Revolution Beauty’s co-founder Tom Allsworth has resigned with immediate effect after the business reported significant losses for the 2022 financial year.
The embattled beauty brand’s full-year 2022 results, which have been delayed since March 2023, revealed it overstated its revenues and profits by £9.6m and £23m respectively.
Pre-tax losses also increased from £17.8m to £44.9m during the period, while operating loss amounted to £38.9m due to Revolution Beauty’s acquisition of Medichem.
Sales increased by 35% to £184.6m, however, but were below the £194m originally forecasted by the group.
Revolution Beauty’s shares continue to remain suspended.
Allsworth has now been replaced by Derek Zissman, who will serve as Non-Executive Chairman.
"The delay in the publication of our FY2022 results has clearly been frustrating for all involved,” said Zissman.
“Following the completion of the independent Investigation and the release of its findings, we continue to take action to ensure we have the right processes and governance in place across our business.”
An investigation by Revolution Beauty's auditor BDO uncovered a string of accounting and management failures, after the brand failed to publish its results in February 2022.
The report found that co-founders Adam Minto and Tom Allsworth had made personal loans of around £1m to distributors and a senior employee.
None of these arrangements were disclosed to the company's board at an appropriate time.
Sales to one of the distributors, which has remained unnamed, accounted for around 56% of all FY22 orders with that company.
BDO stressed that this was a “departure from normal practice” in its report, as the majority of orders were placed in the final month of the financial year.
The accountancy firm’s investigation also found serious issues with Revolution Beauty’s acquisition of pharmaceutical company Medichem.
“Whilst these results are significantly below that forecast by the previous management team to the market, they nevertheless reflect a robust business with a strong brand, loyal following, and significant potential in terms of both sales and profitability,” added Zissman.
“We now expect Revolution Beauty to return to normalised trading and to capitalise on its position as a business with outstanding products, talented colleagues, and a loyal customer base."
Revolution Beauty secured £32m in additional funding earlier this year.
An amended facility agreement was reached with its banking partners, which will provide the business with “sufficient liquidity” to continue delivering its recovery strategy.