
the period 135 (1,287) (1,003)
============================= ================ ================ =============
The share options in issue at each period end have not been
included in the computation of diluted earnings per share, as per
IAS 33, the share options are not dilutive as they are not likely
to be exercised given that the exercise price is higher than the
average market price.
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 2021 30 June 2020 31 December
2020
------------------------------- ---------------- ---------------- -------------
Weighted average number of
shares
Weighted number of ordinary
shares for the purpose of
basic earnings per share 76,749,999 76,749,125 76,749,125
Potentially dilutive shares
awarded 251,863 - 67,040
------------------------------- ----------------
Weighted number of ordinary
shares for the purpose of
diluted earnings per share 77,001,862 76,749,125 76,816,165
------------------------------- ---------------- ---------------- -------------
Earnings/(loss) per share
(pence) - Basic and Diluted 0.18 (1.68) (1.31)
=============================== ================ ================ =============
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