Company Registration Number 09226823
INNOVADERMA PLC
ANNUAL REPORT
FOR YEAR ENDED 30 JUNE 2016
INNOVADERMA PLC
CONTENTS
CONTENTS
Corporate directory
Strategic report
Director’s Report
Independent auditor’s report to the members
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Parent company statement of financial position
Parent company statement of changes in equity
Notes to the financial statements
Page
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8
14
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19
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2
INNOVADERMA PLC
CORPORATE DIRECTORY
Directors
Haris Chaudhry
Joseph Bayer
Geert Lemair
Rodney Turner
Clifford Giles
Company Secretary
Elemental Company Secretary Limited
Company registration number
09226823
Registered office
Auditor
27 Old Gloucester Street
London
United Kingdom
WC1N 3AX
KSI (WA)
Level 2
35 Outram Street
West Perth WA 6005
Australia
Domicile of the company
United Kingdom
Country of incorporation
England and Wales
Legal form of entity
Public Limited Company
London Stock Exchange Code
IDP
1
INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2016
The directors present their strategic report on InnovaDerma PLC and its controlled entities (hereafter “the
Group” or “InnovaDerma”) for the year ended 30 June 2016.
Principal activity
InnovaDerma specializes in a range of male and female hair loss and anti-ageing treatments, and is
aggressively growing its existing markets and expanding into new ones. In addition to a well-established
customer base, brand recognition, intellectual property and a robust operating platform, it has the necessary
clinical and regulatory approvals, ongoing research and development work and strategic marketing initiatives
to provide it with a solid platform for rapid and sustained growth.
InnovaDerma PLC was incorporated on 19 September 2014 to become the holding company for
InnovaDerma ANZ and the other companies in the InnovaDerma Group, in order to list them on a recognised
stock exchange. The previous financial year therefore ran from 19 September 2014 to 30 June 2015
(FY2015).
Financial and Operational Highlights
Group revenue grew strongly to AUD$8.4m (FY2015: AUD$1.05m) reflecting underlying organic growth
and transformation of the Skinny Tan business, which grew more than 10-fold in revenue since its
acquisition in May 2015
Gross profit increased significantly to AUD$4.8m (FY2015: AUD$0.70m)
Profit before tax of AUD$0.47m (FY2015: AUD$ loss of 0.90m)
Expansion of international distribution and retail network is key to growth and financial performance. As
at 30 June 2016, the Company had 2,500 retail points (FY2015: 250) in seven countries
Skinny Tan, launched in Superdrug in February 2016, is now stocked in UK stores nationwide and since
achieved being the No.1 selling tanning brand by revenue
Secured a distribution agreement with Olive Young, Korea’s largest health and beauty store chain.
Skinny Tan is currently sold in Olive Young’s 550 stores nationwide and is distributed through PROS
Korea, a distributor for InnovaDerma products for North East Asia
Secured a distribution with Chemist Warehouse for distribution of Skinny Tan across all of its 320 stores
in Australia
Skinny Tan brand has grown from 14 to 25 products with a strong emphasis on product development to
increase shelf space and cater for multiple international markets
Developed and launched Skinny Tan “Professional Range” of products aimed at beauty and tanning
salons and skin rejuvenation clinics in Australia, UK and the US
Direct to consumer marketing through social media channels drove revenue growth and enabled Skinny
Tan to grow in popularity
Post Period End and Outlook
Strong infrastructure, scalable business and resources now in place to support brand development
across whole product range to drive future performance as a result of focus on growing Skinny Tan
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2016
As announced today, the Group has successfully entered in the United States and secured retail and e-
tailer distribution deals with GNC Holdings, Inc. , Quidsi, Inc., a subsidiary of Amazon.com, Inc. and
Jet.com, a subsidiary of Wal-Mart Stores, Inc
Established US subsidiary and appointed Joseph Panetta as Executive Vice President to accelerate
growth in the American market, as announced this morning
Further Skinny Tan brand extensions expected to be rolled out soon
Focused on developing new and highly effective products in hair care, hair loss treatment and skin
rejuvenation for release in 2017
Continue to focus on expanding distribution and retail network (both physical stores and e-tailers) in new
and existing territories
Strategic decision to move production to the UK from Australia to improve supply chain and operating
margins, as announced on October 24th
Trading since the period end continues strongly
Haris Chaudhry, Executive Chairman said:
“This has been a year of transformation growth for the Group with exceptional financial and operational results
driven by a highly disciplined and agile approach. Our strategic decision to grow Skinny Tan, a premium self-
tanner brand, has enabled us to expand our retail and distribution network and, importantly, provided us with a
scalable business and a global supply chain which we can leverage to continue to grow our brands across the
Group and drive future business performance.
The Group continues to go from strength to strength since the period end and we are delighted to announce
this morning that we have successfully entered the US market and secured distribution deals with three blue-
chip organisations. New product development remains a key focus for us and we will be rolling out brand
extensions, together with new products, for international markets this year and next. We are trading profitably
and the Board looks to the future with confidence and optimism.”
Chairman’s Review of the business, performance & position
Introduction
I am pleased to present our maiden final results for year ended 30 June 2016. In September of this year, we
were admitted to the Standard Listing segment of the UK Listing Authority and to trading on the Main Market
of the London Stock Exchange. This, combined with a year of excellent progress is particularly pleasing as
the Group has delivered a strong performance and solid growth on all key performance measures.
Financial and Operational Performance
Our revenue and profit performance has been consistently strong throughout the year, reflecting the rapid
growth of Skinny Tan which the company has transformed and grown more than 10-fold in revenue since its
acquisition in May 2015. Skinny Tan is a premium self-tanner brand that combines a natural tanning active, to
tan and reduce the visible appearance of cellulite. The business, which we acquired in May 2015, was
successfully integrated in Q2 of 2015. Due to the international appeal of the brand and strong performance,
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2016
the Board decided to focus on growing Skinny Tan as a premium brand, expanding its retail distribution
network globally to accelerate revenue and profit growth. Importantly our strategy to focus on Skinny Tan has
enabled us to build a scalable business and a global supply chain from which we can leverage and continue
to grow our brands across the Group.
This strategy has delivered impressive growth and the Group’s revenue grew by 800% to AUD$8.4m (FY2015
AUD$1.5m) and profit before tax increased to AUD$0.473m, compared to a loss of AUD$0.90m in the
previous year. As at 30 June 2016, InnovaDerma had 2,500 retail points in seven countries (FY2015: 250).
In the period under review, the Board secured the following key retail distribution agreements:
In the period under review, the Board secured the following key retail distribution agreements:
In February 2016, Skinny Tan was launched as a new brand in 220 of Superdrug's stores and by July
2016, it was stocked in all 776 of its stores throughout the UK. In the same month Skinny Tan became
the No.1 selling tanning brand in Superdrug by revenue. Post period end, Skinny Tan won Best
Breakthrough Brand 2016 at the Superdrug Supplier Conference.
In Asia, the Company secured a distribution agreement with Olive Young, Korea's largest health and
beauty store chain. Skinny Tan is currently sold in Olive Young's 550 stores nationwide and is distributed
through PROS Korea, a distributor for InnovaDerma products for North East Asia.
InnovaDerma secured a distribution agreement with Chemist Warehouse for distribution of Skinny Tan
across all of its 320 stores nationwide in Australia. Chemist Warehouse with annual revenues of more
than AUD$2.7bn (£1.5bn) is one of the leading and fastest growing pharmacy chains in Australia.
We place strong emphasis on product development and in the period under review, we extended Skinny Tan
from 14 to 25 products including the Skinny Tan Professional range of products. By extending the brand and
creating complementary products it enables us to capitalise on the complete self-tanning cycle from the initial
priming, to tanning as well as maintaining the tan.
We also launched Skinny Tan Professional Range of products aimed at beauty and tanning salons and skin
rejuvenation clinics in Australia, UK and the US. To complement and extend our brand within the Professional
Range, we developed the Skinny Tan Accredited Training Course which provides a manual together with a
licensed training certificate upon completion of the Licensed Spray Tanner course.
Entry into the American Market
As announced earlier today, we have successfully entered the American market which we believe represents
significant potential for future growth and proves our ability to enter new and complex geographies. We
began marketing trials in the US for Skinny Tan in the spring of 2016 and, owing to their success, we have
secured a retail distribution deal with GNC Holdings, Inc., a leading global speciality retailer of health and
wellness products listed on the New York Stock Exchange. Skinny Tan will be initially rolled out to 655 of
GNC’s 6,000 stores nationwide. Additionally, we have secured the distribution of Skinny Tan with highly
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2016
established e-tailers: Soap.com, a retail site owned by Quidsi Inc., its parent company, which is ultimately
owned by Amazon.com, Inc, and Jet.com, a subsidiary of Wal-Mart Stores, Inc.To support our growth plans in
the American market, we have established Innova Science, Inc., a wholly-owned subsidiary of the Group, and
appointed Joseph Panetta as Executive Vice President and President of Skincare to lead the American
business.
Production move to the UK
As announced on 24 October 2016, the Group will be moving a significant part of its production to the UK,
from Australia which will significantly improve the Company’s supply chain to its most important growth
markets and key customers. We expect a notable improvement in the operating margins of the business
because of lower freight and logistics costs and minimised currency exchange exposure. The cost benefits
are expected to have a positive impact on the Company’s financial performance from the second half of the
financial year 2017.
People
On behalf of the Board, I would like to welcome Joseph Panetta to InnovaDerma who brings with him
extensive experience in consumer brands, and we look forward to working with him to grow the business in
the US. This has been a year of transformation for the business and our employees are the key to our
success, so, on behalf of the Board, I would like to extend our appreciation and thanks for their commitment
and hard work during this period of significant growth for the Group.
Strategy and Outlook
Our focus on growing Skinny Tan’s revenue through an international retail and distribution network has
opened access to a global supply chain for the whole Group. In the year under review we have re-organised
the business, increased our resources and established a solid infrastructure to support our growing business.
The Board believes there are significant opportunities for future expansion and our strategy is therefore
focused on building on and leveraging our achievements to date. We will:
Continue to expand our distribution and e-tailer network in new and existing territories
Extend the Skinny Tan brand to leverage customer and brand loyalty. Further brand extensions are
expected to be rolled out soon
Continue to focus on digital direct to consumer strategy which has supported revenue growth and
enabled Skinny Tan to grow in popularity
Focus on the growth and product development of the Group’s other brands including haircare, hair loss
treatment and skin rejuvenation
Continue to seek value added acquisition targets to integrate into the business
Since the period end, the Company continues to trade strongly and is making excellent progress. This,
together with our strong brands and positive market trends, means we are confident of the future and of
delivering value to our shareholders.
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2016
Financial Review
Overview
The Group achieved excellent results for the year ended 30 June 2016, driven by underlying organic growth
and the transformation of the Skinny Tan business which delivered very strong sales growth. Group revenues
grew to AUD$8.4m (FY2015: AUD$1.05m) largely as a result of the successful integration and restructuring of
the Skinny Tan business acquired in May 2015. Profit before tax was AUD$0.47m (FY2015: loss of AUD
$0.90m). Additional other income of AUD$64,671 was recorded as a result of export development grants for
the UK brand launch.Net asset value increased to AUD$3.15m as at 30 June 2016, representing a 16.6%
increase from 30 June 2015 (AUD$2.69m).
Operating results
The Group's operating profit, excluding other income, was AUD$0.41m (2015: loss of AUD$0.90m). This
reflected the significant investment in people resources and brand marketing to drive the turnaround in the
Skinny Tan brand. Further investment was made in the US to create brand awareness and test market the
direct to consumer channels. As a result of securing distribution deals in America and to capitalise on the
identified retail distribution opportunities, the Group appointed Joseph Panetta as Executive Vice President of
Innova Science Inc., a wholly owned subsidiary of InnovaDerma PLC.
The Group achieved gross margins of 57% (FY2015: 67%) reflecting the move towards a wider distribution
network for Skinny Tan and a significant skew in revenue terms away from the higher margin Leimo (hair
care) business. Gross margins are inclusive of delivery costs to our customers and therefore we have been
reviewing the high freight cost (excluding Australia) to our growth market in the UK, and in the future, the US.
The decision to move manufacturing to the UK will significantly reduce the supply chain timeline and the
expensive overseas shipping costs.The focus in the period under review was to grow and commercialise the
Skinny Tan brand value whilst still maintaining a steady Leimo performance. Overheads grew to $4.38m, of
which marketing was AUD$2.26m and salaries AUD$1.06m. Staff numbers were reduced in the lower cost
Philippines service centre and replaced by a smaller number of higher value employees in marketing and
supply chain roles in Australia and the UK.
Cash and net debt
The Group's cash and cash equivalents as at 30 June 2016 were AUD$0.21m (FY2015: $0.21m). The Group
has no externally financed borrowing and loans but has related party loans of $1.078m which have been
carried forward from prior to listing. The Group has largely self-funded the growth in assets by astute cash
management and a strong focus on cost control.
The growth in trade receivables and inventory for 2016 over 2015 of AUD$2.62m has been partially funded by
the increase in trade payables of AUD$2.01m over the same period with the balance coming from the
increase in related party loan of AUD$0.39m and internally generated cash flow.
The Group is currently reviewing various funding options to support the planned significant growth in both
geographical spread and new product development. It is recognised by the board that whilst we have
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2016
successfully internally funded the growth over the last twelve months, the impetus for sustaining and
expanding the scope of business operations will require further funding.
Taxation
The charge for taxation for the full year was AUD$0.13m with the Group carrying a deferred tax asset of
AUD$0.18m. The Group has utilised carried forward tax losses where possible. All corporate tax liabilities
across the various geographical regimes have been accounted for.
Dividends
The board has elected not to declare a dividend at this time.
Principal Risks and Uncertainties
The principal risks the company faces relate to a) the regulatory requirements in each country to which it
exports and b) cash flow. If those regulations change, the company will need to quickly adapt its strategy to
ensure compliance and facilitate continuing sales. At this stage, because Australia operates very stringent
policies on all products, the company does not view this as very likely to occur, but have nonetheless
recognised the potential risk.
Cashflow is another principal risk as, while the company is in its growth phase, working capital is under
demand to fund the purchase and manufacture of stock in concert with trading terms to retail buyers.
However, the company has support from its shareholders for funding and is anticipating continued sales
growth in the coming twelve months to drive the business forward.
Employees
In line with Companies Act 2006 requirements, we present the following breakdown of our employee
structure:
Role
Directors
Senior Managers
Other Employees
Number of Men
Number of Women
5
1
4
-
1
10
In conjunction with our aforementioned plans to expand into the USA, it is expected that our staff will expand
in the coming calendar year as revenues grow, that the Group will be better able to service our customers and
partners.
By order of the board
Haris Chaudhry
Executive Chairman
31 October 2016
7
INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2016
The Directors present their report and financial statements of the Group for the year ended 30 June
2016.
Directors
The Directors who served the Group during the period are as follows:
Mr Haris Chaudhry
Mr Joseph Bayer
Mr Rodney Turner
Mr Geert Lemair
Mr Clifford Giles (appointed 16 June 2015)
Unless otherwise disclosed, all directors were appointed at the time the company was incorporated
on 19 September 2014 and have remained on the board since that time.
Company Secretary
The following served as Company Secretary during the period:
Mr Nick Lindsay, Elemental Company Secretary Limited, London.
Meetings of the Directors
During the year to 30 June 2016, the directors attended the following meetings of the board of
directors:
Haris Chaudhry
Geert Lemair
Joseph Bayer
Rodney Turner
Clifford Giles
Meetings eligible to attend
Meetings attended
8
8
8
8
8
8
8
8
8
8
Review of the Business
Please refer to the Strategic Report for information on the Group, its strategic direction, this year’s
results, and plans for the future.
Business Model
The Group’s business model is to expand its market share by providing innovative products to its
customers that meet their needs and wants, while continuing to break into new geographical
locations and thus making InnovaDerma a truly global brand.
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2016
Branches outside the UK
The Group’s main operations are headquartered in Melbourne, Australia. Two offices are maintained
in Australia, and one each in New Zealand, the USA, and the Philippines.
Environmental matters
There are no environmental issues arising from the Group’s business that might affect the future
strategic direction or results of our group.
Carbon Emissions
The Group’s operations are the manufacture and sale of health and beauty products, in which carbon
emissions are estimated to be negligible. The Directors do not consider it practicable to obtain this
information at this time.
Social, Community & Human Rights issues
The Board are constantly monitoring the Group’s social & community impact, both for its own staff
and the wider community of end-users for its products.
The Board are mindful of Human Rights issues in the jurisdictions its operates in, and aims to
maintain the highest standards of care and conduct in all its relations to ensure InnovaDerma exceeds
any required standard in this area.
Research and Development
The Group undertakes a variety of research activities into potential new products and new
technologies that could form part of their future offerings to customers. The Group classifies all such
spending as research and expenses the costs accordingly.
It is the view of the directors at this stage that the Group is unable to confirm the potential flow of
benefits from new products until they arrive to market. Given that, it is not possible to capitalise these
expenditures as development.
Financial Instruments
Information regarding the Group’s financial risk management objectives and policies, including
exposure to market, credit and liquidity risks, are presented in Note 26 to these financial statements.
Capital Structure
At 30 June 2016, the ordinary share capital of InnovaDerma PLC consisted of 10,318,535 shares,
valued at EUR 0.10 each. There are no restrictions on the transfer of securities in the Company, and
no restrictions on voting rights.
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2016
Post Balance Sheet Events
On 7 September, InnovaDerma PLC was admitted to the Official List and to trading on the Main
Market of the London Stock Exchange. Trading on the Marche Libre Paris segment of Euronext was
suspended on the same date.
On 20 September, 27,000 ordinary shares of EUR 0.10 were allotted.
Aside from the above items, the directors are not aware of any significant events since the end of the
reporting period.
Indemnification of Officers
No indemnities have been given, during or since the end of the financial period, for any person who
is or has been an officer or auditor of the consolidated group.
InnovaDerma PLC has paid for professional indemnity insurance for the directors of the Company.
The policies cover the year to 30 June 2016, and subsequent.
Proceedings on Behalf of the Group
No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in
any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of
the Group for all or any part of those proceedings.
The Group was not a party to any such proceedings during the period.
Director’s Interests
At the period end date, the directors of the company had the following interests in the shares of the
company, through both direct and indirect holdings:
Director Shares held on
Shares acquired
Shares disposed
Shares held on
1 July 2015
during the period
during the period
30 June 2016
Haris Chaudhry
5,858,790
Geert Lemair
Joseph Bayer
Rodney Turner
Clifford Giles
46,667
93,333
46,667
25,000
-
5,070
20,180
4,430
-
-
-
-
-
-
5,858,790
51,737
113,513
51,097
25,000
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2016
Remuneration Report (audited)
Policy & Practice
The Group operates on a strictly ‘capital efficient’ approach and therefore director’s remuneration has
been based on conservative market matching rates in order to act in the best interest of the company
during the company’s growth phase. At this time, outside of existing shareholdings, there are no
performance components included in directors’ remuneration. A remuneration committee has been
formed to oversee this aspect of the Group’s operations.
Contracts
Directors’ remuneration in its various forms was agreed by the Executive Chairman and relevant
contracts have been executed prior to the appointment.
Mr Chaudhry’s contract is for a fixed term of four years, and may be terminated with sixteen weeks’
notice, given in writing.
All other director’s contracts are for a fixed term of three years, and may be terminated with four
weeks’ notice, given in writing.
Amount of emoluments & compensation
Year to 30 June 2016
Salary
Superannuation
Consultancy
Total
Haris Chaudhry
Geert Lemair 1
Joseph Bayer
Rodney Turner
(9.5% of salary)
Fees
150,000
15,995
96,002
27,150
14,250
1,505
10,078
2,850
Nil
17,500
Nil
Nil
164,250
35,000
106,080
30,000
Clifford Giles
1 Mr Lemair was remunerated via payroll until 31 December 2015, after which time he invoiced for his
services
Nil
-
-
-
Period 19 September 2014
Salary
Superannuation
Consultancy
Total
– 30 June 2015
(9.5% of salary)
Fees
47,475
Haris Chaudhry
Geert Lemair 1
Joseph Bayer 1
Rodney Turner 1
Clifford Giles 1
1 These directors have agreed to forego any remuneration for this period.
4,510
-
-
-
-
-
-
-
-
Nil
Nil
Nil
Nil
Nil
51,985
-
-
-
-
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2016
End of audited section.
Directors’ responsibilities
The Directors are responsible for preparing the Strategic Report and the Directors’ Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year or
period. Under that law the Directors have elected to prepare the financial statements in accordance
with applicable United Kingdom law and those International Financial Reporting Standards (“IFRS”) as
adopted by the European Union. Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the
Group and of the profit or loss of the Group for that period. In preparing these financial statements,
the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether the financial statements have been prepared in accordance with IFRS as
adopted by the European Union;
prepare the financial statements on the going concern basis unless it is inappropriate to
presume the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s transactions and disclose with reasonable accuracy at any time the financial
position of the Group and enable them to ensure that the financial statements comply with the
Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Group’s website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from legislation in other
jurisdictions.
Directors’ statement as to disclosure of information to the auditor
The Directors at the date of approval of this report confirm that:
to the best of their knowledge and belief, there is no relevant audit information of which the
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2016
Group’s auditor is unaware; and
the Directors have taken all the steps that that might reasonably be expected to have taken as
a Director in order to make themselves aware of any relevant audit information and to
establish that the Group’s auditor is aware of that information.
On behalf of the Board
Haris Chaudhry
Executive Chairman
31 October 2016
13
INNOVADERMA PLC
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2016
We have audited these financial statements of InnovaDerma PLC for the year ended 30 June 2016
which comprise the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the
Consolidated and Parent Company Statements of Financial Position, the Consolidated Statement of
Cash Flow, the Consolidated and Parent Company Statements of Changes in Equity and the related
notes. The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as
regards the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to
the company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective responsibilities of the directors and auditors
As explained more fully in the Director’s Responsibilities Statement in the Directors’ Report, the
directors are responsible for the preparation of the financial statements and for being satisfied that
they give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an assessment of whether the
accounting policies are appropriate to the company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant accounting estimates made by
the directors; and the overall presentation of the financial statements. In addition, we read all financial
and non-financial information in the Directors’ Report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material misstatements or inconsistencies we consider
the implications for our report.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group’s and the parent
company’s affairs as at 30 June 2016 and of the group’s profit for the year then ended;
the group’s financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union; and
the parent company’s financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union; and
14
INNOVADERMA PLC
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2016
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Remuneration Report
We have audited the remuneration report, shown within the Directors’ Report, for the year ended 30
June 2016. The directors of the Group are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 421 of the Companies Act 2006. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit, in accordance with section
497 of the Companies Act 2006.
Opinion on Remuneration Report
In our opinion, the Remuneration Report complies with the requirements of section 421 of the
Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial
period for which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
the parent company’s financial statements are not in agreement with the accounting records
and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Nicholas Hollens – Senior Statutory Auditor
For and on behalf of KSI (WA) – Statutory Auditors
35 Outram Street
West Perth WA 6005
Australia
31 October 2016
15
INNOVADERMA PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 30 JUNE 2016
Note
7
Year ended
30 June 2016
$
Period from 19
September 2014 to 30
June 2015
$
8,412,696
(3,580,405)
4,832,291
1,047,651
(345,733)
701,918
64,671
-
(2,257,847)
(1,044,259)
(1,056,315)
(65,914)
472,627
(849,347)
(431,862)
(184,947)
(136,056)
(900,294)
Revenue
Cost of sales
Gross profit
Other income
Marketing expenses
Administrative expenses
Wages and salaries
Listing expenses
Operating profit/(loss)
Profit/(loss) before tax
472,627
(900,294)
Tax expense
6
(125,248)
-
Net profit/(loss) for the period
347,379
(900,294)
Other comprehensive
income/(loss)
Total comprehensive income/
(loss) for the period
Attributable to:
Owners of the parent
Non-controlling interests
24,744
(7,707)
372,123
(908,001)
246,434
125,689
372,123
(908,001)
-
(908,001)
Basic & diluted profit/(loss) per
share
28
0.04
(0.12)
16
INNOVADERMA PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
Note
30 June 2016
$
30 June 2015
$
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Prepayments and other assets
Total current assets
Non-current assets
Property, Plant and Equipment
Intangible assets
Other assets
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
8
9
10
11
12
13
Trade and other payables
14
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Shares
Share premium
Merger reserve
15
16
17
18
Foreign exchange reserve
Accumulated losses
19
Non-controlling interests
Total equity and reserves
207,682
1,970,619
1,107,635
75,006
3,360,942
14,362
3,480,804
-
176,782
3,671,948
7,032,890
2,799,695
2,799,695
1,078,912
7,264
1,086,176
3,885,871
3,147,019
2,496,023
2,553,149
(1,308,057)
17,037
(736,822)
125,689
3,147,019
212,618
112,142
341,794
69,411
735,965
16,509
3,418,479
3,298
-
3,438,286
4,174,251
788,322
788,322
688,063
-
688,063
1,476,385
2,697,866
2,479,468
2,492,674
(1,308,057)
(7,707)
(958,512)
-
2,697,866
17
INNOVADERMA PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
These financial statements were approved and authorised for release by the Directors on 31
October 2016 and are signed on its behalf by:
Haris Chaudhry
Executive Chairman
Company Number: 09226823
18
INNOVADERMA PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR 1 JULY 2015 TO 30 JUNE 2016
Balance as at 1 July 2015
2,479,468
2,492,674
(1,308,057)
(7,707)
(958,512)
-
2,697,866
Ordinary
Share
Capital
$
Share
Premium
Merger
Reserve
$
$
Foreign
Exchange
Reserve
$
Accumulated
Losses
$
Non-
controlling
interests
$
Total Equity
$
Comprehensive income
Profit/ (loss) for the period
Other comprehensive income
Total comprehensive income for the period
-
-
-
-
-
-
Transactions with owners,
owners
in their capacity as
Shares issued
Cost of shares issued
Total transactions with owners, in their capacity as
owners
16,555
60,475
-
-
16,555
60,475
-
-
-
-
-
-
-
221,690
125,689
-
-
347,379
24,744
221,690
125,689
372,123
-
-
-
-
-
-
77,030
-
77,030
24,744
24,744
-
-
-
Balance at 30 June 2016
2,496,023
2,553,149
(1,308,057)
17,037
(736,822)
125,689
3,147,019
19
INNOVADERMA PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD 1 JULY 2015 TO 30 JUNE 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
EMDG Grants received
Payments for corporate listing (non-repeating)
Net cash used by operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Payments for product development
Net cash received on acquisition of subsidiaries
Purchase of Skinny Tan Pty Ltd
Net cash used by investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Proceeds from convertible notes
Proceeds from shares issued
Transaction costs for shares issued
Net cash from financing activities
Year ended
30 June
2016
Note
$
Period
from 19
September
2014 to 30
June 2015
$
6,554,219
1,000,968
(7,040,706)
(1,708,565)
128
64,543
-
-
-
(136,056)
25
(421,816)
(843,653)
-
(18,343)
(62,325)
(31,922)
-
-
(62,325)
32,771
(50,000)
(67,494)
390,849
22,838
-
-
(106,527)
127,510
63,612
1,391,162
17
-
(311,218)
454,461
1,123,765
Increase/(decrease)in cash and cash equivalents
(29,680)
212,618
Cash and cash equivalents at the beginning of the period
Effect of movement in foreign exchange rates
212,618
24,744
-
-
Cash and cash equivalents at the end of the period
8
207,682
212,618
20
INNOVADERMA PLC
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
Non-current assets
Intercompany receivable
Investment in subsidiaries
Goodwill
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Convertible notes
Total non-current liabilities
Total liabilities
Net assets
Equity
Shares
Share premium
Retained earnings
Total equity and reserves
Note
30 June 2016
30 June 2015
$
20
12
14
3,568,627
1,157,379
45,180
1,399,424
5,013,231
5,013,231
50,175
3,892,098
5,099,652
5,099,652
36,680
36,680
14,363
14,363
127,510
127,510
164,190
127,510
127,510
141,873
4,849,041
4,957,779
2,496,023
2,553,149
(200,131)
4,849,041
2,479,468
2,492,674
(14,363)
4,957,779
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 $185,768.
The company had no cashflow in the period, and therefore no cashflow statement has been
prepared.
21
INNOVADERMA PLC
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
Ordinary Share
Capital
$
Share
Premium
$
Retained
Earnings
$
Total Equity
$
Balance brought forward from 30 June 2015
2,479,468
2,492,674
(14,363)
4,957,779
Comprehensive income
Loss for the period
Total comprehensive income for the period
-
-
-
-
(185,768)
(185,768)
(185,768)
(185,768)
Transactions with owners, in their capacity as owners
Issue of shares
Total transactions with owners, in their capacity as owners
16,555
16,555
60,475
60,475
-
-
77,030
77,030
Balance as at 30 June 2016
2,496,023
2,553,149
(200,131)
4,849,041
22
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. Accounting Policies
1.1 Basis of Preparation
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and with those parts of the Companies
Act 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 2016. 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.
Pooling of Interests on Incorporation of Parent Entity
On 28 November 2014, InnovaDerma PLC acquired 100% of the shares of InnovaDerma AUS & NZ Pty
Ltd, InnovaDerma International Limited, InnovaDerma NZ Limited, and ID Philippines, Inc. As all parties
were under common control before and after the transaction, the acquisitions were scoped out of IFRS 3,
and thus accounted for using the pooling of interests method.
Under this method the assets and liabilities of the acquiree are recorded at book value and intangible
assets are only recognised if they were previously recognised by the acquiree. No goodwill is recorded
and expenses of the combination are written off immediately in profit or loss. The difference between the
consideration paid/transferred and the nominal value of the share capital in the acquired companies has
been reflected as a Merger Reserve within equity.
After the acquisition, the consolidation is processed as normal, on a line by line basis for revenue,
expenses, assets and liabilities.
Subsequent 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
23
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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)
(ii)
(iii)
the consideration transferred;
any non-controlling interest (determined under either the full goodwill or proportionate interest
method); and
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 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.
24
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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.
1.5 Finance income
Interest income is recognised on a time proportionate basis that takes into account the effective yield on
the financial asset.
1.6
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.
1.7
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.
1.8 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.
25
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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.
1.9 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.
1.10
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.
1.11 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.
1.12 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.
1.13 Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of
GST incurred is not recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of the amount of GST receivable and payable. The net
amount of GST recoverable from, or payable to, the ATO is included with the receivables or payables in
the statement of financial position.
26
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1.14 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.
1.15
Income Tax
Income tax expense or benefit represents 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
profit as reported in the statement of comprehensive income because it excludes items of income or
expense that are taxable or deductible in other periods and it further excludes items that are never taxable
or deductible. The Group’s liability for current corporation tax is calculated using tax rates and laws that
have been enacted or substantively enacted at the period-end date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the
date of the statement of financial position where transactions 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 are recognised only to the extent that the Directors consider that it is probable that
there will be suitable taxable profits from which the future reversal of the underlying timing differences can
be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the
periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted
at the period-end date.
1.16 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.
27
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1.17 Foreign Currencies
Functional and presentation currency
Items included in the consolidated financial statements of the Group are measured using the currency of
the primary economic environment in which the Group operates (‘the functional currency’). The
consolidated financial statements are presented in Australian dollars, which is the Group’s functional and
presentation currency.
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.
1.18 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 segment was 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.
28
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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 2015 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 2015, 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.
29
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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 2016, InnovaDerma PLC did not have any contingent liabilities.
Contractual Commitments
At 30 June 2016, InnovaDerma PLC had not entered into any contractual commitments.
Consolidation of subsidiaries
In the prior year, following the incorporation of InnovaDerma PLC, the following subsidiaries:
InnovaDerma AUS and NZ Pty Ltd, InnovaDerma International Limited, InnovaDerma NZ Limited, and
ID Philippines, Inc were acquired through a share for share exchange. The subsidiaries have been
consolidated using the pooling of interest method on the basis that the entities being combined were
ultimately controlled by the same party, both before and after the combination. Under this method the
assets and liabilities of the acquiree are recorded at book values and intangible assets and contingent
liabilities are only recognised if they were previously recognised by the acquiree. No goodwill is
recorded and expenses of the combination are immediately written off in the profit or loss.
The carrying value of the subsidiaries’ net assets at the date of
combination were as follows:
InnovaDerma AUS & NZ Pty Ltd
InnovaDerma International Limited
InnovaDerma NZ Limited
ID Philippines Inc
Net Assets
Acquired
$
(58,118)
-
-
-
The shares in InnovaDerma AUS & NZ Pty Ltd, InnovaDerma International Limited, InnovaDerma NZ
Limited, and ID Philippines, Inc were exchanged for 8,969,960 Ordinary Euro 0.10 shares in
InnovaDerma PLC.
30
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
3. Operating segments
Operating segments must be identified on the basis of internal reports about components of the
consolidated entity that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segment and to assess its performance.
As a new group, currently in its growth phase, the Board (the group’s chief operating decision maker)
believe that, at 30 June 2016, there was only one business segment, the hair and beauty division.
The revenue and results of this segment are those of the consolidated entity as a whole and are set out
in the statement of profit or loss and other comprehensive income. The segment assets and liabilities of
this segment are those of the consolidated entity and are set out in the statement of financial position.
4. Operating profit/(loss)
The following items have been included in arriving at the operating profit/(loss):
Year ended
30 June 2016
$
Period from 19
September to 30
June 2015
$
Gains on foreign exchange
-
-
Expenses:
Directors’ remuneration
Depreciation
Auditor’s remuneration
-
-
As auditors (for parent company and
consolidation)
Taxation compliance (for parent company
and subsidiaries)
321,498
3,180
30,000
10,000
47,475
1,834
16,000
5,000
All remuneration payable to the auditors has been disclosed above. No other non-audit services have
been provided. 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.
31
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
5.
Employees
Staff costs for the Group during the period:
Wages and salaries
Social security costs
Pension costs (including superannuation)
Year ended
30 June 2016
$
Period from 19
September to 30
June 2015
993,766
168,902
-
62,549
1,056,315
-
16,045
184,947
The average monthly number of staff (including executive Directors) employed by the Group during the
period amounted to:
Management staff
Other employees
6.
Taxation
Year ended
30 June 2016
Period from 19
September to 30
June 2015
4
14
18
4
21
25
Year ended
30 June 2016
$
Period from 19
September to 30
June 2015
$
Current Tax
Current tax on profits in the period
Deferred tax expense
Income Tax Expense
294,766
(169,518)
125,248
-
-
32
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
Factors affecting current tax charge
The effective rate of tax for the period is higher than the standard rate of corporation tax in the UK of
20% due to tax on subsidiaries located in higher tax jurisdictions. The differences are explained below:
Profit/(Loss) before taxation
472,627
(900,294)
Year ended
30 June 2016
$
Period from 19
September 2014 to
30 June 2015
$
Profit on ordinary activities multiplied by the
standard rate of tax in the UK of 20%
Differences in tax rates in subsidiary jurisdictions
Excluded (gain)/loss from foreign jurisdictions
Losses carried forward
Permanent differences
Total current tax
7. Revenue
Haircare Products
Skin & Beauty Products
8. Cash and cash equivalents
94,525
82,005
(51,316)
-
34
125,248
(180,059)
177,186
2,873
-
-
Year ended
30 June 2016
$
Period from 19
September 2014 to
30 June 2015
$
951,624
7,461,072
922,113
125,538
8,412,696
1,047,651
30 June 2016
$
30 June 2015
$
Cash at bank
207,682
212,618
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.
33
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
9.
Trade and other receivables
Trade Receivables
10.
Inventory
Finished goods (Leimo)
Finished goods (Stop and Pose)
Finished goods (Skinny Tan)
30 June 2016
$
30 June 2015
$
1,970,619
112,142
30 June 2016
$
30 June 2015
$
310,219
-
797,416
1,107,635
248,532
10,886
82,376
341,794
The costs of inventories recognised as an expense and included in cost of sales amounted to
$2,539,817 for the year.
11. Prepayments and Sundry Assets
Deposits held
Prepayments
Input tax
Sundry assets
30 June 2016
$
30 June 2015
$
9,690
35,844
29,472
-
75,006
24,570
-
29,472
15,369
69,411
34
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
12.
Intangible Assets
Group:
Brands (Skinny Tan)
Brands (Leimo)
Brands (Stop & Pose)
Development Costs
Movement in capitalised development costs:
Balance brought forward
Development expenditure during the year/period
Parent Company
Goodwill
Brands (Leimo)
30 June 2016
$
30 June 2015
$
444,202
444,202
2,794,024
2,794,024
148,331
94,247
148,331
31,922
3,480,804
3,418,479
30 June 2016
$
30 June 2015
$
31,922
62,325
94,247
-
31,922
31,922
30 June 2016
$
30 June 2015
$
1,399,424
1,399,424
-
2,492,674
3,892,098
3,892,098
In the prior period, the Parent Company acquired the Leimo brand by issuing shares to the seller. During
this financial year, the brand was transferred to the subsidiary trading in those products – InnovaDerma
AUS & NZ Pty Ltd.
35
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
13. Deferred tax asset
Deferred tax items recognised in income statement:
- Other timing differences
-
Income tax losses
14. Trade and other payables
Trade payables
Other payables
Current tax payable
15. Borrowings
General Borrowings
Convertible Notes
Convertibles
30 June 2016
$
30 June 2015
$
37,292
139,490
176,782
-
-
-
30 June 2016
$
30 June 2015
$
1,814,709
690,711
294,482
2,799,695
687,608
100,714
-
788,322
30 June 2016
$
30 June 2015
$
951,402
127,510
1,078,912
560,553
127,510
688,063
During the period to 30 June 2015, the Group issued convertible notes worth a total of $127,510. The
bonds mature two years from the issue date (29 May 2015) at their nominal value, or can be converted
into shares at the holder’s option at any point between the date of the group’s public listing and the
maturity date. If exercised, the number of shares issued will be calculated based on the group’s share
price at the exercise date.
Given the number of shares issued is variable, depending on the share price at that time, governing
accounting standards categorise the entire convertible note as a liability, with no equity component.
Upon conversion, the borrowings balance will be cleared and a corresponding balance of the same
value will be created in equity.
36
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
16. Deferred tax liability
Deferred tax items recognised in income statement:
- Prepayments
17. Contributed equity
Opening balance as at 1 July 2015
Shares issued during the year
Balance as at 30 June 2016
Shares issued on incorporation
Share for share exchange to acquire subsidiaries 1
Shares issued to complete brand acquisition
Share split (original incorporation shares)
Shares issued on exercise of convertible notes
Share issue costs
Balance as at 30 June 2015
30 June 2016
$
30 June 2015
$
7,264
7,264
-
-
-
30 June 2016
No. of shares
30 June 2016
$
10,209,920
108,615
10,318,535
2,479,468
16,555
2,496,023
30 June 2015
No. of shares
30 June 2015
$
4
8,969,960
626,400
36
613,520
-
10,209,920
5
1,308,157
91,362
-
1,391,162
(311,218)
2,479,468
1 The subsidiaries acquired were InnovaDerma AUS & NZ Pty Ltd, InnovaDerma International Limited,
InnovaDerma NZ Limited, and ID Philippines Inc.
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.
37
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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)
Value of share capital acquired
Value of Merger Reserve
$
1,308,157
(100)
1,308,057
19. Accumulated losses
Balance brought forward
Acquisition of subsidiaries (pooling of interests)
Profit/(loss) for the period
Balance carried forward
30 June 2016
$
30 June 2015
$
(958,512)
-
221,690
(736,822)
-
(58,218)
(900,294)
(958,512)
38
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
20.
Intercompany loan – parent company
Balance brought forward
Leimo brand transfer (see Note 12)
Movement in funds
Balance carried forward
30 June 2016
$
30 June 2015
$
1,157,379
2,492,674
(81,426)
3,568,627
-
-
1,157,379
1,157,379
21.
Investment in subsidiaries
During the year, the Company held interests in the following subsidiaries:
Company Name
Date of Acquisition Percentage Holding
InnovaDerma AUS & NZ Pty Ltd 1
InnovaDerma International Limited 1
InnovaDerma NZ Limited 1
ID Philippines Inc 1
Bach Health Pty Ltd
InnovaScience Inc
Skinny Tan Pty Ltd
Skinny Tan UK Limited
28 November 2014
28 November 2014
28 November 2014
28 November 2014
23 January 2015
31 March 2015
28 May 2015
28 May 2015
30 June 2016
100%
100%
100%
100%
100%
100%
80%
80%
Percentage Holding
30 June 2015
100%
100%
100%
100%
100%
100%
100%
100%
1 Please see notes 1.3 and 16 for further detail on the method of accounting applied for the acquisitions.
The results of these subsidiaries have been consolidated on a line by line basis into the consolidated
financial statements.
39
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
22. Business Combination
In the prior year, the Group acquired 100% of the share capital of Skinny Tan Pty Ltd, in exchange for
cash consideration of $50,075. The acquisition expands the range of products the Group can offer in the
hair and beauty sector and is anticipated to facilitate scalability in the Group’s offerings for the coming
financial year, as expansion continues into new markets.
The following table shows the allocation of consideration paid for Skinny Tan Pty Ltd, the fair value of
assets acquired, liabilities assumed, and the non-controlling interest at the acquisition date.
Consideration
Cash Consideration
Total Consideration
Recognised fair value of assets acquired and liabilities assumed
Accounts receivable
Inventory
Other assets
Brand
Intellectual property
Trade and other payables
Borrowings
Total fair value of assets acquired and liabilities assumed
50,075
50,075
5,444
72,023
16,299
431,515
12,687
(240,373)
(247,520)
50,075
23. Related party transactions
Name
Transaction
Amount received from
/ (paid to) in year
Amount due from/(to)
related party
2016
$
2015
$
2016
$
2015
$
151,495
(151,495)
(151,495)
Farris Marketing
Concepts Pty Ltd
Farris Marketing
Concepts Pty Ltd
Loan payable1
Acquisition of
Stop & Pose
Brand
-
-
(200,000)
Cyngenta Capital &
Advisory
Provision of
services2
(27,237)
-
-
-
-
-
Zaymar Investments
Pty Ltd
Loan payable1
736,007
60,000
(796,007)
(796,007)
Mr Haris Chaudhry
Loan payable1
(173,757)
173,757
-
(173,757)
1 These loans are interest free and unsecured.
2 These expenses were settled via the issue of equity instruments in InnovaDerma PLC.
40
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
Common control acquisition of subsidiaries
As more fully discussed in Note 18, InnovaDerma PLC acquired several subsidiaries via a share for
share exchange. These subsidiaries were majority controlled by Mr Haris Chaudhry, a director of
InnovaDerma PLC; hence, the majority of shares issued for the acquisition were issued to Mr Chaudhry.
Nature of related parties
Farris Marketing Concepts Pty Ltd and Zaymar Investments are related parties of Mr Haris Chaudhry,
the Executive Chairman.
Key Management Personnel
All transactions with key management personnel (the directors) during the year ended 30 June 2016 are
disclosed below:
Salary
Superannuation Consultancy
Total
Total 2015
Haris Chaudhry
Geert Lemair
Joseph Bayer
Rodney Turner
Clifford Giles
150,000
15,995
96,002
27,150
-
Fees
14,250
1,505
10,078
2,850
-
Nil
164,250
51,985
17,500
Nil
Nil
-
35,000
106,080
30,000
-
-
-
-
-
289,147
28,683
17,500
335,330
51,985
During the period, there were no advances, credits or guarantees subsisting on behalf of the directors.
Ultimate Controlling Party
As at the year-end date, the Group was controlled by Mr Haris Chaudhry, who is the majority
shareholder of InnovaDerma PLC.
24. Commitments and contingencies
At 30 June 2016 the Group did not have any contingencies.
At 30 June 2016, the Group had an obligation to pay $71,000 in rent for the forthcoming 12 months,
under a non-cancellable operating lease.
41
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
25. Reconciliation of operating profit to net cash outflow from operations
Profit after income tax
Depreciation
Expenses settled in shares
Year ended
30 June 2016
Period from 19
September to 30
June 2015
$
347,379
(900,294)
2,147
13,418
1,834
-
(Increase) in trade and other receivables
(1,860,774)
(117,765)
(Increase) in inventory
(765,841)
(203,891)
Increase in trade and other payables
1,716,891
376,463
Increase in taxes payable
124,964
-
Net cash outflow from operations
(421,816)
(843,653)
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 2016 were classified as follows:
Note
30 June 2016
30 June 2015
$
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Borrowings
8
9
14
15
207,682
1,970,619
2,178,301
2,799,695
1,078,912
3,878,607
212,618
112,412
325,030
788,322
688,063
1,476,385
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.
42
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
Specific Financial Risk Exposures and Management
The Group’s activities expose it to a number of financial risks that include market risk, credit risk and
liquidity risk.
(a) Market Risk
i) Foreign 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.
Interest rate risk
ii)
The Group had interest-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 2016. As such,
sensitivity analysis with regard to movements in interest rates would not be meaningful.
(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) Liquidity 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 suppor t
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.
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
30 June 2016
Period from 19
September to 30 June
2015
$
Profit/(loss) for the year
347,379
(900,294)
43
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
Weighted average number of shares
10,301,983
7,449,281
29. Subsequent Events
On 7 September, InnovaDerma PLC was admitted to the Official List and to trading on the Main Market
of the London Stock Exchange. Trading on the Marche Libre Paris segment of Euronext was suspended
on the same date.
On 20 September, 27,000 ordinary shares of EUR 0.10 were allotted.
Aside from the above items, the directors are not aware of any significant events since the end of the
reporting period.
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 17, 31 Queen Street
Melbourne VIC 3000
Australia
44