According to an AFX report, the company said that in order to maintain its chances of making a move on the market, the next step would be to underwrite certain transaction costs through Blue Star Capital, a targeted business investment company in which Reflexion chairman Nigel Robertson is a major stake holder.
News of the financial warning was, as expected, not well received on the London Stock Exchange. Currently the company shares are trading at £3.00, down 70 per cent from its previous close of £10.00, prior to the announcement.
Although Blue Star Capital does not have any shared capital in Reflexion Cosmetics, a cash break from the company will be a life-line as it struggles to stay afloat.
Many analysts had tipped Reflexion Cosmetics as being in a good position to capitalise on underperforming cosmetic businesses in the vast UK industry. In November last year, when the company announced first six month losses of €215,790, the company said that it was still very much focused on making acquisitions.
Initially the plan was to focus on cosmetics companies in the UK market, where it listed on the stock exchange back in February, 2004, with a view to developing both the domestic and international markets.
The colour cosmetics, hair care and skin care sectors were to be the initial targets, with companies or brands considered to be undervalued and representing good value for money would be the primary focus
However, after continued studies of the market and lengthy negotiations, the first and all-important acquisition remains elusive, suggesting that market conditions still might not be ideal for the company's ambitions.
"This type of strategy has already been carried out in the food industry, by companies such as Premier Foods, which has achieved great success buying up under-performing brands from leading companies such as Nestlé and Unilever," said Datamonitor market analyst John Band back in November, 2004.
"Undoubtedly similar opportunities exist in the UK cosmetics sector at the present time, both with regards to brands and smaller companies. However, traditionally cosmetics companies have either dropped or re-branded under-performing brands, something that could make it harder to pull off this kind of strategy in this segment," Band added.
The questions on everyone's lips now is do these opportunities still really exist and how much longer Reflexion Cosmetics can survive without making its first acquisition.