Revolution Beauty auditor raises ‘serious concerns’ over accounts

Revolution Beauty, the online retailer that floated on London’s junior stock market last year, has slashed forecasts for the current year and revealed its auditors have refused to sign off the last set of accounts.

The company said on Friday that BDO had informed it of “a number of serious concerns” regarding its accounts for the year to February 2022.

These included Revolution’s “ability to provide sufficient and accurate audit evidence” in several key areas and “the validity of certain commercial arrangements entered into by the company”. 

On BDO’s recommendation, Revolution said it had appointed Macfarlanes and Forensic Risk Alliance to conduct an independent investigation and had set up a committee to lead that process. It said the probe “may take several months” to complete.

Less than a month ago, the company indicated that the audit process would be wrapped up “within a matter of weeks”.

Revolution’s shares were suspended from trading at the start of this month owing to its failure to publish accounts within the timeframe required by stock market listing rules.

Derek Zissman, the non-executive director who will lead the investigation committee, said the company was “taking BDO’s concerns very seriously” and pledged to conduct “a full and independent investigation”.

Elizabeth Lake, the chief financial officer appointed in May this year, is the other member of the committee.

Revolution said its results for the current financial year “will be materially below market expectations and previous guidance”, citing the impact of the conflict in Ukraine, cost inflation and changing consumer spending patterns.

Accounting adjustments arising as a result of the audit may also affect results for the current year, it cautioned.

The group had previously expected sales of £215mn-£225mn and adjusted ebitda of £18mn-£20mn for the year to February 2023.

Revolution is currently in breach of its credit facility terms because it has not filed accounts. But it said its lenders had been supportive and that it believed it had “sufficient liquidity” for its current requirements.