Warpaint London – AGM Update shows substantial growth opportunities, with additional improvement in margins, shares 411p, setting a 500p Target Price

17.06.2025

Ahead of today’s AGM, the £330m-capitalised cosmetics group Warpaint London (LON:W7L) has released its latest Trading Update indicating that the first half of the current year has seen higher margins being reported.

The specialist supplier of colour cosmetics and owner of the W7, Technic, Skin & Tan, Super Facialist, Dirty Works and Fish Soho brands, sells in the UK primarily to major retailers and internationally to local distributors or retail chains.

The group’s mission is to provide access to an extensive range of high-quality cosmetics at an affordable price.

The AGM Statement

Chairman Clive Garston will inform shareholders that:

“The Group continues to trade robustly with sales for the six months to 30 June 2025 expected to be in the range of £50 million to £52 million (six months to 30 June 2024: £45.9 million), including an approximate £5 million contribution from Brand Architekts. 

The Group’s revenue in Q2 has, as expected, been impacted by a slowdown in its US business, which remains a modest proportion of Group sales (2024: 8.5%), following the imposition of higher tariffs. 

However, Group sales overall are being achieved at a significantly higher margin than that achieved in 2024.

Even more so than previous years, the Group expects sales for FY25 to be heavily second half weighted.  

This is due to the large number of planned product roll outs to additional stores in H2 as previously announced, together with a significant Christmas order book.  

There continues to be substantial growth opportunities for Warpaint and the Group is very well positioned to achieve further growth, with additional improvement in margins. 

Brand Architekts, acquired in February 2025, is now fully integrated into the Group and is providing additional and exciting growth opportunities. 

The board therefore remains confident that the Group will meet market expectations for the year ending 31 December 2025.

The Company continues to have a strong balance sheet, with no debt.  

Cash balances as at 10 June 2025 totalled £15.8 million (30 June 2024: £5.5 million).”

Broker’s View

There are three brokers following the company, the average Target Price is 667p, the Highest being 700p, the Lowest 600p.

Analysts Darren Shirley and Clive Black, at Shore Capital Markets, now have estimates out for the current year to end-December 2025 for revenues of £120.3m (£101.6m), with adjusted pre-tax profits of £29.0m (£24.6m), generating earnings of 27.0p (24.4m) and paying out a dividend of 12.2p (11.0p) per share.

For 2026 they see £138.1m sales, £33.5m profits, 31.1p per share in earnings and a 14.0p dividend.

Looking further ahead into 2027, the analysts estimate that £155.1m of sales, could increase profits to £38.2m, with 35.2p earnings enabling a more than twice covered 15.9p dividend per share.

My View

Despite its fairly high rating, I actually like the business model of Warpaint.

Especially so as I note that it is spreading its sales efforts into Italy and the Netherlands and probably elsewhere in Europe.

Here in the UK, where amongst many other leading retailers, its sells into Superdrug and Boots, I also understand that the group’s W7 impulse range will be broadened into some 150 Tesco stores in the second half-year.

Within the last year the group’s shares have been up to 650p, and been down to just 305p, so now at around the 411p level perhaps they offer some early upside upon evidence of its profitable progression in the next six months or so.

I now set a Target Price of 500p for the group’s shares, hopefully achievable within the next year.

(Profile 17.06.2025 @ 411p sets a Target Price of 555p)