Brand Architekts, a leading personal care and beauty products group, has released its final results for the year ending June 2020. Despite facing challenges and the impact of the Covid-19 pandemic, the company managed to navigate through difficult trading conditions and remain financially strong.

The company reported a small underlying loss of £0.8 million, compared to a profit of £4.4 million in the previous year. This decline can be attributed to the divestment of its contract manufacturing business for £35 million, as Brand Architekts shifted its focus to its own brands. However, the company was able to generate an underlying profit of £0.1 million from its continuing operations, albeit down from £2.4 million the previous year.

There was a significant decline in the company’s revenue, falling from £77.3 million in the previous year to £23.7 million. However, when considering only continuing operations, the revenue decline was less severe, dropping from £19.7 million to £16.3 million. On a reported basis, Brand Architekts made a pre-tax profit of £2.2 million, a decrease from £4.1 million the previous year. But when considering continuing operations, the company experienced a pre-tax loss of £4.3 million, compared to a profit of £1.8 million in the previous year.

Various factors influenced these financial results, including a 16% decline in UK sales due to low consumer confidence, retail pressures, and store closures as a result of the Covid-19 pandemic. International sales also declined by 24%, mainly due to currency devaluation in Turkey, increased tariffs on cosmetics from China to the US, and the overall impact of the pandemic on global markets.

In response to these challenges, Brand Architekts divested its contract manufacturing business and appointed a new executive team focused on achieving further profitable growth. The company’s CEO, Quentin Higham, expressed confidence in the company’s future, stating that they now have the right strategy for sustainable growth. Roger McDowell, the incoming Non-Executive Chairman, acknowledged the challenges but saw opportunities for transformation.

Despite the sales decline, some of Brand Architekts’ brands showed positive developments. Two of its ‘drive’ brands were relaunched during the period, resulting in encouraging volume growth. However, the overall decline in UK sales can be attributed to reduced category space, decreased consumer confidence, and decreased effectiveness of promotional activity. The gross profit margin also dropped significantly, but the underlying gross profit margin remained at a satisfactory level.

Sales performance in the second half of the financial year exceeded expectations, particularly through online channels. However, the growth in online sales did not compensate for the decline in high street outlets, which experienced reduced footfall during lockdown. Additionally, several key international markets did not place any orders during the fourth quarter due to store closures.

Brand Architekts observed a significant increase in sales of handcare products, while sales of male grooming products saw a major decline. Looking ahead to the current financial year, the company is aware of the uncertainty surrounding the high street and cautious ordering from retailers for Christmas. However, Brand Architekts remains financially strong with positive cash reserves. The company is prioritizing the development and investment in online sales to navigate these challenging trading conditions.

Useful links:
1. Brand Architekts Official Website
2. BBC News – Business