Revolution Beauty Group (LSE:REVB) — Interim results for the six months ended 31 August 2026

0:01 Good morning, ladies and gentlemen, and welcome to the REVOLUTION BEAUTY GROUP PLC interim results investor presentation. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish your responses where it's appropriate to do so. Before we begin, we would just like to submit the following poll. I would now like to hand you over to the executive management team for their presentation. Tom, good morning, sir.

0:34 Good morning, everybody, and thank you very much for joining us this morning. I'm Tom Ausworth. I'm the CEO of REVOLUTION BEAUTY, and with me today is Neil Cato, the CFO. And we're here to present our half year results for the period ending August 31. Take you through to the highlights. Adam and I returned to the business just thirteen months ago, but, we're delighted with the results we've managed to achieve so far and, in fact, very proud of all the progress we've made. When we did return, the company was in a precarious financial state, having lost 12,000,000 in the previous half of, last year. Immediately put in place a turnaround strategy. I focused on cost savings and financial discipline and stock management, whereas Adam focused his attention on product strategy and retailer relationships.

1:28 We're delighted to have achieved a positive EBITDA in every single month since our return. We've now had thirteen consecutive months of profitability. High quality revenue. In the first half of last year, the company was chasing sales to generate cash, and, therefore, the sales were artificially, increased by sales of outlet, discontinued brands, categories, license, etcetera, all of which had a detrimental effect on the gross margin. You can clearly see this year that great progress has been made with an 11 increase in our gross margin, and this demonstrates that the sales this year have been more true quality sales rather than chased sales at discounted margins.

2:15 Disciplined, and reduction in costs, we've made great foot strides in that area. It's relatively self explanatory. We've worked really hard to reduce costs in all areas, including operations, marketing, and overheads, but at the same time, ensuring that there's been no detrimental effects on the day to day operations. We've now basically taken the company back to a more appropriate size. It simply got too big and out of control. Online sales grew by 22%. As you can see from the fourth bullet point, this is our strategy around growth was focused around TikTok shop. There's no doubt that in history, it tells us that, our sales direct to our own consumer via various different online platforms has always been a really good indicator of the future sales performance in store.

3:08 So we're, therefore, very encouraged and and I'm happy that online sales have been growing because it does give us an indication that the new products we've been bringing out, Adam, have been working on are well accepted, and our reaction has been really strong to those new products to date. Focus on product innovation. As has been covered on previous, presentations, when Adam and I came back, we pivoted our new products towards a slightly lower retail price point, targeting more sort of 5 to £8 rather than the 9 to £12 that previous management had tried to do. This better meets the demands of the REVOLUTION consumer and has resulted in underlying sales growth.

3:53 Our priorities for now and moving forward are relatively simple. We have very, very clear objective. That's to grow the business, to increase profitability, and therefore to generate cash. And we believe that we've now put a really strong strategic plan in place to achieve all three of those things. We're gonna drive growth, by increasing productivity in our existing doors through better MPD that Adam's been working on together with better execution of of, operations and increasing service level. In fact, our service level to our major retailers at the moment is the best it's been since our return. We also will be expanding into some new retailers. We've had successes already with Itos in in Netherlands and, also Kroger in The US.

4:44 We're gonna regain some space that's been lost. We've had a few, you know, hurdles along the way. And since our return, we've taken a few steps forward and the odd step back. But what's encouraging is the retailers where we've actually lost space are already talking to us again about how we can go back and rebuild that space. DM in Germany is a very prime example where we already gathered extra additional space after it looked like we were gonna lose space, and the same in Target in The US. We're also gonna be launching some new brands, which I'll come on to in a slide in a moment. And we're gonna open new categories in skin, hair, gifting, and fragrance. And, obviously, that includes the Debenhams collaboration, and our first Debenhams PLC product, will be launched in literally a couple of weeks' time. So excited about that.

5:34 In terms of profitability, obviously, growth is gonna help that, but we also must keep our costs under control, and we need to continue to manage stock very well, which has been one of the highlights of the last twelve months. We've really managed to increase our ability to manage stock well, keep stock low, and keep it relevant to our current market offering. We also want to make sure that we increase our... Continue to increase, rather, our gross margin. We're now up to 43.6. It will creep up a little... Few more percentage points. I'm I'm not sure that we think it's gonna go massively higher, but we think we can get to sort of 46. So there's a little bit more headroom there for us to aim at. And then the third, obviously, objective is cash generation.

6:21 Goes without saying that if we achieve the first two, we will start to generate cash. We're also seeking to increase our EBITDA margin over the next three years, currently running just under seven. We're looking to increase that step by step over the next few years to eight, nine, and to 10%. It's also noted to change this, this this results period in the amount of, exceptional cash items previously... Previous management, and then us in our first period had to deal with high exceptional cash items such as legal fees with the FCA and restructuring cost redundancies, etcetera. But you'll see in the figures that Neil was presenting today that our cash exceptionals have reduced from from in the millions of pounds to a few 100,000. So that will also enable us to generate cash as we move forward.

7:14 There's a bridge here similar to what you've seen in the past. We just want to explain more... In more detail the the underlying growth story. Although the, sales in the first half of last year were 49,000,000, the margin was down at 33, so it clearly indicates that the sales weren't particularly of good quality. And it was built built into that with some artificial, sales in outlet and discontinued brands, categories, and and licenses. So we have calculated that the overall

7:46 base sale in last, period's first half was around 44,000,000. So in terms of real like for like sales, we've achieved this, period around an 8% growth rather than being flat simply because we're comparing like with like.

8:06 Turning to the future, I'm delighted to confirm that September and October have got off to a good start, and we're fully in line with our expectations. We're launching two new, brands, which we'll cover in the future slide in a moment. We're also focusing on new product, and Adam's got some great new stuff coming out over the next, few months, which will help to build our growth over... In our existing retailers over the next few months. The other thing to point out for the future is the extension and expansion of TikTok shop across Europe. As we covered in our previous presentation, TikTok shop has led our focus on on the digital marketplace and our ability to market our products.

8:52 It definitely has a dual effect by having TikTok shop working really well. We obviously grow sales, which is obviously important, but as important is that we get a halo effect from the marketing and the the exposure that TikTok shop gives us. And we've seen that in our UK retailers and US retailers as TikTok shop has been successful in different launches. We've seen growth of those particular SKUs in store there. So what's really exciting now is that as as TikTok expands through Europe, there are nine, I think, TikTok shop areas opening, geographies opening over the next, six or twelve months, including Germany, France, Spain, Ireland, Belgium, Austria, Netherlands, and Poland.

9:38 So that gives us, as I say, an, ability to grow ourselves in those areas, but more importantly or as importantly, the dual the dual effect and the halo effect to the retailers that were currently in in those territories hopefully will mean that they were able to grow their sales as well. So the the... There's very much a knock on effect all... Always round by the the success we've seen to date in TikTok shop.

10:05 This is probably an exciting bit for today to announce that, literally last week, we, launched BH and Freedom into Primark. This is a major collaboration for us and a new thing, for the business in this, current half year we're working on now. As you may be aware, when Adam and I returned, REVOLUTION had an entry price point, low cost alternative range under the brand name Relove. This had been around for several years and had gone through several iterations because various different management teams had updated it. We spent the first couple of months, fun enough, trying to update it ourselves, but Indians looked at each other and decided that probably the best thing was to start fresh, especially as we already owned two brands, BH and Freedom, but they were sitting dormant.

10:54 BH is a US founded brand that hit retail sales of over 100,000,000 in 2019. But after a change of ownership and then change of management, it spiraled into administration. REVOLUTION acquired it in 2022, but then with various things happening in the business, it was sat dormant, and it was never actually used. In fact, BH has a global social media community similar in size to REVOLUTION with over 7,000,000 followers, 3,700,000 on Instagram, and 1.8 in Facebook. So it has a has a real good strong foundation and base to build upon. FREEDOM, as some of you may remember, was a brand that Adam and I launched originally in 2014 alongside REVOLUTION. But back then, it was similarly priced to REVOLUTION. And because REVOLUTION took off with such a rocket ship, we decided back then to drop it.

11:46 However, it's now coming back as a lower price point, so there is this clear differential between it and REVOLUTION. As you can see from the imagery, these are actually images taken from within Primark. BEAUTY is a very bright and colorful brand. Think COLOUR POP, Too Faced, She Glam, whereas REVOLUTION is stripped back, sleek, and understated. Think ROAD, refi, and, Morphe. The business needs these type of low range, brands to be able to supply to discount retailers such as Primark and many others, but we also need them as a business to protect REVOLUTION's price points in the likes of Superdrug and Boots. The Primark collaboration is a great opportunity for us to test both brands and to test the product assortment we're offering.

12:35 We're already in discussion with various other retailers in Europe and The US to expand both of them, but we want to launch and and learn in Primark for the next couple of months before we decide on the assortments and which retailers to to work with. But we see both of these as an opportunity to grow over the next few years alongside REVOLUTION's return. Thank you, and please let me now hand over to Neil to take you through the financial highlights. Thank you, Tom. Good morning, everyone. I'm going to take you through the numbers for the first six months to 08/31/2026, the income statement, the balance sheet, and the cash flow. I'll also touch on what they tell us as we head into the all important second half of the year and beyond.

13:21 Back up, here's the highlights. Back at the full year results in July, we talked about FY '26 as a story of two very different halves. Well, the first half of this year shows that the second half recovery last year was not a one off. It's now the shape of the business to be profitable in both halves, and in fact, we expect a higher level of EBITDA in the second half of the year. The highlights of the first six months were adjusted EBITDA was a profit of £2,000,000 compared with a loss of £12,500,000 in the same period in the previous year. That's a swing of £14,500,000. And as we have... And we've now been EBITDA positive in every single month since September 2025.

14:09 That's come from two things. First, much better quality revenue with gross margin of 43.6%, up 11.4 percentage points. Secondly, a much leaner cost base with operating costs £9,300,000 lower, down by a third.

14:28 Reported revenue was broadly flat, but once you strip out last year's one offs that Tom was talking about, underlying revenue grew by 8%. And net debt was £25,700,000. That's £4,500,000 lower than a year ago and broadly where it was at the year end despite the usual working capital build ahead of peak trading. Turning to the income statement. Revenue was £48,400,000, 2% below last year's £49,400,000, but last year's first half included around £4,700,000 of sales that we are deliberately not repeating. Those outlet clearance sales, nonrecurring license income, and the discontinued brands and categories should be nosed out on an underlying basis of £44,700,000.

15:19 Revenue grew by 8.3%. By region, The UK returned to growth, up 1.7% to £15,600,000 as our UK digital channels recovered. The US was down 2.8% at £10,200,000, and rest of the world down 4% at £22,600,000. Both of those declines mainly reflect the brands and license income we've exited. And, we've won new customers in both our international direct and distributor channels. Online sales were up 22% driven by TikTok shop, and we see that as a really good lead indicator of brand health. Gross margin of 43.6% was significantly higher than last year's 32.2%, where margin was held back by clearance activity and heavy gross to net charges.

16:13 Encouragingly, it's also ahead of the second half of last year, so the result in the first

16:18 half was a result of better product ranges coming through with realistic forecasting and tighter stock management, so not a one off. Operating costs came down from £28,400,000 to £19,100,000. Within that, distribution costs were down 24%. Marketing was down a third, and admin admin costs were down nearly 40%. And that's the savings program we delivered in the second half of last year now fully embedded in the business. Below EBITDA, depreciation and amortization charges were steady at £2,300,000. Adjusting items, which is mainly restructuring and nonrecurring legal costs, fell from £1,700,000 to just under nought £300,000.

17:05 With the FCA matters successfully concluded and the refinancing completed, those costs have come down significantly, and they're no longer a significant cash drain on the business.

17:16 Net finance costs also fell from £1,700,000 to £1,000,000 after the refinancing, and as a as a result of the accounting for the modification of the RCF on that refinancing. Putting that together, the loss before tax was £1,900,000 compared with £18,400,000 last year, a huge improvement of £16,500,000. Moving on to the balance sheet, a couple of things here that I'd like to draw your attention to. First off, inventory was 2... £22,800,000, 8% lower than a year ago. It's up from the last year end when it was £19,000,000, but that's normal as we're building stock for pea trading and Christmas gifting.

18:02 But most importantly, it's fresher, more relevant stock, And you can see that in the stock provision, which has come down from £9,800,000 to £8,000,000 since the year end. As far as liquidity and funding is concerned, we have our £28,000,000 revolving credit facility, which runs to July 2028 with cash of £4,300,000. Net debt was £25,400,000, and that's £4,800,000 lower than a year ago and broadly in line with the year end. Finally, looking at cash flow, we started the half with £5,900,000 and ended it with £4,300,000 in the bank. And you can see on this chart the movements in the period.

18:53 Adjusted EBITDA contributed £2,000,000, and cash adjusting items were down to £300,000. That compares with £1,700,000 in the same period last year. So it's a much level lower lower level than we've seen in the previous periods now that all of the legal issues are out of the way, and we've completed the restructuring and refinancing. Working capital was close to neutral. We added £3,800,000 of inventory and £3,500,000 of receivables as we built for peak. That was funded by £7,100,000 of higher payables. Overall, we generated £600,000 of cash from operations compared to an outflow last year of £700,000. Spent £1,200,000 on capital expenditure, which were related to investments in retail fixtures or stands to support our space in our retail customers, and we made £1,400,000 of interest in lease payments.

19:52 Currency movements added 300,000. So cash came down by £1,600,000 over the first half. That's the normal seasonal pattern for us. The second half is when the stock we built turns into sales and cash. We expect the second half to be cash generative, and that's how we'll bringing the net debt down. So that's the financial picture for the first half, a profitable half, a much stronger gross margin, a lean cost base, and net debt heading in the right direction. September and October has been in line with the board's expectations, and we remain confident that we're trading at the top end of current market expectations for the full year. That's adjusted EBITDA of up to £6,600,000.

20:37 This morning, Zoos, our house broker, has also published updated forecasts, and that note's available on the investor meet company platform. And that for the first time, those forecasts are out to f y twenty nine, so for this year and the following two years. So I'd encourage you all to read the note. For our part, what I'd like to highlight is the shape of it. Steady top line growth building to 10% year on year, and very importantly, continued improvement in margin. On Zeus' numbers, adjusted EBITDA margin moved from

21:11 6.8% this year to over 8% by FY twenty nine, and adjusted EBITDA grows at a compound rate of just under 20% a year. That's exactly the progression we're focused on, a return to growth but profitable growth as well. So thank you. And with that, I'll hand over to to hand back to to Tom to summarize, and then we're happy to take your questions. Thanks, Neil.

21:36 Well, I think we've made it clear what our our strategy is and objectives are. We wanna get this business back into some clear growth and profitable growth. We've laid out a strategy of how we're gonna do that, increase productivity in existing doors, open new doors, etcetera, bring new brands in, have better MPD at a more accessible price point. It's it's a very straightforward, clear plan that the whole business understands and is working towards.

22:02 In by... In doing that, we wanna improve our profitability, and we've set clear targets on increasing both our gross margin and increasing our EBITDA percentage. Obviously, the effect of all that will be that we will then generate cash, which will allow us to reduce our overall debt. I think what's clear now is that we're past the turnaround stage. Last time we met with everybody, we were in the middle of a turnaround.

22:27 We're now past that. We're now in the rebuild stage, and we're very confident now about where we're going and what the future looks like. We're aware of the figures that Zeus have put in the market today, Neil mentioned, and we are very confident of hitting those numbers. All I have to say is that, you you have a passionate and motivated team here that are determined to do the things we've laid out and to get this company back to where it was previously, and we are absolutely confident we have the correct plans in place to achieve that. So thank you very much again for your time, and we're more than happy to answer any questions.

23:05 Perfect. Tom, Neil, if I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Simon, at this stage, sir, if I may hand over to you to chair the q and a with the team. And if I pick up from you at the end, that'd be great. Thank you.

23:42 Thanks, Jake. First question comes from Hannah. Looking forward, debt reduction will rightly be a key focus. What do you think is a normalized free cash flow margin for your business? And what size of annual free cash flow do you think can be achieved once the turnaround plan is completed? I think longer term, we... We're looking at... To get to that EBITDA margin up to double digit. And then free cash flow off that, that will comfortably cover our interest and CapEx payments, A lot of the new opportunities we're focusing on are much more CapEx light than we have done previously, and our interest payments are get... Getting lower as we reduce net debt. So you can work out from that that we can generate a a a decent level of free cash flow margin, and we'd we'd also expect the the... Those interest payments to come down as we reduce the net debt.

24:48 So we have got to make sure that we've got sufficient headroom to reinvest in the business and make sure that we get that return to growth and invest in marketing where necessary, but we're we're quite confident of seeing seeing that margin progression and free cash flow coming through. Thanks, Neil. Question from Brian. Where are your products manufactured? The majority of the products still come from the Far East, but we've got our own manufacturing facility in The UK. And we manufacture around 15, 20% of our products in The UK. All things like fixing sprays, primers, things that are non color based are all made in The UK.

25:36 Thank you. Three questions from Ash. Can you update us to debt maturity profile and any progress on refinancing? Refinancing. He's got a couple more, but I'll I'll leave you with that to start with. Our RCF runs through until 2028. Obviously, we'll have to refinance it at that point, but we're under no pressure from a cash point of view. We don't see having to raise any further cash. In fact, we're we're looking to reduce our debt, as Neil explained, if we achieve our aims in getting to a double digit EBITDA margin with with our interest relatively low and and and CapEx relatively low. Around half of that should be generating free cash. So we should be in a good position next year. Okay.

26:22 Can you give us an update as to anything that you're worried about seeing included in the autumn budget measures and how they might affect REVB? We don't see any major issues coming up with the budget. I think that it's fair to say that in times of economic hardship, you know, the the people tend... Generally tend to turn to more mass lower lower price point products generally, not just in makeup, but but in makeup. So, the price points we're at in Boost and SUPER DRIGUE FOR REVOLUTION and then the new price points we're bringing out for BH and Freedom, I think, allow us to remain confident that... So there'll be a demand for our products even through more difficult financial times in The UK.

27:09 Thank you. Would would the board ever consider a sale of the company?

27:14 That's certainly not on the agenda. Adam and I came back to rebuild this business. As people probably know, we we reached nearly 200,000,000 turnover before we left the business in 2022, so we see no reason why we can't rebuild at that level again. We've we've learned from the past, and, we're we're actually motivated and determined to to rebuild it. Thank you. How much of h two twenty six revenue will be, do you think, clearance or discontinued brands? And what do you expect underlying h two twenty seven revenue growth to be on a like for like basis?

27:54 There there... There's very little now reduced stock sales. We've put in in place various programs to deal with overstocks and end of line stocks, which are not as, detrimental to the gross margin. So so so we're sort of... I think the the h two will be what we call clean, better quality sales similar to the first half of this year. So don't think we need to worry about future detrimental, reduction in gross margin. As alluded to, you know, we've had a... Have had a few headwinds in terms of some lost space here and there that unfortunately were decided upon before our return, but we've we've dealt with them as they come along. We're now, I think, at the end of of sort of any any negativity, and we're now moving, you know, to a...

28:40 To an upward trend in in every area, whether it be growth and profitability and cash generation. We don't see... Really see any major negatives. I'm sure there are a few further hurdles that we're gonna have to navigate, but, there's nothing on the horizon that we see at the moment that we're particularly concerned about. We will now continue to grow this business. It's, we've made it clear, and the and the numbers make it clear that we're targeting double digit growth in every year for the next next three or four years. Thank you. Second question from Milo. Given the size and importance of The US market, how should we think about the geography returning to growth and becoming a larger part of the mix? REVOLUTION That's a good question. I think if I'm totally honest, the one area of the business that Adam and I had the most concern about when we returned thirteen months ago was The US simply because we're not in The US, and we've got no control over it from here or, you know, certainly less less control of it from here than we have our own markets.

29:43 And, also, of course, it's one of the biggest markets. So so, yeah, we... We've spent a lot of time thinking and working on how we can improve both the way we operate in The US and how we can, therefore, improve the business in The US and start to regrow it. We've got various plans in place. We'll we'll probably take you through them in more detail in the next presentation, but I can assure everyone that growing in The US has been a major focus for us. We've got some new retailers coming on board. Kroger is is probably the biggest one, but there are lots of smaller retailers that we're talking to. Plus, we're already got some interest from from BH. Obviously, as I mentioned earlier, the BH brand was originally a US native brand. It's got a huge following still in The US, and several retailers are interested in bringing it back. So we're we're on a rush to do that because we wanna make sure that we've got the right offering at at the at the right price points. But there... There's plenty of opportunity now for us to grow the business in The US, and we're we're looking at various things at the moment, negotiating various deals in terms of distribution and structure in The US to make sure that we've got a a a sound of foundation in The US to build from in the future. But I can assure everyone that The US is... Was one of our our major attentions that we've been focusing on since our return.

30:58 Thank you. Second to last question, I think. Can you update on what you think changes to provisions might be? Thanks. General, we're not expecting any changes to provisions between now and the year end in in particular. The stock provisioning, like I talked about earlier, is in a much better place, and and I and I think that's gonna continue in in that vein. So we're gonna see less of that impacting the gross margin in the second half of this year compared to the first half of the of the previous year and the second half of the previous year. So no real changes.

31:44 Okay. Thank you. Time for one last question. You mentioned TikTok shop expanding into new European territories. Are those European territories virgin ground for REVOLUTION, or are they places where you've already got business? No. We we... I think I mentioned that. We we... We've already got bricks and mortar coverage in the majority of those territories. We've got quite good coverage, in fact, in in Germany, Italy, Spain, Netherlands, Poland. So TikTok shop is is is a great opportunity for us to, as I said, to sell product but also to to to demonstrate and have a window to the world of our products that we're launching so that there's a halo effect across those retailers we're already in. So, yeah, it's a dual effect.

32:34 Great opportunity for us in both site... Both both areas. Okay. That's it for questions, guys. Thank you very much for doing that. Tom, perhaps you'd like to sum up the takeaways that you'd like people on this call to bear in mind. Thank you. Thanks, everyone, for their support and for sparing with us. Truly believe that we are back. REVOLUTION is now in in its growth stages. We've got a clear plan, and we're all very, very motivated and passionate about what we're doing and believe that this business is is only going upwards now. Thank you very much. Perfect, guys. That's great. If I may just jump back in there, and thank you very much indeed for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback?

33:27 On behalf of the management team of REVOLUTION BEAUTY GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.