MIDAS SHARE TIPS UPDATE: Warpaint make-up is looking good

As usual the weather is bad. As usual, we make the best of it. The British like to party and this weekend has given us the perfect excuse. For most women (and some men), a party means makeup, whether that’s a little bit of lipstick or the full work — foundation, blush, eye shadow, and the rest.

War paint specializes in all things cosmetics, at a price that even budget-conscious consumers can afford – and the company is running on all cylinders.

Founded in the 1990s by two young entrepreneurs, Sam Bazini and Eoin Macleod, the company has its roots in the discount market, originally selling excess stock of brands such as L’Oreal, Revlon and Max Factor to low-cost retailers including B&M, TK Maxx and Savers. In 2002 they started selling their own range, W7, designed to be fun, affordable but also good quality.

Today, Warpaint is listed and generated a 24 per cent increase in turnover to £64 million last year, while profits rose 45 per cent to £10 million and dividend rose 18 per cent to 7.1 pence.

Bazini and Macleod still run the company and W7 still accounts for the majority of Warpaint’s sales. But several own brands are now offered, including Technic, Very Vegan and Man’Stuff – all appealing to young people who want to look good without paying too much.

Midas recommended the shares in 2017, when the group sold most of its wares to discount stores and independent retailers. However, since then there has been a determined push to move to large, mainstream chains, including Tesco, which began selling W7 cosmetics in 2020 and now offers its range in 1,400 stores across the UK. Boots have also joined the roster, Asda came on board last month and other household names should join this year.

Bazini and Macleod have also made great strides abroad. European sales grew by 56 percent last year and now account for more than 40 percent of group sales. Sales in the US rose 80 percent to £5.3 million last year, with further expansion expected this year and beyond.

Internet sales are also on the rise, both via Amazon and the group’s own websites. Looking ahead, the outlook is rosy. Brokers expect double-digit growth in the near future, forecasting £74m in revenue and £12m profit this year, and further strong profits in 2024 and 2025.

The dividend is also a point of attention. Bazini and Macleod each own 25 percent of the company, so not only are they motivated to succeed, they also recognize the importance of rewarding shareholders. A payout of 7.7 pence is expected this year, rising to 8.7 pence next year and more than 10 pence in 2025.

Midas verdict: Most women want to look good, but in difficult times they prefer to pay a little less for it. Warpaint goods cost much less than premium brands, the products are well made, and customers tend to stick with the company. This weekend there is even a ‘Coronation Flash Sale’. Shares are up 10 per cent to £2.46 since 2017, but the best is yet to come – and the dividend is attractive too. Existing shareholders must remain with the company. New investors could also benefit from a few stocks.

Traded on: GOAL ticker: W7L Contact: warpaintlondonplc.com or 01753 639130