Further update on the Group's audit

RNS Number : 3825A

Revolution Beauty Group PLC

23 September 2022

 

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.

For Immediate Release

23 September 2022

REVOLUTION BEAUTY GROUP PLC

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

Further Update on the Group's audit for year ended 28 February 2022

Appointment of Independent Advisers to conduct an Independent Investigation

FY23 Trading Update

Revolution Beauty Group Plc (AIM: REVB) the multi-channel mass beauty innovator provides the following updates regarding the Group's audit for the year ended 28 February 2022 ("FY22") and provides a further trading update regarding the financial year ending 28 February 2023 ("FY23").

Previous Announcements regarding the FY22 Audit

On 2^nd August 2022, the Company announced;

"The Company will now report its final results for the year ended 28 February 2022 ("FY22") on 30 August 2022. This is due to additional time required to complete the Company's audit. Management is not aware of any material issues that have been raised by the auditors during the audit process to date. The annual report will be sent to shareholders and made available on our website on the 31 August 2022."

On 11^th August 2022, the Company then announced;

"The auditors have subsequently raised certain accounting issues with management regarding the audit and these could have a material impact on the results for FY22 that have previously been communicated by the Group. In the event that material adjustments are required, the Group profitability for FY22 could be materially reduced across a number of potential adjustments including stock and bad debt provisioning and revenue recognition. Once these issues have been fully resolved and agreed between the auditors and management a further announcement will be made…

And…

The Group continues to work constructively with the auditors on the audit process and continues to aim for this to be completed by 30 August 2022. The Company will keep shareholders updated on this process and any revisions to the audit timeline."

On 30 August 2022 the Company announced;

"Revolution Beauty confirms that it will not be in a position to publish its audited final results and annual report for FY22 by 31 August 2022 in accordance with AIM Rule 19. Consequently, trading in the Company's ordinary shares will be suspended with effect from 7:30 a.m. on 1 September 2022.

The Company aims to complete its audit and publish its annual report within a matter of weeks of this announcement, post which trading in the Company's ordinary shares is expected to recommence."

FY22 Audit Update, appointment of independent external advisers and commencement of external review process

Today, the Company announces that BDO LLP ("BDO"), the Company's auditor, has written to the Board and identified a number of serious concerns that have arisen during the course of its work on the FY22 audit regarding, amongst others, the Group's ability to provide sufficient and accurate audit evidence in respect of a number of key audit areas and the validity of certain commercial arrangements entered into by the Company.  BDO has indicated that, at the present time, it is not able to sign an audit report in respect of the FY22 accounts.

BDO has further recommended that the Board appoint independent external advisers to undertake an independent investigation regarding the concerns raised and report their findings to an independent committee.

The Company has today appointed Macfarlanes LLP and Forensic Risk Alliance to commence an independent investigation into the matters raised by BDO and any other matters that may become relevant during the course of their review. The Company has also formed an investigation committee of Derek Zissman (Non-executive Director) and Elizabeth Lake (CFO since June 2022) to lead the process with the independent advisers.

At this point it is difficult to estimate a timeline for the investigation, however, the Board considers that it may take several months to complete. Announcements will be made as appropriate.

Current trading and financing

On 2 August 2022, the Group provided the following update on current trading: "we now expect the first half of the year to deliver low single digit revenue growth versus H1 FY22, resulting in a small adjusted EBITDA loss for the six month period ending 31 August 2022. For the full year to 28 February 2023, we now expect between £215m - £225m net sales and adj. EBITDA of between £18m - £20m." 

The Group has now entered its seasonally stronger second half of the financial year and has increased retail distribution worldwide, with its products now in over 15,000 stores. The Company has, however, continued to encounter macro headwinds, including the ongoing impact of the Russia/Ukraine conflict, consumer spending patterns and cost inflation. In light of the above, the Company now expects that its results for FY23 will be materially below market expectations and the previous guidance given.

In addition, it is possible that accounting adjustments arising as a result of the FY22 audit, when finalised, could impact upon the FY23 results also, and there is currently no certainty as to whether this will occur or the quantum of any such adjustments if they are required.

As at 21 September 2022, the Group had net debt of £16.1m and a £40m revolving credit facility which the directors believe provides sufficient liquidity for Groups current requirements.

The Group is currently in breach of its facility agreement given the Audited Accounts for FY22 have not been filed, however, prior to this announcement the banks have continued to be supportive and the full facility remains available to the Group.

Derek Zissman, Non-executive Director and Head of the Investigations Committee, said:

"We are taking BDO's concerns very seriously and will conduct a full and independent investigation. We will continue to keep investors and stakeholders fully updated as the process continues."

- Ends -

For further information please contact:
Revolution Beauty Investor Relations
Elizabeth Lake / Nic Wing	[e-mail]
J oint Corporate Brokers
Zeus (NOMAD): Nick Cowles /Jamie Peel /Jordan Warburton   Liberum: Clayton Bush / Edward Thomas / Miquela Bezuidenhoudt	Tel: [phone] Tel: [phone]
Media enquiries:
Headland Consultancy Rosh Field / Will Smith / Marta Parry-Jones	Tel: [phone] [e-mail]

About Revolution Beauty

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

Today, the Group has a retail footprint of c.15,000 doors across leading retail chains in the UK, USA and other international markets. Revolution Beauty has access to a wide customer base, predominantly aged between 16 and 35, through its digital partners and own DTC platform. It has established and invested to streamline its supply chain with its own manufacturing facility in the UK, and third-party warehousing facilities across the UK, USA and Australia. The Group has offices in the UK, USA, New Zealand and Germany. Revolution Beauty currently employs 411 people.

The total mass beauty market was worth $219bn in 2019 and is expected to grow to $274bn over the next 3 years, driven by a new marketing era dominated by Social Media and influencers. Revolution Beauty has been a leading innovator building a significant global following across social channels, enabling it to spot trends and respond quickly to consumer demand.

Revolution Beauty strategy

Revolution Beauty Group is disrupting the traditional beauty market through products that are more accessible to more people. Through its digital-first strategy, Revolution Beauty brings trend-led products to market faster than competitors. We invest in innovative marketing strategies designed to appeal to a wider audience, and offer products combining quality, inclusivity, innovation and affordability.

 

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