TIDMREVB
RNS Number : 3534Q
Revolution Beauty Group PLC
27 October 2021
For Immediate Release 27 October 2021
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
REVOLUTION BEAUTY GROUP PLC
("Revolution Beauty", the "Group" or the "Company")
Acquisition of Medichem Manufacturing Ltd
Provides Revolution Beauty with its own, fully-owned and
vertically integrated manufacturing business
Board expects the acquisition to be significantly earnings
enhancing in FY23
Revolution Beauty Group plc (AIM: REVB), the mass beauty
innovator, is pleased to announce Revolution Beauty Holdings
Limited, a direct subsidiary of the Company, has acquired the
entire issued share capital of Medichem Manufacturing Ltd
("Medichem") for total consideration of GBP23.0 million subject to
a net assets adjustment by reference to completion accounts (the
"Acquisition").
Medichem is a long-standing supplier of haircare and skincare
products to Revolution Beauty, manufacturing all products from its
UK facility. Medichem's end-to-end operations include an R&D
laboratory, bulk manufacturing, warehousing and distribution, and
employs more than 170 people. During its last financial year to 31
December 2020, Medichem reported audited revenues of GBP13.4
million and profit before tax of GBP1.6 million. Given the strong
year to date growth in Revolution Beauty's haircare and skincare
categories, Medichem has continued to perform well in 2021.
Medichem has a limited number of customers other than Revolution
Beauty (which has contributed in excess of 90% of Medichem's
revenue in the calendar year to date).
The option to acquire Medichem was disclosed at the time IPO and
today's announcement demonstrates Revolution Beauty's delivery
against its strategy set out at the time of listing. It is
Revolution Beauty's first acquisition and provides the Group with
its own, fully-owned and vertically integrated manufacturing
business. It will enable the Group to enhance margins, increase
control of its supply chain and enhance productivity. The Company
expects the Acquisition will be significantly earnings enhancing
for the financial year ending 28 February 2023.
Transaction overview and financial impact
As disclosed in the Company's Admission Document dated 13 July
2021, Revolution Beauty entered into a call option arrangement
whereby it obtained the right to acquire the entire issued share
capital of Medichem for GBP23.0 million post completion of an
independent due diligence and valuation process managed by the
non-executive directors of the Group.
The Acquisition constitutes a related party transaction under
the AIM Rules as Tom Allsworth, Executive Chairman of Revolution
Beauty, is the sole shareholder of Medichem. In addition Medichem
has four leases for properties with Walbrook Investments Limited, a
company controlled by Tom Allsworth, with an aggregate annual
rental of c.GBP0.2 million (the "Leases").
The consideration due of GBP23.0 million will be payable in
instalments, with GBP7.0 million payable in cash on completion from
the Group's current cash resources, and the balance payable in
equal annual GBP4.0 million instalments over four years (together
with an amount equivalent to interest accrued thereon at the rate
of 2.5% per annum). The cash consideration payable will be subject
to a post-completion net assets adjustment (up to an additional
amount capped at GBP4.5 million) by reference to completion
accounts.
The Board of Revolution Beauty expect Medichem will contribute
c.GBP3.0 million of incremental pre-tax profits to the Group for
the financial year ending 28 February 2023.
As a result of the due diligence undertaken on the Acquisition
and the associated advice provided by the Company's auditors, it
has been determined that under IFRS accounting standards, Medichem
will be consolidated into the Group's results as at the date the
option agreement was entered into on 13 July 2021, as opposed to
being consolidated from the date of the Acquisition. The Company
estimates that such consolidation will make a relatively modest
contribution to profitability in the Group's interim results for
the period ended 31 August 2021 as sales of Medichem produced
products in this period were largely of stock acquired at the
prevailing rates prior to consolidation. Similarly, contribution to
revenue is expected to be modest as the majority of Medichem's
revenues are from Revolution Beauty and will be eliminated on
consolidation.
Related Party Transactions
The Directors of Revolution Beauty, with the exception of Tom
Allsworth, having consulted with Zeus Capital (the Company's
Nominated Adviser), consider that the terms of the Acquisition and
the Leases are fair and reasonable insofar as its shareholders are
concerned.
Adam Minto, CEO and Joint Founder of Revolution Beauty Group
plc, said : "The intention to acquire Medichem was disclosed at the
time of our IPO, and I am pleased to announce today that we are
delivering against our strategy and exercising our option to
acquire this highly-complementary manufacturing business. By
vertically integrating Revolution Beauty in this way and taking
manufacturing in-house for the first time, we will have even more
control of our supply chain, allowing us to improve productivity,
our cost base and margins, while being earnings accretive."
For further information:
Revolution Beauty Group plc
Adam Minto, Founder & CEO
Tom Allsworth, Founder & Executive www.revolutionbeautyplc.com
Chairman
Zeus Capital Limited
(Nominated Adviser & Broker)
Corporate Finance
Nick Cowles / Jamie Peel / Jordan Tel: +44 (0) 161 831 1512
Warburton
Equity Capital Markets Tel: +44 (0) 20 3829 5000
Dominic King / Ben Robertson www.zeuscapital.co.uk
Media enquiries:
Headland Consultancy Tel: +44 (0)20 3805 4822
Rosh Field / Will Smith Revolutionbeauty@headlandconsultancy.com
- Ends -
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