Revolution Beauty to undergo investigation into audit failures
The company announced that BDO, the company's auditor, has written to the board and identified a number of ‘serious concerns’ that have arisen during its FY22 audit
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Revolution Beauty has said it will undergo an audit investigation after its failure to complete its auditing quickly enough, as it warns over its full-year profits.
The multi-channel mass beauty brand provider previously announced on 2 August that the company will now report its final results for the year ended 28 February 2022 (“FY22”) on 30 August 2022 due to “additional time required”.
However, on 11 August, the company said in a statement that the auditors had “subsequently raised certain accounting issues with management regarding the audit and these could have a material impact on the results for FY22”.
On 20 August, Revolution Beauty confirmed that it “will not be in a position to publish its audited final results and annual report for FY22 by 31 August 2022 in accordance with AIM Rule 19”. Consequently, trading in the company’s shares were suspended.
Today (23 September), the company announced that BDO, the company’s auditor, has written to the board and identified a number of “serious concerns” that have arisen during the course of its work on the FY22 audit regarding the company’s ability to “provide sufficient and accurate audit evidence in respect of a number of key audit areas and the validity of certain commercial arrangements entered into by the company”.
The company has appointed Macfarlanes LLP and Forensic Risk Alliance to commence an independent investigation into the matters raised by BDO. The company has also formed an investigation committee of Derek Zissman (non-executive director) and Elizabeth Lake (CFO since June 2022) to lead the process with the independent advisers.
On 2 August, the company said: “We now expect the first half of the year to deliver low single digit revenue growth versus H1 FY22, resulting in a small adjusted EBITDA loss for the six month period ending 31 August 2022. For the full year to 28 February 2023, we now expect between £215m – £225m net sales and adj. EBITDA of between £18m – £20m.”
The company has reported that it has now entered its seasonally stronger second half of the financial year and has increased retail distribution worldwide, with its products now in over 15,000 stores.
It has, however, continued to encounter macro headwinds, including the ongoing impact of the Russia/Ukraine conflict, consumer spending patterns and cost inflation. The company expects that its results for FY23 will be below market expectations and the previous guidance given.
As of 21 September, the company had net debt of £16.1m and a £40m revolving credit facility.
Derek Zissman, non-executive director and head of the investigations committee, said: “We are taking BDO’s concerns very seriously and will conduct a full and independent investigation. We will continue to keep investors and stakeholders fully updated as the process continues.”
