BWX (ASX:BWX) share price halted following FY21 results and Go-To acquisition

BWX is raising funds for another acquisition…

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The BWX Ltd (ASX: BWX) share price won't be going anywhere on Friday.

This follows the personal care products company's request for a trading halt this morning.

That request was made following the release of its full year results and the announcement of a capital raising.

BWX share price halted after results release

  • Revenue increased 3.4% to $194.1 million
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 11.5% to $34.5 million
  • Statutory net profit after tax up 60.9% to $23.7 million
  • Earnings per share up 44.9% to 17.1 cents
  • Fully franked final dividend of 3.1 cents per share
  • $100 million equity raising to fund acquisition of 50.1% interest in Go-To Skincare

What happened in FY 2021 for BWX?

For the 12 months ended 30 June, BWX reported a 3.4% increase in revenue to $194.1 million. This was driven by strong sales volumes, reflecting a recovery in some regions from pandemic conditions and increased consumer adoption of retail omni-channel options.

Things were better for the company's earnings, with underlying EBITDA rising 11.5% to $34.5 million. Management advised that this was driven by a 134bps improvement in its gross margin to 59.3%, a disciplined approach to its cost base, and efficiencies across manufacturing,

The key Sukin brand was the star performer during the year, delivering a 16% increase in sales to $95 million. This was supported by a modest increase in Nourished Life sales and offset slightly by declines in Andalou Naturals and Mineral Fusion sales.

What did management say?

BWX 's CEO and Managing Director, Dave Fenlon, commented: "BWX has recorded another solid financial performance in FY21. Despite continual COVID-19 related retail lockdowns, we achieved growth in sales, gross margin and profit, with increased market share across our core categories of skincare, body and hair."

Mr Fenlon also spoke positively about the future, which could bode well for the BWX share price when it returns from its trading halt.

He said: "Our future trajectory has never been stronger. In FY21 we accelerated our growth in distribution points for our brands Sukin, Andalou Naturals and Mineral Fusion through our new strategic partnership with Chemist Warehouse, and new partnership with Woolworths Australia, and Walmart Canada, as well investment in our direct-to-consumer model to meet growing consumer demand."

What's next for BWX?

Mr Fenlon commented: "We enter financial year 2022 with momentum and a good execution against our Three Year Strategic Roadmap, and our soon-to-be opened manufacturing facility is expected to deliver a step change in both financial and operating performance. The current environment requires a proactive and responsive approach. While we continue to monitor our key markets – which are at varying stages of recovery – we are confident we have the right strategy and we are in the right category."

The company's future performance will also be boosted by the proposed acquisition of a 50.1% interest in Go-To Skincare for approximately $89 million. This values Go-To Skincare on a 100% enterprise value basis at $177 million, representing an FY 2021 EV/EBITDA acquisition multiple of 14.9x pre-synergies and 11.9x post-synergies.

Founded by Zoë Foster Blake in 2014, Go-To is an Australian skin care provider with a range of simple, trusted and effective skin care products for the masstige market. In FY 2021, it generated $36.8 million of revenue and $11.6 million of EBITDA.

The deal is expected to be mid-single digit earnings per share accretive on a FY 2021 pro forma basis (pre-synergies) and double digit earnings per share accretive post $3 million of potential synergies in the first full financial year.

To fund the deal, BWX is seeking to raise $100 million. This comprises an $85 million fully underwritten institutional placement and a $15 million share purchase plan.

The placement is being undertaken at $4.85 per new share, which represents an 8.7% discount to the BWX share price at yesterday's close.

BWX share price performance

The BWX share price has been a strong performer in 2021. Since the start of the year, the company's shares have gained 28%. This compares favourably to a 12% gain by the ASX 200.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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