Revolution Beauty (LON: REVB) has released an update to its past accounts. REVB has been suspended since autumn last year of course over these very accounts. This Revolution Beauty release is currently the most read news release on the Stock Exchange site. Not on the grounds that it's a large and important company - it isn't - but everyone's trying to work out why on Earth Boohoo bought into this mess? For note that we're now in May 2023. And REVB is only just able to release its accounts up to Feb 2022.
As here: “Or Revolution Beauty plumped up and now suspended because its accounting isn't good enough to be audited. Which rather brings us back to BOO which, most inadvisedly, just invested in REVB just before the suspension.”
That's how bad it was. Not just that the company had a bad trading record or anything. But that the accounting records were bad enough that they couldn't even be audited. One of the big issues here therefore being that Boohoo question. If the accounting was this bad then what did prompt them to buy into the mess?
Revolution Beauty Group share price from LSE. Note the suspension.
The full gory details for REVB can be read here. The thing that's taken so much time is that forensic accounting simply does. Because if one number is wrong then it's not possible to assume that any numbers are correct. You can't do the usual sampling and checking of some (small) percentage of the numbers, it's necessary to go back and check each and every digit of each and every recorded number.
When that's done losses surge to £38.8 million - “Revolution Beauty saw operating losses surge to £38.8m, up nearly £30m in its long-awaited final year results for the year ending February 2022”. Note that that's not that the business deteriorated over that time period. That's the difference between formerly recorded numbers and reality. “Pre-tax losses were up to £44.9m, from £17.8mn, which it said was down to high freight costs during the pandemic.” Err, yes, well at least that proves that accountants have a sense of humour. #
The result of this is that Revolution Beauty is in breach of its banking covenants. The banks are said to be supportive - quite possibly on the grounds that there would be little recovery if the loans were called in - but there are going concern worries.
REVB's not going to return to a listing anytime soon. There are still the next set of accounts to prepare and so on. They'll need to be fully up to date before they return. We would probably predict a capital raise and a substantial fall in the share price when they do. Probably that is.
The question we're all really awaiting an answer for though is, really, what did Boohoo see here that led them to buy in?