2019
Annual Report
c115847CCL.pdf
INNOVADERMA PLC
CONTENTS
CONTENTS
Corporate directory
Strategic report
Director’s Report
Independent auditor’s report to the members
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Parent company statement of financial position
Parent company statement of changes in equity
Notes to the financial statements
Page
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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
267 St George’s Terrace
PERTH
WA 6000
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
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
The Directors present their strategic report on InnovaDerma PLC and its controlled entities (hereafter
“the Group” or “InnovaDerma”) for the year ended 30 June 2019.
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
Revenue*
Gross profit
Gross margin
Profit before tax
Basic EPS (pence)
Cash and cash
equivalents
*on a constant currency basis
Operational Highlights
FY2019
£12.9m
£8.1m
63%
£1.4
7p
£2.0
FY2018
£10.7m
£6.1m
57%
£0.7
3p
£1.9
% change
+21%
+32.8%
+600bps
+100%
+133%
+5%
• Significantly increased national distribution of Skinny Tan - in c.2,300 stores (FY2018: c.800)
• Highly successful launch of Wonder Serum - No.1 SKU (Stock Keeping Unit) in its category in
Boots regularly since launch
• Roots secured several new retail distribution channels, including Tesco, and multiple product
extensions launched
• DTC customer base grew strongly, delivering record number of orders in H2 2019 with revenue
up 22% on the previous year
• Multiple new international retail and distribution opportunities secured for Skinny Tan, Roots
and Prolong
Outlook
• A very positive start to the new financial year with current trading being in line with
management’s expectations
• Skinny Tan will benefit from a full-year contribution from ranging in Boots in FY2020
• Significant new retail and DTC channels added in UK, US and Australia and distributors
appointed in multiple regions globally expected to contribute to future growth
• Roots development will be accelerated by a new social media campaign and the roll out of new
products
• Major new product launch with multiple SKUs intended to disrupt a large new category in H2
generated by the in-house team for DTC and retail channels
• Prolong expected to make a significant contribution to current FY driven by DTC channel and
multiple distribution contracts signed covering eight countries with minimum-order quantities
Implementation of a new ERP to facilitate management of rapid growth
•
• Supply chain being consolidated to ensure inventory management has the capability to support
expected growth
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Haris Chaudhry, Executive Chairman of InnovaDerma, said:
“I am very pleased to report an excellent set of results and a year of strong operational progress.
Despite retail headwinds, we have delivered an impressive 21% rise in revenue and doubled profit
before tax with good gross margin improvement. Our performance has been supported by the
disciplined execution of our strategy, continuous product innovation to disrupt our markets and
leveraging consumer desire for unique and high performing products.
“We are excited about the opportunities that lie ahead, supported by a near term major launch in a new
category, fast-growing retail footprint and with a robust foundation in place, the Group is well placed to
generate further growth. The year has started very positively, and current trading is in line with
management’s expectations.”
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Executive Chairman’s Statement
Introduction
I am pleased to report an excellent set of results and a period of significant progress underpinned by
our execution of three clear strategic aims as outlined at our interim results: to leverage commercial
opportunities secured with retail partners and distributors; to grow our DTC channel and focus on new
product development. This focus has enabled us to deliver strong growth across our key performance
indicators. Revenue increased by 21% to £12.9m and profit before tax doubled to £1.4m. These results
were achieved in the context of a volatile economic environment and a challenging retail sector.
Retail partners and distribution channels
We have well-established and deep relationships with our retail partners and distributors enabling us to
range our brands in the UK and internationally. During the year, Skinny Tan secured ranging in more
than 1,300 stores in Boots and together with Superdrug, our core brand is now available in more than
2,000 stores in the UK. Roots, our haircare range has extended its distribution and is now available in
1,800 stores in the UK (FY2018: c.400) and now sold in Canada. Charles + Lee, our men’s skincare
range has received positive feedback internationally and completed its entry into New Zealand and
secured opening orders in South Africa. In our Life Sciences business, Prolong successfully secured
two distribution agreements in Hong Kong and eight Middle Eastern countries and established
minimum-order quantities in excess of 6,000 devices for the first contractual year.
Project innovation
Accelerating growth through innovation is a key driver of the business. Consumer tastes, trends and
expectations are continuously changing. There is a growing trend towards more natural, organic and
highly effective ingredients which is influencing the pace and the way in which we innovate. Our
disciplined execution has delivered highly successful new product launches including Wonder Serum
by Skinny Tan which combines self-tanning technology, with anti-aging, anti-oxidant and hydrating
skincare ingredients. The product was very well-received, achieving positive often five-star reviews
from our customer base and is regularly the best-selling product in its category in Boots. Roots, our
haircare range also benefitted from new product development and the brand now has 14 products for
a range of different hair types. Charles + Lee, our affordable alternative premium range of men's skin
care products is growing in popularity and we have extended the product range to include shave care
to capitalise on the growing trend in men’s grooming.
DTC channel
Our DTC channel is an important platform to engage directly with our customers and is key to our
marketing campaigns. Digital and online shopping has changed the retail industry and since
InnovaDerma was founded, our strategy has always embraced the opportunities presented by the digital
transformation across marketing, social media and e-commerce. Our digital strategy has differentiated
and strengthened our business. In H1 2019, following changes in the Facebook algorithm, we
implemented a new DTC strategy which encompasses complimentary channels such as Instagram,
Google, Ad Roll and Taboola to provide us with depth and breadth of consumer engagement. This has
enabled us to deliver strong growth of the DTC channel with our customer base growing by c.50% to
more than 600,000. Our DTC channel also delivered a record number of orders in H2 2019 and revenue
is up 22% on the previous year.
Growth strategy
We delivered strong results, with solid execution this financial year. The Board believes there are
significant opportunities to grow the business and our focus in FY2020 will be based on the following
initiatives to generate further growth over the long term:
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
• Skinny Tan performed very well in Boots and we will seek additional ranging and increased
store depth as the category review process commences. This will be underpinned by the benefit
of having a full year revenue contribution from the account. Our core brand will bring a number
of innovative new products to market during the year to ensure the brand remains at the
forefront of category development and to capitalise on the success of products such as Wonder
Serum, which demonstrates the ability of the brand to compete effectively in skincare and skin
conditioning;
• Superdrug will launch an exclusive Skinny Tan limited edition range in time for Christmas 2019
and also create a major feature around a specially designed gift pack;
• The DTC channel will receive major investment through the addition of Artificial Intelligence, a
360-degree strategy for comprehensive consumer engagement and contracting of a proven
digital sales platform to drive revenue. This is a multi-market strategy covering the UK, US and
Australia;
• Roots will receive major marketing investment to capitalise on the increase in store presence
in Boots. This will be supported by the roll out of new product development;
•
In international markets, Roots will continue to build its presence in existing and new
geographies including India and the EU through our new distributor relationships;
• Charles & Lee will continue to build in Australia and New Zealand driven by a strong pipeline
of new product development. New opportunities will be developed in international markets. In
addition, we will continue our discussions with a key UK retail partner for a launch in H2. Charles
& Lee is in the process of being launched in the US and UK markets through our DTC channel.
We believe there is a strong fit between the brand and social media as a method of engaging
with consumers; and
•
Innovative new product with multiple SKUs in a new category on the topical side of our business
is planned for launch in H2. The product is to be launched with an initial 12 SKUs and has
been formulated and designed with the intention to disrupt a large category. Our new brand
has been generated by the in-house new product development team.
People
On behalf of the Board, I would like to thank the highly dedicated team who worked so diligently to
deliver this strong year of continued growth for the business. I am always impressed by their hard work,
creativity and commitment to our business. In order to sustain our growth trajectory, the business has
invested in additional personnel for our DTC channel, in addition to retail management in the UK. This
ensures we have the skills and capacity to deliver on the strategies and plans we have developed.
Outlook
The new financial year has begun very positively, and current trading is line with management’s
expectations. We look forward to a year of significant growth both in terms of revenue and earnings.
We are excited about our new product launches, especially the new category we will be entering later
this year. This combined with our expanded retail and DTC channels, both for topical and life science
products, gives us much confidence in the business and its future growth opportunities.
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
CEO Statement
The period under review marked a strong year of progress for the Company. We have secured new
distribution channels in the UK and internationally, released category leading products and
strengthened our digital platform.
Topical
Self-tanning
The growth of the Skinny Tan has continued, with the brand securing the number two or three self-
tanning brand in Boots (depending on the period) and the exclusive Wonder Serum product regularly
being the number one SKU across the total category. The online customer community has also grown,
particularly on Instagram and the business has implemented a 360-degree multi-platform strategy to
ensure we exploit all growth channels in the DTC environment.
Skinny Tan’s sales for the period to 30 June 2019 has grown significantly. Sales through the DTC
channel was up 22% year on year which reflects the strength of our DTC model that has underpinned
the significant growth of Skinny Tan since it was acquired by the Company in May 2015. The number
of SKUs increased from 45 to 58 during the period. These new products are being progressively rolled
into distribution which will support further growth during the new financial year.
Off the back of the fantastic success of Wonder Serum, additional new product development is being
undertaken in the serums format to bring new and additional product benefits to consumers. It is
essential that Skinny Tan remains at the forefront of the bronzing category and is seen as an innovator.
The brand continues its transition from bronzing-only to an emerging beauty brand and it is targeting a
much larger market and year-round utility through developing new products aimed at a wider
demographic.
The international distribution of Skinny Tan has been an area of specific focus as it represents the next
major growth opportunity for the brand. Post period end, Skinny Tan entered into a new DTC marketing
agreement in the US with a major digital marketing organisation. It has also relaunched in Australia via
our DTC channel with encouraging early results. Our Canadian distributor is seeking distribution for the
2020 season and in Europe discussions are under way to potentially launch Skinny Tan with a new
distributor in certain regions.
Haircare
Roots continues to develop as a premium haircare range which assists in reducing hair loss. It has
delivered consistent revenue throughout the year achieving one of our key objectives of offsetting the
seasonality of Skinny Tan. Additionally, unlike Skinny Tan, it has global applicability providing a huge
potential target market.
The brand now has distribution in Boots, Superdrug, Tesco and Asda. In the case of Boots, its shelf
presence was doubled, and new SKU’s were added in the range review which went live in store in July.
This is a major vote of confidence in the brand and we have planned a comprehensive marketing
support programme to fully capitalise on this opportunity.
Roots has continued to evolve and has launched new products to cater for both coloured hair, with a
‘Protect’ range, and specific hair types such as curly hair. The ‘Curls’ product forms part of the Boots
range expansion. The brand now has 14 (up from the original five) products in total providing a
comprehensive offering to meet the needs of consumers across a wide range of hair types and
conditions.
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Roots was launched into its first retail distribution in Canada this year and our partner there is pursuing
additional opportunities. It is also close to completing registration for the Indian market and opening
orders will be received as soon as this has been finalised.
Skincare
Charles + Lee is our affordable alternative premium range of men's skin care products and has had a
breakthrough year in FY2019. The Company launched Charles + Lee initially in 30 of Myer’s stores
(Australia’s largest department store chain) and then followed up with a hugely successful Christmas
gift pack. This earned it an extension to all stores. The brand went on to secure ranging in Australia’s
largest Beauty retailer Priceline (with approximately 450 stores nationally) and Terry White Chemmart,
a retail pharmacy chain in Australia.
The brand is demonstrating that it has international appeal having successfully completed its entry into
New Zealand and secured opening orders in South Africa. The registration process for the Indian market
is under way and opening orders will be received as soon as this is finalised.
In the UK we have had extensive discussions with our key retail partners with a positive response. We
will continue to develop these opportunities with the objective of converting them in FY2020.
The brand continues to innovate and has added a number of exciting and very well received products
during the year. The shave range and the hair and body wash have been particularly successful. The
range now consists of 16 SKU’s and three different gift sets.
Life Sciences
Prolong
Life Science has made significant progress throughout the period. Prolong delivered very promising
revenue growth with average gross margins in excess of 65% during the period. The Company
recommenced marketing for Prolong in USA and Australia in Q2 of calendar year 2019 which has
created momentum and supported our revenue generation.
The Company had been negotiating exclusive contracts with distributors worldwide throughout the
period. As a direct result, we have signed two major distribution agreements in Hong Kong and eight
Middle Eastern countries and established minimum-order-quantities in excess of 6,000 for the first
contractual year. The Company expects to secure more distribution contracts throughout the current
FY which will support incremental and strong revenue generation combined with increasing DTC sales.
Outside of the US, Australia and New Zealand where the Company already has regulatory approvals,
it undertook regulatory approvals process for Hong Kong, China, India, Canada, UK, Europe & GCC
countries. The Company’s objective is to broaden its distribution where it has regulatory approvals
thereby growing Prolong’s revenue and profit base through the incremental distribution contracts and
DTC channels.
GrowLase
The Company has secured inventory of its FDA-cleared hair loss helmet, GrowLase, during the period
and is creating various online platforms to enable it to generate scale.
As part of ensuring the product remains an attractive proposition to its target audience, is competitive
amongst other hair loss devices and to ensure recurring sales, the Company embarked on two separate
projects:
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
• Obtaining visual-evidence of progress amongst dozens of men and women suffering from hair
loss through a third party-managed process using GrowLase. Before and after images will then
be used in all our marketing
• Designing a new wet-products regime with GrowLase branded shampoo, conditioner, day
serum and spray.
Both projects are expected to complete in the first half of this financial year with the objective of bringing
the expanded range of product lines under the GrowLase brand to a far wider and geographically
diverse client base through our DTC platform and distribution channels globally and adding annuity
streams through repeat purchases after the initial purchase.
As our distribution channels grow in Life Sciences and begin to contribute a material level of annualised
revenue and profit, the Company would seek to acquire new products that would benefit from its DTC
platform and distribution channels.
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Finance Director’s Review
Overview
The Group delivered a strong revenue performance, driven predominantly by our UK DTC platform and
our retail channels. In addition, Roots contributed strongly in the year under review. The key focus for
the past twelve months has been supporting sales growth through DTC customer acquisition, major
new product development and rolling out planned launches. Group revenues grew 21% to £12.9m
(FY2018: £10.7m). Profit before tax rose by 100% to £1.4m (FY2018: £0.7m).
Operating Results
Gross margins increased 600bps from 57% in FY2018 to 63% in the financial year under review. The
stronger DTC channel revenue mix as against retail sales in Skinny Tan, drove higher returns. The
successful launch of new products Wonder Serum and Coconut Water spray generated a higher sales
basket size than previously achieved.
Marketing expenditure was £3.7m, 60% higher than the previous year (FY2018: £2.3m) driven by
launch and promotional costs for the Boots roll-out, continued support for Superdrug, other new retailers
and a strong drive on DTC customer acquisition and re-marketing. As we highlighted in the half year
report, the DTC channel was presented with significant technology challenges as major platforms
devised higher charges for less promotion. We also highlighted a change in our approach which was
rewarded with very strong DTC revenues in the second half, a combination of better strategic spend
and new product offerings setting the pace. Our DTC customer database grew significantly, both in the
UK and the US, with the business having just over 625,000 customers, up from 422,500 a year ago. As
highlighted previously, we see this as a critical asset for the generation of future revenue for the
business. The Company has taken a conservative approach to valuing the customer list intangible
assets carried on the balance sheet.
Staff costs reduced slightly, with a reduction in director payments and a move to replace higher salaried
cost personnel with better support staff. Administration costs were only 4% higher at £1.5m over the
comparative period last year.
Revenue for the year was slightly impacted by the occurrence of the last two DTC trading days falling
on the weekend. Orders were placed however, as they were not delivered, the Company held over the
resulting revenue and profit. The impact of £122k in revenue and £68k in profit will flow into FY20.
Cash and net debt
The Group remains in a strong cash position and continues to carry no external debt. Cash and
equivalents balance were £2.0m as at 30 June 2018 up from £1.9m in the previous year. Inventory
levels reduced to £2.4m (FY2018: £2.9m) as a result of better inventory and supply chain management.
Trade and other payables increased to £3.0m (FY2018: £2.3m) with Receivables increasing to £3.3
(FY2018: £1.9m) as a result of strong season opening Boots and Superdrug sales.
Taxation
The Group has recognised a tax expense of £0.4m against profit (FY2018: £0.3m). The effective tax
rate of 28% is a reduction over last year (FY2018: 38%) due to the strong performance in the UK market.
The Group has recognised a small timing difference as a deferred tax liability.
Dividends
The Board has elected not to declare a dividend at this time.
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INNOVADERMA PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Principal Risks and Uncertainties
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
9
-
3
22
Role
Directors
Senior Managers
Other Employees
By order of the board
Haris Chaudhry
Executive Chairman
02 October 2019
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
The Directors present their report and financial statements of the Group for the year ended 30 June
2019.
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
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 2019, 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
11
11
11
11
11
11
11
11
11
11
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.
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
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 2019, the ordinary share capital of InnovaDerma PLC consisted of 14,496,633 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
The directors are not aware of any significant events since the end of the reporting period.
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
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 2019, 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 2018
5,189,756
113,513
51,097
11,000
15,000
Haris Chaudhry
Joseph Bayer
Rodney Turner
Kieran Callan
Ross Andrews
Shares acquired
during the period
Shares disposed
during the period
-
8,100
-
4,800
15,000
1,000,000
-
-
-
Shares held on
30 June 2019
4,189,756
121,523
51,097
15,800
30,000
Note: Haris Chaudhry’s shareholding is comprised of holdings held by Zaymar Investments Pty Ltd 4,111,186
shares, Farris Marketing Concepts Pty Ltd 28,570 shares and Faryaal Chaudhry 50,000 shares.
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.
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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
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INNOVADERMA PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Amount of emoluments & compensation
Haris Chaudhry
Joseph Bayer
Rodney Turner
Ross Andrews
Kieran Callan
Salary
Superannuation
100,279
105,121
16,598
-
56,500
278,498
9,527
9,987
1,577
-
4,520
25,611
Consultancy
Fees
-
-
-
19,992
-
Total
Total 2018
109,806
189,200
115,108
119,827
18,175
19,992
61,020
18,920
18,831
18,494
19,992
324,101
365,272
During the period, there were no advances, credits or guarantees subsisting on behalf of the directors.
Directors’ responsibilities
The Directors are responsible for preparing the Strategic Report and the Directors’ Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year or
period. Under that law the Directors have elected to prepare the financial statements in accordance with
applicable United Kingdom law and those International Financial Reporting Standards (“IFRS”) as
adopted by the European Union. Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the
Group and of the profit or loss of the Group for that period. In preparing these financial statements, the
Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether the financial statements have been prepared in accordance with IFRS as adopted
by the European Union;
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position
of the Group and enable them to ensure that the financial statements comply with the Companies Act
2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Group’s website. Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from legislation in other jurisdictions.
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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 2019
16
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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 InnovaDerma Plc (“the
Company” or “the parent Company”) and its subsidiaries (collectively referred to as the Group)
affairs as at 30 June 2019 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 2019, 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.
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.
17
c115847CCL.pdf
Overview of Audit Approach
We identified the key audit risks to be revenue recognition and possible impairment of intangible
assets.
We set materiality for the Group at 1.5% of revenue: £196,231.
We performed full scope audit procedures over all Group entities.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the Financial Statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. These matters included
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. we have determined the matter described below to be a key audit
matter to be communicated in our report.
Revenue Recognition
Refer to Note 7, Revenue (£12,851,835) and accounting policy Notes 1.5
Key Audit Matter
How our audit addressed the matter
InnovaDerma, as a Group, generates
revenues from sales of various health
and beauty products, including the
Skinny Tan lines.
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.
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.
We assessed the transfer of control 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.
Retail & Wholesale sales
These sales are recognised at the date
the stock is segregated from other
for collection or
inventory,
delivery
these
customers terms of trade.
in accordance with
ready
There is a risk 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
the
different types of revenue, we have
identified revenue recognition as a key
risk for our audit.
the year, and
in
18
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Impairment of Intangible Assets
Refer to Note 12, Intangible assets (£6,578,562) and accounting policy Notes 1.7
Key Audit Matter
How our audit addressed the matter
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 2019, the net book value
of intangible assets was £6.578m,
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.
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 £196,231, which represents 1.5% of the Group’s revenue for the year ended 30 June 2019.
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
2018, reflecting the increase in the Group’s revenues during the year to 30 June 2019.
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
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.
19
c115847CCL.pdf
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 has been prepared in accordance with
applicable legal requirements.
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
and 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:
20
c115847CCL.pdf
-
-
-
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; 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
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.
21
c115847CCL.pdf
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
2 October 2019
22
c115847CCL.pdf
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEAR ENDED 30 JUNE 2019
Revenue
Cost of sales
Gross profit
Other Income
Marketing expenses
Listing expenses
Note
7
Year ended 30 June
2019
Year ended 30 June
2018
£
£
12,851,835
10,699,311
(4,763,366)
(4,607,346)
8,088,469
6,091,964
19,859
81,715
(3,683,649)
(2,323,278)
(48,489)
(36,256)
Wages & salaries expenses
(1,458,813)
(1,698,460)
Administrative expenses
(1,506,218)
(1,446,622)
Profit before tax
1,411,159
669,064
Income Tax expense
6
(398,612)
(254,869)
Net profit for the period
1,012,547
414,195
Other comprehensive income
(49,712)
(16,561)
Total comprehensive income
for the period
962,835
397,633
Attributable to:
Owners of the parent
Non-controlling interests
826,227
136,608
291,098
106,535
Basic & diluted profit/(loss)
per share
28
£0.07
£0.03
23
c115847CCL.pdf
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019
As at 30 June 2019 As at 30 June 2018 As at 30 June 2017
Note
£
£
£
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Prepayment and other assets
8
9
10
11
2,043,048
1,906,215
207,301
3,295,255
1,918,982
1,781,773
2,364,530
2,873,533
2,258,989
314,210
180,139
114,705
Total current assets
8,017,043
6,878,868
4,362,768
Non-current assets
Property, Plant and Equipment
53,455
45,197
127,199
Intangible assets
12
6,578,562
5,694,469
3,645,198
Other assets
17,186
30,368
14,031
Deferred tax asset
13
234,329
158,583
115,905
Total non-current assets
6,883,532
5,928,617
3,902,333
Total assets
Current liabilities
14,900,575
12,807,485
8,265,101
Trade and other payables
Current tax payable
14
14
2,957,136
2,309,132
2,419,332
1,202,729
638,778
501,408
Total current liabilities
4,159,865
2,947,910
2,920,740
Non-current liabilities
Borrowings
Deferred tax liability
Total non-current liabilities
15
16
(552)
170
(382)
12,627
3,560
16,187
404,845
-
404,845
24
c115847CCL.pdf
Total liabilities
4,159,483
2,964,097
3,325,585
Net assets
10,741,092
9,843,388
4,939,516
Equity
Share Capital
17
1,735,798
1,727,771
1,565,905
Share premium
8,288,479
8,219,525
3,890,210
Merger reserve
18
(721,132)
(721,132)
(721,132)
Warrant Reserve
-
132,000
-
Foreign Exchange reserve
(172,202)
(157,099)
(53,686)
Non-controlling interest
318,970
234,465
164,481
Retained Profit/(Accumulated
Losses)
19
1,291,179
407,858
93,738
Total equity and reserves
10,741,092
9,843,388
4,939,516
These financial statements were approved and authorised for release by the Directors on 02 October
2019 and are signed on its behalf by:
Haris Chaudhry
Executive Chairman
Company Registration Number: 09226823
25
c115847CCL.pdf
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c
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD 1 JULY 2018 TO 30 JUNE 2019
Year ended 30
Jun 2019
Year ended
30 Jun 2018
£
£
Note
Cash flows from operating activities
Receipts from customers
11,475,562
10,562,102
Payments to suppliers and employees
(10,220,492)
(10,454,037)
EDMG Grants
Taxes Paid
Interest received
-
35,902
(75,746)
(42,678)
3
1,029
Net cash generated/(used) by operating activities
25
1,179,327
102,318
Cash flows from investing activities
Purchase of property, plant and equipment
(46,844)
(13,861)
Payments for product development/Intangibles
(884,094)
(2,049,271)
Net cash used by investment activities
(930,937)
(2,063,132)
Cash flows from financing activities
Proceeds from borrowings
Proceeds from issue of shares
Repayments of borrowings
Payments for convertible notes
Transaction costs for shares issued
-
-
132,000
4,416,000
(13,179)
(392,218)
-
-
-
(506,760)
Net cash from financing activities
118,821
3,517,022
Increase in cash and cash equivalents
367,210
1,556,208
Cash and cash equivalents at the beginning of the period
1,906,214
207,301
Effect of movement in foreign exchange rates
(230,377)
142,705
Cash and cash equivalents at the end of the period
8
2,043,048
1,906,214
27
c115847CCL.pdf
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Current assets
Cash and cash equivalents
Prepayments
Total current assets
Non-current assets
Intercompany Receivable
Investment In subsidiaries
Product development
Deferred Tax Asset
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
As at 30 June 2019
As at 30 June
2018
Note
£
£
977,084
182,047
1,568,170
10,550
1,159,130
1,578,720
20
21
5,018,328
4,998,093
2,312,379
2,312,379
215,851
215,571
-
-
7,546,558
7,526,043
8,705,689
9,104,764
(2,340)
(2,340)
(62,191)
(62,191)
Total non-current liabilities
-
-
Total liabilities
Net assets
Equity
Share Capital
Share premium
Warrant Reserve
Foreign Exchange reserve
Accumulated Losses
Total equity and reserves
(2,340)
(62,191)
8,708,029
9,166,954
17
17
1,738,282
1,727,771
8,288,479
8,219,525
-
132,000
(109,337)
(109,337)
(1,209,395)
(803,004)
8,708,029
9,166,954
28
c115847CCL.pdf
In accordance with section 408 of the UK Companies Act 2006, the Company is availing itself of the
exemption from presenting its individual statement of profit or loss and other comprehensive income.
The Company’s loss for the financial period as determined in accordance with IFRS’s is $406,025.
The company had no cashflow in the period, and therefore no cashflow statement has been prepared.
29
c115847CCL.pdf
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
1.
Accounting Policies
1.1 Basis of Preparation
The consolidated financial statements have been prepared in accordance with 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 2019. A controlled entity is any entity over which InnovaDerma PLC
has the power to govern the financial and operating policies so as to obtain benefits from its activities.
In preparing the consolidated financial statements, all intragroup balances and transactions between
entities in the consolidated group have been eliminated in full on consolidation.
Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination
involving entities or businesses under common control. The business combination will be accounted for
from the date that control is attained, whereby the fair value of the identifiable assets acquired and
liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exceptions).
When measuring the consideration transferred in the business combination, any asset or liability
resulting from a contingent consideration arrangement is also included. Subsequent to initial
recognition, contingent consideration classified as equity is not remeasured and its subsequent
settlement is accounted for within equity. Contingent consideration classified as an asset or liability is
remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss,
unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations are expensed to the statement of
comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain
from a bargain purchase.
31
c115847CCL.pdf
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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.
To give effect to the change in presentation currency, the assets and liabilities of the Group, which were
presented in Australian dollars as at 30 June 2016, were converted into British pounds at a fixed
exchange rate on 1 July 2016 of A$1: £0.5763 and the contributed equity, reserves and retained
earnings were converted at applicable historical rates.
The Australian dollar assets and liabilities at 1 July 2015 were converted at the rate of A$1: £0.5085 in
order to derive British pound opening balances. Revenue and expenses for the twelve months ended
30 June 2016 were converted at the exchange rates ruling at the date of the transaction to the extent
practicable (at an average of A$1: £0.5117 for the reporting period), and equity balances were
converted at applicable historical rates.
32
c115847CCL.pdf
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
The above stated procedures resulted in the recognition of a foreign currency translation reserve of
(£158,726) on 1 July 2016, as set out in the statement of changes in equity.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate
prevailing at the dates of the transactions.
Foreign currency monetary assets and liabilities at the reporting date are translated at the exchange
rate existing at the reporting date. Exchange differences are recognised in the statement of
comprehensive income in the period in which they arise.
1.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents
amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. The
group recognises revenue when the amount of revenue can be reliably measured; when it is probable
that future economic benefits will flow to the entity; and when specific criteria have been met for each
of the group’s activities, as described below. The group bases its estimate of return on historical
results, taking into consideration the type of customer, the type of transaction and the specifics of each
arrangement.
Sales of goods – retail
The group manufactures and sells a range of health and beauty products for sale to the retail market.
Sales of goods are recognised when an order is executed, and stock is segregated from the Group’s
inventory, ready for collection in accordance with that customer’s terms of trade.
The life science products are often sold with volume discounts; customers have a right to return faulty
products in the wholesale market. Sales are recorded based on the price specified in the sales
contracts, net of the estimated volume discounts and returns at the time of sale. Accumulated
experience is used to estimate and provide for the discounts and returns. The volume discounts are
assessed based on anticipated annual purchases.
Internet revenue
Revenue from the provision of the sale of goods on the internet is recognised as at the date that
payment is received, because that is the point the buyer accepts legal responsibility for the good being
sold. Transactions are settled by credit card or a payment plan.
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
33
c115847CCL.pdf
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
with products which are likely to become commercially or technically obsolete. Accordingly, the
Directors are of the view that brands have an indefinite life.
Brands are tested annually for impairment and carried at cost less accumulated impairment charges.
Digital Asset
A specific website/e-commerce platform developed by InnovaDerma PLC is an intangible asset, and
therefore subject to the same recognition and measurement requirements. Expenditure on websites in
existence (which were previously expensed in prior financial statements) cannot be later recognised
as part of the cost of an intangible asset at a later date.
The stages of a website’s development and treatment of these expenditures is as follows:
a) Planning – includes undertaking feasibility studies, defining objectives and specifications,
evaluating alternatives and selecting preferences.
b) Application and Infrastructure Development – includes obtaining a domain name, purchasing
and developing hardware and operating software, installing developed applications and stress
testing
c) Graphical Design Development – includes designing the appearance of web pages.
d) Content development – includes creating, purchasing, preparing and uploading information,
either textual or graphical in nature, on the website before the completion of the website’s
development. This information may either be stored in separate databases that are integrated
into (or accessed from) the website or coded directly into the web pages.
Accounting treatment - providing for purposes other than to advertise and promote InnovaDerma’s
products (e.g. digital photographs of products) and not previously recognised as an expense, then to
capitalise.
Amortisation Useful life, InnovaDerma is to assess whether the useful life of an intangible asset is
finite or indefinite. An intangible asset has an indefinite useful life when there is no foreseeable limit to
the period over which the asset is expected to generate net cash inflows. An intangible asset with a
finite useful life is to be amortised over its useful life. The amortisation method should reflect the
pattern in which the asset’s future economic benefits are expected to be consumed. If that pattern
cannot be determined reliably, the straight-line method is to be used. Amortisation is to be charged in
relation to the asset from the first day that it is put into use and to cease at the earlier of the date that
the asset is classified as held for sale in accordance with AASB 5 Non-Current Assets held for Sale
and Discontinued Operations and the date that the asset is derecognised.
The amortisation period and method for an intangible asset with a finite useful life are to be reviewed
at least at the end of each annual reporting period. If the expected useful life or expected pattern of
consumption of the future economic benefits is different from previous estimates, the amortisation
period or the method is to be changed accordingly. Guidance given in relation to amortisation of
websites is that the best estimate of a website’s useful life shall be short.
Intangible assets with an indefinite useful life are not to be amortised.
An intangible asset shall be derecognised on disposal, or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising is to be recognised in the statement of
comprehensive income when the asset is derecognised. Gains must not be classified as revenue but
shown as a gain in the statement of comprehensive income.
34
c115847CCL.pdf
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Operating stage – follows completion of development, when InnovaDerma is maintaining and
enhancing the applications, infrastructure, graphical design and content of the website.
Accounting treatment – recognise as an expense when incurred unless the definition and recognition
criteria still apply, and these costs have been subsequently incurred in order to add to, replace part of
or service the existing intangible asset.
This does not apply to expenditure on purchasing, developing, and operating hardware (e.g. web
servers, staging servers, production servers and laptops) of a website. This expenditure is to be
accounted for in line with IAS 16.
Customer Lists
Separately Identifiable Direct costs incurred in the creation of Customer Lists (Lists of previous buyers
maintained in order to continue business relationship) are recognised as an intangible asset, in
accordance with the provisions of IAS 38. The asset is an identifiable asset from which future
economic benefits are expected. InnovaDerma has full control over the databases as they are linked
to website domains and only the Company can engineer the data. InnovaDerma generates close to
60% of its group revenue from direct to consumer (DTC) sales. A material proportion of sales are
driven by customer lists and the economic value to the business of this customer list is an integral
component of the future of the business.
Costs have been recognised with the specific task of customer acquisition and include the relevant
costs from digital suppliers and other avenues where the intention is to grow the lists.
Amortisation Useful life, InnovaDerma is to assess whether the useful life of an intangible asset is
finite or indefinite. An intangible asset has an indefinite useful life when there is no foreseeable limit to
the period over which the asset is expected to generate net cash inflows. An intangible asset with a
finite useful life is to be amortised over its useful life. The amortisation method should reflect the
pattern in which the asset’s future economic benefits are expected to be consumed. If that pattern
cannot be determined reliably, the straight-line method is to be used.
Customer lists are tested annually for impairment and carried at cost less accumulated impairment
charges if seen appropriate with regards to infinite/finite useful life.
1.8
Impairment
At the end of each reporting period, the Group assesses whether there is any indication that an asset
may be impaired. The assessment will include the consideration of external and internal sources of
information. If such an indication exists, an impairment test is carried out on the asset by comparing the
recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value
in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable
amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in
accordance with another Standard. Any impairment loss of a revalued asset is treated as a revaluation
decrease in accordance with that other Standard.
1.9 Research and Development
Expenditure during the research phase of a project is recognised as an expense when incurred.
35
c115847CCL.pdf
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Development costs are capitalised only when technical feasibility studies identify that the project is
expected to deliver future economic benefits and these benefits can be measured reliably.
Capitalised development costs have a finite useful life and are amortised on a systematic basis based
on the future economic benefits over the useful life of the project. At this stage, the useful life of the
project has not been determined as development is incomplete, hence amortization has not
commenced.
1.10 Cash & Cash Equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits
held at call with banks, other short-term highly liquid investments with original maturities of three months
or less and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within
borrowings in current liabilities.
1.11
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-
in, first-out (FIFO) method. The cost of finished goods and work in progress comprises design costs,
raw materials, direct labour, other direct costs and related production overheads (based on normal
operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in
the ordinary course of business, less applicable variable selling expenses. Costs of inventories include
the transfer from equity of any gains/losses on qualifying cash flow hedges for purchases of raw
materials.
1.12 Trade Receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating
cycle of the business if longer), they are classified as current assets. If not, they are presented as non-
current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method, less provision for impairment.
1.13 Trade Payables
Trade and other payables are recognised when the Group becomes obliged to make future payments
resulting from the purchase of goods and services. They are initially recognised at fair value and
subsequently at amortised cost using the effective interest rate method. Current liabilities represent
those amounts falling due within one year.
1.14 Goods and Services Tax (GST) & Value Added Tax (VAT)
Revenues, expenses and assets are recognised net of the amount of GST/VAT, except where the
amount of GST/VAT incurred is not recoverable from the Australian Taxation Office (ATO) or HER
MAJESTY’S REVENUE & CUSTOMS (HMRC)
Receivables and payables are stated inclusive of the amount of GST/VAT receivable and payable.
36
c115847CCL.pdf
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
The net amount of GST/VAT recoverable from, or payable to, the ATO/HMRC is included with the
receivables or payables in the statement of financial position.
1.15 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the income statement over the period of the borrowings
using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is
deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some
or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services
and amortised over the period of the facility to which it relates.
1.16
Income Tax
Income tax expense or benefit 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.
The group pays contributions to publicly or privately administered pension insurance plans on a
37
c115847CCL.pdf
INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
mandatory basis. The group has no further payment obligations once the contributions have been
paid. The contributions are recognised as employee benefit expense when they are due.
1.18 Contributed Equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new
shares or options for the acquisition of a business are not included in the cost of the acquisition as part
of the purchase consideration.
If the Company reacquires its own equity instruments, e.g. as the result of a share buy-back, those
instruments are deducted from equity and the associated shares are cancelled. No gain or loss is
recognised in the profit or loss and the consideration paid including any directly attributable incremental
costs (net of income taxes) is recognised directly in equity.
1.19 Segment Reporting
The operating segments were reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segment, has been identified as the
board of directors, which has overall control for strategic decisions.
1.20
Estimates and Judgements
The directors evaluate estimates and judgements incorporated into the financial statements based on
historical knowledge and best available current information. Estimates assume a reasonable
expectation or future events and are based on current trends and economic data, obtained both
externally and within the Group.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for
its property, plant and equipment and finite life intangible assets. The useful lives could change
significantly as a result of technical innovations or some other event. The depreciation and amortisation
charge will increase where useful lives are less than previously estimated lives, or technically obsolete
or non-strategic assets that have been abandoned or sold will be written off or written down.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance
with the accounting policies described in Note 1.6 and Note 1.7. The recoverable amounts of cash-
generating units (required to determine fair value less costs to sell) have been determined based on
value-in-use calculations. These calculations require the use of assumptions, including estimated
discount rates based on the current cost of capital and growth rates of the estimated future cash flows.
1.21 New accounting standards for application in future periods
(a)
New and amended standards adopted by the group
38
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial period
beginning on 1 July 2017 that would be expected to have a material impact on the group.
(b)
New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning on or after 1 July 2017 and have not been applied in preparing these consolidated
financial statements. None of these is expected to have a significant effect on the financial statements
of the group, except the following set out below:
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial
assets and financial liabilities. IFRS 9 was issued in July 2014. It replaces the parts of IAS 39 that relate
to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be
classified into two measurement categories:
1)
those measured as at fair value and 2) those measured at amortised cost. The determination is
made at initial recognition.
The classification depends on the entity’s business model for managing its financial instruments and
the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains
most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken
for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in
other comprehensive income rather than the income statement, unless this creates an accounting
mismatch. The group is yet to assess IFRS 9’s full impact. The group will also consider the impact of
the remaining phases of IFRS 9 when completed by the Board.
2.
Parent Information
Guarantees
InnovaDerma PLC has not entered into any guarantees, in the financial period, in relation of the debts
of its subsidiary.
Contingent Liabilities
At 30 June 2019, InnovaDerma PLC did not have any contingent liabilities.
Contractual Commitments
At 30 June 2019, InnovaDerma PLC had not entered into any contractual commitments.
3. Operating segments
The Group has three (3) geographical/regional segments it operates in the United Kingdom, the
United States of America, and the Asia Pacific region respectively. Each region is subject to differing
rates of profitability, stage of development, opportunities for growth, future prospects, and risks in the
Group’s growth stage. The Group’s internal management and reporting structure is geographically
structured with senior executives responsible for each region. We have specific customers in line
with these regions and have acquired assets within each region.
39
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Revenue by
Geographical region
United Kingdom
United States of America
Australia/NZ/Asia
Assets by Geographical
region
United Kingdom
United States of America
Australia/NZ/Asia
Year ended
30-Jun-19
£
Year ended
30-Jun-18
£
11,856,668
9,563,773
667,781
327,385
650,535
485,003
12,851,835
10,699,311
Year ended
30-Jun-19
£
Year ended
30-Jun-18
£
10,349,659
1,022,694
3,528,222
14,900,575
9,957,818
825,388
2,024,279
12,807,485
4. Operating profit/(loss)
The following items have been included in arriving at the operating profit:
Expenses:
Directors’ remuneration
Depreciation
Auditor’s remuneration
Year ended
Year ended
30-Jun-19
30-Jun-18
£
£
324,101
104,085
365,272
109,251
- As auditors (for parent
company and consolidation)
34,467
33,625
- Taxation compliance (for
parent company and subsidiaries)
3,185
2,659
All remuneration payable to the auditors has been disclosed above. No 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.
40
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
5.
Employees
Staff costs for the Group during the period:
Wages and salaries
Pension costs (including superannuation)
Year ended
30-Jun-19
£
1,300,661
158,152
1,458,813
Year ended
30-Jun-18
£
1,548,165
150,295
1,698,460
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-19
Year ended
30-Jun-18
5
36
41
5
29
34
Year ended
30 June 2019
£
Year ended
30 June 2018
£
409,060
(11,843)
1,395
398,612
395,955
(39,117)
(101,969)
254,869
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:
41
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Profit before taxation
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
Under (over) provision in prior years
Permanent differences
Total current tax
7. Revenue
Haircare Products
Life Science devices
Skin & Beauty Products
8. Cash and cash equivalents
Cash at bank
Year ended
30 June 2019
£
Year ended
30 June 2018
£
1,411,159
669,064
262,056
(46,077)
-
103,759
77,214
1,395
265
398,612
127,122
115,111
18,612
95,708
-
(101,969)
285
254,869
Year ended
30-Jun-19
£
1,322,209
298,744
11,230,882
12,851,835
Year ended
30-Jun-18
£
997,206
101,429
9,600,675
10,699,311
30-Jun-19
30-Jun-18
£
£
2,043,048
1,906,215
Cash at bank is included as cash and cash equivalents in connection with the statement of cash flows.
When in overdraft, this balance is included in trade and other payables.
9.
Trade and other receivables
Trade Receivables
30-Jun-19
30-Jun-18
£
£
3,295,255
1,918,982
42
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
10.
Inventory
Finished goods (Leimo &
GrowLase)
Finished goods (Charles
& Lee and Stevie K)
Finished Goods (Prolong)
Finished Goods (Roots)
Finished goods (Skinny
Tan)
Stock Material (Work in
Progress)
30-Jun-19
30-Jun-18
£
£
227,586
215,949
42,106
258,881
105,855
149,513
74,465
106,620
1,553,330
2,263,204
66,678
173,876
2,364,530
2,873,533
The costs of inventories recognised as an expense and included in cost of sales amounted to
£3,404,178 for the year.
11. Prepayments and Sundry Assets
Deposits held
Prepayments
Input tax
Sundry assets
30-Jun-19
30-Jun-18
£
10,318
303,892
-
-
314,210
£
7,021
165,770
-
7,348
180,139
43
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
12.
Intangible Assets
Group:
Goodwill (Skinny Tan)
Customers Lists
Goodwill (Leimo)
Brands (Charles+Lee and Stevie K)
Digital Asset (Prolong)
30-Jun-19
30-Jun-18
£
£
408,067
2,168,388
1,841,818
43,940
65,816
402,357
1,240,435
1,862,847
38,482
139,870
Intellectual Property (Ergon)
1,472,920
1,463,370
Development Costs
577,613
547,107
6,578,562
5,694,469
Movement in capitalised development costs:
Balance brought forward
Development expenditure during the
year
30-Jun-19
30-Jun-18
£
252,392
325,221
577,613
£
294,715
252,392
547,107
*Refer to note 1.7 for definition and recognition criteria for intangible assets
13. Deferred tax asset
30 June 2019
£
30 June 2018
£
Deferred tax items recognised in income statement:
- Other timing differences
24,359
16,161
-
Income tax losses
209,970
142,422
234,329
158,583
44
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
14. Trade and other payables
Trade payables
Other payables
Current tax payable
15. Borrowings
General Borrowings
16.
Deferred tax liability
Deferred tax items recognised in income
statement:
- Other timing differences
17. Contributed equity
30-Jun-19
30-Jun-18
£
£
2,738,363
218,773
1,202,729
4,159,865
1,392,803
930,114
624,993
2,947,910
30-Jun-19
30-Jun-18
£
(522)
(522)
£
12,627
12,627
30 June 2019
£
30 June 2018
£
170
170
3,560
3,560
2018/19
No. of
shares
Share Capital
Share Premium
£
£
Opening balance as at 1 July
2018
14,376,633
1,725,287
Shares issued during the year
120,000
Share issue costs
-
10,511
-
Balance as at 30 June 2019
14,496,633
1,735,798
8,219,525
121,489
(52,535)
8,288,479
45
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Share Capital
Share Premium
2017/18
No. of shares
£
Opening balance as at 1 July 2017
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
The holder of the ordinary shares is entitled to one vote per share at any meeting of the Company
whether in person or by proxy. The holder is entitled to receive dividends declared from available
profits and to the surplus of assets on a winding up.
18. Merger reserve
InnovaDerma PLC acquired 100% of the share capital of InnovaDerma AUS & NZ Pty Ltd,
InnovaDerma International Limited, InnovaDerma NZ Limited, and ID Philippines, Inc, on 28 November
2014.
These transactions are noted as being completed under common control – all companies involved in
the deal were controlled by Mr Haris Chaudhry before and after the transaction was processed.
This condition falls under a scope exemption for IFRS 3. Per IAS 8.12, the company may, in this
circumstance, utilise pronouncements of other standard-setting bodies that use a similar conceptual
framework to develop accounting standards.
As a UK company, the directors decided to apply UK Generally Accepted Accounting Principles, which
make provision for Pooling of Interests in a common control situation, also commonly referred to as
Merger Accounting.
In this circumstance, the difference between the consideration transferred and the nominal value of
share capital acquired is taken to equity, creating a Merger Reserve.
28 November 2014 Acquisitions:
Consideration transferred (8,969,960 shares)
Nominal value of share capital acquired
Value of Merger Reserve
£
721,187
(55)
721,132
46
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
19. Retained Profits
Balance brought forward
Profit for the period
Balance carried forward
20.
Intercompany loan – parent company
Balance brought
forward
Movement in funds
Balance carried forward
30-Jun-19
30-Jun-18
£
407,858
883,321
1,291,179
£
93,738
314,120
407,858
30-Jun-19
30-Jun-18
£
4,998,093
(20,235)
5,018,328
£
3,058,612
(1,939,481)
4,998,093
21.
Investment in subsidiaries
During the year, the Company held interests in the following subsidiaries:
Company Name
Date of Acquisition
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 (b)
28 November 2014
28 November 2014
23 January 2015
31 March 2015
28 May 2015
28 May 2015
28 April 2017
Percentage
Holding
30 June 2019
100%
Percentage
Holding
30 June 2018
100%
100%
100%
100%
100%
100%
94%
94%
100%
100%
100%
100%
100%
100%
93%
93%
100%
a) During the year, InnovaDerma PLC paid £104,142 to acquire a further 1% of Skinny Tan Pty Ltd,
and through direct holding, SkinnyTan UK Limited.
b) During the financial year FY17 InnovaDerma PLC acquired Ergon Medical Limited, owner of
Prolong. The following table shows the allocation of consideration paid for Ergon Medical
Limited, the fair value of assets acquired, liabilities assumed, and the non-controlling interest at
the acquisition date.
47
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Consideration for Ergon
Cash Consideration
Total Consideration
Recognised fair value of assets acquired and liabilities assumed
Other assets
Brand
Trade and other payables
Total fair value of assets acquired and liabilities assumed
22. Related party transactions
Name
Transaction
Amount received from/
(paid to) in year
Farris Marketing
Concepts Pty Ltd
Loan payable1
Cygenta Capital &
Advisory
Provision of
services2
Graise Partners
International Pty Ltd
Provision of
services2
Zaymar Investments
Pty Ltd
Loan payable1
Mr Haris Chaudhry
Loan payable1
2019
£
-
-
-
-
-
2018
£
(85,395)
(26,773)
(3,078)
(292,274)
£
1,022,710
1,022,710
3,532
1,333,721
(314,543)
1,022,710
Amount due
from/(to)
related party
2019
2018
£
-
-
-
-
£
-
-
-
(13,186)
160
1,552
1,552
1 These loans are interest free and unsecured.
2 These expenses were settled via the issue of equity instruments in InnovaDerma PLC.
Nature of related parties
Farris Marketing Concepts Pty Ltd and Zaymar Investments are related parties of Mr Haris Chaudhry,
the Executive Chairman.
Cygenta Capital & Advisory Pty Ltd is a related party of Mr Joseph Bayer, the Executive Director.
Graise Partners International Pty Ltd is a related party of Mr Rodney Turner, a Non-Executive Director.
48
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
Key Management Personnel
All transactions with key management personnel (the directors) during the year ended 30 June 201 9
are disclosed below:
Haris Chaudhry
Joseph Bayer
Rodney Turner
Ross Andrews
Kieran Callan
Salary
Superannuation
100,279
105,121
16,598
-
56,500
278,498
9,527
9,987
1,577
-
4,520
25,611
Consultancy
Fees
-
-
-
19,992
-
Total
Total 2018
109,806
189,200
115,108
119,827
18,175
19,992
61,020
18,920
18,831
18,494
19,992
324,101
365,272
During the period, there were no advances, credits or guarantees subsisting on behalf of the directors.
24. Commitments and contingencies
At 30 June 2019, the Group did not have any contingencies.
At 30 June 2019, the Group had an obligation to pay £77,876 in rent for the forthcoming 12 months,
under a non-cancellable operating lease.
25. Reconciliation of operating profit to net cash outflow from operations
30-Jun-19
30-Jun-18
£
1,012,547
38,586
£
414,195
95,863
(1,497,163)
(218,980)
509,003
1,171,987
(614,544)
27,170
-
449,940
20,113
(8,648)
(75,746)
(42,678)
1,179,327
102,318
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
Net cash outflow from operations
49
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
26. Financial risk management
The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and
payable & loans from related parties.
The Group’s financial instruments at 30 June 2019 were classified as follows:
Note
30-Jun-19
30-Jun-18
£
£
Financial assets
Cash and cash equivalents
Trade and other
receivables
Total financial assets
Financial liabilities
Trade and other payables
Borrowings
8
9
14
15
2,043,048
3,295,255
5,338,303
4,159,865
(552)
4,159,313
1,906,215
1,918,982
3,825,197
2,947,910
12,627
2,960,537
Fair value versus carrying amounts
All items shown in the preceding table as either financial assets or financial liabilities are short term
instruments whose carrying value is equivalent to the fair value. There is not considered to be a
material difference between the fair value and the carrying value.
Specific Financial Risk Exposures and Management
The Group’s activities expose it to a number of financial risks that include 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.
Credit risk exposures
The Group had no significant concentrations of credit risk.
50
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INNOVADERMA PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
(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 120,000 shares at £1.10, were issued to a
supplier for services provided. Instrument is to be settled by 12 December 2018.
28. Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary shares in issue during the period.
The following reflects earnings and share data used in the earnings per share calculation.
Year ended
30-Jun-19
£
1,012,547
14,456,916
Year ended
30-Jun-18
£
414,195
13,891,362
Profit/(loss) for the year
Weighted average number of shares
29. Subsequent Events
There were no subsequent to report.
30. Company Details
The registered office of InnovaDerma PLC is:
27 Old Gloucester Street
London, United Kingdom, WC1N 3AX
The principal place of business is:
3rd Floor, 26 Finsbury Square
London, United Kingdom, EC2A 1DS
51
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