No recommendation
No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.
(Sharecast News) - Shares in Warpaint London plunged on Wednesday, after the cosmetics firm posted below-forecast sales and lowered its full-year outlook.
Revenues at the AIM-listed owner of W7, Technic and Dirty Works, among other brands, rose 8% in the six months to 30 June, to £49.3m. It was, however, below company guidance for between £50m and £52m.
The gross profit margin improved to 45% from 42.5% as prices rose. But adjusted earnings before interest, tax, depreciation and amortisation eased 5% to £10.8m, and pre-tax profits fell sharply, down 41% to £6.4m.
Warpaint attributed the weaker profits to non-cash losses on foreign exchange forward contracts as well as costs associated with the acquisition of Brand Architeks, which completed in February.
Looking to the rest of the year, Warpaint flagged both an "increasingly weak" UK environment and uncertainty in the US, due to the impact of tariffs. It also noted that one of its long-term customers had gone into administration, putting future revenue from the firm at risk.
As a result, full-year revenues are now expected to come in between £107m and £112m, and adjusted EBITDA between £23.5m and £25.5m. Analysts had previously been expecting annual earnings of around £32m.
As at 0900 BST, shares in the firm had lost 19% at 231p.
Sam Bazini, chief executive, said: "The group traded satisfactorily during the first half, despite the challenging macroeconomic environment. But we have seen conditions remain difficult in recent months, with both consumer and customer confidence being subdued, which now seems likely to remain for some time.
"Coupled with continuing US market uncertainty, alongside a customer going into administration, we are disappointed to be lower our expectations for the full year."
Shore Capital said: "Warpaint's balance sheet is rock solid in our view.
"However, while medium to long-term opportunities remain considerable, and Warpaint is well placed and resourced to capitalise on them as they arise, the short-term headwinds are strengthening amid building consumer uncertainty, and with broader geopolitical headwinds also brewing, we feel it produce to be more conservative with forecasts for now."
Shore Cap cut its expectations for Warpaint's full-year earnings per share by 27% to 19.7p, and for revenues by 9% to £110.5m.
