Warpaint London plc (LON:W7L) Chief Executive Officer Samuel Bazini caught up with DirectorsTalk for an exclusive interview to discuss a record first half, drivers for future growth, expansion & new product development, e-commerce revenues, and what we can expect for the rest of the year and into 2025.
Q1: Sam, results for the first six months of the year published this morning and again, you’ve achieved a record first half with a 25% increase in sales and a 75% increase in profit from operations. Could you just provide some background on what drove this growth in the first half and what’s key to driving future growth?
A1: Obviously, we’re delighted it’s been another record-breaking first half for Warpaint London.
The growth can be attributed to a number of different factors. Revenues have increased from £36 million in the first half of 2023 to £46 million in the first half of this year and this has been achieved by the most part with growth within our existing customer base.
So, as our brands grow and demand from the consumers increases, our existing customers, they give us more space, they give us more stores, which in turn obviously drives up revenue. It is worth noting, we often get asked this, there have been no major new pipe fills in the first half of 2024, skewing the numbers, it’s just steady organic growth within our existing customer base.
However, for me and my co-founder Eoin Macleod, the most pleasing thing is the increase in margin and profitability of the business. Margin is up from 39.1% in the first half of 2023 to 42.5% in the first half of 2024, leading to a 76% increase in profits to £10.9 million against £6.2 million in 2023.
There’s a number of reasons for this jump, it’s a combination of new product development. We were able to slightly increase prices as we bring new products onto the market, and we’re also very conscious that we have to keep our marketing spend under control, which we do, we don’t let that side of the business run away with itself. As a business, our costs are pretty fixed, as our revenues grow, the percentage of the overhead doesn’t grow at the same rate so additional profits drop to the bottom line.
The last part of your question, what is the key to future growth? The key to future growth is more space and more stores and our existing customers and obviously, we’d like to open new doors moving forward. So, that really answers your first question.
Q2: Now, you mentioned plans for expansion with both existing and new retailers and continued new product development. Can you provide some examples of where Warpaint’s products are stocked and how you’re growing with retailers?
A2: Over the last few years, we’ve started to move away from the deep discount retailers and focus on breaking into the mainstream retailers, which we’ve managed to do in the UK with the likes of Tesco, Boots, Superdrug, and Morrisons.
In the US over the last few years, we’ve launched into Five Below, CVS and Kroger, and we’re just launching a limited number of products into Walmart with hope of growing our business within their estate. In the past, we’ve proved we can start small with the major retailers and grow the business, and I’m confident the same will apply to Walmart.
A good example of starting small and growing is Boots. We started with 80 stores on a two-foot fixture, we’ve just rolled out with a three-foot fixture to a further 100 stores so we’ve now got 180 stores across their estate. The result, although it’s only just over double the stores we had before, because we’ve got a bit more space and we’re a better source, the sales have increased fourfold. We’re still in less than 10% of Boots’ estate so we feel there’s lots of room to grow within Boots.
It’s a similar story with most of our retailers. We were in 70 Superdrug stores, we’re just rolling out, as I speak, to another 65 stores. If you look at our customer base, we’re only in 40% of the stores with our key retailers we currently supply, so we feel we’ve got lots of built-in growth for the next few years with just our current accounts.
Q3: You mentioned in the results statement that growing e-commerce revenues has also contributed to growth. How significant is e-commerce in your overall sales strategy and what are the plans to further develop this channel?
A3: Well, our e-commerce sales have been growing steadily for the last few years and they have become an important part and contributor of the business. Last year, e-e-commerce sales represented about 7% of the total of the group sales, e-commerce sales were up 31% in the first half of this year against the same period last year so we expect e-commerce sales as a percentage of the group sales to grow again this year.
With regard to growing this channel further, it will just be more of the same. We want to carry on growing it steadily and the key word is profitably, we don’t want to burn cash. So, e-commerce business delivers the same net margin as the rest of the business and we’re very focused on keeping that formula, we’re not interested in growing the top line at the expense of profitability.
So, what you can expect going forward is further, steady, profitable and sustainable growth.
Q4: Sam, is there anything else that you’d like to add regarding what we should expect from Warpaint London for the rest of the year and into 2025?
A4: Obviously this is our busiest time of year. The house broker’s forecast revenues of £105 million and he’s just upgraded our PBT from £23 million to £24.2 million for 2024 and we’re very, very confident we can achieve these numbers.
For 2025, we expect further significant growth with the retailers we currently supply. In fact, some of our major retailers have resets next year, so we’re hoping to get more space in those retailers. We’re also in talks with a number of new retailers, both in the UK, the US and the rest of the world, and we’re hopeful, but we’re confident, if you like, that we can open some new doors next year.
