Audit review pushes Revolution Beauty into loss after serious issues found in books

Revolution Beauty made around £23 million less in earnings than it had previously reported in the year ending last February, it said on Friday, after finding significant problems in its accounts.

The makeup retailer’s shares have been suspended since September as it was unable to get auditors to sign off on its books for the previous financial year.

On Friday it finally published these figures, for the year ending February 2022, with the caveat from auditors about whether the business can continue trading as a “going concern”.

In a report released in January Revolution Beauty said that it had encountered a series of problems.

For instance it found that the business had sold product worth £9.6 million in February 2022, just before the financial year ended, that should not have been counted towards revenue.

There were also problems with an acquisition, and unusual loans that had been extended to distributors to encourage sales.

On Friday the business finally published its long-delayed results, showing that it had made an adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) loss of around £800,000.

In a May 2022 announcement, before the problems were discovered, bosses told shareholders that Ebitida was around £22 million in profit.

Its £194 million of revenue has been downgraded to £184.6 million, the business 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 in terms of both sales and profitability,” said chairman Derek Zissman.

“We now expect Revolution Beauty to return to normalised trading and to capitalise on its position as a business with outstanding products, talented colleagues, and a loyal customer base.”

CEO Bob Holt said: “Integrity and honesty in every aspect of our business is paramount.

“This has been the focus of the new leadership team as we reset internal controls and processes to ensure that we are in a position to achieve consistent operational excellence at a global scale, and in line with the standards of a UK plc.”

The business said it would publish interim results for the period ending August last year within the next two weeks.

That publication will also include an update on the rest of the financial year to February and the following financial year to date, as well as what is being done to lift the suspension on Revolution Beauty’s shares.