BWX CEO Rory Gration steps down as Sukin owner’s losses blow out to $100m

Rory Gration has stepped down from the top job - a position he held for less than a year - and will be replaced by former Coles (ASX: COL) chief sustainability, property and export officer Thinus Keeve.

The embattled owner of brands such as Sukin, Nourished Life, Flora & Fauna and Zoë Foster Blake’s Go-To Skincare thanked the outgoing CEO for his service to the firm during a ‘highly challenging and disruptive 12 months’.

“Mr Gration and the board have agreed his departure will take effect immediately, allowing Mr Gration the opportunity to enjoy some much-needed family time while exploring other opportunities,” BWX says.

“The board thanks Mr Gration for his contribution to BWX and wishes him well for the future.”

It comes alongside a dire first-half report from BWX, which incurred more than $60 million of impairments during the period relating to the carrying value of intangibles, contract assets write-down and a write-down of its investment in skincare brand Purely Byron.

This led to a $100.8 million loss - far worse than its $5.4 million loss in 1H22 - and a major deterioration of EBITDA which fell from $5.4 million in the prior corresponding half to an earnings loss of $29.7 million.

Revenue also fell by 18.4 per cent to $79.7 million which BWX says is because of several factors including customer de-stocking in key channels, lower cash receipts and capital commitment outlays for the company’s Clayton manufacturing facility, the inability to maintain inventory at optimum levels, and out-of-stock issues in the Australia, international and digital business segments.

Gross margins were also impacted by decreased marketing and promotional activity, additional provisioning for slow-moving inventory of $4.5 million, and sales mix issues due to customers being overstocked.

As with the group’s Q2 results released in January, auditors have yet again raised some red flags - noting there is ‘material uncertainty whether the group will continue as a going concern’.

Despite the $100 million loss, as at 31 December 2022 BWX’s current assets exceed current liabilities by $14.2 million - buoyed by an unconditional waiver from financiers CBA. If no waiver was in place, the company’s auditors suggest liabilities would have exceeded current assets by $40.8 million.

Auditors also appear to be placated by BWX’s intention of retuning to profit by 30 June, but note that the group requires continued ongoing support of its financiers for the foreseeable future.

“Management has prepared forecasts that show a requirement for the group to secure additional debt financing in addition to its current facilities, either from its current banker or other financiers on acceptable terms, for the group to continue to operate as a going concern for the foreseeable future,” the report says.

There does remain uncertainty in respect of trading conditions, performance, and management’s ability to implement certain operating improvements in the business and other initiatives as disclosed in the director’s report.

“There is a material uncertainty, which may cast significant doubt on whether the group will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in its financial report,” the report says.

Nevertheless, BWX says it is ‘focused on restoring profitability to the group’ during the second half and anticipates that revenue will be in the range of $150 million to $175 million, while second-half earnings will be in the range of $5 million to $12 million.

This is dependent on the company completing a debt restructure, customer-owned inventory normalising to levels aligned with customer demand, completion of a group-wide organisational restructure and normalisation of manufacturing at its Clayton plant to resolve out-of-stock issues being experienced.

Shares in BWX are down 2.13 per cent to 23 cents per share at 10.24am AEDT.