Suspended from the ASX for questionable financials and raising capital with said number, beauty and wellness company BWX (ASX: BWX) has gone off the rails. Earnings down over 600% and profits down 1,700%, consequences seem to be catching up.
In the first half of FY23, the Company recorded a revenue decline of 18.4% to $79.7 million. Its earnings fell by $29.7 million, following a $5.4 million increase in H1 FY22. It also accumulated losses of over $100 million.
What’s more? Seeing the business go downhill, the Company CEO Rory Gration resigned (perhaps owing to shareholder pressure). As turmoil hit, Gration realised that he couldn’t manage—and might even be responsible for—the ongoing disruption and bowed out.
He’s just one of the many metaphorical casualties at BWX. The Company has been witnessing a slew of resignations from many senior officials, but new appointments offset that. Thinus Keeve was appointed CEO to replace Gration. Ian Campbell resigned as a non-executive director of the Company on February 10, 2023. Marcus Derwin (Chair of the Audit & Risk Committee) and Lisa Ronson (Chair of the People & Culture Committee) joined the Board as independent non-executive directors.
Rest assured, the board’s actions were not solely responsible for crumbling revenue. For one, customer de-stocking in key channels in Australia reduced revenues and associated cash receipts. Secondly, fewer people bought its products, and BWX had to continue paying the Clayton manufacturing facility. Finally, BWX failed to maintain inventory at optimum levels, giving rise to out-of-stock issues in the Australian, International and Digital business units.
As BWX slowed its marketing activities, gross margins were impacted. Plus, there was additional provisioning for slow-moving inventory worth $4.5 million. The Clayton facility—that makes BWX’s products—operated at lower volumes, impacting cost recoveries with an adverse impact of $1.5 million.
BWX had additional “doubtful” expenses of $2.5 million due to processing delays and higher risk profiles within specific channels. It also incurred non-cash impairment charges of $60.8 million. Overall, its net debt stood at over $85 million as it remained cash flow negative, with cash down over $30 million.
To cut costs and compensate for lost money, the Company divested its investments in PS Health Pty Ltd, trading as Goodness Me and the USPA business in December 2022. It sold its investment in Naked Sundays Pty Ltd in February 2023. In FY23, it expects to complete its organisational restructure and bring in profits.
Currently, though, BWX is still cash constrained ahead of an anticipated refinancing in H2 FY23. The Company expects that FY23 revenue will range between $150 million and $175 million and H2 FY23 EBITDA between $5 million to $12 million, excluding significant one-off items.
Alinda is a Business Reporter for The Sentiment
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