Twiggy Forrest-backed BWX pulls yet another 'swifty': Shareholders brace for the worst

If the checkered history of BWX (ASX: BWX) tell us anything meaningful it’s that the skills required to successfully operate a skincare maker, and an iron ore miner are diametrically different.

But of course you knew that already.

After pulling a 'swifty' late July, BWX appears at face value to be yet again displaying caviller disregard for both shareholders and the broader spirit of the compliances governing all listed companies.

First some histrionics in case you forgot

The share price tumbled 40%-plus late June after the Andrew Forrest-backed skincare group’s capital raise offered new shares at a 48.7% discount to the stock’s previous closing price.

At the end of the capital raise substantial shareholders, family offices Bangarra Group and Andrew Forrest’s Tattarang stood to own at least 44%, up from 34%.

FY22 forecasts slashed

Following on from what was portrayed as an urgent need for balance sheet repair was a severe cut to revenue forecasts for FY22 to $206m from $243m.

Operating profits were originally flagged to be between $45m and $49m for FY23 – around four times FY22 levels.

As you may recall, $10m of the capital raised was earmarked for Commonwealth Bank (ASX: CBA) which at the time agreed to suspend financial reporting obligations on the company’s loans until the end of September.

Revenue cuts followed capital raise

Revenue cuts follow management’s iterations that retail conditions over previous six weeks had become increasingly challenging.

Projected earnings were also cut by two-thirds to $10m, while the company expected to post a FY22 after-tax loss of between -$10m and -$14m.

Bizarre corollary today

In a bizarre corollary to recent events, management decided that it wasn’t in a position to release its audited results today as planned, and has requested a trading halt, which is unlikely to resume before 30 September, when its full year FY22 results are now expected to be released.

Heard enough? Here’s the cherry on top.

Management today stated that it needed more time – due to certain revenue recognition issues - 'for the 2021 financial year and the first half of 2022', that it may need to restate prior results.

Given that it flagged the possibility back in June, there’s every likelihood that BWX may need to write down its tangible assets.

Light the touch paper and stand well clear

These incendiary 1980s-style antics are reminiscent of the infamous Renouf Corporation which inflicted on its shareholders one of the single largest wealth dilutions of any company to ever grace the ASX.

It’s incredulous that someone of Andrew Forrest’s calibre and track-record would not only be associated with a business he clearly knows precious little about, but willingly participated in the company’s recent events.

All’s fair in love and business

All within the parameters of what the ASX and regulators allow for?

Well, that remains to be seen and speculation is already rife over what will follow.

While the company’s auditors, PwC are clearly on the chopping block, febrile shareholders would be forgiven for calling out fraudulent activity.

Should a class action ensue, shareholders should be mindful that at the interim last February, the company reported $85m of debt and $58m of cash, net debt of only $27m, while interest expenses came in at around 10% of operating profit.

Another looksee

However, after a restatement of prior results, these numbers may look decidedly different.

As previously flagged by Market Index, what also clearly needs to be reviewed is:

• The magnitude of cash flow constraints before the last update.

• The prudence of last September’s $89m 50% stake in GoTo Skincare.

Where to from here

The BWX share price is down -87% over one year.

While consensus on the stock has gone to Hold from Moderate Buy, shareholders are likely to running for exits when the stock finally resume trading late September.

Whether BWX can pick up its well-respected brands, along with it new $40m factory - and by all accounts good supply chain – and reincarnate with new management remains to be seen.

Every picture tells a story: BWX share price over one year.