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InnovaDerma PLC (IDP)

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Tuesday 24 September, 2019

InnovaDerma PLC

Final Results

RNS Number : 4178N
InnovaDerma PLC
24 September 2019
 

InnovaDerma PLC

("InnovaDerma", the "Company" or the "Group")

Final results

Disciplined Execution of our Strategy Delivers Strong Financial Performance

InnovaDerma (LSE: IDP), a UK developer of life sciences, beauty and personal care products, is pleased to announce its audited results for the year ended 30 June 2019.

Financial Highlights

 

FY2019

FY2018

% change

Revenue*

£12.9m

£10.7m

+21%

Gross profit

£8.1m

£6.1m

+32.8%

Gross margin

63%

57%

+600bps

Profit before tax

£1.4

£0.7

+100%

Basic EPS (pence)

7p

3p

+133%

Cash and cash equivalents

£2.0

£1.9

+5%

*on a constant currency basis

Operational Highlights

·      Significantly increased national distribution of Skinny Tan - in c.2,300 stores (FY2018: c.800)

·      Highly successful launch of Wonder Serum - No.1 SKU (Stock Keeping Unit) in its category in Boots regularly since launch

·      Roots secured several new retail distribution channels, including Tesco, and multiple product extensions launched

·      DTC customer base grew strongly, delivering record number of orders in H2 2019 with revenue up 22% on the previous year

·      Multiple new international retail and distribution opportunities secured for Skinny Tan, Roots and Prolong

Outlook

·      A very positive start to the new financial year with current trading being in line with management's expectations

·      Skinny Tan will benefit from a full-year contribution from ranging in Boots in FY2020

·      Significant new retail and DTC channels added in UK, US and Australia and distributors appointed in multiple regions globally expected to contribute to future growth

·      Roots development will be accelerated by a new social media campaign and the roll out of new products

·      Major new product launch with multiple SKUs intended to disrupt a large new category in H2 generated by the in-house team for DTC and retail channels

·      Prolong expected to make a significant contribution to current FY driven by DTC channel and multiple distribution contracts signed covering eight countries with minimum-order quantities

·      Implementation of a new ERP to facilitate management of rapid growth

·      Supply chain being consolidated to ensure inventory management has the capability to support expected growth

Haris Chaudhry, Executive Chairman of InnovaDerma, said:

"I am very pleased to report an excellent set of results and a year of strong operational progress.  Despite retail headwinds, we have delivered an impressive 21% rise in revenue and doubled profit before tax with good gross margin improvement.  Our performance has been supported by the disciplined execution of our strategy, continuous product innovation to disrupt our markets and leveraging consumer desire for unique and high performing products. 

"We are excited about the opportunities that lie ahead, supported by a near term major launch in a new category, fast-growing retail footprint and with a robust foundation in place, the Group is well placed to generate further growth.  The year has started very positively, and current trading is in line with management's expectations."

Further enquiries:

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Further enquiries

InnovaDerma

Haris Chaudhry/Joe Bayer

Kieran Callan

 

+61 (0)3 9863 8030

finnCap Ltd

Geoff Nash/Giles Rolls/Kate Bannatyne

Alice Lane - Corporate Broking

 

+44 (0)207 220 0500

www.finncap.com

TB Cardew

Shan Willenbrock/Tom Allison

Joe McGregor

 

+ 44 (0)20 7930 0777

[email protected]

 

 

About InnovaDerma:

 

InnovaDerma PLC (LSE: IDP) specializes in the research, manufacture and marketing of clinically proven products in life sciences, beauty and personal care products. InnovaDerma has presence in Europe, US, Australasia, North Asia and Africa. 

Executive Chairman's Statement

I am pleased to report an excellent set of results and a period of significant progress underpinned by our execution of three clear strategic aims as outlined at our interim results: to leverage commercial opportunities secured with retail partners and distributors; to grow our DTC channel and focus on new product development.  This focus has enabled us to deliver strong growth across our key performance indicators.  Revenue increased by 21% to £12.9m and profit before tax doubled to £1.4m. These results were achieved in the context of a volatile economic environment and a challenging retail sector. 

 

Retail partners and distribution channels

We have well-established and deep relationships with our retail partners and distributors enabling us to range our brands in the UK and internationally.  During the year, Skinny Tan secured ranging in more than 1,300 stores in Boots and together with Superdrug, our core brand is now available in more than 2,000 stores in the UK. Roots, our haircare range has extended its distribution and is now available in 1,800 stores in the UK (FY2018: c.400) and now sold in Canada.  Charles + Lee, our men's skincare range has received positive feedback internationally and completed its entry into New Zealand and secured opening orders in South Africa.  In our Life Sciences business, Prolong successfully secured two distribution agreements in Hong Kong and eight Middle Eastern countries and established minimum-order quantities in excess of 6,000 devices for the first contractual year.

 

Project innovation

Accelerating growth through innovation is a key driver of the business. Consumer tastes, trends and expectations are continuously changing. There is a growing trend towards more natural, organic and highly effective ingredients which is influencing the pace and the way in which we innovate.  Our disciplined execution has delivered highly successful new product launches including Wonder Serum by Skinny Tan which combines self-tanning technology, with anti-aging, anti-oxidant and hydrating skincare ingredients.  The product was very well-received, achieving positive often five-star reviews from our customer base and is regularly the best-selling product in its category in Boots.  Roots, our haircare range also benefitted from new product development and the brand now has 14 products for a range of different hair types. Charles + Lee, our affordable alternative premium range of men's skin care products is growing in popularity and we have extended the product range to include shave care to capitalise on the growing trend in men's grooming.

 

DTC channel

Our DTC channel is an important platform to engage directly with our customers and is key to our marketing campaigns. Digital and online shopping has changed the retail industry and since InnovaDerma was founded, our strategy has always embraced the opportunities presented by the digital transformation across marketing, social media and e-commerce.  Our digital strategy has differentiated and strengthened our business. In H1 2019, following changes in the Facebook algorithm, we implemented a new DTC strategy which encompasses complimentary channels such as Instagram, Google, Ad Roll and Taboola to provide us with depth and breadth of consumer engagement. This has enabled us to deliver strong growth of the DTC channel with our customer base growing by c.50% to more than 600,000.  Our DTC channel also delivered a record number of orders in H2 2019 and revenue is up 22% on the previous year. 

 

Growth strategy

We delivered strong results, with solid execution this financial year. The Board believes there are significant opportunities to grow the business and our focus in FY2020 will be based on the following initiatives to generate further growth over the long term:

 

·      Skinny Tan performed very well in Boots and we will seek additional ranging and increased store depth as the category review process commences. This will be underpinned by the benefit of having a full year revenue contribution from the account.  Our core brand will bring a number of innovative new products to market during the year to ensure the brand remains at the forefront of category development and to capitalise on the success of products such as Wonder Serum, which demonstrates the ability of the brand to compete effectively in skincare and skin conditioning;  

·     Superdrug will launch an exclusive Skinny Tan limited edition range in time for Christmas 2019 and also create a major feature around a specially designed gift pack;

·     The DTC channel will receive major investment through the addition of Artificial Intelligence, a 360-degree strategy for comprehensive consumer engagement and contracting of a proven digital sales platform to drive revenue. This is a multi-market strategy covering the UK, US and Australia;

·     Roots will receive major marketing investment to capitalise on the increase in store presence in Boots. This will be supported by the roll out of new product development;

·    In international markets, Roots will continue to build its presence in existing and new geographies including India and the EU through our new distributor relationships;

·    Charles & Lee will continue to build in Australia and New Zealand driven by a strong pipeline of new product development. New opportunities will be developed in international markets. In addition, we will continue our discussions with a key UK retail partner for a launch in H2. Charles & Lee is in the process of being launched in the US and UK markets through our DTC channel. We believe there is a strong fit between the brand and social media as a method of engaging with consumers; and

·      Innovative new product with multiple SKUs in a new category on the topical side of our business is planned for launch in H2.  The product is to be launched with an initial 12 SKUs and has been formulated and designed with the intention to disrupt a large category. Our new brand has been generated by the in-house new product development team.

 

People

On behalf of the Board, I would like to thank the highly dedicated team who worked so diligently to deliver this strong year of continued growth for the business. I am always impressed by their hard work, creativity and commitment to our business.  In order to sustain our growth trajectory, the business has invested in additional personnel for our DTC channel, in addition to retail management in the UK. This ensures we have the skills and capacity to deliver on the strategies and plans we have developed.

 

Outlook

The new financial year has begun very positively, and current trading is line with management's expectations.  We look forward to a year of significant growth both in terms of revenue and earnings.  We are excited about our new product launches, especially the new category we will be entering later this year.   This combined with our expanded retail and DTC channels, both for topical and life science products, gives us much confidence in the business and its future growth opportunities.

 

CEO Statement

The period under review marked a strong year of progress for the Company. We have secured new distribution channels in the UK and internationally, released category leading products and strengthened our digital platform.

 

Topical

 

Self-tanning

The growth of the Skinny Tan has continued, with the brand securing the number two or three self-tanning brand in Boots (depending on the period) and the exclusive Wonder Serum product regularly being the number one SKU across the total category. The online customer community has also grown, particularly on Instagram and the business has implemented a 360-degree multi-platform strategy to ensure we exploit all growth channels in the DTC environment.

 

Skinny Tan's sales for the period to 30 June 2019 has grown significantly. Sales through the DTC channel was up 22% year on year which reflects the strength of our DTC model that has underpinned the significant growth of Skinny Tan since it was acquired by the Company in May 2015. The number of SKUs increased from 45 to 58 during the period. These new products are being progressively rolled into distribution which will support further growth during the new financial year.

 

Off the back of the fantastic success of Wonder Serum, additional new product development is being undertaken in the serums format to bring new and additional product benefits to consumers. It is essential that Skinny Tan remains at the forefront of the bronzing category and is seen as an innovator. 

 

The brand continues its transition from bronzing-only to an emerging beauty brand and it is targeting a much larger market and year-round utility through developing new products aimed at a wider demographic.

 

The international distribution of Skinny Tan has been an area of specific focus as it represents the next major growth opportunity for the brand.  Post period end, Skinny Tan entered into a new DTC marketing agreement in the US with a major digital marketing organisation. It has also relaunched in Australia via our DTC channel with encouraging early results. Our Canadian distributor is seeking distribution for the 2020 season and in Europe discussions are under way to potentially launch Skinny Tan with a new distributor in certain regions.

                

Haircare

Roots continues to develop as a premium haircare range which assists in reducing hair loss.  It has delivered consistent revenue throughout the year achieving one of our key objectives of offsetting the seasonality of Skinny Tan. Additionally, unlike Skinny Tan, it has global applicability providing a huge potential target market.

 

The brand now has distribution in Boots, Superdrug, Tesco and Asda. In the case of Boots, its shelf presence was doubled, and new SKU's were added in the range review which went live in store in July. This is a major vote of confidence in the brand and we have planned a comprehensive marketing support programme to fully capitalise on this opportunity.

 

Roots has continued to evolve and has launched new products to cater for both coloured hair, with a 'Protect' range, and specific hair types such as curly hair. The 'Curls' product forms part of the Boots range expansion. The brand now has 14 (up from the original five) products in total providing a comprehensive offering to meet the needs of consumers across a wide range of hair types and conditions.  

 

Roots was launched into its first retail distribution in Canada this year and our partner there is pursuing additional opportunities. It is also close to completing registration for the Indian market and opening orders will be received as soon as this has been finalised. 

 

Skincare 

Charles + Lee is our affordable alternative premium range of men's skin care products and has had a breakthrough year in FY2019.  The Company launched Charles + Lee initially in 30 of Myer's stores (Australia's largest department store chain) and then followed up with a hugely successful Christmas gift pack. This earned it an extension to all stores. The brand went on to secure ranging in Australia's largest Beauty retailer Priceline (with approximately 450 stores nationally) and Terry White Chemmart, a retail pharmacy chain in Australia.

The brand is demonstrating that it has international appeal having successfully completed its entry into New Zealand and secured opening orders in South Africa. The registration process for the Indian market is under way and opening orders will be received as soon as this is finalised.

In the UK we have had extensive discussions with our key retail partners with a positive response. We will continue to develop these opportunities with the objective of converting them in FY2020.

The brand continues to innovate and has added a number of exciting and very well received products during the year. The shave range and the hair and body wash have been particularly successful. The range now consists of 16 SKU's and three different gift sets. 

 

Life Sciences

 

Prolong

Life Science has made significant progress throughout the period. Prolong delivered very promising revenue growth with average gross margins in excess of 65% during the period. The Company recommenced marketing for Prolong in USA and Australia in Q2 of calendar year 2019 which has created momentum and supported our revenue generation.

 

The Company had been negotiating exclusive contracts with distributors worldwide throughout the period.  As a direct result, we have signed two major distribution agreements in Hong Kong and eight Middle Eastern countries and established minimum-order-quantities in excess of 6,000 for the first contractual year.  The Company expects to secure more distribution contracts throughout the current FY which will support incremental and strong revenue generation combined with increasing DTC sales.

 

Outside of the US, Australia and New Zealand where the Company already has regulatory approvals, it undertook regulatory approvals process for Hong Kong, China, India, Canada, UK, Europe & GCC countries. The Company's objective is to broaden its distribution where it has regulatory approvals thereby growing Prolong's revenue and profit base through the incremental distribution contracts and DTC channels.

 

GrowLase

The Company has secured inventory of its FDA-cleared hair loss helmet, GrowLase, during the period and is creating various online platforms to enable it to generate scale.

 

As part of ensuring the product remains an attractive proposition to its target audience, is competitive amongst other hair loss devices and to ensure recurring sales, the Company embarked on two separate projects:

·      Obtaining visual-evidence of progress amongst dozens of men and women suffering from hair loss through a third-party-managed process using GrowLase.  Before and after images will then be used in all our marketing

·      Designing a new wet-products regime with GrowLase branded shampoo, conditioner, day serum and spray.

 

Both projects are expected to complete in the first half of this financial year with the objective of bringing the expanded range of product lines under the GrowLase brand to a far wider and geographically diverse client base through our DTC platform and distribution channels globally and adding annuity streams through repeat purchases after the initial purchase.

 

As our distribution channels grow in Life Sciences and begin to contribute a material level of annualised revenue and profit, the Company would seek to acquire new products that would benefit from its DTC platform and distribution channels.

 

Finance Director's Review

 

Overview

The Group delivered a strong revenue performance, driven predominantly by our UK DTC platform and our retail channels.  In addition, Roots contributed strongly in the year under review. The key focus for the past twelve months has been supporting sales growth through DTC customer acquisition, major new product development and rolling out planned launches. Group revenues grew 21% to £12.9m (FY2018: £10.7m).  Profit before tax rose by 100% to £1.4m (FY2018: £0.7m).

 

Operating Results

Gross margins increased 600bps from 57% in FY2018 to 63% in the financial year under review. The stronger DTC channel revenue mix as against retail sales in Skinny Tan, drove higher returns. The successful launch of new products Wonder Serum and Coconut Water spray generated a higher sales basket size than previously achieved.

 

Marketing expenditure was £3.7m, 60% higher than the previous year (FY2018: £2.3m) driven by launch and promotional costs for the Boots roll-out, continued support for Superdrug, other new retailers and a strong drive on DTC customer acquisition and re-marketing. As we highlighted in the half year report, the DTC channel was presented with significant technology challenges as major platforms devised higher charges for less promotion. We also highlighted a change in our approach which was rewarded with very strong DTC revenues in the second half, a combination of better strategic spend and new product offerings setting the pace. Our DTC customer database grew significantly, both in the UK and the US, with the business having just over 625,000 customers, up from 422,500 a year ago. As highlighted previously, we see this as a critical asset for the generation of future revenue for the business. The Company has taken a conservative approach to valuing the customer list intangible assets carried on the balance sheet.

Staff costs reduced slightly, with a reduction in director payments and a move to replace higher salaried cost personnel with better support staff. Administration costs were only 4% higher at £1.5m over the comparative period last year.

Revenue for the year was slightly impacted by the occurrence of the last two DTC trading days falling on the weekend. Orders were placed however, as they were not delivered, the Company held over the resulting revenue and profit. The impact of £122k in revenue and £68k in profit will flow into FY20.

Cash and net debt

The Group remains in a strong cash position and continues to carry no external debt. Cash and equivalents balance were £2.0m as at 30 June 2018 up from £1.9m in the previous year.  Inventory levels reduced to £2.4m (FY2018: £2.9m) as a result of better inventory and supply chain management. Trade and other payables increased to £3.0m (FY2018: £2.3m) with Receivables increasing to £3.3 (FY2018: £1.9m) as a result of strong season opening Boots and Superdrug sales.

 

Taxation

The Group has recognised a tax expense of £0.4m against profit (FY2018: £0.3m). The effective tax rate of 28% is a reduction over last year (FY2018: 38%) due to the strong performance in the UK market. The Group has recognised a small timing difference as a deferred tax liability.

 

Dividends

The Board has elected not to declare a dividend at this time.

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019

 

 

 

 

Year ended 30 June 2019

Year ended 30 June 2018

 

Note

£

£

Revenue

7

12,851,835

10,699,311

Cost of sales

 

(4,763,366)

(4,607,346)

Gross profit

 

8,088,469

6,091,964

 

 

 

 

Other Income

 

19,859

81,715

Marketing expenses

 

(3,683.649)

(2,323,278)

Listing expenses

 

(48,489)

(36,256)

Wages & salaries expenses

 

(1,458,813)

(1,698,460)

Administrative expenses

 

(1,506,218)

(1,446,622)

Profit before tax

 

1,411,159

669,064

 

 

 

 

Income Tax expense

6

(398,612)

(254,869)

 

 

 

 

Net profit for the period

 

1,012,547

414,195

 

 

 

 

Other comprehensive income

 

(49,712)

(16,561)

 

 

 

 

Total comprehensive income for the period

 

962,835

397,633

 

 

 

 

Attributable to:

 

 

 

Owners of the parent

 

826,227

291,098

Non-controlling interests

 

136,608

106,535

 

 

 

 

Basic & diluted profit/(loss) per share

28

£0.07

£0.03

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

 

 

 

As at 30 June 2019

As at 30 June 2018

As at 30 June 2017

 

Note

£

£

£

Current assets

 

 

 

 

Cash and cash equivalents

8

2,043,048

1,906,215

207,301

Trade and other receivables

9

3,295,255

1,918,982

1,781,773

Inventory

10

2,364,530

2,873,533

2,258,989

Prepayment and other assets

11

314,210

180,139

114,705

Total current assets

 

8,017,043

6,878,868

4,362,768

 

 

 

 

 

Non-current assets

 

 

 

 

Property, Plant and Equipment

 

53,455

45,197

127,199

Intangible assets

12

6,578,562

5,694,469

3,645,198

Other assets

 

17,186

30,368

14,031

Deferred tax asset

13

234,329

158,583

115,905

Total non-current assets

 

6,883,532

5,928,617

3,902,333

Total assets

 

14,900,575

12,807,485

8,265,101

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

14

2,957,136

2,309,132

2,419,332

Current tax payable

14

1,202,729

638,778

501,408

Total current liabilities

 

4,159,865

2,947,910

2,920,740

 

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

15

(552)

12,627

404,845

Deferred tax liability

16

170

3,560

0

Total non-current liabilities

 

(382)

16,187

404,845

 

 

 

 

 

Total liabilities

 

4,159,483

2,964,097

3,325,585

 

 

 

 

 

Net assets

 

10,741,092

9,843,388

4,939,516

 

 

 

 

 

Equity

 

 

 

 

Share Capital

17

1,735,798

1,727,771

1,565,905

Share premium

 

8,288,479

8,219,525

3,890,210

Merger reserve

18

(721,132)

(721,132)

(721,132)

Warrant Reserve

 

0

132,000

0

Foreign Exchange reserve

 

(172,202)

(157,099)

(53,686)

Non-controlling interest

 

318,970

234,465

164,481

Retained Profit/(Accumulated Losses)

19

1,291,179

407,858

93,738

Total equity and reserves

 

10,741,092

9,843,388

4,939,516

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR 1 JULY 2018 TO 30 JUNE 2019

 

 

Ordinary Share Capital

Share Premium

Merger Reserve

Warrant Reserve

Foreign Exchange Reserve

Accumulated Earnings/ (Losses)

Non-controlling interests

Total Equity

 

 

£

£

£

£

£

£

£

 

 

Balance as at 1 July 2018

1,727,771

8,219,525

(721,132)

132,000

(157,099)

407,858

234,465

9,843,388

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

 

875,939

136,808

1,012,547

 

Other comprehensive income

-

-

-

-

(49,712)

-

-

(49,712)

 

Total comprehensive income for the year

-

-

-

-

(49,712)

875,939

136,808

962,835

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners, in their capacity as owners

 

 

 

 

 

 

 

 

 

Shares issued

10,511

121,489

-

-

-

-

-

132,000

 

Foreign exchange differences on translation of foreign denominated subsidiaries

 

-

-

-

34,609

2,579

-

37,189

 

Increase holding in Skinny Tan AU

-

 

-

-

-

2,319

(52,103)

(49,785)

 

Cost of Share Warrant

 

 

 

(132000)

 

 

 

(132,000)

 

Cost of shares issued

 

(52,535)

-

-

-

-

-

(52,535)

 

Total transactions with owners, in their capacity as owners

10,511

68,954

0

(132,000)

34,609

4,898

(52,103)

(65,131)

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2019

1,735,798

8,288,479

(721,132)

0

(172,202)

1,291,179

318,970

10,741,092

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

 

FOR THE PERIOD 1 JULY 2018 TO 30 JUNE 2019

 

 

 

 

 

 

 

 

 

 

 

Year ended 30 Jun 2019

Year ended 30 Jun 2018

 

Note

£

£

Cash flows from operating activities

 

 

 

Receipts from customers

 

11,475,562

10,562,102

Payments to suppliers and employees

 

(10,220,492)

(10,454,037)

EDMG Grants

 

0

35,902

Taxes Paid

 

(75,746)

(42,678)

Interest received

 

3

1,029

Net cash used by operating activities

25

1,179,327

102,318

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

 

(46,844)

(13,861)

Payments for product development/Intangibles

 

(884,094)

(2,049,271)

Net cash used by investment activities

 

(930,937)

(2,063,132)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from borrowings

 

0

-

Proceeds from issue of shares

 

132,000

4,416,000

Repayments of borrowings

 

(13,179)

(392,218)

Payments for convertible notes

 

0

0

Transaction costs for shares issued

 

0

(506,760)

Net cash from financing activities

 

118,821

3,517,022

 

 

 

 

Increase in cash and cash equivalents

 

367,210

1,556,208

Cash and cash equivalents at the beginning of the period

 

1,906,214

207,301

Effect of movement in foreign exchange rates

 

(230,377)

142,705

Cash and cash equivalents at the end of the period

8

2,043,048

1,906,214

 

 

PARENT COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

 

 

 

 

 

As at 30 June 2019

As at 30 June 2018

 

Note

£

£

Current assets

 

 

 

Cash and cash equivalents

 

977,084

1,568,170

Prepayments

 

182,047

10,550

Total current assets

 

1,159,130

1,578,720

Non-current assets

 

 

 

Intercompany Receivable

20

5,018,328

4,998,093

Investment In subsidiaries

21

2,312,379

2,312,379

Product development

 

215,851

215,571

Deferred Tax Asset

 

0

0

Total non-current assets

 

7,546,558

7,526,043

Total assets

 

8,705,689

9,104,764

Current liabilities

 

 

 

Trade and other payables

 

(2,340)

(62,191)

Total current liabilities

 

(2,340)

(62,191)

Non-current liabilities

 

 

 

Total non-current liabilities

 

0

0

Total liabilities

 

(2,340)

(62,191)

Net assets

 

8,708,029

9,166,954

Equity

 

 

 

Share Capital

17

1,738,282

1,727,771

Share premium

17

8,288,479

8,219,525

Warrant Reserve

 

0

132,000

Foreign Exchange reserve

 

(109,337)

(109,337)

Accumulated Losses

 

(1,209,395)

(803,004)

Total equity and reserves

 

8,708,029

9,166,954

 

 

 

 

 

                 

 

In accordance with section 408 of the UK Companies Act 2006, the Company is availing itself of the exemption from presenting its individual statement of profit or loss and other comprehensive income. The company's loss for the financial period as determined in accordance with IFRS's is $406,025. The company had no cashflow in the period, and therefore no cashflow statement has been prepared.

 

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR 1 JULY 2018 TO 30 JUNE 2019

 

Ordinary Share Capital

Share Premium

Warrant Reserve

Foreign Exchange Reserve

Accumulated Earnings/ (Losses)

Total Equity

 

£

£

£

£

£

 

Balance as at 30 June 2018

1,727,771

8,219,525

132,000

(109,337)

(803,004)

9,166,954

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

Profit for the period

-

-

-

 

(406,390)

(406,390)

Other comprehensive income

-

-

-

 

-

0

Total comprehensive income for the year

-

-

-

0

(406,390)

(406,390)

 

 

 

 

 

 

 

Transactions with owners, in their capacity as owners

 

 

 

 

 

 

Shares issued

10,511

121,489

-

-

-

132,000

Foreign exchange differences on translation of foreign denominated subsidiaries

 

-

-

-

-

0

Cost of Share Warrant

 

 

(132000)

-

-

(132,000)

Cost of shares issued

 

(52,535)

 

-

-

(52,535)

Total transactions with owners, in their capacity as owners

10,511

68,954

(132,000)

0

0

(52,535)

 

 

 

 

 

 

 

Balance at 30 June 2019

1,738,282

8,288,479

0

(109,337)

-1,209,395

8,708,029

 

NOTES TO THE FINANCIAL STATEMENTS

 

FOR THE YEAR ENDED 30 JUNE 2019

 

 

1.       Accounting Policies

1.1     Basis of Preparation

 

The consolidated financial statements have been prepared in accordance with Internaional Financial Reporting Standards (IFRS) as adopted by the Euopean Union and with those parts of the CompaniesAct 2006 applicable to companies reporting under IFRS.  The consolidated financial statements are drawn up under the historical cost convention, except for the revaluation of financial assets.

 

IFRS, issued by the International Accounting Standards Board (IASB) set out accounting policies that the IASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Material accounting policies adopted in the preparation of the consolidated financial statements are presented below and have been consistently applied unless otherwise stated.

 

1.2     Going Concern

 

This report has been prepared on the going concern basis, which contemplates the continuation of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

           

1.3     Principles of Consolidation

 

The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by InnovaDerma PLC at 30 June 2019. A controlled entity is any entity over which InnovaDerma PLC has the power to govern the financial and operating policies so as to obtain benefits from its activities.

 

In preparing the consolidated financial statements, all intragroup balances and transactions between entities in the consolidated group have been eliminated in full on consolidation.

 

Business Combinations

            Business combinations occur where an acquirer obtains control over one or more businesses. 

            A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exceptions).

           

When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.

           

All transaction costs incurred in relation to business combinations are expensed to the statement of comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.

 

 

Goodwill

Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of:

(i)         the consideration transferred;

(ii)         any non-controlling interest (determined under either the full goodwill or proportionate interest method); and

(iii)        the acquisition date fair value of any previously held equity interest;

over the acquisition date fair value of net identifiable assets acquired.

 

Goodwill on acquisition of subsidiaries is included in intangible assets.

 

Goodwill is tested for impairment annually and is allocated to the Parent Company's cash-generating units or groups of cash-generating units, representing the lowest level at which goodwill is monitored being not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of.

 

Changes in the ownership interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions and do not affect the carrying amounts of goodwill.

 

Non-controlling interests

The interest of non-controlling shareholders in subsidiary companies (holdings of greater than 0%, but less than 50%), are initially recognised at fair value. Subsequent results of the subsidiary are apportioned to the non-controlling interests in proportion to their shareholding.

 

1.4     Foreign Currencies

 

Functional and presentation currency

An entity's functional currency is the currency of the primary economic environment in which it operates. Since incorporation, InnovaDerma PLC has had global operations, with its trading subsidiaries using different functional currencies including British pounds, Australian dollars, and United States dollars, reflective of their local operating environments.

At 1 July 2016, the directors reviewed the Group's spread of economic activity in its different functional currencies and decided to change the presentation currency of the Group from Australian Dollars to British Pounds. The directors believe this will better reflect the levels of activity within the Group, as well as enhance comparability with its industry peer group. The change in presentation currency represents a voluntary change in accounting policy and has been applied retrospectively.

To give effect to the change in presentation currency, the assets and liabilities of the Group, which were presented in Australian dollars as at 30 June 2016, were converted into British pounds at a fixed exchange rate on 1 July 2016 of A$1: £0.5763 and the contributed equity, reserves and retained earnings were converted at applicable historical rates.

The Australian dollar assets and liabilities at 1 July 2015 were converted at the rate of A$1: £0.5085 in order to derive British pound opening balances. Revenue and expenses for the twelve months ended 30 June 2016 were converted at the exchange rates ruling at the date of the transaction to the extent practicable (at an average of A$1: £0.5117 for the reporting period), and equity balances were converted at applicable historical rates.

The above stated procedures resulted in the recognition of a foreign currency translation reserve of (£158,726) on 1 July 2016, as set out in the statement of changes in equity.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions.

 

Foreign currency monetary assets and liabilities at the reporting date are translated at the exchange rate existing at the reporting date. Exchange differences are recognised in the statement of comprehensive income in the period in which they arise.

 

1.5     Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. The group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the group's activities, as described below. The group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

 

Sales of goods - retail

The group manufactures and sells a range of health and beauty products for sale to the retail market. Sales of goods are recognised when an order is executed, and stock is segregated from the Group's inventory, ready for collection in accordance with that customer's terms of trade.

The life science products are often sold with volume discounts; customers have a right to return faulty products in the wholesale market. Sales are recorded based on the price specified in the sales contracts, net of the estimated volume discounts and returns at the time of sale. Accumulated experience is used to estimate and provide for the discounts and returns. The volume discounts are assessed based on anticipated annual purchases.

 

Internet revenue

Revenue from the provision of the sale of goods on the internet is recognised as at the date that payment is received, because that is the point the buyer accepts legal responsibility for the good being sold. Transactions are settled by credit or payment card.

 

1.6     Finance income

 

Interest income is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

 

1.7     Intangible Assets

 

Brands

Externally acquired brands, where identifiable, are capitalised as assets of the group. Brands are initially capitalised at historical cost, or attributable value, when acquired as part of a business combination.

 

Brands have a limited legal life; however, the Group monitors global expiry dates and renews registrations where required. Brands recorded in the financial statements are not currently associated with products which are likely to become commercially or technically obsolete. Accordingly, the Directors are of the view that brands have an indefinite life.

 

Brands are tested annually for impairment and carried at cost less accumulated impairment charges.

 

Digital Asset

A specific website/e-commerce platform developed by InnovaDerma PLC is an intangible asset, and therefore subject to the same recognition and measurement requirements. Expenditure on websites in existence (which were previously expensed in prior financial statements) cannot be later recognised as part of the cost of an intangible asset at a later date.

The stages of a website's development and treatment of these expenditures is as follows:

a)   Planning - includes undertaking feasibility studies, defining objectives and specifications, evaluating alternatives and selecting preferences.

b)   Application and Infrastructure Development - includes obtaining a domain name, purchasing and developing hardware and operating software, installing developed applications and stress testing

c)   Graphical Design Development - includes designing the appearance of web pages.

d)   Content development - includes creating, purchasing, preparing and uploading information, either textual or graphical in nature, on the website before the completion of the website's development. This information may either be stored in separate databases that are integrated into (or accessed from) the website or coded directly into the web pages.

Accounting treatment - providing for purposes other than to advertise and promote InnovaDerma's products (e.g. digital photographs of products) and not previously recognised as an expense, then to capitalise.

Amortisation Useful life, InnovaDerma is to assess whether the useful life of an intangible asset is finite or indefinite. An intangible asset has an indefinite useful life when there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. An intangible asset with a finite useful life is to be amortised over its useful life. The amortisation method should reflect the pattern in which the asset's future economic benefits are expected to be consumed. If that pattern cannot be determined reliably, the straight-line method is to be used. Amortisation is to be charged in relation to the asset from the first day that it is put into use and to cease at the earlier of the date that the asset is classified as held for sale in accordance with AASB 5 Non-Current Assets held for Sale and Discontinued Operations and the date that the asset is derecognised.

The amortisation period and method for an intangible asset with a finite useful life are to be reviewed at least at the end of each annual reporting period. If the expected useful life or expected pattern of consumption of the future economic benefits is different from previous estimates, the amortisation period or the method is to be changed accordingly. Guidance given in relation to amortisation of websites is that the best estimate of a website's useful life shall be short. 

Intangible assets with an indefinite useful life are not to be amortised.

An intangible asset shall be derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Any gain or loss arising is to be recognised in the statement of comprehensive income when the asset is derecognised. Gains must not be classified as revenue but shown as a gain in the statement of comprehensive income.

Operating stage - follows completion of development, when InnovaDerma is maintaining and enhancing the applications, infrastructure, graphical design and content of the website.

Accounting treatment - recognise as an expense when incurred unless the definition and recognition criteria still apply, and these costs have been subsequently incurred in order to add to, replace part of or service the existing intangible asset.

This does not apply to expenditure on purchasing, developing, and operating hardware (e.g. web servers, staging servers, production servers and laptops) of a website. This expenditure is to be accounted for in line with IAS 16.

Customer Lists

 

Separately Identifiable Direct costs incurred in the creation of Customer Lists (Lists of previous buyers maintained in order to continue business relationship) are recognised as an intangible asset, in accordance with the provisions of IAS 38. The asset is an identifiable asset from which future economic benefits are expected. InnovaDerma has full control over the databases as they are linked to website domains and only the Company can engineer the data. InnovaDerma generates close to 60% of its group revenue from direct to consumer (DTC) sales. A material proportion of sales are driven by customer lists and the economic value to the business of this customer list is an integral component of the future of the business.

Costs have been recognised with the specific task of customer acquisition and include the relevant costs from digital suppliers and other avenues where the intention is to grow the lists.

Amortisation Useful life, InnovaDerma is to assess whether the useful life of an intangible asset is finite or indefinite. An intangible asset has an indefinite useful life when there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. An intangible asset with a finite useful life is to be amortised over its useful life. The amortisation method should reflect the pattern in which the asset's future economic benefits are expected to be consumed. If that pattern cannot be determined reliably, the straight-line method is to be used.

Customer lists are tested annually for impairment and carried at cost less accumulated impairment charges if seen appropriate with regards to infinite/finite useful life.

 

 

1.8     Impairment

 

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, to the asset's carrying amount. Any excess of the asset's carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard. Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard.

 

1.9     Research and Development

 

Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably.

 

Capitalised development costs have a finite useful life and are amortised on a systematic basis based on the future economic benefits over the useful life of the project. At this stage, the useful life of the project has not been determined as development is incomplete, hence amortization has not commenced.

 

1.10   Cash & Cash Equivalents

 

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.

 

1.11   Inventories

 

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Costs of inventories include the transfer from equity of any gains/losses on qualifying cash flow hedges for purchases of raw materials.

 

1.12   Trade Receivables

 

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

 

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

 

1.13   Trade Payables

 

Trade and other payables are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services. They are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method. Current liabilities represent those amounts falling due within one year.

 

1.14   Goods and Services Tax (GST) & Value Added Tax (VAT)

 

Revenues, expenses and assets are recognised net of the amount of GST/VAT, except where the amount of GST/VAT incurred is not recoverable from the Australian Taxation Office (ATO) or HER MAJESTY'S REVENUE & CUSTOMS (HMRC)

 

Receivables and payables are stated inclusive of the amount of GST/VAT receivable and payable. The net amount of GST/VAT recoverable from, or payable to, the ATO/HMRC is included with the receivables or payables in the statement of financial position.

 

1.15   Borrowings

 

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

 

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

 

1.16   Income Tax

 

Income tax expense or benefit repesents the sum of current corporation tax payable and provision for deferred income taxes.

 

Current income tax payable is based on taxable profit for the period. Taxable profit differs from net pofit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other peiods and it further excludes items that are never taxable or deducible. The Group's liability for current corporaion tax is calculated using tax rates and laws that have been enacted or substantivelyenacted at he period-end date.

 

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the date of he statement of financial position where transacions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the following exceptions:

 

Deferred tax assets ae recognised only to the extent that the Directors consider that it is probable that there will be suitable taxable pofits from which the future eversal of the undelying timingdifferences can be deducted.

 

Deferred tax is measured on an undiscounted basis at the tax raes that ae expected to apply in the periods in which timing differences reverse, based on tax ates and laws enacted or substantivelyenacted at the period-end date.

 

1.17   Post-Retirement Benefits

 

For salaries paid (all by the Australian subsidiary):

 

A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. Superannuation - the Australian defined contribution pension scheme - is mandated by Australian law and presently set at 9.5% of gross salary payable to an employee.

 

The group pays contributions to publicly or privately administered pension insurance plans on a mandatory basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

 

1.18   Contributed Equity

 

Ordinary shares are classified as equity.

 

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

 

If the Company reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

 

1.19   Segment Reporting

 

The operating segments were reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segment, has been identified as the board of directors, which has overall control for strategic decisions.

 

1.20      Estimates and Judgements

 

The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation or future events and are based on current trends and economic data, obtained both externally and within the Group.

 

Estimation of useful lives of assets

The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.

 

Goodwill and other indefinite life intangible assets

The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policies described in Note 1.6 and Note 1.7. The recoverable amounts of cash-generating units (required to determine fair value less costs to sell) have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows.

 

1.21      New accounting standards for application in future periods

 

(a)         New and amended standards adopted by the group

 

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial period beginning on 1 July 2017 that would be expected to have a material impact on the group.

 

(b)        New standards and interpretations not yet adopted

 

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after 1 July 2017 and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the financial statements of the group, except the following set out below:

 

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in July 2014. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories:

 

1)   those measured as at fair value and 2) those measured at amortised cost. The determination is made at initial recognition.

 

The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The group is yet to assess IFRS 9's full impact. The group will also consider the impact of the remaining phases of IFRS 9 when completed by the Board.

 

 

2.      Parent Information

 

Guarantees

InnovaDerma PLC has not entered into any guarantees, in the financial period, in relation of the debts of its subsidiary.

 

Contingent Liabilities

At 30 June 2019, InnovaDerma PLC did not have any contingent liabilities.

 

Contractual Commitments

At 30 June 2019, InnovaDerma PLC had not entered into any contractual commitments.

 

3.      Operating segments

 

The Group has three (3) geographical/regional segments it operates in the United Kingdom, the United States of America, and the Asia Pacific region respectively. Each region is subject to differing rates of profitability, stage of development, opportunities for growth, future prospects, and risks in the Group's growth stage. The Group's internal management and reporting structure is geographically structured with senior executives responsible for each region. We have specific customers in line with these regions and have acquired assets within each region.

 

 

Year ended

Year ended

30-Jun-19

30-Jun-18

£

£

Revenue by Geographical region

 

 

 

United Kingdom

 

11,856,668

9,563,773

United States of America

 

667,781

650,535

Australia/NZ/Asia

 

327,385

485,003

 

 

12,851,835

10,699,311

 

 

 

 

 

 

Year ended

Year ended

30-Jun-19

30-Jun-18

£

£

Assets by Geographical region

 

 

 

United Kingdom

 

10,349,659

9,957,818

United States of America

 

1,022,694

825,388

Australia/NZ/Asia

 

3,528,222

2,024,279

 

 

14,900,575

12,807,485

 

 

4.      Operating profit/(loss)

 

Thefollowingitems havebeenincluded in arriving at the operating profit:

 

 

Year ended

Year ended

30-Jun-19

30-Jun-18

£

£

Expenses:

 

 

Directors' remuneration

324,101

365,272

Depreciation

104,085

109,251

Auditor's remuneration

 

 

-          As auditors (for parent company and consolidation)

34,467

33,625

-          Taxation compliance (for parent company and subsidiaries)

3,185

2,659

 

 

All remuneration payable to the auditors has been disclosed above. No benefits in kind are payable to the auditors.

 

Contributions to superannuation (money purchase pension schemes) are made on behalf of four directors of the group.

 

 

5.      Employees

 

 

Year ended

Year ended

30-Jun-19

30-Jun-18

£

£

Staff costs for the Group during the period:

 

 

Wages and salaries

1,263,563

1,548,165

Pension costs (including superannuation)

109,502

150,295

 

1,373,065

1,698,460

 

 

The average monthly number of staff (including executive Directors) employed by the Group during the period amounted to:

 

 

 

Year ended

Year ended

30-Jun-19

30-Jun-18

Management staff

 

5

5

Other employees

 

36

29

 

 

41

34

 

 

6.      Taxation

 

 

 

 

Year ended

30 June 2019

£

Year ended

30 June 2018

£

 

 

Current Tax

 

 

 

Current tax on profits in the period

 

409,060

395,955

Deferred tax expense

 

(11,843)

(39,117)

Under/over provision for income tax

 

1,395

(101,969)

Income Tax Expense

 

398,612

254,869

 

Facors affecting current tax charge

 

The effective rate of tax for the period is higher than the standad rate of coporation tax in the UK of 19% due to tax on subsidiaries located in higher tax jurisdictions.  The differencesare explained below:

 

 

 

Year ended

30 June 2019

£

Year ended

30 June 2018

£

Profit before taxation

 

1,411,159

669,064

 

Profit on ordinary activities multiplied by the standard rate of tax in the UK of 19%

 

262,056

127,122

Differences in tax rates in subsidiary jurisdictions

 

(46,077)

115,111

Effect of change in tax rate

 

-

18,612

Excluded (gain)/loss from foreign jurisdictions

 

103,759

95,708

Losses carried forward

 

77,214

-

Under (over) provision in prior years

 

1,395

(101,969)

Permanent differences

 

265

285

Total current tax

 

398,612

254,869

 

7.      Revenue

 

Year ended

Year ended

30-Jun-19

30-Jun-18

£

£

Haircare Products

1,322,209

997,206

Life Science devices

298,744

101,429

Skin & Beauty Products

11,230,882

9,600,675

 

12,851,835

10,699,311

 

8.      Cash and cash equivalents

 

 

 

30-Jun-19

30-Jun-18

£

£

Cash at bank

 

2,043,048

1,906,215

 

 

Cash at bank is included as cash and cash equivalents in connection with the statement of cash flows.

 

When in overdraft, this balance is included in trade and other payables.

 

 

 

9.       Trade and other receivables

 

 

30-Jun-19

30-Jun-18

£

£

Trade Receivables

3,295,255

1,918,982

 

 

10.     Inventory

 

 

 

30-Jun-19

30-Jun-18

£

£

 

 

 

 

Finished goods (Leimo & GrowLase)

 

227,586

105,855

Finished goods (Charles & Lee and Stevie K)

 

215,949

149,513

Finished Goods (Prolong)

 

42,106

74,465

Finished Goods (Roots)

 

258,881

106,620

Finished goods (Skinny Tan)

 

1,553,330

2,263,204

Stock Material (Work in Progress)

 

66,678

173,876

 

 

2,364,530

2,873,533

 

 

The costs of inventories recognised as an expense and included in cost of sales amounted to £3,404,178 for the year.

11.     Prepayments and Sundry Assets

 

 

30-Jun-19

30-Jun-18

£

£

Deposits held

10,318

7,021

Prepayments

303,892

165,770

Input tax

-

-

Sundry assets

-

7,348

 

314,210

180,139

 

12.     Intangible Assets

 

Group:

 

 

 

 

 

 

 

 

 

30-Jun-19

30-Jun-18

£

£

Goodwill (Skinny Tan)

 

408,067

402,357

Customers Lists

 

2,168,388

1,240,435

Goodwill (Leimo)

 

1,841,818

1,862,847

Brands (Charles+Lee and Stevie K)

 

43,940

38,482

Digital Asset (Prolong)

 

65,816

139,870

Intellectual Property (Ergon)

 

1,472,920

1,463,370

Development Costs

 

577,613

547,107

 

 

6,578,562

5,694,469

 

 

 

 

 

 

 

 

 

Movement in capitalised development costs:

 

 

 

 

 

 

 

 

30-Jun-19

30-Jun-18

£

£

Balance brought forward

 

252,392

294,715

Development expenditure during the year

 

325,221

252,392

 

 

577,613

547,107

 

*Refer to note 1.7 for definition and recognition criteria for intangible assets

 

13.     Deferred tax asset

 

 

 

30 June 2019

£

30 June 2018

£

Deferred tax items recognised in income statement:

 

 

-     Other timing differences

 

24,359

16,161

-     Income tax losses

 

209,970

142,422

 

 

234,329

158,583

 

 

14.     Trade and other payables

 

 

 

30-Jun-19

30-Jun-18

£

£

 

 

 

 

Trade payables

 

2,738,363

1,392,803

Other payables

 

218,773

930,114

Current tax payable

 

1,202,729

624,993

 

 

4,159,865

2,947,910

 

 

15.     Borrowings

 

 

30-Jun-19

30-Jun-18

£

£

 

 

 

General Borrowings

(552)

12,627

 

(552)

12,627

 

 

16.        Deferred tax liability

 

 

30 June 2019

£

30 June 2018

£

Deferred tax items recognised in income statement:

 

 

-     Other timing differences

 

170

3,560

 

 

170

3,560

 

17.     Contributed equity

 

 

 

Share Capital

Share Premium

2018/19

No. of shares

£

£

Opening balance as at 1 July 2018

14,376,633

1,725,287

8,219,525

Shares issued during the year

120,000

10,511

121,489

Share issue costs

-

-

(52,535)

Balance as at 30 June 2019

14,496,633

1,735,798

8,288,479

 

 

 

Share Capital

Share Premium

2017/18

No. of shares

£

£

Opening balance as at 1 July 2017

12,569,556

1,565,905

3,890,210

Shares issued during the year

1,807,077

159,381

4,836,075

Share issue costs

-

-

(506,760)

Balance as at 30 June 2018

14,376,633

1,725,286

8,219,525

 

 The holder of the ordinary shares is entitled to one vote per share at any meeting of the Company whether in person or by proxy. The holder is entitled to receive dividends declared from available profits and to the surplus of assets on a winding up.

 

18.     Merger reserve

 

InnovaDerma PLC acquired 100% of the share capital of InnovaDerma AUS & NZ Pty Ltd, InnovaDerma International Limited, InnovaDerma NZ Limited, and ID Philippines, Inc, on 28 November 2014.

 

These transactions are noted as being completed under common control - all companies involved in the deal were controlled by Mr Haris Chaudhry before and after the transaction was processed.

 

This condition falls under a scope exemption for IFRS 3. Per IAS 8.12, the company may, in this circumstance, utilise pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards.

 

As a UK company, the directors decided to apply UK Generally Accepted Accounting Principles, which make provision for Pooling of Interests in a common control situation, also commonly referred to as Merger Accounting.

 

In this circumstance, the difference between the consideration transferred and the nominal value of share capital acquired is taken to equity, creating a Merger Reserve.

 

28 November 2014 Acquisitions:

 

 

£

Consideration transferred (8,969,960 shares)

721,187

Nominal value of share capital acquired

(55)

Value of Merger Reserve

721,132

 

 

19.     Retained Profits

 

 

 

30-Jun-19

30-Jun-18

£

£

Balance brought forward

 

407,858

93,738

Profit for the period

 

883,321

314,120

Balance carried forward

 

1,291,179

407,858

 

20.     Intercompany loan - parent company

 

 

 

30-Jun-19

30-Jun-18

£

£

Balance brought forward

 

4,998,093

3,058,612

Movement in funds

 

(20,235)

(1,939,481)

Balance carried forward

 

5,018,328

4,998,093

 

 

21.     Investment in subsidiaries

 

During the year, the Company held interests in the following subsidiaries:

 

Company Name

Date of Acquisition

Percentage Holding

30 June 2019

Percentage Holding

30 June 2018

InnovaDerma AUS & NZ Pty Ltd

28 November 2014

100%

100%

InnovaDerma International Limited

28 November 2014

100%

100%

InnovaDerma NZ Limited

28 November 2014

100%

100%

ID Philippines Inc

28 November 2014

100%

100%

Bach Health Pty Ltd

23 January 2015

100%

100%

InnovaScience Inc

31 March 2015

100%

100%

Skinny Tan Pty Ltd (a)

28 May 2015

94%

93%

SkinnyTan UK Limited (a)

28 May 2015

94%

93%

Ergon Medical Limited (b)

28 April 2017

100%

100%

 

 

a)   During the year, InnovaDerma PLC paid £104,142 to acquire a further 1% of Skinny Tan Pty Ltd, and through direct holding, SkinnyTan UK Limited.

 

 

b)   During the financial year FY17 InnovaDerma PLC acquired Ergon Medical Limited, owner of Prolong. The following table shows the allocation of consideration paid for Ergon Medical Limited, the fair value of assets acquired, liabilities assumed, and the non-controlling interest at the acquisition date.

 

 

Consideration for Ergon

£

Cash Consideration

1,022,710

Total Consideration

1,022,710

 

 

Recognised fair value of assets acquired and liabilities assumed

 

Other assets

3,532

Brand

1,333,721

Trade and other payables

(314,543)

Total fair value of assets acquired, and liabilities assumed

1,022,710

 

22.     Related party transactions

 

Name

Transaction

Amount received from/

Amount due from/(to)

(paid to) in year

related party

 

 

2019

2018

2019

2018

 

 

£

£

£

£

Farris Marketing Concepts Pty Ltd

Loan payable1

-

(85,395)

-

-

Cygenta Capital & Advisory

Provision of services2

-

(26,773)

-

-

Graise Partners International Pty Ltd

Provision of services2

-

(3,078)

-

-

Zaymar Investments Pty Ltd

Loan payable1

-

(292,274)

-

(13,186)

Mr Haris Chaudhry

Loan payable1

-

160

1,552

1,552

 

1 These loans are interest free and unsecured.

2 These expenses were settled via the issue of equity instruments in InnovaDerma PLC.

Nature of related parties

Farris Marketing Concepts Pty Ltd and Zaymar Investments are related parties of Mr Haris Chaudhry, the Executive Chairman.

Cygenta Capital & Advisory Pty Ltd is a related party of Mr Joseph Bayer, the Executive Director.

Graise Partners International Pty Ltd is a related party of Mr Rodney Turner, a Non-Executive Director.

 

23.        Key Management Personnel

All transactions with key management personnel (the directors) during the year ended 30 June 2019 are disclosed below:

 

Salary

Superannuation

Consultancy Fees

Total

Total 2018

Haris Chaudhry

100,279

9,527

-

109,806

189,200

Joseph Bayer

105,121

9,987

-

115,108

119,827

Rodney Turner

16,598

1,577

-

18,175

18,920

Ross Andrews

-

-

19,992

19,992

18,831

Kieran Callan

56,500

4,520

-

61,020

18,494

 

278,498

25,611

19,992

324,101

365,272

 

 

During the period, there were no advances, credits or guarantees subsisting on behalf of the directors.

 

 

24.     Commitments and contingencies

 

At 30 June 2019, the Group did not have any contingencies.

 

At 30 June 2019, the Group had an obligation to pay £77,876 in rent for the forthcoming 12 months, under a non-cancellable operating lease.

 

 

25.     Reconciliation of operating profit to net cash outflow from operations

 

 

 

30-Jun-19

30-Jun-18

£

£

Profit after income tax

 

1,012,547

414,195

Depreciation

 

38,586

95,863

(Increase)/decrease in trade and other receivables

 

(1,497,163)

(218,980)

(Increase)/decrease in inventories

 

509,003

(614,544)

Increase in trade and other payables

 

1,171,987

27,170

Increase/(decrease) in payables settled by Shares

 

-

449,940

(Increase)/decrease in foreign exchange gains/losses

 

20,113

(8,648)

Increase/(decrease) in taxes payable

 

(75,746)

(42,678)

Net cash outflow from operations

 

1,179,327

102,318

 

 

26.  Financial risk management

 

The Group's financial instruments consist mainly of deposits with banks, accounts receivable and payable & loans from related parties.

 

The Group's financial instruments at 30 June 2019 were classified as follows:

 

 

Note

30-Jun-19

30-Jun-18

£

£

Financial assets

 

 

 

Cash and cash equivalents

8

2,043,048

1,906,215

Trade and other receivables

9

3,295,255

1,918,982

Total financial assets

 

5,338,303

3,825,197

Financial liabilities

 

 

 

Trade and other payables

14

4,159,865

2,947,910

Borrowings

15

(552)

12,627

 

 

4,159,313

2,960,537

 

 

Fair value versus carrying amounts

 

All items shown in the preceding table as either financial assets or financial liabilities are short term instruments whose carrying value is equivalent to the fair value. There is not considered to be a material difference between the fair value and the carrying value.

 

Specific Financial Risk Exposures and Management

 

The Group's activities expose it to a number of financial risks that include maket risk, credit risk andliquidityrisk.

 

(a) Market Risk

 

i)   Foregn exchange risk

The Group does not hold any material financial assets denominated in a foreign currency at the period end, hence it is not exposed to foreign exchange risk.

 

ii)  Interest rate risk

The Group had inteest-bearing liabilities during the period but is not exposed to interest rate risk because the interest rates on their liabilities are set by private agreement, not by reference to market rates. The group does not have any liabilities to financial institutions as at 30 June 2018. As such, sensitivity analysis wih regard to movements in interest rates would not bemeaningful.

 

(b) Credit risk

Exposure to credit risk relating to financial assets arises from the potential non-performance of counter-parties of contract obligations that could lead to financial losses to the group.

 

Credit risk exposures

The Group had no significant concentrations of credit risk.

 

(c) Liqudity risk

Liquidity risk arises from the possibility that the group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The group manages this risk through careful cash management policies. In order to meet its short-term obligations, the group has the support of several key shareholders who are willing to provide funds to the group on an as-needed basis.

 

For loans receivable and payable, please refer to Note 9 - Trade and Other Receivables, Note 14 - Trade and Other Payables & Note 15 - Borrowings. Loans are unsecured and have no fixed repayment date.

 

 

27.  Share Based Payments

 

No share options have been granted to employees or directors during the current or preceding financial year. In this Financial year, an exercisable warrant for 120,000 shares at £1.10, were issued to a supplier for services provided. Instrument is to be settled by 12 December 2018.

 

 

28.     Earnings per share

 

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

 

The following reflects earnings and share data used in the earnings per share calculation.

 

 

 

Year ended

Year ended

30-Jun-19

30-Jun-18

£

£

Profit/(loss) for the year

1,012,547

414,195

Weighted average number of shares

14,496,633

13,891,362

 

 

 

29.  Subsequent Events

 

 

There were no subsequent to report.

 

30.  Company Details

 

The registered office of InnovaDerma PLC is:

 

27 Old Gloucester Street

London

United Kingdom

WC1N 3AX

 

The principal place of business is:

 

Level 10, Suite 1031, 1 Queens Road

Melbourne VIC 3004

Australia 


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