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Results: BWX posts 50% decline in profit but expects strong growth in FY 2020

The BWX Ltd (ASX: BWX) share price will be on watch today after the personal care products company released its full year results.

How did BWX perform in FY 2019?

For the 12 months ended June 30, BWX reported net revenue of $149.5 million. Whilst this was an increase of just 0.5% on FY 2018’s revenue, it is worth noting that second half revenue grew 19.5% on the prior corresponding period.

Underlying EBITDA came in at $21.3 million, which was down 47.2% year on year but in line with its update in May following strong second half growth.

Net profit for the period halved to $9.5 million and diluted earnings per share sank 53% to 7.7 cents.

A final fully franked dividend of 2.7 cents per share was declared by the BWX board, which is within the dividend payout guidance range of 35-50%.

What were the drivers of its result?

The main drag on its performance was its key Sukin brand. Sales of Sukin products fell 20% in FY 2019 due to non-repeating unprofitable promotions and the stabilisation of stock levels in the channel over the period.

However, scan-data shows Sukin is outperforming the Natural segment in pharmacy with 4.4% growth versus -3.7% for the category.

Andalou Naturals sales increased 60% to $48.6 million in FY 2019, though this was partly due to the timing of its ownership. In FY 2018 the business was only under BWX’s ownership for 8 months of the year.

It was a similar story for Nourished Life business. Its sales grew 12.3% to $20.9 million, though was only under BWX ownership for 9.5 months in FY 2018.

Finally, the Mineral Fusion business posted a 19% decline in sales to $24.6 million.

The company’s new managing director and CEO, Dave Fenlon, said: “While 2019 presented challenges that are reflected in our financial outcomes for the year, our overall brand health remains strong. The positive sales momentum in the USA, where we continue to outperform the Natural category, highlights the strategic importance of our multi-brand selling model across distribution channels, geographies, product categories and price points.”

Outlook.

Management appears confident that the strong second half performance can be repeated in FY 2020.

Mr Fenlon said: “BWX remains well positioned with category leading brands underpinned by material growth trends favouring natural products. The Group will continue its investment in brand building, process improvement, capability and innovation to drive deeper consumer penetration and basket size supporting double digit revenue and EBITDA growth in FY 2020.”

The company has provided guidance for 25% revenue growth and 25-35% EBITDA growth.

Also on watch in the retail sector today following results releases include footwear retailer Accent Group Ltd (ASX: AX1) and auto retailer Automotive Holdings Group Ltd (ASX: AHG).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended Accent Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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