Research: Consumer
Revolution Beauty’s (REVB’s) FY24 results demonstrated the new management team’s progress on its updated strategy. Although revenue growth was relatively muted at c 2%, the streamlining of the brand and product portfolio and improvement in inventory turnover led to a swing back to profitability. Due to REVB’s refocused product portfolio and stock clearance, management expects FY25 Masterbrand run-rate revenue to be c £167m, although with a return to revenue growth in H225. Adjusted EBITDA is expected to be ‘at least in line’ with FY24 but H225 weighted.
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Revolution Beauty |
Returning to profitability
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Personal care products |
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10 July 2024 |
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Revolution Beauty’s (REVB’s) FY24 results demonstrated the new management team’s progress on its updated strategy. Although revenue growth was relatively muted at c 2%, the streamlining of the brand and product portfolio and improvement in inventory turnover led to a swing back to profitability. Due to REVB’s refocused product portfolio and stock clearance, management expects FY25 Masterbrand run-rate revenue to be c £167m, although with a return to revenue growth in H225. Adjusted EBITDA is expected to be ‘at least in line’ with FY24 but H225 weighted.
Return to profitability
REVB’s FY24 results reflected the benefits of the revised strategy, as it returned to profitability. Revenue grew 1.8% to £191.3m (FY23: £187.8m), as declines in the UK and US were offset by a 23% increase from the rest of the world, driven by a strong performance in the Middle East and Nordic regions. Importantly, the improvement in inventory turnover, lower freight costs and exiting lower-margin products and brands resulted in a 5.8pp boost to gross margin to 46.2% (FY23: 40.4%). Further down the P&L, the group returned to profitability as the benefits from the three-year £10m cost saving programme begin to materialise. Adjusted EBITDA was £12.6m (FY23: £7.5m loss), adjusted EBIT was £7.4m (FY23: £23.4m loss), while adjusted PBT was £4.3m (FY23: £26.7m loss). REVB finished FY24 with net debt (ex-lease liabilities) of £23.1m (FY23: £20.7m), despite exceptional cash costs in the year of £4.7m, mainly relating to legal fees.
Reigniting the Revolution strategy progressing
At REVB’s capital markets day in February, management set out its ambitions to become a top five mass beauty brand by 2030 through its Reigniting the Revolution strategy, targeting revenues of £1bn in retail sales. The new management team has repositioned the business by streamlining its brand and product portfolio, focusing on the Revolution Masterbrand and core categories. The expansion of its distribution network has helped the company enter new geographies, while a more focused purchasing strategy is starting to deliver operational efficiencies and improvements in service levels to its retail partners.
Valuation: Discount to peers
REVB has seen a 28% fall in its share price in the year to date compared to the peer average rise of 5%. The company trades on EV/EBITDA multiples of 8.0x for FY25e and 7.1x for FY26e, substantial discounts of 37% across both years to its global beauty peers. As it continues to deliver against its guidance and strategic targets, we believe this gap could narrow.
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Consensus estimates
Source: LSEG (priced at 26 June 2024) |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Energy & Resources
Kolibri Global Energy (KEI) has provided an update on operations and revised guidance. It now guides to FY24 revenue of US$57–62m and EBITDA of US$43–48m on average production of 3,200–3,700boepd. KEI plans to start drilling its next three wells in the first half of August. These wells will have longer lateral lengths, which should result in better well economics. We have revised our estimates to reflect the latest guidance and operational update. Our valuation of KEI falls slightly to US$6.8/share. The announced intention to initiate a share buyback, as well as the recent inclusion in the Russell Microcap Index, should provide additional support to the shares.