Revolution Beauty’s delayed results reveal widening losses and the results of its audit include several “unacceptable” business practices that it has vowed to never repeat.
The beauty brand has today posted its financial year 2022 annual results, which were delayed due to the company’s auditor identifying concerns including the “pulling forward” of revenue and handing out undisclosed personal loans to distributors.
The investigation revealed four errors in the reporting of its prior year’s results and the retailer said comparisons had now been corrected.
The audit found sales of £9.6m to three distributors were undertaken for the purposes of meeting sales targets and included stock not needed by the retailers.
Revolution Beauty said: “The board takes this issue very seriously and we have implemented a zero-tolerance policy of pulling forward revenue. In addition, cash collection is monitored daily and customers with substantial overdue balances are put on hold until their accounts are back to operating to terms.”
It also found personal loans had been made to two of its distributors without being disclosed to the board, which it said was “unacceptable” and would not be repeated.
Sales at Revolution Beauty were up 35% to £184.6m compared to the same period the year before but high freight costs and an increase in stock provision of £11.3m saw the brand fall further into the red.
A pre-tax loss of £44.9m widened from £17.8m, while its operating loss totalled £38.9m, an increase of £29.4m, due to a £13m impairment of goodwill from its acquisition of Medichem and £8.9m in IPO-related costs.
Revolution Beauty chair Derek Zissman said: ”Whilst these results are significantly below that forecast by the previous management team to the market, they nevertheless reflect a robust business with a strong brand, loyal following, and significant potential ahead in terms of both sales and profitability.
“The board is committed to upholding the highest level of corporate governance and since the appointments of Bob Holt and Elizabeth Lake, the board has taken significant measures to address the previous lack of listed company experience. The group adopted the Quoted Companies Alliance Governance Code 2018 on listing. We believe that it is important to hold ourselves to high standards in all areas of our business and governance is no different.
”I would like to take this opportunity to express my personal thanks to Bob Holt and Elizabeth Lake, who joined the group at a particularly difficult time, and to all our employees for their enormous commitment and efforts. I understand how unsettling recent months have been for all my colleagues. Together, the whole business is now focused on developing a successful and profitable business for the benefit of shareholders and customers alike.”
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