BWX Ltd (ASX: BWX) shares are up 2% after the natural beauty business revealed strong profit growth in its FY20 report.
Strong FY20 result
BWX reported that its revenue increased by 26% to $187.7 million.
The company said that it made continued market share gains with increased revenue across all four core brands.
Sukin sales increased by 55% to $81.7 million as it becomes more available in Europe, USA and APAC. Sukin is now being sold in over 1,000 doors in the US.
Andalou Naturals sales increased by 10% to $53.3 million. It was affected by COVID-19 restrictions.
Mineral Fusion sales grew by 16%, helped by online accessibility.
Nourished life reported an increase in sales of 15%. The second half saw sales growth of 26% with an accelerated shift to online shopping due to lockdowns.
The gross margin rose 210 basis points (2.1%) to 58%. BWX’s comparable EBITDA (click here to learn what EBITDA) increased by 30% to $27.5 million. The EBITDA margin improved thanks to EBITDA growing faster than revenue. It generated statutory EBITDA of $30.9 million when including the AASB 16 leases accounting changes.
Statutory net profit rose by 59% to $15.2 million.
Balance sheet and dividend
BWX’s net debt was $32 million at the end of FY20. At the end of FY19 it had net debt of $42.8 million. Its cash position was $28.6 million at 30 June 2020, up from $14 million at 31 December 2019.
The board of BWX declared a final dividend of 2.6 cents per share. That payment is within the dividend payout guidance of 35% to 50%.
BWX spent $7.1 million on capital expenditure during the year, which included the rollout of the implementation of the Microsoft Dynamics 365 Enterprise Planning (ERP) software in the USA.
Inventory increased 28%, which was less than the sales growth. BWX said it was effectively managed with tightening supplier trading terms, an increased frequency of review in sales forecasting, scan data and demand planning which the ERP system continues to support.
Outlook
BWX said it’s positioned to capture more market share in FY21. It’s expecting long-term, sustainable growth.
In FY21 the company is expecting revenue and EBITDA growth of at least 10%. FY21’s result will also be boosted by the one-off benefit following an agreement on the final consideration payable to the sellers of the Andalou Naturals business, with no impact on the carrying value of Andalou Naturals.
BWX has really turned things around. I think BWX is one to watch, but you’d need to be a long term investor because it’s currently trading with a price/earnings ratio of around 40, which is quite high.
If BWX can keep delivering double digit profit growth for a number of years then I think it could be a decent investment. But I think a consumer business like Bubs Australia Ltd (ASX: BUB) could also be a really good long term investment.
