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HY21: BWX (ASX:BWX) share price goes nuts on Chemist Warehouse deal

The BWX Ltd (ASX: BWX) share price is going nuts after announcing its HY21 result and a new deal with Chemist Warehouse.

BWX is a business that sells a variety of natural beauty products.

HY21 result numbers

BWX reported that its net revenue rose by 0.6% to $84.5 million. In constant currency terms that growth was 3.4%.

Underlying EBITDA (EBITDA explained) went up by 1.4% to $11.7 million, with reported EBITDA growing by 53.5% to $17.5 million.

BWX said that its marketing investment as a percentage of net revenue continues to grow year on year at 14.2% in line with its target range and reflects a commitment to educating consumers on the benefits of natural beauty products.

Further efficiency gains supported the delivery of a total operating expenses ratio of 42.4%, down 0.2% on the prior corresponding period.

Statutory net profit after tax (NPAT) jumped by 133.1% to $9.9 million.

BWX balance sheet and dividend

BWX announced a fully franked interim dividend of 1 cent per share. It said that strong cash conversion helped grow its net cash position by 171% to $77.7 million.

Growth initiatives

The natural business announced a number of different updates. I’ll start with the smaller ones.

It announced a Woolworths Group Ltd (ASX: WOW) retail partnership which will see Sukin launched in 930 stores.

BWX revealed the first 10 direct to consumer websites will be launched across five countries via The Hut Group.

The company was pleased to say it has achieved distribution gains in global retailers including Walmart (Canada) and natural supermarkets as well as the relaunch of Mineral Fusion in Wholefood Markets.

BWX’s big news was a 5-year equity-linked alliance with Chemist Warehouse Group to fuel growth of Sukin, Andalou Naturals and Mineral Fusion in Australia and international markets. It will a ‘platinum supplier’ with the entire range available online as well as an increased store presence in Australia, New Zealand and Ireland.

The initial tranche of shares to Chemist Warehouse represents 0.6% of BWX at a share price of $3.97. This can increase to 2.4% based on performance targets. This deal is expected to deliver positive profit / earnings per share (EPS)

Summary thoughts

BWX said that it’s on track to meet its full year FY21 guidance of revenue and EBITDA growth of 10%. The new deal is very promising because Chemist Warehouse is such a large retailer in Australia. It could help it become a much larger business. Scale has a lot of benefits for manufacturing companies. The improving profit margins are important and the new manufacturing facility will be really useful for this.

I think BWX could be one to watch, but it’s likely to be a bumpy journey over the years. Natural beauty demand is not a steady path of growth.

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