This business has a chequered history, both with former management's actions when they audaciously attempted to take it private in cohoots with PE, and its operating results. None of them remain with the company though, and it has churned through another CEO (Dave Fenlon) since.
However, after yesterday's update and corresponding share price drop, it is setting up as an attractive takeover candidate for a larger player in the cosmetics industry if the ship is not righted over the next 12-18 months, particularly at around these prices which is ~7-8x forecast FY22 operating profits.
The company's porttfolio of skincare brands (particularly its flagship Sukin) are still category leaders with higher than average gross margins (~60%) for its industry, the company is profitable both on a net income and cash flow basis, and has a clean balance sheet. It has also made investments in automating manufacturing and increasing production capacity, which while a drag on near-term results should bear fruit from FY23 onwards.
Finally, we had a spate of director buying after the HY results at significantly higher prices, which is an indication of insiders' views on the worth of the business.
High-risk, particularly in this market and macro environment, but worth a shot at these levels in my view. DYOR.
