This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

 

REVOLUTION BEAUTY GROUP PLC

 

("Revolution Beauty", the "Group" or the "Company")

 

AUDITED FINAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2023

 

Improving trading performance during period of change

 

Suspension of shares traded on the London Stock Exchange successfully lifted post period end

 

 

Revolution Beauty Group plc (AIM: REVB), the multi-channel mass beauty innovator, today announces its Full Year Results for the year ended 28 February 2023 ("FY23" or the "Period").

 

The Group delivered a resilient performance during the Period, despite continuing to be impacted by previously flagged issues Identified around stock, revenue and the carrying value of Revolution Labs.

 

Nonetheless, trading improved as the year progressed, with the return of top line revenue growth and positive EBITDA in H2; this follows operational and commercial changes made by the new management team.

Since the year end, this trend has continued, and the Group is pleased to be performing ahead of internal expectations.

 

 

Key financials

 

Group results	Year ended 28 February 2023    £'M	Year ended 28 February 2022 Restated £'M	Change YoY £'M
Revenue	187.8	184.6	3.2
Gross profit	75.9	71.0	4.9
Gross profit %	40.4%	38.5%	1.9%
Adj EBITDA	(7.5)	(0.8)	(6.7)
Operating loss	(30.6)	(39.9)	9.3
Net finance costs	(3.3)	(6.0)	2.7
Loss before tax	(33.9)	(45.9)	12.0
Income tax credit	0.2	1.6	(1.4)
Loss for the year	(33.6)	(44.3)	10.7
Gross Cash	11.0	15.6	(4.6)
Net Debt	(21.0)	(8.4)	(12.6)

 

 

Financial Highlights

 

·      Group revenue increased by 1.7% to £187.8m (2022: £184.6m) primarily due to the reopening of physical stores. Store revenue increased by 8.1%; Online sales were lower by 12.1%

·      Gross profit margin increased by 190bps to 40.4%, primarily due to improved stock management and reduced freight costs

·      Adjusted EBITDA loss widened to £7.5m (FY22: £0.8m) due to increased marketing expenses and higher staffing costs due primarily to increased headcount, partly offset by improved margin; loss after tax narrowed to £33.6m (FY22: £44.3m)

·      Significant improvement in year-on-year operating cash flow. Cash balance at year end of £11m. Banking facility fully drawn at £32.0m, £8.0m of which was drawn in the Period, resulting in net debt balance of £21.0m at the year end

·      New inventory provisioning methodology adopted by the Group in FY22, tight inventory control introduced during H2, resulting in the reduction in the inventory provision for FY23 of £6.0m (FY22 increase: £11.3m)

 

Operational Highlights

                                                                                                                                     

·      Rigorous new internal controls and protocols introduced across Group functions and departments; suspension of Group's shares successfully lifted post period-end

·      Improving trading performance and maintained strong stakeholder relationships during a period of significant and well-publicised upheaval for the Group

·      Continued to successfully fulfil consumer demand for Revolution Beauty's relevant, affordable and multichannel offer

·      Growth in store revenues driven by new distribution in Boots in UK and Walgreen in US

·      Rationalisation of product range, with focus redoubled on successful core products and attractive 'Make Up Revolution' brand

·      Appointment of the Group's first Chief Marketing Officer post period end, demonstrating strategic intent to grow across core markets of US, UK and Germany

·      The Group will be announcing imminently the appointment of a new CEO. They will replace Bob Holt, who as previously announced, stands down today. Alistair McGeorge will become the Non-Executive Chair when the new CEO joins the business

·      On March 2023 the Group announced it secured an amended facility agreement with its banking partners which runs through to October 2024. The overall size of the facility was agreed at £32m, reduced from £40m, and is fully drawn. Revised covenants remain in place and the Group continues to enjoy the support of its banking partners

 

 

Current Trading and Outlook

 

·      Post period-end, trading has continued to perform ahead of expectations. As previously announced, sales in Q1 FY24 increased by 60% on the prior year (Q1 FY23 sales were particularly weak due to customers previously overstocking) with EBITDA at £3.5m (Q1 FY23: £7.4m loss)

·      While the Board is mindful of the external environment, it remains confident in the future opportunities open to Revolution Beauty, given its relevant, affordable and multichannel offer. As previously disclosed, the current expectation for FY24 is high single digit growth in revenue, and adjusted EBITDA in the high single digit millions

·      The Group currently has a cash balance of £10.5m, and remains fully drawn on its facility

 

 

Alistair McGeorge, Executive Chairman, commented:

 

"This solid Group trading performance has been achieved during a period of well-publicised upheaval for the business. To that end, I would like to thank my predecessor Derek Zissman, Bob Holt and Elizabeth Lake for their efforts over the past twelve months. Firstly in maintaining the commercial performance of the Group while also overseeing the implementation of new internal protocols and the lifting of the suspension of the Group's shares which are traded on AIM.

 

"While I have only been with Revolution Beauty for a short period, it is clear to me that the business has the right attributes in place. The expertise of colleagues, combined with the relevance, affordability and strength of the Revolution brand gives me confidence that we can achieve continued growth across our core markets. .

 

"While there is still a lot of work to be done, I look forward to supporting our new CEO, to build on  recent momentum within the business, and achieve long-term sustainable growth within what is a large and attractive beauty market."

 

 

For further information please contact:

Investor Relations Elizabeth Lake	[email protected]
Joint Corporate Brokers Zeus (NOMAD): Nick Cowles /Jamie Peel /Jordan Warburton Liberum: Clayton Bush / Edward Thomas / Miquela Bezuidenhoudt	Tel: +44 (0) 161 831 1512 Tel: +44 (0) 203 100 2222
Media enquiries Headland Consultancy Matt Denham / Will Smith / Antonia Pollock	Tel: +44 (0)20 3805 4822 [email protected]

 

About Revolution Beauty

Revolution Beauty is a global mass beauty and personal care business which operates a multi brand, multi category strategy and sells its products both direct-to-consumer (DTC) via its e-commerce operations, and in physical and digital retailers through wholesale relationships.

 

Today, the Group has a retail footprint of c.17,000 doors across leading retail chains in the UK, USA and other international markets. Revolution Beauty has access to a wide customer base, predominantly aged between 16 and 35, through its digital partners and own DTC platform. It has established and invested to streamline its supply chain with its own manufacturing facility in the UK, and third-party warehousing facilities across the UK, USA and Australia. The Group has offices in the UK, USA, New Zealand and Germany. Revolution Beauty currently employs 347 people.

 

The total mass beauty market was worth $218bn in 2022 and is expected to grow to $255bn over the next 3 years (source: Euromonitor). Revolution Beauty has been a leading innovator building a significant global following across social channels, enabling it to spot trends and respond quickly to consumer demand, and translating this to mass market beauty retail.

 

CHAIR'S STATEMENT               

I am delighted to present my first report as Executive Chair of Revolution Beauty. This is an exciting time for the business as we seek to capitalise on its undoubted strengths.

As has been well publicised, the business has suffered a number of significant commercial and financial shortcomings. These have been outlined in detail in the FY22 annual report. Most of these are now behind us and this is due to the successful actions of my predecessor as Chair, Derek Zissman, outgoing CEO Bob Holt and the wider executive team. With a new Board now in place we can look forward to driving sustainable profitable growth.

LIFTING OF SHARE SUSPENSION

Over the past year, the over-riding priority for the business, its shareholders and stakeholders has been to lift the suspension of trading in the Group's shares.

As set out in our FY22 annual report and accounts, the Company's shares were suspended on 1 September 2022. The focus of the Board from then was to work tirelessly to restore trading in the Company's shares for the benefit of all stakeholders.

The hurdles to getting the suspension lifted were,

·      the completion of the FY22 audit (annual report and accounts published 26 May 2023).

·      the publication of the FY23 interims (published 2 June 2023).

·      completion of a report on the Group's working capital carried out by KPMG and similarly a report on the updated Financial Position and Prospects Procedures (FPPP).

·      a fully constituted Board with four independent non-executive directors (27 June 2023).

With the publication of the interim results on 2 June 2023, the Company had met the conditions for re-listing, and it also gave notice of the date of the AGM 27 June 2023.

Following considerable work from the whole Revolution Beauty team, the Company's shares were restored to trading on AIM (Alternative Investment Market) on 28 June 2023

CORPORATE GOVERNANCE, BOARD AND MANAGEMENT CHANGES

The Group has adopted the Quoted Companies Alliance Corporate Governance Code 2018 (QCA Code) and the Board remains committed to upholding the highest levels of corporate governance. The Board acknowledges that in some areas this was not historically the case, and has taken significant measures to address these historic and complex matters which were the subject of an Independent Investigation.

Between the start of FY23 and the request from boohoo Group Plc for Board representation, there have been a number of significant changes to the Board and management of the business:

Andrew Clark announced his intention to step down as a director and CFO of the Company on 12 May 2022. On the same date, we welcomed Elizabeth Lake as director and Chief Financial Officer. 

In November 2022, it was announced that due to the events since IPO and the transition from a private company to a public company, Chief Executive Officer Adam Minto resigned as a Director of the Group and stepped down from the business with immediate effect. Bob Holt had been appointed as Interim Chief Operating Officer in October and was subsequently appointed Chief Executive Officer and a Director on 28 November 2022. 

In December 2022, Gita Samani and Edward Rumsey also resigned from the Board.

On completion of the FY22 audit, Tom Allsworth resigned as a Director of the Group on 24 May 2023. 

Under the leadership of Bob Holt, two Non-Executive Directors ("NEDs") with significant listed company and commercial experience (Rachel Maguire and Matthew Eatough) were appointed to strengthen the Board and help stabilise it at a time of intense corporate activity. Following the settlement announcement with boohoo Group Plc, three further NEDs were appointed (Peter Hallett, Neil Catto and Rachel Horsefield) to reflect the change in leadership, bringing with them experience closely aligned to the direction of the new leadership team.

 

Following these appointments, as at the date of this Report, the Board has six NEDs and this will increase to seven imminently once the new CEO is appointed and I become a non-executive Chair.

 

Since the board changes referred to above, the Board and the Nominations Committee have been conducting a search for a new CEO and for non executive Directors to replace Jeremy Schwartz, Rachel Maguire and Matthew Eatough, who, having played their part in the restoration of the Company's trading on AIM and the transition to the new leadership team, have each decided that they will not put themselves forward for election at the forthcoming AGM. This search process is well progressed and we intend to announce a series of appointments in the near future. I would like to thank each of Jeremy, Rachel and Matthew for their responsive and professional service and guidance during this transitional period.

 

REGULATOR ACTION

The Company informed the shareholders on 21 July that the Financial Conduct Authority (the "FCA") had notified Revolution Beauty that it had commenced an investigation into potential breaches of the Market Abuse Regulation (EU) 596/2014 (as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018) in relation to certain matters in the period from July 2021 to September 2022. Revolution Beauty is cooperating fully with the FCA and will provide updates in due course.

 

OUR PEOPLE 

 

I would like to take this opportunity to express my thanks to all the employees of Revolution Beauty for their efforts during what has been a challenging and busy period. 

      

LOOKING FORWARD

 

The business is well placed to move forward and continue to deliver topline growth and improving profitability under the leadership of its new CEO. The business operates within a growing sector and is positioned to take advantage of the opportunities.

 

 

 

  

Alistair McGeorge

Executive Chair

31 August 2023  

 

 

 

           

CHIEF EXECUTIVES REVIEW

 

INTRODUCTION

The Company was listed on the AIM in July 2021 and was suspended from trading in September 2022.  I was appointed to the Board in November 2022 to bring stability to the business following a period of significant turmoil.

 

The results presented herewith recognise significant change in the business, Elizabeth Lake the CFO was appointed in May 2022 and was instrumental in bringing the Company out of suspension in July 2023.

 

As stated in the Chair's report I will be leaving the business at the end of August 2023.

 

I am proud of what has been achieved under my short tenure and take satisfaction from achieving what I was brought in to achieve, the stabilisation of the business and the lifting of the share suspension.

 

We are pleased to report the results for the year ended 28 February 2023. Turnover grew by 1.7% to £187.8m (FY22 £184.6m) and losses before tax reducing to £33.9m (FY22 £45.9m).

 

Adjusted EBITDA for the period was a loss of £7.5m compared to a loss of £0.8m in FY22. All of this loss was in H1 and was due to lower sales and increasing overheads particularly within marketing and people costs. In H2 cost saving measures were put in place and revenue grew.

 

Both Elizabeth Lake our Chief Financial Officer and I were appointed during the year being reported, and the results include significant changes to those envisaged when the company was floated in July 2021.

 

Underlying cashflows have improved, however during the period exceptional legal and professional fees (c.£3.8m) and costs of restructuring have been paid (c.£1.3m), impacting cash generation. Without these one off costs the business would have generated cash through its operating activities. The cash balance at the end of the year is £11m, and the £32m facility is fully drawn, resulting in a net debt balance of £21.0m. The cash balance at 30 August was £10.5m.

 

UPDATE ON INDEPENDENT INVESTIGATION

As announced on 23 September 2022, the Company's auditor wrote to the Board on 21 September 2022 to identify a number of serious concerns that had arisen during the course of its work on the audit of the Company's accounts for FY22. The detail of the findings can be found in the FY22 Annual Report and Accounts.

 

The Board appointed independent external advisors to undertake an Independent Investigation, Macfarlanes (lawyers) and FRA (forensic accountants).

 

The delayed completion of the FY22 results subsequently had a knock-on effect to the timetable for the publication of these FY23 results. In addition, these results also reflect the impact of the issues previously identified, particularly around stock and revenue and the carrying value of Revolution Labs.

 

The report highlighted a number of accounting irregularities and control issues, which have now been dealt with.

 

FY23 PERFORMANCE

During the year, we achieved a small increase in Group sales, up 1.7%% to £187.5m as compared to the same 12-month period last year. This is a solid performance given the turmoil within the business during the year and the impact of certain customers being overstocked and therefore reducing their buying, particularly in the digital wholesale channel.

 

I want to highlight the future opportunities for the Group rather than continuing to dwell on the control weaknesses of the past. As part of the restructure we implemented, all global sales heads reported into me and for the first time were accountable for controlling the costs of their individual departments and headcount. We feel more comfortable now with the ability of the teams to forecast sales and costs attributable to them than at any time since joining.

 

Due to the previous lack of control around new product development, we typically produced over one thousand new products each year into an already saturated product offering. Our sales teams, in conjunction with our customers, are now working to a more controlled product range. We have in the past been recognised as being able to bring innovative products to market more efficiently and speedier than our mass market competitors. We continue to deliver that flexibility.

 

Our gross margin in the year improved to 40.4% from 38.5% in FY22. The improvement was mainly driven by reducing freight costs and reduced stock provision charges.

 

Since entering the US market, we have seen strong growth.  Work remains ongoing to further strengthen relationships, streamline the product range and improve service levels on stock supply. These measures will ensure continued focus on fulfilling the brand's full potential in the US market.

 

Our trading throughout our other major markets, in the UK, Germany, the Nordics and Australasia have performed well, and we look forward to building further on those markets whilst opening new territories which offer long term attractive opportunities for profitable growth. The global cosmetics market continues to grow and offers significant rewards for those brands with established relationships and the ability to be innovative and proactive to ever evolving market opportunities.

 

What became very evident during the early part of my appointment was the underperformance of a number of newly developed brands and sub brands. We have subsequently reduced significantly the product ranges on Revolution Man, Tanning, BH cosmetics and Fragrance. Again, our focus is on our core range of products and in the categories we are successful in, with some variation by country or individual customer need. To reiterate, we continue to provide a flexible approach to give customers products that excite whilst maintaining a commercially viable approach to future partnership discussions.

 

 

 

POST-PERIOD END AND CURRENT TRADING

The post year end trading has continued to perform ahead of our internal expectations We are seeing increasing demand for our products in our key markets, and our sales teams are confident of hitting their forecast sales targets.

It would be remiss of me to fail to mention the significant management effort which was needed to rescue the business from the errors of the recent past. I would like to thank the slimmed down management team for the successful turnaround in the business in such a short period of time.

 

I also should like to thank all stakeholders for their support in the period reported.

 

OUTLOOK

We  are proud of the progress that has been made in the business over the past year, and that we were able to secure the lifting of the share suspension.

 

We have been focused on reinforcing internal controls and processes to ensure that we are in a position to achieve consistent operational excellence at a global scale, and in line with the required standards. I know I am handing over to an experienced team who will continue from here.

 

The business is poised for the next stage of its growth story, and I wish Alistair and the rest of the team well as they take the business to the next level.

 

Bob Holt OBE

Chief Executive Officer

31 August 2023

 

 

 

FINANCIAL REVIEW

 

 

Following the publication of the FY22 Annual Report and Accounts and the H1 FY23 interims, the suspension on the Company's shares was lifted and the shares have been trading as normal since 28 June 2023.

 

FY23 is a story of two halves, in H1 Group revenue decreased by 4.2% and adjusted EBITDA was a loss of £7.5m. The second half of the year saw a return to top line revenue growth due to the changes that were made by the new management team both operationally and commercially.

 

REVENUE

	Year ended	Year ended
	28 February 2023	28 February 2022
			Change
	£'M	£'M	£'M	%
Revenue	187.8	184.6	3.2	1.7%
Gross margin	75.9	71.0	4.9	6.9%
Adjusted EBITDA	(7.5)	(0.8)	(6.7)	(834%)

 

Revenue in the year increased by £3.2m or 1.7%, with the opening of stores following the closures during the pandemic, consumers switched back very quickly from online to physical stores. Overall we saw a rapid decline in online sales of 12% year on year, whilst revenue from our own websites increased 2%, revenue from digital partners fell 23% as they de-stocked following the fall in demand.

 

Gross margin for the year ended 28 February 2023 improved significantly to 40.4%/£75.9m (FY2022: 38.5%/£71.0m) as a result of improved stock management, and reduced freight costs as freight rates returned to near pre-pandemic levels.

 

Adjusted EBITDA loss increased from a loss of £0.8m in FY22 to a loss of £7.5m in FY23. The main reason for this increased loss was the marketing spend on stand updates which was significantly higher than FY22 which had been impacted by lockdowns and low spend in stores. In addition, the business had increased staffing levels in FY22 in anticipation of significantly higher revenue and this resulted in higher people costs, particularly in the first half of FY23.

 

By business channel: Digital Stores	Year ended 28 February 2023 £'M		Year ended 28 February 2022 £'M		Change £'000	%
	51.0 136.8	27% 73%	58.0 126.6	31% 69%	(7.0) 10.2	(12.1%) 8.1%
Total revenue	187.8	100%	184.6	100%	3.2	1.7%
By region:
UK	67.0	36%	71.5	39%	(4.5)	(6.3%)
US	51.9	28%	48.0	26%	3.9	8.2%
ROW	68.9	36%	65.1	35%	3.8	5.9%
Total revenue	187.8	100%	184.6	100%	3.2	1.7%

 

As shown in the table above, Group revenue increased by £3.2m to £187.8m in the year ended 28 February 2023 (2022: £184.6m). This revenue growth was achieved during a year in which the business went through significant change as a result of the issues that arose from the Investigation as set out in the CEO report.

 

Store revenue increased by £10.2m or 8.1% to £136.8m (2022: £126.6m), with both the US and UK store groups growing at 8% and 9% respectively, driven by new distribution in Boots in the UK and new distribution in Walgreen in the US.

 

An increased number of customers returned to the stores when Covid-19 related trading restrictions were lifted, and this resulted in a decline in digital sales in the year of £7m compared with the prior year. Within this we saw growth of 2% from our own websites, however revenue from our digital partners declined 23% as they implemented significant destocking measures which resulted in a drop in order levels.

 

Most of the impact of the decline in revenue from our digital partners was in the UK market which resulted in UK sales reducing by £4.5m despite increased store distribution in Boots and a good performance in Superdrug.

 

US revenue increased by £3.8m due to new distribution in Walgreen, and the recovery of US retailer performance following the pandemic.

 

In the Rest of the World (ROW) we saw 5.9% growth overall, which included  14% growth in revenue from our distributers.

 

 

 

 

PROFITS

	Year ended	Year ended
	28 February	28 February
	2023	2022 Restated	Change
	£'000	£'000	£'000
Gross profit	75,884	71,028	4,856
Marketing and distribution costs	(57,469)	(49,546)	(7,923)
Administrative expenses	(42,161)	(35,038)	(7,123)
Impairment losses on financial assets	(204)	(1,428)	1,224
Impairment of property, plant and equipment	(2,177)	(1,948)	(229)
Impairment of goodwill	(3,388)	(13,000)	9,612
Provision for legal cases	(1.066)	(1,018)	(48)
Exceptional item - IPO costs	-	(8,936)	8,936
Other income	-	5	(5)
Operating loss	(30,581)	(39,881)	9,300
Net finance costs	(3,293)	(6,034)	2,741
Loss before taxation	(33,874)	(45,915)	12,041
Gross profit margin	40.4%	38.5%	1.9ppt

 

Gross profit margin for the year ended 28 February 2022 increased from 38.5% to 40.4%. The improvement in margin was driven primarily by the reduction in freight rates following their historical highs due to the pandemic. The margin at H1 was higher at 41.4% due to seasonality, with higher seasonal promotions in H2.

 

Whilst there will be ongoing changes to the stock provision based on New Product Development (NPD), Net Realisable Value (NRV) and slow-moving stock, the movement between FY22 and FY23 has reduced due to the actions taken by new management to manage stock purchasing, establish exit routes for slow moving stock and focus NPD on fewer better products.

 

Operating loss for the year ended 28 February 2023 of £30.6m reduced by £9.3m (2022: £39.9m). This was due to a number of factors:

Improvement in gross profit (£4.9m) driven by reduction in stock provision charges and lower freight rates following record levels during the pandemic.

 

·      Reduction in one off costs incurred in FY22, impairment of assets (£10.6m, mostly from the acquisition of Medichem), IPO costs (£8.9m)

·      Increase in spend on stand updates (£5m) catching up with updates missed during the pandemic, and additional marketing and distribution spend (£2.9m)

·      Increase in People costs (£2m), resulting from scaling up for expected increase in revenue, loss on foreign exchange on revaluation of US balances (£1.5m) and other overheads (£2.9m)

 

Loss before taxation for the year reduced to £33.9m (2022: Loss before taxation £45.9m), an improvement of £12.0m.

 

TAXATION

The Group's tax credit decreased year on year by £1.4m primarily due to the prior year including tax refunds totalling £1.6m arising from historic overpayments and loss carry back, resulting in an overall credit of £1.6m in FY22 compared with a credit of £0.2m in FY23.

 

LOSS AFTER TAXATION

Loss after taxation decreased to £33.6m (2022: Loss after taxation £44.3m).

 

ADJUSTED PROFITS

The Group uses a number of Alternative Performance Measures ("APMs") in addition to those measures reported in accordance with IFRS. Such APMs are not defined terms under IFRS and are not intended to be a substitute for any IFRS measure. The Directors believe that the APMs are important when assessing the underlying financial and operating performance of the Group. Full details of the exceptional charges incurred during the year are presented in Note 5 to the financial statements.

 

The exceptional items identified as non-recurring in nature are set out below and were considered in calculating the adjusted profits. Exceptional Items are defined in Note 2

 

 

 

 

 

 

Operating loss Depreciation, amortisation & impairment Share-based payment Loss on disposal of asset Exceptional items:	Year ended 28 February 2023 £'000	Year ended 28 February 2022 £'000	Change £'000
	(30,581) 15,867   303 62	(39,881) 22,560   3,534 -	9,300 (6.693)   (3,231)   62
IPO related costs	-	8,936	(8,936)
Acquisition costs	262	621	(359)
Restructuring costs	1,310	261	1,049
Provision for legal cases	1,474	1,018	456
Legal and professional fees	3,528		3,528
Audit Fees	300	2,150	(1,850)
Total exceptional items added back	6,874	12,986	(6,112)
Adjusted EBITDA	(7,475)	(801)	(6,674)

 

 

 

Adjusted EBITDA decreased by £6.7m to a loss of £7.5m during the year (2022: £0.8m loss). The reduction in EBITDA was primarily due to additional stand marketing costs and higher People costs as the business had scaled up for high levels of growth at the end of FY22 and the first half of FY23.

 

Depreciation, amortisation and impairment was significantly lower as a result of the impairments to stands and goodwill made in FY22. The remaining amount of goodwill and assets acquired for Medichem were impaired in FY23, bringing the carrying value to zero, as a result in changes to forecasts.

 

As part of the changes the new management team made, teams were restructured which resulted in one off costs associated with the restructure.

 

Significant one off legal and professional fees were incurred in relation to the Independent Investigation and the work required to enable the suspension on the Company's shares to be lifted.

 

FINANCIAL POSITION AND RESOURCES

 

	As at	As at
	28 February	28 February
	2023	2022 Restated	Change
	£'000	£'000	£'000
Intangible assets	5,728	9,837	(4,109)
Property, plant and equipment	7,928	8,215	(287)
Right of use asset	2,310	4,150	(1,840)
Reimbursement asset	-	3,267	(3,267)
Non-current assets	15,966	25,469	(9,503)
Current assets excluding cash	104,393	101,401	2,992
Liabilities excluding borrowings	(112,817)	(98,507)	(14,310)
Cash and cash equivalents	11,044	15,619	(4,575)
Borrowings	(31,721)	(23,551)	(8,170)
Net debt	(20,677)	(7,932)	(12,745)
Net assets	(13,135)	20,431	(33,566)

 

NON-CURRENT ASSETS

The Group states property, plant and equipment at cost, less depreciation or provision for impairment. Non-current assets as at 28 February 2023 reduced to £16.0m (2022: £25.5m), mainly due to a further impairment of the acquisition of Medichem, resulting in no residual carrying value and the movement of the reimbursement asset to current assets due to Management's view that the legal case will be settled within 12 months.

 

CURRENT ASSETS

Current assets increased to £104.4m as at 28 February 2023 (2022: £101.4m). The inventory balance was higher at £47.6m (2022: £44.7m) which was due to business requirements. There was an increase in Trade Receivables of £3.0m consistent with higher sales. As the US business has grown, there is an impact on trade debtor balances caused by typically longer payment terms. Other receivables also increased by £3.2m representing the reimbursement asset on a copyright infringement legal case (see Note 4).

 

LIABILITIES

The increase in total liabilities excluding borrowings as at 28 February 2023 of £14.3m relates mainly to an increase in trade payables of £9m due to stock purchases, impact of foreign exchange, audit fees, and accruals and contract liabilities mainly due to fixture accruals for Walmart and marketing deductions for new and existing US retail customers.

 

LIQUIDITY

At 28 February 2023, the Group had £11.0m cash, with gross borrowing of £32m fully drawn from the RCF.

The face value of the Group net debt is £21.0m. The reported net debt of £20.7m is after deducting £0.3m of prepaid fees. These figures exclude the deferred consideration.

 

BANKING FACILITIES

As at 28 February 2023 the Group had a £40.0m RCF in place. In September 2022, the Group breached its facility agreement as a result of not publishing its audited accounts by 31 August 2022. Following on from this, there was uncertainty as to what the adjusted EBITDA numbers would be for FY21 and FY22, until these statements were finalised. Therefore, the Group was unable to certify its results to the Banks. As a result, the banks agreed a short-term liquidity covenant and the facilities operated under this arrangement until a new suite of covenants was agreed on 29 March 2023 with the first quarterly test at the end of May 2023 which the Group cleared. As at the date of signing this report, the Group has an amended and restated credit facility of £32.0m of which the full £32.0m is drawn and has cash balances of c.£11.0m as at the end of July which provides sufficient liquidity to the Group for its current requirements.

 

Due to the qualifications in the audit report, the Group received a waiver from its banking partners prior to the signing of the financial statements for the provision in the RCF which classifies a qualified audit opinion as an Event of Default. Therefore, the Group remains within all the requirements of the facility agreement, see note 2.

 

CASH FLOW

 

Net cash (used in) generated from operations Income tax Net cash generated from operating activities	Year ended 28 February 2023 £'000	Year ended 28 February Restated 2022 £'000	Change £'000
	(1,959) 1,898 (61)	(17,841) (890) (18,731)	15,882 2,788 18,670
Purchase of intangible assets	(1,018)	(3,066)	2,048
Purchase of property, plant and equipment	(7,496)	(4,968)	(2,528)
Purchase of subsidiary	-	(6,630)	6,630
Others	1	(509)	510
Net cash used in investing activities	(8,513)	(15,173)	6,660
Interest paid	(1,175)	(5,000)	3,825
Drawdown of borrowings	8,000	29,000	(21,000)
Repayment of borrowings	-	(78,665)	78,665
(Repayment)/Proceeds of debt instruments	-	(6,000)	6,000
Issue of new shares	-	105,775	(105,775)
Others	(2,127)	(983)	(1,144)
Net cash generated from financing activities	4,698	44,127	(39,429)
Net increase/(decrease) in cash during the year	(3,876)	10,223	(14,099)

Net cash used in operations improved in FY23 and reduced by £15.9m. Without the level of exceptional costs incurred in the year particularly relating to legal and professional fees surrounding the Independent Investigation, and activities to secure the lifting of the suspension on the Company's shares, together with significant restructuring costs, the Group would have generated significant operating cash inflows.

ISSUE OF NEW SHARES

In FY22, in conjunction with the Company's IPO, new shares with a total value of £105.8m were issued at £1.60 per share during the year. The IPO also involved the repayment of borrowings amounting to £82.4m. No new shares were issued in FY23.

 

ACQUISITION OF MEDICHEM

In July 2021, the Revolution Beauty Group was granted a call option to acquire 100% of the issued share capital of Medichem. The Group exercised the call option in October 2021. Total purchase consideration of £27.5m comprises an initial cash consideration of £7.0m which was paid in October 2021, with the balance of £20.5m to be paid in 4 equal instalments from October 2022 net of the repayment of a £1.5m loan from Medichem to a company owned by the seller of Medichem. As at the date of signing the Board are in negotiations with the previous owner of Medichem to reach a revised agreement on the amount of consideration due and the payment terms for any further consideration payable.

Since the year end, a deed of variation to the original sale and purchase agreement has been signed on 7 March 2023, confirming that no consideration will be demanded until 21 October 2025. See Note 34 for details of the deferment schedule.

 

DIVIDEND

No ordinary dividends were paid during the year under review. The Directors do not recommend payment of a final ordinary dividend for the year (2022: £nil). Consistent with the guidance provided at IPO, the Group does not envisage paying dividends in the foreseeable future and intends to re-invest surplus funds in the development of the Group's business.

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS

The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with UK adopted International Accounting Standards ('IFRSs') and have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 101 'Reduced Disclosure Framework'. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.

In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:

•  properly select and apply accounting policies;

•  present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

•  provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

•  make an assessment of the Group's ability to continue as a going concern.

•  In preparing the Parent Company financial statements, the Directors are required to:

•  select suitable accounting policies and then apply them consistently;

•  make judgements and accounting estimates that are reasonable and prudent;

•  state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Alistair McGeorge

Executive Chair

31 August 2023

 

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 28 February 2023

 

 

Revenue Cost of sales	Note	Year ended 28 February 2023 £'000	Year ended 28 February 2022 Restated £'000
	7	187,842 (111,958)	184,579 (113,551)
Gross profit		75,884	71,028
Marketing and distribution costs		(57,469)	(49,546)
Administrative expenses
- General administrative expenses		(42,161)	(35,038)
- Impairment losses on financial assets		(204)	(1,428)
- Impairment of property, plant and equipment and right-of-use assets	17,18	(2,177)	(1,948)
- Impairment of goodwill and other intangibles	16	(3,388)	(13,000)
- Provision for legal cases	27	(1,066)	(1,018)
- IPO related costs	5	-	(8,936)
Total administrative expenses		(48,996)	(61,368)
Other operating income	10	-	5
Operating loss	10	(30,581)	(39,881)
Finance income	12	1	76
Finance costs	13	(3,294)	(6,110)
Loss before taxation		(33,874)	(45,915)
Income tax credit/(expense)	14	228	1,606
Loss for the year		(33,646)	(44,309)
Other comprehensive income net of taxation Exchange differences on translation of foreign operations - may be reclassified to profit and loss		(223)	158
Total comprehensive loss for the year		(33,869)	(44,151)
Earnings per share (p)	15	(10.9)	(15.7)
Diluted earnings per share (p)	15	(10.9)	(15.7)
Adjusted EBITDA*	5	(7,475)	(801)

 

* Adjusted EBITDA is a non-GAAP measure and is defined as Operating Loss adjusted for depreciation and amortisation, impairments and reversals of impairment, profits and losses on the disposal of assets, share based charges and releases and operating exceptional items as disclosed in note 5.

The following notes are an integral part of these financial statements.