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TheComposer4 Jun '26 - 07:22 - 4746 of 4746 Edit

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Interesting backdrop developing here.

The ex-dividend date is now only a week away, the AGM follows shortly afterwards, disclosed shorts have disappeared from ShortTracker, buyback authority is expected to be renewed and the broader macro backdrop appears to be improving as oil prices continue to ease.

The market already knows about the weak FY26 start. The key question now is whether trading is stabilising and whether management remains confident in the expected H2 recovery.

With a debt free balance sheet, strong cash generation, a growing dividend, ongoing international expansion, entry into new South American markets and continued online growth, it feels to me as though the market is still focusing far more on what went wrong than what could go right.

Worth noting DividendMax is currently showing a very attractive yield profile here, especially considering W7L remains debt free, cash generative and still increasing dividends despite the difficult FY26 start.

The market still seems heavily focused on short-term sentiment while perhaps underappreciating the longer-term fundamentals and recovery potential.

https://www.dividendmax.com/united-kingdom/london-stock-exchange/personal-goods/warpaint-london-plc/dividends

Yes, management stated the Rossmann Germany launch is expected to begin from May 2026 and referenced a pilot rollout into ~2,200 stores.

Importantly, even though it starts as a capsule/pilot range, the significance here is the sheer scale of the distribution opportunity if sell-through performs well.

Rossmann is one of Europe’s largest drugstore chains, so this could become a very meaningful long-term growth driver for W7L if expanded further over time.

At current levels, the risk/reward now looks increasingly asymmetric to me.

If recovery does materialise through H2 as management expects, the upside from these levels could eventually prove materially greater than any remaining downside.

Warpaint London PLC reported a 3% increase in revenue to £105.1 million for the year ended 31 December 2025, alongside a 140 basis point improvement in gross profit margin to 42.6%. However, adjusted EBITDA decreased by 15% to £21.3 million, and profit before tax fell 24% to £18.1 million, impacting adjusted earnings per share by 25% to 16.7p. The company ended the year with a significantly strengthened cash position of £16.0 million, up 102% from the previous year, and maintained a debt-free balance sheet. The Group also recommended an increased final dividend of 9.0 pence per share, bringing the total for the year to 13.0 pence per share.

Brokers certainly don’t always get things right, but it’s also worth remembering that broker price targets are generally based on detailed financial models, forecasts, peer comparisons, cash generation, margin assumptions, growth expectations and management guidance — not simply pulled out of thin air.

In that context, it’s notable that both Berenberg (510p PT) and RBC (440p PT, reiterated Outperform) still see valuations massively above current levels despite already factoring in slower growth, tougher retail conditions and macro uncertainty.

At ~190–200p, after falling from ~500p within 12 months, the market already seems to be pricing a very pessimistic scenario here. Yet the company remains debt-light, cash generative, dividend paying, has expanded its brand portfolio through Barry M, and management has already guided toward a return to organic growth in 2026 together with further significant customer rollout opportunities.

Meanwhile disclosed shorts have reduced dramatically over recent months rather than increasing further, which is difficult to reconcile with the idea of a major structural deterioration in the business.

Tomorrow obviously decides things, but if management simply confirms stabilisation, improving rollout momentum and renewed growth progression into 2026, then from these heavily depressed levels a very sharp recovery in sentiment and valuation would not surprise me at all.

One can also assume/argue the opposite — that a move back toward 250p+ (even 270p+) is just as possible here if tomorrow’s update/outlook comes in better than current market expectations and fear levels.

At ~190–200p, after such a major derating already, the market hardly seems to be pricing much optimism at all. If management simply confirms improving momentum into 2026, rollout progress and stabilisation in trading, the risk/reward now arguably looks more balanced — if not skewed somewhat to the upside — from these levels, in my view.

Also worth remembering that Berenberg reiterated its Buy rating and 510p price target following the February trading update and Barry M acquisition announcement, suggesting some professional valuations remain materially above current levels despite all the recent macro fear and volatility.

Nice to note that Short Closures/Reductions are further continuing here:

https://shorttracker.co.uk/company/GB00BYMF3676/

More Short Closures noted:

https://shorttracker.co.uk/company/GB00BYMF3676/

The price action here continues to look extremely constructive, both technically and fundamentally.

Technically, W7L has now clearly broken out of its post-update base and established a higher trading range, moving from the panic lows around 175–200p into the 240–260p zone on strong volume. This is exactly how sustainable re-ratings begin — sharp repricing followed by consolidation at higher levels as stock transfers into stronger hands. The chart structure now shows a clear sequence of higher lows and higher highs, which is the hallmark of an emerging uptrend rather than a temporary bounce.

Fundamentally, the outlook has materially strengthened. The Barry M acquisition adds immediate scale, distribution across 1,300+ retail locations and meaningful earnings upside potential — secured at a highly attractive price and funded entirely from cash. Brand Architekts has already been turned profitable in year one, demonstrating management’s integration capability and disciplined capital allocation.

Importantly, management has explicitly guided to a return to organic growth in 2026 and expects to update the market on further significant new customer rollouts at the April results. That creates a clear and credible catalyst window directly ahead.

Institutional behaviour is also supportive. Major holders such as Schroders have increased positions, while multiple short sellers — including JPM and Arrowstreet — have been steadily reducing exposure. This combination of institutional accumulation and short covering typically accompanies the early stages of a sustained re-rating.

Looking further ahead, the AGM and trading update in June provide an additional catalyst. Management credibility has already been reinforced through disciplined execution, balance sheet strength, and value-accretive acquisitions. Continued operational progress into the AGM period would further support investor confidence and valuation normalisation.

Despite the recent recovery, the shares still trade well below historic levels and broker valuation ranges, while the company retains net cash, strong margins, expanding distribution and multiple growth drivers.

From both a technical and fundamental perspective, the trajectory now points toward continued strengthening into the April results and beyond. The recovery and re-rating process appears to be underway, and the market is increasingly recognising the improved outlook.

Schroders has now increased its holding in W7L above the key 10% threshold, as confirmed in today’s RNS.

Their stake has risen to 10.04% (over 8.1 million shares), up from 9.97% previously. This is a significant institutional vote of confidence, especially coming immediately after the trading update and Barry M acquisition.

Large long-term institutions do not increase positions at this stage unless they see compelling value and upside potential. Crossing the 10% level is particularly notable, as it reflects conviction rather than passive exposure.

Combined with the ongoing short reductions from JPM and others, this strongly suggests that institutional positioning is shifting in favour of the recovery and re-rating case.

This is exactly the type of accumulation behaviour often seen in the early stages of a longer-term move higher.

Despite the recent bounce, the rally here still hasn’t really begun yet. The shares had de-rated heavily on well-flagged issues, expectations were reset hard, and today’s price action looks more like early stabilisation than any kind of exhaustion.

Volume remains elevated, short positions continue to reduce, and the business now has clarity on trading, a strengthened balance sheet, and a highly attractive, fully completed acquisition in Barry M. With organic growth expected to resume and margins set to normalise as one-offs roll off, the downside from these levels looks increasingly limited.

If sentiment continues to improve and the market starts to look forward rather than backward, this has plenty of room to re-rate from here. In my view, the real move is still ahead.

This update materially de-risks the story in several ways.

FY25 landed broadly as flagged at H1, with the known one-offs clearly quantified and no further deterioration. H2 rollouts were delivered as planned, gross margins improved, and Brand Architekts has already swung to profitability in year one — exactly as management guided.

The Barry M acquisition is the standout. £1.4m cash for a well-known value brand with ~£15m revenue, deep UK retail penetration (1,300+ stores) and no legacy liabilities looks highly attractive, especially given Warpaint’s sourcing and distribution strengths. Funded entirely from cash, with £18m still on the balance sheet, this is a low-risk, potentially highly accretive bolt-on.

Crucially, management are now explicitly guiding to a return to organic growth in FY26, with further significant rollouts to be detailed at the full-year results. After a very heavy de-rating, this update removes downside uncertainty and adds a new growth lever.

At current levels, the shares still appear to discount a much weaker outcome than the business is now pointing to. If trading stabilises as expected, this feels like the point where sentiment can start to turn. DYOR.

I understand the frustration, but this is fairly typical for AIM rather than a sign of indifference.

AIM companies are not required to publish a financial calendar or pre-announce trading update dates, and they’re not obliged to issue interim TUs unless information becomes price-sensitive. Five months between interims (Sept) and an H2 trading update (Jan/Feb) is actually very normal, especially after expectations were reset at H1.

It’s also important to note that any material deterioration in trading would have to be disclosed immediately via an RNS, regardless of whether a scheduled update was due or not. Silence does not allow management to “sit on” bad news.

Some companies choose to issue multiple updates; others don’t — that’s a policy choice, not a governance failure. What matters now is how H2 trading compares with the already-lowered expectations, not the precise timing of the RNS.

For context on timing, W7L’s trading updates over recent years haven’t followed a fixed weekday or fixed-month pattern. Over the past three years they’ve been released on different days, including:

• Wednesday 11 January 2023

• Friday 12 January 2024

• Thursday 6 February 2025

The move into early February in 2025 also coincided with the Brand Architekts acquisition (completed Dec 2024), which understandably pushed reporting later that year. Once a company has established February as an acceptable window, it remains acceptable thereafter.

It’s also worth remembering that AIM-listed companies are not required to publish a financial calendar or pre-announce trading update dates, nor are they obliged to issue trading updates at all unless information becomes price-sensitive. As a result, some variability in timing is entirely normal on AIM and doesn’t carry any inherent signal.

So there’s no consistent “read-through” from the calendar. What matters is how H2 trading compares with the already-lowered expectations, not the precise timing of the RNS.

Or next week?

Berenberg currently has a W7L price target of 510p — which is materially above the current level. If the upcoming trading update simply meets or modestly beats already-lowered expectations, brokers (including Berenberg) could revisit their forecasts and adjustment assumptions.

On key metrics — valuation, cash position, margins, dividend yield and balance sheet strength — W7L still looks very much undervalued relative to peers and historical multiples, and recent price/volume behaviour suggests demand absorbing supply rather than distribution. That doesn’t guarantee a rerate, but it does frame the risk/reward as skewed to the upside from here assuming simply a stable update. DYOR.

With no update yet, recent price action continues to look driven more by liquidity than fundamentals. The September H1 reset de-rated the stock heavily, expectations were lowered, and the shares are now trading at levels that already discount a cautious H2.

What matters from here is not timing noise but how the upcoming update compares with those reduced expectations. At ~193p, the valuation implies very limited recovery, despite a debt-free balance sheet, strong gross margins, a covered dividend, meaningful insider ownership and continued store roll-outs across multiple geographies.

Risk/reward at these levels looks asymmetric — downside appears increasingly limited unless trading materially disappoints again, while any H2 stabilisation could drive a meaningful re-rating.

W7L continues to trade on sentiment rather than fundamentals.

Zero debt, rising cash, ~40% insider ownership and a covered dividend, while short interest is now easing.

Recent pressure has been liquidity- and flow-driven, not operational.

When volume returns, moves in thin stocks like this are rarely subtle.

It’s extremely low volume trading here! This now is clearly the most Undervalued/Oversold Quality FTSE/AIM share trading based on forward fundamentals.