BWX

BWX

BWX Limited (ASX:BWX), developer and manufacturer of natural skin and hair care products, rose following the release of its financial results for the first-half of the 2019 financial year.

BWX recorded a half-year revenue of $68.1 million, up 1.4% compared to the previous corresponding session. However, BWX’s reported an NPAT of $2.6 million, indicating a 51.8% decrease from the first half of 2018, heavily impacted by operational disruptions during the period (including the well-publicised failed management buyout). Reported EBITDA also suffered a 40.5% decrease to $7.2 million, in-line with 2018 December’s guidance update. The net operating cash flow was also affected by higher inventories and prepayments which are expected to realise earnings through the second-half of 2019. BWX experienced significant improvements in second quarter operating performance as the benefits of ERP platform implementation emerge.

BWX downwardly revised its FY19 guidance to $27 million to $29 million (previously in the range of $27 million to $32 million). These revisions reflect the postponement of several upside initiatives that were initially planned for the first half of 2019. Nonetheless, following BWX’s half-yearly report, Managing Director and Chief Executive Myles Anceschi stated that in spite of several challenges and business restructuring, operational activities are gaining momentum with a substantial turnaround in the second quarter providing confidence on the company’s future outlook.

Consumer demand for BWX products continues to be solid across Australian pharmacies, with Sukin taking the top spot across skincare brands in the sector. However, Sukin experienced the largest negative impact from operational disruptions, with revenue in the segment declining by 182% from the previous period. Mineral Fusion’s rebrand launch earlier last January also yielded significant returns as baseline sales have grown across the past month.

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Within the United States, consumer sales remain dominant for Andalou Naturals with aggregate revenues in the segment increasing by 182% from the first half of 2018. Similarly, Nourished Life also recorded stable growth in sales revenue (53%); potentially looking to expand towards new international markets by the second half of this year. Chief Executive Anceshi commented that whilst “it is disappointing that we could not declare an interim dividend given the impact on cash balances this period, the outlook for the final dividend will be assessed by the Board in August.”

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Unfortunately, BWX continues to struggle against declining gross profit margins, falling by 51.5% from the previous corresponding session. Operating expenses continue to increase on a year-on-year basis, jumping by 22% to $28.4 million, with over 80% of expenses attributable to the acquisition of Andalou Naturals and Nourished Life.

Interestingly, despite losses incurred across financial categories, BWX’s shares performed relatively strongly. Nonetheless, it will be interesitng to examine whether sentiment continues to flurry into the once ‘market darling’; a lot of which hinges on its successful intergration of its recently-acquired brands.

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