FINAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2023

Revolution Beauty Group PLC

31 August 2023

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

REVOLUTION BEAUTY GROUP PLC

("Revolution Beauty", the "Group" or the "Company")

AUDITED FINAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2023

Improving trading performance during period of change

Suspension of shares traded on the London Stock Exchange successfully lifted post period end

Revolution Beauty Group plc (AIM: REVB), the multi-channel mass beauty innovator, today announces its Full Year Results for the year ended 28 February 2023 ("FY23" or the "Period").

The Group delivered a resilient performance during the Period, despite continuing to be impacted by previously flagged issues Identified around stock, revenue and the carrying value of Revolution Labs.

Nonetheless, trading improved as the year progressed, with the return of top line revenue growth and positive EBITDA in H2; this follows operational and commercial changes made by the new management team.

Since the year end, this trend has continued, and the Group is pleased to be performing ahead of internal expectations.

Key financials

Group results	Year ended 28 February 2023 £'M	Year ended 28 February 2022 Restated £'M	Change YoY £'M
Revenue	187.8	184.6	3.2
Gross profit	75.9	71.0	4.9
Gross profit %	40.4%	38.5%	1.9%
Adj EBITDA	(7.5)	(0.8)	(6.7)
Operating loss	(30.6)	(39.9)	9.3
Net finance costs	(3.3)	(6.0)	2.7
Loss before tax	(33.9)	(45.9)	12.0
Income tax credit	0.2	1.6	(1.4)
Loss for the year	(33.6)	(44.3)	10.7
Gross Cash	11.0	15.6	(4.6)
Net Debt	(21.0)	(8.4)	(12.6)

Financial Highlights

· Group revenue increased by 1.7% to £187.8m (2022: £184.6m) primarily due to the reopening of physical stores. Store revenue increased by 8.1%; Online sales were lower by 12.1%

· Gross profit margin increased by 190bps to 40.4%, primarily due to improved stock management and reduced freight costs

· Adjusted EBITDA loss widened to £7.5m (FY22: £0.8m) due to increased marketing expenses and higher staffing costs due primarily to increased headcount, partly offset by improved margin; loss after tax narrowed to £33.6m (FY22: £44.3m)

· Significant improvement in year-on-year operating cash flow. Cash balance at year end of £11m. Banking facility fully drawn at £32.0m, £8.0m of which was drawn in the Period, resulting in net debt balance of £21.0m at the year end

· New inventory provisioning methodology adopted by the Group in FY22, tight inventory control introduced during H2, resulting in the reduction in the inventory provision for FY23 of £6.0m (FY22 increase: £11.3m)

Operational Highlights

· Rigorous new internal controls and protocols introduced across Group functions and departments; suspension of Group's shares successfully lifted post period-end

· Improving trading performance and maintained strong stakeholder relationships during a period of significant and well-publicised upheaval for the Group

· Continued to successfully fulfil consumer demand for Revolution Beauty's relevant, affordable and multichannel offer

· Growth in store revenues driven by new distribution in Boots in UK and Walgreen in US

· Rationalisation of product range, with focus redoubled on successful core products and attractive 'Make Up Revolution' brand

· Appointment of the Group's first Chief Marketing Officer post period end, demonstrating strategic intent to grow across core markets of US, UK and Germany

· The Group will be announcing imminently the appointment of a new CEO. They will replace Bob Holt, who as previously announced, stands down today. Alistair McGeorge will become the Non-Executive Chair when the new CEO joins the business

· On March 2023 the Group announced it secured an amended facility agreement with its banking partners which runs through to October 2024. The overall size of the facility was agreed at £32m, reduced from £40m, and is fully drawn. Revised covenants remain in place and the Group continues to enjoy the support of its banking partners

Current Trading and Outlook

· Post period-end, trading has continued to perform ahead of expectations. As previously announced, sales in Q1 FY24 increased by 60% on the prior year (Q1 FY23 sales were particularly weak due to customers previously overstocking) with EBITDA at £3.5m (Q1 FY23: £7.4m loss)

· While the Board is mindful of the external environment, it remains confident in the future opportunities open to Revolution Beauty, given its relevant, affordable and multichannel offer. As previously disclosed, the current expectation for FY24 is high single digit growth in revenue, and adjusted EBITDA in the high single digit millions

· The Group currently has a cash balance of £10.5m, and remains fully drawn on its facility

Alistair McGeorge, Executive Chairman, commented:

"This solid Group trading performance has been achieved during a period of well-publicised upheaval for the business. To that end, I would like to thank my predecessor Derek Zissman, Bob Holt and Elizabeth Lake for their efforts over the past twelve months. Firstly in maintaining the commercial performance of the Group while also overseeing the implementation of new internal protocols and the lifting of the suspension of the Group's shares which are traded on AIM.

"While I have only been with Revolution Beauty for a short period, it is clear to me that the business has the right attributes in place. The expertise of colleagues, combined with the relevance, affordability and strength of the Revolution brand gives me confidence that we can achieve continued growth across our core markets. .

"While there is still a lot of work to be done, I look forward to supporting our new CEO, to build on recent momentum within the business, and achieve long-term sustainable growth within what is a large and attractive beauty market."

For further information please contact:

Investor Relations

Elizabeth Lake

Investor.Relations@revolutionbeautyplc.com

Joint Corporate Brokers

Zeus (NOMAD): Nick Cowles /Jamie Peel /Jordan Warburton

Liberum: Clayton Bush / Edward Thomas / Miquela Bezuidenhoudt

Tel: +44 (0) 161 831 1512

Tel: +44 (0) 203 100 2222

Media enquiries

Headland Consultancy

Matt Denham / Will Smith / Antonia Pollock

Tel: +44 (0)20 3805 4822

Revolutionbeauty@headlandconsultancy.com

About Revolution Beauty

Revolution Beauty is a global mass beauty and personal care business which operates a multi brand, multi category strategy and sells its products both direct-to-consumer (DTC) via its e-commerce operations, and in physical and digital retailers through wholesale relationships.

Today, the Group has a retail footprint of c.17,000 doors across leading retail chains in the UK, USA and other international markets. Revolution Beauty has access to a wide customer base, predominantly aged between 16 and 35, through its digital partners and own DTC platform. It has established and invested to streamline its supply chain with its own manufacturing facility in the UK, and third-party warehousing facilities across the UK, USA and Australia. The Group has offices in the UK, USA, New Zealand and Germany. Revolution Beauty currently employs 347 people.

The total mass beauty market was worth $218bn in 2022 and is expected to grow to $255bn over the next 3 years (source: Euromonitor). Revolution Beauty has been a leading innovator building a significant global following across social channels, enabling it to spot trends and respond quickly to consumer demand, and translating this to mass market beauty retail.

CHAIR'S STATEMENT

I am delighted to present my first report as Executive Chair of Revolution Beauty. This is an exciting time for the business as we seek to capitalise on its undoubted strengths.

As has been well publicised, the business has suffered a number of significant commercial and financial shortcomings. These have been outlined in detail in the FY22 annual report. Most of these are now behind us and this is due to the successful actions of my predecessor as Chair, Derek Zissman, outgoing CEO Bob Holt and the wider executive team. With a new Board now in place we can look forward to driving sustainable profitable growth.

LIFTING OF SHARE SUSPENSION

Over the past year, the over-riding priority for the business, its shareholders and stakeholders has been to lift the suspension of trading in the Group's shares.

As set out in our FY22 annual report and accounts, the Company's shares were suspended on 1 September 2022. The focus of the Board from then was to work tirelessly to restore trading in the Company's shares for the benefit of all stakeholders.

The hurdles to getting the suspension lifted were,

· the completion of the FY22 audit (annual report and accounts published 26 May 2023).

· the publication of the FY23 interims (published 2 June 2023).

· completion of a report on the Group's working capital carried out by KPMG and similarly a report on the updated Financial Position and Prospects Procedures (FPPP).

· a fully constituted Board with four independent non-executive directors (27 June 2023).

With the publication of the interim results on 2 June 2023, the Company had met the conditions for re-listing, and it also gave notice of the date of the AGM 27 June 2023.

Following considerable work from the whole Revolution Beauty team, the Company's shares were restored to trading on AIM (Alternative Investment Market) on 28 June 2023

CORPORATE GOVERNANCE, BOARD AND MANAGEMENT CHANGES

The Group has adopted the Quoted Companies Alliance Corporate Governance Code 2018 (QCA Code) and the Board remains committed to upholding the highest levels of corporate governance. The Board acknowledges that in some areas this was not historically the case, and has taken significant measures to address these historic and complex matters which were the subject of an Independent Investigation.

Between the start of FY23 and the request from boohoo Group Plc for Board representation, there have been a number of significant changes to the Board and management of the business:

Andrew Clark announced his intention to step down as a director and CFO of the Company on 12 May 2022. On the same date, we welcomed Elizabeth Lake as director and Chief Financial Officer.

In November 2022, it was announced that due to the events since IPO and the transition from a private company to a public company, Chief Executive Officer Adam Minto resigned as a Director of the Group and stepped down from the business with immediate effect. Bob Holt had been appointed as Interim Chief Operating Officer in October and was subsequently appointed Chief Executive Officer and a Director on 28 November 2022.

In December 2022, Gita Samani and Edward Rumsey also resigned from the Board.

On completion of the FY22 audit, Tom Allsworth resigned as a Director of the Group on 24 May 2023.

Under the leadership of Bob Holt, two Non-Executive Directors ("NEDs") with significant listed company and commercial experience (Rachel Maguire and Matthew Eatough) were appointed to strengthen the Board and help stabilise it at a time of intense corporate activity. Following the settlement announcement with boohoo Group Plc, three further NEDs were appointed (Peter Hallett, Neil Catto and Rachel Horsefield) to reflect the change in leadership, bringing with them experience closely aligned to the direction of the new leadership team.

Following these appointments, as at the date of this Report, the Board has six NEDs and this will increase to seven imminently once the new CEO is appointed and I become a non-executive Chair.

Since the board changes referred to above, the Board and the Nominations Committee have been conducting a search for a new CEO and for non executive Directors to replace Jeremy Schwartz, Rachel Maguire and Matthew Eatough, who, having played their part in the restoration of the Company's trading on AIM and the transition to the new leadership team, have each decided that they will not put themselves forward for election at the forthcoming AGM. This search process is well progressed and we intend to announce a series of appointments in the near future. I would like to thank each of Jeremy, Rachel and Matthew for their responsive and professional service and guidance during this transitional period.

REGULATOR ACTION

The Company informed the shareholders on 21 July that the Financial Conduct Authority (the "FCA") had notified Revolution Beauty that it had commenced an investigation into potential breaches of the Market Abuse Regulation (EU) 596/2014 (as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018) in relation to certain matters in the period from July 2021 to September 2022. Revolution Beauty is cooperating fully with the FCA and will provide updates in due course.

OUR PEOPLE

I would like to take this opportunity to express my thanks to all the employees of Revolution Beauty for their efforts during what has been a challenging and busy period.

LOOKING FORWARD

The business is well placed to move forward and continue to deliver topline growth and improving profitability under the leadership of its new CEO. The business operates within a growing sector and is positioned to take advantage of the opportunities.

Alistair McGeorge

Executive Chair

31 August 2023

CHIEF EXECUTIVES REVIEW

INTRODUCTION

The Company was listed on the AIM in July 2021 and was suspended from trading in September 2022. I was appointed to the Board in November 2022 to bring stability to the business following a period of significant turmoil.

The results presented herewith recognise significant change in the business, Elizabeth Lake the CFO was appointed in May 2022 and was instrumental in bringing the Company out of suspension in July 2023.

As stated in the Chair's report I will be leaving the business at the end of August 2023.

I am proud of what has been achieved under my short tenure and take satisfaction from achieving what I was brought in to achieve, the stabilisation of the business and the lifting of the share suspension.

We are pleased to report the results for the year ended 28 February 2023. Turnover grew by 1.7% to £187.8m (FY22 £184.6m) and losses before tax reducing to £33.9m (FY22 £45.9m).

Adjusted EBITDA for the period was a loss of £7.5m compared to a loss of £0.8m in FY22. All of this loss was in H1 and was due to lower sales and increasing overheads particularly within marketing and people costs. In H2 cost saving measures were put in place and revenue grew.

Both Elizabeth Lake our Chief Financial Officer and I were appointed during the year being reported, and the results include significant changes to those envisaged when the company was floated in July 2021.

Underlying cashflows have improved, however during the period exceptional legal and professional fees (c.£3.8m) and costs of restructuring have been paid (c.£1.3m), impacting cash generation. Without these one off costs the business would have generated cash through its operating activities. The cash balance at the end of the year is £11m, and the £32m facility is fully drawn, resulting in a net debt balance of £21.0m. The cash balance at 30 August was £10.5m.

UPDATE ON INDEPENDENT INVESTIGATION

The Board appointed independent external advisors to undertake an Independent Investigation, Macfarlanes (lawyers) and FRA (forensic accountants).

The delayed completion of the FY22 results subsequently had a knock-on effect to the timetable for the publication of these FY23 results. In addition, these results also reflect the impact of the issues previously identified, particularly around stock and revenue and the carrying value of Revolution Labs.

The report highlighted a number of accounting irregularities and control issues, which have now been dealt with.

FY23 PERFORMANCE

During the year, we achieved a small increase in Group sales, up 1.7%% to £187.5m as compared to the same 12-month period last year. This is a solid performance given the turmoil within the business during the year and the impact of certain customers being overstocked and therefore reducing their buying, particularly in the digital wholesale channel.

I want to highlight the future opportunities for the Group rather than continuing to dwell on the control weaknesses of the past. As part of the restructure we implemented, all global sales heads reported into me and for the first time were accountable for controlling the costs of their individual departments and headcount. We feel more comfortable now with the ability of the teams to forecast sales and costs attributable to them than at any time since joining.

Due to the previous lack of control around new product development, we typically produced over one thousand new products each year into an already saturated product offering. Our sales teams, in conjunction with our customers, are now working to a more controlled product range. We have in the past been recognised as being able to bring innovative products to market more efficiently and speedier than our mass market competitors. We continue to deliver that flexibility.

Our gross margin in the year improved to 40.4% from 38.5% in FY22. The improvement was mainly driven by reducing freight costs and reduced stock provision charges.

Since entering the US market, we have seen strong growth. Work remains ongoing to further strengthen relationships, streamline the product range and improve service levels on stock supply. These measures will ensure continued focus on fulfilling the brand's full potential in the US market.

Our trading throughout our other major markets, in the UK, Germany, the Nordics and Australasia have performed well, and we look forward to building further on those markets whilst opening new territories which offer long term attractive opportunities for profitable growth. The global cosmetics market continues to grow and offers significant rewards for those brands with established relationships and the ability to be innovative and proactive to ever evolving market opportunities.

What became very evident during the early part of my appointment was the underperformance of a number of newly developed brands and sub brands. We have subsequently reduced significantly the product ranges on Revolution Man, Tanning, BH cosmetics and Fragrance. Again, our focus is on our core range of products and in the categories we are successful in, with some variation by country or individual customer need. To reiterate, we continue to provide a flexible approach to give customers products that excite whilst maintaining a commercially viable approach to future partnership discussions.

POST-PERIOD END AND CURRENT TRADING

The post year end trading has continued to perform ahead of our internal expectations We are seeing increasing demand for our products in our key markets, and our sales teams are confident of hitting their forecast sales targets.

It would be remiss of me to fail to mention the significant management effort which was needed to rescue the business from the errors of the recent past. I would like to thank the slimmed down management team for the successful turnaround in the business in such a short period of time.

I also should like to thank all stakeholders for their support in the period reported.

OUTLOOK

We are proud of the progress that has been made in the business over the past year, and that we were able to secure the lifting of the share suspension.

We have been focused on reinforcing internal controls and processes to ensure that we are in a position to achieve consistent operational excellence at a global scale, and in line with the required standards. I know I am handing over to an experienced team who will continue from here.

The business is poised for the next stage of its growth story, and I wish Alistair and the rest of the team well as they take the business to the next level.

Bob Holt OBE

Chief Executive Officer

31 August 2023

FINANCIAL REVIEW

Following the publication of the FY22 Annual Report and Accounts and the H1 FY23 interims, the suspension on the Company's shares was lifted and the shares have been trading as normal since 28 June 2023.

FY23 is a story of two halves, in H1 Group revenue decreased by 4.2% and adjusted EBITDA was a loss of £7.5m. The second half of the year saw a return to top line revenue growth due to the changes that were made by the new management team both operationally and commercially.

REVENUE



	Year ended	Year ended
	28 February 2023	28 February 2022
			Change
	£'M	£'M	£'M	%
Revenue	187.8	184.6	3.2	1.7%
Gross margin	75.9	71.0	4.9	6.9%
Adjusted EBITDA	(7.5)	(0.8)	(6.7)	(834%)

Revenue in the year increased by £3.2m or 1.7%, with the opening of stores following the closures during the pandemic, consumers switched back very quickly from online to physical stores. Overall we saw a rapid decline in online sales of 12% year on year, whilst revenue from our own websites increased 2%, revenue from digital partners fell 23% as they de-stocked following the fall in demand.

Gross margin for the year ended 28 February 2023 improved significantly to 40.4%/£75.9m (FY2022: 38.5%/£71.0m) as a result of improved stock management, and reduced freight costs as freight rates returned to near pre-pandemic levels.

Adjusted EBITDA loss increased from a loss of £0.8m in FY22 to a loss of £7.5m in FY23. The main reason for this increased loss was the marketing spend on stand updates which was significantly higher than FY22 which had been impacted by lockdowns and low spend in stores. In addition, the business had increased staffing levels in FY22 in anticipation of significantly higher revenue and this resulted in higher people costs, particularly in the first half of FY23.

By business channel: Digital Stores	Year ended 28 February 2023 £'M		Year ended 28 February 2022 £'M		Change £'000	%
By business channel: Digital Stores	51.0 136.8	27% 73%	58.0 126.6	31% 69%	(7.0) 10.2	(12.1%) 8.1%
Total revenue	187.8	100%	184.6	100%	3.2	1.7%
By region:
UK	67.0	36%	71.5	39%	(4.5)	(6.3%)
US	51.9	28%	48.0	26%	3.9	8.2%
ROW	68.9	36%	65.1	35%	3.8	5.9%
Total revenue	187.8	100%	184.6	100%	3.2	1.7%

As shown in the table above, Group revenue increased by £3.2m to £187.8m in the year ended 28 February 2023 (2022: £184.6m). This revenue growth was achieved during a year in which the business went through significant change as a result of the issues that arose from the Investigation as set out in the CEO report.

Store revenue increased by £10.2m or 8.1% to £136.8m (2022: £126.6m), with both the US and UK store groups growing at 8% and 9% respectively, driven by new distribution in Boots in the UK and new distribution in Walgreen in the US.

An increased number of customers returned to the stores when Covid-19 related trading restrictions were lifted, and this resulted in a decline in digital sales in the year of £7m compared with the prior year. Within this we saw growth of 2% from our own websites, however revenue from our digital partners declined 23% as they implemented significant destocking measures which resulted in a drop in order levels.

Most of the impact of the decline in revenue from our digital partners was in the UK market which resulted in UK sales reducing by £4.5m despite increased store distribution in Boots and a good performance in Superdrug.

US revenue increased by £3.8m due to new distribution in Walgreen, and the recovery of US retailer performance following the pandemic.

In the Rest of the World (ROW) we saw 5.9% growth overall, which included 14% growth in revenue from our distributers.

PROFITS



	Year ended	Year ended
	28 February	28 February
	2023	2022 Restated	Change
	£'000	£'000	£'000
Gross profit	75,884	71,028	4,856
Marketing and distribution costs	(57,469)	(49,546)	(7,923)
Administrative expenses	(42,161)	(35,038)	(7,123)
Impairment losses on financial assets	(204)	(1,428)	1,224
Impairment of property, plant and equipment	(2,177)	(1,948)	(229)
Impairment of goodwill	(3,388)	(13,000)	9,612
Provision for legal cases	(1.066)	(1,018)	(48)
Exceptional item - IPO costs	-	(8,936)	8,936
Other income	-	5	(5)
Operating loss	(30,581)	(39,881)	9,300
Net finance costs	(3,293)	(6,034)	2,741
Loss before taxation	(33,874)	(45,915)	12,041
Gross profit margin	40.4%	38.5%	1.9ppt

Gross profit margin for the year ended 28 February 2022 increased from 38.5% to 40.4%. The improvement in margin was driven primarily by the reduction in freight rates following their historical highs due to the pandemic. The margin at H1 was higher at 41.4% due to seasonality, with higher seasonal promotions in H2.

Whilst there will be ongoing changes to the stock provision based on New Product Development (NPD), Net Realisable Value (NRV) and slow-moving stock, the movement between FY22 and FY23 has reduced due to the actions taken by new management to manage stock purchasing, establish exit routes for slow moving stock and focus NPD on fewer better products.

Operating loss for the year ended 28 February 2023 of £30.6m reduced by £9.3m (2022: £39.9m). This was due to a number of factors:

Improvement in gross profit (£4.9m) driven by reduction in stock provision charges and lower freight rates following record levels during the pandemic.

· Reduction in one off costs incurred in FY22, impairment of assets (£10.6m, mostly from the acquisition of Medichem), IPO costs (£8.9m)

· Increase in spend on stand updates (£5m) catching up with updates missed during the pandemic, and additional marketing and distribution spend (£2.9m)

· Increase in People costs (£2m), resulting from scaling up for expected increase in revenue, loss on foreign exchange on revaluation of US balances (£1.5m) and other overheads (£2.9m)

Loss before taxation for the year reduced to £33.9m (2022: Loss before taxation £45.9m), an improvement of £12.0m.

TAXATION

The Group's tax credit decreased year on year by £1.4m primarily due to the prior year including tax refunds totalling £1.6m arising from historic overpayments and loss carry back, resulting in an overall credit of £1.6m in FY22 compared with a credit of £0.2m in FY23.

LOSS AFTER TAXATION

Loss after taxation decreased to £33.6m (2022: Loss after taxation £44.3m).

ADJUSTED PROFITS

The Group uses a number of Alternative Performance Measures ("APMs") in addition to those measures reported in accordance with IFRS. Such APMs are not defined terms under IFRS and are not intended to be a substitute for any IFRS measure. The Directors believe that the APMs are important when assessing the underlying financial and operating performance of the Group. Full details of the exceptional charges incurred during the year are presented in Note 5 to the financial statements.

The exceptional items identified as non-recurring in nature are set out below and were considered in calculating the adjusted profits. Exceptional Items are defined in Note 2

Operating loss Depreciation, amortisation & impairment Share-based payment Loss on disposal of asset Exceptional items:	Year ended 28 February 2023 £'000	Year ended 28 February 2022 £'000	Change £'000
	(30,581) 15,867 303 62	(39,881) 22,560 3,534 -	9,300 (6.693) (3,231) 62
IPO related costs	-	8,936	(8,936)
Acquisition costs	262	621	(359)
Restructuring costs	1,310	261	1,049
Provision for legal cases	1,474	1,018	456
Legal and professional fees	3,528		3,528
Audit Fees	300	2,150	(1,850)
Total exceptional items added back	6,874	12,986	(6,112)
Adjusted EBITDA	(7,475)	(801)	(6,674)

Adjusted EBITDA decreased by £6.7m to a loss of £7.5m during the year (2022: £0.8m loss). The reduction in EBITDA was primarily due to additional stand marketing costs and higher People costs as the business had scaled up for high levels of growth at the end of FY22 and the first half of FY23.

Depreciation, amortisation and impairment was significantly lower as a result of the impairments to stands and goodwill made in FY22. The remaining amount of goodwill and assets acquired for Medichem were impaired in FY23, bringing the carrying value to zero, as a result in changes to forecasts.

As part of the changes the new management team made, teams were restructured which resulted in one off costs associated with the restructure.

Significant one off legal and professional fees were incurred in relation to the Independent Investigation and the work required to enable the suspension on the Company's shares to be lifted.

FINANCIAL POSITION AND RESOURCES

	As at	As at
	28 February	28 February
	2023	2022 Restated	Change
	£'000	£'000	£'000
Intangible assets	5,728	9,837	(4,109)
Property, plant and equipment	7,928	8,215	(287)
Right of use asset	2,310	4,150	(1,840)
Reimbursement asset	-	3,267	(3,267)
Non-current assets	15,966	25,469	(9,503)
Current assets excluding cash	104,393	101,401	2,992
Liabilities excluding borrowings	(112,817)	(98,507)	(14,310)
Cash and cash equivalents	11,044	15,619	(4,575)
Borrowings	(31,721)	(23,551)	(8,170)
Net debt	(20,677)	(7,932)	(12,745)
Net assets	(13,135)	20,431	(33,566)

NON-CURRENT ASSETS

The Group states property, plant and equipment at cost, less depreciation or provision for impairment. Non-current assets as at 28 February 2023 reduced to £16.0m (2022: £25.5m), mainly due to a further impairment of the acquisition of Medichem, resulting in no residual carrying value and the movement of the reimbursement asset to current assets due to Management's view that the legal case will be settled within 12 months.

CURRENT ASSETS

Current assets increased to £104.4m as at 28 February 2023 (2022: £101.4m). The inventory balance was higher at £47.6m (2022: £44.7m) which was due to business requirements. There was an increase in Trade Receivables of £3.0m consistent with higher sales. As the US business has grown, there is an impact on trade debtor balances caused by typically longer payment terms. Other receivables also increased by £3.2m representing the reimbursement asset on a copyright infringement legal case (see Note 4).

LIABILITIES

The increase in total liabilities excluding borrowings as at 28 February 2023 of £14.3m relates mainly to an increase in trade payables of £9m due to stock purchases, impact of foreign exchange, audit fees, and accruals and contract liabilities mainly due to fixture accruals for Walmart and marketing deductions for new and existing US retail customers.

LIQUIDITY

At 28 February 2023, the Group had £11.0m cash, with gross borrowing of £32m fully drawn from the RCF.

The face value of the Group net debt is £21.0m. The reported net debt of £20.7m is after deducting £0.3m of prepaid fees. These figures exclude the deferred consideration.

BANKING FACILITIES

As at 28 February 2023 the Group had a £40.0m RCF in place. In September 2022, the Group breached its facility agreement as a result of not publishing its audited accounts by 31 August 2022. Following on from this, there was uncertainty as to what the adjusted EBITDA numbers would be for FY21 and FY22, until these statements were finalised. Therefore, the Group was unable to certify its results to the Banks. As a result, the banks agreed a short-term liquidity covenant and the facilities operated under this arrangement until a new suite of covenants was agreed on 29 March 2023 with the first quarterly test at the end of May 2023 which the Group cleared. As at the date of signing this report, the Group has an amended and restated credit facility of £32.0m of which the full £32.0m is drawn and has cash balances of c.£11.0m as at the end of July which provides sufficient liquidity to the Group for its current requirements.

Due to the qualifications in the audit report, the Group received a waiver from its banking partners prior to the signing of the financial statements for the provision in the RCF which classifies a qualified audit opinion as an Event of Default. Therefore, the Group remains within all the requirements of the facility agreement, see note 2.

CASH FLOW

Net cash (used in) generated from operations Income tax Net cash generated from operating activities	Year ended 28 February 2023 £'000	Year ended 28 February Restated 2022 £'000	Change £'000
	(1,959) 1,898 (61)	(17,841) (890) (18,731)	15,882 2,788 18,670
Purchase of intangible assets	(1,018)	(3,066)	2,048
Purchase of property, plant and equipment	(7,496)	(4,968)	(2,528)
Purchase of subsidiary	-	(6,630)	6,630
Others	1	(509)	510
Net cash used in investing activities	(8,513)	(15,173)	6,660
Interest paid	(1,175)	(5,000)	3,825
Drawdown of borrowings	8,000	29,000	(21,000)
Repayment of borrowings	-	(78,665)	78,665
(Repayment)/Proceeds of debt instruments	-	(6,000)	6,000
Issue of new shares	-	105,775	(105,775)
Others	(2,127)	(983)	(1,144)
Net cash generated from financing activities	4,698	44,127	(39,429)
Net increase/(decrease) in cash during the year	(3,876)	10,223	(14,099)

Net cash used in operations improved in FY23 and reduced by £15.9m. Without the level of exceptional costs incurred in the year particularly relating to legal and professional fees surrounding the Independent Investigation, and activities to secure the lifting of the suspension on the Company's shares, together with significant restructuring costs, the Group would have generated significant operating cash inflows.

ISSUE OF NEW SHARES

In FY22, in conjunction with the Company's IPO, new shares with a total value of £105.8m were issued at £1.60 per share during the year. The IPO also involved the repayment of borrowings amounting to £82.4m. No new shares were issued in FY23.

ACQUISITION OF MEDICHEM

In July 2021, the Revolution Beauty Group was granted a call option to acquire 100% of the issued share capital of Medichem. The Group exercised the call option in October 2021. Total purchase consideration of £27.5m comprises an initial cash consideration of £7.0m which was paid in October 2021, with the balance of £20.5m to be paid in 4 equal instalments from October 2022 net of the repayment of a £1.5m loan from Medichem to a company owned by the seller of Medichem. As at the date of signing the Board are in negotiations with the previous owner of Medichem to reach a revised agreement on the amount of consideration due and the payment terms for any further consideration payable.

Since the year end, a deed of variation to the original sale and purchase agreement has been signed on 7 March 2023, confirming that no consideration will be demanded until 21 October 2025. See Note 34 for details of the deferment schedule.

DIVIDEND

No ordinary dividends were paid during the year under review. The Directors do not recommend payment of a final ordinary dividend for the year (2022: £nil). Consistent with the guidance provided at IPO, the Group does not envisage paying dividends in the foreseeable future and intends to re-invest surplus funds in the development of the Group's business.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS

The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with UK adopted International Accounting Standards ('IFRSs') and have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 101 'Reduced Disclosure Framework'. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.

In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

• make an assessment of the Group's ability to continue as a going concern.

• In preparing the Parent Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Alistair McGeorge

Executive Chair

31 August 2023

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 28 February 2023

Revenue Cost of sales	Note	Year ended 28 February 2023 £'000	Year ended 28 February 2022 Restated £'000
Revenue Cost of sales	7	187,842 (111,958)	184,579 (113,551)
Gross profit		75,884	71,028
Marketing and distribution costs		(57,469)	(49,546)
Administrative expenses
- General administrative expenses		(42,161)	(35,038)
- Impairment losses on financial assets		(204)	(1,428)
- Impairment of property, plant and equipment and right-of-use assets	17,18	(2,177)	(1,948)
- Impairment of goodwill and other intangibles	16	(3,388)	(13,000)
- Provision for legal cases	27	(1,066)	(1,018)
- IPO related costs	5	-	(8,936)
Total administrative expenses		(48,996)	(61,368)
Other operating income	10	-	5
Operating loss	10	(30,581)	(39,881)
Finance income	12	1	76
Finance costs	13	(3,294)	(6,110)
Loss before taxation		(33,874)	(45,915)
Income tax credit/(expense)	14	228	1,606
Loss for the year		(33,646)	(44,309)
Other comprehensive income net of taxation Exchange differences on translation of foreign operations - may be reclassified to profit and loss		(223)	158
Total comprehensive loss for the year		(33,869)	(44,151)
Earnings per share (p)	15	(10.9)	(15.7)
Diluted earnings per share (p)	15	(10.9)	(15.7)
Adjusted EBITDA*	5	(7,475)	(801)

* Adjusted EBITDA is a non-GAAP measure and is defined as Operating Loss adjusted for depreciation and amortisation, impairments and reversals of impairment, profits and losses on the disposal of assets, share based charges and releases and operating exceptional items as disclosed in note 5.

The following notes are an integral part of these financial statements.

Consolidated Statement of Financial Position

As at 28 February 2023

			As at
		As at	28 February
		28 February	2022
		2023	Restated
	Note	£'000	£'000
Non-current assets
Intangible assets	16	5,728	9,837
Property, plant and equipment	17	7,928	8,215
Right-of-use assets	18	2,310	4,150
Reimbursement asset		-	3,267
Total non-current assets		15,966	25,469
Current assets
Inventories	19	47,606	44,683
Trade and other receivables	20	52,708	55,334
Reimbursement asset		4,079	-
Corporation tax recoverable		-	1,384
Cash and cash equivalents	21	11,044	15,619
Total current assets		115,437	117,020
Current liabilities
Lease liabilities	18	(2,060)	(1,915)
Trade and other payables	22	(82,707)	(69,924)
Deferred consideration	24	(10,910)	(4,889)
Provisions	27	(7,060)	-
Borrowings	23	(31,721)	(23,551)
Corporation tax payable		(28)	(48)
Total current liabilities		(134,486)	(100,327)
Net current assets/(liabilities)		(19,049)	16,693
Total assets less current liabilities		(3,083)	42,162
Non-current liabilities
Lease liabilities	18	(954)	(2,732)
Deferred consideration	24	(9,098)	(13,504)
Deferred tax liabilities	26	-	-
Provisions	27	-	(5,495)
Total non-current liabilities		(10,052)	(21,731)
Net assets/(liabilities)		(13,135)	20,431
Equity
Share capital	29	3,097	3,097
Share premium		103,487	103,487
Warrant reserve		7,239	7,239
Merger reserve		14,860	14,860
Translation reserve		446	669
Retained earnings		(142,264)	(108,921)
Total (deficit)/equity		(13,135)	20,431

The following notes are an integral part of these financial statements.

Refer to Note 4 for detailed information on the correction of prior period errors.

These financial statements were approved and authorised for issue by the Board of Directors on 31 August 2023 and were signed on its behalf by:

Alistair McGeorge

Director

Consolidated Statement of Changes in Equity

For the year ended 28 February 2023

	Note	Share capital £'000	Share premium £'000	Warrant reserve £'000	Merger reserve £'000	Translation reserve £'000	Retained earnings £'000	Total equity £'000
Balance at 1 March 2021		-	-	-	14,860	511	(64,989)	(49,618)
Loss for the year - as restated		-	-	-	-	-	(44,309)	(44,309)
Other comprehensive income net of taxation:
Foreign operations - foreign currency translation differences		-	-	-	-	158	-	158
Total comprehensive income/expense for the year - as restated		-	-	-	-	158	(44,309)	(44,151)
Transactions with owners in their capacity as owners:
Issue of shares, net of transaction costs of £4,940,241	28	696	105,080	-	-	-	-	105,776
Capital reorganization	28	2,416	-	-	-	-	(2,416)	-
Repurchase of shares	28	(15)	-	-	-	-	15	-
Share-based payments		-	-	-	-	-	2,778	2,778
Issue of warrants	29	-	(1,593)	7,239	-	-	-	5,646
Total transactions with owners		3,097	103,487	7,239	-	-	377	114,200
Balance at 28 February 2022- as restated		3,097	103,487	7,239	14,860	669	(108,921)	20,431

Loss for the year		-	-	-	-	-	(33,646)	(33,646)
Other comprehensive income net of taxation:
Foreign operations - foreign currency translation differences		-	-	-	-	(223)	-	(223)
Total comprehensive income/expense for the year		-	-	-	-	(223)	(33,646)	(33,869)
Transactions with owners in their capacity as owners:
Share-based payments		-	-	-	-	-	303	303
Total transactions with owners		-	-	-	-	-	303	303
Balance at 28 February 2023		3,097	103,487	7,239	14,860	446	(142,264)	(13,135)

The following notes are an integral part of these financial statements.

Consolidated Statement of Cash Flows

For the year ended 28 February 2023



		Year ended	Year ended
		28 February	28 February
		2023	2022 Restated
	Note	£'000	£'000
Loss for the period		(33,646)	(44,309)
Adjustments for:
Taxation charge/(credit)	14	(228)	(1,606)
Finance costs	13	3,294	6,110
Finance income	12	(1)	(76)
Depreciation of property, plant and equipment and right-of-use assets	17,18	8,369	6,310
Impairment of property, plant and equipment and right-of-use assets	17,18	2,177	1,948
Amortisation of intangible assets	16	1,933	1,303
Impairment of intangible assets	16	3,388	13,000
Loss/(profit) on disposal of property, plant and equipment		-	(34)
Loss on disposal of intangible assets	16	62	-
Equity settled share-based payment expense		303	2,778
Issue of warrants	30	-	5,645
Provisions movement	27	1,565	2,228
Movements in working capital:
Movement in inventories		(2,923)	(5,708)
Movement in receivables		1,814	(1,666)
Movement in payables		11,934	(3,764)
Cash used in operations		(1,959)	(17,841)
Income taxes received/(paid)		1,898	(890)
Net cash used in operating activities		(61)	(18,731)
Cash flows from investing activities
Purchase of intangible assets		(1,018)	(3,066)
Purchase of property, plant and equipment		(7,496)	(4,968)
Proceeds on disposal of property, plant and equipment		-	-
Finance income		1	1
Payment of financial derivatives		-	(510)
Purchase of subsidiaries (net of cash acquired)		-	(6,630)
Net cash generated by/(used in) investing activities		(8,513)	(15,173)
Cash flows from financing activities
Interest paid		(1,175)	(5,000)
Proceeds from borrowings		8,000	29,000
Proceeds from issue of shares, net of transaction costs		-	105,775
Repayment of debt instruments		-	(6,000)
Repayment of borrowings		-	(78,665)
Payment of lease liabilities(1)		(2,127)	(534)
Loan issue fees		-	(449)
Net cash generated by financing activities		4,698	44,127

Consolidated Statement of Cash Flows

For the year ended 28 February 2023



		Year ended	Year ended
		28 February	28 February
		2023	2022
	Note	£'000	£'000
Cash and cash equivalents
Net (decrease)/increase in the year		(3,876)	10,223
At 1 March		15,619	5,581
Effects of exchange rate changes on cash and cash equivalents		(699)	(185)
At 28 February		11,044	15,619

(1) Payment of lease liabilities includes £115k (2022: £45k) of interest payments and £2,012k (2022: £489k) of principal lease payments.

(2) The share based payment charge for the year is £303k (2022: £3,534k), of which £Nil (2022: £756k) was paid in cash.

The following notes are an integral part of these financial statements.

Notes to the Consolidated Financial Statements

For the year ended 28 February 2023

1 GENERAL INFORMATION

Revolution Beauty Group plc ("the Company") is a company limited by shares, and is registered, domiciled and incorporated in England and Wales. The Company listed on the Alternative Investment Market (AIM) on 19 July 2021. The address of the registered office is 201 Temple Chambers, 3-7 Temple Avenue, London, EC4Y 0DT.

The Group ("the Group") consists of Revolution Beauty Group plc and all of its subsidiaries as listed in note 4 to the Company financial statements.

The Group's principal activity, business activities and other factors likely affecting the Groups performance are set out in the Chief Executive Officers Review.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

This consolidated financial information for the year ended 28 February 2023 comprises the Company and its subsidiaries. The financial information presented has been prepared applying the accounting policies and presentation applied in the preparation of the Group's consolidated financial statements for the year ended 28 February 2023. These preliminary results do not constitute the Group's statutory accounts for the years ended 28 February 2023 and 28 February 2022. The statutory accounts for the year ended 28 February 2022 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The statutory accounts for the year ended 28 February 2023, which have been approved by the Directors, will be sent to shareholders in September 2023 and delivered to the Registrar of Companies.

The auditor has reported on the Group and Company statutory accounts for the year ended 28 February 2023. The reports were qualified, and included a material uncertainty related to Going Concern and have been reproduced in notes 37 and 38 of this announcement.

Prior period adjustments made to the amounts reported in the Group's 2022 financial statements have been set out in note 4.

Measurement convention

The financial statements have been prepared under the historical cost convention except for, where disclosed in the accounting policies, certain items shown at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for goods, services and assets.

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. If in the future, such estimates and assumptions which are based on management's best judgement at the reporting date, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change.

Critical accounting estimates and key sources of estimation uncertainty in applying the accounting policies are disclosed in note 3.

Basis of consolidation

The consolidated financial statements incorporate those of Revolution Beauty Group plc and all of its subsidiaries.

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

• The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights

• Substantive potential voting rights held by the company and by other parties

• Other contractual arrangements

• Historic patterns in voting attendance.

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group.

Business Combinations

The cost of a business combination is the fair value at acquisition date of the assets given, equity instruments issued, and liabilities incurred or assumed. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. Costs directly attributable to the business combination are expensed to the profit or loss as incurred.

Going concern Base Case Forecast

Having achieved the lifting of the suspension of the Company's shares on AIM on 28 June 2023 and performed above the previous budget over recent months, the Group has updated its base case forecast for the period through to August 2024 to reflect all aspects of its current operational structure.

Following a comprehensive review and forecast exercise prior to the lifting of the share suspension on AIM, the updated base case forecast to August 2024 has evolved with the current FY24 performance to date, whilst largely consistent with expectations earlier in the year upon release of the FY22 Financial Statements. The current Board shares the more prudent outlook taken by the previous Board in May 2023, whilst also planning for growth in revenue and profitability. Immediately following the release of these Financial Statements the Board intends to appoint a new CEO, who will have time to develop and deliver a strategy intended to grow from the current base, this process is not expected to result in any significant change to plans or forecasts in the short term.

Management have determined that the period to August 2024 is the relevant period over which to consider the Groups performance for the assessment of going concern and have therefore forecast operational and financial performance over that period. Twelve months has been selected as the going concern period because forecasting over this period is the most accurate, the further out the forecast is the greater likelihood of volatility. The five months to 31 July 2023 have shown sales performing ahead of budget. The updated base case to August 2024 forecasts that the Group will generate cash as it builds sustainable growth from a solid core business, growth is expected to be achieved through current sales channels and some increased distribution, underpinned by marketing and capital investment as set out in the Group's strategy.

In addition to sustainable growth in sales, the base case forecasts that the management team's strategy will drive improvements in working capital, with inventory and receivables managed in line with trading volumes. Existing trading terms with supplier and customers are forecast to be maintained under the base case.

Cost reduction measures taken during FY23 have been adhered to and the Group has demonstrated during the early months of FY24 that it now has a more appropriate cost base from which it can achieve its forecast revenue. The significant accounting changes made in the prior year remain and form the basis of the Groups reporting and forecast model.

The Groups gross inventory balance has reduced significantly, resulting in a significant reduction in its inventory provision since FY22. Inventory reductions have been driven by a more rationalised purchasing program, which is more targeted to the Group's demand forecast. In addition, significant amounts of older inventory has been sold through the Groups outlet channels or destroyed where no longer considered to be of any value.

Under the base case scenario, the lowest amount of headroom against the minimum liquidity covenant is £4,632k in December 2023, the lowest test point in the EBITDA covenant is August 2023, when there is £3,211k of headroom.

Lending Arrangements

On 30 March 2023 the Group announced that that it had secured an amended facility agreement with its banking partners (the "Lenders"). The amendment includes a waiver of breaches of the terms of the original agreement. As part of the amended facility agreement which runs through to October 2024, the overall size of the facility was agreed at £32m, reduced from £40m, and is fully drawn. The Directors are of the view that the reduced facility provides the business with sufficient liquidity as it continues delivering its strategy for the Going Concern period. The facility matures in October 2024, it is the board's intention and expectation that the facility will be refinanced during FY24.Indeed, following the lifting of the share suspension, initial discussions with the Group's banking partners have started positively. The Group continues to enjoy the support of its banking partners, management believe that recent progress in stabilising net debt, generating cash, ensuring covenant compliance and rationalising the cost base have positioned the Group well for refinancing its debt facilities, and is confident of refinancing beyond October 2024.

Revised covenants remain in place and include a minimum liquidity threshold of £5.0 million and an Adjusted EBITDA covenant. Certain non-financial covenants that applied following the amendments of the agreement were complied with and are no longer in place.

Adjusted EBITDA covenant is tested quarterly and the minimum liquidity threshold is tested weekly.

The remaining non-financial covenants include a condition that would result in an Event of Default occurring where the auditors qualify the annual consolidated financial statements. The lenders have provided a waiver in respect of the covenant relating to the Auditors qualifications in their audit report for these financial statements as was indicated in the FY22 financial statements.

The forecast results under the base case indicate that the Group will remain in compliance with financial covenants throughout the going concern period.

On 7 March 2023 the Group announced that it had reached an agreement in respect of the timing of payments of deferred consideration for its acquisition of Medichem Manufacturing Limited. A Deed of Variation dated 6 March 2023 was signed which amends the terms of the deferred consideration and completion net asset adjustment, adjusting the timing of the payment, all of which are now payable beyond the Going Concern assessment period.

Downside Scenarios

In addition to the base case scenario, the Group has considered the potential impact of a severe but plausible downside scenario. Under the severe but plausible scenario, a 10% reduction in total sales from August 2023, driven by consumer demand in the beauty market caused by wider economic factors has been modelled. Under such circumstances the Group would need to take action to reduce costs, which would include, but not be limited to, reducing capital expenditure, marketing and general overheads including people costs.

In such a scenario, if mitigating actions were taken, the Group would remain in compliance with its covenants throughout the forecast period. However, the sensitivity of the Adjusted EBITDA performance under such circumstances suggests that there is a realistic possibility that a prolonged reduction in sales of 10% could result in the Group breaching its Adjusted EBITDA covenant. Were the Group exposed to a similar scenario and no mitigating actions taken, the Adjusted EBITDA covenant would be breached in February 2024.

Under a scenario in which the Groups revenue reduced to 10% below the forecast levels in the base case from September 2023 onward and no mitigating actions were taken, the Group would breach its minimum liquidity threshold in February 2024. The Directors are confident that under such a scenario, there would be sufficient time for them to take actions within their control over the cost base to prevent a breach occurring.

If the Group were to breach either of its covenants, it would be reliant on the support of its lenders in order to be able to continue to operate. The Group enjoys a good relationship with its banking partners and is confident of their continued support. The Group would have sufficient cash to continue operating under all plausible scenarios modelled.

Conclusion

The Directors are pleased with the current performance of the business particularly given the challenging economic outlook and the disruption faced by the business in FY22 and FY23. Net sales have increased since the balance sheet date, which reflects the continued strength of the brand.

Steps taken with regard to the deferral and renegotiation of the Medichem consideration and the amendment of the Groups lending arrangements and reductions to the cost base are significant in strengthening liquidity and providing a base from which to grow.

Having considered the information available and recent changes to the business, the Directors are satisfied that the base case supports the application of the going concern assumption in preparation of the financial statements.

However, the Directors also recognise the continuing challenges the business has faced since its shares resumed trading on AIM, including addressing legacy issues, as well as the underperformance of sales versus previous expectations, as well as the uncertainty in the wider economy. As noted above, the Directors have reset the strategy with reductions in forecast expenditure and improvements to the working capital cycle considered to be commensurate with the level of revenues forecast. The current Board continue to believe in this strategy and look to enhance the business further so that it is well place to grow to deliver its full potential.

The Directors are confident that the adopted strategy and actions taken to address the cost base and working capital cycle can be successfully executed. In the event that revenue falls below the level forecast in the base case scenario, the Directors are also confident that they are able to take mitigating actions within their control to reduce costs further on a timely basis, in order to maintain compliance with the Adjusted EBITDA and minimum liquidity covenant tests.

The Directors acknowledge that, in the event either a financial or non-financial covenant were to be breached, due to either a downturn in operational activity or the impact or timing of settlement of any financial commitments, known or otherwise, arising from legacy issues, the Group would be reliant on its lenders not requiring immediate repayment of the outstanding loan or obtaining alternative finance in order to continue to operate as a going concern. The lenders have provided a waiver in respect of the covenant relating to the Auditors qualifications of their audit report on these financial statements. Notwithstanding that the audit for the year ending 28 February 2024 had not yet commenced, the Directors anticipate that certain qualifications will be carried into the Auditors opinion on the FY24 financial statements. The Lenders have also confirmed their present intention to waive any further Event of Default which might occur as a result of the audit report to be issued by the Parent's Auditor in respect of the financial year of the Group ending 28 February 2024 containing qualifications which are substantially the same as qualifications on these financial statements.

These factors, in conjunction with the sensitivity identified in the severe but plausible downside scenario with respect to the Adjusted EBITDA covenant, represent material uncertainty which may cast significant doubt over the Group's ability to continue to operate as a going concern. The financial statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.

New and revised standards in issue but not yet effective

The following standards and interpretations relevant to the Group are in issue but are not yet effective and have not been applied in the preparation of the financial statements.

Standard/amendment	Effective date
Amendments to IAS 1 - Classification of liabilities as current or non-current	1 January 2023
Amendments to IAS 1 - Disclosure of accounting policies	1 January 2023
Amendments to IAS 8 - Definition of accounting estimates	1 January 2023
Amendments to IAS 12 - Deferred tax related to assets and liabilities arising from a single transaction	1 January 2023

The above standards are not expected to impact the Group materially.

Revenue recognition

Revenue represents invoiced sale of goods to customers net of sales tax. Revenue is recognised when control of a good is transferred to the customer, which is when the Group's performance obligations are considered to have been met in line with its contracts and is adjusted for returns and provisions for expected returns, discounts, rebates and refunds.

Estimation is required in assessing concessions provided to the customer such as refunds and returns. Such estimates are determined using either the 'expected value' or 'most likely amount' method, which are determined by assessing historic concessions made to customers for refunds and returns. Provisions for refunds and returns are recognised within trade and other payables. Returns are an area of significant judgement, as set out below.

The Group sells its products via their own website and to third party online retailers ("digital") and wholesale sales to retailers and distributors ("store groups").

Digital

Revenue from the sale of goods sold through the Groups website is recognised when the product is delivered to the customer. Payment of the transaction price is due immediately when the customer purchases the products. The Group's policy is to offer a right of return if notified within a specified time period. The Group therefore retains an insignificant risk of ownership through a digital sale when a refund is offered or when return goods are accepted if a customer is not satisfied. Revenue in such cases is recognised at the point of delivery to the customer provided the Group can reliably estimate future returns and the Group recognises a liability for returns against revenue based on previous accumulated experience and other factors.

Loyalty scheme

The Group operates a loyalty card scheme for 'digital' customers where points are earned for products purchased online. The Group accounts for loyalty points as a separately identifiable component of the sales transaction in which they are granted. Deferred revenue is recognised in relation to points issued but not yet redeemed. Deferred revenue is subsequently recognised when the loyalty points are redeemed or when they expire.

A portion of the transaction price is allocated to the loyalty scheme points based on relative stand-alone selling price of the points issued. When estimating relative stand-alone selling price, the Group assesses the likelihood that the customer will redeem the points based on historic redemption rates.

Store groups

Store group revenue is recognised when title has passed in accordance with the terms of the contract. The timing of transfer of control in wholesale transactions is either when the goods have been collected by the customer or when the goods have been delivered to the location specified in the contract and the customer has accepted the products in accordance with the sales contract.

Sales incentives, cash discounts and product returns are deducted from net sales, such as commercial cooperation and discounts. Incentives granted to customers are recorded as a deduction from net sales.

Sales incentives, cash discounts, provisions for returns and incentives granted to distributors and customers are recorded simultaneously to the recognition of sales if it is highly probable that the incentive will be utilised., The determination of whether incentives will be utilised is based mainly on statistics compiled from past experience and contractual conditions. Historical experience enables the group to estimate reliably the value of goods that will be returned, or the extent of utilisation of any incentive given, and restrict the amount of revenue that is recognised such that it is highly probable that there will not be a reversal of previously recognised revenue.

In some cases, the Group can enter into arrangements with customers where payments are made to compensate for certain promotional actions or operational costs for which the Group will be invoiced. As such payments cannot usually be separated from the supply relationship, the compensation for promotional actions is not deemed to be a distinct service and therefore the Group recognises the consideration paid as a deduction of revenue.

Foreign currencies

The financial statements are presented in Sterling, this being the currency of the primary economic environment of the Group.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Non-monetary items are not retranslated. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

On consolidation, assets and liabilities of foreign operations are translated into sterling at year-end exchange rates. The results of foreign operations are translated into sterling at average rates of exchange for the year. Exchange differences arising on translating net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the translation reserve.

Finance income and costs

Finance costs comprise interest charged on liabilities and finance costs accruing from lease liabilities.

Interest income and interest payable are recognised in the statement of comprehensive, using the effective interest method. Amounts included in finance income and finance costs are set out in notes 11 and 12 respectively.

Exceptional Items

Exceptional items are those which are non-recurring and not assessed to represent charges and credits incurred or gained in the Group's normal course of business and are material by size or nature. All items identified as exceptional are set out in note 4.

Segmental reporting

The Group has one operating segment; being its retail business. The Chief Operating Decision Maker has been identified as the board of directors of Revolution Beauty Group Plc, which receives regular reporting on its retail business.

Property, plant and equipment

All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Stands are provided to retail customers for displaying the Group's products in store. The Group recognises stands as property, plant and equipment as the Group are solely responsible for providing, maintaining and disposing of the stands and therefore the Group is considered to have control of these assets.

Depreciation is calculated using the straight-line method to allocate assets' cost amounts to their residual values over their estimated useful lives. The estimated useful lives are as follows:

Leasehold improvements	5 years
Stands	2 to 10 years
Office equipment	3 years
Computer equipment	3 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within 'Administrative expenses' in the income statement.

Goodwill

Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.

Intangible assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably.

Amortisation is calculated on a straight-line basis, less its estimated residual value, over its useful economic life. The estimated useful lives are as follows:

Software	5 years
Website costs	3 years
Trademarks	5 years
Intellectual property	5 -10 years

Impairment of property, plant and equipment and of intangible assets, including right-of-use assets

At each reporting period end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried in at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Inventories

Inventories are stated at the lower of cost and net realisable value on a 'Weighted Average Cost' basis. Costs of purchased inventory includes the purchase price, import duties, other taxes and delivery costs and are determined after deducting rebates and discounts received or receivable. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where applicable, transfers from cash flow hedging reserves in equity

Inventory in transit is stated at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Financial instruments

Financial assets and liabilities are recognised on the statement of financial position when the Group has become party to the contractual provisions of the instrument and derecognised when it ceases to be a party to such provisions.

Trade and other receivables

Trade receivables are initially measured at their transaction price. Other receivables are initially measured at fair value plus any directly attributable transaction costs. Receivables are held to collect the contractual cash flows which are solely payments of principal and interest. Therefore, these receivables are subsequently measured at amortised cost using the effective interest rate method. The Group does not hold any receivables with a significant financing component.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and other short-term investments held by the Group with maturities of less than three months. These are highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of change in fair value.

Trade and other payables

Trade and other payables are initially recognised at fair value less transaction costs and subsequently measured at amortised cost using the effective interest rate method, with all movements being recognised in the statement of comprehensive income. Cost is considered to approximate fair value.

Deferred Consideration

Deferred consideration is initially recognised at fair value and subsequently measured at amortised cost. Charges arising on significant financing component of deferred consideration are recognised in profit or loss over the life of the deferral period.

Borrowings

Interest-bearing loans are initially measured at fair value, net of direct transaction costs and are subsequently measured at amortised cost. The effective interest method allocates interest expense to each period at the rate which discounts estimated future cash payments through the expected life of the debt to the net carrying amount on initial recognition. Finance charges, including fees and premiums payable on settlement or redemption, are recognised in profit or loss over the term of the loan using an effective rate of interest. Arrangement fees in relation to undrawn facilities are recognised as a prepayment to reflect the right for the Group to borrow in the future on pre-specified terms which may be favourable. The prepayment is released to profit or loss on a systematic basis, the timing of which depends on the probability of further draw down of the facility. If further draw down is not probable, the fee is recognised over the period of the facility to which it relates, if it is probable, the prepayment is held at full amount until draw down.

Classification and subsequent measurement of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements and financial covenants entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all its liabilities.

Derivatives

The Group enters into foreign exchange forward contracts and swaps. These derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. Fair value gains and losses are recognised in profit and loss.

Equity

Equity instruments issued are recorded at fair value on initial recognition net of transaction costs.

Provisions

Provisions are recognised when the company has a present (legal or constructive) obligation as a result of a past event, it is probable the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.

Where the Group has contractual arrangements in place that are expected to result in reimbursement of liabilities for which a liability has been provided for, a reimbursement asset is separately recognised. Such assets are only recognised where the Group is virtually certain of that the reimbursement will be received. The resulting recognition within the profit and loss, is that the provision is recognised net of the reimbursement asset.

Impairment of financial assets under IFRS 9

An impairment loss is recognised for the expected credit losses on financial assets when there is an increased probability that the counterparty will be unable to settle an instrument's contractual cash flows on the contractual due dates, a reduction in the amounts expected to be recovered, or both.

The probability of default and expected amounts recoverable are assessed using reasonable and supportable past and forward-looking information that is available without undue cost or effort. The expected credit loss is a probability-weighted amount determined from a range of outcomes and takes into account the time value of money.

Trade receivables

For trade receivables, the simplified approach is used for expected credit losses as there is no significant financing component. The lifetime expected credit losses are measured by applying an expected loss rate to the gross carrying amount. The expected loss rate comprises the risk of a default occurring and the expected cash flows on default based on the aging of the receivable. The risk of a default occurring always takes into consideration all possible default events over the expected life of those receivables ("the lifetime expected credit losses"). Different provision rates and periods are used based on groupings of historic credit loss experience by product type, customer type and location.

Impairment of other receivables measured at amortised cost

The measurement of impairment losses depends on whether the financial asset is 'performing', 'underperforming' or 'non-performing' based on the Group's assessment of increases in the credit risk of the financial asset since its initial recognition and any events that have occurred before the year-end which have a detrimental impact on cash flows. The financial asset moves from 'performing' to 'underperforming' when the increase in credit risk since initial recognition becomes significant.

In assessing whether credit risk has increased significantly, the Group compares the risk of default at the year-end with the risk of a default when the receivable was originally recognised using reasonable and supportable past and forward-looking information that is available without undue cost. The risk of a default occurring takes into consideration default events that are possible within 12 months of the year- end ("the 12-month expected credit losses") for 'performing' financial assets, and all possible default events over the expected life of those receivables ("the lifetime expected credit losses") for 'underperforming' financial assets.

Impairment losses and any subsequent reversals of impairment losses are adjusted against the carrying amount of the receivable and are recognised in profit or loss.

Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense unless those costs are required to be recognised as part of the cost of other assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received. Termination benefits are recognised immediately as an expense when the Group is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Defined contribution pension plans

Obligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated Statement of Profit or Loss in the periods which services are rendered by employees.

Share-based payments

The company issues equity-settled share-based incentives to certain employees in the form of share options and incentive shares and recharges the cost of these to the relevant subsidiary company. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date is expensed in the relevant subsidiary's financial statements on a straight-line basis over the estimated vesting period, based on the estimate of shares that will eventually vest. For share options which vest in instalments over the vesting period, each instalment is treated as a separate share option grant, each with a different vesting period. A corresponding adjustment is made to equity.

The fair value of incentive shares and share options are measured using the Monte Carlo model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions and behavioural conditions.

If the vesting conditions of incentive shares or share options are modified in a manner that is beneficial to the employee and this modification increases the fair value of the equity instruments granted (or increases the number of equity instruments granted) measured immediately before and after the modification, the entity shall include the incremental fair value granted in the measurement of the amount recognized for services received as consideration for the equity instruments granted. The incremental fair value granted is the difference between the fair value of the modified equity instrument and that of the original equity instrument, both estimated as at the date of modification. If the modification occurs during the vesting period, the incremental fair value granted is included in the measurement of the amount recognised for services received over the period from the modification date until the date when the modified equity instruments vest, in addition to the amount based on the grant date at fair value of the original equity instruments, which is recognised over the remained of the original vesting period. Cancellations or settlements are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

Taxation

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in shareholders' funds. In this case, the tax is also recognised in other comprehensive income or directly in shareholders' funds, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is recognised on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is released or the deferred income tax liabilities is settled.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Since the Group is able to control the timing of the reversal of the temporary difference associated with interests in subsidiaries, a deferred tax liability is recognised only when it is probable that the temporary difference will reverse in the foreseeable future mainly because of a dividend distribution.

At present, no provision is made for the additional tax that would be payable if the subsidiaries in certain countries remitted their profits because such remittances are not probable, as the Group intends to retain the funds to finance organic growth locally.

Leases

On commencement of a contract (or part of a contract) which gives the Group the right to use an asset for a period of time in exchange for consideration, the Group recognises a right-of-use asset and a lease liability unless the lease qualifies as a 'short-term' lease or a 'low-value' lease.

Short-term leases

Where the lease term is twelve months or less and the lease does not contain an option to purchase the leased asset, lease payments are recognised as an expense on a straight-line basis over the lease term.

Leases of low-value assets

For leases where the underlying asset is 'low-value', lease payments are recognised as an expense on a straight-line basis over the lease term.

Initial and subsequent measurement of the right-of-use asset

A right-of-use asset is recognised at commencement of the lease and initially measured at the amount of the lease liability, plus any incremental costs of obtaining the lease and any lease payments made at or before the leased asset is available for use by the Group.

The right-of-use asset is subsequently measured at cost less accumulated depreciation and any accumulated impairment losses. The depreciation methods applied are as follows:

Right-of-use assets

on a straight-line basis over the shorter of the lease term and the useful life

The right-of-use asset is adjusted for any re-measurement of the lease liability and lease modifications.

Initial measurement of the lease liability

The lease liability is initially measured at the present value of the lease payments during the lease term discounted using the interest rate implicit in the lease, or the incremental borrowing rate if the interest rate implicit in the lease cannot be readily determined.

The lease term is the non-cancellable period of the lease plus additional periods arising from extension options that the Group is reasonably certain to exercise and termination options that the Group is reasonably certain not to exercise.

Subsequent measurement of the lease liability

The lease liability is subsequently increased for a constant periodic rate of interest on the remaining balance of the lease liability and reduced for lease payments.

Interest on the lease liability is recognised in profit or loss, unless interest is directly attributable to qualifying assets, in which case it is capitalised in accordance with the Group's policy on borrowing costs.

Remeasurement of the lease liability

The lease liability is adjusted for changes arising from the original terms and conditions of the lease that change the lease term, the Group's assessment of its option to purchase the leased asset, the amount expected to be payable under a residual value guarantee and/or changes in lease payments due to a change in an index or rate. The adjustment to the lease liability is recognised when the change takes effect and is adjusted against the right-of-use asset, unless the carrying amount of the right-of-use asset is reduced to nil, when any further adjustment is recognised in profit or loss. On termination of leases, the right-of-use asset and lease liability are derecognised, with any resulting gain or loss being recognised in profit or loss.

Adjustments to the lease payments arising from a change in the lease term or the lessee's assessment of its option to purchase the leased asset are discounted using a revised discount rate. The revised discount rate is calculated as the interest rate implicit in the lease for the remainder of the lease term, or if that rate cannot be readily determined, the lessee's incremental borrowing rate at the date of reassessment.

Changes to the amounts expected to be payable under a residual value guarantee and changes to lease payments due to a change in an index or rate are recognised when the change takes effect and are discounted at the original discount rate unless the change is due to a change in floating interest rates, when the discount rate is revised to reflect the changes in interest rate.

Lease modifications

A lease modification is a change that was not part of the original terms and conditions of the lease and is accounted for as a separate lease if it increases the scope of the lease by adding the right to use one or more additional assets with a commensurate adjustment to the payments under the lease.

For a lease modification not accounted for as a separate lease, the lease liability is adjusted for the revised lease payments, discounted using a revised discount rate. The revised discount rate used is the interest rate implicit in the lease for the remainder of the lease term, or if that rate cannot be readily determined, the lessee company's incremental borrowing rate at the date of the modification.

Where the lease modification decreases the scope of the lease, the carrying amount of the right-of-use asset is reduced to reflect the partial or full termination of the lease. Any difference between the adjustment to the lease liability and the adjustment to the right-of-use asset is recognised in profit or loss.

For all other lease modifications, the adjustment to the lease liability is recognised as an adjustment to the right-of-use asset.

Government grants

Government grants are recognised when there is reasonable assurance that the grant conditions will be met, and the grants will be received.

Government grants received in the year are towards staff wage costs under the job retention scheme during Covid-19. The grant income is recognised under other operating income over the period necessary to match with the related wage expense.

Dividends

Dividends are recognised when declared and authorised during the financial year and no longer at the discretion of the Group.

3 JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Judgements

In the course of preparing the financial statements, judgements have been made in the process of applying the accounting policies that have had a significant effect in the amounts recognised in the financial statements. The following are the areas requiring the use of judgements that may significantly impact the financial statements.

Expected Credit Losses

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade debtors is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade debtors. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the statement of comprehensive income. On confirmation that the trade debtor will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Reimbursement Assets

Reimbursement assets are recognised when it is determined to be virtually certain that they will be recovered, in accordance with IAS 37. Judgment is required in making this determination prior to the receipt of cash flows, the Group considers strength and validity of contractual arrangement in place as well as the resources of the counterparty to any reimbursement. Where the contractual arrangements are considered secure, the counterparty has sufficient resources and there is no other plausible reason for the asset not to be recovered, the reimbursement is recognised.

Estimates

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods. Estimates include:

Returns

Some customers are able to return unsold stock. At the period end, the Group makes a provision for returns based on historical averages, or actual values that have been agreed with the customer.

Measurement of inventory provision

The Group's inventory provision methodology is made up of a net realisable value (NRV) component and a slow moving component. The slow moving component includes a provision for inventory that has recently been launched and therefore has limited sales history and also for more mature inventory which is assessed based on its sales cover, which gives rise to the key source of estimation uncertainty.

The NRV provision is determined by assessing the latest sales price of a Stock Keeping Unit ("SKU"), less the cost of selling it, against the cost of purchasing it. There is judgment applied in assessing the costs included in selling each SKU. The Group determines cost to sell on an average basis across all SKUs. The cost to sell includes the incremental costs of selling, such as commissions, as well as non-incremental selling costs including expected marketing costs and expected costs to hold the stock until the anticipated time of sale.

Inventory consists of a large number of SKUs, with a range of values. The slow-moving inventory provision is calculated for each SKU, based on sales in a 12 month period, to calculate the number of months cover held at the balance sheet date for each SKU held in stock.

No provision is applied to SKUs where inventory cover is 12 months or less. Where a SKU has more than 12 months inventory cover a provision of 50% is applied to inventory expected to sell in months 13-24 and 100% to inventory expected to sell thereafter. Inventory cover is determined by dividing the level of inventory on hand at the balance sheet date by sales data for a 12 month period including a period after the balance sheet date, at a SKU by SKU level.

As recent sales data does not accurately reflect the expected future sales of products developed in the 12 months prior to the balance sheet date on an individual basis, historic sales performance of all new products launched over the preceding three years has been applied. Therefore, the Group has determined the historic rate of sale of newly developed products and makes a further slow moving provision of 25% of the value of new SKUs launched in the 12 month period up to the reporting date.

The total provision at 28 February 2023 is £33.8m (2022: £39.8m). The calculation of the inventory provision as at 28 February 2023 is based on a number of assumptions. These are set out below, alongside a sensitivity to those assumptions considered to be most subjective by management.

• Provision rate of 50%. An increase or decrease in the provision rate of 50% on inventory with inventory cover of greater than 24 months but less than 36 months to the minimum of 0% or maximum of 100% possible would increase or decrease the inventory provision by £2.2m respectively.

• Newly developed product provision. An increase or decrease in the provision applied to products developed in the 12 months prior to the reporting date by 5% would increase or decrease the overall provision by £1.2m.

Impairment of goodwill

The Group determines whether goodwill is impaired when indicators of impairment are identified or in the annual assessment of impairment. The annual assessment requires an estimate of the value in use of the CGUs to which the assets are allocated, which is by business unit.

Estimating the value in use requires the Group to make an estimate of the expected future cash flows from each business unit and discount these to their net present value at a discount rate. The resulting calculation is sensitive to the assumptions in respect of future cash flows and the discount rate applied.

Forecasting expected cash flows and selecting an appropriate discount rate inherently requires estimation. A sensitivity analysis has been performed over the estimates (see Note 15). The resulting calculation is sensitive to the assumptions in respect of future cash flows and the discount rate applied. The Directors consider that the key assumptions made within the cash flow forecasts include sales levels. The Directors consider that the assumptions made represent their best estimate of the future cash flows generated by the CGUs, and that the discount rate used is appropriate given the risks associated with the specific cash flows.

Measurement, useful lives and impairment of property, plant and equipment

The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and physical condition of the assets. In the event of impairment, an estimate of the asset's recoverable amount is made. The value of the assets are tested whenever there are indications of impairment.

Impairment of property, plant and equipment

The Group determines whether property, plant and equipment, predominantly related to stands used in stores to present the Group's inventory for sale, are impaired or require reversal of impairment when indicators of impairments or reversal of impairment exist or based on the annual impairment assessment. The annual assessment requires an estimate of the value in use of the CGUs to which the assets are allocated, which is at a customer level.

Estimating the value in use requires the Group to make an estimate of the expected future cash flows from each customer and discount these to their net present value at a discount rate. The resulting calculation is sensitive to the assumptions in respect of future cash flows and the discount rate applied.

Forecasting expected cash flows and selecting an appropriate discount rate inherently requires estimation. A sensitivity analysis has been performed over the estimates (see Note 16). The resulting calculation is sensitive to the assumptions in respect of future cash flows and the discount rate applied. The Directors consider that the key assumptions made within the cash flow forecasts include sales levels. The Directors consider that the assumptions made represent their best estimate of the future cash flows generated by the CGUs, and that the discount rate used is appropriate given the risks associated with the specific cash flows.

Measurement of legal provisions

The Group recognises a provision when it has a present liability for a past event, in accordance with IAS 37. With regard to legal claims, management consider the status of any claims and all legal advice available to determine that a liability exists. Where no agreement has been reached for the value of a claim with the claimant, estimation is required in assessing the quantum of the liability. Estimating the liability also involves consideration of all available advice from counsel, the legal stage of the claim, any offers for settlement which have been made and whether or not they have been accepted. The strength of the claims and the defence is also considered. Management consider that the assessment made in respect of legal claims provided for at the Balance Sheet date represent their best possible estimate of the expected liability using the available information.

4 CORRECTION OF PRIOR YEAR ERRORS

The Directors have determined that a provision which was previously disclosed as a contingent liability should have been recognised as a provision during the year ended 28 February 2022, as the process of reaching a settlement of the case had reached a stage whereby it had been established that a material settlement was likely and a value could have been accurately estimated.

The Group has posted or reposted social media video clips which contain sound recordings and musical compositions from the music library of the relevant social media platform. A letter was received in Autumn 2020 from two music owners, claiming copyright infringement. Letters raising such allegations are common in other business sectors involved in social media. The Group, funded by its insurers, is robustly defending the allegations and, taking a cautious approach, has sought to remove any allegedly offending posts over which the Group has control. Despite the time that has passed, no court proceedings have been brought by the music owners.

The Directors have taken formal legal advice from specialist US intellectual property attorneys and engaged in a mediation process with the claimants. Based on that advice and the ongoing mediation process and settlement offers made to date, the Group believes that a liability of £4.3m should have been provided for at 28 February 2022.

In addition, it has been determined that reimbursement assets of £3.3m should have been recognized in respect of insurances and reimbursements the Group will received when a settlement is ultimately paid. The reimbursement assets recognised relate to an insurance policy and indemnities. £2.0m has been recognised in respect of the indemnities. Further detail relating to the indemnities has not been disclosed on the grounds that such disclosure is considered to be seriously prejudicial.

The impact on the Statement of Profit or Loss is a net charge in respect of legal case so £1,018k. In addition, £0.2m in legal costs were settled on behalf of the Group by its insurance during the year ended 28 February 2022. Deferred tax assets totalling £432k should have been recognised as a result, with a corresponding credit in the Statement of Profit or Loss.

In the prior year, disclosure of related party transactions with close family members of Key Management Personnel were omitted. These are now disclosed in Note 33.

Impact on the Statement of Profit or Loss and Other Comprehensive Income

Extract	Year ended 28 February 2022		Year ended 28 February 2022
	Reported	Adjustments	Restated
	£'000	£'000	£'000

Provision for legal cases	-	(1,018)	(1,018)

Loss before taxation	(44,897)	(1,018)	(45,915)

Income tax charge credit	1,174	432	1,606

Loss for the period	(43,723)	(586)	(44,309)

Total comprehensive loss for the period	(43,565)	(586)	(44,151)


Earnings per share (p)	(15.5)	(0.2)	(15.7)
Diluted earnings per share (p)	(15.5)	(0.2)	(15.7)

Impact on the Statement of Financial Position

Extract	28 February 2022		28 February 2022
	Reported	Adjustments	Restated
	£'000	£'000	£'000

Reimbursement Assets	-	3,267	3,267

Net non-current assets	22,202	3,267	25,469
Provisions (non-current)	(1,210)	(4,285)	(5,495)
Deferred tax liabilities	(432)	432	-

Net assets	21,017	(586)	20,431


Retained earnings	(108,335)	(586)	(108,921)

Total equity	21,017	(586)	20,431

5 ADJUSTED PERFORMANCE MEASURES

The APMs are used internally in the management of the Group's business performance, budgeting and forecasting, and for determining Executive Directors' remuneration and that of other management throughout the business. The APMs are also presented externally to meet investors' requirements for further clarity and transparency of the Group's financial performance. Where items of profits or costs are being excluded in an APM, these are included elsewhere in our reported financial information as they represent actual income or costs of the Group.

The Group's Alternative Performance Measures are set out below.

Adjusted EBITDA

Adjusted EBITDA is defined as Operating Profit adjusted for depreciation and amortisation, impairments and reversals of impairment, profits and losses on the disposal of assets, share based charges and releases and exceptional items.




	Year ended	Year ended
	28 February	28 February
	2023	2022 Restated
	£'000	£'000
Operating loss	(30,581)	(39,881)
Amortisation of intangible assets	1,933	1,303
Impairment of goodwill and other intangibles	3,388	13,000
Depreciation of property, plant and equipment and right-of-use assets	8,369	6,309
Impairment of property, plant and equipment and right-of-use assets	2,177	1,948
Loss of disposal of asset	62	-
Share-based payment expenses	303	3,534
Operating exceptional items:
IPO related costs	-	8,936
Acquisition costs	262	621
Restructuring costs	1,310	261
Provision or settlement of legal cases	1,474	1,018
Exceptional legal fees	3,528	-
Exceptional audit fees	300	2,150
Adjusted EBITDA	(7,475)	(801)

Operating exceptional items

As announced on 23 September 2022, the Company's auditor wrote to the Board on 21 September 2022 to identify a number of serious concerns that had arisen during the course of its work on the audit of the Company's accounts for the year ended 28 February 2022. The Board appointed independent external advisors to undertake an independent investigation, and the Company appointed Macfarlanes (lawyers), Rosenblatt (lawyers) and FRA (forensic accountants) on 23 September 2022. As a result of issue identified through this process, exceptional legal and professional fees were incurred at a cost of £3.5m (which includes £0.4m paid on behalf of two Directors). In addition, these concerns raised led to exceptional audit fees to be incurred above the level usually required for the Group's annual statutory audit at a further cost of £0.3m.

Further to the investigation outcomes a reorganisation of the Groups operations and processes, included the restructure of senior management positions. This reorganisation resulted in the Group incurring exceptional redundancy and professional cost of £1.3m.

In addition, the Group incurred £262k in further professional fees and inventory costs in connection with the acquisitions completed during 2022 which are considered to be outside the normal course of business:

- the acquisition of Medichem Manufacturing Ltd

- the purchase of asset from BH Cosmetics Inc.

The Group incurred legal and professional costs of £0.1m and £0.2m respectively, in the process of concluding the above-mentioned acquisitions, which are considered to be transaction related costs outside the normal course of business.

During the current and prior year, the Group made provision of £1.0m in respect of a legal claim in respect of copyright infringement on music rights in the US., this amount had not been settled by the balance sheet date and is included within provisions. During the year, the Group reached a legal settlement of £0.3m related to a one off trademark dispute.

Prior period operating exceptional items

Having listed on AIM in July 2021, the Group incurred certain expenses connected with the listing through the course of the period. These expenses included £2.9m related to legal and professional fees associated with the IPO process, £0.5m in staff bonuses associated with the IPO and £5.6m in connection with the issue of warrants.

In addition, the Group incurred £621k in further professional fees in connection with the acquisitions which are considered to be outside the normal course of business:

- the acquisition of Medichem Manufacturing Ltd.

- the purchase of asset from BH Cosmetics Inc.

The Group incurred legal and professional costs of £0.3m and £0.3m respectively, in the process of concluding the above mentioned acquisitions, which are considered to be transaction related costs outside the normal course of business.

- a reorganisation of the Groups US operations, including the restructure of senior management positions and changes to certain operational reporting process. This reorganisation resulted in the Group incurring exceptional redundancy and professional cost of £0.3m.

As an outcome of the financial investigations related to the financial year ended 28 February 2022, exceptional audit fees were incurred above the level usually required for the Group's annual statutory audit, at a cost of £2.2m.

6 SEGMENTAL REPORTING

IFRS 8 Operating Segments requires that operating segments be identified on the basis of internal reporting and decision-making. The Group identifies operating segments based on internal management reporting that is regularly reported to and reviewed by the Board of directors, which is identified as the chief operating decision maker. Management information is reported as one operating segment, being revenue from sales of products.

7 REVENUE

An analysis of the Group's revenue is as follows:	2023 £'000	2022 £'000
Revenue analysed by class of business
Digital	51,008	58,013
Store groups	136,834	126,566
	187,842	184,579
Revenue analysed by geographical market
UK	66,974	71,456
United States of America	51,961	48,021
Rest of World	68,907	65,102
	187,842	184,579

The Group generated revenue from one individual customer that accounted for greater than 10% of total revenue in FY23 and FY22. Total revenue from that one customer was £19.6m (2022: £20.0m).The performance obligations are settled upon delivery of the products to the specified customer location or upon collection by the customer. Payment is typically due within 30 to 90 days from delivery for online retailers and store groups.

8 EMPLOYEES

An analysis of the Group's staff costs is as follows:	Year ended 28 February 2023 £'000	Year ended 28 February 2022 £'000
Wages and salaries	17,774	14,076
Social security costs	2,292	1,378
Pension costs - defined contribution	323	226
Equity-settled share-based payments	303	3,534
Total employee benefit expense	20,692	19,214

Included in wages and salaries is an amount totalling £Nil (2022: £446k) relating to a staff bonus paid to staff in connection with the Group's listing on AIM during 2021, this was a one-off payment and as such has been included within operating exceptional items, as set out in note 4. Included in wages and salaries in the current year is £Nil (2022: £2k) in respect of furlough grants received.

The Group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are separately held from those of the Group in an independently administered fund. At the reporting date, contributions totalling £4k (2022: £34k) were payable to the fund and are included within other creditors.

Average number of staff

Administration Cost of sales

Year ended 28 February

2023

£'000

Year ended 28 February

2022

£'000

279

137

228

141

416

369

9 DIRECTORS' REMUNERATION

An analysis of the Group's directors' remuneration costs is as follows: Directors' remuneration excluding pension

Year ended 28 February

2023

£'000

Year ended 28 February

2022

£'000

1,659

994

Remuneration disclosed above includes the following amounts paid to the highest paid director:



	Year ended	Year ended
	28 February	28 February
	2023	2022
	£'000	£'000
Directors' remuneration	468	343

Pension contributions of £550 (2022: £1,320) were made on behalf of one director during the year. Full details of Directors remuneration are set out on in the Renumeration Report in the Groups' Annual Report and Accounts .

10 OPERATING LOSS




	Year ended	Year ended
	28 February	28 February
	2023	2022 Restated
	£'000	£'000
The operating loss is arrived at after charging/(crediting):
In-store marketing and stands	26,166	20,325
Warehousing and logistics	13,681	12,639
Freight out	7,817	8,709
Commissions payable	5,106	5,082
Net foreign exchange (gains)/losses	(321)	252
Government grants	-	(5)
Amortisation of intangible assets	1,933	1,303
Impairment of goodwill and other intangibles	3,388	13,000
Depreciation of property, plant and equipment - owned	6,548	5,394
Depreciation of property, plant and equipment - right-of-use assets	1,821	915
Impairment of property, plant and equipment - owned	1,811	1,948
Cost of stocks recognised as an expense	112,704	113,353
Provision utilised on cost of inventory	(5,898)	11,262
Share-based payment charge	303	3,534
Operating lease rentals
- short-term leases	89	-
- low-value leases	18	4

11 Text Box: Financial Statements AUDITORS REMUNERATION



	Year ended	Year ended
	28 February	28 February
	2023	2022
	£'000	£'000
Fees payable to the Group's auditor and its associates:
Audit of the financial statements	1,367	2,750
Subsidiary entity audit fees	150	150
All other non-audit services
- Half year review	-	23
- Reporting accountant	-	410
- Tax advisory	-	129
	1,517	3,462

12 FINANCE INCOME

	2023 £'000	2022 £'000
Gain on movement of the fair value of financial derivatives	-	76
Interest receivable	1	-
	1	76

13 FINANCE COSTS






	2023	2022
	£'000	£'000
Interest on bank overdrafts and loans	1,379	230
Series A and B loan notes	-	3,810
Interest on debt instruments	-	617
Other loans	-	548
Interest on lease liabilities	146	82
Other interest	1,769	823
	3,294	6,110

14 INCOME TAX CREDIT/EXPENSE

	2023 £'000	2022 Restated £'000
Current tax:
UK corporation tax on profits for the current period	-	204
Adjustments in respect of prior periods	7	(1,609)
	7	(1,405)
Foreign current tax on profits for the current period	(120)	201
Adjustments in respect of prior periods	(72)	(46)
Total current tax	(185)	(1,250)
Deferred tax
Origination and reversal of timing differences	(180)	191
Previously unrecognised tax loss, tax credit or timing difference	137	(115)
Effect of restatement	-	(432)
Total deferred tax	(43)	(356)
Total income tax credit	(228)	(1,606)

Factors affecting tax charge for the year

Loss before taxation	2023 £'000	2022 Restated £'000
Loss before taxation	(33,874)	(45,915)
Expected tax credit based on the standard rate of corporation tax in the UK of 19%	(6,457)	(8,530)
Tax effect of expenses that are not deductible in determining taxable profit	184	5,319
Fixed Asset Differences	(200)	(202)
Adjustment in respect of prior years	(64)	(1,655)
Effect of overseas tax rates	(5)	116
Deferred tax adjustments in respect of prior years	137	(547)
Deferred tax assets not recognised	6,219	3,893
Effect of change in deferred tax rate	(42)	-
Total income tax credit	(228)	(1,606)

The Group has tax losses totalling £54,773k (2022: £28,913k) and other temporary differences of £24,182k (2022: £29,543k) for which no deferred tax asset has been recognised due to uncertainty over future recoverability.

Changes to UK corporation tax rates were substantively enacted by the Finance Bill 2021 on 24 May 2021. These included an increase of the corporation tax rate to 25% from 1 April 2023. As this change was substantively enacted at the year end date, where deferred tax is recognised, it is at a rate of 25% in the current year (2022: 25%).

15 EARNINGS PER SHARE

The Group reports basic and diluted earnings per common share. Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of common shares outstanding during the period.

Diluted earnings per share is determined by adjusting the profit attributable to common shareholders by the weighted average number of common shares outstanding, taking into account the effects of all potential dilutive common shares, including options.

	2023 £'000	2022 Restated £'000
Loss attributable to shareholders	(33,646)	(44,309)
Adjustments:
Weighted average number of shares	309,737,250	282,835,551
Basic earnings per share (p)	(10.9)	(15.7)
Total comprehensive expense attributable to the owners of the company	(33,646)	(44,309)
Weighted average number of shares	309,737,250	282,835,551
Dilutive effect of share options and warrants	-	-
Weighted average number of diluted shares	309,737,250	282,835,551
Diluted earnings per share (p)	(10.9)	(15.7)

Pursuant to IAS 33, options whose exercise price is higher than the average price of the Company's shares in the year were not taken into account in determining the effect of dilutive instruments. The calculation of diluted earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings per share.

16 INTANGIBLE ASSETS

			Website		Intellectual	Acquired
	Goodwill	Software	costs	Trademarks	property	rights	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cost:
As at 1 March 2021	2,017	1,843	1,757	358	723	532	7,230
Additions - business combinations	15,786	-	-	-	-	631	16,417
Additions	-	288	-	178	2,600	-	3,066
Disposals	-	(70)	-	(65)	(7)	-	(142)
Exchange adjustments	-	-	-	-	-	-	-
As at 28 February 2022	17,803	2,061	1,757	471	3,316	1,163	26,571
Additions		679	-	113	226	-	1,018
Disposals		(466)	-	(37)	(591)	-	(1,095)
Exchange adjustments	450	(5)	-	-	(134)	-	311
As at 28 February 2023	18,253	2,269	1,757	547	2,817	1,163	26,806
Amortisation and impairment:
As at 1 March 2021	-	673	877	154	366	503	2,573
Amortisation charge for the period	-	422	586	82	184	29	1,303
Impairment charge	13,000	-	-	-	-	-	13,000
Disposals	-	(70)	-	(65)	(7)	-	(142)
Exchange adjustments	-	-	-	-	-	-	-
As at 28 February 2022	13,000	1,025	1,463	171	543	532	16,734
Amortisation charge for the year	-	632	294	101	406	500	1,933
Impairment charge	2,786	245	-	-	226	131	3,388
Disposals	-	(404)	-	(37)	(591)	-	(1,032)
Exchange adjustments	-	1		2	52	-	55
As at 28 February 2023	15,786	1,499	1,757	237	636	1,163	21,078
Carrying amount:
As at 28 February 2022	4,803	1,036	294	300	2,773	631	9,837
As at 28 February 2023	2,467	770	-	310	2,181	-	5,728

Amortisation and impairment of intangible assets is recognised within administrative expenses in the Statement of Comprehensive Income. Intangible assets are located across the Groups geographical market as follows: UK £2,942k (2022: £5,220k), ROW £Nil (2022: £Nil), US £2,786k (2022: £4,617k).

Impairment testing

Goodwill is tested for impairment at each reporting date and a review undertaken for indicators of impairment.

For the purposes of impairment testing the Group assigns goodwill to cash generating units (CGUs). Goodwill has been assigned to the following two CGUs Revolution Beauty Inc of £2,333k (2022: £2,017k) and Revolution Labs Ltd (formerly Medichem Ltd) of £2,786k (2022: £15,786k).

In testing the goodwill of each CGU the Group aggregates all identifiable assets, including all other intangible asset and property, plant and equipment. The assets of the CGU are compared to the value in use of the CGU in order to assess the recoverable amount. The value in use is calculated by discounting future cashflows forecast to be generated from the CGU over a five year period using the Group's pre-tax weighted average cost of capital (WACC), which is disclosed in note 16.

At 28 February 2023, the recoverable amount of the Revolution Labs Ltd CGU was determined to be below the carrying amount, an impairment of £2.8m (2022: £13.0m) was recognised to impair the full goodwill balance. The most significant factors driving the impairment charges were the reduction in forecast production and sales of inventory produced by Revolution Labs Ltd, which were determined based on the latest financial information available and management forecasts.

Impairment reviews are sensitive to changes in key assumptions. Management determined that the key assumption used in the cashflow forecast is the sales and production of inventory produced by Revolution Labs Ltd. As such, management prepared a sensitivity analysis on the sales and production and calculated that an increase of 10% would have also resulted in a full impairment charge being required to goodwill.

17 PROPERTY, PLANT AND EQUIPMENT

			Office and
	Leasehold		Computer
	improvements	Stands	equipment	Total
	£'000	£'000	£'000	£'000
Cost:
As at 1 March 2021	465	36,696	511	37,672
Additions - business combinations	17	215	122	354
Additions	13	4,774	205	4,992
Disposals	-	(6,682)	(338)	(7,020)
Exchange adjustments	-	111	(1)	110
As at 28 February 2022	495	35,114	499	36,108
Additions	1	7,643	207	7,851
Disposals	-	(7,661)	(184)	(7,845)
Exchange adjustments	-	66	27	93
As at 28 February 2023	496	35,162	549	36,207
Depreciation and impairment:
As at 1 March 2021	246	26,698	357	27,301
Charge for the year	99	5,131	164	5,394
Impairment charge	-	1,948	-	1,948
Disposals	-	(6,661)	(283)	(6,944)
Exchange adjustments	-	201	(7)	194
As at 28 February 2022	345	27,317	231	27,893
Charge for the year	103	6,251	194	6,548
Impairment charge	15	1,766	30	1,811
Disposals	-	(7,661)	(184)	(7,845)
Exchange adjustments	-	(130)	2	(128)
As at 28 February 2023	463	27,543	273	28,279
Carrying amount:
As at 28 February 2022	150	7,797	268	8,215
As at 28 February 2023	33	7,619	276	7,928

Depreciation and impairment of property, plant and equipment is recognised within administrative expenses in the Statement of Comprehensive Income. Property, plant and equipment is located across the Group's geographical market as follows: UK £3,380k (2022: £5,169k), ROW £1,720k, (2022: £2,337k), US £2,827k (2022: £710k).

Impairment testing

The Group determines whether these assets are impaired when indicators of impairment exist or at each reporting date. For impairment testing purposes, stand assets are grouped by customer into CGUs. Impairment testing is carried out by comparing the carrying value of the assets held at a CGU with the recoverable amount of the CGU.

The recoverable amount of a CGU is the higher of value in use or fair value less cost of disposal. The Group determines the recoverable amount with reference to its value in use. Value in use is assessed by forecasting the cashflow generated from a CGU over the remaining useful life of the asset of the CGU. A pre-tax Weighted Average Cost of Capital (WACC) derived from externally benchmarked data is then used to discount the cashflows to present value. The WACC applied for 2023 was 26% (2022: 12%), this is considered a key assumption for the impairment review and a movement of 2% in the WACC rate used would result in a £0.1m change to the impairment.

During the year, an impairment of stand assets of £1,766k (2022: £1,948k) was recognised. This impairment was driven by certain customers not reaching forecasted sales levels and related to eight UK customers and one US customer (2022: four UK customer and three US customers) where the value in use was assessed to be below the carrying value. One UK customer accounted for the majority of the impairment at £1,132k.

As disclosed in Note 15, management determined during the year that the recoverable amount of Medichem CGU was below its carrying value. This has resulted in an impairment of property plant and equipment of £171k.

Impairment reviews are sensitive to changes in key assumptions. Management have determined that the key assumption used in the cashflow forecast is the gross profit for each customer. As such, management have prepared sensitivity analysis on the gross profit for each customer and calculated that a reduction in performance in line with the severe but plausible scenario set out in note 1 would result in an additional impairment of £0.4m.

18 LEASES

	Land and	Plant and
	Buildings	machinery	Other	Total
	£'000	£'000	£'000	£'000
Right-of-use assets
1 March 2021	939	111	15	1,065
Additions	3,208	-	55	3,263
Additions through business combinations	627	108	9	744
Disposals	-	-	(7)	(7)
Depreciation	(832)	(66)	(17)	(915)
28 February 2022	3,942	153	55	4,150
Additions	328	-	-	328
Disposals	-	-	-	-
Depreciation	(1,736)	(74)	(11)	(1,821)
Impairment charge	(366)	-	-	(366)
Exchange Adjustment	19	-	-	19
28 February 2023	2,187	79	44	2,310
Lease liabilities
1 March 2021	979	115	15	1,109
Additions	3,208	-	55	3,263
Additions through business combinations	615	110	9	734
Disposals	-	-	(7)	(7)
Interest expense related to lease liabilities	77	5	-	82
Repayment of lease liabilities (including interest)	(446)	(71)	(17)	(534)
28 February 2022	4,433	159	55	4,647
Additions	328	-	-	328
Disposals	-	-	-	-
Interest expense related to lease liabilities	140	4	2	146
Repayment of lease liabilities (including interest)	(2,040)	(72)	(15)	(2,127)
Exchange Adjustment	20			20
28 February 2023	2,881	91	42	3,014
Current	2,002	47	11	2,060
Non-current	879	44	31	954



	2023	2022
	£'000	£'000
Maturity analysis:
Within 1 year	2,005	2,022
Between 1 and 5 years	1,105	2,676
Over 5 years	-	137
	3,110	4,835
Less unearned interest	(96)	(188)
Lease liability	3,014	4,647
Analysed as:
Non-current	954	2,732
Current	2,060	1,915
	3,014	4,647

The carrying value of right-of-use assets in respect of the above lease liabilities is £2,678k (2022: £4,150k). Lease assets are located across the Group's geographical market as follows: UK £2,408k (2022: £4,143k), ROW £Nil (2022: £Nil), US £270k (2022: £Nil).

The Group's lease arrangements are in relation to property leases, plant and office equipment. The leases have termination dates ranging from 2023 to 2028.

The rates of interest implicit in the Group's lease arrangements are not readily determinable and management have determined that the incremental borrowing rate to be applied in calculating the lease liability is 3.0%. The fair value of the Group's lease obligations is approximately equal to their carrying amount.



	2023	2022
	£'000	£'000
Effects of leases on financial performance:
Depreciation charge on right-of-use assets included within 'administrative expenses'	1,821	915
Interest expense on lease liabilities included within 'finance costs'	146	82
Expense relating to short-term leases included within 'administrative expenses'	89	-
Expense relating to low-value leases included within 'administrative expenses'	18	4
	2,074	1,001
Effects of leases on cash flows: Total cash outflow for right-of-use asset leases	(2,127)	(538)

The Group has leases in respect of printers which have been classified as low value in accordance with IFRS 16. In the year, the Group had three property leases which have a term of 12 months or less where it has elected to treat the lease as a short-term lease in accordance with IFRS 16. The Group is committed to minimum lease payments in respect of these leases as follows:

Short-term lease commitment

Low-value lease commitment

2023

£'000

2022

£'000

19 INVENTORIES

Finished goods and goods for resale

2023

£'000

2022

£'000

47,606

44,683

Stock written down/(written back) during period

(5,986)

11,262

The total cost of inventories recognised as an expense in cost of sale in the year was £111,861k (2022: £113,353k). For further details on inventory valuation, key assumptions and sensitivities, see Note 3.

20 TRADE AND OTHER RECEIVABLES



	2023	2022
	£'000	£'000
Current assets
Trade receivables	50,715	47,611
Other receivables	452	4,209
Prepayments	1,541	3,514
	52,708	55,334

All of the trade receivables were non-interest bearing and receivable under normal commercial terms. The fair value of the Group's trade and other receivables is the same as their book value stated above. The Group has assessed the credit risk of its financial assets measured at amortised cost by reference to the historic default experience of each debtor and the analysis of the debtor's financial position. The Group has determined that the loss allowance for expected credit losses of those assets is £2,151k (2022: £1,983k).

21 CASH AND CASH EQUIVALENTS



	2023	2022
	£'000	£'000
Cash at bank and in hand	11,044	15,619

22 TRADE AND OTHER PAYABLES




	2023	2022
	£'000	£'000
Trade payables	56,233	47,145
Other taxation and social security	826	2,556
Other payables	51	2,159
Accruals and contract liabilities	25,597	18,064
	82,707	69,924

23 BORROWINGS




	2023	2022
	£'000	£'000
Bank revolving credit facility	31,721	23,551
	31,721	23,551
Analysed as:
Payable within one year	31,721	23,551

The balance is shown net of loan arrangement fees of £279k (2022: £449k). Interest is charged on the RCF based on the Sterling Overnight Index Average plus an applicable margin. The RCF has a maturity date of 19 October 2024 however the Group was in breach of the covenants due to its shares being suspended from trading, therefore the amount is presented within current liabilities.

On 29 March 2023, the Group agreed an amendment to the revolving credit facility (RCF) with its banking partners. The amendment included a waiver of breaches of the terms of the original agreement. As part of the amended facility agreement which runs through to October 2024, the overall size of the facility was agreed at £32m, reduced from £40m, and is fully drawn. Revised covenants have been agreed, which include, a minimum liquidity threshold of £5.0 million and an Adjusted EBITDA covenant, as well as certain non-financial covenants. The Adjusted EBITDA covenant is tested quarterly and the minimum liquidity threshold is tested weekly. Interest accrues on the face value of the drawn down loan amount at Sterling Overnight Index Average (SONIA) plus 3.5% margin.

24 DEFERRED CONSIDERATION


	2023	2022
	£'000	£'000
Current	10,910	4,889
Non-current	9,098	13,504

During the previous financial year, Revolution Beauty Holdings exercised its option to wholly acquire Revolution Beauty Labs (Formerly Medichem Ltd) which was previously 100% owned and controlled by a previous director and shareholder of Revolution Beauty Group Plc, with a deferred consideration of £20,500,000 to be paid evenly over a 4-year period, which accrues interest at 2.5% per annum. Total interest accrued on this consideration is £1,298,450.

On the 7^th March 2023 the Group announced that it had reached an agreement in respect of the timing of payments of deferred consideration for its acquisition of Medichem Manufacturing Limited, which has been disclosed within Note 34.

25 FINANCIAL RISK MANAGEMENT

The Group's financial instruments at the reporting dates mainly comprise cash and various items arising directly from its operations, such as trade and other receivables and trade and other payables.

(a) Risk management policies

The Group's Directors are responsible for overviewing capital resources and maintaining efficient capital flow, together with managing the Group's cash flow risk, foreign exchange risk, credit risk and liquidity risk.

(b) Financial assets and liabilities

Financial assets and liabilities analysed by the categories were as follows:

Financial assets at amortised cost:

Trade and other receivables Cash and cash equivalents

2023

£'000

2022

£'000

51,167

11,044

51,820

15,619

62,211

67,439

Financial liabilities at amortised cost:

Borrowings

Trade and other payables Deferred consideration Lease liabilities

31,721

81,881

20,008

3,014

23,551

67,368

18,393

4,647

136,624

113,959

The carrying value of all financial instruments is not materially different from their fair value.

Credit risk is the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. Maximum credit risk at the reporting dates was as follows:



	2023	2022
	£'000	£'000
Current trade and other receivables	51,167	51,820

The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from

defaults the Group uses publicly available financial information and its own trading records to rate its major customers. The Group's exposure and the credit ratings and compliance with credit limits of its counterparties are continuously monitored. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk.

Trade receivables are regularly reviewed for impairment loss. The Group has assessed the credit losses attributable to its financial assets measured at amortised cost and has determined that the loss allowance for expected credit losses of those assets is immaterial to the financial statements.

(d) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group uses a mixture of long-term and short-term loan notes together with short term intragroup borrowings.

Contractual cash flows relating to the Group's financial liabilities are as follows:

	Carrying amount £'000	Contractual cashflows £'000	Within 1 year £'000	1-2 years £'000	2-5 years £'000	More than 5 years £'000
28 February 2023
Borrowings	31,721	32,000	32,000	-	-	-
Trade payables	56,233	56,233	56,233	-	-	-
Accruals and other payables	25,648	25,648	25,648	-	-	-
Deferred consideration	20,008	21,798	11,163	5,382	5,253	-
Lease liabilities	3,014	2,918	2,005	394	519	-
Total	136,624	138,597	127,049	5,776	5,772	-

	Carrying amount £'000	Contractual cashflows £'000	Within 1 year £'000	1-2 years £'000	2-5 years £'000	More than 5 years £'000
28 February 2022
Borrowings	23,551	24,000	24,000	-	-	-
Trade payables	47,145	47,145	47,145	-	-	-
Accruals and other payables	20,223	20,223	20,223	-	-	-
Deferred consideration	18,393	19,000	3,625	5,125	10,250	-
Lease liabilities	4,647	4,835	2,022	2,094	582	137
Total	113,959	115,203	97,015	7,219	10,832	137

(e) Interest rate risk

Interest rate risk is the risk that the future cash flows associated with a financial instrument will fluctuate because of changes in market interest rates.

Profit or loss is sensitive to higher/lower interest expense on borrowings as a result of changes in interest rates. The risk of movement within the interest rate for the RCF equates to approximately £3,200 for each 100 basis point movement in interest rates charged.

(f) Foreign exchange risk

Foreign exchange risk is mitigated by closely monitoring foreign exchange movements, having natural hedges with the Group's overseas operations, and having appropriate terms with non-GBP denominated suppliers.

(g) Capital management

The Group's main objective when managing capital is to protect returns to shareholders by ensuring the Group will continue to trade for the foreseeable future. In order to maintain or adjust the capital structure, the Group may adjust the dividends paid to shareholders, return capital to shareholders or issue new shares.

The Group considers its capital to include net cash (being the aggregate of bank balances less borrowings), share capital, share-based payment reserve, merger reserve and retained earnings.

	2023 £'000	As at 28 February 2022 As Restated £'000
Cash and cash equivalents	11,044	15,619
Borrowings	(31,721)	(23,551)
Net debt	(20,677)	(7,932)
Total equity	(14,197)	19,999
	(34,874)	12,067

26 DEFERRED TAX

The deferred tax balances recognised in the consolidated statement of financial position are as follows:




	2023	2022 Restated
	£'000	£'000
Deferred tax (liability)/asset
Accelerated capital allowances	(525)	(1,366)
Tax losses	1,126	2,030
Intangible fixed assets	(601)	(511)
Other timing differences	-	152)
Net deferred tax liability	-	-

The net movement is explained as follows:





	2023	2022
	£'000	£'000
Opening deferred tax liability	-	177
Charge/(credit) to profit or loss	(43)	76
Acquisition of subsidiary	-	167
Effects of exchange rate changes	43	11
Effect of restatement	-	(432)
Closing deferred tax liability	-	-

27 PROVISIONS

	Dilapidations £'000	Legal cases £'000	On Hold £'000	Total £'000
Opening Provision	100	4,295	1,100	5,495
Charge/(credit) to profit or loss	-	1,438	526	1,964
Reversal of unutilised amounts	-	-	(829)	(829)
Effects of exchange rate changes		430		430
Closing Provision	100	6,163	797	7,060

The dilapidations provision relates to the estimated costs to be incurred by the Group in restoring the underlying assets to the condition required by the terms and conditions of the Group's lease arrangements.

The on hold provision relates to charges expected in respect of supplier purchase orders which are expected to be cancelled and for which no inventory is expected to be received, the full amount is expected to be settled within the next 12 months.

The Group has taken formal legal advice from specialist US intellectual property attorneys and engaged in a mediation process with the claimants. Based on that advice and the ongoing mediation process and settlement offers made to date, the Group believes that a liability of £4.3m should have been provided for at 28 February 2022. In addition, it has been determined that contingent assets of £3.3m should have been recognized in respect of insurances and reimbursements the Group will received when a settlement is ultimately paid. This results in a total net additional liability of £1.0m and a charge to the consolidated statement of profit or Loss of £1.0m. Full details of the prior year adjustment recognised are set out in note 4.

In addition to the reimbursement asset recognised in respect of insurances and indemnities receivable against the liability for the claim, there are further contingent assets which have not been recognised. Whilst inflows are considered highly probable in respect of these remaining indemnities, they are not virtually certain and have therefore not been recognised as reimbursements. Further detail relating to the indemnities are not provided on the grounds that such disclosure would be considered seriously prejudicial.

The Group expects to agree and settle the claim within the next financial year.

28 SHARE-BASED PAYMENTS

Equity-settled schemes

C share / Nominee scheme

The Group has granted Nominee share options at the date of IPO based on the unvested portion of their shares under the cancelled C share scheme. The vesting period ranges between one and four years depending on the remaining vesting period that was applicable to each individual under the C share scheme. As the Nominee scheme represents new equity instruments granted as replacement equity instruments for the cancelled C share scheme, management has determined that it represents a modification to the existing share scheme. The equity-settled classification has not changed. As such, the existing share-based payment charge of the C share scheme continues to be recognised over the original vesting period. The incremental increase in the total fair value of the Nominee share options is recognised over the remaining vesting period.

New LTIP

The Group has granted options to certain employees under the New LTIP scheme. There is a non-market based performance condition attached to the New LTIP share options, which will impact the number of shares which will eventually vest. The vesting condition is based on the level of EBITDA achieved by the Group in the three financial years following the grant. The vesting period ranges from three to four years.

Legacy LTIP

The Legacy LTIP scheme rewards legacy employees who did not have share options under the old C share scheme. The vesting period ranges from three to four years.

Additional LTIP

The Group has granted options to one employee under the Additional LTIP scheme. There is a market based performance condition attached to the Additional LTIP share options, which will impact the number of shares which will eventually vest. The vesting condition is based on the market capitalisation of the Group in the five years following the IPO. The vesting period is five years. The probability of achieving the market capitalisation conditions has been considered in determining the fair value of the share options using the Monte Carlo option-pricing model.

SIP

The Group has granted options to each employee enrolled in the SIP scheme. The vesting period is three years and there is a service condition attached to the options.

A reconciliation of equity-settled share-based payment schemes is presented below:

	Balance at				Balance at
	the start of				the end of
2023	the year	Granted	Exercised	Forfeited	the year
C share / Nominee scheme	2,398,308		(1,210,739)	(713,594)	473,975
New LTIP	1,902,190			(862,391)	1,039,799
Legacy LTIP	801,650			(49,867)	751,783
Additional LTIP	5,000,000			(5,000,000)	-
SIP	339,750			(27,000)	312,750
	10,441,898	-	(1,210,739)	(6,652,852)	2,578,307
Weighted average exercise price	£0.01	£-	£0.01	£0.01	£0.01

	Balance at				Effect of	Balance at
	the start of				capital	the end of
2022	the year	Granted	Exercised	Forfeited	reorganisation	the year
C share / Nominee scheme	950,288	469,613	(975,237)	(121,549)	2,075,193	2,398,308
D share scheme	176,795	-	-	-	(176,795)	-
E share scheme	165,745	-	-	-	(165,745)	-
New LTIP	-	2,108,902	-	(206,712)	-	1,902,190
Legacy LTIP	-	955,567	-	(153,917)	-	801,650
Additional LTIP	-	5,000,000	-	-	-	5,000,000
SIP	-	362,250	-	(22,500)	-	339,750
	1,292,828	8,896,332	(975,237)	(504,678)	1,732,653	10,441,898
Weighted average exercise price	£2.47	£0.01	£-	£0.01	£-	£0.01

The weighted average remaining contractual life of the Group's equity-settled share options outstanding at the reporting date was 1.0 years (2022: 3.9 years)

Cash-settled schemes

Phantom SIP

The Group has granted a Phantom Share Award to each overseas employee enrolled in the Phantom SIP scheme. This entitles holders to a right to receive a cash payment equal to the market value of the Group's shares on the vesting date. The vesting period is three years.

2023

Balance at the start of the year

Granted

Exercised

Forfeited

Other

Balance at the end of the year

Phantom SIP

31,500

(4,500)

27,000

Weighted average exercise price

2022

Balance at the start of the year

Granted

Exercised

Forfeited

Other

Balance at the end of the year

Phantom SIP

38,250

(6,750)

31,500

Weighted average exercise price

The weighted average remaining contractual life of the Group's cash-settled share options outstanding at the reporting date was 1.5 years (2022: 2.5 years).

The expense recognised in the period for the share-based payment transactions was £306k for equity settled schemes and a £3k credit for cash settled schemes due to forfeitures (2022: £3,530k equity settled schemes and £4k for cash settled schemes)

The fair value per option granted during the period covered by the financial statements and the assumptions used in the calculation are as follows:

	Grant period
	2023	2022
Share price at grant date	£1.60 - £1.63	£1.60 - £1.63
Exercise price	£nil - £0.01	£nil - £0.01
Expected option life	3 - 5 years	3 - 5 years
Expected volatility	50.0%	50.0%
Expected dividends	0.0%	0.0%
Discount rate	0.2%	0.2%
Weighted average fair value per option	£1.59	£1.59

	2023 No. ('000)	2022 No. ('000)
Class of share
Ordinary shares of 1p each	309,737	309,737
	309,737	309,737

SHARE CAPITAL

	£'000	£'000
Class of share
Ordinary shares of 1p each	3,097	3,097
	3,097	3,097

There were no issuances of share capital during the year.

Ordinary share rights

Ordinary shares carry full voting rights and rights in respect of dividends and capital distributions (including on winding up).

During the prior period, 469,613 C Ordinary shares were issued and 11,050 C Ordinary shares, 2,250,000 A1 Deferred shares and 228,000 A2 Deferred shares were bought back and cancelled.

As part of the company's admission to AIM on 13 July 2021, a capital reorganisation occurred, pursuant to which the existing shares were subdivided and redesignated into Ordinary shares and Deferred shares, following which all such Deferred shares were cancelled. On completion of the capital reorganisation, the share capital comprised 240,180,313 Ordinary shares of £0.01 each. A further 69,194,687 Ordinary shares of £0.01 each were issued as part of the Placing on 19 July 2021. On 20 August 2021, the Company issued a further 362,250 Ordinary shares of £0.01 each. Total consideration for the shares issued in the period was £110,716k.

30 RESERVES

Share capital

The called-up share capital records the nominal value of shares issued and paid up.

Share premium reserve

Consideration received for shares issued above their nominal value, net of transaction costs.

Warrant reserve

A warrant instrument dated 13 July 2021 was issued upon the Groups admission to AIM. The Company granted Zeus Capital, a right to subscribe in cash for 9,281,250 Shares at £1.60 per Share during the period commencing on the date of admission and expiring on the date which is the tenth anniversary of admission.

The Group valued the warrant using the Black-Scholes model, applying a risk-free interest rate, expected term and an estimated share price and volatility.

The warrant reserve represents the fair value of warrants outstanding at the date of issue. Each warrant confers the right to subscribe in cash for one ordinary share at the placing price of 160 pence per share. The warrants are only exercisable during the period from 20 July 2022 to 19 July 2031.

Merger reserve

The merger reserve has arisen due to a group reorganisation, under the merger method of accounting.

Translation reserve

The translation reserve represents foreign exchange gains and losses on the retranslation of the results and net assets of the foreign operations of the Group.

Retained earnings

Cumulative profit and loss net of distributions to owners.

31 NET DEBT

Changes in liabilities arising from financing activities

The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's consolidated cash flow statement as cash flows from financing activities.

Cash and cash equivalents Borrowings

Lease liabilities

As at 1 March

2022

£'000

Cash flows

£'000

Non-cash movements

£'000

As at 28 February

2023

£'000

15,619

(23,551)

(4,647)

(3,876)

(8,000)

2,127

(699)

(170)

(494)

11,044

(31,721)

(3,014)

Net debt

(12,579)

(9,749)

(1,363)

(23,691)

Cash and cash equivalents Borrowings

Lease liabilities

As at 1 March

2021

£'000

Cash flows As restated

£'000

Non-cash movements

£'000

As at 28 February

2022

£'000

5,581

(79,605)

(1,109)

10,223

61,115

534

(185)

(5,061)

(4,072)

15,619

(23,551)

(4,647)

Net debt

(75,133)

71,872

(9,318)

(12,579)

Amortised cost

Prepaid financing fees

Year ended 28 February

2023

£'000

Year ended 28 February

2022

£'000

(31,721)

(279)

(23,551)

(449)

Gross borrowings

(31,721)

(24,000)

32 CAPITAL COMMITMENTS

Amounts contracted for but not provided in the financial statements:

Acquisition of tangible fixed assets

Year ended 28 February

2023

£'000

Year ended 28 February

2022

£'000

106

3,000

33 RELATED PARTY TRANSACTIONS

Interests in subsidiaries are set out in note 4 to the Company financial statements.

Transactions with related parties

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The Group entered into the following transactions with companies under the control of one of the Directors:

Other related parties	Year ended 28 February 2023 £'000	Year ended 28 February 2022 £'000
Sales	3	12
Purchases	-	11,928
Rent paid	236	140

The following amounts were outstanding at the reporting date:

Other related parties

Amounts due to related parties

Year ended 28 February

2023

£'000

Year ended 28 February

2022

£'000

Included within deferred consideration is a loan to Walbrook Investments Limited, a company under the control of T Allsworth, of £1,500k (2022:

£1,500k). The amount is offset against the Groups' liability to T Allsworth in respect of the acquisition of Medichem and will be settled through the payment of the deferred consideration.

Medichem Properties Limited (Formerly Walbrook Investments Limited), is a company under the control of one of the former directors. During the period the company provided rental premises to the group for cash payments of £235k (2022: £140k). As at the period end there is a rent liability of £370k (2022: £592k) outstanding.

Astound Commerce Ltd, a company in which one of the former Non-Executive Directors is employed, sold services to the group for a total of

£278k (2022: £449k), of which £23k (2022: £23k) remains outstanding in trade creditors as of the period end.

During the financial year, the Group employed a number of individuals which are considered close family members of the Directors, and paid salaries of £472k (2022: £407k).

The Group entered into the following transactions with boohoo Group Plc, an entity considered to have significant influence over the group.

Other related parties

Year ended 28 February

2023

£'000

Year ended 28 February

2022

£'000

Sales

987

647

Purchases

The receivable amount outstanding at the balance sheet date was £223k (2022: £305k).

For the purposes of IAS 24 "Related Party Disclosure", the Group consider key management personnel to be the Directors of Revolution Beauty Group plc, executives below the level of the Company's Board are not regarded as key management personnel. Remuneration for the board of directors is set out in note 8.

DIRECTORS' TRANSACTIONS

At 28 February 2023 the Directors owed £Nil (2022: £215k) to the Group in respect of excess interest paid during the period, these amounts were repaid during the year.

During the prior year, Revolution Beauty Holdings exercised its option to wholly acquire Revolution Beauty Labs (Formerly Medichem Ltd), from a director who had a controlling interest, for an initial consideration of £7,000,000, with a deferred consideration of £16,000,000 to be paid evenly over a 4-year period. An agreement was reached with the director to amend the terms of the deferred consideration, details of the amendment and outstanding liability are set out in note 24.

34 SUBSEQUENT EVENTS

On 7 March 2023 the Group announced that it had reached an agreement in respect of the timing of payments of deferred consideration for its acquisition of Medichem Manufacturing Limited.

A Deed of Variation dated 6 March 2023 was signed which amends the terms of the deferred consideration and completion net asset adjustment, adjusting the timing of the payments as outlined below:

• £3.625 million payable on 21 October 2025 (being the £5.125 million consideration reduced by the £1.5 million loan due from one of the Sellers companies, Walbrook)

• £5.125 million payable on 21 October 2026

• £5.125 million payable on 21 October 2027

• £5.125 million payable on 21 October 2028 Interest accrues on outstanding balances at a rate of 2.5% per annum

On 30 March 2023 the Group announced that that it had secured an amended facility agreement with its banking partners. The amendment includes a waiver of breaches of the terms of the original agreement. As part of the amended facility agreement which runs through to October 2024, the overall size of the facility was agreed at £32m, reduced from £40m, and is fully drawn. Revised covenants remain in place and include a minimum liquidity threshold of £5.0 million and an Adjusted EBITDA covenant. Certain non-financial covenants that applied following the amendments of the agreement were complied with and are no longer in place.

On 28 June 2023 on the lifting of the Company's share suspension from AIM, 5,684,210 nominal cost options were awarded to Bob Holt and 2,842,105 nominal cost options were awarded to Elizabeth Lake. On the 19 July 2023, Bob Holt and Elizabeth Lake, both respectively exercised their combined 8,526,315 nominal cost options of £0.01 in the capital of the Company.

35 ULTIMATE CONTROLLING PARTY

The Directors do not consider there to be one ultimate controlling party.

Subsequent to the reporting date, three directors have been appointed on the instigation of boohoo Group Plc, an entity considered to have significant influence over the Group by virtue of its shareholding.

36 COMPANY STATEMENT OF FINANCIAL POSITION

	Note	2023 £'000	2022 £'000
ASSETS
Non-current assets
Investments	4	-	-
Other receivables	5	14,543	44,202
Total non-current assets		14,543	44,202
Current assets
Other receivables	5	354	603
Cash and cash equivalents	6	648	7,263
Total current assets		1,002	7,866
Current liabilities
Trade and other payables	7	(6,079)	(896)
Borrowings	8	(31,721)	(23,551)
Total current liabilities		(37,800)	(24,447)
Net current assets/(liabilities)		(36,798)	(16,581)
Total assets less current liabilities		(22,255)	27,621
Net assets		(22,255)	27,621
Equity	9
Share capital		3,097	3,097
Share premium		103,487	103,487
Share-based payment reserve		4,712	4,409
Warrant reserve		7,239	7,239
Retained earnings		(140,790)	(90,611)
Total equity		(22,255)	27,621

37 AUDIT OPINION ON CONSOLIDATED FINANCIAL STATEMENTS

Independent auditor's report to the members of Revolution Beauty Group Plc

Qualified opinion on the Group financial statements

In our opinion, except for the possible effects of the matters described in the Basis for qualified opinion section of our report, the Group financial statements:

• give a true and fair view of the state of the Group's affairs as at 28 February 2023 and of the Group's loss for the year then ended;

• have been properly prepared in accordance with UK-adopted international accounting standards; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the Group financial statements of Revolution Beauty Group plc (the 'Company') and its subsidiaries (the 'Group') for the year ended 28 February 2023 which comprise the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and Notes to the Consolidated Financial Statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK-adopted international accounting standards.

Basis for qualified opinion

As announced on 23 September 2022, we wrote to the Board on 21 September 2022 setting out a number of serious concerns with respect to certain governance and control arrangements in place over a number of key financial and business transactions that took place during the prior year to 28 February 2022 and which impacted the Group financial statements for the year ended 28 February 2022 and which may also have had a consequential impact on the Group financial statements for the year ended 28 February 2023. We communicated to the Board a number of findings and issues and we recommended that the Board appoint external advisers to undertake an independent Investigation (the "Investigation").

The Company announced on 13 January 2023 the completion of that Investigation and its findings. . A number of the matters identified in our letter and by the investigation led us to undertake additional audit procedures and resulted in qualifications to our opinion in respect of the Group financial statements for the year ended 28 February 2022. We have therefore considered the impact of those qualifications in determining the qualifications to our opinion on the Group financial statements for the year ended 28 February 2023. Each matter set out below represents a separate qualification to our opinion:

Potential liabilities and contingent liabilities

The Investigation report identified a number of matters and actions which could potentially lead to liabilities and contingent liabilities. Management advised us that that they fully investigated these matters and have not identified any further specific liabilities that may arise and as such no further provision or disclosure has been considered necessary by the Board. However, given the nature of these findings, we continue to be unable to determine whether further liabilities or contingent liabilities, such as claims, tax assessments or irregularities may subsequently materialise and we have therefore been unable to determine the impact that such further potential liabilities or losses may have on the financial position of the Group as at 28 February 2023, and/or whether any further contingent liabilities need to be disclosed in the notes to the Group financial statements.

Cancelled purchase orders

Management had placed deferred purchase orders prior to and during the pandemic. As a result of the trading terms with its suppliers, this resulted in the Group having to negotiate a settlement for these unfulfilled orders. A liability of £1.1m was recorded as at 28 February 2022 as Management's best estimate of the unavoidable cost in meeting these commitments. We were unable to obtain sufficient appropriate audit evidence to support the recognition of these commitments at the 28 February 2022 or whether the commitments should have been recognised in a prior period or constitute a non-adjusting post balance sheet event. . Given that we were unable to conclude on the opening provision and the timing of the recognition of the associated expense, we are therefore unable to determine whether the income statement for the year ended 28 February 2023 is materially correct and/or whether the amount expensed previously for cancelled orders has been recorded in the correct period and consequently whether any adjustment to the Group financial statements for the year ended 28 February 2023 is required.

Carrying value of goodwill of Revolution Beauty Labs Limited (previously called Medichem Manufacturing Limited ("Medichem"))

In October 2021, the Group exercised an option to purchase the entire share capital of Medichem which was wholly owned by Tom Allsworth (former Executive Chairman and co-founder of the Group). The option was exercised following completion of an independent valuation of Medichem. The Investigation identified a number of issues, which related to factors which were not considered as part of the assessment of the acquisition price, which could have a material impact on the valuation reported and the associated goodwill arising from the acquisition.

As a result of these issues, we were unable to obtain sufficient appropriate audit evidence to support the carrying value of goodwill arising on the acquisition of Medichem as at 28 February 2022 included in the balance sheet at that date as £2.8m. We were therefore unable to determine whether the subsequent impairment of goodwill of £2.8m included in the Group financial statements for year ended 28 February 2023 is materially correct and/or whether the impairment included in the Group financial statements has been recorded in the correct period, and consequently whether any adjustment to the Group financial statements for the year ended 28 February 2023 is required.

Related party disclosures

The Investigation identified a number of related party transactions of members of the Board and management which had not been disclosed to all members of the Board nor to us as the auditors. Management have set out in note 35 to the Group financial statements those related party transactions that have been identified through the Investigation as well as those that have been captured during the ordinary course of business. We also refer to note 33 to the Group financial statements where the Board has assessed and disclosed in the Group financial statements that Key Management is limited to the Board of Directors.

There are a number of limitations in us being able to conclude that related party transactions and key management disclosures are complete. The key reasons giving rise to these limitations are as follows:

- the findings from the Investigation as to actions and involvement of certain individuals in the business and engagement with key trading partners may suggest that Management may not have identified all individuals required to be considered as Key Management. However, it has not been possible for us to be conclusive in this respect;

- certain of the Directors that were members of the Board and other senior individuals are no longer with the Group and we are therefore limited as to enquiries that can be made of Management who were present throughout the year being audited; and

- there was an absence of appropriate processes and records in the year to capture all related parties and transactions that may have taken place with those parties.

Should there be further relationships which by their nature would be disclosed as related parties, then transactions made with those parties may have been made outside normal commercial terms which may result in revisions being required to the recording of such transactions. We have therefore been unable to conclude that the Group financial statements are free from material misstatement arising from the omission of related party transactions being fully disclosed and we are unable to determine whether the disclosures in respect of related party transactions in the Group financial statements are complete and accurate.

Further, we have been unable to determine whether the disclosures in respect of Directors' remuneration are complete and accurate.

In addition, and without further modifying our opinion, a number of other matters highlighted by the Investigation have been included within the key audit matters section of this report.

Our opinion on the current period's Group financial statements is also modified because of the possible effect of these matters on the comparability of the current period's figures and the corresponding figures.

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs

(UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the Group financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Independence

We remain independent of the Group in accordance with the ethical requirements that are relevant to our audit of the Group financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Material uncertainty related to going concern

We draw attention to note 2 to the Group financial statements, which indicates the following:

· under the terms of the amended facility agreement, an Event of Default arises where a qualified audit report is issued on the consolidated financial statements. The Lenders previously issued a waiver in respect of this clause relating to the year ended 28 February 2022 and have issued a further waiver in respect of this clause relating to the financial statements for the year ended 28 February 2023. The Lenders have confirmed their present intention to issue a similar waiver relating to the financial statements for the year ending 28 February 2024 provided that any qualifications in respect of that year are substantially the same as those set out in the Basis for qualified opinion section of our report on the financial statements for the year ended 28 February 2023. In the event that such a waiver is not forthcoming the Group would be in breach of the amended facility agreement; and

· if the Group was unable to achieve its forecasts, due to either a downturn in operational activity or the impact or timing of settlement of any financial commitments, known or otherwise, arising from legacy issues, and be unable to implement mitigating actions within the Group's control on a timely basis, it may breach covenants or the minimum liquidity threshold set out in its amended facility agreement.

In respect of any or all of the above breaches of the amended facility agreement, the Group is reliant on the support of its Lenders to waive any or all of the above breaches of the facility or the Group would need to seek alternative sources of funding to repay all amounts due under the amended facility agreement and provide the Group with sufficient ongoing finance to continue as a going concern.

As stated in note 2 to the Group financial statements, these events or conditions, along with other matters as set out in note 2 to the Group financial statements, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. The Group financial statements do not include any adjustments that may be necessary if the Group is not a going concern. Our opinion is not modified in respect of this matter.

We considered going concern to be a Key Audit Matter because of the significance of this issue. The scope of our audit addressed this Key Audit Matter through performing the following procedures:

· we assessed the Directors' forecasts with the assistance of business restructuring specialists to test the application and completeness of assumptions approved by the Directors within the forecasts and checked the model mechanics including the mathematical accuracy;

· we evaluated the reasonableness of the assumptions and future plans modelled within the Directors' base case forecasts and the Directors' severe but plausible downside scenario including whether such plans and assumptions are consistent when compared to past performance and align with expectations within the wider retail industry and adjusted for the Group's specific circumstances;

· we inspected the Group's revised covenant terms included in the amended facility agreement to gain evidence that the scenarios modelled had appropriately considered these revised covenant terms;

· we further considered the Directors' assessment of their anticipated compliance with the non-financial covenants included in the amended facility agreement to determine whether these result in a material uncertainty or not;

· we considered the Directors' assessment of the adequacy of headroom on the financial covenants under both the base case and the severe but plausible downside scenario;

· we also considered the severe but plausible downside scenario and the extent to which the likelihood of this scenario was sufficiently low to support the Directors' conclusion that events and conditions identified result in material uncertainty in relation to the adoption of the going concern basis in the preparation of the Group financial statements as opposed to the going concern basis not being appropriate and the Group financial statements being required to be prepared on an alternative basis; and

· we considered the adequacy of the disclosures in the Group financial statements against the requirements of accounting standards and consistency of the disclosures against the Directors' base case forecasts and the Directors' severe but plausible downside scenario.

In auditing the Group financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the Group financial statements is appropriate.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Overview - for the year ended 28 February 2023

Coverage^{^[1]}

83% (2022:80%) of Group loss before tax

100% (2022:100%) of Group revenue

99% (2022:94%) of Group total assets

Key audit matters

	2023	2022
Material uncertainty related to going concern	ü	ü
Revenue recognition	ü	ü
Management override of controls	ü	ü
Inventory Provision Legal dispute Existence & valuation of trade receivables Business acquisition of Revolution Beauty Labs Ltd and Limited and associated deferred consideration Carrying value of non-current stand assets	ü ü x x x	ü x ü ü ü

Three KAM's included on our audit report in respect of the financial statements for the year ended 28 February 2022 are no longer considered to be a key audit matters this year, as indicated above, because:

· Business acquisition of Revolution Beauty Labs Ltd and associated deferred consideration related to the acquisition that took place in 2022 and is therefore not relevant to the current period;

· Existence and valuation of trade receivables was identified as a key audit matter in 2022 as a result of the inter-relationship with revenue and significant balances which were outstanding that were found to relate to revenue that was subsequently reversed. Similar issues have not been identified in 2023; and

· Carrying value of non-current stand assets was considered to be a KAM in 2022 due to the loss making position and the revised inventory provisioning policy in 2022 that had a material impact on cashflows which led to a need to reassess impairment indicators for stands in respect of prior years.

Materiality

Group financial statements as a whole

£0.93m (2022: £0.9m) based on 0.5% (2022: 0.5%) of revenue.

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

As a result, we identified two significant components, namely: Revolution Beauty Limited in the UK and Revolution Beauty Inc. in the US. The Group audit team completed full scope audits on the Parent Company and the two significant components.

Non-significant components were subject to either audit procedures on specified balances and/or desktop review procedures, which were performed by the Group audit team. Desktop review procedures comprised Group level analytical procedures of each non-significant component.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Group financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Group financial statements as a whole, and in forming our qualified opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matters included in the Basis for qualified opinion and the Material uncertainty related to going concern sections above, we determined the matters described below to be additional key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit.

Key audit matter

How the scope of our audit addressed the key audit matter

Revenue recognition

Note 2 - sets out the accounting policy per revenue stream for the recognition of revenue and the measurement of that revenue including consideration of all deductions to gross revenue initially recognised.

Note 3 - sets out the key sources of estimation uncertainty included in the process of determining the level of returns expected in order to arrive at a provision for returns and resultant reduction to revenue.

Note 7 - sets out the analysis of the Group's revenue by class of business as well as by geographical market.

The Group generates revenue through the supply to retail store groups and distributors (Business to Business - B2B), sales directly to the consumer via the Group's own website (Business to customer - B2C) and supplies inventory on a consignment basis.

Revenue is recognised in line with the requirements set out in IFRS 15 - Revenue from Contracts with Customers ("IFRS 15") taking into consideration contracts in place, identification of the relevant performance obligations and determination of the transaction price.

Revenue is recognised on a net basis where applicable taking into consideration the relevant performance obligations in respect of the contracts with the retail store groups. There are various deductions processed against payments made by customers which are offset against revenue as appropriate. Given the extent of deductions taken by the retail store groups, there is a risk that not all deductions are appropriately recognised in the correct accounting period and offset correctly as a reduction to revenue.

Revenue is only to be recognised when the performance obligation is settled. The recognition of revenue is identified as a significant risk with a particular focus around the year-end for the B2B revenue stream. Therefore, the significant risk of fraud associated with revenue was concentrated on the appropriate recognition of revenue and any manual adjustments made directly to revenue.

The following procedures were carried out in response to the risks identified:

· Business to Business revenue (B2B)

We performed the following procedures:

· for a sample of customer contracts with significant retail store groups and consignment customers, we read the terms of business to check that the appropriate application of IFRS 15 had been applied, and we agreed those terms back to the recognition of revenue where appropriate; and

· for a sample of revenue items recorded in the general ledger, we agreed the revenue recorded to supporting documentary evidence and the receipt of cash.

As part of our response to the risk of fraud due to management override of controls, we performed the following procedures relevant to revenue with the assistance of our IT specialists:

· we performed data analytics to identify entries posted in the general ledgers to revenue via journals processed which were of audit interest, such as those considered to be unusual;

· we identified who posted the journal to agree that it aligned to their role; and

· where we considered this to require further investigation, we challenged management to understand the nature or reason for the journal and sought to obtain further evidence to support the validity of the journal entry.

We also reviewed the Group financial statements to confirm that the disclosures with respect to revenue were appropriate and sufficient with reference to the requirements of IFRS 15.

Key observations:

Based on the work performed, we are satisfied that revenue reflected in the financial statements has been recognised appropriately in accordance with the Group's accounting policies and the accounting standards.

Key audit matter

How the scope of our audit addressed the key audit matter

Management override of controls

Refer to pages 35 to 38 (Audit and Risk Committee Report)

The findings from the Investigation together with our assessment of the control environment identified evidence that senior management were able to override the controls that were in place during the prior year and that this situation continued in FY23. Our audit also identified a number of misstatements in the prior period which also impact the FY23.

As a result, there is a risk that controls may not have prevented or detected and corrected material misstatements on a timely basis more broadly in the Group financial statements for the year ended 28 February 2023.

We involved our forensic specialists in our response to, and our audit of, the findings of the Investigation.

We evaluated the terms of engagement and credentials and independence of the Group's appointed external advisors. We critically assessed the detailed findings and using our forensic experts considered if the approach taken was reasonable and whether any additional procedures were considered necessary. We also considered the nature of the findings and undertook additional procedures and testing to satisfy ourselves where we considered it was necessary.

Based on the prior period misstatements noted, as well as the results of the Investigation, we ensured our planned audit approach appropriately addressed the matters that had been raised through the Investigation. We also considered the impact on the level of our materiality used in testing to ensure appropriate consideration of the level of expected errors. Our audit approach was entirely substantive, with no reliance on internal controls, and management explanations were assessed against the available evidence that was considered to be reliable.

In light of the findings from the Investigation we performed an extended analysis of work on the IT systems relevant to the audit, with a specific focus on access rights to those systems and the risks related to access gained to and activity within those systems in the year. An extended analysis was also carried out over journal entries considered to have higher risk criteria and which we agreed back to supporting documentation which we considered appropriate.

We planned the scope of our work throughout the audit to include in depth challenge of management and those charged with governance, and applied increased and scepticism in all areas.

We sought alternative representations and required additional procedures to be performed to support those representations where in our judgement, we considered to be necessary.

Key observations:

From the evidence obtained, we considered the risk of management override of control to have been reduced to an acceptable level for the reported financial position as at 28 February 2023, and for the financial results of the year then ended.

Key audit matter

How the scope of our audit addressed the key audit matter

Inventory provision

£47.6m (2022: £44.7m) after provision of £33.9m (2022: £39.8m) of inventory held at the balance sheet date.

Note 2 sets out the accounting policies for inventory.

Note 3 sets out judgements and key sources of estimation uncertainty within inventory.

Note 19 sets out the components of inventory and amounts recognised as an expense in the period.

The Group has significant inventory holdings. With the changes in fashion and trends, demand for these products results in limited life cycles and the Group has been continuously launching new products to stay on trend. This heightens the risk of impairment of inventory where such new launches (with minimum order quantities) are not successful.

Inventories are carried at the lower of cost and net realisable value. Determining net realisable value requires significant estimates to be made in relation to:

- future selling prices and volumes; and

- the future costs associated with selling the inventory.

Management have extracted extensive data to enable them to analyse historical trends to support the sale through volumes of inventory, both for existing lines of stock and new products launched in the year, and subsequently prepared an inventory provision using the same methodology as that adopted for the first time for the preparation of the 2022 financial statements.

We performed the following audit procedures to address the risks identified:

· obtained an understanding of the stock provision methodology and policies, together with how estimates and assumptions were determined by management;

· confirmed that the provisioning methodology adopted by management remains appropriate and prepared on a consistent basis to the prior year;

· assessed the accuracy and completeness of the information used by management in calculating the provision by performing tests over the data used in both the calculation of the inventory provision and the analysis of the sell through of inventory in previous years prepared by management to support the provision;

· challenged and assessed the key assumptions applied by management in estimating the provision by the use of historical evidence, post year end actual sales and knowledge of the industry, including the percentages used to calculate the forecast rate of sales and the percentages used to determine excess stock; and

· considered the adequacy of the disclosures in the Group financial statements against the requirements of the relevant accounting standards.

Key observations:

We are satisfied that the inventory provision has been calculated appropriately and that inventory is recorded at the lower of cost and net realisable value.

Key audit matter

How the scope of our audit addressed the key audit matter

Legal Dispute

Provision of £6.2m (2022: £4.3m) and reimbursement assets of £4.1m (2022: £3.3m) recognised at the balance sheet date and related disclosures of contingent assets (note 27).

Note 2 sets out the accounting policies for provisions and contingent assets.

Note 3 sets out judgements and key sources of estimation uncertainty within provisions and contingent assets.

Note 27 sets out the details of the legal dispute and the unrecognised contingent asset.

The Group has a number of legal cases. The Group is required to assess whether it is probable that there will be a financial outflow related to these cases and, if so, recognise a provision based on their best estimate.

The most significant of these cases is the claim into the historic unlicensed use of music used in the Group's social media posts. To date there have been two rounds of mediation in relation to this case and the Group has made settlement offers.

In addition the Group has an insurance policy and indemnities provided by the pre-IPO shareholders of Revolution Beauty Group Plc. When a provision is recognised, the Group will be required to assess if receiving reimbursement is virtually certain to recognise an asset.

Due to the significance of the amounts involved, and level of judgement required in this matter we determined this to be a key audit matter.

We completed the following audit procedures to address the risks identified:

we evaluated Management's assessment of the accounting required for the legal case, which includes internal and external legal counsel's assessment of the case, and performed procedures to reach an independent assessment of the conclusions reached. These included:

- obtained and read external counsel's assessment of the likely outcome of the case and assessed the accuracy and completeness of the information used by Management in calculating the provision, which included having direct discussions with internal and external legal counsel on the facts, circumstances and timeline of events in respect to the case;

- obtained and inspected relevant supporting documentation, which included legal risk assessments, communication with claimants, written settlement offers made and counter offers received;

- challenged Management where appropriate to ensure all relevant information was considered in the determination of the provision based on the information available at each reporting period;

- reviewed Management's assessment in respect to the potential reimbursement assets to the Group if the provision were to be settled and considered the assessment against the requirements of IAS 37: Provisions, Contingent Liabilities and Contingent Assets, for the recognition of reimbursement assets or disclosure of contingent assets;

- considered the associated taxation impacts of the recognition of the provision and corresponding reimbursement assets. We challenged Management on the relevant jurisdiction to ensure that the provision and reimbursement assets (which are recognised in different jurisdictions and hence for tax purposes are to be considered independently) are considered appropriately in respect to the different tax laws and requirements for tax purposes; and

- considered the adequacy of the disclosures in the Group financial statements against the requirements of the relevant accounting standards.

Key observations:

We are satisfied that the provision for the expected settlement of the legal dispute has been determined appropriately and that the evidence to support the virtually certain basis for recognition of the reimbursement assets is appropriate. We are also satisfied that the disclosures in respect of the provision and reimbursement assets relating to the legal dispute, and the unrecognised contingent asset, are in accordance with the Group's accounting policies and the accounting standards.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the Group financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the Group financial statements as a whole.

Based on our professional judgement, we determined materiality for the Group financial statements as a whole and performance materiality as follows:

	2023	2022
Materiality	£0.93 million	£0.9 million
Basis for determining materiality	0.5% of revenue
Rationale for the benchmark applied	Revenue represents the most appropriate benchmark of trading for the Group given the volatility in performance caused by significant growth in the Group but also the findings and issues highlighted by the Investigation.
Performance materiality	£0.56 million	£0.54 million
Basis for determining performance materiality	60% of materiality We considered a number of factors including the expected level of known and likely misstatements, our knowledge of the group's internal controls and management's attitude towards proposed adjustments

Component materiality

We set materiality for each significant component of the Group based on a percentage of between 48% and 86% (2022: between 39% and 90%) of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £450,000 to £800,000 (2022: ranged from £350,000 to £810,000). In the audit of each component, we further applied performance materiality levels of 60% (2022: 60%) of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £27,900 (2022: £27,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and Accounts other than the Group and Company financial statements and our auditor's reports thereon. Our qualified opinion on the Group financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Group financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the Group financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

As described in the Basis for our qualified opinion section above, the scope of our audit was limited in several areas as set out in that section. We have concluded that where the other information refers to any of the balances covered by the limitation of scope the other information may be materially misstated for the same reasons.

Other Companies Act 2006 reporting

Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.

Strategic Report and Directors' report

Except for the possible effects of the matters described in the Basis for qualified opinion section of our report, in our opinion, based on the work undertaken in the course of the audit:

· the information given in the Strategic Report and the Directors' report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements; and

· the Strategic Report and the Directors' report have been prepared in accordance with applicable legal requirements.

Except for the possible effects of the matters described in the Basis for qualified opinion section of our report above, in the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' report.

Matters on which we are required to report by exception

Arising from the limitation on the scope of our work as set out in the "Basis of the qualified opinion" section above, we have not obtained all the information and explanations that we considered necessary for the purpose of our audit.

We have also been unable to determine whether certain disclosures of directors' remuneration specified by law have been made and are complete.

Responsibilities of the Directors

As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the Group financial statements, the Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the Group financial statements

Our objectives are to obtain reasonable assurance about whether the Group financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Group financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

· we gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, through discussion with management and the Audit Committee and our knowledge of the industry. We focused on significant laws and regulations that could give rise to a material misstatement in the Group financial statements, including, but not limited to, the Companies Act 2006, the AIM Rules, relevant accounting standards and UK tax legislation; and

· we considered the risks of potential non-compliance with these laws and regulations in our initial planning and risk assessment work and communicated these risks to the engagement team to consider in planning and executing their work.

We considered the fraud risk areas to be management override of controls and revenue recognition, specifically the mis-statement of revenue for the financial year, valuation of inventory through using inappropriate assumptions to determine the provision, completeness of related party transactions which impact the commercial terms of transactions and an appropriate recognition and disclosure of provisions in respect of the ongoing legal case on copyright infringement claims..

The specific work we have undertaken to address the risk of fraud in the Group financial statements has included:

· considering whether there are undisclosed related party transactions. Due to the evidence in the Investigation Report of potential related parties which were not previously disclosed to the Board, and inherent limitations of our work and the Investigation in this area, we have considered it necessary to qualify our opinion in this area, as set out in the Basis for qualified opinion above;

· testing the cut-off of revenue and the validity of revenue transactions recorded in the records of the Group (see the keys audit matters section above);

· working with our IT specialists to identify journal entries with characteristics of audit interest based on our fraud risks assessment and then assessing whether these were appropriate by obtaining evidence to support these journals;

· assessing the key assumptions used in the determination of the inventory provision and challenging these by reference to data on historic and post year-end sales (see the key audit matters section above).

· considering the appropriateness of alternative performance measures and testing their calculation and rationale for inclusion as alternative performance measures;

· challenging management on the ongoing legal case for the copyright infringement claims and confirming that the accounting treatment of the Boards best estimate of the provision and accounting thereof is appropriate and sufficiently disclosed (see the key audit matters section above):

· considering whether there are potential additional liabilities arising as a result of matters identified through the Investigation Report. Due to the inherent limitations in assessing these we have qualified our audit work in this respect as set out in the Basis for qualified opinion above; and

· involving our forensic specialists in our audit of the findings of the Investigation and allocating further senior team members to the audit team.

Our audit procedures were designed to respond to risks of material misstatement in the Group financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. In addition, the extent to which the audit was capable of detecting irregularities, including fraud was limited by the matter described in the Basis for qualified opinion section of our report.

A further description of our responsibilities is available on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Other matter

We have reported separately on the Company financial statements of Revolution Beauty Group Plc for the year ended 28 February 2023. The opinion in that report is a qualified opinion and included a material uncertainty related to going concern.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Sophia Michael (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London, UK

31 August 2023

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

38 AUDIT OPINION ON THE COMPANY FINANCIAL STATEMENTS

Independent auditor's report to the members of Revolution Beauty Group Plc

Qualified Opinion on the Company financial statements

In our opinion, except for the possible effects of the matters described in the Basis for qualified opinion section of our report:

· the financial statements give a true and fair view of the state of the Parent Company's affairs as at 28 February 2023;

· the financial statements have been properly prepared in accordance with the United Kingdom Generally Accepted Accounting Practice; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Revolution Beauty Group Plc ("the Company") for the year ended 28 February 2023 which comprise the Company Statement of Financial Position, the Company Statement of Changes in Equity, and the Notes to the Company Financial Statements, including a summary of the significant accounting policies. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 'Reduced Disclosure Framework' (United Kingdom Generally Accepted Accounting Practice).

Basis for qualified opinion

In respect of the year ended 28 February 2022, Revolution Beauty Group Plc had loans receivable of £142m from subsidiary undertakings at the year-end before recognising expected credit losses of £97.6m resulting in a carrying value of £44.2m. Under IFRS 9 - Financial Instruments, entities are required to recognise expected credit losses for all financial assets held at amortised cost, including intercompany loans receivable. The recoverability of these financial assets is reliant on the future cashflows of those subsidiaries and the Board had accordingly prepared their assessment for recoverability based on forecast future cash flows which resulted in an expected credit loss of £97.6m on the intercompany loans receivable as at 28 February 2022.

The forecasts used to derive the expected credit loss should be based on conditions prevailing as at each balance sheet date. Due to significant changes to senior management and the executive Board, Management were unable to provide forecasts that would have existed as at 28 February 2022. We therefore were unable to obtain sufficient appropriate audit evidence that the expected credit loss calculations provided in respect of the prior period income statement and the resultant carrying value as at 28 February 2022, were prepared on a reasonable and informed basis and therefore were unable to conclude that the carrying value of the financial asset as at that date was free from material misstatement. As a result, we did not express an opinion on the Company financial statements for the year ended 28 February 2022.

Our opinion on the financial statements for the year ended 28 February 2023 is modified because we have been unable to determine whether there was any consequential effect of this disclaimer of opinion on the figures included in the Company Statement of Changes in Equity, and related notes to the financial statements, in respect of the year ended 28 February 2023.

During the course of our audit for the year ended 28 February 2023, we also identified a number of additional matters where we were unable to obtain sufficient appropriate audit evidence and which result in a qualified opinion on the Company financial statements.

As announced on 23 September 2022, we wrote to the Board on 21 September 2022 setting out a number of serious concerns with respect to certain governance and control arrangements in place over a number of key financial and business transactions that took place during the prior year to 28 February 2022 and which may have had an impact also on the financial statements for the year ended 28 February 2023. We communicated to the Board of Directors a number of findings and issues and we recommended that the Board appoint external advisers to undertake an independent Investigation (the "Investigation"). The Company announced on 13 January 2023 the completion of that Investigation and its findings. A number of the matters identified in our letter and by the investigation have led us to undertake additional audit procedures and have resulted in qualifications to our opinion. Each matter set out below represents a separate qualification to our opinion:

Potential liabilities and contingent liabilities

The Investigation report identified a number of matters and actions which could potentially lead to liabilities and contingent liabilities. Management have advised us that that they have fully investigated these matters and have not identified any further specific liabilities that may arise and as such no further provision or disclosure has been considered necessary by the Board. However, given the nature of these findings, we have been unable to determine whether further liabilities or contingent liabilities, such as claims, tax assessments or irregularities may subsequently materialise and we have therefore been unable to determine the impact that such further potential liabilities or losses may have on the financial position of the Company as at 28 February 2023, and/or whether any further contingent liabilities need to be disclosed in the notes to the Company financial statements.

Related party disclosures

The Investigation identified a number of related party transactions of members of the Board and management which had not been disclosed to all members of the Board nor to us as the auditors. Management have set out in note 33 to the Group financial statements those related party transactions that have been identified through the Investigation as well as those that have been captured during the ordinary course of business. We also refer to note 33 to the Group financial statements where the Board has assessed and disclosed in the Group financial statements that Key Management is limited to the Board of Directors.

- there was an absence of appropriate processes and records in the year to capture all related parties and transactions that may have taken place with those parties.

Should there be further relationships which by their nature would be disclosed as related parties, then transactions made with those parties may have been made outside normal commercial terms which may result in revisions being required to the recording of such transactions. We have therefore been unable to conclude that the Company financial statements are free from material misstatement arising from the omission of related party transactions being fully disclosed and we are unable to determine whether the disclosures in respect of related party transactions in the Company financial statements are complete and accurate.

Further, we have been unable to determine whether the disclosures in respect of Directors' remuneration are complete and accurate.

Our opinion on the financial statements for the year ended 28 February 2023 is further modified because of the possible effect of all of these matters set out above on the comparability of the current period's figures and the corresponding figures. In addition, were any adjustments to be required to any of the balances impacted, the strategic report and the directors report would also need to be amended.

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Independence

We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Material uncertainty related to going concern

We draw attention to the matters set out in note 2 to the Company financial statements, where the Directors indicate the following:

· under the terms of the amended facility agreement, an Event of Default arises where a qualified audit report is issued on the consolidated financial statements. The Lenders previously issued a waiver in respect of this clause relating to the year ended 28 February 2022 and have issued a further waiver in respect of this clause relating to the financial statements for the year ended 28 February 2023. The Lenders have confirmed their present intention to issue a similar waiver relating to the financial statements for the year ending 28 February 2024 provided that any qualifications in respect of that year are substantially the same as those set out in the Basis for qualified opinion section of our report on the financial statements for the year ended 28 February 2023. In the event that such a waiver is not forthcoming the Company would be in breach of the amended facility agreement; and

In respect of any or all of the above breaches of the amended facility agreement, the Company is reliant on the support of its Lenders to waive any or all of the above breaches of the facility or the Company would need to seek alternative sources of funding to repay all amounts due under the amended facility agreement and provide the Company with sufficient ongoing finance to continue as a going concern.

As stated in note 2 to the Company financial statements, these events or conditions, along with other matters as set out in note 2 to the Company financial statements, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. The Company financial statements do not include any adjustments that may be necessary if the Company is not a going concern. Our opinion is not modified in respect of this matter.

We considered going concern to be a Key Audit Matter because of the significance of this issue. The scope of our audit addressed this Key Audit Matter through performing the following procedures:

· we inspected the Company's revised covenant terms included in the amended facility agreement to gain evidence that the scenarios modelled had appropriately considered these revised covenant terms;

· we considered the Directors' assessment of the adequacy of headroom on the financial covenants under both the base case and the severe but plausible downside scenario;

· we also considered the severe but plausible downside scenario and the extent to which the likelihood of this scenario was sufficiently low to support the Directors' conclusion that events and conditions identified result in material uncertainty in relation to the adoption of the going concern basis in the preparation of the Company financial statements as opposed to the going concern basis not being appropriate and the Company financial statements being required to be prepared on an alternative basis; and

· we considered the adequacy of the disclosures in the Company financial statements against the requirements of accounting standards and consistency of the disclosures against the Directors' base case forecasts and the Directors' severe but plausible downside scenario.

In auditing the Company financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the Company financial statements is appropriate.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

An overview of the scope of our audit

Our audit of the Company financial statements was scoped by obtaining an understanding of the Company and its environment, including the Company's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. We performed a full scope audit on the Company financial statements.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Company financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Company financial statements as a whole, and in forming our qualified opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matters included in the Basis for qualified opinion and the Material uncertainty related to going concern sections above, we determined the matter described below to be an additional key audit matter to be communicated in our report. This is not a complete list of all risks identified by our audit.

Key audit matter

How the scope of our audit addressed the key audit matter

Revolution Beauty Group Plc (Parent Company) Loans Receivable from subsidiaries

£14.5m (2022: £44.2m) carrying value of parent company loan receivable as at 28^th February 2023 after recognizing expected credit loss of £39.9m (2022: 97.6).

Note 2 of the company financial statements sets out the accounting policy for initial recognition and subsequent assessment of expected credit losses on the above financial assets.

Revolution Beauty Group Plc has Loans receivable of £152m from subsidiary undertakings as at 28th February 2023 before recognizing expected credit losses.

In the absence of contractual agreements between the parties these loans are treated as loans payable on demand by the subsidiary undertakings with 0% effective interest rate.

IFRS 9 requires entities to recognise expected credit losses for all financial assets held at amortised cost, including intercompany loans from the perspective of the lender. The recoverability of these financial assets is reliant on the future cashflows of those subsidiaries and the Board of Directors have accordingly prepared their assessment for recoverability based on forecast future cash flows for the period out to the end of the banking facility term which is October 2024. These forecasts have resulted in an expected credit loss of £39.9m on the intercompany loans receivable as at 28^th February 2023.

The Directors are required to present disclosures in a manner that helps users of financial statements to understand the judgements that directors make about the future and about other sources of estimation uncertainty. Due to the degree of estimation uncertainty inherent in this assessment this was considered to be a key audit matter.

We assessed the accuracy of the forecast models used to determine anticipated future cash flows in the Directors' recoverability assessment. To do this we challenged management on the underlying assumptions, including the growth rates applied to future months and whether such plans align with expectations within the wider retail industry as adjusted for the Group's specific circumstances.

Management prepared three different scenarios and weighted the probable outcome of each scenario. We assessed Management's expectations applied to each scenario to consider how actual results that may differ from forecast results could impact the asset's carrying value. We assessed whether the disclosures in the financial statements detail the key judgements within the recoverability assessment and sources of estimation uncertainty

We challenged management on their ability to generate reasonable cash flow forecasts in line with the circumstances prevailing as of 28^th Feb 2023 by performing a comparison to performance in recent months compared to previous cashflows set and we also considered the material uncertainties that are inherent in the performance of the business, particularly at 28^th February 2023.

We reviewed the Company financial statements to assess whether the disclosures in the Company financial statements appropriately reflect the key judgements within the expected credit loss calculation and sources of estimation uncertainty.

Key observations:

We are satisfied that the judgements made by management in the determination of expected credit loss on intercompany receivable are reasonable.

Our application of materiality

Based on our professional judgement, we determined materiality for the Company financial statements as a whole and performance materiality as follows:

	2023	2022
Materiality	£651,000	£630,000
Basis for determining materiality	5% of Loss before tax	1% of Total assets
Rationale for the benchmark applied	For our 2023 audit the benchmark used was the loss before tax which was a change from the 2022 audit when Total Assets was used. In FY22 the inter-company receivable represented a majority of the Total Assets and we concluded that it was the appropriate benchmark to determine materiality last year, but in FY23, the impairment of the inter-company receivable and the significant costs incurred relating to the Investigation led us to conclude that loss before tax was the most appropriate benchmark to determine materiality this year.
Performance materiality	£358,000	£378,000
Basis for determining performance materiality	60% of overall materiality. We considered a number of factors including the expected level of known and likely misstatements, our knowledge of the Company's internal controls and management's attitude towards proposed adjustments.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £19,530 (2022: £18,900). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and Accounts other than the Group and Company financial statements and our auditor's reports thereon. Our qualified opinion on the Company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Company financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the Company financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

As described in the Basis for our qualified opinion section above, the scope of our audit for the year ended 28 February 2023 was limited in several areas as set out in that section. We have concluded that where the other information refers to any of the balances covered by the limitation of scope the other information may be materially misstated for the same reasons.

Other Companies Act 2006 reporting

Strategic Report and Directors' report

Except for the possible effects of the matters described in the Basis for qualified opinion section of our report, in our opinion, based on the work undertaken in the course of the audit:

· the information given in the Strategic Report and the Directors' report for the financial year for which the Company financial statements are prepared is consistent with the Company financial statements; and

· the Strategic Report and the Directors' report have been prepared in accordance with applicable legal requirements.

Except for the possible effects of the matters described in the Basis for qualified opinion section of our report above, in the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' report.

Matters on which we are required to report by exception

Arising from the limitation on the scope of our work as set out in the "Basis of the qualified opinion" section above:

· we have not obtained all the information and explanations that we considered necessary for the purpose of our audit;

· we were unable to determine whether adequate accounting records have been kept; and

· we were unable to determine whether certain disclosures of directors' remuneration specified by law have been made and are complete.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

· returns adequate for our audit have not been received from branches not visited by us; or

· the Company financial statements are not in agreement with the accounting records and returns.

Responsibilities of Directors

As explained more fully in the Statement of Directors' Responsibilities in respect of the Annual Report and Accounts, the Directors are responsible for the preparation of the Company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the Company financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the Company financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Company financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

· we gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it operates, through discussion with management and the Audit Committee and our knowledge of the industry. We focused on significant laws and regulations that could give rise to a material misstatement in the Company financial statements, including, but not limited to, the Companies Act 2006, the AIM Rules, relevant accounting standards and UK tax legislation;

· following the identification of relevant findings and concerns from our audit work, and the subsequent investigation by the Investigation Committee, we re-considered our planning and risk assessment and identified potential additional fraud risks.

We considered the fraud risk areas of the Company to be management override of controls, completeness of related party transactions which impact the commercial terms of transactions and the existence and valuation of loans receivable from subsidiaries.

The specific work we have undertaken to address the risk of fraud in the Company financial statements has included:

· considering whether there are undisclosed related party transactions. Due to the evidence in the Investigation Report of potential related parties which were not previously disclosed to the Board, and inherent limitations of our work and the investigation in this area, we have considered it necessary to qualify our opinion in this area, as set out in the Basis for qualified opinion above;

· challenging assumptions and judgements made by Management in their significant accounting estimates and judgements in other areas also, including in particular, in relation to the impairment assessment for the carrying value of the expected credit loss on the company receivable from subsidiaries;

· involving our forensic specialists in our audit of the findings of the Investigation and allocating further senior team members to the audit team.

Our audit procedures were designed to respond to risks of material misstatement in the Company financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the Company financial statements, the less likely we are to become aware of it. In addition, the extent to which the audit was capable of detecting irregularities, including fraud was limited by the matters described in the Basis for qualified opinion section of our report.

A further description of our responsibilities is available on the Financial Reporting Council's website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Other matter

We have reported separately on the Group financial statements of Revolution Beauty Group Plc for the year ended 28 February 2023. The opinion in that report is qualified and included a material uncertainty related to going concern.

Use of our report

Sophia Michael (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London

United Kingdom

31 August 2023

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

[1] These are areas which have been subject to a full scope audit by the group engagement team

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