The pure-play online retailer Adore Beauty was the year’s biggest initial public offering and the largest, female-led Australian market float.

WHO: Adore Beauty was launched in 2000 by 21-year-old Melbourne student Kate Morris and her partner James Height out of Morris’ garage, with $7,157 in start-up capital loaned from Height’s father. Today Adore Beauty sells 11,000 products from 230 brands in professional, prestige, niche, and masstige. The retailer has 590,000 active customers and 18.5 million users across its Australian and New Zealand websites.

IN THEIR OWN WORDS: “My co-founder James Height and I created Adore Beauty in a garage in Melbourne with a clear purpose—to create an empowering beauty shopping experience that would make our customers feel confident and fabulous,” said co-founder Kate Morris.

“We are a proudly values-led company embodied by 183 talented and passionate employees who have contributed to our success through their passion, hard work, and tenacity.

“As we have done for our first 20 years, we are focused on sustainable growth and building a high-quality business over the long term. We believe that by staying true to our customers. brands. values and vision, we can weather the challenges and take advantage of our opportunities as Adore Beauty embarks on its next phase of growth as an ASX-listed company.”

“The IPO provides the company with a great opportunity to strengthen its competitive advantage by continuing to improve upon its core capabilities and continue to grow the business,” said Adore Beauty Chair Justin Ryan. “I am excited about the future prospects of Adore Beauty and am pleased to have the opportunity to welcome new investors to share in this exciting journey.”

“It’s a terrific company, it’s well-managed, it has diligently built up a dedicated following over two decades, all the metrics are great,” said analyst Gaurav Sodhi, Deputy Head of Research at InvestSmart Group. “I think there’s a very good chance that this hits a billion [Australian] dollars. There are so many ways for this company to grow,” Sodhi added.

DETAILS:

• Adore raised $192 million or $4.80, a share giving the business a valuation of $464.4 million—3.9 times the company’s forecast calendar 2020 sales of $112.4 million.
• In September 2019, Morris and Height sold a 60 percent stake in the business to Sydney-based private equity firm Quadrant Growth Fund.
• Quadrant is selling 40 percent of its holding for $137.2 million and will retain a 32.5 percent holding marking its first exit from its growth fund. Quadrant has agreed not to sell more shares until the company releases its FY 2021 results.
• Adore’s founders Kate Morris and James Height will earn $45.9 million each by selling 40 percent of their holdings. Their individual stakes will fall from 19.3 percent to 10.8 percent each. The founders’ remaining shareholdings will also be escrowed to prevent further sales, but for unspecified time periods.
• Skincare is the company’s biggest category, accounting for 57 percent of sales.
• The pandemic fueled sales, which are up 65.5 percent over 2019 and fast-tracked the company’s IPO plans.
• Active customers are forecast to grow 79 percent in 2020, from 404,033 to 724,459.
• Revenue is forecast to increase 76.3 percent to $158.2 million, with net profit after tax tipped to nearly triple from $1.4 million to $3.5 million in 2020. Much of its profit growth is expected to come from increased gross profit margins from 30.7 percent in 2019 to a forecast of 32.1 percent in 2020.
• An Adore Beauty mobile app is due to launch by year-end, with private-label products and a loyalty program to follow in 2021.
• The New Zealand market was launched in 2019 and further international expansion is also planned.
• According to Adore’s prospectus, industry experts estimate the total beauty and personal care market in Australia generated sales of $10.9 billion in 2019, with online sales of 7.3 percent or about $797 million.
• Adore’s forecasts suggest online sales in Australia could grow at a compound annual rate of 24 percent over the next four years to equal a market size of $3.2 billion.
• The listing was managed by Morgan Stanley and UBS.