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Buy The Core at 1.375p The Investment Case:The Core is a business which focuses on the distribution of branded cosmetics to major retailers. A recent acquisition has brought the company close to break-even and we believe that profitability is now not far off. Backed by a heavyweight management team with decades of experience in the industry between them we rate the shares as a buy. Company Description:The Core was founded by current CEO, Stirling Murray, in May 2004 to create, develop, launch and distribute personal care and beauty brands. Using its experience in the field it also provides consultancy and brand management services. Over the past year the company has become more focused on the distribution side of the business with the consulting side taking a back seat. The company's main distribution brands include; Elite Model's Fashion, a range of colour cosmetics, beauty and hair accessories; Blockhead, a range of sun and skincare products; Mane N'Tail, a former horse grooming product range now focused on human hair care; and finally Bloom, an Australian colour cosmetics brand, which is to be launched with a major retailer in the UK this Spring. On the brand management side of the business The Core has a joint venture agreement with French fragrance manufacturer Ulric de Varens to handle all of its UK marketing and commercial activities for the Ulric de Varens range of products. In January 2008 a range of fragrances were launched in 300 Superdrug stores throughout the UK. The Consultancy business advises brand owners on marketing, commercial strategies and other brand management services. Clients include nail and hand care brand Manicare, hair extension products made by Racoon and Sleek, a colour cosmetics brand. The Core listed on AIM in March 2006 but the major landmark in its history was the reverse takeover of Amirose International, which was completed in July 2007. Amirose is an Essex based business which specialises in the mass market and budget sectors of the personal care and beauty market. It manufactures and distributes a range of products and accessories under its own brand names to major high street names including Wilkinsons and Superdrug and recently secured the launch of its skincare product, Radiance, into Tesco, the first time an Amirose product has been listed into the retail giant. Amirose also supplies own-label products to retailers including Marks & Spencers. The acquisition provided The Core with the opportunity to bring its own portfolio into Amirose's already established distribution and logistics facility as well as providing the opportunity for the introduction of Amirose products to its network of UK retail contacts. Product development was also boosted with the company able to use Amirose's established Far Eastern supply chain contacts and wells as accessing its low cost manufacturing and packaging base. Financials: The company's last set of results covered the six month period to 30th November 2007. Boosted by a first time contribution of £454,000 from Amirose and an excellent performance from the original business revenues for the period rose twelvefold to £972,000. Losses of £143,00 were down on the £179,000 posted in the comparative period and the loss per share was cut from 0.43p per share to 0.1p per share. At the end of the period there was £0.18 million of cash in the bank and the company had loan notes of £0.76 million, leaving it with net debt of £0.58 million. Over the period the company made £930,000 in distribution revenues compared with nothing during the first half of 2006. Of this, 51% was generated by The Core Business and 49% by Amirose. The company has said that substantial distribution sales are contracted for the rest of 2008 including the launch of a further colour cosmetics brand into Superdrug and a skincare product into Tesco. Consultancy revenue for the period was down from £78,000 to £38,000 due to the distribution focus and selective choice of consultancy projects. The Elite Models Fashion cosmetics range is now listed in 200 Superdrug stores and manicure and hair accessories in over 350 stores. A further roll out of selected products in early 2008 has been agreed with a major retailer. Sales and distribution agreements with other international brands are under review as are the development and launch of its own brands.
The forecasts are those of UKMicrocap.com and have not been approved by the company. Management: CEO, Stirling Murray has extensive experience of international cosmetics and fragrance, having worked in the industry for almost 3 decades. He has held senior management and board roles for leading companies such as Revlon, Estee Lauder, Rimmel and Bourjois (Chanel). Director, Jack Gordon has experience in the salon sector and with the marketing and distribution of beauty and personal care products with Amirose. Sales Director, Clare Moreland, has 23 years experience in sales and marketing and had worked in the cosmetics and fragrance industry in senior management roles for Elizabeth Arden, Parfum International and Rimmel Cosmetics. Nick Kohn, Business development Director, has over 25 years experience in building international businesses and brands in fragrance and men's toiletries. He has worked at senior level for Proctor and Gamble, Shulton, Mennen and Estee Lauder.
Bull Points:
- Heavyweight management team - Focuses on niche products - Full benefits of the Amirose acquisition still to come Bear Points: - Bringing new brands to market can take a long time - Wide spread on the shares - Ultimate demand for products comes from consumer spending - 'Penny stock' status may put investors off
Key Data EPIC: CORE
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