Canadian cosmetics, skin-care and anti-ageing retailer Faces is expanding worldwide, albeit less aggressively than originally intended.

CEO Ramesh Jolly, who bought the 35 year-old company with private equity backing to expand its product range, floated it in London last September to raise its profile internationally and prise a modest £1.2m of new money from investors. He admits he’s ‘currently focused on North America’ meaning expansion into the UK seems to have been put on hold.

However, Jolly is sanguine about his strategy: ‘As a retail concept, Faces is unique – we make cosmetics and skin care products under our own prestige brand and sell them in our own stores. We operate through our corporate-owned stores and franchises, offering high margins that are attractive to franchisees.’

Faces has stores in Canada, the USA, Mexico, Puerto Rico, Ireland and Serbia, and Jolly is excited by prospects further East, mentioning that a master franchise has been sold in the Gulf region and saying Faces is ‘working on India’, where cosmetics are ‘not very well represented’.

At the time of float, expectations were higher and as the store roll-out has been slower than expected, Jolly recently appointed an experienced director to concentrate on franchise and business development and brought in a new finance director to boot.

He admits the AIM float was a distraction but reckons expansion is back on track with interim profits up 60% to £124,000 on sales up a sluggish 6% to £1.1m. Jolly believes he can expand the total number of stores from its present 55 – six of which are owned and the rest franchised – ‘to 300 in five years’.

Research house Hardman & Co has downgraded its pre-tax profit forecasts by a third to £179,000 for 2007 and £490,000 for 2008. Earnings equivalent to 0.2p make for a p/e ratio in the forties. That is too heavy for a company that doesn’t appear to be growing sales particularly fast.

If it can crack some of its new markets a re-assessment will be appropriate, but avoid for now.

Faces Cosmetics	AIM	£2.23m	1.25p	0.00p
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