Brand Architekts (BAR) , a challenger UK beauty brand company, released a trading update for the year ended 30 June 2023 (FY23). The company reported a substantial increase in sales to £20.1m, up 41% from FY22, mainly attributed to the full-year impact of the acquisition of InnovaDerma, completed in May 2022. Excluding InnovaDerma, revenue still increased by 7%, primarily driven by strong international sales offsetting challenging trading conditions in the UK.
Despite economic and market headwinds, Brand Architekts generated a reduced operating loss in H2 2023. Without giving a figure, the company said it was a "a significant improvement on the performance in H1" thanks in part to better targeted advertising and promotions. The company anticipates similar improvements in full-year losses. It maintained a healthy net cash position of c. £8.2m at year-end, slightly surpassing both the half-year position and market expectations.
Brand Architekts said it continued to invest in its "Invest & Nurture" brands, which command higher retail prices, stronger consumer loyalty, and better margins. The company successfully integrated InnovaDerma, with core functions now based in the UK, and full synergies expected to be realised by January 2024.
In terms of new product launches, Brand Architekts recently introduced its Super Facialist Clear Skin product catering to teenagers with a new direct-to-consumer site launched in March 2023. Additionally, the company commenced new brand awareness and customer acquisition campaigns for Skinny Tan in July 2023, and plans to launch its Solution Menopause range in 2024.
Brand Architekts also said it resolved its legal claim with joint venture counterpart Jamie Stevens Media Limited (JSML) in Mr Haircare Ltd, a premium male haircare brand. The legal claim alleged a breach of shareholders' agreement dating back to the company's acquisition of Fish in 2018. After negotiations, Brand Architekts agreed to a full and final settlement of all claims amounting to £200k, along with legal costs of £225k.
Additionally, Brand Architekts said it will acquire JSML's 55% shareholding in Mr Haircare at a "fair value price" to be determined later in the year. The proposed acquisition should conclude before year-end when Mr Haircare will relaunch as "MR" with expected FY23 sales of £0.54m.
In international sales, Brand Architekts experienced strong growth helped by a post-Covid rebound in volumes from general merchandise stores across North America and Europe, benefiting Dirty Works. The company's global expansion is set to continue with planned distribution rollouts to AS Watson stores in 2023 and 2024 across the Middle East and Asia, including Thailand, Vietnam, the Gulf, Philippines, Malaysia, Taiwan, Singapore, and Turkey.
The company said its immediate priorities were driving brand awareness, expansion, maintaining a focus on brand contribution, and releasing working capital tied up in harvest brands. With the integration of InnovaDerma, the company is set to return to profitability in the near term. Markets seem to agree, lifting BAR shares 14% on today's update.
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