Revolution Beauty Group acquires Medichem Manufacturing for £23m
(REVB ) has acquired the beauty supplier Medichem Manufacturing in a £23m deal which the company expects to be ‘significantly earnings enhancing’ in FY23.
Revolution, a multi-brand mass beauty innovator which floated on London’s junior AIM market earlier this year in July 2021, said the £23m deal marks the company’s first acquisition and provides the Group with its own, fully-owned and vertically integrated manufacturing business.
The acquisition of Medichem Manufacturing, which the company expects to be significantly earnings enhancing for the financial year ending 28 February 2023, will enable the Group to enhance its margins, increase control of its supply chain as well as enhance productivity.
Medichem Manufacturing is a long-standing supplier of haircare and skincare products to Revolution Beauty, manufacturing all products from its UK facility. During the 2020 financial year, the Company reported audited revenues of £13.4m and profit before tax of £1.6m.
‘Given the strong year to date growth in Revolution Beauty’s haircare and skincare categories, Medichem has continued to perform well in 2021,’ the Company explained to investors today.
Medichem has a limited number of customers other than Revolution Beauty - a partnership which has contributed in excess of 90% of Medichem’s revenue in the calendar year to date.
The option to acquire Medichem was disclosed at the time of Revolution Beauty’s IPO.
£23m will be payable in instalments, with £7m payable in cash on completion from its current cash resources, and the balance payable in equal annual £4m instalments over four years.
The Board of Revolution Beauty said it expects Medichem to contribute around £3m of incremental pre-tax profits to the Group for the financial year ending 28 February 2023.
Commenting on the acquisition, Adam Minto, Chief Executive Officer and Joint Founder of Revolution Beauty Group said: “The intention to acquire Medichem was disclosed at the time of our IPO, and I am pleased to announce today that we are delivering against our strategy and exercising our option to acquire this highly-complementary manufacturing business.”
He added, “By vertically integrating Revolution Beauty in this way and taking manufacturing in-house for the first time, we will have even more control of our supply chain, allowing us to improve productivity, our cost base and margins, while being earnings accretive.”
Last month, Revolution Beauty recorded £78 million of revenue in the six months to 31 August 2021, representing a 35% increase from the same period in 2020. Following the strong 1H21 sales growth, the Group said it remained ‘confident’ in achieving full year market expectations.
During Q121, Revolution Beauty launched into 1,800 Target stores throughout the US with its Makeup Revolution brand. The Board said it expects this expansion to continue and build into an influential multi-brand and multi-category relationship with Target. It said the US remains on course to become Revolution Beauty’s biggest country by revenue globally in 2021.
Elsewhere in the US, the Group has continued to see strong sales growth through its beauty chain Ulta, with the US market showing fast ‘consumer bounce back’ in its stores.
View from Vox
On its first day of dealings back in July 2021, Revolution Beauty Group successfully executed a £300 million placing as part of its initial public offering on London’s junior AIM market.
At the time, the global mass beauty and personal-care company, which sells products that are primarily vegan (around 70%) and 100% cruelty free, placed 69.2 million new ordinary shares at a price of 160p, leaving the company with a market capitalisation of around £495m.
The Group believes its London listing will provide the business with the permanent capital needed to support its long-term growth strategy and to enhance its profile and visibility.
Since launching in 2014, Revolution has seen rapid growth with a reported CAGR of 99% from FY14 –FY19 and has generated revenues in the year to 31 December 2020 of £137.5m.
According to data reported by City A.M, Revolution Beauty, which partners with Superdrug and Boots, generated £157.6m in revenue in the fourteen months to 28 February 2021. The Group holds a retail footprint of around 11,000 doors across the UK, USA and internationally.
In a recent Q&A with Vox Markets, Revolution Beauty discussed its upcoming IPO. CEO, Adam Minto, talked through the principle behind the key USPs and a go-to market strategy.
Follow News & Updates from here:
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.