REG - Revolution Beauty Gp - FINAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2024
26/06/2024 07:00
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RNS Number : 8642T Revolution Beauty Group PLC 26 June 2024
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 2023
£ million £ million Change
Revenue 191.3 187.8 +2%
Gross profit 88.4 75.9 +16%
Gross margin 46.2% 40.4% +5.8ppts
Operating costs(1) 75.8 83.4 -9%
Adjusted measures(2)
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
(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
(mailto: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
(mailto: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 Year ended 28 February
2024 2023
£'M £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 28 February
As at 29 February 2023
2024 Restated
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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
Year ended 29 February Year ended 28 February
2024 2023
£'000 £'000
Note
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
As at 28 February
As at 29 February 2023
2024 Restated
£'000 £'000
Note
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
Share capital Share premium Warrant reserve Merger reserve Translation Retained earnings Total equity
£'000 £'000 £'000 £'000 reserve £'000 £'000
Note £'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
Year ended 29 February Year ended 28 February
2024 2023
£'000 £'000
Note
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
Year ended 29 February Year ended 28 February
2024 2023
£'000 £'000
Note
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 Year ended 28 February
2023 2023
£'000 Adjustments £'000
£'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'000
Average number of staff
Administration 261 279
Cost of sales 86 137
347 416
9 DIRECTORS' REMUNERATION
Year ended 29 February Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'000
Directors' remuneration 2,168 468
10 OPERATING PROFIT
Year ended 29 February Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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
Intellectual property Acquired
Goodwill Software Website costs Trademarks £'000 rights Total
£'000 £'000 £'000 £'000 £'000 £'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
Office and Computer equipment
Leasehold improvements £'000
£'000 Stands Total
£'000 £'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 Plant and machinery
£'000 £'000 Other Total
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'000
Maturity analysis:
Within 1 year 1,202 2,005
Between 1 and 5 years 4,012 1,105
Over 5 years - -
5,214 3,110
Less unearned interest
(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 Year ended 28 February
2024 2023
£'000 £'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 60 89
expenses'
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 Year ended 28 February
2024 2023
£'000 £'000
Short-term lease commitment 28 5
Low-value lease commitment 1 1
29 6
19 INVENTORIES
Year ended 29 February Year ended 28 February
2024 2023
£'000 £'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 28 February
Year ended 29 February 2023
2024 £'000
£'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 Year ended 28 February
2024 2023
£'000 £'000
Cash at bank and in hand 8,636 11,044
22 TRADE AND OTHER PAYABLES
Year ended 28 February
Year ended 29 February 2023
2024 £'000
£'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Legal cases On Hold Total
£'000 £'000 £'000 £'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 Year ended 28 February
2024 2023
No. ('000) 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 Non-cash movements As at 29 February
2023 Cash flows £'000 2024
£'000 £'000 £'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 Non-cash movements As at 28 February
2022 Cash flows £'000 2023
£'000 £'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'000
Other related parties
Sales 7 3
Rent paid 237 236
The following amounts were outstanding at the reporting date:
Year ended 29 February Year ended 28 February
2024 2023
£'000 £'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 Year ended 28 February
2024 2023
£'000 £'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 (http://www.revolutionbeautyplc.com) in June. The
Annual General Meeting is to be held on 31 July 2024.
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