Salvage of Zoe Foster Blake’s Go-To owner BWX goes down to the wire

Key points

  • BWX has been trying to refinance its loans with Commonwealth Bank since November.
  • The majority shareholder in Go-To ended up in financial trouble thanks to an acquisition spree.
  • The profitable Go-To has just launched a retail presence in Europe via 220 stores operated by German cosmetics retailer Douglas.

Zoe Foster Blake’s skincare juggernaut, Go-To, has distanced itself from majority shareholder BWX Ltd as debt negotiations to save the embattled ASX-listed cosmetics group go down to the wire.

BWX, which makes and sells top-selling brands such as Sukin through Chemist Warehouse, Coles and Woolworths, as well as having a stake in Go-To, has been trying to refinance its loans with Commonwealth Bank since November. The bank was recently forced to lend BWX more money as the company’s financial situation worsened, and agreed not to act on loan breaches dating back to December.

This stay-of-execution on the loans ended last Friday, and BWX needed to come up with a new deal – with the bank or other financiers – by Monday or face collapse.

Author and founder of Go-To Skincare Zoe Foster-Blake.

Go-To has been at pains to point out its independence from BWX.

“Go-To operates as an independent entity, managing its own treasury, formulations, manufacturing and retailer relationships. We have an independent Sydney-based team led by our CEO, Brad Dransfield, and no financial, manufacturing or supplier affiliations with BWX,” the company said.

“The Go-To business is in a strong position with year-to-date performance seeing double-digit growth.”

The group, founded by Foster-Blake, has just launched a retail presence in Europe via 220 stores operated by German cosmetics retailer Douglas.

“This is a key milestone for the Go-To business and our growing international community,” Go-To’s chief marketing officer, Leonie Faddy, said.

Go-To is profitable, and in a very different financial position from Purely Byron, the beauty brand co-founded by model and actor Elsa Pataky and backed by her husband, Hollywood star Chris Hemsworth.

BWX’s financial woes triggered the collapse of Purely Byron last month.

Administrators were appointed after BWX wrote off its loans and 47 per cent equity interest in Purely Byron and a new owner could not be found. BWX’s cash shortage woes meant it could no longer fund the venture, which launched its first products less than a year ago and was years away from breaking even.

But Go-To looms as a bigger headache for any future owner of BWX, thanks to an option that means Foster-Blake, and other investors, can choose to sell their 49.9 per cent stake to BWX for $59.2 million cash, based on current valuations of the business.

BWX ended up in financial trouble thanks to an acquisition spree under former chief executive Dave Fenlon, whose purchases included paying $89 million for 51 per cent of Foster Blake’s Go-To in 2021.

The group has also been crippled by the discontinuation of its practice of channel stuffing, which threatened to unravel BWX in July before billionaire Andrew Forrest helped rescue the group.

Channel stuffing involves retailers inflating sales by “selling” more products to their distributors than they can readily sell to consumers.

BWX suffered from its retailers having to sell the backlog of goods in their distribution centres, which meant it did not get any fresh cash for these already-paid-for sales, but it still had to fork out cash to promote them. This helped create a cash shortage that meant the group has also had trouble paying suppliers despite the fresh funds from Commonwealth Bank.

BWX shares last traded at 20¢ but have been suspended from trading while debt negotiations continued.

On March 24, BWX said its banker had agreed to a waiver on certain loan covenants until March 31, but it said it did not have material certainty whether this waiver would be extended after this period.

“Discussions are under way between the company, its lender and various parties who may provide additional debt and/or equity funding or replace its existing debt funding.”

BWX declined to comment further.

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