Revolution Beauty Group, a cosmetics and personal care company based in the UK, has recently disclosed the findings of an independent investigation into its accounts and raised numerous concerns. This investigation was prompted by an accounting probe that resulted in the resignation of former CEO Adam Minto. The examination revealed issues surrounding historical sales, inventory provisioning, and personal loans.

One of the major concerns discovered during the investigation relates to the acquisition of Medichem in October 2021. While the acquisition was valued at £26 million, only £7 million has been paid so far, leaving £19 million outstanding. Additionally, the auditor BDO flagged personal loans made by Minto and Medichem founder Tom Allsworth to employees, senior directors, and distributors of the company. Further undisclosed loans and investments totaling approximately £1 million to one of Revolution Beauty’s distributors were also unearthed, requiring further investigation.

The London Stock Exchange suspended the trading of Revolution Beauty’s shares in September after the company failed to publish its annual accounts. Consequently, the company anticipates adjustments to its full-year 2022 results, particularly in terms of inventory provisioning and revenue.

Furthermore, BDO’s findings highlighted irregularities in sales made in February 2022 to three key distributors of Revolution Beauty who had received loans from Minto and Allsworth. The investigation revealed that unusually large orders were placed in that month, accounting for a significant portion of the annual orders. The sales made in February, totaling approximately £9 million, will not be recognized in Revolution Beauty’s upcoming annual results, which will only be published after the completion of the audit.

In response to these findings, Allsworth, who still holds a board position, has agreed to step down before the publication of the results. The company is now focused on addressing the raised concerns and ensuring transparency in its financial reporting.

The outcome of this investigation raises concerns about the management and financial practices at Revolution Beauty. It underscores the necessity for greater accountability and oversight in the cosmetics and personal care industry. As investors and consumers, it is essential to have confidence in the companies we support and rely on. Thus, the future of Revolution Beauty and its ability to regain trust in the market will heavily depend on the conclusions drawn from this investigation.

Useful Links:
1. Financial Times: Revolution Beauty’s accounting probe
2. Revolution Beauty Official Website