Warpaint’s strategy to grow focuses on the continuing development of the W7 brand. The disruptive potential is the ability to move from idea to market in 3-5 months, which is beyond the capability of larger cosmetics houses. W7 is an innovative, design-focused brand proposition, predominantly selling to high street retailers and independent beauty shops. A global growth strategy sees it now in 56 countries, with key focus on the US and China. Additionally, the online channel is a growing contributor to revenue and highlights the scope for further sales growth. Management is also progressing opportunities for other brands such as Taxi.

The colour cosmetic market is valued at c $52bn according to a global industry study and forecasts suggest this will rise to $80bn by 2026, a CAGR of 4.8%. Warpaint aims to build internationally recognised brands, starting with W7. Exports of W7 are 58% of revenue as UK dependence reduces. By enhancing distribution and marketing platforms to incorporate social media and e-commerce, the offering should become more widely available to an international audience. W7 has recently launched a new range of ‘Very Vegan’ cosmetics, which has shown encouraging sales traction. In addition to other brands, including Outdoor Girl, it has a close-out division, which buys and sells close-out and excess stock of branded cosmetics.

Warpaint’s joint CEOs have been working together for 25 years and have deep experience of their market. The own-brand division (83% of revenue) enjoyed over seven years of revenue growth before IPO, and consensus forecasts are for meaningful revenue and profit growth to continue. At interim, PBT before plc costs rose 6% but with a strong Christmas order book, consensus expects FY17 PBT to grow 13% inclusive of plc costs in 2017. Warpaint’s progressive dividend policy is reflected in the forecasts, with dividends per share increasing y-o-y from FY16 to FY18. Net cash of £3.5m in FY16 is expected to grow to £7.0m in FY17.