The global skincare and beauty market is unquantifiably huge. Within that, the natural beauty and wellness sub category is emerging and gaining more and more traction as consumers seek to reduce their impact on the environment and incorporate more natural ingredients in their skincare routine.
With influencers touting their favourite products and other clever marketing strategies, the space is becoming increasingly crowded, just like my bathroom cupboard. That, coupled with inflationary pressures and a scaling back of consumer spending has seen listed natural beauty and wellness conglomerate BWX Limited (ASX: BWX) take an introspective look at their business.
The Group owns four brands and sells them across 28 global markets. These brands include Andalou Naturals, Mineral Fusion, Sukin and Zoe Foster-Blake’s uber successful Go-To Skincare. BWX also owns two pure play digital ecommerce platforms with over 15,000 unique products: Nourished Life, and Flora & Fauna, another Australian success story piloted by Julie Mathers.
To grow the business and ensure their products are staples within all cupboards, BWX has been investing in themselves having acquired Flora & Fauna earlier in the year and seeing the completion of a purpose-built manufacturing facility in Clayton, Victoria to enhance efficiencies.
Guidance given by the Company anticipates that FY22 revenue will come in at $206 million, representing a 6% increase on the prior corresponding period. NPAT however, expected to sit in the negatives, with the Company foreseeing losses between $10 and $14 million for FY22.
So, with the primary objective of reducing debt and paving a path to profitability, the Company has announced a fully underwritten $23.2 million capital raise. The Raise will comprise a placement component of $13.5 million and an entitlement offer of $9.7 million.
Despite “the Board believ[ing that] it is likely that BWX’s intangible assets may be impaired to a level significantly below their carrying value,” they certainly are valuing shares at a low price.
Shares will be offered at $0.60 each, representing a crazy 48.7% discount to the last closing price of BWX on 23 June.
The proceeds of the Offer will go directly to reducing debt of which the Company will have $58-$62 million at the end of the financial year.
The raise is part of the Company’s plan to change their approach, pivoting to “prioritise the future sustainability of profit margins.” This morning’s investor presentation outlined just how they plan to do this by increasing prices of their products, reducing trade spend and facilitating the quicker movement of products from their new manufacturing facility to the market. The Company will also look to reduce their inventory by $20 million as they transition to the new facility.
BWX expects their balance sheet to look a lot healthier come FY23 with improved performance across all their brands both in Australia and abroad. To secure the funds at such a discount, the Company has taken the bold step of issuing FY23 guidance, before FY22 has even ended.
In this guidance, they forecast revenue to increase by at least 29% to $260m-$270m while backing their restructure to flow down to earnings where they have issued FY23 EBITDA guidance of $45m-$49m, or a 488% increase on their $6m-$10m forecast for FY22.
Given the dire FY22 forecast, ambitious FY23 guidance where any failure would be attributed to current market volatility, it comes as no surprise to see BWX shares reach a new 52-week low this morning of $0.69 per share.
With new shares from the capital raise to be issued next week, it may take a while for BWX shares to claw back to their high over the same period of $5.56.
Samantha Freidin is a business journalist at Emerald Financial whilst also completing a Masters of Marketing and Digital Communications at Monash University.
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