Revolution Beauty PLC said today it is facing a major investigation into its accounts for the year to February 2022 while trading in the current 12 months has been materially worse than expected.
Shares in the AIM-listed group have been suspended since 1 September due to a failure to file 2022 accounts, but now it says that its auditor, BDO, has flagged up several issues of "serious concern" arising from its work on the audit.
Specifically, these relate to Revolution’s ability to provide sufficient and accurate audit evidence in respect of a number of key areas and the validity of certain commercial arrangements.
As a consequence, BDO has said it cannot sign off the accounts and recommended the appointment of an independent external auditor.
Macfarlanes LLP and Forensic Risk Alliance have been selected to carry out this audit, which might take several months to complete.
In addition, Revolution said the Russia/Ukraine conflict, consumer spending patterns and cost inflation had all hurt trading recently and results for the year to February 2023 will be "materially below" market expectations and previous guidance.
That is before any adjustments that are necessary once the audit for 2022 is complete, it said in a statement.
As at 21 September 2022, the group had net debt of £16.1mln and a £40mln revolving credit facility, which its directors believe provides sufficient liquidity for current requirements.
Revolution added it is currently in breach of its facility agreement due to the 2022 accounts not being filed, but thus far its banks have been supportive.
Derek Zissman, head of Revolution’s Investigations Committee, added: "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."