BWX shares soar as solid sales growth predicted

Shares in BWX have hit their highest level in a year, with short-sellers caught out after the troubled natural cosmetics company met its earnings guidance and predicted solid sales growth.

BWX shares were up 22.8 per cent to 2.86 at 1410 AEST on Friday, their highest level since December, and had traded as high as $3.02. More than $9 million worth of shares had changed hands, more than 10 times the value of recent days. The stock is 11.9 per cent sold short, one of the most-shorted shares on the ASX, and shares rose steadily throughout the day in an apparent short squeeze.

BWX said it had delivered $21.3 million in full-year underlying earnings under new chief executive David Fenlon, meeting its updated guidance of $21 million to $23 million. The Sukin and Andalou Naturals cosmetics brand owner said it had made $149.5 million in net sales, up 0.5 per cent, with sales up 19.5 per cent in the second half. Its reported net profit after tax plunged 70 per cent to $9.5 million, however, as operating expenses increased.

“While 2019 represented challenges that are reflected in our financial outcomes for the year, our overall brand health remains strong,” Fenlon said. “We enter the new year with increased capability and a clear strategic roadmap to deliver a turnaround in our performance.”

He said the company would not make the past mistakes of overstocking or holding unprofitable promotions.

“They are now a thing of the past,” Fenlon told analysts.

Fenlon said Sukin was now the No.4 skincare brand in Australia. The company predicted 20 per cent to 25 per cent revenue growth and 25 per cent 35 per cent earnings growth this financial year. The company has $67.7 million in debt, which it refinanced on June 30, and said it is within its banking covenants. BWX declared a dividend of 2.7 cents per share, fully franked, down from 4.2 cents a year ago.

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