Recovering from its rebellious phase—and after being disciplined by the ASX—global natural beauty and wellness company BWX Limited (ASX: BWX) is finally sobering up.
After its financial fiasco in 2022, the Company reported sales revenue of $38.1 million in Q2 FY23, significantly lower than its target. Of course, revenue was impacted by its dented revenue recognition process, cash constraints as a result of the trading suspension, poor inventory, and reduced marketing activities.
On August 29, 2022, the Company sought suspension from the ASX after it was found that BWX had fudged its revenue forecast and overall financials for FY21 and FY22. It turned out, the actual figures were significantly below what was mentioned, making it unable to meet its full-year guidance.
Understandably, the ASX was pissed, and BWX, the Company behind Sukin, finally ended up releasing its audited FY22 results in December 2022. Walking on eggshells now, BWX updated its overall sales revenue forecast for FY23, revising it down to $170 million to $190 million from the previous range of $205 million to $230 million. Its EBITDA forecast also took a dip to $10 to $15 million from $25 to $30 million.
Besides the impact of its trading suspension, the Company’s retail businesses also suffered as fewer people bought its products online. Its digital business—Nourished Life and Flora & Fauna—witnessed high consumer acquisition costs, less web traffic and more out-of-stock banners slapped across its products. In the US, too, customers have become more cautious about spending on “natural” stuff, which will impact BWX’s overall revenue in FY23.
Still, it’s not all bad for BWX. On January 6, 2023, it got China’s registration approval from the National Medical Products Administration (NMPA) for twelve Sukin-branded skincare products. The Company can sell these products through the country’s wholesale and retail channels instead of just relying on e-commerce. This is expected to add over $15 million in revenue per annum by FY26.
In the US, cash constraints have delayed the launch of many new products as marketing spend reduced.
Based on current scan-out data, the excess inventory levels are expected to reduce by Q3 FY23. And hopefully, along with that, the out-of-stock issues will improve, too. All of this rests on the Company’s debt restructuring.
In December, BWX divested many of its shares to save some cash. It divested its shares in PS Health Pty Ltd, trading as Goodness Me, thus ending BWX’s investment in that business. Then, it divested the assets of the USPA business to Anagenics Limited. Anagenics acquired all raw materials, components and finished goods and will pay a royalty to BWX during FY24 and FY25 provided that certain revenue hurdles are met. BWX is now looking for interested parties to divest its remaining interests in the Nourished Venture portfolio during H2 FY23.
In FY22, the Company reported a loss of over $330 million and undertook a total Board restructure. It is starting fresh and hopefully with a little more consciousness than before. BWX plans on completing the organisational revamp by Q3 FY23. Financial discipline, inventory run-down, and long-term debt restructuring will continue to take the top spot on its agenda.
Alinda is a Business Reporter for The Sentiment
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