Warpaint London results don’t paint a pretty picture

Shares in AIM-listed cosmetics company Warpaint London (LON:W7L) dropped by 4.76% to 40p (as of 14:30 BST) after pre-tax profits for the year ended 31st December fell by 61.7%. Group revenues were up by 1.6%, but gross margins declined by 200 basis points due to lower margins on US sales and adverse exchange rates.

Chairman Clive Garston commented: “The Group had a satisfactory trading performance in 2019 and there was a positive start to the current trading year. Since the year end the W7 range has been successfully launched into Tesco, and early results are encouraging.  Active discussions are taking place with other major retailers.

“However, currently the Covid-19 pandemic is casting a giant shadow over world economies and Warpaint is not immune to it. As was stated in our update in April, trading for the first two months of the current year was at the upper end of the board’s expectations, but since then there has been a substantial reduction in Group sales as a result of lockdowns, which have caused the closure of many of our customer’s retail outlets in the UK and in our other markets.

“[…]The directors believe that the Company’s business model remains robust and It is the board’s opinion that without the impact of the corona virus pandemic, 2020 would have been a year of recovery and improvement in financial performance for the Group. There are exciting opportunities for Warpaint and we continually review and refresh our product offerings and are well-placed to grow. 

“Whilst the Covid-19 outbreak will inevitably have a negative impact on the business, I do believe that the Company is well-placed for the future. The uncertainty caused by the pandemic cannot be underestimated, but the important thing is that the Group is financially sound and in a position to deal with all current uncertainties and implement its strategy“.