Faith in Nature has plunged into the red as a software upgrade caused “significant disruption” at the eco personal care brand.
In response, the business – which sells a range of vegan and cruelty-free haircare products and soaps, as well as laundry and washing-up liquid – secured loans and new investment totalling more than £5m to shore up the balance sheet and support its growth plan, newly filed accounts have revealed.
Turnover increased 11% to £17.6m and gross profits 12% to £11.5m at Faith in Nature during the year to 30 June 2024. The company said this reflected a “huge effort” in the first year following significant structural changes being made across all parts of the group.
However, the implementation of a new ERP (enterprise resource planning) software system led to around a quarter of orders from customers not being processed over a six-month period, resulting in extensive one-off losses.
Faith in Nature slumped to a pre-tax loss of £2m, compared with a small £47k profit in the previous year, the Companies House accounts showed.
It called the result “disappointing” but said it did not represent the underlying trading of the business with significant demand being left unfulfilled.
The business continued to grow sales in the new financial year, but the directors recognised a need to bring in new funding to strengthen the balance sheet and support the next phase of development, the accounts said.
Faith in Nature secured £1.2m of convertible loan notes prior to year end, and a further £600k in the new financial year. Additional investment came from a group of high net-worth investors and an agreement was put in place to complete a fundraising of £3.5m, including a minimum of £2.5m of equity financing.
The directors expected the company to return to profitability in the future and confirmed that further financial support would be provided by the major shareholders if needed. The accounts added the directors also remained confident the business would continue to be a going concern.
However, they warned there was no guarantee the growth plans would be successful or that shareholder support and continued investment from third parties would remain available. “Therefore, a material uncertainty over the company’s ability to fulfil its debt obligations in the short term remains,” the accounts said.
As a result, the auditors of the accounts were forced to conclude a “material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern”.
Net debt at the business more than doubled to £2.3m by the end of the financial year, the accounts also showed.
Faith in Nature continued to grow sales and gross margins in the new financial year. It also completed a relocation of all operations to a single manufacturing site.
The company said it had successfully rebuilt its stock profile following the disruption of FY24 and was now operating at 99%-plus service levels with customers.
SIgnificant investments
Chairman Alexander Rind told The Grocer: “During the year ended June 2024, Faith in Nature made a number of significant investments in building a best-in-class operation to underpin sustainability-driven manufacturing of personal care products in the UK – unique in fact for an SME – and now has a site that is worth in excess of £12m.
“These material commitments, including significant operational spend while the site commissioning was finalised, were made ahead of, but helped to secure, the financial commitments disclosed in the accounts and underpin the company’s growth strategy, which is now being successfully implemented. The business, with its new investment, continues to grow and the board remains positive about the company’s future prospects.”
Faith in Nature was founded by Rivka Rose in 1974 as a natural, cruelty-free and vegan beauty brand. Today it supplies the likes of Boots, Waitrose, Holland & Barrett, Sainsbury’s, Amazon, Ocado, Whole Foods Market and Booths.
The brand claimed a world first in 2022 when it appointed ‘nature’ to its board, effectively giving the natural world a legal voice in the running of the business.
Faith in Nature raised more than £750k from 800-plus crowd investors in 2023, representing the first time the company sought outside funding in its 50-year history.
“We have built our business around people, planet and profit and this now features monthly at our board meetings, where we review progress against our KPIs and strive to make the right decisions that balance all three pillars – having put nature on our board to offer a voice and a vote, we are proud of this world-leading initiative as it reminds us constantly of our DNA and values,” the latest accounts said.
“The board and shareholders are highly motivated to growing the business in a way that respects the needs of the planet and that supports our ambitious and growth-minded business.”
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