For
immediate release
26 June 2024
Revolution Beauty Group
plc
("Revolution Beauty", the
"Group", or the "Company")
AUDITED FINAL RESULTS FOR
THE YEAR ENDED 29 FEBRUARY 2024
Return to profitability and
good progress with Reigniting the Revolution
strategy
Revolution Beauty (AIM: REVB), the
multi-channel mass beauty innovator, today announces its Full Year
Results for the year ended 29 February 2024 ("FY 2024" or the
"Period").
|
2024
£ million
|
2023
£ million
|
Change
|
Revenue
|
191.3
|
187.8
|
+2%
|
Gross profit
|
88.4
|
75.9
|
+16%
|
Gross margin
|
46.2%
|
40.4%
|
+5.8ppts
|
Operating
costs1
|
75.8
|
83.4
|
-9%
|
Adjusted measures2
|
|
|
|
Adjusted EBITDA
|
12.6
|
(7.5)
|
+£20.1m
|
% of revenue
|
6.7%
|
(4.0%)
|
+10.7ppts
|
Adjusted EBIT
|
7.4
|
(23.4)
|
+£30.8m
|
% of revenue
|
3.9%
|
(12.5%)
|
+16.4ppts
|
Adjusted profit before
tax
|
4.3
|
(26.7)
|
+£31.0m
|
Statutory measures
|
|
|
|
Profit before tax
|
11.4
|
(33.9)
|
+£45.3m
|
Diluted earnings/(loss) per
share
|
3.2p
|
(10.9p)
|
+14.1p
|
Cash and cash
equivalents
|
8.6
|
11.0
|
-£2.4m
|
Net debt excluding lease
liabilities
|
(23.1)
|
(20.7)
|
-£2.4m
|
Notes:
(1) Operating costs is defined as Distribution &
Administrative costs excluding depreciation, amortisation,
exceptional items & share based compensation
(2) Adjusted measures, which are not statutory measures, show
the underlying performance of the Group excluding large, non-cash
and exceptional items.
Financial highlights
·
Sales up 2% year on year to £191.3m, including
the impact of significant product clearance activity in the first
half
o Strong performance in Rest of World more than offset weakness
in US and e-commerce.
·
Gross margin of 46.2% (FY23: 40.4%) up 5.8
percentage points with a focus on inventory management and
profitability.
· Adjusted EBITDA
of £12.6m - adjusted EBITDA margin of 6.7% (FY23: negative 4.0%) as
a result of the improved gross margin, controlled reductions in
marketing spend and reductions in distribution costs.
· Operating costs as a percentage of sales decreased to 39.6%
from 44.4%; £10m, three-year cost saving programme
underway.
·
Profit before tax of £11.4m (FY23: loss of
£33.9m).
·
Net debt contained at £23.1m despite exceptional
cash costs of £4.7m.
Operational highlights
· Clear strategy in place to "Reignite the Revolution" by
focussing on the Revolution Masterbrand and powering core product
categories, to become a global top 5 player in the mass beauty
market.
·
Expansion of retail distribution across key
geographies.
·
New Product Development ("NPD") strategy
launched, with greater focus on efficiency.
·
Gross inventory reduced by 32%. Inventories (net
of provision) reduced to £40.7m and stock turn increased by 47% to
2.2 (from 1.5 a year ago).
·
Improved service levels during the second half of
the year for all retailers.
·
Social media followers increased from 5.9m to
6.4m.
·
Strengthened board of directors and management
team.
Summary and outlook
The Group's strategy to focus on
the Masterbrand and core product categories was unveiled at the
capital markets event in February 2024. This strategy is already
showing good progress in improving profitability and working
capital efficiency. This will enable greater investment in New
Product Development and marketing to return the business to
growth.
In FY25, we expect revenues to
decline year-on-year in the first half at a slightly higher rate
than in the second half of FY24, reflecting our more focused
product portfolio and the impact of stock clearance in the first
half of FY24. With a reinvigorated innovation pipeline and
opportunities to expand our offering and distribution network, we
expect a return to revenue growth in the second half of the year.
Benefitting from the Group's ongoing cost savings programme,
Adjusted EBITDA for FY25 is expected to be at least in-line with
FY24 with a significant weighting to the second half.
Lauren Brindley, CEO commented:
"FY24 was a year of great
strategic and financial progress following two challenging years. I
am extremely proud of what Team Revolution has achieved. Our new
Reigniting the Revolution strategy is already delivering
improvements across the business, strengthening our core and
providing a much firmer platform from which to grow.
As we progress through the new
financial year, I am excited about the potential of our
reinvigorated pipeline of innovation and the number of
opportunities to expand our retail distribution globally. As
the strategy continues to take effect, we expect to see a return to
growth in the second half of the year. That will put us firmly on
the right trajectory to achieving our ambition of being a top 5
player in the mass beauty market."
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014 AS IT FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN
UNION (WITHDRAWAL) ACT 2018, AS AMENDED.
The company will hold a video
webcast for analysts and investors at 9am (UK time) today.
The webcast is available via the following link:
https://www.investis-live.com/revolution-beauty/66680b14e119530d002bb711/bdffv
A replay will subsequently be
available on the Revolution Beauty investor relations
webpage.
For further information, please
contact:
Investor Relations
Lauren Brindley, CEO
Neil Catto, CFO
Investor.Relations@revolutionbeautyplc.com
Joint Corporate Brokers
Liberum (NOMAD): Edward
Thomas / Dru Danford / John More
Tel: +44 (0) 203 100
2222
Zeus: Nick Cowles /
Jamie Peel / Jordan Warburton
Tel: +44 (0) 161 831
1512
Media enquiries
Headland Consultancy: Matt Denham / Antonia Pollock
Tel: +44 (0)20 3805
4822
Revolutionbeauty@headlandconsultancy.com
CHAIRMAN'S STATEMENT
As Chairman of Revolution Beauty
Group plc, it is my privilege to present to you our annual report
for the fiscal year 2024. It has been a year marked by significant
achievements, challenges, and opportunities, and I am pleased to
report that Revolution Beauty Group has demonstrated its resilience
and commitment to excellence.
In the face of a rapidly changing
landscape, Revolution Beauty Group has continued to adapt and
innovate, remaining at the forefront of the beauty industry. We are
delighted to report a return to profit against a backdrop of well
documented challenges, as we now look to the future.
LIFTING OF SHARE SUSPENSION
Following publication of the FY22
and H1 23 results, the Company's shares were restored to trading on
the Alternative Investment Market (AIM) on 28 June 2023. As well as
the publication of the results, the group took steps to improve
controls around the financial and governance issues that led to the
reporting delays and the initial suspension. Having subsequently
issued the H1 24 financial results and this Annual Report and
Accounts, in line with the reporting deadlines, I am pleased to say
that we have returned to a typical reporting cycle.
CORPORATE GOVERNANCE, BOARD AND MANAGEMENT
CHANGES
The Group has adopted the Quoted
Companies Alliance Corporate Governance Code 2023 (QCA Code), and
the Board remains committed to upholding the highest levels of
corporate governance.
Following the publication of the
FY22 Annual Report and Accounts, boohoo Group plc, a significant
shareholder in the Group, requested board representation. Following
discussion between the previous board and boohoo, a settlement
agreement was reached and announced on 18 July 2023. The agreement
included the following board changes:
• Bob Holt resigned as CEO, leaving the board on 31 August
2023.
• Derek Zissman resigned from the board on 18 July 2023 and I
became executive Chair whilst a search for a new CEO was
undertaken.
• Rachel Maguire and Matthew Eatough who had
been appointed under the leadership of Bob Holt, resigned from the
Board following his departure.
• Jeremy Schwartz also resigned from the Board following Bob
Holt's departure.
• 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.
I would like to take this
opportunity to thank everyone who served as members of the Board
for the service, both during the year and previously. FY24 saw
significant challenges for the governance of the Group and the
performance of the board throughout is a credit to its
members.
Following an extensive search
undertaken by the nomination committee, the Group announced on 31
August that Lauren Brindley would join as our new CEO from 18
September and that I would become non-executive Chair. Lauren has
now been with us for nine months in which time she has brought a
fresh perspective and strategic vision that has energized our
company's direction. Her leadership has been instrumental in
driving innovation, fostering collaboration, and enhancing
shareholder value.
At the same time, it was announced
that Chris Fry and Colin Henry were appointed as independent
non-executive directors. Chris and Colin were identified following
a search led by the Nomination Committee. They have become chairs
of the remuneration and audit committees respectively and I have
enjoyed working with them both very much.
On 13 December 2023 it was
announced that Elizabeth Lake had decided to resign from the Board.
Elizabeth held the role of CFO through a challenging period and I
am grateful to her for her service.
Following Elizabeth's resignation,
Neil Catto was appointed as CFO. Having already served as a
non-executive director and with extensive relevant experience, Neil
was well placed to take over. I have enjoyed working with Neil
since his appointment as CFO, his excellent work to date and
partnership with Lauren provides the Group with strong financial
leadership for the next chapter on its journey.
On 13 December 2023 it was also
announced that Erin Brookes would join the board. Erin joins with
sector experience in her role as Managing Director at Alvarez and
Marsal and I welcome her to the board and look forward to working
with her further.
The Board changes over the past
two years have caused upheaval in the leadership of the business
and some uncertainty through this period. I am delighted that we
now have a settled board with the right executive leadership and a
strong non-executive Group to support and challenge them in the
delivery of our strategy.
SETTLEMENT AGREEMENTS
The outcome of the investigation
that was undertaken over the past 24 months and the costs
associated resulted in claims being made against our
founders.
On 2 February 2024, the Group and
Adam Minto, the former CEO and founder of the Group, entered into a
settlement agreement relating to the events that led to the delay
of the audit of Revolution Beauty's FY22 results and the suspension
of trading of the Group's shares during Mr. Minto's time as CEO,
with no admission or acceptance of liability by either party.
Further details are set out in note 5 to the Financial
Statements.
Under the Settlement agreement, a
full and final settlement of certain claims between them has been
reached.
In connection with this
settlement, Mr. Minto will pay Revolution Beauty a settlement sum
of £2.9m.
On 5 February 2024 the Group
announced that it had come to an agreement with Tom Allsworth, the
former Executive Chairman and co-founder of the Group,
regarding:
(i) the
settlement of certain claims between Revolution Beauty and Mr.
Allsworth,
(ii) the timing
of future payments relating to the prior acquisition of Medichem
Manufacturing Limited (now
called Revolution Beauty Labs Ltd)
and
(iii) Mr. Allsworth's
future role within Revolution Beauty Labs Limited.
The agreement made full and final
settlement of certain claims between the Group and Mr. Allsworth,
with no admission or acceptance of liability by either
party.
Under the agreement, the Group
agreed to pay Mr. Allsworth an ex-gratia payment of £270,000 in
respect of certain historical legal fees incurred by Mr.
Allsworth.
A deed of variation regarding the
remaining deferred consideration in respect of the purchase of
Medichem by the Group was also entered into. Pursuant to which the
total remaining consideration under the Medichem SPA of £19.0m will
now be repaid in instalments on a revised payment
schedule.
As part of the arrangements, Mr
Allsworth will continue in the management team of Revolution Beauty
Labs, but not as a formal director.
I am pleased to have these
settlements behind us, drawing a line under a period of uncertainty
and meaning that the Group can move forward.
REGULATOR ACTION
The Company informed the
shareholders on 21 July 2023 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 thank our shareholders for their continued support
and confidence in Revolution Beauty Group. I would also like to
express my gratitude to our dedicated employees, whose hard work
and passion are the driving force behind our success.
LOOKING FORWARD
Looking ahead, we are optimistic
about the future of Revolution Beauty. We see tremendous
opportunities for growth and expansion, both domestically and
internationally, and we remain committed to delivering innovative
products and exceptional customer products.
I am confident that the Group is
well-positioned to deliver value to our shareholders and
stakeholders in the years to come. Together, we will continue to
Revolutionise the beauty industry and create long-term sustainable
value.
Alistair McGeorge
Non-Executive Chair
25 June 2024
CHIEF
EXECUTIVE OFFICER'S REVIEW
INTRODUCTION
It is with great pride and
enthusiasm that I address you today as the CEO of Revolution Beauty
plc in the first Annual Report since my appointment in September.
As we reflect on the past year, I am pleased to report that our
company has returned to positive profitability and demonstrated
resilience in the face of challenges.
The lifting of the suspension of
trading in the Group's shares during the year, and the appointment
of the new management team, brought to a close a tumultuous period
for the Group.
I, with my new management team, am
pleased to say that as we review the FY24 performance we are firmly
focused on the future and opportunities ahead at this exciting time
in the Group's history.
The FY24 results reflect the start
of major strategic changes that are taking place in the business to
create an efficient cost base from which the company can grow. The
operating model is being transformed to deliver efficiency and
enable the Group to deliver growth in an attractive global beauty
market.
The major changes have included
simplifying our brand offering, moving from seven brands across
eleven categories to three brands across seven categories. We have
also reduced the excessive volume of new products being launched,
to focus on building a profitable and sustainable new product
pipeline.
This optimisation of our product
portfolio releases resources and investment to unlock the major
profitable growth opportunities for our Masterbrand, Revolution,
and our value brand, Relove, globally.
The Masterbrand, Revolution, will
continue to bring innovative products, inspired by our community,
to the mass beauty market faster than the competition, but by
re-establishing a digital test and learn model, alongside a
streamlined product portfolio we can scale profitably to our
physical distribution footprint.
Alongside the portfolio
simplification, the company has also implemented a rigorous control
environment following the investigation process that was completed
in 2023.
By optimising the brand portfolio,
by powering up our major product categories of cosmetics and
skincare and with focussed growth globally both by market and
channel, I am confident we can unlock the many opportunities ahead
of us as a company. These steps will deliver our vision to
revolutionise beauty for every 'you' and become a top five mass
beauty player by 2030.
FY24 PERFORMANCE
We are pleased to report the
results for the year ended 29 February 2024, with the Group
returning to profit. Turnover grew by 1.8% to £191.3m (FY23
£187.8m) and the Group reports profit before tax of £11.4m compared
with a loss of £33.9m in FY23.
Adjusted EBITDA for the period was
positive £12.6m compared to a loss of £7.5m in FY23. The
improvement in performance was driven by improved inventory
purchasing, better control of overhead and direct costs, including
reduced marketing investment.
During the year, we achieved a
small increase in Group sales, up 1.8% to £191.3m as compared to
the same 12-month period last year. This performance includes a
major benefit from the sell through of material amounts of excess
inventory in the first half of the year.
Our gross margin in the year
improved to 46.2% from 40.4% in FY23. The improvement was driven
largely from reduced inventory provision charges. The reduced
charges were achieved with a more focussed purchasing plan based on
a significantly optimised product assortment globally. This smarter
operational delivery brought significant improvements to our retail
service levels in the second half of the year, driving sales of our
core products and removing the excess inventory purchasing of
previous years. These cash savings will in turn allow further
investment in our growth strategy going forward.
The Group continues to trade with
two strategic routes to market for offline trade; direct retail in
our key markets of the UK, US, Germany and APAC and through our
network of distributor partners through other geographies. In total
the company is now present in over 75 markets around the
world.
Sales in UK direct retail
continued to grow in FY24, supported by the inventory clearance
program, our core Revolution master-brand make-up assortment and
our Revolution Pro skincare franchise.
We saw a 14.9% decline in sales in
our USA business during FY24. Performance was impacted by reduced
US focused marketing investment and poor service levels to major
customers. With the optimised product portfolio, we are now
delivering strong service to all retail customers in the market and
have just launched a US focused marketing program to drive brand
awareness and conversion. We have a new President in place, Erin
Cast, who has deep US beauty experience, and a focused strategy, I
am sure she and the team will enable the brand to fulfil its
potential moving forward.
Our Rest of World direct Retail
and distributor channels are a fundamental part of our strategy and
this business grew 22.8% in FY24, demonstrating the excitement
around the brand and the demand for our products in new markets.
Our strategy of localising for key markets, both with our product
portfolio and marketing campaigns, is proving highly effective and
we have many opportunities ahead, both in existing markets and new
territories.
Our digital business has two major
channels, our third-party wholesale digital business and our own
ecommerce sites. Our third- party wholesale digital business grew
in the year, with strong growth from major digital partners
including Amazon EU & Zalando. To accelerate further we are
launching Amazon US & Tik Tok shop in H1 FY25.
Our own ecommerce sites saw
reduced sales in FY24, driven by a strategic decision in H1 to
significantly reduce non-profitable traffic driving marketing
investments. Despite the reduction in traffic driving marketing,
the business increased both conversion and average order value in
H2. We also drove incremental value from our loyalty scheme. We
have robust plans in place to elevate our digital proposition in
FY25 profitably, including an improve ecommerce proposition for the
US market and new marketplace partnerships.
CURRENT TRADING AND OUTLOOK
The post year end trading has
continued to perform in line with our internal expectations. We
continue to execute our Masterbrand strategy, which requires a
reduction in both brands and SKUs and means we will not address
certain aspects of sales made in H1 FY24. We remain confident of
growing the business in the short term and reigniting our core
offering as we work towards our goal of becoming a top five global
mass beauty player by 2030.
I would like to take this
opportunity to express my gratitude to our dedicated team, who's
hard work and passion have been instrumental to the delivery of
this performance through a challenging year. The talent on show
within team Revolution since I joined the Group has been so
impressive and I am excited to see how the team develops as we
execute our strategy over the coming years.
I would also like to thank our
loyal customers and shareholders for their continued support and
confidence in Revolution Beauty.
As we embark on the next chapter
of our journey, I am confident that together, we will continue to
Revolutionise the beauty industry.
Lauren Brindley
Chief Executive Officer
25 June 2024
FINANCIAL REVIEW
The following results are
presented for the year ended 29 February 2024. 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.
REVENUE
|
Year ended 29 February
2024
£'M
|
Year ended
28 February
2023
£'M
|
|
Change
£'000
|
%
|
By business channel:
|
|
|
|
|
|
|
Digital
|
42.3
|
22.1%
|
51.0
|
27.2%
|
(8.7)
|
(17.1%)
|
Stores
|
149.0
|
77.9%
|
136.8
|
72.8%
|
12.2
|
8.9%
|
Total
revenue
|
191.3
|
|
187.8
|
|
3.5
|
1.9%
|
By region:
|
|
|
|
|
|
|
UK
|
62.5
|
32.7%
|
67.0
|
35.7%
|
(4.5)
|
(6.7%)
|
US
|
44.2
|
23.1%
|
51.9
|
27.6%
|
(7.7)
|
(14.8%)
|
ROW
|
84.6
|
44.2%
|
68.9
|
36.7%
|
15.7
|
22.8%
|
Total
revenue
|
191.3
|
|
187.8
|
|
3.5
|
1.9%
|
As shown in the table above, Group
revenue increased by £3.5m to £191.3m in the year ended 29 February
2024 (2023: £187.8m). This revenue growth was achieved whilst the
business went through a period of significant change as a result of
the issues that arose from the internal investigation conducted
ahead the Group's readmission to the AIM market.
Revenue in the year increased by
£3.5m or 1.9%. Revenue performance varied across the Group's
geographic reporting segments, the UK declined by 6.7%, although UK
Store Group Revenue actually grew, digital revenue declined as
digital marketing spend was reduced and customers continued the
return to the high street. The
US declined by 14.8%, driven by
store Group revenue declines as the US business went through a
period of volatility. The ROW segment grew by 22.8%, driven by
growth in direct retail and sales through distributors
channels.
Store revenue increased by £12.2m
or 8.9% to £149.0m (2023: £136.8m). UK store group revenue grew by
2.0%, the US declined by 14.8% and the ROW grew by 22.8%. Declines
in the US were significantly impacted by the changes taking place
in the business during the year, steps have been taken to stabilise
the US business in recent months.
FY24 has seen a continuation of
the return to high street shopping in the wake of the COVID-19
pandemic. This trend, coupled with a reduction in the online
marketing spend as the Group consolidated its cash position earlier
in the year, has resulted in a reduction in sales through the
Groups own ecommerce channels. Sales through our digital partners
were in line with FY23.
US revenue decreased by £7.7m, the
Group retained consistent distribution throughout the US and
remains focussed on this key market. In the Rest of the World (ROW)
we saw 22.8% growth overall, which was driven by 45% growth in
revenue from our distributer channel, which remains a key source of
growth as we enter new markets.
PROFITS
|
Year ended
29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Change
£'000
|
Gross profit
|
88,355
|
75,884
|
12,471
|
Marketing and distribution
costs
|
(47,132)
|
(57,469)
|
(10,337)
|
Administrative expenses
|
(37,899)
|
(42,161)
|
(4,262
|
Impairment losses
on financial
assets
|
(1,035)
|
(204)
|
831
|
Impairment of property, plant and equipment
|
(75)
|
(2,177)
|
(2,102
|
Impairment of goodwill
|
-
|
(3,388)
|
(3,388
|
Provision for legal cases
|
(293)
|
(1,066)
|
(773
|
Other income
|
2,414
|
-
|
2,414
|
Operating
profit/(loss)
|
4,335
|
(30,581)
|
34,916
|
Net finance income/(costs)
|
7,108
|
(3,293)
|
10,401
|
Profit/(loss)
before taxation
|
11,443
|
(33,874)
|
45,317
|
Gross
profit margin
|
46.2%
|
40.4%
|
5.8ppt
|
Gross margin for the year ended 29
February 2024 improved significantly to 46.2%/£88.4m (FY2023:
40.4%/£75.9m) as a result of improved inventory management, and
significant reduction in the inventory provision charges. The
margin at H1 was higher at 49.4% due to seasonality, with higher
seasonal promotions in H2 and a higher proportion of the inventory
provision release occurring in H1 following the implementation of
managements exit strategy for slow-moving inventory.
Whilst there will be ongoing
movements in the inventory provision due to levels of New Product
Development (NPD), Net Realisable Value (NRV) and slow-moving
inventory, the movement between FY23 and FY24 has reduced due to
the actions taken by new management to manage inventory purchasing,
establish exit routes for slow-moving inventory and focus NPD on
fewer better products.
Adjusted EBITDA increased from a
loss of £7.5m in FY23 to a profit of £12.6m in FY24. The main
driver for this profit was the improvement in the gross margin
described above, a controlled reduction in marketing during a focus
on liquidity early in the year and lower distribution costs
compared to FY23 which was impacted by the significant decrease in
global freight rates. In addition, the business has decreased
operating costs in FY24, driven by the removal of internal
warehouse costs.
Operating profit for the year
ended 29 February 2024 of £4.6m increased by £35.2m (2023 operating
loss: £30.6m). This was due to a number of factors:
•
Improvement in gross profit (£12.8m) driven by reduction in
inventory provision charges and lower freight rates following
record levels previously experienced.
•
Reduction in one off cost incurred in FY24; impairment of assets
(reduced by £2.1m, mostly from the full impairment of the
acquisition of Medichem), and the recognition of the settlement
income with the Group's co-founder and former CEO (£2.4m) (see note
5 to the financial statements for details)
•
Decrease in spend on stand updates (£2.9m) following the increased
spend in the prior year catching up with updates missed during the
pandemic and decrease in marketing and distribution spend
(£4.8m)
Profit before taxation for the
year increased to £11.4m (2023: Loss before taxation £33.9m), an
improvement of £45.3m.
FINANCE INCOME AND COSTS
On 12 December 2023 the Group
announced that it had reached agreement to sign a second deed of
variation in respect of the timing and value of payments of
deferred consideration for its acquisition of Revolution Beauty
Labs Limited (Formerly: Medichem Manufacturing Limited). The
amendment to the deferred consideration payable resulted in a net
gain of £8.8m being recognised within finance income (see note 24
to the financial statements for details).
TAXATION
The Group's tax charge increased
from a credit of £0.2m to a charge of £0.7m. The increase to the
tax charge was the result of the Group's return to
profitability.
PROFIT/(LOSS) AFTER TAXATION
Profit after taxation increased to
£10.7m (2023: Loss after taxation £33.7m).
ALTERNATIVE 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. Full details of the adjusting charges
incurred during the year are presented in Note 5 to the financial
statements.
The adjusting items identified as
non-recurring in nature are set out below and were considered in
calculating the adjusted profits. Adjusting Items are defined in
Note 2 and Note 5.
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Change
£'000
|
Operating profit/(loss)
|
4,335
|
(30,581)
|
34,916
|
Depreciation, amortisation
& impairment
|
5,180
|
15,867
|
(10,687)
|
Share-based payment
|
2,372
|
303
|
2,069
|
(Profit)/Loss on disposal of asset
|
(6)
|
62
|
(68)
|
Adjusting
items:
|
|
|
|
Settlement Income
|
(2,414)
|
-
|
(2,414)
|
Acquisition costs
|
-
|
262
|
(262)
|
Restructuring costs
|
1,439
|
1,310
|
129
|
Provision for legal cases
|
(1,644)
|
1,474
|
(3,118)
|
Legal and professional fees
|
2,917
|
3,528
|
(611)
|
Audit Fees
|
391
|
300
|
91
|
Total
adjusting items
added back
|
791
|
6,874
|
(6,083)
|
Adjusted
EBITDA
|
12,570
|
(7,475)
|
20,045
|
Adjusted
EBIT
|
7,396
|
(23,404)
|
30,800
|
Net finance income/(costs)
|
(7,107)
|
3,293
|
(10,400)
|
Adjusting
items:
|
|
|
|
Gain on amendment of deferred consideration
|
(10,243)
|
-
|
(10,243)
|
Adjusted
PBT
|
4,260
|
(26,697)
|
30,957
|
Adjusted EBITDA increased by
£20.1m to a profit of £12.6m during the year (2023: £7.5m loss).
The increase in EBITDA was primarily due to the reduction in
inventory provision after the actions taken to establish exit
routes for slow-moving inventory, and to better manage inventory
purchasing.
Depreciation, amortisation and
impairment was significantly lower as a result of the impairments
to stands and goodwill made in FY23. 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
forecast performance.
Changes in the leadership of the
company and certain other minor restructuring activity that took
place in the year resulted in one off cost associated with the
restructure.
Significant one off legal and
professional fees were incurred in relation to the completion of
the Independent Investigation and the subsequent legal settlements
with the Group's co-founders and previous Directors.
Additional, exceptional legal fees
were associated to the work required to enable the suspension on
the Company's shares to be lifted in July 2023 and the
requisitioned general meeting raised by the Group's major
shareholder, boohoo Group plc.
FINANCIAL POSITION AND RESOURCES
|
As at 29 February
2024
£'000
|
As at 28
February
2023
Restated
£'000
|
Change
£'000
|
Intangible assets
|
4,934
|
5,728
|
(794)
|
Property, plant and equipment
|
9,242
|
7,928
|
1,314
|
Right of
use asset
|
4,177
|
2,310
|
1,867
|
Other receivable
|
1,931
|
-
|
1,931
|
Deferred
tax asset
|
496
|
-
|
496
|
Non-current
assets
|
20,780
|
15,966
|
4,814
|
Current
assets excluding
cash
|
89,635
|
102,416
|
(12,781)
|
Liabilities excluding
borrowings
|
(87,088)
|
(110,840)
|
23,752
|
Cash and
cash equivalents
|
8,636
|
11,044
|
(2,408)
|
Borrowings
|
(31,785)
|
(31,721)
|
(64)
|
Net
debt
|
(23,149)
|
(20,677)
|
(2,472)
|
Net
assets/(liabilities)
|
178
|
(13,135)
|
13,313
|
NON-CURRENT ASSETS
The Group states property, plant
and equipment at cost, less depreciation or provision for
impairment. Non- current assets as at 29 February 2024 increased to
£20.8m (2023: £16.0m), mainly due to the recognition of the legal
settlement reached with one of the Company's co-founders and former
CEO, which is to be paid in six equal instalments annually between
28 March 2024 and 28 March 2029, the instalments due after twelve
months from the balance sheet date have been recognised as a
non-current asset.
CURRENT ASSETS
Current assets excluding cash
decreased to £89.6m as at 29 February 2024 (2023: £102.4m). The
inventory balance was lower at £40.8m (2023: £47.6m) which was due
to the improvement in inventory purchasing. There was a decrease in
Trade Receivables of £11.0m due to the timing of sales in the
current and prior year, as well as an improved recovery of aged
debt. Other receivables have increased by £3.0m representing the
reimbursement asset on a copyright infringement legal case and
first instalment of the legal settlement with the Company's
co-founder and former CEO.
LIABILITIES
The decrease in total liabilities
excluding borrowings as at 29 February 2024 of £23.8m relates
mainly to the decrease in trade payables of £16.0m due to the
active reduction in legacy payables through agreed payment plans
with the largest inventory suppliers and the improved inventory
purchasing process, and additionally the impact of foreign
exchange. Accruals have also decreased by £2.0m predominantly due
to the reduction in legal and professional costs.
LIQUIDITY
On 29 February 2024, the Group had
£8.6m cash, with gross borrowing of £32m fully drawn from the
Revolving Credit Facility ('RCF'). The face value of the Group net
debt is £26.4m. The reported net debt of £31.8m is after deducting
£0.2m of prepaid fees. These figures exclude the deferred
consideration.
BANKING FACILITIES
As of 29 February 2024 the Group
had a £32m RCF in place. As announced on 8 February 2024, the Group
signed a twelve-month extension to the £32m RCF, which will now run
until October 2025 and be on terms consistent with those agreed on
29 March 2023. As set out in the going concern disclosure in
note 1 to the financial statements, amendments to the EBITDA
covenant were made subsequent to the year end. As also set out in
note 1, compliance with these covenants is forecast under the base
case scenario. However, under a severe but plausible downside
scenario, a breach of the amended covenants is possible, which has
resulted in the Directors material uncertainty assessment with
regard to going concern.
CASHFLOW
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Change
£'000
|
Net
cash (used in)
generated from operations
|
7,272
|
(1,959)
|
9,231
|
Income tax
|
(753)
|
1,898
|
(2,651)
|
Net
cash generated from operating activities
|
6,519
|
(61)
|
6,580
|
Purchase of intangible assets
|
(270)
|
(1,018)
|
748
|
Purchase of property, plant and equipment
|
(4,265)
|
(7,496)
|
3,231
|
Others
|
3
|
1
|
2
|
Net
cash used
in
investing activities
|
(4,532)
|
(8,513)
|
3,981
|
Interest paid
|
(2,634)
|
(1,175)
|
(1,459)
|
Drawdown of borrowings
|
-
|
8,000
|
(8,000)
|
Issue of new shares
|
88
|
-
|
88
|
Others
|
(2,172)
|
(2,127)
|
(45)
|
Net
cash generated
from financing
activities
|
(4,718)
|
4,698
|
(9,416)
|
Net
increase/(decrease) in
cash during
the year
|
(2,731)
|
(3,876)
|
1,145
|
In FY24 net cash generated from
operations improved significantly, by £9.2m year on year. Without
the level of adjusting 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 FY24, a total of 8,791,984
ordinary shares were issued under the share incentive plans, in
note 29.
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 (2023: £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.
DIRECTORS' RESPONSIBILITY STATEMENT
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 25 June
2024
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 29 February
2024
Note
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Revenue
|
7
|
191,287
|
187,842
|
Cost of
sales
|
|
(102,932)
|
(111,958
|
Gross profit
|
88,355
|
75,884
|
Marketing and distribution
costs
|
|
(47,132)
|
(57,469
|
Administrative expenses
|
|
|
|
-
General administrative expenses
|
|
(37,899)
|
(42,161
|
-
Impairment losses
on financial
assets
|
|
(1,035)
|
(204
|
-
Impairment of
property, plant
and equipment
and right-of-use
assets
|
17, 18
|
(75)
|
(2,177
|
-
Impairment of
goodwill and
other intangibles
|
16
|
-
|
(3,388
|
-
Provision for
legal cases
|
27
|
(293)
|
(1,066
|
Total administrative
expenses
|
|
(39,302)
|
(48,996
|
Other operating income
|
10
|
2,414
|
-
|
Operating
profit/(loss)
|
10
|
4,335
|
(30,581
|
Finance income
|
12
|
10,247
|
1
|
Finance costs
|
13
|
(3,139)
|
(3,294
|
Profit/(Loss)
before taxation
|
|
11,443
|
(33,874
|
Income tax (expense)/credit
|
14
|
(743)
|
228
|
Profit/(Loss)
for the
year
|
10,700
|
(33,646
|
Other
comprehensive income
net of
taxation
Exchange differences
on translation
of foreign
operations -
may be reclassified to profit and loss
|
153
|
(223
|
Total
comprehensive profit/(loss)
for the
year
|
10,853
|
(33,869
|
Earnings per share (p)
|
15
|
3.4
|
(10.9
|
Diluted earnings per share (p)
|
15
|
3.2
|
(10.9
|
Adjusted EBITDA*
|
5
|
12,570
|
(7,475
|
*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 adjusting items as disclosed in note
4.
The following notes are an
integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
As at 29 February 2024
Note
|
As at 29 February
2024
£'000
|
As at 28
February
2023
Restated
£'000
|
Non-current
assets
|
|
|
|
Intangible assets
|
16
|
4,934
|
5,728
|
Property, plant and equipment
|
17
|
9,242
|
7,928
|
Right-of-use assets
|
18
|
4,177
|
2,310
|
Other receivables
|
20
|
1,931
|
-
|
Deferred
tax asset
|
26
|
496
|
-
|
Total
non-current assets
|
20,780
|
15,966
|
Current
assets
|
|
|
|
Inventories
|
19
|
40,775
|
47,606
|
Trade and other receivables
|
20
|
42,739
|
50,731
|
Reimbursement asset
|
27
|
6,122
|
4,079
|
Cash and
cash equivalents
|
21
|
8,636
|
11,044
|
Total
current assets
|
98,272
|
113,460
|
Current
liabilities
|
|
|
|
Lease
liabilities
|
18
|
(894)
|
(2,060)
|
Trade and other payables
|
22
|
(67,249)
|
(82,730)
|
Deferred consideration
|
24
|
-
|
(10,910)
|
Provisions
|
27
|
(6,622)
|
(7,060)
|
Borrowings
|
23
|
-
|
(31,721)
|
Corporation tax payable
|
|
(579)
|
(28)
|
Total
current liabilities
|
(75,344)
|
(132,509)
|
Net current
assets/(liabilities)
|
22,928
|
(19,049)
|
Total
assets less
current liabilities
|
43,708
|
(3,083)
|
Non-current
liabilities
|
|
|
|
Lease
liabilities
|
18
|
(3,481)
|
(954)
|
Borrowings
|
23
|
(31,785)
|
-
|
Deferred consideration
|
24
|
(8,264)
|
(9,098))
|
Total
non-current liabilities
|
|
(43,530)
|
(10,052)
|
Net
assets/(liabilities)
|
178
|
(13,135)
|
Equity
|
|
|
|
Share capital
|
30
|
3,185
|
3,097
|
Share premium
|
|
103,487
|
103,487
|
Warrant reserve
|
|
7,239
|
7,239
|
Merger reserve
|
|
14,860
|
14,860
|
Translation reserve
|
|
599
|
446
|
Retained earnings
|
|
(129,192)
|
(142,264)
|
Total
(deficit)/equity
|
178
|
(13,135)
|
The following notes are an
integral part of these financial statements and refer to Note 4 for
detailed information on the correction of prior period
errors.
These financial statements of
Revolution Beauty Group plc, registered number 11666025, were
approved and authorised for issue by the Board of Directors on 25
June 2024 and were signed on its behalf by:
Neil Catto, Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Note
|
Share
capital
£'000
|
Share premium
£'000
|
Warrant
reserve
£'000
|
Merger
reserve
£'000
|
Translation
reserve
£'000
|
Retained earnings
£'000
|
Total
equity
£'000
|
Balance
at
1
March 2022
|
|
3,097
|
103,487
|
7,239
|
14,860
|
669
|
(108,921)
|
20,431
|
Loss for
the year
|
|
-
|
-
|
-
|
-
|
-
|
(33,646)
|
(33,646)
|
Other
comprehensive income
net of
taxation:
|
|
|
|
|
|
|
|
|
Foreign
operations - foreign currency translation differences
|
|
-
|
-
|
-
|
-
|
(223)
|
-
|
(223)
|
Total
comprehensive income/ expense for the year
|
|
-
|
-
|
-
|
-
|
(223)
|
(33,646)
|
(33,869)
|
Transactions
with owners
in
their capacity as
owners:
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
-
|
-
|
-
|
-
|
-
|
303
|
303
|
Total transactions
with owners
|
|
-
|
-
|
-
|
-
|
-
|
303
|
303
|
Balance
at
28
February 2023
|
|
3,097
|
103,487
|
7,239
|
14,860
|
446
|
(142,264)
|
(13,135)
|
Profit for the year
|
|
-
|
-
|
-
|
-
|
-
|
10,700
|
10,700
|
Other
comprehensive income
net of
taxation:
|
|
|
|
|
|
|
|
|
Foreign
operations - foreign currency translation differences
|
|
-
|
-
|
-
|
-
|
153
|
-
|
153
|
Total comprehensive
income/ expense for the
year
|
|
-
|
-
|
-
|
-
|
153
|
10,700
|
10,853
|
Transactions
with owners
in
their capacity as
owners:
|
|
|
|
|
|
|
|
|
Issue of shares
|
30
|
88
|
-
|
-
|
-
|
-
|
-
|
88
|
Share-based payments
|
|
-
|
-
|
-
|
-
|
-
|
2,372
|
2,372
|
Total transactions
with owners
|
|
88
|
-
|
-
|
-
|
-
|
2,372
|
2,460
|
Balance
at
29
February 2024
|
|
3,185
|
103,487
|
7,239
|
14,860
|
599
|
(129,192)
|
178
|
For the year ended 29 February
2024
The following notes are an
integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 29 February
2024
Note
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Profit/(Loss) for
the period
|
|
10,700
|
(33,646
|
Adjustments for:
|
|
|
|
Taxation charge/(credit)
|
14
|
743
|
(228
|
Finance costs
|
13
|
3,139
|
3,294
|
Finance income
|
12
|
(10,247)
|
(1
|
Depreciation of property, plant and equipment and right-of-use assets
|
17, 18
|
4,208
|
8,369
|
Impairment of property, plant and equipment and right-of-use assets
|
17, 18
|
75
|
2,177
|
Amortisation of intangible assets
|
16
|
897
|
1,933
|
Impairment of intangible assets
|
16
|
-
|
3,388
|
Loss/(profit) on disposal of property, plant and equipment
|
17
|
2
|
-
|
Loss/(profit) on disposal of intangible assets
|
16
|
28
|
62
|
Equity
settled share-based payment expense
|
|
2,372
|
303
|
Provisions movement
|
27
|
(201)
|
1,565
|
Movements in working
capital:
|
|
|
|
Movement in inventories
|
|
6,933
|
(2,923)
|
Movement in receivables
|
|
3,523
|
3,791
|
Movement in payables
|
|
(14,900)
|
9,957
|
Cash used in operations
|
|
7,272
|
(1,959
|
Income taxes received/(paid)
|
|
(753)
|
1,898
|
Net
cash generated
by/(used in)
operating activities
|
|
6,519
|
(61)
|
Cash
flows from
investing activities
|
|
|
|
Purchase of intangible assets
|
|
(270)
|
(1,018
|
Purchase of property, plant and equipment
|
|
(4,265)
|
(7,496
|
Finance income
|
|
3
|
-1
|
Net
cash used
in
investing activities
|
(4,532)
|
(8,513)
|
Cash
flows from
financing activities
|
|
|
|
Interest paid
|
|
(2,634)
|
(1,175
|
Proceeds from borrowings
|
|
-
|
8,000
|
Proceeds from issue of shares, net of transaction costs
|
|
88
|
-
|
Payment of lease liabilities(1)
|
|
(2,172)
|
(2,127)
|
Net
cash (used
in)/generated by
financing activities
|
(4,718)
|
4,698
|
Note
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Cash and cash equivalents
|
|
|
|
Net decrease in the year
|
|
(2,731)
|
(3,876
|
At 1
March
|
21
|
11,044
|
15,619
|
Effects of exchange rate changes on cash and cash equivalents
|
|
323
|
(699)
|
At
29 February
|
21
|
8,636
|
11,044
|
|
|
|
|
|
(1)
Payment of lease liabilities includes £49k (2023: £115k) of
interest payments and £2,069k (2023: £2,012k) of principal lease
payments.
(2)
The share-based payment charge for the year is £2,370k (2023:
£303k), of which £Nil (2023: £Nil) was paid in
cash.
The following notes are an
integral part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ended 29 February
2024
1
GENERAL INFORMATION
Revolution Beauty Group plc ("the
Company") is a public company limited by shares, and incorporated
in England and Wales, with company number 11666025, and domiciled
in the United Kingdom. The Company listed on the Alternative
Investment Market (AIM) on 19 July 2021. The address of 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 as
listed in note 4 to the Company financial statements.
The Group's principal activity,
business activities and other factors likely affecting the Groups
performance are set out in the Chief Executive Officers Review on
pages 8 to 9 and the Principal Risk and Uncertainties affecting the
Group are set out on pages 22 to 26.
These results for the year ended 29
February 2024 are an excerpt from the Annual Report & Accounts
2024 and do not constitute the Group's statutory accounts for 2024
or 2023. Statutory accounts for 2023 have been delivered to
the Registrar of Companies, and those for 2024 will be delivered
following the Company's Annual General Meeting. The Auditor
has reported on those accounts; their reports were qualified and
include an emphasis of matter with regard to the correction to
prior year disclosed in note 4 to the financial statements. The
report also draws attention to the material uncertainty over the
Group's ability to continue as going concern, as set out in note 2
to the financial statements by the directors. They did not contain
statements under Sections 498(2) or (3) of the Companies Act 2006
or equivalent preceding legislation.
2
SUMMARY OF MATERIAL ACCOUNTING POLICIES
Basis of preparation
The financial statements have been
prepared in accordance with UK-adopted International Accounting
Standards ("IFRS"). The financial statements have been prepared on
the historical cost basis.
The financial statements are
prepared and presented in Sterling, which is the functional
currency of the Company. Monetary amounts in these financial
statements are rounded to the nearest £'000.
Prior period adjustments made to
the amounts reported in the Company's 2023 financial statements
have been set out in note 4.
Measurement convention
The financial statements have been
prepared under the historical cost convention except for, where
disclosed in the accounting policies, certain items shown at fair
value. Historical cost is generally based on the fair value of the
consideration given in exchange for goods, services and
assets.
The preparation of financial
statements in conformity with IFRS requires management to make
estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the disclosure of
contingent liabilities at the reporting date. If in the future,
such estimates and assumptions which are based on management's best
judgement at the reporting date, deviate from the actual
circumstances, the original estimates and assumptions will be
modified as appropriate in the year in which the circumstances
change.
Critical accounting estimates and
key sources of estimation uncertainty in applying the accounting
policies are disclosed in note 3.
Basis of consolidation
The consolidated financial
statements incorporate those of Revolution Beauty Group plc and all
of its subsidiaries (as included in note 4 of the parent entity
accounts).
Where the company has control over
an investee, it is classified as a subsidiary. The company controls
an investee if all three of the following elements are present:
power over the investee, exposure to variable returns from the
investee, and the ability of the investor to use its power to
affect those variable returns. Control is reassessed whenever facts
and circumstances indicate that there may be a change in any of
these elements of control.
De-facto control exists in
situations where the company has the practical ability to direct
the relevant activities of the investee without holding the
majority of the voting rights. In determining whether de-facto
control exists the company considers all relevant facts and
circumstances, including:
•
The size of the company's voting rights relative to both the size
and dispersion of other parties who hold voting rights
•
Substantive potential voting rights held by the company and by
other parties
•
Other contractual arrangements
•
Historic patterns in voting attendance.
The consolidated financial
statements present the results of the company and its subsidiaries
("the Group") as if they formed a single entity. Intercompany
transactions and balances between group companies are therefore
eliminated in full.
Where necessary, adjustments are
made to the financial statements of subsidiaries to bring the
accounting policies used into line with those used by other members
of the Group.
Business Combinations
The cost of a business combination
is the fair value at acquisition date of the assets given, equity
instruments issued, and liabilities incurred or assumed. The excess
of the cost of a business combination over the fair value of the
identifiable assets, liabilities and contingent liabilities
acquired is recognised as goodwill. Costs directly attributable to
the business combination are expensed to the profit or loss as
incurred.
Going concern Base Case Forecast
Having achieved the lifting of the
suspension of the Company's shares on AIM on 28 June 2023 and
delivered sales growth of 1.9% on the previous year, with a return
to profitability at the Adjusted EBITDA level, the Group has
updated its base case forecast for the period through to August
2025 to reflect the management team's latest
expectations.
The Group set out its refreshed
strategy in February, with a focus on the core Masterbrand to drive
global growth by powering up its core, underpinned by smarter
operations and improved financial rigour. This new strategy is
designed to deliver long term growth across the Group's regions and
channels, through the strength of the Masterbrand. In the short
term, the Group will no longer address certain brand and category
sales that had previously driven revenue, whilst not always
achieving the profitability that the management team expect.
Therefore, a softness in sales in the short term is expected as the
Group rebalances its revenues and positions itself to capitalise on
its new strategy. This has been seen in recent months as sales in
the final months of FY24, and early FY25, have not reached the
levels of the preceding year.
Management have determined that
the period up to the end of August 2025 is the relevant period over
which to consider the Groups performance for the assessment of
going concern and have therefore forecast
operational and financial
performance over that period. Twelve months has been selected as
the going concern period because forecasting over this period is
the most accurate, the further out the forecast the greater
likelihood of volatility. The three months to 31 May 2024 have
shown sales performing below levels seen in the previous year,
which was expected as the implementation of the new strategy takes
place. The updated base case to July 2024 forecasts that the Group
will generate cash as it builds sustainable growth from a solid
core business and will then be well positioned to accelerate in the
years to come.
In addition to sustainable growth
in sales, the base case forecasts that the management team's
strategy will drive improvements in working capital, with inventory
and receivables managed in line with trading volumes. Existing
trading terms with supplier and customers are forecast to be
maintained under the base case.
Cost reduction measures taken over
the last two years have been adhered to and the Group continues to
take steps to address its costs base. The right balances of
marketing and capital investment is key to the delivery of the
strategy and returning to growth as quickly as possible.
The significant accounting changes
made in the prior year remain and form the basis of the Groups
reporting and forecast model, the application of more rigorous
financial reporting and control applied following the readmission
of the Group's shares to the AIM market continues as it moves
forward.
The Groups gross inventory balance
has reduced significantly once again, resulting in a further
reduction in its inventory provision since FY23. Inventory
reductions have been driven by a more rationalised purchasing
program, which is more targeted to the Group's demand forecast. In
addition, significant amounts of older inventory have been sold
through the Groups outlet channels or destroyed where no longer
considered to be of any value.
Lending Arrangements
On 30 March 2023 the Group
announced that it had secured an amended facility agreement with
its banking partners (the "Lenders"). The amendment includes a
waiver of breaches of the terms of the original agreement. As part
of the amended facility agreement, the overall size of the facility
was agreed at £32m, reduced from £40m, and is fully
drawn.
On the 8 February 2024, the Group
signed a twelve-month extension to the facility, to run until
October 2025 on unchanged terms.
Revised covenants remain in place
and include a minimum liquidity threshold of £5.0 million and an
Adjusted EBITDA covenant. Certain non-financial covenants that
applied following the amendments of the agreement were complied
with and are no longer in place. Adjusted EBITDA covenant is tested
quarterly and the minimum liquidity threshold is tested
weekly.
On 4 June 2024, a further
amendment to the facility was signed to reduce the Adjusted EBITDA
covenant through the remaining term of the facility.
The Directors are of the view that
the reduced facility provides the business with sufficient
liquidity as it continues delivering its strategy for the Going
Concern period. The facility matures in October 2025, it is the
board's intention and expectation that the facility will be
refinanced during FY25. The Group continues to enjoy the support of
its banking partners, management believe that recent progress in
stabilising, realigning the strategy, generating cash, ensuring
covenant compliance and rationalising the cost base have positioned
the Group well for refinancing its debt facilities, and is
confident of refinancing beyond October 2025.
The remaining non-financial
covenants include a condition that would result in an Event of
Default occurring where the auditors qualify the annual
consolidated financial statements. The lenders have provided a
waiver in respect of the covenant relating to the Auditors
qualifications in their audit report for these financial statements
as was indicated in the FY23 financial statements.
The forecast results under the
base case indicate that the Group will remain in compliance with
financial covenants throughout the going concern period.
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 6 March
2023 was signed which amends the terms of the deferred
consideration and completion net asset adjustment, adjusting the
timing of the payment.
On 12 December 2023 the Group
announced that it had reached agreement to sign a second deed of
variation in respect of the timing and value of payments of
deferred consideration for its acquisition of Medichem
Manufacturing Limited.
Downside Scenarios
Under the base case scenario, the
lowest amount of headroom against the minimum liquidity covenant is
£741k in June 2024, the lowest test point in the EBITDA covenant is
August 2024, when there is £819k of headroom.
In addition to the base case
scenario, the Group has considered the potential impact of a severe
but plausible downside scenario. Under the severe but plausible
scenario, a 10% reduction in total sales from August 2024, driven
by consumer demand in the beauty market caused by wider economic
factors has been modelled. Under such circumstances the Group would
need to take action to reduce costs, which would include, but not
be limited to, reducing capital expenditure, marketing and general
overheads including people costs.
In such a scenario, if mitigating
actions were taken, the Group would remain in compliance with its
covenants throughout the forecast period. However, the sensitivity
of the Adjusted EBITDA performance under such circumstances
suggests that there is a realistic possibility that a prolonged
reduction in sales of 10% could result in the Group breaching its
Adjusted EBITDA covenant. Were the Group exposed to a similar
scenario and no mitigating actions taken, the Adjusted EBITDA
covenant would be breached in November 2024.
Under a scenario in which the
Groups revenue reduced to 10% below the forecast levels in the base
case from August 2024 onward and no mitigating actions were taken,
the Group would maintain headroom against its minimum liquidity
threshold throughout the forecast period, although a breach would
be a realistic possibility. The Directors are confident that under
such a scenario, there would be sufficient time for them to take
actions within their control over the cost base to prevent a breach
occurring.
If the Group were to breach either
of its covenants, it would be reliant on the support of its lenders
in order to be able to continue to operate. The Group enjoys a good
relationship with its banking partners and is confident of their
continued support. The Group would have sufficient cash to continue
operating under all plausible scenarios modelled.
Conclusion
The Directors are satisfied with
the current performance of the business as the transition to the
new strategy is undertaken, particularly given the disruption faced
by the business in recent years.
Steps taken with regard to the
deferral and renegotiation of the Medichem consideration and the
amendment of the Groups lending arrangements and reductions to the
cost base 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 continuing challenges the business has faced since
its shares resumed trading on AIM, including addressing legacy
issues, as well as the underperformance of sales versus previous
expectations, as well as the uncertainty in the wider economy. As
noted above, the Directors have reset the strategy with reductions
in forecast expenditure and improvements to the working capital
cycle considered to be commensurate with the level of revenues
forecast. The current Board continue to believe in this strategy
and look to enhance the business further so that it is well place
to grow to deliver its full potential.
The Directors are confident that
the adopted strategy and actions taken to address the cost base and
working capital cycle can be successfully executed. 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 within their control to reduce 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 Auditor
qualifications of their audit report on these financial
statements.
These factors, in conjunction with
the sensitivity identified in the severe but plausible downside
scenario with respect to the 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.
Standards, amendments and
interpretations to existing standards that are not yet effective
and have not been early adopted by the group.
The following standards and
interpretations relevant to the Group have been published for
accounting periods after 1 March 2024 but have not been adopted by
the UK and have not been applied in the preparation of the
financial statements.
Standard/amendment
Amendments to IAS 1 -
Classification of liabilities as current or non-current
Amendments to IAS 1 - Non-current
liabilities with covenants
Amendments to IAS 21 - The effects
of Changes in Foreign Exchange Rate
The above standards are not
expected to impact the Group materially.
Revenue recognition
Revenue represents invoiced sale
of goods to customers net of sales tax. Revenue is recognised when
control of a good is transferred to the customer, which is when the
Group's performance obligations are considered to have been met in
line with its contracts and is adjusted for returns and provisions
for expected returns, discounts, rebates and refunds.
Estimation is required in
assessing concessions provided to the customer such as refunds and
returns. Such estimates are determined using either the 'expected
value' or 'most likely amount' method, which are determined by
assessing historic concessions made to customers for refunds and
returns. Provisions for refunds and returns are recognised within
trade and other payables. Returns are an area of significant
judgement, as set out below.
The Group sells its products via
their own website and to third party online retailers ("digital")
and wholesale sales to retailers and distributors ("store
groups").
Revenue from the sale of goods
sold through the Group's website is recognised when the product is
delivered to the customer. Payment of the transaction price is due
immediately when the customer purchases the products. The Group's
policy is to offer a right of return if notified within a specified
time period. The Group therefore retains an insignificant risk of
ownership through a digital sale when a refund is offered or when
return goods are accepted if a customer is not satisfied. Revenue
in such cases is recognised at the point of delivery to the
customer provided the Group can reliably estimate future returns
and the Group recognises a liability for returns against revenue
based on previous accumulated experience and other
factors.
LOYALTY SCHEME
The Group operates a loyalty card
scheme for 'digital' customers where points are earned for products
purchased online. The Group accounts for loyalty points as a
separately identifiable component of the sales transaction in which
they are granted. Deferred revenue is recognised in relation to
points issued but not yet redeemed. Deferred revenue is
subsequently recognised when the loyalty points are redeemed or
when they expire.
A portion of the transaction price
is allocated to the loyalty scheme points based on relative
stand-alone selling price of the points issued. When estimating
relative stand-alone selling price, the Group assesses the
likelihood that the customer will redeem the points based on
historic redemption rates.
STORE GROUPS
Store group revenue is recognised
when title has passed in accordance with the terms of the contract.
The timing of transfer of control in wholesale transactions is
either when the goods have been collected by the customer or when
the goods have been delivered to the location specified in the
contract and the customer has accepted the products in accordance
with the sales contract.
Sales incentives, cash discounts
and product returns are deducted from net sales, such as commercial
cooperation and discounts. Incentives granted to customers are
recorded as a deduction from net sales.
Sales incentives, cash discounts,
provisions for returns and incentives granted to distributors and
customers are recorded simultaneously to the recognition of sales
if it is highly probable that the incentive will be utilised., The
determination of whether incentives will be utilised is based
mainly on statistics compiled from past experience and contractual
conditions. Historical experience enables the group to estimate
reliably the value of goods that will be returned, or the extent of
utilisation of any incentive given, and restrict the amount of
revenue that is recognised such that it is highly probable that
there will not be a reversal of previously recognised
revenue.
In some cases, the Group can enter
into arrangements with customers where payments are made to
compensate for certain promotional actions or operational costs for
which the Group will be invoiced. As such payments cannot usually
be separated from the supply relationship, the compensation for
promotional actions is not deemed to be a distinct service and
therefore the Group recognises the consideration paid as a
deduction of revenue.
Foreign currencies
The financial statements are
presented in Sterling, this being the functional currency of the
primary economic environment of the parent company.
Foreign currency transactions are
translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where
items are re-measured. Non-monetary items are not retranslated.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement.
On consolidation, assets and
liabilities of foreign operations are translated into sterling at
closing rate at the date of that statement of financial position.
The results of foreign operations are translated into sterling at
average rates of exchange for the year. Exchange differences
arising on translating net assets at opening rate and the results
of overseas operations at actual rate are recognised in other
comprehensive income and accumulated in the translation
reserve.
Finance income and costs
Finance costs comprise interest
charged on liabilities and finance costs accruing from lease
liabilities.
Interest income and interest
payable are recognised in the statement of comprehensive, using the
effective interest method. Amounts included in finance income and
finance costs are set out in notes 12 and 13
respectively.
Adjusting Items
Adjusting items are those which
are non-recurring and not assessed to represent charges and credits
incurred or gained in the Group's normal course of business and are
material by size or nature. All items identified as adjusting are
set out in note 5.
Segmental reporting
The Group has one operating
segment; being its retail business. The Chief Operating Decision
Maker has been identified as the board of directors of Revolution
Beauty Group plc, which receives regular reporting on its retail
business.
Property, plant and equipment
The Group states property, plant
and equipment at cost, less accumulated depreciation and
accumulated impairment. Historical cost includes expenditure that
is directly attributable to the acquisition of the
items.
Subsequent costs are included in
the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the
item can be measured reliably. The carrying amount of the replaced
part is derecognised. All other repairs and maintenance are charged
to the income statement during the financial period in which they
are incurred.
Stands are provided to retail
customers for displaying the Group's products in store. The Group
recognises stands as property, plant and equipment as the Group are
solely responsible for providing, maintaining and disposing of the
stands and therefore the Group is considered to have control of
these assets.
Depreciation is calculated using
the straight-line method to write down assets' cost amounts to
their residual values over their estimated useful lives. The
estimated useful lives are as follows:
Leasehold improvements
5 years
Stands
2 to 10 years
Office equipment
3 years
Computer
equipment
3 years
The assets' residual values,
useful lives and depreciation method are reviewed, and adjusted if
appropriate, at the end of each reporting period. An asset's
carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount and are recognised
within 'Administrative expenses' in the income
statement.
Goodwill
Goodwill arises on the acquisition
of a business. Goodwill is not amortised. Instead, goodwill is
tested annually for impairment, or more frequently if events or
changes in circumstances indicate that it might be impaired and is
carried at cost less accumulated impairment losses. Impairment
losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Intangible assets other than goodwill
Intangible assets acquired
separately from a business are recognised at cost and are
subsequently measured at cost less accumulated amortisation and
accumulated impairment losses.
Intangible assets acquired on
business combinations are recognised separately from goodwill at
the acquisition date where it is probable that the future economic
benefits that are attributable to the asset will flow to the entity
and the fair value of the asset can be measured
reliably.
Amortisation is calculated on a
straight-line basis, less its estimated residual value, over its
useful economic life. The estimated useful lives are as
follows:
Software
5 years
Website
costs 3 years
Trademarks
5 years
Intellectual property
5 -10 years
Impairment of property, plant and equipment and of intangible
assets, including right-of-use assets
At each reporting period end date,
the Group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss, if any.
Where it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Recoverable amount is the higher
of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an
asset (or cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately in profit or loss, unless
the relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation
decrease.
Where an impairment loss
subsequently reverses, the carrying amount of the asset (or
cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset (or
cash-generating unit) prior years. A reversal of an impairment loss
is recognised immediately in profit or loss, unless the relevant
asset is carried in at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation
increase.
Inventories
Inventories are stated at the
lower of cost and net realisable value on a 'Weighted Average Cost'
basis. Costs of purchased inventory includes the purchase price,
import duties, other taxes and delivery costs and are determined
after deducting rebates and discounts received or receivable. Cost
comprises of direct materials and delivery costs, direct labour,
import duties and other taxes, an appropriate proportion of
variable and fixed overhead expenditure based on normal operating
capacity.
Inventory in transit is stated at
the lower of cost and net realisable value.
Net realisable value is the
estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to
make the sale.
Financial instruments
Financial assets and liabilities
are recognised on the statement of financial position when the
Group has become party to the contractual provisions of the
instrument and derecognised when it ceases to be a party to such
provisions.
TRADE AND OTHER RECEIVABLES
Trade receivables are initially
measured at their transaction price. Other receivables are
initially measured at fair value plus any directly attributable
transaction costs. Receivables are held to collect the contractual
cash flows which are solely payments of principal and interest.
Therefore, these receivables are subsequently measured at amortised
cost using the effective interest rate method. The Group does not
hold any receivables with a significant financing
component.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise
cash at bank and other short-term investments held by the Group
with maturities of less than three months from date of acquisition.
These are highly liquid investments that are readily convertible
into known amounts of cash and are subject to an insignificant risk
of change in fair value.
TRADE AND OTHER PAYABLES
Trade and other payables are
initially recognised at fair value less transaction costs and
subsequently measured at amortised cost using the effective
interest rate method, with all movements being recognised in the
statement of comprehensive income. Cost is considered to
approximate fair value.
DEFERRED CONSIDERATION
Deferred consideration is
initially recognised at fair value and subsequently measured at
amortised cost. Charges arising on significant financing component
of deferred consideration are recognised in profit or loss over the
life of the deferral period.
BORROWINGS
Interest-bearing loans are
initially measured at fair value, net of direct transaction costs
and are subsequently measured at amortised cost. Borrowings are
classified between current and non-current liabilities dependent on
the remaining term of the loan, alongside compliance with attached
covenants. The effective interest method allocates interest expense
to each period at the rate which discounts estimated future cash
payments through the expected life of the debt to the net carrying
amount on initial recognition. Finance charges, including fees and
premiums payable on settlement or redemption, are recognised in
profit or loss over the term of the loan using an effective rate of
interest. Arrangement fees in relation to undrawn facilities are
recognised as a prepayment to reflect the right for the Group to
borrow in the future on pre-specified terms which may be
favourable. The prepayment is released to profit or loss on a
systematic basis, the timing of which depends on the probability of
further draw down of the facility. If further draw down is not
probable, the fee is recognised over the period of the facility to
which it relates, if it is probable, the prepayment is held at full
amount until draw down.
CLASSIFICATION AND SUBSEQUENT MEASUREMENT OF FINANCIAL
LIABILITIES
Financial liabilities and equity
instruments are classified according to the substance of the
contractual arrangements and financial covenants entered into. An
equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all its
liabilities.
DERIVATIVES
The Group enters into foreign
exchange forward contracts and swaps. These derivatives are
initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured to their
fair value at each reporting date. Fair value gains and losses are
recognised in profit and loss.
EQUITY
Equity instruments issued are
recorded at fair value on initial recognition net of transaction
costs.
Provisions
Provisions are recognised when the
company has a present (legal or constructive) obligation as a
result of a past event, it is probable the company will be required
to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision
is the best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the
risks and uncertainties surrounding the obligation. If the time
value of money is material, provisions are discounted using a
current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a
finance cost.
Where the Group has contractual
arrangements in place that are expected to result in reimbursement
of liabilities for which a liability has been provided for, a
reimbursement asset is separately recognised. Such assets are only
recognised where the Group is virtually certain that the
reimbursement will be received. The resulting recognition within
the profit and loss, is that the provision is recognised net of the
reimbursement asset.
Impairment of financial assets under IFRS 9
The Group establishes a provision
for impairment of financial assets when there is objective evidence
that the group will not be able to collect all amounts due
according to the original terms of the receivable.
The probability of default and
expected amounts recoverable are assessed using reasonable and
supportable past and forward-looking information that is available
without undue cost or effort. The expected credit loss is a
probability-weighted amount determined from a range of outcomes and
takes into account the time value of money.
Trade receivables
For trade receivables, the
simplified approach is used for expected credit losses as there is
no significant financing component. The lifetime expected credit
losses are measured by applying an expected loss rate to the gross
carrying amount. The expected loss rate comprises the risk of a
default occurring and the expected cash flows on default based on
the aging of the receivable. The risk of a default occurring always
takes into consideration all possible default events over the
expected life of those receivables ("the lifetime expected credit
losses"). Different provision rates and periods are used based on
groupings of historic credit loss experience by product type,
customer type and location.
Impairment of other receivables measured at amortised
cost
The measurement of impairment
losses depends on whether the financial asset is 'performing',
'underperforming' or 'non-performing' based on the Group's
assessment of increases in the credit risk of the financial asset
since its initial recognition and any events that have occurred
before the year-end which have a detrimental impact on cash flows.
The financial asset moves from 'performing' to 'underperforming'
when the increase in credit risk since initial recognition becomes
significant.
In assessing whether credit risk
has increased significantly, the Group compares the risk of default
at the year- end with the risk of a default when the receivable was
originally recognised using reasonable and supportable past and
forward-looking information that is available without undue cost.
The risk of a default occurring takes into consideration default
events that are possible within 12 months of the year-end ("the
12-month expected credit losses") for 'performing' financial
assets, and all possible default events over the expected life of
those receivables ("the lifetime expected credit losses") for
'underperforming' financial assets.
Impairment losses and any
subsequent reversals of impairment losses are adjusted against the
carrying amount of the receivable and are recognised in profit or
loss.
Employee benefits
The costs of short-term employee
benefits are recognised as a liability and an expense unless those
costs are required to be recognised as part of the cost of other
assets.
The cost of any unused holiday
entitlement is recognised in the period in which the employee's
services are received. Termination benefits are recognised
immediately as an expense when the Group is demonstrably committed
to terminate the employment of an employee or to provide
termination benefits.
Defined contribution pension plans
Obligations for contributions to
defined contribution pension plans are recognised as an expense in
the Consolidated Statement of Profit or Loss in the periods which
services are rendered by employees.
Share-based payments
The company issues equity-settled
share-based incentives to certain employees in the form of share
options and incentive shares and recharges the cost of these to the
relevant subsidiary company. Equity-settled share- based payments
are measured at fair value at the date of grant. The fair value
determined at the grant date is expensed in the relevant
subsidiary's financial statements on a straight-line basis over the
estimated vesting period, based on the estimate of shares that will
eventually vest. For share options which vest in instalments over
the vesting period, each instalment is treated as a separate share
option grant, each with a different vesting period. A corresponding
adjustment is made to equity.
The fair value of incentive shares
and share options are measured using the Monte Carlo model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effect of non- transferability,
exercise restrictions and behavioural conditions.
If the vesting conditions of
incentive shares or share options are modified in a manner that is
beneficial to the employee and this modification increases the fair
value of the equity instruments granted (or increases the number of
equity instruments granted) measured immediately before and after
the modification, the entity shall include the incremental fair
value granted in the measurement of the amount recognised for
services received as consideration for the equity instruments
granted. The incremental fair value granted is the difference
between the fair value of the modified equity instrument and that
of the original equity instrument, both estimated as at the date of
modification. If the modification occurs during the vesting period,
the incremental fair value granted is included in the measurement
of the amount recognised for services received over the period from
the modification date until the date when the modified equity
instruments vest, in addition to the amount based on the grant date
at fair value of the original equity instruments, which is
recognised over the remained of the original vesting period.
Cancellations or settlements are treated as an acceleration of
vesting and the amount that would have been recognised over the
remaining vesting period is recognised immediately.
Taxation
The tax expense for the period
comprises current and deferred tax. Tax is recognised in the income
statement, except to the extent that it relates to items recognised
in other comprehensive income or directly in shareholders' funds.
In this case, the tax is also recognised in other comprehensive
income or directly in shareholders' funds, respectively.
The current income tax charge is
calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries where the Group
operates and generates taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax assets are
recognised only to the extent that it is probable that future
taxable profit will be available against which the temporary
differences can be utilised. Deferred income tax is recognised on
temporary differences arising between the tax basis of assets and
liabilities and their carrying amounts in the financial statements.
Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantively enacted by the balance sheet
date and are expected to apply when the related deferred income tax
asset is released or the deferred income tax liabilities is
settled.
Deferred income tax assets and
liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when
the deferred income tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
Since the Group is able to control
the timing of the reversal of the temporary difference associated
with interests in subsidiaries, a deferred tax liability is
recognised only when it is probable that the temporary difference
will reverse in the foreseeable future mainly because of a dividend
distribution.
At present, no provision is made
for the additional tax that would be payable if the subsidiaries in
certain countries remitted their profits because such remittances
are not probable, as the Group intends to retain the funds to
finance organic growth locally.
Leases
On commencement of a contract (or
part of a contract) which gives the Group the right to use an asset
for a period of time in exchange for consideration, the Group
recognises a right-of-use asset and a lease liability unless the
lease qualifies as a 'short-term' lease or a 'low-value'
lease.
SHORT‑TERM
LEASES
Where the lease term is twelve
months or less and the lease does not contain an option to purchase
the leased asset, lease payments are recognised as an expense on a
straight-line basis over the lease term.
LEASES OF LOW‑VALUE
ASSETS
For leases where the underlying
asset is 'low-value', lease payments are recognised as an expense
on a straight-line basis over the lease term.
Initial and subsequent measurement of the right-of-use
asset
A right-of-use asset is recognised
at commencement of the lease and initially measured at the amount
of the lease liability, plus any incremental costs of obtaining the
lease and any lease payments made at or before the leased asset is
available for use by the Group.
The right-of-use asset is
subsequently measured at cost less accumulated depreciation and any
accumulated impairment losses. The depreciation methods applied are
as follows:
Right-of-use assets on a
straight-line basis over the shorter of the lease term and the
useful life.
The right-of-use asset is adjusted
for any re-measurement of the lease liability and lease
modifications.
Initial measurement of the lease liability
The lease liability is initially
measured at the present value of the lease payments during the
lease term discounted using the interest rate implicit in the
lease, or the incremental borrowing rate if the interest rate
implicit in the lease cannot be readily determined.
The lease term is the
non-cancellable period of the lease plus additional periods arising
from extension options that the Group is reasonably certain to
exercise and termination options that the Group is reasonably
certain not to exercise.
Subsequent measurement of the lease
liability
The lease liability is
subsequently increased for a constant periodic rate of interest on
the remaining balance of the lease liability and reduced for lease
payments.
Interest on the lease liability is
recognised in profit or loss, unless interest is directly
attributable to qualifying assets, in which case it is capitalised
in accordance with the Group's policy on borrowing
costs.
Remeasurement of the lease liability
The lease liability is adjusted
for changes arising from the original terms and conditions of the
lease that change the lease term, the Group's assessment of its
option to purchase the leased asset, the amount expected to be
payable under a residual value guarantee and/or changes in lease
payments due to a change in an index or rate. The adjustment to the
lease liability is recognised when the change takes effect and is
adjusted against the right-of-use asset, unless the carrying amount
of the right-of-use asset is reduced to nil, when any further
adjustment is recognised in profit or loss. On termination of
leases, the right-of-use asset and lease liability are
derecognised, with any resulting gain or loss being recognised in
profit or loss.
Adjustments to the lease payments
arising from a change in the lease term or the lessee's assessment
of its option to purchase the leased asset are discounted using a
revised discount rate. The revised discount rate is calculated as
the interest rate implicit in the lease for the remainder of the
lease term, or if that rate cannot be readily determined, the
lessee's incremental borrowing rate at the date of
reassessment.
Changes to the amounts expected to
be payable under a residual value guarantee and changes to lease
payments due to a change in an index or rate are recognised when
the change takes effect and are discounted at the original discount
rate unless the change is due to a change in floating interest
rates, when the discount rate is revised to reflect the changes in
interest rate.
Lease modifications
A lease modification is a change
that was not part of the original terms and conditions of the lease
and is accounted for as a separate lease if it increases the scope
of the lease by adding the right to use one or more additional
assets with a commensurate adjustment to the payments under the
lease.
For a lease modification not
accounted for as a separate lease, the lease liability is adjusted
for the revised lease payments, discounted using a revised discount
rate. The revised discount rate used is the interest rate implicit
in the lease for the remainder of the lease term, or if that rate
cannot be readily determined, the lessee company's incremental
borrowing rate at the date of the modification.
Where the lease modification
decreases the scope of the lease, the carrying amount of the
right-of-use asset is reduced to reflect the partial or full
termination of the lease. Any difference between the adjustment to
the lease liability and the adjustment to the right-of-use asset is
recognised in profit or loss.
For all other lease modifications,
the adjustment to the lease liability is recognised as an
adjustment to the right-of-use asset.
Dividends
Dividends are recognised when
declared and authorised during the financial year and no longer at
the discretion of the Group.
3
JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Group's
accounting policies, the Directors are required to make judgements,
estimates and assumptions about the carrying amount of assets and
liabilities, and the disclosure of contingent assets and
liabilities, that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates, and subsequent
changes are accounted for when such information becomes
available.
Judgements
In the course of preparing the
financial statements, judgements have been made in the process of
applying the accounting policies that have had a significant effect
in the amounts recognised in the financial statements. The
following are the areas requiring the use of judgements that may
significantly impact the financial statements.
EXPECTED CREDIT LOSSES
Impairment provisions for trade
receivables are recognised based on the simplified approach, within
IFRS 9, using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of non-payment of the trade receivables is assessed.
This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit
loss for the trade receivables. For trade receivables, which are
reported net, such provisions are recorded in a separate provision
account with the loss being recognised within cost of sales in the
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
REIMBURSEMENT ASSETS
Reimbursement assets are
recognised when it is determined to be virtually certain that they
will be recovered, in accordance with IAS 37. Judgment is required
in making this determination prior to the receipt of cash flows,
the Group considers strength and validity of contractual
arrangement in place as well as the resources of the counterparty
for any reimbursement. Where the contractual arrangements are
considered secure, the counterparty has sufficient resources and
there is no other plausible reason for the asset not to be
recovered, the reimbursement is recognised.
Estimates
The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised where the revision affects only that period, or
in the period of the revision and future periods where the revision
affects both current and future periods.
Estimates include:
RETURNS
Some customers are able to return
unsold inventory. At the period end, the Group makes a provision
for returns based on historical averages, or actual values that
have been agreed with the customer.
MEASUREMENT OF INVENTORY PROVISION
The Group's inventory provision
methodology is made up of a net realisable value (NRV) component
and a slow-moving component. The slow-moving component includes a
provision for inventory that has recently been launched and
therefore has limited sales history and also for more mature
inventory, which is assessed based on its sales cover, which gives
rise to the key source of estimation uncertainty.
The NRV provision is determined by
assessing the latest sales price of a Stock Keeping Unit ("SKU"),
less the cost of selling it, against the cost of purchasing it.
There is judgment applied in assessing the costs included in
selling each SKU. The Group determines cost to sell on an average
basis across all SKUs. The cost to sell includes the incremental
costs of selling, such as commissions, as well as non- incremental
selling costs including expected marketing costs and expected costs
to hold the inventory until the anticipated time of
sale.
Inventory consists of a large
number of SKUs, with a range of values. The slow-moving inventory
provision is calculated for each SKU, based on sales in a 12 month
period, to calculate the number of months cover held at the balance
sheet date for each SKU held in inventory.
No provision is applied to SKUs
where inventory cover is 12 months or less. Where a SKU has more
than 12 months inventory cover a provision of 50% is applied to
inventory expected to sell in months 13-24 and
100% to inventory expected to sell
thereafter. Inventory cover is determined by dividing the level of
inventory on hand at the balance sheet date by sales data for a 12
month period including a period after the balance sheet date, at a
SKU by SKU level.
As recent sales data does not
accurately reflect the expected future sales of products developed
in the 12 months prior to the balance sheet date on an individual
basis, historic sales performance of all new products launched over
the preceding three years has been applied. Therefore, the Group
has determined the historic rate of sale of newly developed
products and makes a further slow moving provision of 25% of the
value of new SKUs launched in the 12 month period up to the
reporting date.
The total provision at 29 February
2024 is £14.3m (2023: £33.8m). The calculation of the inventory
provision as at 29 February 2024 is based on a number of
assumptions. These are set out below, alongside a sensitivity to
those assumptions considered to be most subjective by
management.
•
Provision rate of 50%. An increase or decrease in the provision
rate of 50% on inventory with inventory cover of greater than 24
months but less than 36 months to the minimum of 0% or maximum of
100% possible would increase or decrease the inventory provision by
£1.5m respectively.
•
Newly developed product provision. An increase or decrease in the
provision applied to products developed in the 12 months prior to
the reporting date by 5% would increase or decrease the overall
provision by £0.5m.
IMPAIRMENT OF GOODWILL
The Group determines whether
goodwill is impaired when indicators of impairment are identified
or in the annual assessment of impairment. The annual assessment
requires an estimate of the value in use of the CGUs to which the
assets are allocated, which is by business unit. A CGU for goodwill
is deemed to be an individual entity, as per Note 16.
Estimating the value in use
requires the Group to make an estimate of the expected future cash
flows from each business unit and discount these to their net
present value at a discount rate. The resulting calculation is
sensitive to the assumptions in respect of future cash flows and
the discount rate applied.
Forecasting expected cash flows
and selecting an appropriate discount rate inherently requires
estimation. A sensitivity analysis has been performed over the
estimates (see Note 16). The resulting calculation is sensitive to
the assumptions in respect of future cash flows and the discount
rate applied. The Directors consider that the key assumptions made
within the cash flow forecasts include sales levels. The Directors
consider that the assumptions made represent their best estimate of
the future cash flows generated by the CGUs, and that the discount
rate used is appropriate given the risks associated with the
specific cash flows.
MEASUREMENT, USEFUL LIVES AND IMPAIRMENT OF PROPERTY, PLANT
AND EQUIPMENT
The annual depreciation charge for
property, plant and equipment is sensitive to changes in the
estimated useful economic lives and residual values of the assets.
The useful economic lives and residual values are reassessed
annually. They are amended when necessary to reflect current
estimates, based on technological advancement, future investments,
economic utilisation and the physical condition of the assets. In
the event of impairment, an estimate of the asset's recoverable
amount is made. The value of the assets are tested whenever there
are indications of impairment.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
The Group determines whether
property, plant and equipment, predominantly related to stands used
in stores to present the Group's inventory for sale, are impaired
or require reversal of impairment when indicators of impairments or
reversal of impairment exist or based on the annual impairment
assessment. The annual assessment requires an estimate of the value
in use of the CGUs to which the assets are allocated, which is at a
customer level.
Estimating the value in use
requires the Group to make an estimate of the expected future cash
flows from each customer and discount these to their net present
value at a discount rate. The resulting calculation is sensitive to
the assumptions in respect of future cash flows and the discount
rate applied.
Forecasting expected cash flows
and selecting an appropriate discount rate inherently requires
estimation. A sensitivity analysis has been performed over the
estimates (see Note 16). The resulting calculation is sensitive to
the assumptions in respect of future cash flows and the discount
rate applied. The Directors consider that the key assumptions made
within the cash flow forecasts include sales levels. The Directors
consider that the assumptions made represent their best estimate of
the future cash flows generated by the CGUs, and that the discount
rate used is appropriate given the risks associated with the
specific cash flows.
MEASUREMENT OF LEGAL PROVISIONS
The Group recognises a provision
when it has a present liability for a past event, in accordance
with IAS 37.
With regard to legal claims,
management consider the status of any claims and all legal advice
available to determine that a liability exists. Where no agreement
has been reached for the value of a claim with the claimant,
estimation is required in assessing the quantum of the liability.
Estimating the liability also involves consideration of all
available advice from counsel, the legal stage of the claim, any
offers for settlement which have been made and whether or not they
have been accepted. The strength of the claims and the defence is
also considered. Management consider that the assessment made in
respect of legal claims provided for at the Balance Sheet date
represents their best possible estimate of the expected liability
using the available information.
4
CORRECTION OF PRIOR YEAR ERRORS
The Directors have identified a
number of balances which were previously classified as trade and
other payables which should have been offset against the trade
receivables and other receivables. These balances are deductions
from revenue, relating to shortages and damages, that are payable
to the customer from whom the revenue was recognised. This
adjustment is solely a balance sheet reclassification, and
therefore only has an impact on the Statement of Financial
Position. The total of £1,977,000 has been reclassified as at 28
February 2023, resulting in a decrease to both trade and other
receivables and trade and other payables.
Impact on the Statement of Financial
Position
|
Year ended 28 February
2023
£'000
|
Adjustments
£'000
|
Year ended 28 February
2023
£'000
|
Trade and other receivables
|
52,708
|
(1,977)
|
50,731
|
Total current assets
|
115,437
|
1,977
|
113,460
|
Trade and other payables
|
(82,707)
|
1,977
|
(80,730
|
Total
current liabilities
|
(134,486)
|
-
|
(132,509
|
Net
assets/(liabilities)
|
(13,135)
|
-
|
(13,135
|
Total equity
|
(13,135)
|
-
|
(13,135
|
There was no material impact on the
financial position at 28 February 2022 hence no third balance sheet
has been presented as a primary statement.
5
ALTERNATIVE 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.
For the financial period ended 29
February 2024, the Group has used the term 'adjusted items' as
opposed to 'exceptional items' as used in previous financial
periods. The Group exercises judgement in assessing whether items
should be classified as adjusted items. This assessment covers the
nature of the item, cause of occurrence and scale of impact of that
item on the reported performance.
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 business. 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 adjusting
items.
Adjusted EBIT
Adjusted EBIT is calculated as
profit/(loss) before tax, interest, share-based payment charges and
adjusting items.
Adjusted profit/(loss) before tax
Adjusted profit/(loss) before tax
is calculated as profit/(loss) before tax, share-based payment
charges and adjusting items.
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Operating profit/(loss)
|
4,335
|
(30,581
|
Amortisation of intangible assets
|
897
|
1,933
|
Impairment of goodwill and other intangibles
|
-
|
3,388
|
Depreciation of property, plant and equipment and right-of-use assets
|
4,208
|
8,369
|
Impairment of property, plant and equipment and right-of-use assets
|
75
|
2,177
|
(Profit)/Loss of disposal of asset
|
(6)
|
62
|
Share-based payment
expenses
|
2,372
|
303
|
Operating adjusting
items:
|
|
|
Acquisition costs
|
-
|
262
|
Restructuring costs
|
1,439
|
1,310
|
Provision or settlement of legal cases
|
(1,644)
|
1,474
|
Adjusting legal and professional fees
|
2,917
|
3,528
|
Additional audit fees
|
391
|
300
|
Adjusting Settlement
Income
|
(2,414)
|
-
|
Adjusted
EBITDA
|
12,570
|
(7,475
|
Depreciation, amortisation
and impairments
|
(5,174)
|
(15,929
|
Adjusted
EBIT
|
7,396
|
(23,404
|
Net finance (income)/costs
|
(7,107)
|
3,293
|
Financing adjusting
items:
|
|
|
Adjusting gain on amendment of deferred consideration
|
(10,243)
|
-
|
Adjusted
Profit/(loss) before
taxation
|
4,260
|
(26,697)
|
Operating adjusting items
As announced on 23 September 2022,
the Company's previous 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, with the investigation concluding on 13 January 2023. As a
result of issues identified through this process, and the
corresponding legal and professional advice required to ensure the
relisting of the Group's ordinary shares on AIM market on 28 June
2023, the Company incurred exceptional costs of £1.4m. In addition,
these concerns raised led to additional audit fees to be incurred
above the level usually required for the Group's annual statutory
audit at a further cost of £0.4m.
As a result of issues identified
through this process, the Company announced legal proceedings
against the Company's co-founder and former CEO, Adam Minto, on 20
June 2023 alleging that the director breached his fiduciary,
statutory, contractual and/or tortious duties to the Company. A
settlement was reached on 2 February 2024, for £2.9m to be paid
annually over six equal instalments between 28 March 2024 and 28
March 2029, the discounted value of the adjusting settlement income
to the company was £2.4m at the balance sheet date. Included within
adjusting legal fees are £658k of cost associated with legal and
professional support associated with this process.
On the 21 July 2023 the Financial
Conduct Authority ('FCA') notified the Company that it had
commenced an investigation into potential breaches of the Market
Abuse Regulation, in relation to matters relating to the period
from July 2021 to September 2022. In engaging with the FCA, the
Company has incurred legal and professional costs of
£0.2m.
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
adjusting legal and professional fees are £694k of cost associated
with legal and professional support associated with this
process.
During the financial year the
Group incurred adjusting restructuring and redundancy costs of
£1.4m. This included Elizabeth Lake who stood down as CFO and as a
Director of the Plc Board on 31 December 2023. In addition, there
was a restructuring of the Group's senior management team and the
Company's warehouse facilities, which included staff
redundancies.
On 29 January 2024 the Company
received a pre-action letter from Chrysalis, stating that it
believes that it has certain potential claims against the Company
in relation to its purchase of Revolution Beauty shares in July
2021 and the sale of those shares in late 2022. Chrysalis has not
commenced formal legal proceedings, and the Company contests the
allegations and has been engaging with Chrysalis's advisers,
resulting in legal and professional fees of £0.1m.
As noted in the prior year's
financial statements, the Group made a provision in respect of a
legal claim in respect of copyright infringements on music rights
in the US. Post year end, the Group reached a settlement in respect
of this legal claim, which has been treated as an adjusting event
for the balance sheet date, and the Group has recognised the full
reimbursement asset from the indemnifying parties due to the
certainty of settlement and resulted in a financial gain of £1.6m
through the profit and loss.
Revolution Beauty Holdings
acquired Revolution Beauty Labs (Formerly Medichem Ltd) which was
previously 100% owned and controlled by a previous director and
shareholder of Revolution Beauty Group Plc, with a deferred
consideration owed. During the financial year there were two
separate deeds of amendments to the deferred consideration, as
included in further detail within note 24, which resulted in a
total gain of £10.2m which has been recognised in the profit or
loss as finance income at the date of the modification.
Prior period operating adjusting 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 £3.5m (which includes
£0.4m paid on behalf of two Directors). In addition, these concerns
raised led to adjusting audit fees to be incurred above the level
usually required for the Group's annual statutory audit at a
further cost of £0.3m.
Further to the investigation
outcomes a reorganisation of the Groups operations and processes,
included the restructure of senior management positions. This
reorganisation resulted in the Group incurring adjusting redundancy
and professional cost of £1.3m.
In addition, the Group incurred
£262k in further professional fees and inventory costs in
connection with the acquisitions completed during 2022 which are
considered to be outside the normal course of business:
•
the acquisition of Medichem Manufacturing Ltd
•
the purchase of asset from BH Cosmetics Inc.
The Group incurred legal and
professional costs of £0.1m and £0.2m respectively, in the process
of concluding the above-mentioned acquisitions, which are
considered to be transaction related costs outside the normal
course of business.
During the current and prior year,
the Group made provision of £1.0m in respect of a legal claim in
respect of copyright infringement on music rights in the US. This
amount had not been settled by the balance sheet date and is
included within provisions. During the year, the Group reached a
legal settlement of £0.3m related to a one-off trademark
dispute.
6
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. The Groups sells
its products through several geographic areas as set out below and
through various revenue channels. All of these channels are managed
through one central team and structure, inventory is also purchased
centrally. Therefore, management information is reported as one
operating segment, being revenue from sales of products and
inventory purchasing.
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
An
analysis of
the Group's
revenue is
as follows:
|
|
|
Revenue analysed by class of business
|
|
|
Digital
|
42,347
|
51,008
|
Store groups
|
148,940
|
136,834
|
|
191,287
|
187,842
|
Revenue analysed by geographical market
|
|
|
UK
|
62,514
|
66,974
|
United
States of America
|
44,207
|
51,961
|
Rest of
World
|
84,566
|
68,907
|
|
191,287
|
187,842
|
7
REVENUE
The Group generated revenue from
no individual customer that accounted for greater than 10% of total
revenue in FY24 (FY23: One). Total revenue from that one customer
for 2023 was £19.6m. The performance obligations are settled upon
delivery of the products to the specified customer location or upon
collection by the customer. Payment is typically due within 30 to
90 days from delivery for online retailers and store
groups.
8
EMPLOYEES
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
An
analysis of
the Group's
staff costs
is as
follows:
|
|
|
Wages and salaries
|
19,180
|
17,774
|
Social
security costs
|
2,003
|
2,292
|
Pension
costs - defined contribution
|
339
|
323
|
Equity-settled share-based
payments
|
2,372
|
303
|
Total employee benefit expense
|
23,894
|
20,692
|
The Group operates a defined
contribution pension scheme for all qualifying employees. The
assets of the scheme are separately held from those of the Group in
an independently administered fund. At the reporting date,
contributions totalling £34k (2023: £4k) were payable to the fund
and are included within other creditors.
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Average number of staff
|
|
|
Administration
|
261
|
279
|
Cost of
sales
|
86
|
137
|
|
347
|
416
|
9
DIRECTORS' REMUNERATION
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
An
analysis of
the Group's
directors' remuneration costs
is as
follows:
Directors' remuneration
excluding pension
|
4,565
|
1,659
|
Remuneration disclosed above
includes the following amounts paid to the highest paid
director:
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Directors' remuneration
|
2,168
|
468
|
10
OPERATING PROFIT
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
The operating profit/(loss) is arrived at after charging/(crediting):
|
|
|
Net foreign exchange (gains)/losses
|
264
|
(321
|
Amortisation of intangible assets
|
897
|
1,933
|
Impairment of goodwill and other intangibles
|
-
|
3,388
|
Depreciation of property, plant and equipment - owned
|
2,700
|
6,548
|
Depreciation of property, plant and equipment - right-of-use assets
|
1,508
|
1,821
|
Impairment of property, plant and equipment - owned
|
75
|
1,811
|
Cost of inventory recognised
as an
expense
|
123,131
|
112,704
|
Inventory
provision written back
|
(17,914)
|
(5,898
|
Share-based payment
charge
|
2,372
|
303
|
Lease charges:
|
|
|
-
short-term leases
|
60
|
89
|
-
low-value leases
|
12
|
18
|
11
AUDITORS REMUNERATION
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Fees payable to the Group's auditor and its associates:
|
|
|
Audit of the financial statements
|
490
|
1,367
|
Subsidiary entity
audit fees
|
120
|
150
|
|
610
|
1,517
|
12
FINANCE INCOME
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Interest receivable
|
3
|
1
|
Gain on amendment of deferred consideration
|
10,243
|
-
|
|
10,246
|
1
|
The gain on amendment of deferred
consideration relates to the deed of amendments in relation to the
acquisition of Medichem, included in note 24.
13
FINANCE COSTS
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Interest on bank overdrafts and loans
|
2,764
|
1,379
|
Interest on lease liabilities
|
49
|
146
|
Other interest
|
326
|
1,769
|
|
3,139
|
3,294
|
14
INCOME TAX CREDIT/EXPENSE
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Current
tax:
|
|
|
UK
corporation tax
on profits
for the
current period
|
-
|
-
|
Adjustments in respect of prior periods
|
-
|
7
|
|
-
|
7
|
Foreign current tax on profits for the current period
|
14
|
(120
|
Adjustments in respect of prior periods
|
1,122
|
(72
|
Total current tax
|
1,136
|
(185
|
Deferred
tax
|
|
|
Origination and reversal of timing differences
|
(486)
|
(180
|
Previously unrecognised
tax loss,
tax credit
or timing
difference
|
2
|
137
|
Total deferred tax
|
(484)
|
(43
|
Total
income tax
charge/(credit)
|
743
|
(228
|
Factors affecting tax charge for the year
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Profit/(Loss) before
taxation
|
11,443
|
(33,874
|
Expected tax credit based on the standard rate of corporation tax in the UK of
24.49% (2023: 19%)
|
2,802
|
(6,457
|
Tax effect of expenses that are not deductible in determining taxable profit
|
(2,176)
|
184
|
Fixed
Asset Differences
|
9
|
(200
|
Adjustment in respect of prior years
|
1,122
|
(64
|
Effect of overseas tax rates
|
(47)
|
(5
|
Deferred tax adjustments in respect of prior years
|
1
|
137
|
Deferred tax assets not recognised
|
(978)
|
6,219
|
Effect of change in deferred tax rate
|
10
|
(42
|
Total
income tax
charge/(credit)
|
743
|
(228
|
The Group has tax losses totalling
£95,001k (2023: £54,773k) and other temporary differences of
£21,720k (2023: £24,182k) for which no deferred tax asset has been
recognised due to uncertainty over future
recoverability.
15
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 ordinary
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.
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Profit/(loss) attributable
to shareholders:
|
10,700
|
(33,646)
|
Weighted average number of shares ('000)
|
315,003
|
309,737
|
Basic
earnings
per share (p)
|
3.4
|
(10.9)
|
Total comprehensive
income/(loss) attributable to the owners of the company
|
10,700
|
(33,646
|
Weighted average number of shares ('000)
|
315,003
|
309,737
|
Dilutive effect of share options and warrants
|
19,724
|
-
|
Weighted average number of diluted shares ('000)
|
334,727
|
309,737
|
Diluted
earnings per
share (p)
|
3.2
|
(10.9)
|
Pursuant to IAS 33, options whose
exercise price is higher than the average price of the Company's
shares in the year 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.
16
INTANGIBLE ASSETS
|
Goodwill
£'000
|
Software
£'000
|
Website costs
£'000
|
Trademarks
£'000
|
Intellectual property
£'000
|
Acquired
rights
£'000
|
Total
£'000
|
Cost:
|
|
|
|
|
|
|
|
As
at 1 March 2022
|
17,803
|
2,061
|
1,757
|
471
|
3,316
|
1,163
|
26,571
|
Additions
|
-
|
679
|
-
|
113
|
226
|
-
|
1,018
|
Disposals
|
-
|
(466)
|
-
|
(37)
|
(591)
|
-
|
(1,095)
|
Exchange adjustments
|
450
|
(5)
|
-
|
-
|
(134)
|
-
|
311
|
As
at 28
February 2023
|
18,253
|
2,269
|
1,757
|
547
|
2,817
|
1,163
|
26,806
|
Additions
|
-
|
100
|
-
|
170
|
-
|
-
|
270
|
Disposals
|
-
|
(254)
|
-
|
(114)
|
(159)
|
-
|
(527)
|
Exchange adjustments
|
(139)
|
-
|
-
|
|
(10)
|
-
|
(149)
|
As
at
29
February 2024
|
18,114
|
2,114
|
1,757
|
603
|
2,648
|
1,163
|
26,400
|
Amortisation
and
impairment:
|
|
|
|
|
|
|
|
As
at 1 March 2022
|
13,000
|
1,025
|
1, 463
|
171
|
543
|
532
|
16,734
|
Amortisation charge
for the
period
|
-
|
632
|
294
|
101
|
406
|
500
|
1,933
|
Impairment charge
|
2,786
|
245
|
-
|
-
|
226
|
131
|
3,388
|
Disposals
|
-
|
(404)
|
-
|
(37)
|
(591)
|
-
|
(1,032)
|
Exchange adjustments
|
-
|
1
|
-
|
2
|
52
|
-
|
55
|
As
at 28
February 2023
|
15,786
|
1,499
|
1,757
|
237
|
636
|
1,163
|
21,078
|
Amortisation charge
for the
year
|
-
|
522
|
-
|
119
|
256
|
-
|
897
|
Impairment charge
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Disposals
|
-
|
(254)
|
-
|
(86)
|
(159)
|
-
|
(499)
|
Exchange adjustments
|
-
|
-
|
-
|
-
|
(10)
|
-
|
(10)
|
As
at
29
February 2024
|
15,786
|
1,766
|
1,757
|
270
|
723
|
1,163
|
21,466
|
Carrying
amount:
|
|
|
|
|
|
|
|
As
at 28
February 2023
|
2,467
|
770
|
-
|
310
|
2,181
|
-
|
5,728
|
As
at 29
February 2024
|
2,328
|
348
|
-
|
333
|
1,925
|
-
|
4,934
|
Amortisation and impairment of
intangible assets is recognised within administrative expenses in
the Statement of Comprehensive Income. Intangible assets are
located across the Groups' geographical market as follows: UK
£2,606k (2023: £2,942k), ROW £Nil (2023: £Nil), US £2,328k (2023:
£2,786k).
Impairment testing
Goodwill is tested for impairment
at each reporting date and a review undertaken for indicators of
impairment.
For the purposes of impairment
testing the Group assigns goodwill to cash generating units (CGUs).
Goodwill has been assigned to the following two CGUs Revolution
Beauty Inc of £2,328k (2023: £2,333k) and Revolution Labs Ltd
(formerly Medichem Ltd) of £Nil (2023: £2,786k).
In testing the goodwill of each
CGU, the Group aggregates all identifiable assets, including all
other intangible asset and property, plant and equipment. The
assets of the CGU are compared to the value in use of the CGU in
order to assess the recoverable amount. The value in use is
calculated by discounting future cashflows forecast to be generated
from the CGU over a five year period using the Group's pre-tax
weighted average cost of capital (WACC), which is disclosed in note
17.
At 28 February 2023, the
recoverable amount of the Revolution Labs Ltd CGU was determined to
be below the carrying amount, an impairment of £2.8m was recognised
to impair the full goodwill balance. The most significant factors
driving the impairment charges were the reduction in forecast
production and sales of inventory produced by Revolution Labs Ltd,
which were determined based on the latest financial information
available and management forecasts.
17
PROPERTY, PLANT AND EQUIPMENT
|
Leasehold improvements
£'000
|
Stands
£'000
|
Office and Computer equipment
£'000
|
Total
£'000
|
Cost:
|
|
|
|
|
As
at 1 March 2022
|
495
|
35,114
|
499
|
36,108
|
Additions
|
1
|
7,643
|
207
|
7,851
|
Disposals
|
-
|
(7,661)
|
(184)
|
(7,845)
|
Exchange adjustments
|
-
|
66
|
27
|
93
|
As
at 28
February 2023
|
496
|
35,162
|
549
|
36,207
|
Additions
|
101
|
4,099
|
50
|
4,249
|
Disposals
|
(416)
|
(3,608)
|
(48)
|
(4,072)
|
Exchange adjustments
|
-
|
(582)
|
(1)
|
(583)
|
As
at
29
February 2024
|
181
|
35,070
|
550
|
35,801
|
Depreciation
and impairment:
|
|
|
|
|
As
at 1 March 2022
|
345
|
27,317
|
231
|
27,893
|
Charge for the year
|
103
|
6,251
|
194
|
6,548
|
Impairment charge
|
15
|
1,766
|
30
|
1,811
|
Disposals
|
-
|
(7,661)
|
(184)
|
(7,845)
|
Exchange adjustments
|
-
|
(130)
|
2
|
(128)
|
As
at 28
February 2023
|
463
|
27,543
|
273
|
28,279
|
Charge for the year
|
29
|
2,509
|
162
|
2,700
|
Impairment charge
|
-
|
993
|
-
|
993
|
Impairment Reversal
|
-
|
(918)
|
-
|
(918)
|
Disposals
|
(416)
|
(3,608)
|
(46)
|
(4,070)
|
Exchange adjustments
|
-
|
(426)
|
-
|
(426)
|
As
at
29
February 2024
|
76
|
26,093
|
389
|
26,558
|
Carrying
amount:
|
|
|
|
|
As
at 28
February 2023
|
33
|
7,619
|
276
|
7,928
|
As
at 29
February 2024
|
105
|
8,975
|
161
|
9,241
|
Depreciation and impairment of
property, plant and equipment is recognised within administrative
expenses in the Statement of Comprehensive Income. Property, plant
and equipment is located across the Group's geographical market as
follows: UK £3,729k (2023: £3,380k), ROW £3,487k, (2023: £1,720k),
US £2,025k (2023: £2,827k).
Impairment testing
The Group determines whether these
assets are impaired when indicators of impairment exist or at each
reporting date. For impairment testing purposes, stand assets are
grouped by customer into CGUs. Impairment testing is carried out by
comparing the carrying value of the assets held at a CGU with the
recoverable amount of the CGU.
The recoverable amount of a CGU is
the higher of value in use or fair value less cost of disposal. The
Group determines the recoverable amount with reference to its value
in use. Value in use is assessed by forecasting the cashflow
generated from a CGU over the remaining useful life of the asset of
the CGU. A pre-tax Weighted Average Cost of Capital (WACC) derived
from externally benchmarked data is then used to discount the
cashflows to present value. The WACC applied for 2024 was 27%
(2023: 26%), this is considered a key assumption for the impairment
review and a movement of 2% in the WACC rate used would result in a
£0.1m change to the impairment.
During the year, an impairment of
stand assets of £993k (2023: £1,766k) was recognised. This
impairment was driven by certain customers not reaching forecasted
sales levels and related to two UK customers and one US customer
(2023: eight UK customer and one US customers) where the value in
use was assessed to be below the carrying value. One UK customer
accounted for the majority of the impairment at £851k.
During the year, an impairment
reversal of stand assets of £917k (2023: £nil) was recognised
through administrative expenses. This impairment reversal related
to one customer, which returned to profitability to a sufficient
extent that the value in use of the CGU based upon the forecast
cashflow was in excess of the historical cost of its assets, if no
impairment had been recognised. Management therefore determined
that the impairment should be reversed, the value of the CGU after
the reversal represents the historical cost of the assets, less
accumulated depreciation, as if no impairment had been historically
recognised.
As disclosed in Note 16,
management determined during the year that the recoverable amount
of Medichem CGU was below its carrying value. This has resulted in
an impairment of property, plant and equipment of £nil (2023:
£171k).
Impairment reviews are sensitive
to changes in key assumptions. Management have determined that the
key assumption used in the cashflow forecast is the gross profit
for each customer. As such, management have prepared sensitivity
analysis on the gross profit for each customer and calculated that
a reduction in performance in line with the severe but plausible
scenario set out in note 1 would result in an additional impairment
of £0.1m.
18
LEASES
|
Land and
Buildings
£'000
|
Plant and machinery
£'000
|
Other
£'000
|
Total
£'000
|
Right-of-use
assets
|
|
|
|
|
As
at 1 March 2022
|
3,942
|
153
|
55
|
4,150
|
Additions
|
328
|
-
|
-
|
328
|
Disposals
|
-
|
-
|
-
|
-
|
Depreciation
|
(1,736)
|
(74)
|
(11)
|
(1,821)
|
Impairment charge
|
(366)
|
-
|
-
|
(366)
|
Exchange Adjustment
|
19
|
-
|
-
|
19
|
As
at 28
February 2023
|
2,187
|
79
|
44
|
2,310
|
Additions
|
3,529
|
490
|
-
|
4,019
|
Disposals
|
(555)
|
-
|
-
|
(555)
|
Depreciation
|
(1,472)
|
(25)
|
(11)
|
(1,508)
|
Impairment charge
|
-
|
-
|
-
|
-
|
Exchange Adjustment
|
(89)
|
-
|
-
|
(89)
|
As
at
29
February 2024
|
3,600
|
544
|
33
|
4,177
|
Lease liabilities
|
|
|
|
|
As
at 1 March 2022
|
4,433
|
159
|
55
|
4,647
|
Additions
|
328
|
-
|
-
|
328
|
Disposals
|
-
|
-
|
-
|
-
|
Interest expense related to lease liabilities
|
140
|
4
|
2
|
146
|
Repayment of lease liabilities
(including interest)
|
(2,040)
|
(72)
|
(15)
|
(2,127)
|
Exchange Adjustment
|
20
|
-
|
-
|
20
|
As
at 28
February 2023
|
2,881
|
91
|
42
|
3,014
|
Additions
|
3,529
|
490
|
-
|
4,019
|
Disposals
|
(576)
|
-
|
-
|
(576)
|
Interest expense related to lease liabilities
|
42
|
6
|
1
|
49
|
Repayment of lease liabilities
(including interest)
|
(1,982)
|
(125)
|
(11)
|
(2,118)
|
Exchange Adjustment
|
(13)
|
-
|
-
|
(13)
|
As
at
29
February 2024
|
3,881
|
462
|
32
|
4,375
|
Current
|
734
|
148
|
12
|
894
|
Non-current
|
3,147
|
314
|
20
|
3,481
|
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Maturity
analysis:
|
|
|
Within 1
year
|
1,202
|
2,005
|
Between 1 and 5 years
|
4,012
|
1,105
|
Over 5 years
|
-
|
-
|
Less unearned interest
|
5,214
|
3,110
|
(839)
|
(96
|
Lease liability
|
4,375
|
3,014
|
Analysed as:
|
|
|
Non-current
|
894
|
954
|
Current
|
3,481
|
2,060
|
|
4,375
|
3,014
|
The carrying value of right-of-use
assets in respect of the above lease liabilities is £4,177k (2023:
£2,310k). Lease assets are located across the Group's geographical
market as follows: UK £4,000k (2023: £2,040k), ROW £Nil (2022:
£Nil), US £177k (2023: £270k).
The Group's lease arrangements are
in relation to property leases, plant and office equipment. The
leases have termination dates ranging from 2023 to 2029.
The rates of interest implicit in
the Group's lease arrangements are not readily determinable and
management have determined that the incremental borrowing rate to
be applied in calculating the lease liability is 9.0%. The fair
value of the Group's lease obligations is approximately equal to
their carrying amount.
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Effects of leases on
financial performance:
|
|
|
Depreciation charge
on right-of-use
assets included
within 'administrative
expenses'
|
1,508
|
1,821
|
Interest expense on lease liabilities included
within 'finance
costs'
|
49
|
146
|
Expense relating to
short-term leases included within 'administrative expenses'
|
60
|
89
|
Expense relating to low-value leases included within 'administrative
expenses'
|
12
|
18
|
|
1,629
|
2,074
|
Effects of leases on cash
flows:
Total cash outflow for right-of-use asset
leases
|
(2,118)
|
(2,127)
|
The Group has leases in respect of
printers which have been classified as low value in accordance with
IFRS 16. In the year, the Group had three property leases which
have a term of 12 months or less where it has elected to treat the
lease as a short-term lease in accordance with IFRS 16. The Group
is committed to minimum lease payments in respect of these leases
as follows:
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Short-term lease
commitment
|
28
|
5
|
Low-value lease commitment
|
1
|
1
|
|
29
|
6
|
19
INVENTORIES
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Finished goods and goods for resale
|
40,775
|
47,606
|
The total cost of inventories
recognised as an expense in cost of sale in the year was £123,131k
(2023: £111,861k). For further details on inventory valuation, key
assumptions and sensitivities, see Note 3. Total inventory written
back during the year was £17,914k (2023: £5,986k).
20
TRADE AND OTHER RECEIVABLES
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
Restated
|
Current
|
|
|
Trade receivables
|
37,733
|
48,738
|
Other receivables
|
2,412
|
452
|
Prepayments
|
2,594
|
1,541
|
|
42,739
|
50,731
|
Non-Current
|
1,931
|
-
|
Other receivables
|
|
1,931
|
-
|
All of the trade receivables were
non-interest bearing and receivable under normal commercial terms.
The fair value of the Group's trade and other receivables is the
same as their book value stated above. The Group has assessed the
credit risk of its financial assets measured at amortised cost by
reference to the historic default experience of each debtor and the
analysis of the debtor's financial position. The Group has
determined that the loss allowance for expected credit losses of
those assets is £3,118k (2023: £2,151k).
Included within, both current and
non-current, other receivables, is the financial asset of the legal
settlement reached with the Company's co-founder and former CEO,
Adam Minto, which was reached on 2 February 2024, for £2.9m. This
is to be paid annually over six equal instalments between 28 March
2024 and 28 March 2029, the discounted value of the exceptional
settlement income to the company was £2.4m at the balance sheet
date, split between current and non-current.
21
CASH AND CASH EQUIVALENTS
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Cash at bank and in hand
|
8,636
|
11,044
|
22
TRADE AND OTHER PAYABLES
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
Restated
|
Trade payables
|
40,256
|
56,233
|
Other taxation and social security
|
1,206
|
826
|
Other payables
|
201
|
51
|
Accruals
and contract liabilities
|
25,586
|
23,620
|
|
67,249
|
80,730
|
23
BORROWINGS
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Bank revolving credit facility
|
31,785
|
31,721
|
Analysed as:
|
|
|
Payable within one year
|
-
|
31,721
|
Payable after one year
|
31,785
|
-
|
The balance is shown net of loan
arrangement fees of £215k (2023: £279k). Interest is charged on the
RCF based on the Sterling Overnight Index Average plus an
applicable margin. The RCF has a maturity date of 19 October 2025,
therefore is presented within non-current liabilities. However, the
Group was in breach of the covenants in the prior period due to its
shares being suspended from trading, therefore the amount was
presented within current liabilities.
On 29 March 2023, the Group agreed
an amendment to the revolving credit facility (RCF) with its
banking partners. The amendment included a waiver of breaches of
the terms of the original agreement. As part of the amended
facility agreement 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 have been agreed, which include, a
minimum liquidity threshold of £5.0 million and an Adjusted EBITDA
covenant, as well as certain non-financial covenants. The Adjusted
EBITDA covenant is tested quarterly and the minimum liquidity
threshold is tested weekly. Interest accrues on the face value of
the drawn down loan amount at Sterling Overnight Index Average
(SONIA) plus 3.5% margin and is paid quarterly.
On the 8 February 2024, the Group
signed a twelve-month extension to its £32m RCF. The RCF will now
run until October 2025 on unchanged terms.
24
DEFERRED CONSIDERATION
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Current
|
-
|
10,910
|
Non-current
|
8,264
|
9,098
|
Revolution Beauty Holdings
acquired Revolution Beauty Labs (Formerly Medichem Ltd) which was
previously 100% owned and controlled by a previous director and
shareholder of Revolution Beauty Group Plc, with a deferred
consideration of £20,500,000 to be paid evenly over a 4-year
period, which accrues interest at 2.5% per annum.
On the 7th 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 6 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:
•
£3.625 million payable on 21 October 2025 (being the £5.125 million
consideration reduced by the £1.5 million loan due from one of the
Sellers companies, Walbrook).
•
£5.125 million payable annually on 21 October from 2026 to 2028,
interest accrues on the outstanding balances at a rate of 2.5% per
annum.
The change in the fair value of
the liability under the agreement and the amortised cost of the
original deferred consideration resulted in a net gain of £2,369k,
which has been recognised in the profit or loss as finance income
at the date of the modification.
On 12 December 2023 the Group
announced that it had reached agreement to sign a second deed of
variation in respect of the timing and value of payments of
deferred consideration for its acquisition of Medichem
Manufacturing Limited.
The terms of the new amendment
include the removal of the accrued interest clause and the minimum
repayment terms of the amendment, the repayment period has
substantially increased from 2028 to 2044. Management have
determined that amendment is substantial based on the qualitative
changes to the agreement. Additionally, the amendment has been
considered quantitatively substantial based upon recalculating the
amortised cost of the modified deferred consideration by
discounting the modified contractual cash flows using the original
effective interest rate. The resulting movement in amortised cost
is greater than 10% of the amortised cost at date of amendment. The
change in the fair value of the liability under the agreement and
the amortised cost of the original deferred consideration resulted
in a net gain of £7,874k, which has been recognised in the profit
or loss as finance income at the date of the
modification.
25
DEFERRED TAX
The deferred tax balances
recognised in the consolidated statement of financial position are
as follows:
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Deferred tax liability/(asset)
|
|
|
Accelerated capital allowances
|
370
|
(525
|
Tax
losses
|
(2,369)
|
1,126
|
Intangible fixed assets
|
1,503
|
(601
|
Other timing differences
|
-
|
-
|
Net
deferred tax
liability/(asset)
|
(496)
|
-
|
The net movement is explained as
follows:
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Opening deferred tax liability/(asset)
|
-
|
-
|
Charge/(credit) to
profit or
loss
|
(484)
|
(43
|
Effects of exchange rate changes
|
(11)
|
43
|
Closing
deferred tax
liability/(asset)
|
(496)
|
-
|
Recognition of the deferred tax
assets is based upon the expected generation of future taxable
profits. Deferred tax is calculated at 25% as enacted from April
2023 by the UK Government.
26
PROVISIONS
|
Dilapidations
£'000
|
Legal cases
£'000
|
On
Hold
£'000
|
Total
£'000
|
Opening Provision
|
100
|
6,163
|
797
|
7,060
|
Charge/(credit) to
profit or
loss
|
-
|
296
|
121
|
417
|
Utilised
amounts
|
-
|
-
|
(618)
|
(618)
|
Effects of exchange rate changes
|
-
|
(237)
|
-
|
(237)
|
Closing Provision
|
100
|
6,324
|
300
|
6,622
|
The dilapidations provision
relates to the estimated costs to be incurred by the Group in
restoring the underlying assets to the condition required by the
terms and conditions of the Group's lease arrangements.
The on hold provision relates to
charges expected in respect of supplier purchase orders which are
expected to be cancelled and for which no inventory is expected to
be received, the full amount is expected to be settled within the
next 12 months.
The legal cases provision is where
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 has taken formal legal
advice from specialist US intellectual property attorneys and
engaged in a mediation process with the claimants. This process
concluded and settled post year end and has been treated as an
adjusting event as at the balance sheet date. As such due to the
known certainty regarding the settlement, the Group as at 29
February 2024 has fully recognised both the legal provision of the
settlement and reimbursement asset, of £6,122k, in respect of
insurances and indemnities receivable against the liability for the
claim. In the prior period, not all of the indemnities were
recognised, as they were not virtually certain, therefore due to
the full recognition a financial gain has been recognised through
the profit and loss for this full recognition within this financial
year. Further detail relating to the indemnities are not provided
on the grounds that such disclosure would be considered seriously
prejudicial.
28
Contingent Liabilities
As previously announced, the Group
received notice from Chrysalis Investment Limited ("Chrysalis") on
22 November 2023, stating that Chrysalis believed it had certain
potential claims against the Group in relation to its purchase of
Revolution Beauty Plc shares in July 2021 and the sale of those
shares in late 2022. Chrysalis had not commenced formal legal
proceedings at this point.
On 19 April 2024, the Group
received a further letter from Chrysalis's legal advisers,
including draft particulars of Chrysalis's alleged claims and
details of the quantum of Chrysalis' thereof. These were stated as
a claim of £39m, together with a claim for consequential losses of
a further £6.2m. Further to this additional letter, no claim had
yet been filed with the court.
The Company strongly contests the
Chrysalis allegations and believes that the claim is fundamentally
flawed in a number of respects. Nonetheless, the Company will
continue to engage with Chrysalis and its advisers, as it is
required to do under the UK's civil procedure rules, with a view to
reaching a resolution of this matter.
The Group announced on 21 July
2023 that the Financial Conduct Authority ("FCA") 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. The Group is cooperating fully with the FCA. Until such
time as more information is available on the outcome of the
investigation, no assessment can be made of any potential
liabilities that may arise from it.
29
SHARE CAPITAL
|
Year ended 29 February
2024
No. ('000)
|
Year ended 28 February
2023
No. ('000
|
Class of share
|
318,529
|
309,737
|
Authorised and fully paid ordinary shares of 1p each
|
|
318,529
|
309,737
|
|
£'000
|
£'000
|
Class of share
|
|
|
Authorised and fully paid ordinary shares of 1p each
|
3,185
|
3,097
|
|
3,185
|
3,097
|
During the year, a total of
8,791,984 ordinary shares were issued under the share incentive
plans, as per note 29.
Ordinary share rights
Ordinary shares carry full voting
rights and rights in respect of dividends and capital distributions
(including on winding up).
30
NET DEBT
Changes in liabilities arising from financing
activities
The table below details changes in
the Group's liabilities arising from financing activities,
including both cash and non-cash changes. Liabilities arising from
financing activities are those for which cash flows were, or future
cash flows will be, classified in the Group's consolidated cash
flow statement as cash flows from financing activities.
|
As at 1 March
2023
£'000
|
Cash flows
£'000
|
Non-cash
movements
£'000
|
As at 29 February
2024
£'000
|
Cash and
cash equivalents
|
11,044
|
(2,085)
|
(323)
|
8,636
|
Borrowings
|
(31,721)
|
-
|
(64)
|
(31,785)
|
Lease
liabilities
|
(3,014)
|
2,118
|
(2,376)
|
(3,272)
|
Net
debt
|
(23,691)
|
33
|
(2,763)
|
(26,421)
|
|
As at 1 March
2022
£'000
|
Cash flows
£'000
|
Non-cash
movements
£'000
|
As at 28 February
2023
£'000
|
Cash and
cash equivalents
|
15,619
|
(3,876)
|
(699)
|
11,044
|
Borrowings
|
(23,551)
|
(8,000)
|
(170)
|
(31,721)
|
Lease
liabilities
|
(4,647)
|
2,127
|
(494)
|
(3,014)
|
Net
debt
|
(12,579)
|
(9,749)
|
(1,363)
|
(23,691)
|
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Amortised Cost
|
(31,785)
|
(31,721
|
Prepaid financing
fees
|
(215)
|
(279
|
Gross borrowings
|
(32,000)
|
(32,000
|
31
RELATED PARTY TRANSACTIONS
Interests in subsidiaries are set
out in note 4 to the Company financial statements.
Transactions with related parties
Transactions between the Group and
its subsidiaries, which are related parties, have been eliminated
on consolidation and are not disclosed in this note.
The Group entered into the
following transactions with companies under the control of one of
the Directors:
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Other
related parties
|
|
|
Sales
|
7
|
3
|
Rent
paid
|
237
|
236
|
The following amounts were
outstanding at the reporting date:
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Other
related parties
|
|
|
Amounts due to related parties
|
-
|
1
|
Amounts due from related parties
|
1
|
-
|
Included within deferred
consideration in the prior period was a loan to Walbrook
Investments Limited, a company under the control of T Allsworth, of
£1,500k which in the 7thMarch 2023 amendment was offset against the
Groups' liability to T Allsworth in respect of the
acquisition.
Medichem Properties Limited
(Formerly Walbrook Investments Limited), is a company under the
control of one of the former directors. During the period the
company provided rental premises to the group for cash payments of
£237k (2023: £235k). As at the period end there is a rent liability
of £167k (2023: £370k) outstanding.
During the financial year, the
Group paid salaries of £143k to the co-founders and former
Directors of the Group in addition to also paying £509k through
salary to one of the co-founders for their legal advice and
personal tax benefit associated with the independent investigation
commissioned by the Company.
Additionally, the Group employs a
number of individuals which are considered close family members of
the former Directors, and paid salaries of £224k (2023:
£472k).
The Group entered into the
following transactions with boohoo Group Plc, an entity considered
to have significant influence over the group.
|
Year ended 29 February
2024
£'000
|
Year ended 28 February
2023
£'000
|
Other
related parties
|
|
|
Sales
|
994
|
987
|
Purchases
|
31
|
57
|
The receivable amount outstanding
at the balance sheet date was £129k (2023: £223k).
During the year the Group entered
into a rental agreement for office space with Boohoo that commences
on 1 March 2024, as the terms have been committed to the Group has
recognised the corresponding lease asset and lease liability of
£2.4m at the balance sheet date.
For the purposes of IAS 24
"Related Party Disclosure", the Group consider key management
personnel to be the Directors of Revolution Beauty Group plc,
executives below the level of the Company's Board are not regarded
as key management personnel. Remuneration for the board of
directors is set out in note 8.
DIRECTORS' TRANSACTIONS
During the prior year, Revolution
Beauty Holdings exercised its option to wholly acquire Revolution
Beauty Labs (Formerly Medichem Ltd), from a director who had a
controlling interest, for an initial consideration of
£7,000,000, with a deferred
consideration of £16,000,000 to be paid evenly over a 4-year
period. An agreement was reached with the director to amend the
terms of the deferred consideration, details of the amendment and
outstanding liability are set out in note 24.
31
ANNUAL REPORT AND ACCOUNTS
AND ANNUAL GENERAL MEETING
The 2024 Annual Report and Accounts and Notice
of the General Meeting will be posted to shareholders and published
on the Group's website at www.revolutionbeautyplc.com
in June. The Annual General Meeting is to be held on 31 July
2024.