ANNUAL REPORT 2018
INNOVADERMA PLC
CONTENTS
CONTENTS
Corporate directory
Strategic report
Directors’ 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
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INNOVADERMA PLC
CORPORATE DIRECTORY
Directors
Haris Chaudhry
Joseph Bayer
Rodney Turner
Kieran Callan
Ross Andrews
Company Secretary
Elemental Company Secretary Limited
Company registration number
09226823
Registered office
Auditor
27 Old Gloucester Street
London
United Kingdom
WC1N 3AX
Greenwich & Co UK
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
2
INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
The Directors present their strategic report on InnovaDerma PLC and its controlled entities (hereafter
“the Group” or “InnovaDerma”) for the year ended 30 June 2018.
Principal activity
InnovaDerma specializes in the research, manufacture and marketing of clinically proven products in
life sciences, beauty and personal care products. InnovaDerma has presence in the UK, Europe, US,
Australasia, North Asia and Africa.
Financial Highlights
• The Company experienced strong revenue growth reflected in a 21% improvement over the
previous year
• Profit before tax of £0.67m was lower due to investments made in brand development and
growth
• Excellent performance from Roots Double Effect ("Roots") which delivered almost £1m (£917k)
in sales in its first year of launch
• DTC revenue, customer base and reach, increased significantly with this channel delivering
record number of orders in the last quarter of FY2018
• The Company remains free of bank or secured debt
Operational Highlights
• The Skinny Tan brand has continued its transformation into becoming a more complete beauty
brand with significant product extensions and placement into non-tanning categories
• The successful launch of Roots has provided the Company with a non-seasonal, revenue
generating brand which will be supported by a pipeline of new product extensions
• DTC continues to provide a strong platform for sales growth and customer engagement
• Our customer database grew significantly driven by our digital marketing channels
Post-Period End and Outlook
• As announced on 19 September 2018, Skinny Tan™ portfolio to be sold online and in 1,250 of
Boots stores from February and March 2019 respectively
• Strong revenue growth and profit improvement expected with significant new retail channels
added in the UK and Australia and distributors appointed in multiple global regions
• Supply chain issues resolved with excellent product availability and inventory levels to support
expected significant growth
• Outlook for the life sciences portfolio remains strong with the introduction of a new Prolong™
manufacturer which will significantly reduce product costs
• Secured ranging of Charles + Lee™ in Australia’s leading pharmacy groups Terry White
Chemmart and Priceline
• Roots expected to add material growth to revenue and profit as it gains momentum through
new product line extensions and new distribution opportunities in multiple geographies
• Appointment of Kieran Callan as the UK based CEO to manage the strong growth expected in
FY2019
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Haris Chaudhry, Executive Chairman of InnovaDerma, said:
“I am pleased to report this has been a year of significant progress and achievement with our brands
delivering revenue growth as they penetrate new geographical markets and distributors. Customer
centricity lies at the heart of our business and our innovative DTC channel and strong social media
engagement enables us to reach our customers and ensures we optimise their experience. Our DTC
channel is key to our growth and remains core to retaining and driving brand loyalty.
“In just three years, Skinny Tan has transformed from a bronzing only to a beauty brand, become the
most followed self-tanning brand on Facebook and has set the template for other brands to follow
successfully. Our in-house developed premium-haircare brand Roots, delivered an excellent
performance and it is particularly pleasing that in 12 months, it has secured distribution in UK’s
leading retail chains, Superdrug, Boots and Tesco. The Company is trading in line with expectations
post year end and is well positioned for future revenue and profit growth from our stable of strong
brands.”
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Executive Chairman’s Statement
Introduction
I am pleased to report another year of strong progress and achievement for InnovaDerma, one which
has seen revenue growth, new product development, product launches and entry into major new retail
chains globally.
Group revenues grew strongly by 21% on a constant currency basis to approximately £10.7m (FY2017:
£8.9m), primarily driven by our Direct to Consumer (“DTC”) channel which delivered a record number
of orders in the second half of the year and generated the highest ever monthly revenue in May and
June. Profit before tax was £0.67m (FY2017: £1.03m) and lower primarily as a result of significant
investments made across the business which were critical to sustaining the future growth and included
the launch of Prolong. Stock availability issues for Roots, which have since been resolved, and lower
than expected revenue out of the US in June, also contributed to the lower than expected profit versus
the original forecast. Our flagship brand Skinny Tan benefitted from new product development and
delivered an excellent performance. Roots, our in-house developed premium-haircare range which was
launched just one year ago, made a positive contribution to the Group’s business and is now available
in UK’s leading retail chains.
Throughout the financial year, the Company has developed and strengthened its product portfolio and
created a bedrock of multiple brands and products which will fuel the growth in revenue and profit
expected in FY2019. We developed and launched multiple new sub-brands and extensions for our two
core brands, Skinny Tan and Roots. The Charles + Lee and Stevie K Cosmetics product range were
also extended, and we created an innovative marketing campaign for Prolong, the world’s first FDA-
cleared device for premature ejaculation for launch in US and Australia.
Self-tanning
The growth of the Skinny Tan brand has continued, with revenue strengthening year on year during the
peak tanning season. The online customer community has grown, and brand loyalty has driven
increased orders with the strengthening DTC platform.
Skinny Tan’s sales-out for the period to 30 June 2018 has grown significantly. Sales-through the DTC
channel were up 20% YoY showing 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
(individual product lines) increased from 31 to 45 during the period. However, as most of these new
products were launched in the last quarter of the FY18, we expect the impact of this growth will be
evidenced during the new financial year.
Investment into new product development is key to ensuring that Skinny Tan remains at the forefront
of the bronzing category and in the period, the Company launched Bum Booster and the Skin Blur
range. The Company also launched FACE by Skinny Tan, a range of innovative tanning products
formulated for facial use. The exclusivity with Superdrug expires in February 2019 and, to enhance
growth, the Company has undertaken increased product development work on multiple product
extensions for new retail channels expected in FY2019. The Company has transitioned the brand from
tanning-only to an emerging beauty brand and aims to target a much larger market and year-round
utility through developing new products aimed at a wider demographic.
The international distribution of Skinny Tan is key to driving global brand awareness and revenue. Post
period end, it was announced that Skinny Tan had entered a number of new geographies including
France, Germany, Ireland and appointed a significant distributor to open up and manage sales in the
Nordic countries including Norway, Sweden, Denmark and The Netherlands. We will also be making
our first entry into Canada, and Japan.
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Haircare
Roots, a premium haircare brand launched in August 2017, was developed because the Company
identified a gap in the market for high quality premium haircare brand that assists in reducing hair loss.
It has the advantage of providing consistent revenue throughout the year and, as the brand grows, it
will help to offset the seasonality of Skinny Tan. Additionally, it has a target market and client longevity
far stronger than the self-tanning market.
The Company sold close to £1m worth of Roots products during the FY2018 despite a limited retail
footprint (circa 400 Superdrug stores) and challenges in the availability of the product in its launch year
which bodes extremely well with the long-term prospects of the brand. The product has gone from
strength to strength and 12 months after launch this highly effective and popular brand is now available
in Superdrug (789 stores), Boots (359 of the largest of Boots’ 2,500 stores) and from November in
Tesco (432 of the largest of 3,000+ stores) which demonstrates our ability to create a popular brand
and monetize it within a very short time frame.
Roots was launched with five products and this has now been extended to nine products including heat
protect spray, conditioning spray and conditioning mask, which were developed as a result of customer
demand/feedback via social media. The majority of these were launched late in the FY and multiple
new product lines are in the process of launching throughout the new FY which is expected to double
the SKU count this year. The Company believes that Roots will become a significant brand in FY2019
and we are seeking to expand the retail footprint within the UK and elsewhere internationally. Roots
has now been registered with the FDA for US launch and Health Canada for an impending launch in
Canada during this financial year.
As mentioned above, demand for Roots exceeded supply of available inventory in the second half of
FY2018. These supply chain issues have now been addressed and the Company has developed a
substantial inventory to supply our own DTC, our retail partners and as and when we launch into other
retail chains and new territories.
Cosmetic and Skincare
Charles + Lee is an affordable alternative premium range of men's skin care products, marketed as an
effective and understated brand, containing natural and organic ingredients. It is cruelty free and has
been certified by the Roundtable on Sustainable Palm Oil (the "RSPO"). Charles + Lee is performing
well and gaining good momentum, especially in retail stores. We have extended the brand to
incorporate a men's shaving range, oil-free moisturiser and an after-shave balm.
The Company launched Charles + Lee in 30 of Myer’s stores (Australia’s largest department store
chain) in the first half of FY2018 which was subsequently extended to 46 stores. Terry White Chemmart,
a retail chain in Australia, began to range its products in August 2018. The brand is beginning to earn
recognition internationally and post period end we announced Charles + Lee will make its entry into
New Zealand, South Africa and India, one of the fastest growing consumer markets globally.
The brand was presented to Australia’s largest Beauty retailer Priceline (with approximately 450 stores
nationally) this month and the Company has received confirmation that it will be launched in stores prior
to the Christmas peak buying season.
Stevie K Cosmetics is an award winning, mid-priced, bold range of cosmetics with strong branding and
eye-catching packaging. During the period the brand’s new website was launched, and its lipsticks and
eye makeup can be purchased through its DTC platform.
The Company has expanded the product line for Stevie K Cosmetics and remains committed to
launching the product in the UK. However, given the competition in the colour cosmetics space and the
Company’s significant financial investment to expand the product range across Skinny Tan, Roots and
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Charles + Lee, it has been decided to defer Stevie K Cosmetics’ launch on DTC and retail until we are
confident that a successful launch can be monetised and generate a suitable return on investment.
Life Sciences
The Company is seeking to build its life sciences product portfolio, particularly in skincare, by either
developing its own devices and or acquiring businesses which are complementary to HeadMaster and
Prolong™.
Prolong, the world's only FDA-cleared medical device for premature ejaculation, was launched in the
United States and Australia in May. The launch was supported by a highly creative marketing
campaign, a first of its kind, ground-breaking sex-positive platform with the aim to normalise and de-
stigmatise discussions around sexual health and wellbeing for men. This resulted in the Company
selling 622 units during the two-month period (May-June). The Company is seeking CE Mark regulatory
approval for Prolong and, once obtained, the device will be launched in the UK and Europe.
The marketing campaigns were scaled back from July owing to a number of Prolong units exhibiting
battery switch issues. Consequently, the Company is in discussions with a large manufacturer to start
production during the first half of the new FY which will also have the benefit of reducing the cost of
each unit by more than 40% compared to the current model. This development ensures that the gross
profit margins are increased considerably once marketing has restarted. The packaging of the unit is
also being improved and the Company remains confident of a successful relaunch prior to Christmas.
As part of wider global re-launch, the Company has completed Japanese FDA registration through its
distributor and is commencing registration both in China and India (two of the largest markets globally)
to take advantage of the reduced cost of goods in what is traditionally price sensitive markets.
The Company is in discussions with a number of distributors around the globe to launch the devices in
their territories throughout the new financial year. Post-period end, although the marketing campaign
has halted, sales are consistent through DTC and is expected to grow once the marketing campaigns
are scaled up.
HeadMaster, a wearable FDA-cleared helmet to aid hair generation and reduce hair loss, is expected
to augment Prolong as an incremental revenue generator and the Company has placed an order for
the first production run and expect to launch the brand in the first half of FY2019.
People
On behalf of the Board, I would like to welcome Kieran Callan to his new role as Chief Executive Officer.
Kieran started with us as CEO this month and brings with him more than three decades of experience
in senior management and Chief Executive Officer roles with a solid track record of delivering significant
and profitable growth. He will be based in the UK and will manage the strong growth expected in
FY2019, major new retail chains and the launch of new products. We have a highly dedicated team
who work very hard and are committed to making InnovaDerma a truly exceptional business. On behalf
of the Board, I would like to thank them all for their quality of work and commitment.
Post-Period End and Outlook
We recognise that as a growth business, we must be prudent on how we allocate our resources to
maximise return on investment. Our priority this year will be to grow our core revenue generating
brands, Skinny Tan and Roots, and expand the distribution channels for Charles + Lee and Prolong.
We remain committed to our other brands and we expect product launches for Headmaster and Stevie
K Cosmetics online and in certain territories in FY2019.
7
INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
In three years, Skinny Tan has been transformed from bronzing-only to a beauty brand with excellent
brand awareness - especially in the UK. Our focus will be to continue to grow the brand through our
DTC channel, new retail chains and in new territories. Innovation is a key driver to ensuring brand
relevance and ensuring we continue to resonate with our customers. We have a healthy innovation
pipeline and expect to launch new sub products throughout FY2019 alongside securing new retail
chains as the exclusivity with Superdrug expires in February 2019. Skinny Tan remains the most-
followed self-tanning brand globally on the world’s largest social media platform, Facebook. Skinny
Tan is now also positioned to enter a number of new geographies including the Nordic countries Canada
and Japan through our fast-growing distributor network.
Roots has the benefit of being non-seasonal, providing us with consistent revenue throughout the year.
This exciting brand is now available in Boots and Superdrug and will be available in Tesco from
November and our focus will be to expand our retail presence further within UK with new retail channels
and deeper distribution within the existing retail channels. This will be augmented by expanding the
brand internationally and with continued focus to launch new products for our customers. The Company
expects continued roll out of new products throughout FY2019 and expects the number of SKUs to
double during the period.
Charles + Lee is making excellent progress having just secured Australia’s largest beauty retailer
(Priceline) by stores and we expect the brand to be launched in new international markets including
South Africa, Canada and India in the coming months. The brand is expected to be launched in the UK
this financial year.
The Company is making excellent progress and trading is broadly in line with expectations with Roots
continuing to show strong growth. We have an exciting and innovative life sciences portfolio which is
in its early stages and expected to make a positive contribution to the Group’s performance this FY.
Our efforts this financial year will be to secure further distribution deals for Prolong and continue to
normalise and de-stigmatise discussions around sexual health and wellbeing for men. Prolong has
been well received internationally and we expect to launch the product in new territories including
Japan.
In summary, the outlook for the Company is robust, supported by a strong brand portfolio, our ever-
growing online DTC channel, international retail and distribution partners and a pipeline of new
products.
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Finance Director’s Review
Overview
The Group delivered solid sales growth, driven predominantly by a robust UK DTC performance, strong
Superdrug sales out and a very pleasing Roots introduction to the market. 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 £10.7m (FY2017: £8.9m)
Profit before tax of £0.67m was lower than the previous year (FY2017: £1.03m).
Operating Results
Costs associated with new product development and launches impacted gross margins and increased
operating expenses. Gross margins declined from 63% in FY2017 to 57% in the financial year under
review. The combination of product mix in Skinny Tan, which now covers a broader range of price
points, and introductory launch offerings of new products into the major retailers have reduced average
selling prices. However, we expect benefits will be generated from the expansion of products, price
points and channels as the product offering stabilises with the major retailers.
Marketing expenditure was £2.3m, 14% lower than the previous year (FY2017: £2.7m). Whilst spend
on launch costs, public relations and associated sales driven initiatives was higher than the previous
year, the Group has reflected the significant investment in increasing its customer list as an intangible
asset against the respective brands. Overall the direct total customer database has grown 66% from
the previous year. This focussed investment has driven the growth in D2C activity over the year and is
an integral platform for future growth.
The Group has continued to invest in organisational capability and brand support with the subsequent
increase in salary and wage costs. Administration expenses were increased on the previous year
primarily due to expansion in our facilities, higher depreciation charge and higher merchant service
charges coming from increased DTC volumes.
Other income recorded of £0.08m was significantly lower than the previous period as the volume of
intercompany transactions reduced significantly due to less product movement between subsidiaries
as manufacturing is now fully consolidated in the UK.
Cash and net debt
The Group continues to carry no external bank debt and has now only £13k of related party loans
(FY2017: £0.405m). The Group undertook a capital raising in October 2017 where the issue of
1,600,000 shares realised net proceeds £4.2m. Cash and equivalents was £1.9m as at 30 June 2018,
which remains a comfortable level to meet business as usual requirements. Inventory levels increased
to £2.9m (FY2017: £2.3m) which reflected the increased product range. Trade and other payables
decreased slightly to £2.3m (FY2017: £2.4m).
Taxation
The Group has recognised a tax expense of £0.3m against profit (FY2017: £0.3m). The effective tax
rate of 38.1% is an increase over last year (FY2017: 33%) due to the differences in tax rates in
subsidiary jurisdictions. We did receive the benefit of an overprovision from previous years which
reduced the impact of foreign jurisdictions on the lower UK tax rate.
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.
9
INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
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:
Number of Men
Number of Women
5
2
5
-
2
20
Role
Directors
Senior Managers
Other Employees
By order of the board
Haris Chaudhry
Executive Chairman
02 October 2018
10
INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
The Directors present their report and financial statements of the Group for the year ended 30 June
2018.
Directors
The Directors who served the Group during the period are as follows:
Mr Haris Chaudhry
Mr Joseph Bayer
Mr Rodney Turner
Mr Kieran Callan
Mr Ross Andrews (appointed 26th July 2017)
Company Secretary
The following served as Company Secretary during the period:
Elemental Company Secretary Limited, London.
Meetings of the Directors
During the year to 30 June 2018, the directors attended the following meetings of the board of directors:
Meetings eligible to attend
Meetings attended
Haris Chaudhry
Joseph Bayer
Rodney Turner
Kieran Callan
Ross Andrews
Review of the Business
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11
11
11
10
11
11
11
11
10
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 business.
Branches outside the UK
The Group’s main operations are headquartered in London, United Kingdom. Offices are maintained
in Australia, New Zealand, the USA, and the Philippines.
11
INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
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 in the 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 it 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 2018, the ordinary share capital of InnovaDerma PLC consisted of 14,376,633 shares, with
a nominal value of EUR 0.10 each. There are no restrictions on the transfer of securities in the
Company, and no restrictions on voting rights.
Post Balance Sheet Events
On 12th September 2018, 120,000 warrants were exercised at £1.10 and converted into ordinary
shares of EUR 0.10.
Aside from the above items, the directors are not aware of any significant events since the end of the
reporting period.
12
INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
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 2018, 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
1 July 2017
Shares acquired
during the period
Shares disposed
during the period
Haris Chaudhry
Joseph Bayer
Rodney Turner
Kieran Callan
Ross Andrews
5,780,220
113,513
51,097
11,000
-
-
-
-
15,000
775,000
-
-
-
Shares held on
30 June 2018
5,030,222
113,513
51,097
11,000
15,000
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.
The committee is chaired by Mr Ross Andrews, Mr Rodney Turner is the other participating member.
All aspects of key management personnel remuneration are now overseen by the remuneration
committee, including the new contracts which have been prepared for the Executive Directors.
The remuneration committee is undertaking a strategic review of the structure of director remuneration
to ensure that the correct mix of fixed remuneration and performance-related incentives are provided,
to maintain the Company’s competitiveness in the corporate marketplace.
13
Contracts
Directors’ remuneration in its various forms was historically agreed by the Executive Chairman but is
now overseen exclusively by the remuneration committee. All directors are provided with relevant
contracts have been executed prior to the appointment.
Mr Chaudhry’s contract is continuous, until terminated by either party. Mr Chaudhry may terminate the
contract by giving twenty weeks’ notice, in writing.
Mr Bayer’s contract is continuous, until terminated by either party. Mr Bayer may terminate the contract
by giving twelve weeks’ notice, in writing.
All other director’s contracts are for a fixed term of two years from the date of their appointments
14
INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Amount of emoluments & compensation
Year to 30 June 2018
£
Salary
Superannuation
Consultancy
Fees
Total
Total 2017
Haris Chaudhry
172,786
1 Geert Lemair
Joseph Bayer
Rodney Turner
3 Clifford Giles
4 Ross Andrews
2 Kieran Callan
-
109,431
17,279
-
-
-
16,414
-
10,396
1,641
-
-
-
-
189,200
184,806
-
-
-
-
-
15,686
119,827
103,557
18,920
19,546
-
16,669
18,831
18,831
-
18,494
18,494
8,236
299,496
28,451
37,325
365,272
348,500
1 Geert Lemair resigned from the Board on the 10th of January 2017
2 Kieran Callan was appointed to the board on the 30th of January 2017
3 Clifford Giles resigned from the board on the 3rd May 2017
4 Ross Andrews was appointed to the board on the 26th July 2017
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.
15
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
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
02 October 2018
16
REPORT OF THE INDEPENDENT AUDITOR TO
THE MEMBERS OF INNOVADERMA PLC
Opinion
In our opinion:
-
-
-
-
the financial statements give a true and fair view of the state of the Group’s and of the parent
company’s affairs as at 30 June 2018 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with
applicable law and IFRSs as adopted by the European Union; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS
Regulation.
Whom we are reporting to
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.
What we have audited
The financial report of InnovaDerma PLC for the year ended 30 June 2018, which comprises the
following statements:
- 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, and
- All related notes to the above.
17
The financial reporting framework that has been applied in the preparation of the Group and parent
company financial statements is applicable law and IFRSs as adopted by the European Union.
Overview of Audit Approach
We identified the key audit risks to be revenue recognition, change of presentation currency, and
possible impairment of intangible assets.
We set materiality for the Group at 1.5% of revenue: £160,489.
We performed full scope audit procedures over all Group entities at the head office in Melbourne,
Australia.
Our Assessment of Risks of Material Misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on
our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement
team.
REVENUE RECOGNITION
Risk Description
InnovaDerma, as a Group, generates revenues from sales of various health
and beauty products, including the Skinny Tan and Leimo lines.
The method for recognising revenue varies depending on the type of sale
being made:
- Direct to customer sales
These sales are made via the internet, and the sale is recognised at
the point of purchase, as the customer has paid and accepted
responsibility for the purchase of the good.
- Retail & Wholesale sales
These sales are recognised at the date the stock is segregated from
other inventory, ready for collection or delivery in accordance with
these customers terms of trade.
There is are risks around the timing of revenue recognition of product sales,
particularly focused on the contractual terms of delivery and location of sale.
In addition, due to the volume of transactions in the year, and the different
types of revenue, we have identified revenue recognition as a key risk for our
audit.
The Group’s revenue recognition policy is disclosed in note 1.5.
How the scope of
our
audit
responded to the
risk
Our audit work assessed the design and implementation of controls over the
recognition of revenue. We tested, in detail, a sample of completed orders
around the year end date, with specific focus on recognition conditions for
revenue.
We assessed the transfer of risk and reward to the customer by reviewing
dates of transaction completion on Shopify (the Group’s online shopping
portal), and dates of stock segregation and dispatch for retail and wholesale
sales.
Key Observations: We noted no material instances of inappropriate revenue
recognition arising in our testing.
18
IMPAIRMENT OF INTANGIBLE ASSETS
Risk Description
Management are required to assess the carrying value of intangible assets
and perform an impairment review under IAS 36 Impairment of Assets on an
annual basis and whenever an indication of impairment exists.
At 30 June 2018, the net book value of intangible assets was £5.694m,
incorporating goodwill from the acquisition of subsidiaries, as well as brands
purchased and external customer lists.
Assessment of the carrying value of capitalised development costs and
possible impairment is a key risk due to the quantum of the balance recorded
on the Group balance sheet, and the number and complexity of judgements
involved in assessing the impairment.
How the scope of
audit
our
responded to the
risk
We obtained management’s impairment review models covering key
capitalised development costs. We determined that, of the assumptions
underpinning the models, the key assumption was the short-term forecast
cash flow projections applied.
We focused our assessment on the goodwill arising from the acquisition of
InnovaDerma AUS & NZ Pty Ltd, whose brand was showing indicators of
potential impairment during the year. We obtained from management, and
evaluated in detail, value in use calculations showing future sales of
associated product lines.
Key Observations: We concluded that the assumptions applied in the
impairment models were appropriate and no impairments were identified from
the work performed.
Our application of materiality and an overview of the scope of our audit
Materiality
We define materiality as the magnitude of a misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality in determining the nature, timing and extent of our audit work and in
evaluating the results of that work. We determined materiality for the Group financial statements as a
whole to be £160,489, which represents 1.5% of the Group’s revenue for the year ended 30 June 2018.
This benchmark is considered the most appropriate because this is a key performance measure used
by the Board of Directors to report to investors on the financial performance of the Group.
Materiality for the current year is higher than the level that we determined for the year ended 30 June
2017, reflecting the increase in the Group’s revenues during the year to 30 June 2018.
We use a different level of materiality, performance materiality, to drive the extent of our testing and this
was set at 75% of financial statement materiality for the audit of the Group financial statements. We
19
also determine a lower level of specific materiality for certain areas such as Directors’ remuneration and
related party transactions.
We agreed with the Board that we would report all audit differences in excess of £8,000, as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also
report to the Audit Committee on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
Overview of the scope of our audit
A description of the generic scope of an audit of financial statements is provided on the Financial
Reporting Council’s website at www.frc.org.uk/auditscopeprivate. We conducted our audit in
accordance with International Standards on Auditing (ISAs) (UK and Ireland). Our responsibilities under
those standards are further described in the ‘Responsibilities for the financial statements and the audit’
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion. We are independent of the Group in accordance with the Auditing Practices Board’s Ethical
Standards for auditors, and we have fulfilled our other ethical responsibilities in accordance with those
Ethical Standards.
The Group has operations in the UK, the USA, Australia, and the Philippines, but all are managed by
the Group’s management, which operates from Melbourne. Through our procedures, all Group entities
were subjected to a comprehensive audit approach. Our audit approach was based on a thorough
understanding of the Group’s business and is risk based, and in particular included:
-
-
-
-
undertaking interim procedures before the year end date to evaluate the Group’s internal control
environment, including IT systems and controls;
at this visit, we performed an evaluation of the design effectiveness of controls over key financial
statement risk identified as part of our risk assessment, reviewed the accounts production
process and performed certain transactional procedures for the first nine months of the year in
advance of the year end;
at the final audit visit, we undertook substantive testing on significant transactions, balances
and disclosures, the extent of which was based on various factors such as our overall
assessment of the control environment, the effectiveness of controls over individual systems
and the management of specific risks; and
the scope of the current year audit has remained consistent with the scope of that of the prior
year.
Opinion on Other Matters prescribed by the Companies Act 2006
Our opinions on other matters prescribed by the Companies Act 2006 are unmodified In our opinion,
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
-
-
the information given in the Strategic Report and the Report of the Directors for the financial
year for which the financial statements are prepared is consistent with the financial statements;
and
the Strategic Report and the Report of the Directors have been prepared in accordance with
applicable legal requirements.
20
In the light of the knowledge and understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic Report
or the Report of the Directors.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required 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 financial statements and the part of the Directors’ Remuneration Report to
be audited 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.
Under the Listing Rules, we are required to review:
-
-
the Directors’ statements in relation to going concern and longer-term viability, set out on pages
25 and 28; and
the part of the Corporate Governance Statement relating to the Company’s compliance with
the provisions of the UK Corporate Governance Code specified for our review.
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the
annual report is:
- materially inconsistent with the information in the audited financial statements; or
-
-
apparently materially incorrect based on, or materially inconsistent with, our knowledge of the
Group acquired in the course of performing our audit; or
otherwise misleading.
In particular, we are required to report to you if:
- we have identified any inconsistencies between our knowledge acquired during the audit and
the Directors’ statement that they consider the annual report is fair, balanced and
understandable; or
-
the annual report does not appropriately disclose those matters that were communicated to the
Audit Committee which we consider should have been disclosed.
We have nothing to report in respect of any of the above matters.
We also confirm that we do not have anything material to add or to draw attention to in relation to:
-
-
-
-
the Directors’ confirmation in the annual report that they have carried out a robust assessment
of the principal risks facing the Group including those that would threaten its business model,
future performance, solvency or liquidity;
the disclosures in the annual report that describe those risks and explain how they are being
managed or mitigated;
the Directors’ statement in the financial statements about whether they have considered it
appropriate to adopt the going concern basis of accounting in preparing them, and their
identification of any material uncertainties to the Group’s ability to continue to do so over a
period of at least twelve months from the date of approval of the financial statements; and
the Directors’ explanation in the annual report as to how they have assessed the prospects of
the Group, over what period they have done so and why they consider that period to be
21
appropriate, and their statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Responsibilities for the financial statements and the audit
What the Directors are responsible for:
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view.
What we are responsible for:
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 Ethical Standards for Auditors.
NICHOLAS HOLLENS
Senior Statutory Auditor for and on behalf of Greenwich & Co UK
Statutory Auditor, Chartered Accountants
Perth, Australia
2nd October 2018
22
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEAR ENDED 30 JUNE 2018
Revenue
Cost of sales
Gross profit
Other Income
Marketing expenses
Listing expenses
Wages & salaries expenses
Administrative expenses
Profit before tax
Year ended 30 June
2018
£
Year ended 30 June
2017
£
10,699,311
8,858,173
Note
7
(4,607,346)
(3,281,748)
6,091,965
5,576,425
81,715
204,941
(2,323,278)
(2,711,126)
(36,256)
(1,698,460)
(1,446,622)
669,064
(85,126)
(1,170,039)
(785,640)
1,029,435
Income Tax expense
6
(254,869)
(340,482)
Net profit for the period
414,195
688,953
Other comprehensive income
(16,562)
(157,966)
Total comprehensive income for the period
397,633
530,987
Attributable to:
Owners of the parent
Non-controlling interests
Basic & diluted profit/(loss) per share
28
291,098
106,535
£0.03
350,173
180,814
£0.06
23
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
As at 30 June
2018
£
As at 30 June
2017
£
As at 30 June
2016
£
Note
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Prepayment 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
Trade and other payables
Current tax payable
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Share Capital
Share premium
Merger reserve
Warrant Reserve
Foreign Exchange reserve
Non-controlling interest
Retained Profit/ (Accumulated
Losses)
Total equity and reserves
8
9
10
11
12
13
14
14
15
16
17
18
19
1,906,215
1,918,982
2,873,533
180,139
6,878,868
45,197
5,694,469
30,368
158,583
5,928,617
12,807,485
207,301
1,781,773
2,258,989
114,705
4,362,768
127,199
3,645,198
14,031
115,905
3,902,333
8,265,101
119,687
1,135,668
638,330
43,226
1,936,911
8,277
2,005,987
-
101,879
2,116,143
4,053,054
2,309,132
638,778
2,947,910
2,419,332
501,408
2,920,740
1,443,754
169,710
1,613,464
12,627
3,560
16,187
404,845
-
404,845
621,777
4,186
625,963
2,964,097
3,325,585
2,239,427
9,843,388
4,939,516
1,813,627
1,727,771
8,219,525
(721,132)
132,000
(157,099)
234,465
1,565,905
3,890,210
(721,132)
-
(53,686)
164,481
1,375,404
1,405,161
(721,132)
105,040
(415,161)
407,858
93,738
64,315
9,843,388
4,939,516
1,813,627
24
These financial statements were approved and authorised for release by the Directors on 02 October
2018 and are signed on its behalf by:
Haris Chaudhry
Executive Chairman
Company Registration Number: 09226823
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD 1 JULY 2017 TO 30 JUNE 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
EDMG Grants
Taxes Paid
Interest received
Year ended 30
Jun 2018
Note
£
Year
ended 30
Jun 2017
£
10,562,102
8,212,042
(10,454,037)
(8,820,953)
35,902
59,149
(42,678)
(56,784)
1,029
25
Net cash used by operating activities
25
102,318
(606,521)
Cash flows from investing activities
Purchase of property, plant and equipment
Payments for product development/Intangibles
Net cash used by investment activities
Cash flows from financing activities
Proceeds from borrowings
Proceeds from issue of shares
Repayments of borrowings
Payments for convertible notes
Transaction costs for shares issued
Net cash from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of movement in foreign exchange rates
(13,861)
(118,922)
(2,049,271)
(117,163)
(2,063,132)
(236,085)
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4,416,000
1,529,630
(392,218)
(138,508)
-
(68,233)
(506,760)
(106,347)
3,517,022
1,216,542
1,556,209
373,936
207,301
119,687
142,705
(286,322)
Cash and cash equivalents at the end of the period
8
1,906,215
207,301
28
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Current assets
Cash and cash equivalents
Prepayments
Total current assets
Non-current assets
Intercompany Receivable
Investment In subsidiaries
Product development
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Net assets
Equity
Share Capital
Share premium
Warrant Reserve
Foreign Exchange reserve
Accumulated Losses
Total equity and reserves
As at 30 June
2018
Note
£
As at 30
June
2017
£
20
21
17
17
1,568,170
10,550
1,578,720
-
-
-
4,998,093 3,058,612
2,312,379 2,057,865
-
7,526,043 5,116,477
9,104,764 5,116,477
215,571
(62,191)
(62,191)
137,069
137,069
(62,191)
137,069
9,166,954 4,979,408
1,727,771 1,565,905
8,219,525 3,890,210
-
(109,338)
(367,369)
132,000
(109,337)
(803,004)
9,166,954 4,979,408
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 $435,635.
The company had no cashflow in the period, and therefore no cashflow statement has been prepared.
29
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B
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018. 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.
31
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 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.
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
32
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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:
33
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
34
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
50% 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.
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
35
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
36
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 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.
1.17 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.
For salaries paid (all by the UK subsidiary):
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a
separate entity which in the UK is NEST (National Employment Savings Trust).
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.
37
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
38
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 to the debts
of its subsidiary.
Contingent Liabilities
At 30 June 2018, InnovaDerma PLC did not have any contingent liabilities.
Contractual Commitments
At 30 June 2018, 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.
Revenue by
Geographical region
United Kingdom
Year ended
30-Jun-18
£
Year ended
30-Jun-17
£
9,563,773
7,215,482
39
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
United States of America
Australia/NZ/Asia
Assets by Geographical
region
United Kingdom
United States of America
Australia/NZ/Asia
650,535
485,003
919,018
723,673
10,699,311
8,858,173
Year ended
30-Jun-18
£
Year ended
30-Jun-17
£
9,957,818
825,388
2,024,279
12,807,485
5,091,029
478,593
2,695,479
8,265,101
4. Operating profit/(loss)
The following items have been included in arriving at the operating profit:
Year ended
30-Jun-18
£
Year ended
30-Jun-17
£
365,272
109,251
348,500
13,137
33,625
20,659
2,659
3,542
Expenses:
Directors’ remuneration
Depreciation
Auditor’s remuneration
- As auditors
(for parent company and
consolidation)
- Taxation
compliance (for parent
company and subsidiaries)
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.
5.
Employees
Year ended
30-Jun-18
£
Year ended
30-Jun-17
£
40
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Staff costs for the Group during the
period:
Wages and salaries
Pension costs (including
superannuation)
1,548,165
150,295
1,698,460
1,115,912
54,127
1,170,039
The average monthly number of staff (including executive Directors) employed by the Group during
the period amounted to:
Management staff
Other employees
6.
Taxation
Current Tax
Current tax on profits in the period
Deferred tax expense
Under/over provision for income tax
Income Tax Expense
Year ended
30-Jun-18
Year ended
30-Jun-17
5
29
34
5
19
24
Year ended
30 June 2018
£
Year ended
30 June 2017
£
395,955
(39,117)
(101,969)
254,869
345,651
(44,644)
39,475
340,482
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
19% due to tax on subsidiaries located in higher tax jurisdictions. The differences are explained below:
Profit before taxation
669,064
1,029,435
Year ended
30 June 2018
£
Year ended
30 June 2017
£
Profit on ordinary activities multiplied by the
standard rate of tax in the UK of 19%
Differences in tax rates in subsidiary jurisdictions
Effect of change in tax rate
Excluded (gain)/loss from foreign jurisdictions
Losses carried forward
127,122
115,111
18,612
95,708
-
195,785
67,352
(931)
38,801
-
41
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Under (over) provision in prior years
Permanent differences
Total current tax
(101,969)
285
254,869
39,475
-
340,482
7. Revenue
Year ended
30-Jun-18
£
997,206
101,429
Haircare Products
Life Science devices
Skin & Beauty Products
9,600,675
10,699,311
Year ended
30-Jun-17
£
144,837
0
8,713,336
8,858,173
8. Cash and cash equivalents
Cash at bank
30-Jun-18
£
1,906,215
30-Jun-17
£
207,301
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
Trade Receivables
10.
Inventory
30-Jun-18
30-Jun-17
£
1,918,982
£
1,781,773
30-Jun-18
30-Jun-17
£
£
Finished goods (Leimo)
105,855
117,645
42
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Finished goods (Charles
& Lee and Stevie K)
Finished Goods (Prolong
Finished Goods (Roots)
Finished goods (Skinny
Tan)
Stock Material (Work in
Progress)
149,513
74,465
106,620
2,263,204
173,876
2,873,533
47,563
-
-
2,093,781
-
2,258,989
The costs of inventories recognised as an expense and included in cost of sales amounted to
£3,284,379 for the year.
11. Prepayments and Sundry Assets
Deposits held
Prepayments
Input tax
Sundry assets
12.
Intangible Assets
Group:
30-Jun-18
30-Jun-17
£
£
7,021
165,770
0
7,348
180,139
12,351
77,937
17,412
7,006
114,706
Goodwill (Skinny Tan)
Customers Lists
Goodwill (Leimo)
Brands (Charles+Lee and Stevie K)
Digital Asset (Prolong)
30-Jun-18
30-Jun-17
£
£
402,357
357,852
1,240,435
-
1,862,847
1,604,595
38,482
139,870
-
-
Intellectual Property (Ergon)
1,463,370
1,333,721
43
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Development Costs
547,107
349,030
5,694,469
3,645,198
Movement in capitalised development costs:
Balance brought forward
Development expenditure during the
year
30-Jun-18
30-Jun-17
£
£
294,715
252,392
547,107
54,315
294,715
349,030
*Refer to note 1.7 for definition and recognition criteria for intangible assets
13. Deferred tax asset
Deferred tax items recognised in income statement:
- Other timing differences
-
Income tax losses
30 June 2018
£
30 June 2017
£
16,161
142,422
40,031
75,874
158,583
115,905
14. Trade and other payables
Trade payables
Other payables
Current tax payable
15. Borrowings
30-Jun-18
30-Jun-17
£
£
1,392,803
930,114
624,993
2,947,910
1,583,801
835,572
501,367
2,920,740
30-Jun-17
£
30-Jun-16
£
44
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
General Borrowings
12,627
12,627
404,845
404,845
16.
Deferred tax liability
Deferred tax items recognised in income
statement:
- Other timing differences
30 June 2018
£
30 June 2017
£
3,560
3,560
-
-
17. Contributed equity
2017/18
Opening balance as at 1 July
2017
No. of
shares
Share Capital
Share Premium
£
£
12,569,556
1,565,905
Shares issued during the year
1,807,077
159,381
Share issue costs
-
Balance as at 30 June 2018
14,376,633
1,725,286
3,890,210
4,836,075
(506,760)
8,219,525
Share Capital
Share Premium
2016/17
No. of shares
£
Opening balance as at 1 July 2016
Shares issued during the year
Share issue costs
10,318,535
2,251,021
-
1,375,404
190,501
-
Balance as at 30 June 2017
12,569,556
1,565,905
£
1,405,161
2,591,396
(106,347)
3,890,210
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,
45
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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)
Nominal value of share capital acquired
Value of Merger Reserve
19. Retained Profits
£
721,187
(55)
721,132
Balance brought forward
Profit for the period
Balance carried forward
30-Jun-18
30-Jun-17
£
93,738
314,1120
407,858
£
(415,161)
508,899
93,738
20.
Intercompany loan – parent company
Balance brought
forward
Movement in funds
Balance carried forward
30-Jun-18
30-Jun-17
£
£
3,058,612
(1,939,481)
4,998,093
1,865,784
(1,192,828)
3,058,612
21.
Investment in subsidiaries
During the year, the Company held interests in the following subsidiaries:
46
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Company Name
Date of Acquisition Percentage Holding
InnovaDerma AUS & NZ Pty Ltd
28 November 2014
InnovaDerma International Limited
28 November 2014
InnovaDerma NZ Limited
ID Philippines Inc
Bach Health Pty Ltd
InnovaScience Inc
Skinny Tan Pty Ltd (a)
SkinnyTan UK Limited (a)
Ergon Medical Limited
28 November 2014
28 November 2014
23 January 2015
31 March 2015
28 May 2015
28 May 2015
28 April 2017
30 June 2018
100%
100%
100%
100%
100%
100%
93%
93%
100%
Percentage Holding
30 June 2017
100%
100%
100%
100%
100%
100%
91%
91%
100%
a) During the year, InnovaDerma PLC paid £208,991 to acquire a further 2% of Skinny Tan Pty Ltd,
and through direct holding, SkinnyTan UK Limited. This was satisfied by the payment of $173,724
and 37,186 shares in InnovaDerma Plc
22. Related party transactions
Name
Transaction
Farris Marketing
Concepts Pty Ltd
Cygenta Capital &
Advisory
Graise Partners
International Pty Ltd
Zaymar Investments
Pty Ltd
Mr Haris Chaudhry
Loan
payable1
Provision of
services2
Provision of
services2
Loan
payable1
Loan
payable1
Amount received from/
(paid to) in year
Amount due
from/(to)
related party
2018
£
(85,395)
(26,773)
(3,078)
2017
2018
£
-
-
-
£
-
-
-
2017
£
89,502
-
-
(292,274)
(138,508)
(13,186)
(320,231)
160
1,470
1,552
-
1 These loans are interest free and unsecured.
2 These expenses were settled via the issue of equity instruments in InnovaDerma PLC.
Variation in Amount due to Farris Marketing between 2017 and 2018 due to valuation of AUD loan in
GBP as at 30 June 2017
Nature of related parties
Farris Marketing Concepts Pty Ltd and Zaymar Investments are related parties of Mr Haris Chaudhry,
the Executive Chairman.
47
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018
are disclosed below:
Year to 30 June 2018
£
Haris Chaudhry
Geert Lemair
Joseph Bayer
Rodney Turner
Clifford Giles
Ross Andrews
Kieran Callan
Salary
Superannuation
Consultancy
Fees
172,786
-
109,431
17,279
-
-
-
16,414
-
10,396
1,641
-
-
-
Total
Total 2017
189,200
184,806
-
15,686
119,827
103,557
18,920
-
19,546
16,669
-
18,831
18,831
18,494
18,494
8,236
-
-
-
-
-
299,496
28,451
37,325
365,272
348,500
During the period, there were no advances, credits or guarantees subsisting on behalf of the directors.
24. Commitments and contingencies
At 30 June 2018, the Group did not have any contingencies.
At 30 June 2018, the Group had an obligation to pay £69,353 in rent for the forthcoming 12 months,
under a non-cancellable operating lease.
25. Reconciliation of operating profit to net cash outflow from operations
Profit after income tax
Depreciation
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
Increase in trade and other payables
Increase/(decrease) in payables settled by Shares
(Increase)/decrease in foreign exchange gains/losses
Increase/(decrease) in taxes payable
30-Jun-18
30-Jun-17
£
414,195
95,863
(218,980)
(614,544)
27,170
449,940
(8,648)
(42,678)
£
688,953
13,136
(981,290)
(1,620,659)
1,307,276
-
4,275
(18,212)
48
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Net cash outflow from operations
102,318
(606,521)
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 2018 were classified as follows:
Note
30-Jun-18
30-Jun-17
£
£
Financial assets
Cash and cash equivalents
Trade and other
receivables
Total financial assets
Financial liabilities
Trade and other payables
Borrowings
8
9
14
15
1,906,215
1,918,982
3,825,197
2,947,910
12,627
2,960,537
207,301
1,781,773
1,989,074
2,920,740
404,845
3,325,585
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 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 2018. 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.
49
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
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 120,00 shares at £1.10, were issued to a
supplier for services provided. This warrant was exercised and the new shares issued on 18
September 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
30-Jun-18
£
414,195
13,891,362
Year ended
30-Jun-17
£
688,953
11,395,485
Profit/(loss) for the year
Weighted average number of shares
29. Subsequent Events
On the 12th of September 2018 the Warrants issued where exercised at £1.10 per share with total
payment to the company being £132,000 as per agreement.
30. Company Details
The registered office of InnovaDerma PLC is:
27 Old Gloucester Street
London
50
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
United Kingdom
WC1N 3AX
The principal place of business is:
Level 10, Suite 1031, 1 Queens Road
Melbourne VIC 3004
Australia
51