Weak UK sales weigh on Warpaint profits

Warpaint London, the owner of cosmetics brand W7, posted a rise in full-year revenue on Wednesday but a drop in pre-tax profit amid challenging trading conditions in the UK.

In the year to the end of December 2018, revenue pushed up 49.2% t £48.5m, while adjusted profit from operations rose to £8.3m from £7.7m the year before. However, group pre-tax profit declined 32% to £4.7m, dented by sluggish UK sales and currency movements.

Revenue in the UK, which now accounts for 48% of total business versus 52% in 2017, fell 24% during the year amid tough conditions on the high street.

"We believe the consumer is behaving (possibly because of Brexit fatigue) as if the UK economy is in recession, despite real wage growth and high employment levels. This is affecting spending patterns, shopping behaviour and consumer attitude," it said. "In our opinion the UK high street was also impacted in 2018 by the cold winter with snow in February and the record hot summer."

The final dividend for the year came in at 2.9p a share, taking the total dividend to 4.4p, up from 4p in 2017.

Chairman Clive Garston said 2018 was a challenging year as the company faced continuing Brexit-related uncertainty, a fluctuating sterling exchange rate and a big drop in retail sales on the UK high street.

"However, despite the challenges of 2018 I believe the company is well placed for the future," he said.

"Whilst trading conditions remain difficult in the UK, we have had a promising start to the current financial year. We continue to grow internationally and expect our sales outside the UK to be an ever greater proportion of group sales going forward. In particular, I am encouraged by the sales of the Retra brands and our growth in the US.

"The group has a sound financial footing with a strategy for growth across all our markets. The board is cautiously optimistic for the 2019 financial outturn, with growth in sales and EBITDA anticipated."

At 1110 BST, the shares were down 2% at 96.40p.