19th Nov 2024 11:30
(Alliance News) - Revolution Beauty Group PLC on Tuesday said it swung to a loss during the first half of its current financial year, as it implements a plan to revamp the business after a turbulent two years.
The London-based cosmetics retailer swung to a pretax loss of GBP10.9 million during the six months that ended August 31, from a profit of GBP366,000 the year before.
This was primarily due to revenue falling 20% to GBP72.4 million from GBP90.4 million last year, and cost of sales increasing 7.7% to GBP49.2 million from GBP45.7 million.
The group was also hit by a GBP10.2 million write-off charge for old stock provisions, as it focused on making clearance sales to shift slow-moving products from previous years. The group is aiming to simplify its product portfolio, and discontinue unproductive stock-keeping units.
Revolution Beauty reiterated its full-year expectations for sales to decline at a "slightly lower rate" than in its first half. It also anticipates underlying adjusted earnings before interest, tax, depreciation and amortisation to be at least in line with financial 2024, as previously forecast.
Underlying adjusted Ebitda in the first six months of the year rose 18% to GBP3.9 million from GBP3.3 million last year.
In 2022, auditors had refused to sign off on Revolution Beauty's accounts for the prior year, which launched an investigation into the business and led to its shares being suspended from the London Stock Exchange.
The investigation found the accounts had counted GBP10 million of sales towards revenue that should not have been included, and found that Co-Founders Adam Minto and Tom Allsworth had made personal loans to an employee which were not disclosed to the board.
Revolution Beauty considered taking Minto to court, but instead reached an agreement that saw Minto pay nearly GBP3 million to the company. Minto stepped down in November 2023.
Chief Executive Officer Lauren Brindley has been leading the group since August last year, replacing Bob Holt, who resigned alongside Chair Derek Zissman. This was the culmination of a lengthy struggle with shareholder boohoo Group PLC, which called for replacements to the company's leadership team. Online fashion retailer boohoo owns more than a 25% stake in Revolution Beauty.
CEO Brindley said: "This is a year of transformation for Revolution Beauty, and our performance in the first half reflects the steps we have taken to position the group for long-term, profitable growth. Since launching our new strategy in February, we have substantially cut a long tail of unproductive [stock-keeping units], improved our operational delivery and made good progress with our cost savings programmes. Consequently, we now have a core portfolio that is growing globally with a significantly improved underlying gross margin.
"As we look to the second half and beyond, we have a strong pipeline of growth initiatives, including new and expanded retailer relationships, a reinvigorated pipeline of make-up innovation, the launch of our new skincare range and the global expansion of our budget brand, Relove.
"As these initiatives start to take effect, we expect a return to growth in the fourth quarter and anticipate that this will accelerate through financial 2026. With good momentum in the underlying business, I remain highly confident in the 'Reigniting the Revolution' strategy and in our ability to become a top-five mass beauty brand."
Broker Panmure Liberum forecast revenue of GBP155 million for Revolution Beauty's financial year due to end on February 28, 2025, which would represent a 19% fall from GBP191.3 million last year, and a pretax loss of GBP5.6 million, compared to pretax profit of GBP11.4 million the year before.
Shares in Revolution Beauty were down 3.4% at 13.21 pence each in London on Tuesday morning.
By Emily Parsons, Alliance News reporter
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