The BWX Limited (ASX: BWX) share price has fallen 19% in early trading after giving the ASX a trading update.
BWX said that its normalised earnings before interest, tax, depreciation and amortisation (EBITDA) in FY19 is expected to be broadly in line with FY18's normalised EBITDA of $40.3 million.
The new BWX CEO Myles Anceschi put the blame firmly on the failed takeover "There has been significant disruption and loss of business momentum at the beginning of FY19 due to the now failed management buyout (MBO) process. The MBO diverted significant management time and resources, and several key projects were delayed resulting in an impact on the business."
BWX outlined a number of things that went wrong. First, there was an extended delay in a return to normal operations of its ERP program. This apparently contributed to lost domestic sales and materially higher operational costs for Sukin and Nourished Life.
The multi-brand selling platform roll-out was significantly delayed, resulting in lost sales. A relocation of the Nourished Life Warehouse and the consolidation of four US warehouses to one also temporarily impacted sales and costs.
BWX said all of the above, and other, initiatives are important for future growth, for generating cost efficiencies and operating leverage.
Despite all of the above problems, CEO Anceschi said that its categories are growing in all active markets.
Is it now a buy?
It has been a fairly disastrous period for BWX's reputation and share price since initiating the acquisitions in the US.
Only time will tell whether it's a been a bit of bad luck or whether BWX is making excuses for poor performance.
If BWX can achieve the same EBITDA and net profit after tax (NPAT) in FY19 as FY18, with growth likely in FY20 and beyond, then today's price could end up being cheap in the long run.
I still believe it operates in an attractive industry and a globally-growing revenue base is useful for BWX compared to domestically-focused shares.
Before this update, I was thinking I wouldn't buy any more shares until after the half-year result. If it achieves the same statutory earnings per share (EPS) of 16.6 cents as FY18, which includes acquisition costs, then it's trading at 16x FY19's earnings.
There is blood on BWX's streets, but I don't plan on buying until at least seeing the half-year result and some reassurance that the business' segments, particularly Sukin, are still growing revenue and there will further profit margin growth in the future.
