- Sale abandoned
- £15 million placing and £1.5 million retail offer
- Co-founders to return
Beleaguered make-up and haircare company Revolution Beauty (REVB:AIM) jumped 20% after the board abandoned a formal sale process and instead raised £15 million pounds through a placing and announced a £1.5 million retail offer.
The company is bringing back co-founders Tom Allsworth and Adam Minto and said it is in talks with top shareholder Debenhams to supply branded cosmetics under an exclusive agreement, with the latter also participating in the equity placing.
REVOLUTION BEAUTY 2.0
The placing involves issuing up to 345.1 million new shares at 3p per share, representing a 14.16% discount to the prior closing price. The funds will be used to reduce debt, fund capital expenditures and working capital needs and cover restructuring costs.
The proceeds of the retail offer are expected to provide further liquidity headroom.
Once installed as CEO Allsworth will implement a focused plan to restore growth and set a clear path to create long-term value.
The company said: ‘The founders possess deep knowledge of the brand, product and market and have a proven record of growing revenue beyond current levels whilst maintaining high profit margins, historically having grown the business to almost £190 million of revenue and delivering a compound annual growth rate of 99% between FY14 and FY19 (from £4.4 million of revenue to £136.5 million of revenue).’
Revolution Beauty revealed the business had swung into a £5.5 million loss for the year to February on a 26% fall in revenue to £142.6 million. The company announced its banking facilities have been conditionally extended to 31 July 2028.
Looking ahead the firm expects 2026 revenue in the range of £110 million to £120 million and to achieve a low single-digit millions adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation).
Cost saving measures are anticipated to be between £8 million and £10 million.
UPHILL BATTLE
Pouring some healthy scepticism on the new plans AJ Bell analyst Dan Coatsworth said: ‘Trying to find positives in the situation is like putting lipstick on a pig but the shares are up slightly today on the fundraise news and the return of co-founder Tom Allsworth as CEO.
‘The injection of capital should give it some breathing space with lenders as it looks to execute a strategy based on product development and a more credible pricing strategy, efficiencies and optimised market spend.
‘However, these initiatives will need to work quickly if Revolution Beauty is truly to become a viable business for the long term.’
Disclaimer: Financial services company AJ Bell owns Shares magazine. The author of the article (Martin Gamble) and the editor (Tom Sieber) own shares on AJ Bell.
