The Body Shop’s administrator has proposed a company voluntary arrangement (CVA) to rescue the business, according to a report outlining the struggling beauty chain’s financial position and the events leading up to its administration.

FRP Advisory has proposed a CVA that will see The Body Shop entering talks with landlords and other creditors in a bid to secure its future.

FRP’s report, sent to creditors of The Body Shop, said the retailer will continue to trade under the ownership of Aurelius Group if a CVA proposal is agreed upon.

However, “in the event that a CVA cannot be agreed, the joint administrators will proceed with a sale of the business and assets,” FRP added.

The beauty chain, which fell into administration in February less than three months after being acquired by private equity firm Aurelius, has since closed nearly half its 197 stores and made nearly 754 staff redundant across its head office, distribution centre and store estate in the UK.

FRP said the company’s cash flow was “adverse” to that expected as it outlined The Body Shop’s financial position and the events that led to its administration.

“Following the completion of the acquisition, it became apparent that the short-term cash position of the company was adverse to that that had been forecast, driven by poor results in the 2023 financial year and the unwinding of the company’s working capital,” it said. 

“Prior to the sale to the Aurelius Group, stock levels were depleted over the peak Christmas trading period. Meanwhile, trade creditor arrears increased and a $76m revolving credit facility was repaid.

“As a result, January 2024 saw a higher requirement to fund working capital plus certain exceptional costs that were not foreseen.”

The Body Shop’s bankers intended to “cease providing banking facilities” while “simultaneously seeking cash backing in respect of guarantees provided by the company (approximately £8.9m) and ceasing the cash pooling arrangements enjoyed by the group resulting in nearly £6m of blocked cash”.

The report adds that this “ultimately resulted in a substantial unplanned cash outflow from the business” with a “forecast peak funding requirement for the company in excess of £100m”, which was ”significantly greater than the requirement identified as part of the acquisition process”, which suggested a peak requirement of £63m in FY24.

The Body Shop employed about 10,000 people and operated roughly 3,000 stores in 70 countries when it was sold to Aurelius in December 2023.

In one of its first moves to strengthen the business, Aurelius offloaded The Body Shop’s European arm to an international family office it had previously done business with called Alma24. 

Soon after, Retail Week reported the beauty chain’s businesses across continental Europe were in danger of collapsing, leaving the fate of more than 2,000 jobs and hundreds of stores in multiple countries in the balance.

The retailer’s subsidiaries and overseas businesses, including those in the US and Canada, have filed for bankruptcy since, resulting in the loss of hundreds of jobs and store closures.