TIDMREVB
RNS Number : 3021T
Revolution Beauty Group PLC
14 November 2023
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")
INTERIM RESULTS FOR THE SIX MONTHSED 31 AUGUST 2023
H1 24 revenue up 20%, driven by volume growth across all regions
and softer prior year comparatives.
Strong improvement in EBITDA, up GBP14.3m, due to higher sales
volumes, gross margins and cost reduction initiatives.
New CEO, CMO and COO appointed, bringing considerable industry
experience.
Upgrade to FY24 full year EBITDA guidance.
Revolution Beauty Group plc (AIM: REVB), the multi-channel mass
beauty innovator, today announces its unaudited Half Year Results
for the six months ended 31 August 2023 ('H1 24').
Financial Highlights
Group results
(Unaudited) H1 24 H1 23 Change Change
GBP'M GBP'M GBP'M %
Revenue 90.4 75.3 15.1 20%
-------- -------- --------- ---------
Gross Profit 44.7 31.2 13.5 43%
-------- -------- --------- ---------
Gross Margin 49.4% 41.4% 8.0pt 19%
-------- -------- --------- ---------
Adjusted EBITDA* 6 .4 (7.9) 14.3 181%
-------- -------- --------- ---------
Adjusted EBITDA
% 7.1% (10.5%) 17.6% n/a
-------- -------- --------- ---------
Operating (Loss) (0.5) (12.5) 12.0 96%
-------- -------- --------- ---------
Profit/(Loss)
before tax 0.4 (13.7) 14.1 n/a
-------- -------- --------- ---------
Gross inventory 58.6 97.5 (38.9) (40%)
-------- -------- --------- ---------
Cash 8.0 11.8 (3.8) (32%)
-------- -------- --------- ---------
Net (debt) (23.8) (15.9) (7.9) (50%)
-------- -------- --------- ---------
*Adjusted EBITDA is an alternative performance measure used by
management to gauge the underlying performance of the business,
adjusting for certain non-cash, non-recurring and normalising items
that are not considered to form part of underlying performance
(note 8).
-- Group revenue increased by 20% driven by growth across all
regions and softer H1 23 comparatives.
-- Gross margin improved to 49%, with significant improvement in
freight rates, improving stock control and more focused New Product
Development ('NPD').
-- Adjusted EBITDA of GBP6.4m, increased by GBP14.3m due to
sales performance, improved gross margin and cost control.
-- Operating loss decreased to GBP0.5m (H1 23: GBP12.5m loss),
due to improved performance and a lower level of exceptional
costs.
o GBP2.3m gain on the revaluation of deferred consideration
relating to the acquisition of Medichem in October 2021. The
amendment to the terms of the payment of the deferred consideration
was announced on 7 March 2023 (see note 6).
-- Gross inventory reduced by GBP38.9m due to improved controls
over product assortment, alongside a discontinued stock clearance
programme.
-- As at 10 November 2023, cash balances were GBP12.3m, with net debt of GBP19.7m.
o Cash outflow from operations in H123 was GBP0.4m, including
GBP4.2m of exceptional legal and professional costs and GBP8.2m of
payments principally relating to legacy supplier debts.
o Net bank debt was GBP23.5m at the end of H1 23, with GBP32.0m
drawn on the RCF and GBP8.0m of cash.
o Significant headroom on covenants remains.
Operational Highlights
-- Strengthened and refreshed Board and management team.
o Lauren Brindley appointed Group Chief Executive Officer,
bringing significant leadership expertise across retail, beauty,
and brands.
o Alison Hollingsworth appointed Chief Marketing Officer,
bringing beauty brand development and marketing expertise.
o Steve Vanoli appointed Chief Operating Officer, bringing
merchandising and operational experience in the retail sector.
o After engagement with major shareholders, four new
Non-Executive Directors have been appointed, bringing relevant and
complementary experience to the Board.
-- Increased number of doors worldwide through new retail relationships, expansion of existing relationships and entry into new territories.
o US store revenue grew 8% due to a new partnership with
Walmart.
o UK stores revenue grew 13% with strong performances across
Boots and Superdrug.
o Rest of the world stores revenue up 58%, with growth primarily
due to weak H1 23 comparative revenue in Germany and Turkey.
o Distributer revenue grew 65% primarily due to weak prior year
comparatives related to overstocking, and new distribution in
Middle East.
o Digital wholesale revenue grew 12% reflecting recovery from
previous overstocking issues in H1 23. Own web sales declined 18%
following strategic reallocation of marketing investment.
-- Total D2C contactable database increased 16% year-on-year to
1.98 million; total customer base increased 3%, with returning
customers increasing by 6%.
-- The Group continued to focus on its distinctive social media
presence and successfully leveraged its existing Revolution branded
channels, delivering global social channel follower growth of 6%
year on year with an increase in engagement rate across all
cosmetics channels of 27% year on year.
Outlook
-- The strength of the Revolution brand and the beauty markets
in which we operate underpins our global growth ambitions.
-- The Group has sufficient cash resources and covenant headroom
to finance its current organic growth plans.
-- Revolution Beauty has made a good start to the second half of
FY 24, with revenue and adjusted EBITDA in line with internal
forecasts.
-- While the crucial Christmas trading period is still to come,
the Group is upgrading its guidance for the full year and now
expects adjusted EBITDA to be not less than double-digit millions
for FY 24 (an increase from the previously guided high single digit
millions). The Group continues to expect revenue growth to be in
the high single digits in FY 24.
-- New CEO to present three-year strategic plan for the Group at
a capital markets event early in the new year.
Lauren Brindley, Group Chief Executive Officer, said:
"Since joining Revolution Beauty, I have seen first-hand the
strength of the Revolution brand, the brilliance of my colleagues
and the enduring relevance of our product offer. It is these
aspects which have supported the business over the past 18 months,
and which I am confident will unlock future opportunities.
"With improved internal controls and the right leadership in
place with clearer roles and responsibilities, momentum has built
across the business in the first half of the year. Our strengthened
financial performance and the return to positive EBITDA represents
a significant milestone in the next phase of this business, while
new retail partnerships in the US and strengthened retail
partnerships elsewhere around the world are representative of our
operational progress.
"Looking ahead, I believe there are significant and compelling
opportunities for Revolution Beauty within a large and attractive
market. While there is still lots to do, we are on the right
trajectory, and I am developing a strategic plan with our new
executive leadership team to ensure we are best-placed to deliver
future growth. I look forward to sharing this vision and more
detail on our plans early in the new year."
Presentation
A recorded management presentation from Lauren Brindley, CEO and
Elizabeth Lake, CFO is available here:
https://stream.brrmedia.co.uk/broadcast/65524fd57cc5473d88694591
For further information please contact:
Investor Relations Investor.Relations@revolutionbeautyplc.com
Lauren Brindley, CEO
Elizabeth Lake, CFO
Joint Corporate Brokers
Zeus (NOMAD): Nick Cowles /Jamie Tel: +44 (0) 161 831 1512
Peel /Jordan Warburton Tel: +44 (0) 203 100 2222
Liberum: Dru Danford / Edward
Thomas / John More / Miquela
Bezuidenhoudt
Media enquiries Tel: +44 (0)20 3805 4822
Headland Consultancy Revolutionbeauty@headlandconsultancy.com
Matt Denham / Will Smith / Antonia
Pollock
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.17,500 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 411 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.
Chief Executive Officer's Review
This review follows the very recent publication of our FY 23
Annual Report and Accounts on 31 August 2023, and the period under
review in this report, H1 24, was before the start of my tenure at
Revolution Beauty. However, I am pleased with the financial
performance and the operational progress that these results
demonstrate. These are figures which underline the resilience and
attractiveness of the Revolution brand during a period of
well-publicised upheaval for the Group. In addition, the progress
achieved during the period represents a step-forward for the Group,
strengthening our position as we look towards sustainable future
growth.
Since joining the Group in September 2023, I have been impressed
by the strength of the brand, the engagement we enjoy with our
global customer base, the quality of our retail partner
relationships, the pipeline of new product and the passion of our
employees.
During my time with the Group, I have been getting to know the
business across all the markets in which we operate and focused on
developing a growth strategy, which will be anchored in a
three-year plan. This is being created in tandem with the wider
leadership team and we will provide more detail on this in early
2024.
It is clear there are significant opportunities for growth and
for operating excellence across Revolution Beauty, but there is
work to be done. We have already taken action to ensure that we can
begin to deliver on our potential. This has included: optimising
our brand and product portfolio, with a clearer focus on our core
products and a reduction in ongoing replenishable SKU count by
c.50%; putting in place a more effective operating model, under a
new Chief Operating Officer, and taking steps to improve our global
supply chain; refreshing the Executive Team, so that we have the
right leadership team in place with clearer roles and
responsibilities; and evaluating cost saving initiatives which will
help to increase profitability and cash generation.
While the crucial Christmas trading period is still to come, the
Group is upgrading its guidance for the full year and now expects
adjusted EBITDA to be not less than double-digit millions for FY 24
(an increase from the previously guided high single digit
millions). The Group continues to expect revenue growth to be in
the high single digits in FY 24.
As we look further ahead, we will provide a comprehensive update
on the future opportunities we see for Revolution Beauty to all our
stakeholders in early 2024.
Financial Review
As previously announced the Directors have determined that a
provision which was previously disclosed as a contingent liability
should have been recognised as a provision during the period ended
31 August 2022. The impact of the correction is set out in note
3.
Revenue
Revenue for H1 24 was GBP90.4m, up 20% on H1 23. This growth
rate is ahead of the global beauty market and is driven by strong
performances in retail globally and the distributer revenue
channel. Year on year growth in H2 24 is expected to be lower due
to stronger prior year comparatives in H2 23.
Global store group revenue contributed just over half of the
growth, with UK store revenue increasing 12% year-on-year through
strong sales to Superdrug and Boots, and US store group performance
benefitting from new distribution in Walmart.
The growth in distributer revenue accounted for just under half
of overall Group revenue growth in the period. This was achieved
through extended distribution in the Middle East coupled with
stronger performances across a number of distributer customers
where the prior year comparisons were particularly weak.
International store groups also performed strongly contributing
c.25% of the growth, with Turkey and Germany performing
particularly well following overstocking in H1 2023.
Digital wholesale revenue grew 12% reflecting recovery from
previous overstocking issues in H1 23. Own web sales declined 18%
following strategic reallocation of marketing investment.
Gross Margin
Gross margin in the period was 49.4%, significantly ahead of the
41.4% achieved in H1 23.
Approximately half of this increase is due to the reduction in
freight rates which has reduced landed costs significantly. Freight
rates are now back to pre-pandemic levels.
The gross margin further improved as a result of changes in the
value of the stock provision. Approximately 2 percentage points of
this improvement is attributable to a more focused approach to new
product development, designed to improve quality, relevance, and
customer satisfaction as well as stock management and
profitability. A further 1 percentage point is due to achieving a
selling price above the provisioned cost of slow moving and
obsolete stock.
Due to the timing of stock flows in and out of the Group it is
anticipated that some of the gains resulting from the release of
stock provision will reverse in H2 24 and have a lower positive
impact on margin by year end. At the same time the Group remains
focussed on clearing old stock and improving buying patterns. Going
forward, it is anticipated that margin increases will be driven by
price and product mix.
Adjusted EBITDA and Operating Loss
The adjusted EBITDA for the period was GBP6.4m (H1 23 EBITDA
loss GBP7.9m), an improvement of GBP14.3m.
The increase is due to revenue and margin growth, coupled with
reductions in year-on-year marketing costs, particularly in stand
updates, and improvements in direct costs associated with
distribution.
Operating loss was GBP0.5m, against a loss of GBP12.5m in H1 23.
There were material exceptional restructuring and legal and
professional costs in the statement of comprehensive income
(c.GBP2.8m, see note 8). In addition, there was an increase in
share-based payment charges as a result of the grant of relisting
awards as announced on 28 June with the Group's readmission to
AIM.
Reported profit after tax was GBP0.3m against a loss of GBP13.8m
in H1 23. The finance income arises primarily from the revaluation
of the deferred consideration due from the acquisition of Medichem,
following the Deed of Variation signed on 6 March 2023 amending the
timing of the payments. This resulted in a financial gain which is
reported in finance income.
Cash
We ended the period with a cash balance of GBP8.0m and gross
borrowing amounted to GBP32.0m.
Whilst there was an operating cash outflow of GBP0.4m in the
period, the Group has paid material legal and professional
exceptional costs (c.GBP4.2m) and has paid down material amounts of
legacy stock supplier debts (c.GBP8.2m). A payment plan has been
agreed with these stock suppliers to ensure the situation is not
repeated in the future. Going forward the level of exceptional
costs is expected to materially reduce, and the outflow in working
capital is also expected to reduce as a result of actions that have
been taken to control stock management and cash collection.
The Group has sufficient cash resources and covenant headroom to
finance its current organic growth plans.
Regulator action
The Company informed shareholders on 21 July 2023 that the
Financial Conduct Authority 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 continues to cooperate fully with
the FCA and will provide updates as necessary.
REVOLUTION BEAUTY GROUP PLC
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF-YEARED 31 AUGUST 2023
6 months 6 months Year ended
Note ended 31 ended 31 28 February
August 2023 August 2023
2022 As
restated
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Revenue 5 90,399 75,273 187,842
Cost of sales (45,733) (44,088) (111,958)
Gross profit 44,666 31,185 75,884
Marketing and distribution
costs (22,845) (26,964) (57,469)
Administrative expenses
- General administrative
expenses (22,349) (16,682) (42,161)
- Impairment losses
on financial assets - - (204)
- Impairment of property,
plant and equipment - - (2,177)
- Impairment of goodwill - - (3,388)
- Provision for legal
cases - - (1,066)
Total administrative
expenses (22,349) (16,682) (48,996)
Operating loss (528) (12,461) (30,581)
Finance income 6 2,358 - 1
Finance costs (1,464) (1,192) (3,294)
Profit/(Loss) before
taxation 366 (13,653) (33,874)
Income tax credit/(expense) (21) (111) 228
Profit/(Loss) for the
year/period 345 (13,764) (33,646)
Other comprehensive
expense
for the period, net
of tax
Exchange differences 829 (1,433) (223)
Total comprehensive
income/(loss) for the
period 1,174 (15,197) (33,869)
Earnings per share (p) 7 0.0 (4.4) (10.9)
Diluted earnings per
share (p) 7 0.0 (4.4) (10.9)
Adjusted EBITDA 8 6,438 (7,867) (7,475)
The total comprehensive loss for the period is entirely
attributable to the owners of the parent company.
The above consolidated statement of comprehensive income should
be read in conjunction with the accompanying notes.
Refer to Note 3 for detailed information on the correction of
prior period errors.
REVOLUTION BEAUTY GROUP PLC (Company Number: 11666025)
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 31 AUGUST 2023
31 August 31 August 28 February
Notes 2023 2022 2023
As restated
Unaudited Unaudited
ASSETS GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 5,116 9,956 5,728
Property, plant and equipment 7,399 8,945 7,928
Right-of-use assets 1,501 3,602 2,310
Reimbursement asset 3 - 3,586 -
14,016 26,089 15,966
Current assets
Inventories 10 42,320 55,200 47,606
Trade and other receivables 11 43,370 53,144 52,708
Corporation Tax Receivable 340 - -
Reimbursement asset 3 4,079 - 4,079
Cash and cash equivalents 8,006 11,754 11,044
Total current assets 98,115 120,098 115,437
Current liabilities
Lease liabilities (1,204) (2,046) (2,060)
Trade and other payables 12 (65,889) (83,062) (82,707)
Deferred consideration 6 - (5,083) (10,910)
Provisions 3 (6,815) - (7,060)
Borrowings 9 (31,807) (27,637) (31,721)
Corporation tax payable - (311) (28)
Total current liabilities (105,715) (118,139) (134,486)
Net current assets (7,600) 1,959 (19,049)
Total assets less current
liabilities 6,416 28,048 (3,083)
Non-current liabilities
Lease liabilities (708) (1,974) (954)
Deferred consideration 6 (16,137) (13,778) (9,098)
Deferred tax liabilities 91 (28) `-
Provisions 3 - (6,151) -
Total non-current liabilities (16,754) (21,931) (10,052)
Net assets (10,338) 6,117 (13,135)
Equity
Share capital 3,183 3,097 3,097
Share premium 103,487 103,487 103,487
Warrant reserve 7,239 7,239 7,239
Merger reserve 14,860 14,860 14,860
Translation reserve 1,275 (764) 446
Retained earnings (140,382) (121,802) (142,264)
Total equity (10,338) 6,117 (13,135)
Refer to Note 3 for detailed information on the correction of
prior period errors.
REVOLUTION BEAUTY GROUP PLC
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEARED 31 AUGUST 2023
Share Share Warrant Merger Translation Retained Total
capital Premium reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 March 2022 - as restated 3,097 103,487 7,239 14,860 669 (108,921) 20,431
Loss for the period - as restated - - - - - (13,764) (13,764)
Other comprehensive income net of
taxation:
Foreign operations - foreign currency
translation
differences - - - - (1,433) - (1,433)
Total comprehensive loss for the period - - - - (1,433) (13,764) (15,197)
Transactions with owners in their
capacity as owners:
Share-based payments - - - - - 883 883
Total transactions with owners - - - - - 883 883
Balance at 31 August 2022 - as restated 3,097 103,487 7,239 14,860 (764) (121,802) 6,117
Refer to Note 3 for detailed information on the correction of
prior period errors.
REVOLUTION BEAUTY GROUP PLC
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEARED 31 AUGUST 2023
Share Share Warrant Merger Translation Retained Total
capital premium reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 March 2023 3,097 103,487 7,239 14,860 446 (142,264) (13,135)
Profit for the period - - - - - 345 345
Other comprehensive expense net of
taxation:
Foreign operations - foreign currency
translation
differences - - - - 829 - 829
Total comprehensive loss for the period - - - - 829 345 1,174
Transactions with owners in their
capacity
as owners:
Issue of shares, net of transaction
costs 86 - - - - - 86
Share-based payments - - - - - 1,537 1,537
Total transactions with owners 86 - - - - 1,537 1,623
Balance at 31 August 2023 3,183 103,487 7,239 14,860 1,275 (140,382) (10,338)
The above consolidated statement of changes in equity should be
read in conjunction with the accompanying notes
REVOLUTION BEAUTY GROUP PLC
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE HALF-YEARED 31 AUGUST 2023
6 months 6 months Year ended
ended 31 ended 31 28 February
August 2023 August 2023
2022
As restated
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Loss for the financial period 345 (13,764) (33,646)
Adjustments for:
Taxation 21 111 (228)
Finance costs 1,464 1,192 3,294
Finance income (2,358) - (1)
Depreciation of property, plant and
equipment 2,100 2,638 8,369
Impairment of property, plant and
equipment - - 2,177
Amortisation of intangible assets 462 787 1,933
Impairment of intangible assets - - 3,388
Loss/(profit) on disposal of property,
plant and equipment 5 197 62
Equity settled share-based payment
expense 1,537 884 303
Provisions movement (245) 336 1,565
Movements in working capital:
Movement in inventories 5,285 (10,517) (2,923)
Movement in receivables 9,339 1,638 1,814
Movement in payables (18,346) 12,060 11,934
Cash used in operating activities (391) (4,438) (1,959)
Income tax refunded/(paid) (516) 1,564 1,898
Net cash used in operating activities (907) (2,874) (61)
Cash flows from investing activities
Purchase of intangible assets (128) (449) (1,018)
Purchase of property, plant and equipment (896) (2,767) (7,496)
Finance income - - 1
Net cash used in investing activities (1,024) (3,216) (8,513)
Cash flows from financing activities
Interest paid (1,199) (873) (1,175)
Proceeds from borrowings - 4,000 8,000
Payment of lease liabilities (1,102) (1,066) (2,127)
Net cash generated from financing
activities (2,301) 2,061 4,698
Cash and cash equivalents
Net (decrease) in the period (4,232) (4,029) (3,876)
Cash and cash equivalents at the
beginning of the period 11,044 15,619 15,619
Effects of exchange rate changes 1,194 164 (699)
Cash and cash equivalents at the
end of the period 8,006 11,754 11,044
REVOLUTION BEAUTY GROUP PLC
NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL
STATEMENTS
FOR THE HALF-YEARED 31 AUGUST 2023
1. General information
Revolution Beauty Group Plc ("the Company") is a company limited
by shares and is registered and incorporated in England and Wales.
The registered office is 201 Temple Chambers, 3-7 Temple Avenue,
London EC4Y 0DT.
The group ("the Group") consists of Revolution Beauty Group Plc
and all of its subsidiaries.
The Board of Directors approved this unaudited interim financial
information on 13 November 2023.
2. Significant accounting policies
These consolidated condensed financial statements for the
interim half-year reporting period ended 31 August 2023 have been
prepared in accordance with IAS 34 'Interim Financial Reporting'.
These interim financial statements do not constitute full financial
statements and do not include all the notes of the type normally
included in annual financial statements. Accordingly, these
financial statements are to be read in conjunction with the annual
report for the year ended 28 February 2023. The FY 23 numbers
included in this report are not statutory accounts for that year
(but have been derived from the statutory accounts). The FY 23
statutory accounts contain a qualified audit report which can be
found on the Group's website
https://revolutionbeautyplc.com/results-and-reports/ .
The annual financial statements of the Group are prepared in
accordance with UK-adopted International Accounting Standards
("IFRSs"). The Group has applied the same accounting policies and
methods of computation in its interim consolidated financial
statements as in its 28 February 2023 annual financial statements.
There are no new and amended standards and/or interpretations that
will apply for the first time in the next annual financial
statements that are expected to have a material impact on the
Group.
Tax charged within the 6 months ended 31 August 2023 has been
calculated by applying the effective rate of tax which is expected
to apply to the Group for the year ending 28 February 2024 as
required by IAS 34.
The financial statements have been prepared on the historical
cost basis except for, where disclosed in the accounting policies,
certain financial instruments that are measured at fair value. The
financial statements are prepared in Sterling, which is the
functional currency and presentational currency of the parent
Company and primary operating subsidiary. Monetary amounts in these
financial statements are rounded to the nearest GBP1,000.
Going concern
As reported in note 2 of the FY 23 Annual Report and Accounts,
the Directors have completed a full assessment of forecast and
banking arrangements to consider going concern.
The Group's revenue growth, margin improvement and return to
positive adjusted EBITDA in H1 all represent key improvement in the
Group's financial stability since the previous assessment. Steps
taken with regard to the deferral and renegotiation of the Medichem
consideration and the amendment of the Group's lending arrangements
and reductions in payables are significant in strengthening
liquidity and providing a base from which to grow.
Having considered the information available and recent changes
to the business, the directors are satisfied that the base case
supports the application of the going concern assumption in
preparation of the financial statements.
However, the directors also recognise the challenges the
business has faced since its listing on AIM and the
underperformance of sales versus previous expectations, as well as
the uncertainty in the wider economy. The strength of the Group's
brand and recent reductions in expenditure and a more refined stock
purchasing process have enable continued growth through a
challenging period. The Directors are working to build on this
period of stabilisation with a renewed strategy that keeps the
Group on a stable financial footing on a long term basis.
In the event that revenue falls below the level forecast in the
base case scenario, the Directors are also confident that they are
able to take mitigating actions to reduce controllable costs
further on a timely basis, in order to maintain compliance with the
Adjusted EBITDA and minimum liquidity covenant tests.
The Directors acknowledge that, in the event either a financial
or non-financial covenant were to be breached, due to either a
downturn in operational activity or the impact or timing of
settlement of any financial commitments, known or otherwise,
arising from legacy issues, the Group would be reliant on its
lenders not requiring immediate repayment of the outstanding loan
or obtaining alternative finance in order to continue to operate as
a going concern. The lenders have provided a waiver in respect of
the covenant relating to the Auditors qualifications of their audit
report on the FY 23 financial statements. Notwithstanding that the
audit for the year ending 28 February 2024 has not yet commenced,
the Directors anticipate that certain qualifications will be
carried into the Auditors opinion on the FY2 4 financial
statements. The Lenders have also confirmed their present intention
to waive any further Event of Default which might occur as a result
of the audit report to be issued by the Parent's Auditor in respect
of the financial year of the Group ending 28 February 2024
containing qualifications which are substantially the same as
qualifications on these financial statements.
The Group's Revolving Credit Facility matures in October 2024.
The Group is currently in discussion with its banking partners to
extend the facility on terms consistent with the existing agreement
for a period of 12 months beyond the current maturity. The board is
confident that the discussion will result in an extension of the
facility. Whilst the board has confidence in the process and
lenders remain supportive, there is uncertainty in the extension of
the current facility until a further agreement is signed. Were an
agreement for an extension not to be reached the Group would need
to find additional financing upon maturity of the RCF, the board is
confident that this would be achievable.
These factors, in conjunction with the sensitivity identified in
the severe but plausible downside scenario with respect to the
recently agreed Adjusted EBITDA covenant, represent material
uncertainty which may cast significant doubt over the Group's
ability to continue to operate as a going concern. The financial
statements do not include the adjustments that would be required
should the going concern basis of preparation no longer be
appropriate.
3. Correction of prior period errors
The Directors have determined that a provision which was
previously disclosed as a contingent liability should have been
recognised as a provision during the period ended 31 August 2022 as
the process of reaching a settlement of the case had reached a
stage whereby it had been established that a material settlement
was likely, and a value could have been accurately estimated.
The Group has posted or reposted social media video clips which
contain sound recordings and musical compositions from the music
library of the relevant social media platform. A letter was
received in Autumn 2020 from two music owners, claiming copyright
infringement. Letters raising such allegations are common in other
business sectors involved in social media. The Group, funded by its
insurers, is robustly defending the allegations and, taking a
cautious approach, has sought to remove any allegedly offending
posts over which the Group has control. Despite the time that has
passed, no court proceedings have been brought by the music
owners.
The Directors have taken formal legal advice from specialist US
intellectual property attorneys and engaged in a mediation process
with the claimants. Based on that advice and the ongoing mediation
process and settlement offers made to date, the Group believes that
a liability of GBP4.9m should have been provided for at 31 August
2022.
In addition, it has been determined that reimbursement assets of
GBP3.6m should have been recognised in respect of insurances and
reimbursements the Group will receive when a settlement is
ultimately paid. The reimbursement assets recognised relate to an
insurance policy and indemnities. GBP2.3m has been recognised in
respect of the indemnities. Further detail relating to the
indemnities has not been disclosed on the grounds that such
disclosure is considered to be seriously prejudicial.
The impact on the Statement of Profit or Loss for the period
ended 31 August 2022 is a net charge in respect of the legal case
of GBP336k. In addition, GBP0.2m in legal costs were settled on
behalf of the Group by its insurance during the period ended 31
August 2022. Deferred tax assets totalling GBP432k should have been
recognised as a result, with a corresponding credit in the
Statement of Profit or Loss.
Impact on the Statement of Profit or Loss and Other
Comprehensive Income
6 month 6 month
period ended period ended
Extract 31 August 31 August
2022 2022
Reported Adjustments Restated
GBP'000 GBP'000 GBP'000
Administrative expenses (16,346) (336) (16,682)
Loss before taxation (13,317) (336) (13,653)
Loss for the period (13,428) (336) (13,764)
Total comprehensive loss
for the period (14,861) (336) (15,197)
Earnings per share (p) (4.3) (0.1) (4.4)
Diluted earnings per share
(p) (4.3) (0.1) (4.4)
Adjusted EBITDA (7,531) (336) (7,867)
Impact on the Statement of Financial Position
31 August 31 August
Extract 2022 2022
Reported Adjustments Restated
GBP'000 GBP'000 GBP'000
Reimbursement Asset - 3,586 3,586
Provisions (non-current) (1,210) (4,941) (6,151)
Deferred tax liabilities (460) 432 (28)
Net assets/(liabilities) 7,040 (923) 6,117
Retained earnings (120,879) (923) (121,802)
Total equity 7,040 (923) 6,117
4. Segmental reporting
IFRS 8 Operating Segments requires that operating segments be
identified on the basis of internal reporting and decision-making.
The Group identifies operating segments based on internal
management reporting that is regularly reported to and reviewed by
the board of directors, which is identified as the chief operating
decision maker. Management information is reported as one operating
segment, being revenue from sales of products.
5. Revenue
6 month 6 month
period ended period ended Year ended
An analysis of the Group's revenue 31 August 31 August 28 February
is as follows: 2023 2022 2023
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Revenue analysed by class of
business
Digital 18,098 18,486 51,008
Store Groups 72,301 56,787 136,834
90,399 75,273 187,842
Revenue analysed by geographical
location
United Kingdom 31,397 28,231 66,974
United States of America 23,619 22,704 51,961
Rest of World 35,383 24,338 68,907
90,399 75,273 187,842
6. On 7 March 2023 the Group announced that it had reached an
agreement in respect of the timing of payments of deferred
consideration for its acquisition of Medichem Manufacturing
Limited.
A Deed of Variation dated 7 March 2023 was signed which amends
the terms of the deferred consideration and completion net asset
adjustment, adjusting the timing of the payments as outlined
below.
-- GBP3.625 million payable on 21 October 2025 (being the
GBP5.125 million consideration reduced by the GBP1.5 million loan
due from one of the Sellers companies, Walbrook Investments
Ltd)
-- GBP5.125 million payable on 21 October 2026
-- GBP5.125 million payable on 21 October 2027
-- GBP5.125 million payable on 21 October 2028 Interest accrues
on outstanding balances at a rate of 2.5% per annum
The modification was deemed by management to be substantial.
This was determined by recalculating the amortised cost of the
modified deferred consideration by discounting the modified
contractual cash flows using the original effective interest rate
and resulting in a movement in amortised cost of greater than 10%
of the original. The variance between the fair value of the
modification and the amortised cost of the original deferred
consideration resulted in a net gain of GBP2,370k, which has been
recognised in the profit or loss as finance income at the date of
the modification.
7. Earnings per share
The Group reports basic and diluted earnings per common share.
Basic earnings per share is calculated by dividing the profit
attributable to common shareholders of the Company by the weighted
average number of common shares outstanding during the period.
Diluted earnings per share is determined by adjusting the profit
attributable to common shareholders by the weighted average number
of common shares outstanding, taking into account the effects of
all potential dilutive common shares, including options.
6 month 6 month
period ended period ended Year ended
31 August 31 August 28 February
2023 2022 2023
Unaudited Unaudited
Loss attributable to shareholders
(GBP'000) 345 (13,764) (33,646)
Weighted average number of
shares 311,776,151 309,737,250 309,737,250
Basic earnings per share (p) 0.0 (4.4) (10.9)
Total comprehensive expense
attributable to the owners
of the company (GBP'000) 345 (13,764) (33,646)
Weighted average number of
shares 311,776,151 309,737,250 309,737,250
Dilutive effect of share options - - -
Diluted earnings per share
(p) 0.0 (4.4) (10.9)
Pursuant to IAS 33, options whose exercise price is higher than
the value of the Company's security were not taken into account in
determining the effect of dilutive instruments. The calculation of
diluted earnings per share does not assume conversion, exercise, or
other issue of potential ordinary shares that would have an
antidilutive effect on earnings per share.
8. Adjusted performance measures
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.
The APMs are used internally in the management of the Group's
business performance, budgeting and forecasting, and for
determining Executive Directors' remuneration and that of other
management throughout the Group. The APMs are also presented
externally to meet investors' requirements for further clarity and
transparency of the Group's financial performance. Where items of
profits or costs are being excluded in an APM, these are included
elsewhere in our reported financial information as they represent
actual income or costs of the Group.
The Group's Alternative Performance Measures are set out
below.
Adjusted EBITDA
Adjusted EBITDA is defined as Operating Profit adjusted for
depreciation and amortisation, impairments and reversals of
impairment, profits and losses on the disposal of assets, share
based charges and releases and exceptional items.
6 month 6 month
period ended period ended Year ended
31 August 31 August 28 February
2023 2022 2023
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Operating loss (528) (12,461) (30,581)
Amortisation of intangible
assets 462 787 1,933
Impairment of intangible assets - - 3,388
Depreciation of property,
plant and equipment 2,100 2,638 8,369
Impairment of property, plant
and equipment - - 2,177
Loss on disposal of asset 5 - 62
Share-based payments 1,640 884 303
Operating exceptional items:
Acquisition costs - 76 262
Restructuring costs 440 209 1,310
Provision for settlement of
legal cases - - 1,474
Exceptional legal fees 2,319 - 3,528
Exceptional audit fees - - 300
Adjusted EBITDA 6,438 (7,867) (7,475)
Operating exceptional items
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 the year ended 28 February 2022. The
Board appointed independent external advisors to undertake an
independent investigation, and the Company appointed Macfarlanes
(lawyers), Rosenblatt (lawyers) and FRA (forensic accountants) on
23 September 2022. As a result of issue identified through this
process, exceptional legal and professional fees were incurred at a
cost of GBP896k (FY 23: GBP3.5m).
During the period a major shareholder of the Group, boohoo Group
Plc ("boohoo"), requisitioned a General Meeting with certain
resolutions to be voted upon, the details of which are available on
the Group's website. On 18 July 2023, prior to the General Meeting
taking place, the Group announced a settlement agreement with
boohoo. The terms of the settlement included the resignation of
directors Bob Holt and Derek Zissman and the appointment of
Alistair McGeorge, Neil Catto, Rachel Horsefield and Peter Hallet.
Included within exceptional legal fees are GBP577k of cost
associated with legal and professional support associated with this
process.
On 20 June 2023 the Group announced that it had sent a letter of
claim to one of its former directors, the claim alleges that the
director breached his fiduciary, statutory, contractual and/or
tortious duties to the Company, included within exceptional legal
fees are GBP670k associated with advice in relation to this
claim.
During the period the Group settled legal claims in the US
totalling GBP176k.
During the period the Group incurred GBP440k in restructuring
and redundancy costs. Thes included GBP211k paid to Bob Holt, the
former CEO, GBP76k of costs incurred in closing one of the Group's
warehouse units and GBP153k on restructuring undertaken at
Revolutions Beauty Labs, the Group's manufacturing subsidiary.
9. Borrowings
31 August 31 August 28 February
2023 2022 2023
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Bank revolving credit facility 31,807 27,637 31,721
31,807 27,637 31,721
Payable within one year 31,807 27,637 31,721
10. Inventories
31 August 31 August 28 February
2023 2022 2023
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Finished goods and goods for
resale 42,320 55,200 47,606
Stock written down/(written
back) during period (14,926) 3,510 (5,986)
The total cost of inventories recognised as an expense in cost
of sale in the period was GBP45,673,000 (Period ended August 2022:
GBP43,984,000, full year ended February 2023: GBP111,861,000).
11. Trade and Other Receivables
31 August 31 August 28 February
2023 2022 2023
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Trade Receivables 40,909 46,016 50,715
Other Receivables 364 2,527 452
Prepayments 2,097 4,601 1,541
43,370 53,144 52,708
12. Trade and Other Payables
31 August 31 August 28 February
2023 2022 2023
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Trade Payables 38,995 59,295 56,233
Other Taxation and Social
Security 1,044 1,467 826
Other Payables 60 503 51
Accruals and Contract Liabilities 25,790 21,797 25,597
65,889 83,062 82,707
13. Contingent Liabilities
In February 2023 the Group terminated an arrangement with its
Polish agent. The agent has submitted a claim for lost commission
and costs as a result of the termination. The Group believes that
is has performed its obligation under the arrangement and that no
further commission is payable. The directors have taken legal
advice with regard to this matter and currently believe that it is
not probable that a material liability will arise.
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END
IR BCBDBUDBDGXX
(END) Dow Jones Newswires
November 14, 2023 02:00 ET (07:00 GMT)
Revolution Beauty (LSE:REVB)
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