Contents
Financial Statements
Group Financial Statements
Independent auditor’s report
25
Consolidated statement of comprehensive
income
32
Consolidated statement of financial position
33
Consolidated statement of changes in equity
34
Consolidated statement of cash flows
35
Notes to the consolidated financial statements 36
Company Financial Statements
Company statement of financial position
60
Company statement of changes in equity
61
Notes to the company financial statements
62
Company information
1
Financial and operational highlights
2
Non-Executive Chairman’s statement
4
Strategic Report
Strategic report:
Chief Executive’s report
5
Principal risks and uncertainties
10
Section 172 statement
11
Governance
Directors’ report:
Directors’ report
13
Corporate governance report
15
Audit committee report
17
Remuneration committee report
19
Nomination committee report
23
Directors’ responsibility statement
24
Company Information
1
Directors
Ross Andrews
Andrew Dunderdale
Blake Hughes
Simon Pyper
Mark Ward
Company secretary
Elemental Company Secretarial Limited
Company number
09226823
Registered office
27 Old Gloucester Street
London
WC1N 3AX
Independent auditor
Crowe U.K. LLP
55 Ludgate Hill
London
EC1M 7JW
Bankers
Barclays Bank plc
1 Churchill Place
Canary Wharf
London
E14 5HP
Solicitor
Fieldfisher LLP
Riverbank House
2 Swan Lane
London
EC4R 3TT
Country of incorporation
England and Wales
Legal form of entity
Public Limited Company
London Stock Exchange code
IDP
Financial and operational highlights
2
InnovaDerma plc Annual Report & Accounts 2021 I Financial and operational highlights
Financial Highlights
FY2021
FY20201
Change
Revenue2
£10.2m
£13.2m
(22.7%)
Gross profit
£5.8m
£6.0m
(3.0%)
Gross margin
56.7%
45.2%
1150 bps
Adjusted EBITDA3
(£1.5m)
(£3.4m)
£1.9m
Basic EPS
(£0.13)
(£0.31)
£0.18
Cash and cash equivalents
£2.3m
£1.2m
£1.1m
1
See note 2.3 for a description of the prior year restatement.
2
On a constant currency basis
3
Adjusted EBITDA defined as EBITDA before non-recurring items, including impairments, abortive and restructuring costs. A reconciliation of adjusted
EBITDA can be found in note 6 to the Group financial statements.
Operational Highlights
New executive management team, led by CEO Blake Hughes and Group Finance Director Andrew Dunderdale, made
immediate and substantive performance improvements and put in place foundations for future growth.
Enhanced e-commerce operational excellence with 76% of customers giving Skinnytan.co.uk 5 stars.
Excellent Charles + Lee performance vs prior year despite the impact of COVID-19, with the brand refresh ready for further
market rollout.
Shifted focus away from revenue generation at the expense of profits to an e-commerce led business to generate
sustainable profitable growth.
Improved pricing model increased gross margins to 61.3% in second half, from 49.9% in first half, and compared to 51.6%
for the prior year Jan-Jun 2020.
Successful, oversubscribed fundraise of £4.5 million (£4.0 million net of expenses) completed in April 2021.
Outlook
The Group continues to trade in line with expectations with a return to profitability in the year ending 30 June 2022.
UK tanning market consumer consumption now returning to historical levels.
Key foundations for future profitable growth in place:
• UK-based executive management team.
• Full year effect of improved and enhanced gross margin strategy.
• 2022 new product development pipeline delivered despite global manufacturing and logistics challenges.
• Strong cost control.
Drivers of future growth in place:
•
New high-reach Influencer Marketing Strategy: Partnership with Liberty Poole.
•
Global Amazon relationship already delivering material sales in lead UK market at a healthy margin.
•
Significantly upgraded packaging, with stronger sustainability profile, for both Skinny Tan and Charles + Lee.
•
Partnership agreement signed in December 2021 to accelerate sales of the Prolong medical device, with InnovaDerma
plc retaining 45% stake in the business, and enabling the Group to focus on its topical products.
3
Blake Hughes, CEO:
“I joined InnovaDerma in November 2020 and it was immediately apparent that substantial and business-wide change was
required to ensure the Group could reach its full potential. We have great talent and a fantastic product range however the
business was suffering from a lack of strategic and operational focus.
We have made the transformational interventions needed to improve the financial and structural foundations of the Group
and deliver our goal of sustainable and profitable growth. The actions have and continue to take place, and it is satisfying
to see our strategy already delivering, whether through increased margins or through improved customer ratings, with
Skinny Tan now rated 5 stars by more than 3 out of every 4 visitors.
It is testament to the hard work of our employees that we progress through the pandemic in better shape than when we
entered it, and I would like to take this opportunity to thank them all for their efforts.
We are wholly focused on driving sustainable and profitable growth, concentrating our resources on areas which will allow
us to significantly grow shareholder value. It has been a challenging period for the Group however I strongly believe we
have resolved the underlying issues that the Group faced and that we are well positioned for future profitable growth.”
Non-Executive Chairman’s statement
4
InnovaDerma plc Annual Report & Accounts 2021 I Non-Executive Chairman’s statement
I am pleased to deliver my first report as Chairman of the Group, having been asked to fulfil that role on 11 January 2021.
At the time of my appointment, the Group was experiencing difficult trading conditions from the continued impact of
COVID-19 and tighter movement restrictions that had been imposed across the UK over the important festive season.
Whilst many other consumer facing companies were also impacted by COVID-19 during this time, InnovaDerma’s problems
were exacerbated by previous executive management’s failure to take preventative measures to protect the business. The
cash position was such that we had to immediately enter into a short-term loan agreement and set the wheels in motion for
a significant fundraise, subsequently announced in April 2021.
The Board tasked Blake Hughes (who joined us in November 2020 as our new CEO) to implement a programme of
significant change across the entire organisation to ensure that the Group was focused on the areas that would drive
both immediate and substantive performance improvements whilst also allowing the Board to build the foundations
for future growth. These measures included operational efficiency through the protection of profit and cash and strong
overhead cost reductions, lower year-on-year inventory and lower cost digital targeting of existing customers; gross margin
improvement by setting higher gross margin promotional hurdle rates; new products sold at full recommended retail price
at launch; and improvements to the e-commerce journey for customers.
I’m pleased to report that we started to see the benefits of these changes in the second half of the year. We have made
strong progress in rebuilding our gross margin, delivering a substantial H2 improvement of over 970 basis points versus
same period in 2020. The margin improvement has been achieved by selling new products at higher gross margin, strictly
controlling our global promotional spending and greater recovery of e-commerce delivery costs. Our Direct to Consumer
(“DTC”) revenues saw a marked and seasonal improvement during the second half of the year as expected but remains
behind historical levels, which reflects lower category consumption due to UK Government restrictions on social gatherings
and also the weather. Our Retail revenue momentum is returning, but levels have remained materially impacted by the
restrictions on movement and social gatherings. We expect our retail performance to return in the coming months.
Despite the continued impact of COVID-19 restrictions, and the unseasonably poor weather in the UK over April and May,
revenues increased in the second half to £6.1m (first half £4.1m) making £10.2m for the year; gross margins increased to
61.3% in second half (first half 49.9%) resulting in a gross margin of 56.7% for the year; EBITDA before non-recurring items
significantly improves in the second half of the year, resulting in an adjusted EBITDA loss of £1.5m for the year.
The Group is undoubtedly in a stronger position than when I took over as Chairman. I am pleased with the progress that
has been made to date and I believe that we now have the right platform to grow the business. I would like to thank the
management team, employees and shareholders who have supported the Group over the last year.
By order of the Board
Ross Andrews
Chairman
20 December 2021
Strategic Report:
Chief Executive’s report
5
Strategic Report
When I joined the Group in November 2020, I said that I was excited at the opportunity to join InnovaDerma and
re-build the business bringing with me the organisational and financial leadership that is required to succeed in the digital
e-commerce driven world. We have since taken necessary steps to transform the business and it has been a year of
significant change. We have shifted our focus away from revenue generation at the expense of profits to an e-commerce
led business that is well-positioned to generate sustainable, profitable growth. I believe we have emerged as a new Group
with a fundamentally stronger approach.
Strategy
I have focused the Group on a number of necessary operational and financial interventions to transform and future-proof
the business. These actions will enable a return to profitability and a new focus on sustainable and profitable growth
moving forward. The action plan focused on:
1. Optimising our organisation
Our business is only as strong as our people and how they collaborate as a team. The focus has been to ensure that
we have the right people, in the right country, with the right skills, focused on the right targets and powered by the right
mindset. This has involved an appropriate movement of resource from Australia to the UK where we generate most of our
revenue.
2. Strengthen our financial foundations
This year has seen a significant strengthening of the balance sheet through the fundraise but also a focus on future
profitable growth with a laser-like focus on improving gross margins, cutting low return costs and introducing real time
accurate financial profitability metrics.
3. Focusing our resources on our priority brands
Skinny Tan is InnovaDerma’s flagship brand. Despite its clear success there remain significant profitable growth
opportunities when compared to successful global beauty brands and it is therefore our number one priority. Our
broader objective is to build a portfolio of global beauty growth brands. To enable us to do this successfully, we have
adopted a stage gate process, incubating brands in a local market and expanding globally only once they have proven
their sustainable potential within their local market. Given the effects of the pandemic we have further strengthened our
e-commerce foundations in the UK market, through the previously untapped potential of Amazon.co.uk as a key driver of
future profitable growth.
4. Improve our customer experience online and in store
A full review of both our online customer journey as well as our relative performance in retail stores identified the need for
strengthening our customer service, improved on-shelf navigation and improved at home product experience. Each of
these areas have been addressed to ensure that we enter future peak consumption periods with a stronger chassis that
will drive sustainable profitable growth.
5. Modernising our customer acquisition marketing model
The Group has strong heritage in digital marketing, particularly with Facebook. As the digital landscape evolves,
accelerated by the pandemic, this landscape has become increasingly competitive with escalating costs. We now have
in place a modern nuanced digital strategy that leverages the full gamut of digital media, including a strong focus on cost
effective e-mail marketing and a conversion optimised e-commerce site, that goes beyond a pure Facebook play.
Strategic Report:
Chief Executive’s report (continued)
6
InnovaDerma plc Annual Report & Accounts 2021 I Chief Executive’s report
Our performance
We have a new and well-defined strategy in place, and we are delivering against it.
Our gross margin improvement plan is showing strong results, as is our new customer acquisition digital marketing
model and our focus on cost efficiencies. We have launched a suite of products on Amazon and our 2022 new product
development programme has been turbo charged. Moreover, we are putting our customers at the heart of our planning,
focusing on our priority brands and reducing complexity, with the clear objective of delivering sustainable, profitable
revenue growth. As a Board we are optimistic about the future of the Group and excited about the potential of the Group’s
priority brands.
New product development continues to be a core sales generation strategy and a strength for the Group. Despite the
pandemic Skinny Tan developed and launched 6 new SKUs which all achieved UK retail listing. Notox Beauty Elixir and the
Strawberry & Cream Pink Whipped Tanner were the star performers establishing themselves in the top 10 products sold
through our UK website in the period January to June 2021.
Key performance indicators (KPIs)
The Board are mindful that, although InnovaDerma plc is a UK listed company, many KPIs used by traditional, larger PLC
businesses are not appropriate for a Group of our scale. Moreover, the effects of the pandemic have focused the Board
even more on our core financial KPIs as outlined below.
KPI
Description
Revenue growth
Year-on-year revenue change. An indicator of product performance and relative market share.
Gross profit margin %
Revenue less cost of goods sold, as a percentage of revenue. A measure of pricing, production and
purchasing efficiencies.
Adjusted EBITDA
Earnings before interest, tax, depreciation and amortisation, foreign exchange movements on (non-
trading) intercompany loans, and non-recurring items including impairments, abortive and restructuring
costs. Demonstrates the profitability of the underlying business by removing structural factors of the
business unrelated to trade in the year.
Marketing spend efficiency
Marketing costs as a percentage of revenue. Marketing spend efficiency assessed value for money of
marketing and its ability to drive sales efficiently and effectively.
The Group revenue performance was broadly in line with expectations delivering £10.2m, a decline of 23% (2020: £13.3m).
The pandemic has affected each of our key markets at different times, triggering varying levels and durations of lockdown,
which in turn had a dramatic effect on social interaction and beauty category consumption. The shift to e-commerce during
the pandemic was positive for the Group but this was offset by the reduced category consumption and a surge in on-line
advertising costs, particularly Facebook. This dampened revenue performance and had a corresponding impact on Group
profitability. Despite unseasonably poor weather in the UK, Q4 saw a marked improvement in sales driven by retail revenue
momentum which we believe will continue throughout the coming year.
Marketing spend efficiency was broadly flat at 39.5% of revenue in 2021 (2020: 39.4%). We are diversifying our marketing
investment away from a majority-focus on Facebook to a more nuanced digital marketing strategy that includes higher
spend through Google and via beauty influencers. The Group is targeting significant improvement in marketing efficiency
over the coming year.
Operating loss before tax was £1.9m (2020 restated: £5.0m loss), and adjusted EBITDA loss was £1.5m (2020 restated:
loss of £3.4m). Through January to June 2021, we took action to rebuild our gross margin, delivering over 970 basis
points versus same period in 2020. This margin improvement was achieved by setting higher gross margin targets for new
products, strictly controlling our global promotional spending and greater recovery of e-commerce delivery costs. This
gross margin improvement strategy will continue into next year and we expect it to deliver enhanced profitability for the
Group moving forward.
7
Strategic Report
At 30 June 2021, the Group held net cash of £2.3m (2020: £1.2m) following the oversubscribed fundraise of £4.5 million
(£4.0 million net of expenses) completed in April 2021. We are grateful for the strong vote of support from our shareholders
and the Directors believe that the Group has sufficient working capital to return the business to profitability.
We also identified and addressed a number of incorrect accounting treatments adopted by previous management. These
related to incorrectly capitalised marketing costs, non-impairment and non-amortisation of intangible assets, overstatement
of inventory position and understatement of liabilities, and the incorrect treatment of foreign exchange movements. Please
see note 2.3 of the notes to the consolidated financial statements for a description of the prior year restatement.
These corrections are a result of the Board’s drive to strengthen internal control processes, led by the new executive
and Audit Committee, implemented and maintained by a new finance team. Historic controls and record management
have been reviewed, augmented and enhanced with a focus on visibility and transparency. Key interventions have
included biweekly executive stock management review, enhanced monthly financial review and forecasting, and thorough
accounting treatment review at both Board and Audit Committee levels.
These actions were necessary to ensure we have strong financial controls, clear and robust financial data for effective
management decisions, and a strong foundation for sustainable profitable growth.
Brand Strategy
Our strategy is to first focus on Skinny Tan as it represents the biggest opportunity for the Group. Skinny Tan represents
88% of Group revenue (2021: £8.9m) but has significant room for growth, in both new and existing markets, when
compared with other global beauty brands. Charles + Lee is our second priority brand. It has proven its potential in
Australia and will be expanded globally when positive retail conditions return. Roots and Nuthing will remain in incubation
in the UK, their home market, where we will further strengthen the proposition prior to any strategic rollout. As previously
announced, our Life Science brands are non-core to the business.
Skinny Tan
Skinny Tan’s performance has been heavily impacted by COVID-19, and the scale and timing of lockdowns in each of
our key markets. Revenue for the year declined 23% to £8.9m (2020: £11.6m) but grew 47% in Australia to £0.6m (2020:
£0.4m), where the impact of COVID-19 was lower in the peak period. This hints at future growth potential as category
consumption returns globally. Innovation was a key driver of sales as reflected in the successful launches of Notox Beauty
Elixir and Strawberry and Cream Tanner. Both products were in our top 5 sellers through our UK DTC business. Skinnytan.
co.uk is now rated 5 stars by more than 3 in every 4 customers. We have responded to higher Facebook advertising costs
by moving to a multichannel digital marketing model that leverages lower cost email marketing and Google advertising,
alongside existing Facebook advertising. Going forward we will continue to evolve our marketing model, including greater
use of our Influencer Liberty Poole to maximise the ROI of our marketing investment.
Charles + Lee
Charles + Lee, our affordable, no-nonsense, high performance Australian men’s skin care and grooming range, has been
a star performer. Revenue has grown 35% globally (2021: £0.5m, 2020: £0.4m) led by its home market, Australia. The
brand offering is now sharper and its footprint growing across new and existing stores and e-commerce. The success
of its Christmas gifting offering indicates that the brand is ready for further expansion when the retail environment is
more favourable. Distribution remains focused on department stores and high-end pharmacies, complimented by our
e-commerce offering.
Roots
Revenue for our premium hair care brand fell by 48% to £0.4m (2020: £0.8m) as a result of changed consumer shopping
patterns in the haircare category. In particular pharmacies, where we are listed along with Boots and Superdrug, lost
Strategic Report:
Chief Executive’s report (continued)
8
InnovaDerma plc Annual Report & Accounts 2021 I Chief Executive’s report
significant market share during lockdown to the grocery distribution channels. Whilst we do believe shopping patterns will
normalise over the coming 12 months, the anti-hair loss space in the UK now has a significantly more market entrants.
We will look to sharpen the proposition and incubate the brand in order to generate sales growth once again, prior to any
further strategic expansion.
Nuthing
Nuthing (2021: £0.2m, 2020: £0.3m), an innovative range of products for hair removal, was listed in Superdrug as
retail exclusive in February 2020 just weeks before the UK entered its first COVID-19 lockdown. As a result of this and
subsequent lockdowns, the UK instore launch did not fully complete and the brand remains in our incubation category.
We will refine and optimise the proposition, and agree a timeline for relaunch with Superdrug, in due course. We remain
confident in the potential for innovation in this category and believe the fun and great-smelling proposition is differentiated
to other products in the category today.
Life Sciences
The Group completed its review of the Life Science brand portfolio and has determined that the Prolong brand has limited
synergies with the Topical brand portfolio, particularly given the differing regulatory requirements. The board remains
confident in Prolong as a brand and its patent-protected technology. However, given its small scale and unique regulatory
needs, we identified a partnership as the most suitable option to grow the brand and maximise shareholder value. In
December 2021, InnovaDerma plc entered into an agreement with Mark Ward, Non-Executive Director of the Group,
to accelerate and develop the Prolong brand. InnovaDerma plc will retain a 45% ownership stake in the Ergon Medical
Limited, previously wholly owned by InnovaDerma plc, with the remaining 55% being acquired by Mark Ward for a value of
£275k. Our three-to-five year strategy is to realise significant shareholder value through either IPO, private equity or trade
sale.
The Group has concluded that Grow Lase has no ongoing value and has been discontinued at minimal cost.
People
I would like to thank our employees, partners and shareholders for your support and commitment in what has been a
transformational year. I look forward to sharing our continued progress with you.
At 30 June 2021, there were 20 women (2020: 24) employed across the Group making 53% (2020: 55%) of our workforce.
Of these employees, 6 senior managers were female. No women were directors. This is an important consideration for
future Board appointments.
Environment
The Group continuously monitors its environmental profile and implemented a new sustainability strategy. By the end of
2023 the Group pledges to:
•
Ensure all bottles are 100% recyclable;
•
Eliminate single use plastic from secondary packaging;
•
All cardboard used will be FSC certified; and
•
All bottles and tubes will be made from at least 30% recycled plastic.
9
Strategic Report
Outlook
The Board is optimistic that the transformation plan enacted this year, as well as underlying improved consumer
consumption versus last year, will enable the business to return to profitability this year. The Group has been trading in line
with expectations, with retail momentum steadily returning in the UK beauty category to pre-pandemic levels. However, the
recent rise of the Omicron variant of COVID-19 has led UK retailers delaying a number of December orders into early 2022.
The organisation is now UK-led with key foundations in place for future profitable growth: higher gross margins, enhanced
new product development pipeline and stronger cost control. Moreover, we believe our strategic partnership with leading
UK Influencer Liberty Poole, our relationship with Amazon globally and our key brand packaging upgrades will be key
catalysts for growth this coming year. The new executive management team now have a solid foundation to enable the
Group to grow profitably and we remain confident in achieving that in the year ending 30 June 2022.
Strategic Report:
Principal risks and uncertainties
10
InnovaDerma plc Annual Report & Accounts 2021 I Principal risks and uncertainties
The following are the principal risk factors that the Board believe could materially affect the Group’s performance and
prospects.
Pandemic risk / COVID-19
The Group is exposed to the impact of the ongoing outbreak of COVID-19 and the risks relating to measures imposed by
national governments to control the outbreak. The Group recognises the risk of a potential fall in revenue and profitability
due to lower general economic activity.
At the date of approval of the financial statements, the UK government has announced additional measures aimed at
containing the spread of the Omicron variant of COVID-19, including the reimposition of compulsory face coverings in
certain public spaces and advice to work from home where possible. The Directors consider it premature to determine or
quantify any likely impact of the additional measures or any consequent impact on demand for the Group’s products. The
situation continues to be actively monitored.
Regulatory changes
Regulatory changes, such as Brexit, could have an adverse impact upon the Group. The Group monitors legislative and
regulatory changes and alters its business practices where appropriate.
On-line marketing / technology changes
The Group relies on various digital platforms to drive revenue through acquisition of new customers and the re-marketing
to existing customers. These digital platforms have become increasingly sophisticated with major platforms using complex
algorithms to determine bid costs. The Group recognises these shifts and constantly reviews bid costs and tests new and
alternative digital platforms to reduce reliance on any one platform.
Loss of key personnel
An unforeseen loss of key personnel would be damaging to the Group and could result in the loss of key corporate and
operational knowledge. The Group has a continuity program in place to ensure that Directors are able to minimise the
disruption caused by the potential loss of key personnel.
Liquidity risk
This is the risk that the Group does not maintain sufficient liquidity risk. The Group manages this risk through careful cash
management policies to ensure it can always meet its working capital commitments as they fall due. In addition, on 27 May
2021 SkinnyTan UK Limited entered into a CBILS loan facility for £950k. The fellow subsidiaries of the InnovaDerma group
are guarantors under this agreement. The loan facility was drawn down in full on 2 July 2021.
Cyber security risk
The Group’s direct-to-consumer (“DTC”) business and its reliance on digital platforms and other systems raises the
importance of cyber security to the Group. The Group’s digital systems routinely handle confidential and proprietary
information and therefore relies on the secure processing, storage and transmission of such information in line with
regulatory requirements. The Group manages this risk via regular systems reviews, investigation of possible process
weakness, and implementation of best practice codes.
Strategic Report:
Section 172 statement
11
Governance
In accordance with section 172 of the Companies Act 2006, our Directors act in the way that they consider, in good faith,
would most likely promote the success of the Group for the benefit of its shareholders as a whole while having regard for all
stakeholders. InnovaDerma considers collaborative engagement with all stakeholders as vital for our business. It is at the
core of what we do. Stakeholders include not only our shareholders, but also our suppliers and workforce. By maintaining
regular dialogue, we aim to receive feedback on our strategy, performance and governance which are then factored into
the Board’s decision-making process.
Our Directors regard, amongst other matters, to:
Shareholders – The support of our investors is vital to the long-term performance and success of the Company and the
Group.
Employees – The Group recognises that its people are critical to our ability to deliver our Group strategic goals. It is the
Group’s objective to ensure that the workplace is safe and inclusive, welcomes diversity and offers everyone the chance to
develop to their full potential.
Suppliers – Our external supply chains are an integral part of our business and effective engagement with our suppliers is
an essential element of our ability to perform. By understanding their needs, we aim to improve our performance and build
relationships to promote the success of the Company and the Group.
Customers – We aim to ensure that our customers experience the highest level of product quality and customer service.
As a result of the Group governance structure, whereby the Company’s Director is also a Director of the Group, the matters
that the Board is responsible for considering under s172 have been considered to an appropriate extent in relation both to
the Group and to the Company.
Shareholders
InnovaDerma seeks to develop an investor base of long-term holders that are aligned with our strategy. By clearly
communicating our strategy and objectives, shareholders engage in ongoing dialogue and maintain continued support
for what we do. The Group’s investor relations are managed by the Chief Executive Officer, Blake Hughes, and Chairman,
Ross Andrews, with the support and assistance of the Group’s broker. The Group also maintains a website (www.
innovaderma.com) which contains information on the Group’s business, corporate information and specific disclosures
required.
Employees
The Board understands the Group’s long-term success depends on the engagement and commitment of its employees,
and the Board considers their interests in its decision-making processes. The Group seeks to ensure that the workplace
is safe and inclusive, welcomes diversity and offers everyone the chance to develop to their full potential. The Board has
sought to improve communications and understand the interests of employees during the year and specifically during the
COVID-19 pandemic and the various country-specific lockdowns. Our CEO, Blake Hughes, has provided regular team
updates and opportunities for Q&A during the period of home working. This has ensured staff receive answers to a wide
variety of questions and allowed the Group to provide staff with pertinent information and key business performance
updates.
Suppliers
The Group collaborates closely with strategic supply partners, particularly in areas of new product development, product
manufacture and digital marketing delivery. We seek to ensure that all partners are aligned around common objectives,
collaborate to deliver efficient and uninterrupted service, and have open, transparent and regular strategic supply dialogue.
Strategic Report:
Section 172 statement (continued)
12
InnovaDerma plc Annual Report & Accounts 2021 I Section 172 statement
Customers
The Group is focused on ensuring that consumers receive the highest possible standards of product performance and
customer experience. To enable this, we have mapped and optimised the ways that consumers can interact with the
business and ensure that all communication is reviewed and acted upon in a timely manner. This includes customers
interacting directly with the business via our social platforms as well as through brand and retailer customer service
channels.
This report was approved by the board on 20 December 2021 and signed on its behalf.
Blake Hughes
Director
Directors’ Report
Governance
13
The Directors present the annual report and audited financial statements for InnovaDerma plc (the “Group”) together with the Independent
auditor’s report for the year ended 30 June 2021.
The Strategic Report on pages 5 to 12 provides a fair review of the Group’s business for the year ended 30 June 2021 as well as explaining
the Group’s strategy, objectives, future developments, its key performance indicators for monitoring business and the principal risks and
uncertainties that could impact the Group.
Directors
The Directors who served during the year and subsequently were as follows:
Ross Andrews
Joseph Bayer
(resigned 11 January 2021)
Kieran Callan
(resigned 4 August 2020)
Andrew Dunderdale
(appointed 2 September 2021)
Blake Hughes
(appointed 18 November 2020)
Rodney Turner
(resigned 16 December 2020)
Simon Pyper
(appointed 16 December 2020)
Mark Ward
(appointed 19 October 2020)
With regard to the appointment and replacement of Directors, InnovaDerma plc is governed by its Articles of Association, the UK Corporate
Governance Code, the Companies Act and related legislation. The Articles themselves may be amended by special resolution of the
shareholders. The powers of the Directors are governed by the Companies Act 2006, the Articles of the Company are detailed in the
corporate governance report on pages 15 to 16. Directors are not required to offer themselves for re-election at each Annual General
Meeting but each Director follows best practise and offers himself for re-election.
Directors’ indemnification
The Company’s articles of association provide for the Directors and officers of the Company to be appropriately indemnified, subject to the
provisions of the Companies Act 2006. The Company purchases and maintains insurance for the Directors and officers of the Company in
performing their duties, as permitted by section 233 Companies Act 2006.
Capital structure
At 30 June 2021, the ordinary share capital of InnovaDerma plc consisted of 27,374,673 shares, with a nominal value of EUR 0.10 each. All
issued shares are fully paid and each share carries one vote at General Meetings. There are no restrictions on the transfer of securities in the
Company, and no restrictions on voting rights.
Substantial shareholders
As at 30 June 2021 the Directors consider there to be no ultimate controlling party by virtue of the fact no one party or parties holds a
majority shareholding in the Group.
Shareholdings in the Group of more than 5.0% of issued share capital as at 20 December 2021 are as follows:
Shareholder
% holding
Mark Ward
17.07%
Edale Capital LLP
11.46%
Roger McDowell
5.03%
Dividends
No dividends were paid or proposed in the year (2020: nil).
Directors’ Report
(continued)
14
InnovaDerma plc Annual Report & Accounts 2021 I Directors' Report
Events after the reporting date
On 27 May 2021 SkinnyTan UK Limited entered into a CBILS loan facility for £950k. The fellow subsidiaries of the InnovaDerma group are
guarantors under this agreement. The loan facility was drawn down in full on 2 July 2021.
On 2 September 2021 the Board approved the grant of options over 125,000 Ordinary shares to Blake Hughes and 95,500 Ordinary shares
to Andrew Dunderdale. Both grants have an exercise price of £0.35 and will be exercisable on or after the third anniversary of the grant date
subject to share price performance of the Company and conditions defined in the share option plan.
One third of the options may be exercised when the market price of the Ordinary Shares is equal to at least 25% increase over the grant
price for a period of not less than one month; one third when the market price of the Ordinary Shares is equal to at least 50% increase over
the grant price for a period of not less than one month; and the balance may be exercised when the market price of the Ordinary Shares is
equal to at least 75% increase over the grant price for a period of not less than one month.
On 3 December 2021 Ergon Medical Limited, a wholly owned subsidiary of InnovaDerma plc, subdivided its 3,614 £1 Ordinary A shares
into £0.10 Shares and re-designated them as Ordinary B shares and issued 51,060 new Ordinary A shares to Mark Ward, Non-Executive
Director of InnovaDerma plc. The issue of new shares dilutes InnovaDerma plc’s shareholding in Ergon Medical Limited to 45%. The
transaction is an effective step disposal and as such Ergon Medical Limited is now an associate rather than a subsidiary of InnovaDerma plc.
The funds raised by Ergon Medical Limited will be used to further promote the expansion of the Prolong device in US markets.
The impact of the step disposal removes Ergon Medical Limited and the trade of Prolong US from the consolidated financials of
InnovaDerma plc going forward. In the year ended 30 June 2021, Ergon Medical Limited and the trade of Prolong US generated revenue
of £153k (2020: £93k) and profit before tax of £31k (2020 restated: loss before tax £145k). As at 30 June 2021, the business unit had net
liabilities excluding intercompany of £58k (2020 restated: net liabilities excluding intercompany of £109k).
The Directors confirm that there are no other events after the reporting date which require disclosure.
Going concern
The Group meets its day-to-day working capital requirements through free cashflow. Based on cash flow projections, the Group considers
the existing financing facilities to be adequate to meet short-term commitments.
The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt over the Group’s ability to
continue as a going concern. Accordingly, the Group has prepared the financial statements on going concern basis.
Directors’ Report:
Corporate governance report
15
Governance
The Board
The Board’s principal task is to set the Group’s strategy, which is devised to deliver optimum value for shareholders. The Board is also
responsible for the long-term success of the Group through the sustainability of the Group’s business model and demonstrating leadership
and drive to ensure the Group delivers on its strategies.
Other matters reserved for decision by the full Board include approval of the annual report, authorisation of all acquisitions and disposals,
sanction of all major capital expenditure, the raising of equity or debt and investor relations. These tasks were the responsibilities of all
Directors who served during the year.
The Board reviews the risks that arise and continually reviews any emerging and ongoing risks and the outcomes are noted in the Strategic
Report on page 10.
The financial period saw a significant strengthening of the Board. In August 2020, Kieran Callan stepped down as Chief Executive Officer.
In December 2020, Joe Bayer stepped down from an executive to non-executive position and was shortly thereafter dismissed from the
Board. Rodney Turner stepped down as a Non-Executive Director in December 2020. A number of important Board appointments were
also made. In October 2020, Mark Ward was appointment as a Non-Executive Director (Non-Independent) followed in November 2020 with
the appointment of the Company’s new Chief Executive, Blake Hughes, and in December 2020 Simon Pyper was appointed as a further
Non-Executive Director. Following the year end the Board was further strengthened with the appointment of Andrew Dunderdale as Finance
Director in September 2021, having joined the Group in February 2021.
The Group currently does not have a formal diversity policy as historically it did not consider it appropriate given the scale of the business.
However, the current Board recognises the importance of having a formal diversity policy to ensure that everyone is given equal
opportunities to progress regardless of age, gender or educational and professional background and it is the Board’s intention to adopt a
formal policy, details of which will be contained in the Group’s next annual report and accounts.
Compliance
The Listing Rules of the Financial Conduct Authority (“FCA”) require listed companies to choose an appropriate corporate governance
framework and disclose whether or not they have complied with the principles and provisions. The group has adopted the UK Corporate
Governance Code (the “Code”) issued by the Financial Reporting. The Code is available on the Financial Reporting Council’s website:
www.frc.org.uk. The Board is committed to the principles set out in the Code but judges that some of the processes are less relevant, given
the relative size and complexity of the business.
The Group has not complied with the Code as follows:
•
Best practise is to have at least half the Board, excluding the Chairman, as independent Directors. The Board consists of five Directors
of which, excluding the Chairman, one is independent. Of the five Directors, two are Executive; one, Ross Andrews, is the Independent
Non-Executive Chairman; one, Simon Pyper is an Independent Non-Executive Director; and one, Mark Ward, is a Non-Independent
Non-Executive Director. The Board considers that the composition of the Board is appropriate for the size of the Group.
•
The Group does not have an internal audit function. The Audit Committee has considered the need for a separate internal audit function
and notes that there are some elements of internal audit that are currently outsourced, including specific agreed upon controls reviews
in our non-UK businesses. Due to the size of the Group and procedures in place to monitor both trading performance and internal
controls, it was concluded the costs of an entire separate internal audit department would outweigh the benefits.
Composition of the Board
The Board consists of two Executive Directors and three Non-Executive Directors. The Board considers that two Non-Executive Directors
Ross Andrews (Chairman) and Simon Pyper to be independent when assessed by the circumstances set out in Provision 10 of the
Code. Given their relatively small shareholdings, the Board does not believe that these impact on their independence. The third Non-
Executive Director, Mark Ward, is not considered independent due to the size of his shareholding. Upon appointment, Directors are
informed of the time commitment expected from them. A copy of the terms and conditions of the appointment of the Non-Executive
Directors is available for inspection at InnovaDerma plc’s registered office during normal business hours and during the AGM.
Ross Andrews – Non-Executive Chairman
Ross is an experienced corporate adviser with 30 years’ investment banking and stockbroking experience, advising companies and
management teams on public market transactions. He was a main board director of Zeus Capital during which time the firm grew from a
small corporate finance advisory business in the Northwest of England to an established investment banking operation based in London,
Manchester and Birmingham. He is a non-executive director of several listed companies and brings extensive financial, commercial and
corporate governance experience to the Board. Most recently, he established Guild Financial Advisory Limited, an independent corporate
finance boutique focused on advising fast growing companies (both private and listed). He is a member of the Audit Committee and
Chairman of the Remuneration and Nominations Committees.
Blake Hughes – Chief Executive Officer
Blake has spent his career in the beauty and personal care sectors and has extensive experience in e-commerce, marketing and digital
analytics. Most recently, he held the roles of CEO and Chief Marketing Officer of Philip Kingsley, the award-winning premium hair care range.
Prior to that, Blake was Managing Director of Murad (EMEA), the prestigious skin care brand and has also worked in a variety of brand
and marketing roles for blue chip companies including Procter & Gamble, Elizabeth Arden and Marks & Spencer. He holds a Masters in
Chemistry from Oxford University.
Directors’ Report:
Corporate governance report (continued)
16
InnovaDerma plc Annual Report & Accounts 2021 I Corporate governance report
Andrew Dunderdale – Group Finance Director
Andrew joined the Group in February 2021 as Group Finance Director before being appointed to the Board in September 2021. He
holds a Masters in Mathematics, is a Chartered Accountant and was most recently the London Finance Director at AIM listed Be Heard
Group plc, until its sale to MSQ in September 2020. Prior to that, he had served as Group Financial Controller at WPP Branding & Design
division from 2010 to 2017. His previous roles have seen Andrew work in digital and marketing sectors, developing extensive experience in
transformation, M&A and capital markets.
Simon Pyper – Independent Non-Executive Director
Simon was formerly the Chief Executive Officer and Chief Financial Officer of digital marketing group Be Heard Group plc. Simon was
appointed Chief Financial Officer of Be Heard Group plc in May 2018 and undertook the role of CEO from September 2018. Prior to this, he
was Chief Financial Officer of AIM listed GlobalData plc from 2007 to 2017. During his tenure, Simon oversaw its reverse takeover of TMN
plc and admission to AIM and facilitated its acquisition led growth strategy. Simon is currently the Chief Financial Officer of Xenia Broking,
one of the largest credit insurance brokers in the UK. Simon is a member of the Nominations and Remuneration Committees and chair of
the Audit Committee.
Mark Ward – Non-Independent Non-Executive Director
Mark is a successful and experienced digital and technology professional with strong links to the consumer and service industries. He
founded Hunter Macdonald, a digital transformation and services company in 2013 and under his leadership, the business employed more
than 400 employees within 5 years. In 2017, Hunter Macdonald was recognised as being one of the fastest-growing companies in the UK,
and in October of the same year, the business merged with Scandinavian based Netcompany which is now publicly listed on Nasdaq OMX.
Mark began his career at PwC working in M&A and operations and spent 13 years in senior operational director roles for Reckitt Benckiser,
Verizon, BT, and Friends Life.
Board meetings
The directors have met as a full board on 16 occasions during the year, including meetings by video link. The attendance at meetings during
the year to 30 June 2021 for each director is as follows:
Director
Board Meeting
Audit Committee
Remuneration Committee
Meeting
eligible to
attend1
Meetings
attended
Meeting
eligible to
attend
Meetings
attended
Meeting
eligible to
attend
Meetings
attended
Ross Andrews
16
16
2
2
2
2
Joe Bayer
6
6
–
–
–
–
Kieran Callan
–
–
–
–
–
–
Blake Hughes
11
11
–
–
–
–
Simon Pyper
10
10
2
2
1
1
Rodney Turner
6
6
–
–
1
1
Mark Ward
14
14
–
–
–
–
1
Andrew Dunderdale attended 6 Board meetings prior to appointment as a Director.
Procedures are in place to enable the Directors to take appropriate independent professional advice at the Group’s expense if that is
necessary for the furtherance of their duties. All Directors have access to the advice and services of the Company Secretary.
Under the formal terms of the Board Committees, the Board has delegated specific responsibilities to the Audit, Remuneration and
Nomination Committees. The Board considers that all the members of each Committee have the appropriate experience and none of them
has interests which conflict with their positions on the Committees. The reports of these committees can be found on pages 17 to 23.
Board effectiveness
The constitution of the Board changed significantly in the first half of the year. As a consequence of these changes, and in particular the
appointment of new Directors, both Executive and Non-Executive, the Board now has a balance and depth of skills and experience,
together with suitable knowledge of the Group and industry, which was previously lacking. These changes enable the Board to successfully
discharge its respective duties and responsibilities. Overall, the collective view of the Directors is that the Board is effective in discharging its
responsibilities. The Board confirms its belief that all Directors bring significant value to the business, are effective in Board decision making
and show the appropriate level of commitment to their roles.
The performance and effectiveness of the Board was not subject to a formal annual evaluation in the year ended 30 June 2021. In the year
ending 30 June 2022 a formal evaluation will be undertaken, encompassing strategy and culture, budgeting and financial performance, risk
and control processes, management diversity and Board operation. The results of this will be included in the next annual report.
Directors’ Report:
Audit committee report
17
Governance
As Chairman of the Audit Committee, I am pleased to present our report to you for 2021.
Key activities of the Audit Committee
The Audit Committee assists the Board in setting Governance standards and has specific responsibility over financial controls, financial
reporting and audit effectiveness. In 2021, specifically, the Audit Committee has:
•
Conducted a review of the Annual Report and Accounts and Interim Statements to confirm that it was fair, balanced and
understandable;
•
Reviewed the significant financial judgements made in the year;
•
Reviewed the effectiveness of the Group’s internal controls and risk management framework for both financial and non-financial
controls; and
•
Reviewed several of the Group’s current and historical contracts.
During the year the Audit Committee met on two occasions, and I am satisfied that we were presented with papers of good quality and in a
timely fashion.
The Committee comprises only Independent Non-Executive Directors and consists of the Chairman of the Board, Ross Andrews, and
myself.
The integrity of financial reporting
We reviewed the integrity of the financial statements and all formal announcements relating to financial performance during 2021. As part of
the review, we challenged management on whether significant areas of judgement and significant risks were adequately evaluated, reported,
and disclosed.
The Committee has considered in detail the prior year restatements disclosed in note 2.3 to the financial statements. The restatements
predominantly relate to the carrying value of goodwill and other assets and the elimination of client acquisition costs which were incorrectly
capitalised by previous management.
The impact on the Group’s adjusted EBITDA for the year ended 30 June 2020 was (£3,480k) and an impact of (£8,604k) on net assets as at
30 June 2020.
Fair, balanced and understandable
On behalf of the Board, the Committee reviewed the 2021 annual report and audited financial statements to ensure that they provide a fair,
balanced and understandable reflection of the Group, its performance, position and future prospects.
As part of the review, the Committee considered whether:
•
There are any material or sensitive omissions from the narrative;
•
The narrative is a true and balanced reflection of events and performance in the year;
•
There is consistency throughout the Annual Report and Financial Statements; and
•
There is a clear explanation of key performance indicators, their link to performance and strategy and equal prominence of statutory
performance measures.
In the view of the Committee, the Annual Report is fair, balanced and understandable in accordance with the requirements of the UK
Corporate Governance Code.
Directors’ Report:
Audit committee report (continued)
18
InnovaDerma plc Annual Report & Accounts 2021 I Audit committee report
Significant financial estimations and judgements
Issue
Consideration of estimation or judgement
Carrying value of
goodwill
The impairment test for the carrying value of goodwill and acquired intangible assets requires forward looking
value-in-use calculations that involve assumptions and judgements by the management team. The Audit Committee
sought to review these calculations and challenge the assumptions contained within, particularly around future
revenue growth assumptions and discount rate used. The Committee concluded that the impairment review had
been completed in line with the provisions of IAS36 and that management had used a range of sensitivities to stress
tests the models used. The Audit Committee were satisfied with conclusions reached by management.
Capitalisation of
customer lists
Previous management incorrectly capitalised client acquisitions costs, predominately social media marketing costs,
and in doing so did not fully recognise costs within the relevant income statements. The Committee has reviewed
the previous assumptions used in calculating the capitalisation of client acquisition costs and have made the
appropriate prior year adjustments to both earnings and net assets.
Segmental reporting
The Committee reviewed management assumptions when reviewing segmental disclosures. In its review, the Audit
Committee considered the requirements of IFRS 8 (“Operating Segments”) and ensured that they were in line with
what was reviewed by the Chief Operating Decision Makers (the Executive Board). The Committee is satisfied that
the Group’ segment reporting is appropriate.
Adjusted performance
measures (APM’s)
The Committee reviewed the Strategic Report and the financial statements contained within the Annual Report and
Accounts to ensure that APM’s were not given undue prominence over statutory numbers and that adjustments
made to get to the APM’s were both consistent with previous years and that the adjustments gave the reader a
clearer understanding of the underlying performance of the business. The Committee is satisfied that the Accounts
give a balance and fair view of performance and APM’s are presented in a consistent and clear manner, so that
they contribute to the readers overall understanding of the accounts and the business performance.
Major contract review
During the year, management reviewed several current and historic material third-party contracts.
Between October 2017 and August 2019, the Group’s previous management entered a contractual relationship
with Jenepe Limited for a strategic review of the Group’s life science business. A fee of £380k was agreed and
paid by the Group, though management’s review failed to identify any discernable deliverable or benefit resulting
from the contract with Jenepe Limited.
There are no further liabilities in relation to this contract and moreover there is no ongoing relationship between the
Group and Jenepe Ltd.
The effectiveness of internal controls and risk management framework
The Committee’s process for identifying, evaluating and managing risk is being developed and enhanced. During the year, the Directors
completed a ‘stocktake’ of internal control documentation around the Group (financial and non-financial). The committee were satisfied that,
whilst there were inconsistencies in format, each of the principal risks were addressed in the design of the controls.
Being a small Group, we are reliant on the integrity of our people, processes and reporting procedures to ensure the compliance and control
procedures are in place. Moreover, the Audit Committee will continually review our compliance and controls framework. Additionally, we
will look to reduce the risk of compliance on control failures by the introduction of a management self-assessment process which will be
supervised by the Audit Committee.
External auditor
In July 2021 the Group appointed Crowe UK LLP (“Crowe”) as auditors, replacing Elderton Audit UK (“Elderton”) who are based in Perth,
Australia.
In order to maintain the independence of the external auditors, the Board has determined that non-audit work will not be offered to the external
auditors unless there are clear efficiencies and only where such work is permitted under the Financial Reporting Council’s Ethical Standard.
The Audit Committee annually reviews the remuneration received by the auditors for audit services and non-audit work. Their audit and non-
audit fees are set, monitored and reviewed throughout the year (see note 7 of the financial statements).
The Audit Committee has considered the need for a separate internal audit function but due to the size of the Group and procedures in
place to monitor both trading performance and internal controls, it was concluded the costs of an entire separate internal audit department
would outweigh the benefits. The Audit Committee and Board are continually assessing the need for additional assurance procedures within
the Group.
The Committee confirms that there are no contractual obligations which restrict the choice of external auditor.
By order of the Board
Simon Pyper
Chairman of the Audit Committee
20 December 2021
Directors’ Report:
Remuneration committee report
19
Governance
I am pleased to present the Remuneration Committee’s report to you for 2021.
The 2018 Corporate Governance Code recommends that the Remuneration Committee comprises at least three independent Non-
Executive Directors and is chaired by one of these Directors. During the year ended 30 June 2021, the Remuneration Committee consisted
of the Chairman, Ross Andrews, and Rodney Turner. On 16 December 2020, Rodney Turner resigned from the Board and all committees
and Simon Pyper was appointed Chairman of the Remuneration Committee, with Ross Andrews remaining a member of the committee.
Key activities of the Remuneration Committee
•
Reviewing the Group Remuneration Policy, ensuring continued effectiveness.
•
Reviewing salaries for Executive and Non-Executive Directors and senior employees.
•
Review and approval of long-term incentive plans.
•
Approving awards under the Group’s long-term incentive plans.
Advisors to the Remuneration Committee
No third-party advisors assisted or gave guidance to the Remuneration Committee during the year.
Directors’ remuneration policy
The Board is responsible for setting the Group’s policy on Directors’ remuneration and the Remuneration Committee decides on the
remuneration package of each Executive Director. The primary objectives of the Group’s policy on executive remuneration are that it should
be structured to attract and retain executives of a high calibre with the skills and experience necessary to develop the Group successfully
and, secondly, to reward them in a way which encourages the creation of value for the shareholders. The performance measurement of the
Executive Directors and the determination of their annual remuneration package is undertaken by the Remuneration Committee. No Director
is involved in setting their own remuneration.
With regards to Non-Executive Directors’ remuneration is set with regards to comparisons of similar sized businesses with the aim of
attracting and retaining Non-Executive Directors with the appropriate skills and experience. The Remuneration Committee is mindful of the
employment conditions of employees (other than Directors) of the company when setting executive pay but it is not a key determinant.
The views of shareholders and employees were not sought in advance of setting executive remuneration as the costs of doing so for such
a small company would be unduly burdensome. Shareholders are, however, able to demonstrate their support or not for the remuneration
policy at the Annual General Meeting of the Company. The Company intends to move a resolution at the next general meeting to approve
the Directors’ Remuneration Policy.
Directors’ service contracts and letters of appointment
Directors are not required to offer themselves for re-election at each Annual General Meeting but each Director follows best practise and
offers himself for re-election. The Executive Directors have rolling service contracts that are subject to the following notice periods:
•
Blake Hughes, 6 months
•
Andrew Dunderdale, 3 months
The Chairman and Non-Executive Directors are appointed for an initial term of two years and are typically expected to serve three two-year
terms.
Directors’ Report:
Remuneration committee report (continued)
20
InnovaDerma plc Annual Report & Accounts 2021 I Remuneration committee report
Remuneration policy
Executive Directors
Element
Purpose
Operation
Maximum opportunity
Performance metrics
Base salary
To attract and retain
Executive Directors with
the required skills and
experience to deliver
InnovaDerma’s continued
growth strategy
Base salaries are reviewed
on an annual basis with any
changes effective 1 January
each year
There is no maximum salary,
although salary levels are
set to progressively move
towards median levels
for companies of similar
size, operational and
geographical complexity
Base salary levels and
corresponding increases
are based on individual
experience, skills and Group
performance along with
competitiveness against
similar companies
Benefits
To provide market
competitive benefits
Benefits may include
medical cover, critical
life and death in service
insurance. Other benefits
may be awarded as
appropriate and include
relocation
Benefits may vary by
role and individual
circumstances and are
periodically reviewed
Not performance-related
Pensions
Competitive to market
to reward sustained
contribution by Executive
Directors
Contributions to a Director’s
defined contribution pension
scheme as appropriate
Maximum Company
contribution of 10% plus
any agreed salary exchange.
This aligns with the pension
available to InnovaDerma’s
UK workforce
Not performance-related
Annual
performance-
related bonus
To reward and incentivise
based on the achievement
of the budget and other
business-related objectives
Financial and non-financial
performance targets are
set and reviewed by the
Remuneration Committee
For the Chief Executive
Officer, a performance
bonus (maximum of 49% of
base salary) is payable for
achieving agreed financial
targets being budgeted
Adjusted EBITDA for the
financial year
Up to 100% of potential
bonus can be related to
financial performance
criteria based on the budget
approved by the Committee.
A proportion of the potential
bonus can, at the discretion
of the Committee, be
awarded for achieving non-
financial KPIs. Performance
weightings may vary from
year to year
The Committee has
discretion to adjust
formulaic bonus outcomes
to ensure alignment of
pay with the underlying
performance of the business
and personal performance
over the financial year
Share-based
payments
To align Executive Directors
to the delivery of the long-
term strategy of the Group
and provide long-term value
for shareholders
Share options may be
granted to Executive
Directors after a period
of no less than two years
from the previous grant
date, or more frequently by
exception.
The maximum opportunity
is, for any grant of share-
based payments, to the
value of 100% of base
salary for the Executive
Directors.
Share options will vest
subject to the achievement
of performance targets that
are aligned to the long-term
strategy of the Group and
provide long-term value for
shareholders
Governance
21
Non-Executive Directors
Element
Purpose
Operation
Maximum opportunity
Performance metrics
Chairman and Non-
Executive Directors’
fees
To attract and retain
a Chairman and
Independent Non-
Executive Directors with
the required skills and
experience
Paid monthly in arrears
and reviewed each year.
Any reasonable business-
related expenses can be
reimbursed
The Chairman and Non-
Executive Directors’ fees
are determined by relevant
benchmark data
Annual review by the
Board
The Director’s remuneration policy is applicable to current and prospective Executive and Non-Executive Directors.
On a loss of office, the Company will honour the terms of the employee’s service contract. Where an employee has had his contract
terminated by the Company, an ex-gratia payment may also be made (over and above the notice period in the contract) if the Board
considers that appropriate. The amount of any ex-gratia payment will depend on the individual circumstances at the time and be approved
by the Board.
Directors’ remuneration
The remuneration paid to all employees of the Group can be found in note 8 to the consolidated financial statements.
The value of all elements of remuneration received by each Director and former Director was as follows:
Salary
and
fees
£’000
Bonus
£’000
Taxable
benefits
£’000
Pension-
related
benefits
£’000
Total
2021
£’000
Fixed
2021
£’000
Variable
2021
£’000
Total
2020
£’000
Fixed
2020
£’000
Variable
2020
£’000
Ross Andrews
31
–
–
–
31
31
–
26
26
–
Joseph Bayer
111
–
–
8
119
119
–
155
155
–
Kieran Callan
20
–
–
2
22
22
–
131
131
–
Haris Chaudhry
–
–
–
–
–
–
–
128
128
–
Andrew Dunderdale
37
–
–
12
49
49
–
–
–
–
Blake Hughes
120
59
–
12
191
132
59
–
–
–
Rodney Turner
12
–
–
–
12
12
–
22
22
–
Simon Pyper
14
–
–
–
14
14
–
–
–
–
Mark Ward
–
–
–
–
–
–
–
–
–
–
Total
345
59
–
34
438
379
59
462
462
–
Following his appointment as Chairman, Ross Andrews’ fees increased from £29k pa to £40k pa from May 2021.
During the year the salary of the CEO, Blake Hughes, was increased from £170k to £200k pa reflecting a more market appropriate rate.
Furthermore, Blake Hughes’ bonus arrangements were adjusted to reflect his significant contribution in the successful refinancing of the
Group.
Kieran Callan stepped down as Chief Executive Officer and as a Director of the Group with immediate effect on 5 August 2020, by mutual
agreement with the Board and Kieran agreed to be available until 31 August 2020 for any handover and to assist the Board in any relevant
matters. As part of those discussions the Company paid Kieran an ex-gratia payment of £40k in addition to his normal notice period. The
Board approved such payment in line with the Company’s internal policies.
No payments were made in the year that did not adhere to the Remuneration Committee policy.
Executive Directors’ remuneration FY21 outturn
Blake Hughes
Andrew Dunderdale
100
50
0
150
200
250
Maximum
On target
Minimum
Actual
Fixed pay
Annual bonus
132
132
132
132
0
63
53
59
100
50
0
150
200
250
Maximum
On target
Minimum
Actual
Fixed pay
Annual bonus
49
49
49
49
Target assumes discretionary bonus at 50% of maximum for FY21 and successful fundraise in year.
Directors’ Report:
Remuneration committee report (continued)
22
InnovaDerma plc Annual Report & Accounts 2021 I Remuneration committee report
Directors’ shareholdings
The Directors of the Company on 20 December 2021 and at the reporting date, and their interest in the issued ordinary share capital of the
Company as at that date, were as follows:
20 December
2021
30 June
2021
30 June
2020
Ross Andrews
322,290
322,290
94,860
Andrew Dunderdale
24,937
24,937
–
Blake Hughes
128,571
128,571
–
Simon Pyper
71,428
71,428
–
Mark Ward
4,672,277
3,791,990
870,000
Detail of share incentive schemes
Share options outstanding as at the following dates for each Director and former Director serving the Company in the year ended 30 June
2021 were as follows:
20 December
2021
30 June
2021
30 June
2020
Ross Andrews
75,000
75,000
75,000
Joe Bayer
–
–
250,000
Kieran Callan
25,320
25,320
125,000
Andrew Dunderdale
95,500
–
–
Blake Hughes
125,000
–
–
Rodney Turner
–
–
75,000
Simon Pyper
–
–
–
Mark Ward
–
–
–
Details of these share options including date of grant and average share price can be found in the Directors’ Report page 14 and note 25 to
the consolidated financial statements. No share options remain vested but unexercised, and no share options were exercised in the relevant
year.
General meeting
At the general meeting of the Company dated 16 December 2020, the votes cast in respect of directors’ remuneration were as follows:
Votes for
Votes against
Votes withheld
To receive and approve the directors’ remuneration report for the year ended
30 June 2020
99.76%
0.24%
20,963
To approve Directors’ Remuneration Policy
99.48%
0.52%
30,963
By order of the Board
Simon Pyper
Chairman of the Remuneration Committee
20 December 2021
Directors’ Report:
Nomination committee report
23
Governance
The Nomination Committee is responsible for considering and making recommendations to the Board in respect of appointments to the
Board, the Board committees and the chairmanship of the Board committees. The Nomination Committee’s members are the Group’s Non-
Executive Chairman, Ross Andrews (who also acts as the Chair), and Simon Pyper, Independent Non-Executive Director.
The Nomination Committee’s terms of reference deal with such issues as membership, frequency of meetings and the requirements for
quorum and notice procedure. The responsibilities of the Nomination Committee covered in its terms of reference include:
•
review of the Board composition;
•
appointing new Directors;
•
reappointment and re-election of existing Directors;
•
succession planning;
•
taking into account the skills and expertise that will be needed on the Board in the future;
•
reviewing time required from Non-Executive Directors;
•
determining membership of other Board committees; and
•
ensuring external facilitation of the evaluation of the Board.
The Nomination Committee meets at least once a year.
There were three Board appointments during the year, Mark Ward, Blake Hughes and Simon Pyper. Andrew Dunderdale joined the Board
after the reporting date. The recruitment process undertaken for each appointment is summarised below:
Mark Ward
Prior to appointment as a Director, Mark Ward was an existing shareholder. Following a number of conversations with the then Chief Executive
Officer, he approached the Board regarding a Board position having raised concerns regarding the strategic focus of the executive management
team. All the Board members interviewed Mark Ward and when considering his appointment paid particular attention to his strong links to
the consumer and service industries and his wealth of technology and FMCG experience. The Board believed that he would be an important
addition to the Board. As a consequence of his shareholding Mark was appointed as a Non-Independent, Non-Executive Director.
Blake Hughes
The board appointed Spencer Stewart, a leading executive search and consulting firm specialising in the appointment of Chief Executive
roles, to identify a short list of suitable candidates. The Board identified that a successful candidate must have the following qualities.
•
Experience of working in the beauty and skincare sector, ideally with a premium brand, with a focus on sustainability and ethical
production;
•
Strong financial acumen;
•
Customer-centric, with strong commercial skills;
•
Experience of selling to major beauty retailers;
•
Digitally-savvy, with experience of digital marketing, e-commerce platforms and direct-to-consumer sales models; and
•
International experience, with experience of managing a geographically-diverse team.
Following an extensive search process and interview process, a strong short list of potential candidates were identified and presented to the
Board. Whilst Ross Andrews, current Non-Executive Chairman lead the process, all Board members interviewed Blake and played a full part
in the final stages of the process.
Simon Pyper
Knowing that the Board was looking to strengthen its non-executive financial leadership, one of the Company’s major institutional
shareholders made an introduction to Simon Pyper. All members of the Board interviewed Simon and recognised that his strong financial
acumen, his previous experience as a finance director within public companies, and his digital and marketing expertise would complement
the existing skills and experience of the Board.
Andrew Dunderdale
Andrew joined the Group as Finance Director, a non-board position, in February 2021. The key criteria that the Board identified as being
required in a Finance Director were as follows.
•
Technically strong;
•
Commercially astute;
•
Ability to instil financial rigour throughout the Group;
•
Ability to collaborate effectively with executive management; and
•
Previous PLC experience or experience as finance director of a subsidiary companies in a large PLC.
Andrew demonstrated in Board meetings and to the wider organisation that he was able to make a significant positive impact on the
financial disciplines within the business and was promoted the Board in September 2021.
Directors’ Report:
Directors’ responsibility statement
24
InnovaDerma plc Annual Report & Accounts 2021 I Directors’ responsibility statement
The Directors are responsible for preparing the annual report and the Group and parent Company 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”) in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in 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. The Directors are satisfied the annual reports has been
prepared in accordance with the financial reporting framework.
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 parent Company and of their profit or loss for that period. In preparing each of the Group and parent
Company financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
•
make judgements and estimates that are reasonable, relevant and reliable;
•
state whether they have been prepared in accordance with IFRS and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union;
•
assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
•
use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report and a Directors’ Report that
complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Auditor
Each of the persons who is a Director at the date of approval of this annual report confirms that:
•
so far as the Director is aware, there is no relevant audit information of which the Group’s auditor is unaware; and
•
the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit
information and to establish that the Group’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.
Crowe U.K. LLP have expressed their willingness to continue in office as auditor and appropriate arrangements have been put in place for
them to be deemed reappointed as auditor in the absence of an Annual General Meeting.
This report was approved by the board on 20 December 2021 and signed on its behalf.
Blake Hughes
Director
Financial Statements
25
To the members of Innovaderma Plc
Opinion
We have audited the financial statements of Innovaderma plc (the “Parent Company”) and its subsidiaries (the “Group”) for the year ended
30 June 2021, which comprise:
•
the Group statement of comprehensive income for the year ended 30 June 2021;
•
the Group and parent company statements of financial position as at 30 June 2021;
•
the Group and parent company statements of changes in equity for the year then ended 30 June 2021;
•
the Group statement of cash flows for the year then ended 30 June 2021; and
•
the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and in
accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The financial reporting
framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 101 The Financial Reporting Standard applicable in the UK and Republic of
Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2021
and of the Group’s loss for the period then ended;
•
the group financial statements have been properly prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union;
•
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the directors assessment of the group’s and parent company’s ability to continue
to adopt the going concern basis of accounting included:
•
Reviewing management’s financial projections for the Group and parent company for a period of more than 12 months from the date of
approval of the financial statements.
•
Checking the numerical accuracy of management’s financial projections.
•
Challenging management on the assumptions underlying those projections and sensitised them to reduce anticipated net cash inflows
from future trading activities.
Report of the Independent Auditor to the
Members of Innovaderma plc
26
InnovaDerma plc Annual Report & Accounts 2021 I Independent Auditor’s Report
Report of the Independent Auditor to the
Members of Innovaderma plc (continued)
•
Obtained the latest management results post year end 30 June 2021 to review how the Group and parent company are trending
toward achieving the forecast.
•
Performed sensitivity analysis on key inputs of the forecast by calculating the impact of various scenarios and considering the impact
on the group and parent Company’s ability to continue as a going concern in the event that a downward scenario occurs.
•
Assessing the completeness and accuracy of the matters described in the going concern disclosure within the significant accounting
policies as set out in note 2.2.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s and parent company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In relation to the entities reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected
to change the economic decisions of a user of the financial statements.
We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £90,000, based
on 5% of group loss before tax. Materiality for the parent company financial statements was set at £30,000 based on a percentage of net
assets.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial
statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our
evaluation of the specific risk of each audit area having regard to the internal control environment. We determined performance materiality
for the Group financial statements as a whole to be £63,000. Performance materiality for the parent company financial statements was set
at £21,500.
Where considered appropriate performance materiality may be reduced to a lower level, such as for related party transactions and directors’
remuneration.
We agreed with the audit committee to report to it all identified errors in excess of £4,500. Errors below that threshold would also be
reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
We tailored the scope of our audit to ensure that we obtained sufficient evidence to support our opinion on the financial statements as
a whole, taking into consideration the structure of the Group and the Parent Company, the accounting processes and controls and the
industry in which the Group operates.
Financial Statements
27
As Group auditors we carried out the audit of the Company financial statements and, in accordance with ISA (UK) 600, obtained sufficient
evidence regarding the audit of subsidiaries in the United Kingdom, USA, Australia and The Philippines. Subsidiaries were deemed to be
significant to the Group financial statements either due to size or their risk characteristics. Our audit of the group was completed remotely.
Audit work over subsidiaries was performed at materiality levels ranging from £30,000 to £75,000.
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.
This is not a complete list of all risks identified by our audit.
Key Audit Matter
How the scope of our audit addressed the key audit matter
Revenue recognition
Revenue is recognised in accordance with the accounting policy
set out in the financial statements.
We focus on the risk of material misstatement in the recognition
of revenue, as a result of both fraud and error, because revenue
is material and is an important determinant of the group’s
profitability, which as a consequent impact on its share price
performance.
The performance obligations of revenue contracts are satisfied at
the point where goods are delivered to customers, therefore we
assessed that the greatest risk of fraud or error in revenue exists
around the revenue recognised close to the year end date. See
note 2.9 for management’s revenue recognition policy.
•
We assessed that the accounting policy conformed with the
requirements of IFRS15 and then tested its application to a
sample of contracts.
•
We substantively tested a sample of revenue transactions,
agreeing to proof of delivery and cash receipt;
•
We performed cut off testing to ensure revenue is being
recorded in the correct period by substantially testing
transactions around the year end to proof of delivery.
Prior period adjustments
Management has identified a number of separate and inter-linked
prior period errors which have been presented as prior period
adjustments in the consolidated financial statements and also in
the underlying subsidiary entity financial statements.
These items and their presentation have had a material impact on
the Group’s reported statement of comprehensive income and
statement of financial position for the financial year 30 June 2020.
Details of the impact are set out in note 31 to the Group
financial statements and note 2 to the Parent Company financial
statements.
•
We assessed that the accounting treatment adopted
conformed with the requirements of IAS8, tested its
application to the items identified by management
and challenged the judgements which underpinned
management’s treatment of these items.
•
We substantively tested all material components of
identified prior period adjustments and obtained supporting
documentation for the treatment adopted
•
We consulted internally with Technical specialists and also a
senior audit partner independent of the audit team
28
InnovaDerma plc Annual Report & Accounts 2021 I Independent Auditor’s Report
Valuation of intangible assets and goodwill
The Group’s intangible assets comprise of goodwill arising on
acquisition of subsidiaries, intellectual property rights, product
development costs and technology assets.
When assessing the carrying value of goodwill and intangible
assets, management makes judgements regarding the appropriate
cash generating unit, strategy, future trading and profitability and
the assumptions underlying these. We considered the risk that
goodwill and/or other intangible assets were impaired.
See note 12 for further details around management’s impairment
assessment and the key assumptions.
•
We evaluated, in comparison to the requirements set out in
IAS 36, management’s assessment (using discounted cash
flow models) as to whether goodwill and/or other intangible
assets were impaired.
•
We challenged, reviewed and considered by reference to
external evidence, management’s impairment and fair value
models as appropriate and their key estimates, including
the discount rate. We reviewed the appropriateness and
consistency of the process for making such estimates.
•
We obtained a discounted cash flow models supporting
the intangible asset valuation prepared by management’s
experts prepared at the CGU level of the acquired entities.
We challenged the key assumptions into the model, including
the forecast revenue and gross margin, discount rates and
growth rates.
•
We assessed the competence and independence of
management’s experts.
•
We compared cash flow forecasts used in the impairment
review to historical performance, and challenged where
forecasts indicated performance that deviated significantly
from historical performance, in the absence of significant
changes in the business or market environment.
•
Discount rates and terminal growth rates were benchmarked
to externally derived data and our knowledge of sector
performance, to evaluate the reasonableness of these
assumptions.
•
Sensitivity analysis was performed by management on the
key assumptions such as growth, margin and discount rates
to identify those assumptions to which that the goodwill
or intangible asset valuation was highly sensitive. We have
applied further sensitivity to create a worst case scenario and
challenged management on the likelihood of such a scenario
occurring, and on what remedial actions would be taken
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to
enable us to express an opinion on these matters individually and we express no such opinion.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
•
the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
•
the strategic and the Directors’ report have been prepared in accordance with applicable legal requirements.
Report of the Independent Auditor to the
Members of Innovaderma plc (continued)
Financial Statements
29
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the Directors’ report. We have nothing to report in respect of
the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
•
the Parent Company 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.; or
•
a corporate governance statement has not been prepared by the Parent Company
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern and that part of the Corporate Governance
Statement relating to the Parent Company’s compliance with the provisions of the UK Corporate Governance Statement specified for
our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
•
Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified on page 14;
•
Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why the period is
appropriate set out on page 2;
•
Directors’ statement on fair, balanced and understandable set out on page 17;
•
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 10;
•
The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 18; and
•
The section describing the work of the Audit Committee set out on pages 17 to 18.
30
InnovaDerma plc Annual Report & Accounts 2021 I Independent Auditor’s Report
Report of the Independent Auditor to the
Members of Innovaderma plc (continued)
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 24, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below however the primary responsibility for the prevention and
detection of fraud lies with management and those charged with governance of the Company.
•
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and the procedures in place for
ensuring compliance. The most significant identified were the Companies Act 2006 and the UK Corporate Governance Code. Our work
included direct enquiry of the Company Secretary who oversees all legal proceedings, reviewing Board and relevant committee minutes
and inspection of correspondence.
•
As part of our audit planning process we assessed the different areas of the financial statements, including disclosures, for the risk
of material misstatement. This included considering the risk of fraud where direct enquiries were made of management and those
charged with governance concerning both whether they had any knowledge of actual or suspected fraud and their assessment of the
susceptibility of fraud. We considered the risk was greater in areas that involve significant management estimate or judgement. Based
on this assessment we designed audit procedures to focus on the key areas of estimate or judgement, this included specific testing of
journal transactions, both at the year end and throughout the year.
•
We used data analytic techniques to identify any unusual transactions or unexpected relationships, including considering the risk of
undisclosed related party transactions. We substantively tested a sample of transactions identified as high risk through the analytical
techniques based on a number of risk criteria.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may
not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK).
The potential effects of inherent limitations are particularly significant in the case of misstatement resulting from fraud because fraud may
involve sophisticated and carefully organised schemes designed to conceal it, including deliberate failure to record transactions, collusion or
intentional misrepresentations being made to us.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
Following the recommendation of the Audit Committee, we were appointed by the Audit Committee, on 5 July 2021 to audit the financial
statements for the period ending 30 June 2021.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we remain
independent of the Company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
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
Financial Statements
31
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.
Stephen Bullock
Senior Statutory Auditor
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
Date: 20 December 2021
32
InnovaDerma plc Annual Report & Accounts 2021 I Consolidated Statement of Comprehensive Income
Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2021
Note
2021
£’000
2020
(restated1)
£’000
Continuing operations
Revenue
5
10,211
13,212
Cost of sales
(4,421)
(7,241)
Gross profit
5,790
5,971
Marketing expenses
(4,036)
(5,200)
Wages and salaries expenses
(1,731)
(1,888)
Administrative expenses
(1,902)
(2,730)
Impairment of goodwill
–
(1,198)
Loss from operations
6
(1,879)
(5,045)
Finance cost
9
(4)
(1)
Operating loss before tax
(1,883)
(5,046)
Taxation
10
(371)
483
Operating loss after tax
(2,254)
(4,563)
Other comprehensive Income
Exchange income on foreign currency net investments
20
84
Total comprehensive expense for the period
(2,234)
(4,479)
Attributable to:
Owners of the parent
(2,246)
(4,430)
Non-controlling interests
12
(49)
Loss per share
Basic and diluted (£)
11
(0.13)
(0.31)
1 See note 2.3 for a description of the prior year restatement.
The notes on pages 36 to 59 form part of these financial statements.
Financial Statements
33
Consolidated Statement of
Financial Position
As at 30 June 2021
Note
£’000
2021
£’000
£’000
2020
(restated1)
£’000
£’000
2019
(restated1)
£’000
Non-current assets
Goodwill
12
439
439
1,637
Other intangible assets
13
230
124
325
Property, plant and equipment
14
233
149
52
Deferred tax asset
17
–
384
234
902
1,096
2,248
Current assets
Cash and cash equivalents
2,338
1,241
2,043
Inventories
16
1,808
1,275
1,951
Trade and other receivables
18
1,896
1,590
3,176
6,042
4,106
7,170
Current liabilities
Trade and other payables
19
(3,547)
(3,470)
(3,177)
Net current assets
2,495
636
3,993
Total assets less current liabilities
3,397
1,732
6,241
Net assets
3,397
1,732
6,241
Equity
Share capital
20
2,859
1,738
1,738
Share premium account
21
11,193
8,288
8,288
Merger reserve
(721)
(721)
(721)
Foreign exchange reserve
282
262
178
Share-based payment reserve
10
78
–
Accumulated losses
(10,262)
(7,941)
(3,390)
Equity attributable to owners of parent
3,361
1,704
6,093
Non-controlling interest
36
28
148
Total equity
3,397
1,732
6,241
1 See note 2.3 for a description of the prior year restatement.
The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 20 December 2021.
Blake Hughes
Director
Company registration number 09226823
The notes on pages 36 to 59 form part of these financial statements.
34
InnovaDerma plc Annual Report & Accounts 2021 I Consolidated Statement of Changes in Equity
Consolidated Statement of
Changes in Equity
For the year ended 30 June 2021
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Foreign
exchange
reserve
£’000
Share-
based
payment
reserve
£’000
Accumulated
losses
attributable
to owners of
parent
£’000
Equity
attributable
to owners
of parent
£’000
Non-
controlling
interests
£’000
Total
equity
£’000
Balance at 1 July 2019 as
previously reported
1,736
8,288
(721)
(172)
–
1,291
10,422
319
10,741
Restatements
2
–
–
350
–
(4,681)
(4,329)
(171)
(4,500)
Balance at 1 July 2019
(restated1)
1,738
8,288
(721)
178
–
(3,390)
6,093
148
6,241
Loss for the period
–
–
–
–
–
(4,514)
(4,514)
(49)
(4,563)
Exchange difference on translation
of foreign operations
–
–
–
84
–
–
84
–
84
Total comprehensive income
for the year
–
–
–
84
–
(4,514)
(4,430)
(49)
(4,479)
Share-based payment expense
–
–
–
–
78
–
78
–
78
Increase holding in subsidiary
–
–
–
–
–
(37)
(37)
(71)
(108)
Balance at 30 June 2020
(restated1)
1,738
8,288
(721)
262
78
(7,941)
1,704
28
1,732
Loss for the period
–
–
–
–
–
(2,266)
(2,266)
12
(2,254)
Exchange difference on translation
of foreign operations
–
–
–
20
–
–
20
–
20
Total comprehensive income
for the year
–
20
–
(2,266)
(2,246)
12
(2,234)
Issue of new shares
1,121
3,379
–
–
–
–
4,500
–
4,500
Issue costs deducted from equity
–
(474)
–
–
–
–
(474)
–
(474)
Share-based payment credit
–
–
–
–
(68)
–
(68)
–
(68)
Increase holding in subsidiary
–
–
–
–
–
(55)
(55)
(4)
(59)
Balance at 30 June 2021
2,859
11,193
(721)
282
10
(10,262)
3,361
36
3,397
1 See note 2.3 for a description of the prior year restatement.
Financial Statements
35
Consolidated Statement of Cash Flows
For the year ended 30 June 2021
Note
£’000
2021
£’000
£’000
2020
(restated1)
£’000
Net cash (used in)/inflow from operating activities
24
(2,559)
(601)
Investing activities
Consideration paid for increased shareholding of subsidiary
(59)
(109)
Purchases of property, plant and equipment
(114)
(108)
Capitalisation of development costs
(220)
(82)
Net cash used in investing activities
(393)
(299)
Financing activities
Net proceeds on issue of shares
3,526
–
Proceeds from borrowings
500
–
Interest paid
(4)
(1)
Net cash generated/(used) from financing activities
4,022
(1)
Net increase/(decrease) in cash and cash equivalents
1,070
(901)
Cash and cash equivalents at beginning of year
1,241
2,043
Effect of foreign exchange rate changes
27
99
Cash and cash equivalents at end of year
2,338
1,241
1 See note 2.3 for a description of the prior year restatement.
36
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements
1. General information
InnovaDerma plc is a Group incorporated and domiciled in England and Wales under the Companies Act 2006. The address of its registered
office is 27 Old Gloucester Street, London, United Kingdom, WC1N 3AX.
The principal activity of the Group is the development, distribution and sale of skincare, haircare, beauty and life science products in the
markets that it operates.
2. Accounting policies and critical accounting judgements
2.1
Basis of preparation
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the
Group operates. Foreign operations are included in accordance with the policies set out in note 2.8.
The Group’s financial information has been prepared in accordance with International Financial Reporting Standards (“IFRS”) in accordance
with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, and on a basis consistent with that
adopted in the previous year.
New standards that have been adopted in the annual financial statements for the year ended 30 June 2021, but have not had a significant
effect on the Group are:
•
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment –
Definition of Material)
•
IFRS 3 Business Combinations (Amendment – Definition of Business)
•
Revised Conceptual Framework for Financial Reporting
The Board are evaluating the impact of the adoption of all other standards, amendments and interpretations but do not expect them to have
a material impact on the Group operation or results.
Certain standards, amendments to, and interpretations of, published standards have been published that are mandatory for the Group’s
accounting years beginning on or after 1 January 2021 or later years and which the Group has decided not to adopt early:
•
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) (effective for periods commencing on or after 1 January
2022);
•
IFRS 17: Insurance Contracts (effective for periods commencing on or after 1 January 2023);
•
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) (effective for periods commencing on or after 1
January 2022);
•
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41) (effective for periods
commencing on or after 1 January 2022); and
•
References to Conceptual Framework (Amendments to IFRS 3) (effective for periods commencing on or after 1 January 2022).
The above listed changes are not anticipated to have a material impact on the Group’s financial statements.
The financial statements have been prepared on the historical cost basis modified for assets recognised at fair value on acquisition.
Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies
adopted are set out below.
2.2
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion the Directors have considered
the financial position of the Group, its cash, liquidity position and borrowing facilities together with its forecasts and projections for 12
months from the approval date that take into account reasonably possible changes in trading performance. The going concern basis of
accounting has therefore continued to be adopted in preparing the financial statements.
The Group has taken into account the uncertainty due to the economic impact of COVID-19, and has made prudent forecasts, incorporating
mitigating actions, based on current knowledge. It has also secured a CBILS loan of £950k, drawn down in full on 2 July 2021.
2.3
Prior year restatement
The Group has restated the prior year comparatives to correct the following prior period accounting errors:
•
To expense marketing costs incorrectly capitalised totalling £1,249k for the year ended 30 June 2018, £984k for the year ended 30
June 2019, and £840k for the year ended 30 June 2020.
•
Write down inventory due to incorrect allocation of cost of sales by £413k in the year ended 30 June 2019 and by £1,428k in the year
ended 30 June 2020.
•
Reclassify Prolong intellectual property of £1,423k, prior to impairment, to goodwill to reflect the underlying nature of the April 2017
acquisition of Ergon Medical Limited.
Financial Statements
37
•
Impairment of goodwill on acquisitions of £2,566k relating to Leimo / Grow Lase, Prolong and Stevie K, to correctly reflect note 2.6.
•
An amortisation charge relating to intangible assets, totalling £489k for the year ended 30 June 2018, £235k for the year ended
30 June 2019, and £215k for the year ended 30 June 2020, to correctly reflect note 2.11.
•
£701k reduction in goodwill of Skinny Tan, due to incorrect accounting for step acquisition of Skinny Tan Pty Ltd.
•
Register accruals totalling £392k for audit, tax and legal fees and bonus payments predominantly for the year ended 30 June 2020.
•
Recognise £140k expense relating to PAYE and VAT payments in the year ended 30 June 2019.
•
Recognise expense totalling £109k incorrectly recorded as prepayments in the year ended 30 June 2018.
•
Register £60k bad debt provision relating to the year ended 30 June 2020.
•
Recognise £78k share-based payment expense in the statement of changes in equity for the year ended 30 June 2020, reallocated
from the statement of comprehensive income.
•
£410k intercompany loan exchange movements reallocated from foreign exchange reserve to administrative expenses.
•
Recognise corporation tax charges for the year ended 30 June 2017 of £217k and for the year ended 30 June 2018 of £118k.
•
Derecognise a deferred tax asset of £402k due to uncertainty of sufficient future profits in those subsidiaries.
•
Reduce corporation tax liability by £1,387k as a result of the above-listed adjustments.
•
Reduce the non-controlling interest by £181k as a result of the above-listed adjustments.
These changes have had a material impact on the Group’s reported statement of comprehensive income and statement of financial position
for the financial year 30 June 2020. Please refer to note 31 for further details of the restatement.
2.4
Basis of consolidation
The consolidated financial statements incorporate the results and net assets of the Group and entities controlled by the Group (its
subsidiaries) made up to 30 June each year. Control is achieved where the Group has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired during the year are included in the Consolidated Statement of Comprehensive Income from the
effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the results of
subsidiaries to bring the accounting policies used in line with those used by the Group. All intra-group transactions, balances, income and
expenses, and profits are eliminated on consolidation.
2.5
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 assumed (including contingent liabilities) is recognised, subject to certain limited exceptions.
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.
2.6
Goodwill
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of:
•
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 Group’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. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a subsequent period.
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.
2.7
Non-controlling interests
The interest of non-controlling shareholders in subsidiary companies (holdings of 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.
38
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
2.8
Foreign currencies
The individual results of each Group company are presented in the currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company
are expressed in pounds sterling, which is the functional currency of the Group, and the presentation currency for the consolidated financial
statements.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated
at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.
Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are
recognised directly in other comprehensive income and are credited/(debited) to the foreign exchange reserve.
2.9
Revenue recognition
Revenue represents the value, net of sales taxes, of goods sold to customers. Revenue is recognised at a point in time when a product
has been delivered to the customer and control has transferred to the customer. Revenue on sales to retail customers is recognised upon
receipt of a valid PO and successful delivery to the customer warehouse; revenue on direct-to-consumer (“DTC”) sales is recognised upon
successful delivery to the customer. The Company’s revenue is derived from fixed price unit prices and therefore the amount of revenue to
be earned from each transaction is determined by reference to those fixed prices.
2.10 Taxation
Tax expense represents the total of tax currently payable and deferred tax charge.
i)
Current tax
The tax expense, or credit, is chargeable on the taxable loss for the year. Taxable loss differs from operating loss before tax due to items not
tax deductible. The current tax charges are calculated using tax rates that have been enacted or substantively enacted at the reporting date.
ii)
Deferred tax
Deferred tax assets and liabilities are calculated at the tax rates expected to be effective at the time the timing differences are expected to
reverse. Deferred tax assets and liabilities arise on timing differences between the recognition of gains and losses in the financial statement
and recognition in the tax computation.
A net deferred tax asset is recognised only if it can be regarded as more likely than not that there will be suitable taxable profits from which
future reversal of the underlying timing differences can be deducted.
Deferred tax assets and liabilities are offset where the Group has a right to offset the current tax assets and liabilities, and the deferred tax
assets and liabilities relate to taxes levied by the same tax authority.
2.11 Intangible assets
All intangible assets are stated at their amortised cost or fair value at initial recognition less any provision for impairment. Amortisation is
calculated at rates estimated to write off the cost of the relevant assets on a straight-line basis over their expected useful lives. It is applied
at the following rates:
Intellectual property rights
3 years
Product development costs
3 years
Capitalised software
3 years
An intangible asset shall be derecognised on disposal, or when no future economic benefits are expected from its use or disposal.
2.12 Research and development
Research expenditure is written off as incurred. Expenditure on internally developed products is capitalised if it can be demonstrated that:
•
It is technically feasible to development product for it to be available for use or sold;
•
Adequate technical, financial and other resources are available to complete the development;
•
There is an intention to complete and sell or use the product;
•
There is an ability for the Group to sell the product;
•
Sale of the product will generate future economic benefits; and
•
Expenditure on the project can be measured reliably.
Costs are capitalised as intangible assets unless physical assets, such as tooling, exist and are classified as property, plant and equipment.
Financial Statements
39
2.13 Property, plant and equipment
Property, plant and equipment are initially recorded at cost. Once the asset is available for use, depreciation is calculated at rates estimated
to write off the cost of the relevant assets on a straight-line basis over their expected useful economic lives. It is applied at the following
rates:
Computer equipment
3 years
Office equipment
3 years
Fixtures and fittings
3 years
2.14 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, and other direct costs, 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.
Provisions are made for obsolete, slow-moving or defective items where appropriate.
2.15 Provisions for liabilities
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than
not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Such provisions are
measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting
date. Provisions are not recognised for future operating losses.
2.16 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of on entity and a financial liability or equity instrument of another.
(a)
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost or fair value through profit and loss.
The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for managing them. The Group initially measures a financial asset at its fair value plus, in the
case of a financial asset not at fair value through profit or loss, transaction costs.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The
business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified as follows:
•
Financial assets at amortised cost (debt instruments)
•
Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions
are met:
•
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows;
and
•
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest rate (“EIR”) method and are subject to impairment.
Interest received is recognised as part of finance income in the Statement of Comprehensive Income. Gains and losses are recognised in
profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost include trade and other
receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Group of similar financial assets) is derecognised when:
•
The rights to receive cash flows from the asset have expired; or
•
The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows
in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially
all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
40 InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
Impairment of financial assets
The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair value. For trade and other
receivables due in less than 12 months, the Group applies the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore,
the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each
reporting date.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group
may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the
outstanding contractual amounts in full before taking into account any credit enhancements held by the Group.
A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when
past due for more than one year and not subject to enforcement activity. At each reporting date, the Group assesses whether financial
assets carried at amortised cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.
(b) Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, or
payables as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net
of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables and loans.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose
of repurchasing in the near term. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other
comprehensive income.
Loans and borrowings and trade and other payables
After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost
using the EIR method. Gains and losses are recognised in the Statement of Comprehensive Income when the liabilities are derecognised, as
well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the
EIR. The EIR amortisation is included as finance costs in the statement of comprehensive income.
This category generally applies to trade and other payables.
Derecognition
A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Comprehensive Income.
2.17 Share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date and is expensed on a straight-line basis over the vesting period, usually three years. In accordance with IFRS
2, from a single entity perspective, InnovaDerma plc recognises an increase in investment and corresponding increase in equity to represent
the settlement. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 25.
At each statement of financial position date, the Group revises its estimate of the number of equity instruments expected to vest as a result
of the effect of non-market-based vesting conditions and taking account of the average time in employment across the year. The impact of
the revision of the original estimates, if any, is recognised in the consolidated statement of comprehensive income such that the cumulative
expense reflects the revised estimate, with a corresponding adjustment to the consolidated statement of changes in equity.
2.18 Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash at bank held by the Group.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual
results may differ from these estimates.
Financial Statements
41
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision
affects both current and future periods.
The following are the critical judgements that the Directors have made in the process of applying the Group’s accounting policies and that
have the most significant effect on the amounts recognised in the financial statements.
Deferred tax asset recoverability
A deferred tax asset is recognised only if it can be regarded as more likely than not that there will be suitable taxable profits from which
future reversal of the underlying timing differences can be deducted. Management exercise judgement in determining whether suitable
taxable profits are likely for the relevant subsidiaries of the Group on a timely basis. The review is conducted using the subsidiaries’ recent
forecasts and future growth plans.
Impairment reviews
Management conducts annual impairment reviews of the Group’s non-current assets on the Group consolidated Statement of Financial
Position. This includes a review of goodwill annually, of development costs where IAS 36 requires it, and other assets as the appropriate
standards prescribe. Any impairment review is conducted using the Group’s future growth targets regarding its key markets. Sensitivities are
applied to the growth assumptions to consider any potential long-term impact of current economic conditions, such as the impact caused
by the COVID-19 pandemic. Provisions are made where the recoverable amount is less than the current carrying value of the asset. Further
details as to the estimation uncertainty and the key assumptions are set out in note 12.
Research and development
As described in note 2.12, Group expenditure on new product development activities is capitalised if it meets the criteria as per IAS 38.
Management have exercised and applied judgement when determining whether the criteria of IAS 38 is satisfied in relation to development
costs. As part of this judgement process, management establish the future economic benefit relating to the product or process, evaluate
the operational plans to complete the product development and establish where the development is positioned on the Group’s product
development road map and assess the costs against IAS 38 criteria. This process involves input from the operational, financial and
commercial functions and is based upon detailed project cost analysis of both time and materials.
4. Operating segments
The Group derives revenue from the sale of skin and beauty, haircare and life science products. The income streams are all derived from the
utilisation of these products which, in all aspects except details are revenue, are reviewed and managed together within the Group and as
such are considered to be only one segment.
A geographical analysis of the revenue from the Group’s customers, by destination, is as follows:
2021
£’000
2020
(restated)
£’000
United Kingdom
7,919
10,833
United States of America
1,151
1,613
Asia Pacific
1,141
766
10,211
13,212
A geographical analysis of the net current assets from the Group, by location, is as follows:
2021
£’000
2020
(restated)
£’000
United Kingdom
1,860
188
United States of America
240
215
Asia Pacific
395
233
2,495
636
42
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
5. Revenue
The Group’s revenues from products and services were as follows:
2021
£’000
2020
(restated)
£’000
Skin and beauty products
9,610
11,966
Haircare products
440
980
Life science devices
161
266
10,211
13,212
6. Loss from operations
Loss before tax for the year has been arrived at after (crediting)/charging:
2021
£’000
2020
(restated)
£’000
Depreciation
35
11
Amortisation
116
281
Impairment of goodwill
–
1,198
Net foreign exchange losses/(gains)
140
632
Cost of inventories recognised as expense
2,918
5,371
Non-recurring items including impairments, abortive and restructuring
210
–
Share-based payment expense
(68)
78
Directors’ remuneration (see page 21)
438
462
Staff costs (see note 8)
1,731
1,888
Adjusted EBITDA
Adjusted EBITDA has been arrived at after accounting for:
2021
£’000
2020
(restated)
£’000
Operating loss before tax
(1,883)
(5,046)
Depreciation
35
11
Amortisation
116
281
Impairment of goodwill
–
1,198
Foreign exchange losses/(gains) on intercompany loans
135
123
Non-recurring items including impairments, abortive and restructuring
210
–
Share-based payment (credit)/expense
(68)
78
Adjusted EBITDA
(1,455)
(3,355)
Financial Statements
43
7. Auditor’s remuneration
Fees payable to the Group’s auditors and their associates, for services to the Group, were as follows:
2021
£’000
2020
(restated)
£’000
Fees payable to the company’s auditors for the audit of the
company and its subsidiaries pursuant to legislation
80
57
Fees payable to the company’s auditors for the other assurance services
36
–
Fees payable to the company’s former auditors for the audit of the
company and its subsidiaries pursuant to legislation
–
35
Fees payable to the company’s former auditors for the tax compliance services
–
3
116
95
Fees of £36k (2020: nil) were charged by Crowe UK LLP, prior to their appointment as auditor, in relation to the Company prospectus and
fundraise in the year.
8. Staff costs
The average monthly number of employees, excluding Non-Executive Directors, was as follows:
2021
Number
2020
Number
Management
3
5
Other employees
35
35
38
40
The gender split of employees was as follows:
Number of
Men
Number of
Women
Management
3
–
Other employees
15
20
18
20
Staff costs for all employees during the year, including Non-Executive Directors, were as follows:
2021
£’000
2020
(restated)
£’000
Wages and salaries
1,590
1,607
Social security costs
98
79
Pension scheme contributions
111
124
Share-based payment expense
(68)
78
1,731
1,888
Remuneration of key management, comprising Executive Directors and Non-Executive Directors, during the year was as follows:
2021
£’000
2020
£’000
Wages and salaries
404
432
Social security costs
24
21
Pension scheme contributions
34
30
Share-based payment expense
(68)
78
394
561
Details of Directors’ remuneration are set out in the Remuneration Committee Report on pages 19 to 22.
44
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
9. Finance costs
2021
£’000
2020
£’000
Interest on bank overdrafts, loans and borrowings
4
1
4
1
10. Taxation
Analysis of tax (charge) / credit in the year
2021
£’000
2020
(restated)
£’000
Current tax:
UK corporation tax on loss in the year
–
–
Adjustment in respect of previous periods
–
109
Foreign taxes paid
(1)
–
Total current tax
(1)
109
Deferred tax:
Origination and reversal of timing differences
–
–
Adjustment in respect of previous periods
(370)
374
Total deferred tax
–
374
Total current tax
(371)
483
Factors affecting tax (charge) / credit for the year:
2021
£’000
2020
(restated)
£’000
Operating loss before tax
(1,883)
(5,046)
Operating loss before tax multiplied by standard rate of corporation tax in the UK 19.0% (2020: 19.0%)
358
959
Effects of:
Expenses not deductible for tax purposes
33
(398)
Deferred tax not recognised
(682)
(226)
Remeasurement of deferred tax
108
–
Adjustments to tax charge in respect of prior periods
(112)
268
Effects of overseas tax rates
(74)
98
Losses carried back
–
(266)
Other adjustments
(2)
48
Total tax (charge) / credit for the year
(371)
483
Financial Statements
45
11. Losses per share
2021
£’000
2020
(restated)
£’000
Losses for the purposes of basic and diluted losses per share being net losses attributable to owners of
the Group
2,246
4,430
2021
Number
2020
Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted losses per share
17,449,621
14,496,633
Loss per share
2021
£
2020
(restated)
£
Basic and diluted
(0.13)
(0.31)
IAS 33 requires presentation of diluted EPS when a Group could be called upon to issue shares that would decrease earnings per share
or increase the loss per share. For a loss-making Group with outstanding share options, the net loss per share would be decreased by the
exercise of options. Therefore, as per IAS33:36, the anti-dilutive potential ordinary shares are disregarded in the calculation of diluted EPS.
12. Goodwill
£’000
Cost
At 1 July 2019
1,637
Additions
–
At 30 June 2020
1,637
Additions
–
At 30 June 2021
1,637
Accumulated impairment
At 1 July 2019
–
Impairment in year
(1,198)
At 30 June 2020
(1,198)
Impairment in year
–
At 30 June 2021
(1,198)
Carrying amount
At 1 July 2019
1,637
At 30 June 2020
439
At 30 June 2021
439
46
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit
from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated as follows:
Goodwill
£’000
CGU
Skinny Tan
214
Prolong
1,423
Total
1,637
The goodwill arose on the acquisition of Skinny Tan in the period ended 30 June 2015 and on the acquisition of Prolong in the year ended
30 June 2017. Goodwill represents the excess of the fair value of the consideration given over the fair value of the identifiable assets and
liabilities acquired.
Impairment tests
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired, by comparing
the carrying value of the goodwill to its value in use on a discounted cash flow basis. In undertaking the impairment test, management
considered both internal and external sources of information.
The Group tests intangible assets with finite lives for impairment if an indicator exists. The Board considers the potential impact of COVID-19
on the future prospects of the business to be an indicator of impairment and has carried out an impairment test by comparing the carrying
value of each CGU to its value in use on a discounted cash flow basis.
Forecast cash flows
Management have prepared cash flow forecasts for 5 years for each CGU on the basis of estimated sales and relevant costs for the period.
These cash flows are based on the useful economic life of the ‘know how’, which is considered to be the essential asset.
The key assumptions to the value in use calculations are set out below:
•
Discount rates. The interest rate applied to the CBILS loan, drawn down after the reporting date, is base rate plus 3.02%, therefore
management have deemed 3.12% a relevant figure to use for cost of capital.
•
Growth rates. Management have assumed a growth rate of sales and costs of between 3% and 5%, dependent on the brand, the
territory in which sales are forecast, and the probable inflationary pressures in those territories.
Financial Statements
47
13. Other intangible assets
Intellectual
property
rights
£’000
Product
development
costs
£’000
Capitalised
software
£’000
Total
£’000
Cost
At 1 July 2019
123
580
168
871
Additions
–
82
–
82
Disposals
–
–
–
–
Exchange differences
–
–
–
–
At 30 June 2020
123
662
168
953
Additions
–
97
123
220
Disposals
(123)
(576)
–
(699)
Exchange differences
–
–
–
–
At 30 June 2021
–
183
291
474
Amortisation
At 1 July 2019
(82)
(439)
(25)
(546)
Charge for the year
(41)
(162)
(78)
(281)
On disposals
–
–
–
–
Exchange differences
–
–
(2)
(2)
At 30 June 2020
(123)
(601)
(105)
(829)
Charge for the year
–
(48)
(68)
(116)
On disposals
123
576
–
699
Exchange differences
–
–
2
2
At 30 June 2021
–
(73)
(171)
(244)
Carrying amount
At 1 July 2021
–
110
120
230
At 30 June 2020
–
61
63
124
At 30 June 2019
41
141
143
325
The Group amortises capitalised development costs on a straight-line basis over a period of 3 years, rather than against product sales
directly relating to the development expenditure, as this is estimated to be its useful economic life. Provision is made for any impairment.
The disposals in the year ended 30 June 2021 represent intellectual property and development costs relating to brands which are no longer
active and for which the Group expects no further sales.
The amortisation charge on intangible assets is included in administrative expenses in the consolidated income statement.
48
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
14. Property, plant and equipment
Computer
equipment
£’000
Office
equipment
£’000
Fixtures
and
fittings
£’000
Total
£’000
Cost or valuation
At 1 July 2019
80
9
116
205
Additions
108
–
–
108
Disposals
–
–
–
–
Exchange differences
–
–
–
–
At 30 June 2020
188
9
116
313
Additions
114
–
–
114
Disposals
(30)
(4)
(116)
(150)
Exchange differences
5
–
–
5
At 30 June 2021
277
5
–
282
Accumulated depreciation
At 1 July 2019
(35)
(2)
(116)
(153)
Charge for the year
(9)
(2)
–
(11)
On disposals
–
–
–
–
Exchange differences
–
–
–
–
At 30 June 2020
(44)
(4)
(116)
(164)
Charge for the year
(31)
(4)
–
(35)
On disposals
31
4
116
151
Exchange differences
(1)
–
–
(1)
At 30 June 2021
(45)
(4)
–
(49)
Carrying amount
At 30 June 2021
232
1
–
233
At 30 June 2020
144
5
–
149
At 30 June 2019
45
7
–
52
Financial Statements
49
15. Subsidiaries
A list of the subsidiaries, including the name, country of incorporation, and proportion of ownership interest is given in note 4 to the
Company’s financial statements.
16. Inventories
2021
£’000
2020
(restated)
£’000
Work in progress
72
26
Finished goods
1,736
1,249
1,808
1,275
17. Deferred tax asset
2021
£’000
2020
(restated)
£’000
Origination and reversal of timing differences
–
384
–
384
In the year ended 30 June 2021, deferred tax assets of £384k arising on accumulated losses were derecognised (2020 restated: nil) due to
uncertainty of sufficient future profits in those subsidiaries.
The total unrecognised deferred tax balance at 30 June 2021 is £1,830k (2020 restated: £1,200k).
18. Trade and other receivables
2021
£’000
2020
(restated)
£’000
Trade receivables
1,530
1,092
Prepayments
200
307
Contract assets
45
–
Corporation tax
95
95
Social security and other taxes
19
49
Other debtors
7
47
1,896
1,590
Contracts assets represent timing difference between cash receipt and order fulfilment from direct-to-consumer (“DTC”) sales at the
reporting date.
Sensitivity analysis on foreign currency risk arising on trade receivables denominated in currencies other than their function currency can be
found in note 27. The maximum exposure to credit risk for trade receivables at the reporting date, by currency, was as follows:
2021
£’000
2020
£’000
£ Sterling
1,501
998
United States dollar
–
14
Australian dollar
29
80
Philippine Peso
–
–
1,530
1,092
Trade receivables disclosed above are classified as financial assets at amortised cost.
Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer’s credit quality and
defines credit limits by customer.
The Group does not hold any collateral or other credit enhancements over any of its trade receivables, with the exception of stock recovered
from customers in respect of the doubtful debts disclosed below.
50
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
Ageing of past due but not credit impaired receivables at the statement of financial position date was:
2021
£’000
2020
(restated)
£’000
Current
919
565
31-60 days
431
447
61-90 days
149
2
91-120 days
18
2
121+ days
13
76
1,530
1,092
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the
date credit was initially granted up to the reporting date.
The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value The Group’s bad
debt provision at the reporting date was £47k (2020 restated: £50k).
19. Trade and other payables
2021
£’000
2020
(restated)
£’000
Trade payables
2,247
2,239
Accruals and deferred income
606
457
Social security and other taxes
604
676
Other creditors
90
98
3,547
3,470
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit
period taken for trade purchases is 40 days. For all suppliers, no interest is charged on the trade payables. The Group has financial risk
management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
Sensitivity analysis on foreign currency risk arising on trade payables denominated in currencies other than their function currency can be
found in note 27. The maximum exposure to foreign currency risk for trade payables at the reporting date, by currency, was as follows:
2021
£’000
2020
£’000
£ Sterling
1,881
1,823
United States dollar
138
218
Australian dollar
228
198
Philippine Peso
–
–
2,247
2,239
The Directors consider that the carrying amount of trade payables approximates to their fair value.
20. Share capital
£’000
Authorised, allotted, called up and fully paid:
Balance at 1 July 2019:
14,496,633 Ordinary shares of EUR 0.10 each
1,738
Issued in the Year:
nil Ordinary shares of EUR 0.10 each
–
Balance at 30 June 2020:
14,496,633 Ordinary shares of EUR 0.10 each
1,738
Issued in the Year:
12,878,040 Ordinary shares of EUR 0.10 each
1,121
Balance at 30 June 2021:
27,374,673 Ordinary shares of EUR 0.10 each
2,859
Financial Statements
51
21. Share premium account
£’000
Balance at 1 July 2019
8,288
Balance at 30 June 2020
8,288
Premium arising on issue of equity shares
3,379
Expenses arising on issue of equity shares
(474)
Balance at 30 June 2021
11,193
22. Reserves
Full details of movements in reserves are set out in the consolidated statement of changes in equity on page 34. The following describes the
nature and purpose of each reserve within owners’ equity:
Reserve
Description and purpose
Share premium
Amount subscribed for share capital in excess of nominal value.
Merger reserve
Difference between consideration transferred and nominal value of share capital on 2014
acquisition of InnovaDerma AUD & NZ Pty Ltd, InnovaDerma International Limited, InnovaDerma
NZ Limited and ID Philippines, Inc.
Foreign exchange reserve
Net exchange difference recognised on translation of retained earnings of non-UK trading entities
at the beginning and end of the period.
Share-based payment reserve
Cumulative charge relating to share-based payments issued to employees.
Accumulated losses
Cumulative net gains and losses attributable to shareholders.
Non-controlling interests
Cumulative net gains and losses attributable to non-controlling interests.
52
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
23. Non-controlling interests
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material to the Group. The
amounts disclosed for each subsidiary are before intercompany eliminations.
Summarised balance sheet
SkinnyTan UK Limited
Skinny Tan Pty Ltd
2021
£’000
2020
(restated)
£’000
2021
£’000
2020
(restated)
£’000
Current assets
5,325
4,282
307
72
Current liabilities
(3,724)
(2,686)
(1,058)
(1,095)
Net current assets
1,601
1,596
(751)
(1,023)
Non-current assets
44
49
–
–
Non-current liabilities
–
–
–
–
Non-current net assets
44
49
–
–
Net assets
1,645
1,645
(751)
(1,023)
Accumulated NCI
66
74
(30)
(46)
Summarised statement of comprehensive income
SkinnyTan UK Limited
Skinny Tan Pty Ltd
2021
£’000
2020
(restated)
£’000
2021
£’000
2020
(restated)
£’000
Revenue
7,365
10,567
599
407
Profit/(loss) for the year
1
(1,167)
273
(2)
Other comprehensive income
–
–
–
–
Total comprehensive income
1
(1,167)
273
(2)
Profit allocated to NCI
0
(49)
12
(0)
Dividends paid to NCI
–
–
–
–
Summarised cash flows
SkinnyTan UK Limited
Skinny Tan Pty Ltd
2021
£’000
2020
(restated)
£’000
2021
£’000
2020
(restated)
£’000
Cash flows from operating activities
800
(564)
34
1
Cash flows from investing activities
(31)
(64)
–
–
Cash flows from financing activities
–
–
–
–
Net increase/(decrease) in cash and cash equivalents
769
(628)
34
1
Financial Statements
53
24. Notes to the cash flow statement
2021
£’000
2020
(restated)
£’000
Operating loss before tax
(1,883)
(5,046)
Adjustments for:
Finance costs
4
1
Depreciation
35
11
Amortisation
116
281
Share-based payment expense
(68)
78
Impairment of intangible asset
–
1,198
Operating cash flows before movements in working capital
(1,796)
(3,477)
Decrease / (increase) in inventories
(533)
676
Decrease in receivables
(306)
1,910
(Decrease) / increase in payables
77
293
Cash used in operations
(2,558)
(598)
Income taxes received / (paid)
(1)
(3)
Net cash used in operating activities
(2,559)
(601)
Cash and cash equivalents
2021
£’000
2020
£’000
£ Sterling
2,086
813
United States dollar
191
403
Australian dollar
58
20
Philippine Peso
3
5
2,338
1,241
Sensitivity analysis on foreign currency risk arising on cash and cash equivalents denominated in currencies other than their function
currency can be found in note 27.
Cash and cash equivalents comprises cash at bank held by the Group. The carrying amount of these assets approximates their fair value.
25. Share-based payments
Equity-settled share option scheme
The Group has a share option scheme for key management, for which some options are EMI qualifying. Options are exercisable at a fixed
price and the vesting period is three years. If the options remain unexercised after a period of ten years from the date of grant the options
expire. Options are forfeited if the employee leaves the Group before the options vest. If an employee leaves the Group after the option
vests, the employee has 90 days in which to exercise the option. If not exercised, the option will lapse at the end of the 90-day period.
Details of the share options outstanding during the year are as follows:
2021
Number
of share
options
2021
Weighted
average
exercise
price (£)
2020
Number
of share
options
2020
Weighted
average
exercise
price (£)
Outstanding at beginning of the year
525,000
1.20
–
n/a
Granted during the year
–
n/a
525,000
1.20
Exercised during the year
–
n/a
–
n/a
Forfeited during the year
424,680
1.20
–
n/a
Outstanding at the end of the year
100,320
1.20
525,000
1.20
Exercisable at the end of the year
–
n/a
–
n/a
54
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
The options outstanding at 30 June 2021 had a weighted average exercise price of £1.20 (2020: £1.20) and a weighted average remaining
contractual life of 9 years (2020: 10 years). The range of exercise prices for outstanding share options at 30 June 2021 was £1.20 to £1.20
(2020: £1.20 to £1.20).
In 2021, the aggregate of the estimated fair values of the options granted is £10k (2020: £78k). A share-based payment credit of £68k was
generated in the year (2020: £78k charge) due to options forfeited in the year.
The inputs into the Black-Scholes model are as follows:
2021
2020
Weighted average share price
0.60
0.60
Weighted average exercise price
1.20
1.20
Expected volatility
65%
65%
Expected life
3 years
3 years
Risk-free rate
0.7%
0.7%
Expected dividend yields
0.0%
0.0%
Expected volatility was determined by calculating the historical volatility of similar listed businesses over the previous three years. The
expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions, and behavioural considerations.
26. Retirement benefit schemes
The Group operates defined contribution retirement benefit schemes for all employees. The charge for the year relating to the Group defined
contribution schemes was £111k (2020: £124k). Contributions of £15k remained unpaid as at 30 June 2021 (2020: £4k).
27. Financial instruments
The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s financial performance. The
Group’s financial instruments comprise cash and cash equivalents and various items such as trade payables and trade receivables that arise
directly from its operations. The Group is exposed through its operations to the following risks:
•
Capital risk
•
Foreign currency risk
•
Credit risk
•
Interest rate risk
•
Liquidity risk
Capital risk
The Group manages its capital to ensure that each entity in the Group will be able to continue as a going concern whilst maximising
the return to shareholders through the optimisation of the balance between debt and equity. The Group’s overall strategy has remained
unchanged between 2020 and 2021.
The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the Group, comprising
issued capital, reserves and accumulated losses as disclosed in notes 20 to 22.
The Group is not subject to any externally imposed capital requirements.
The Group’s primary source of capital is equity. By pricing products and services commensurate with the level of risk and focusing on the
effective collection of cash from customers, the Group aims to maximise revenues and operating cash flows.
The Group considers that the current capital structure will provide sufficient flexibility to ensure that appropriate investment can be made, if
required, to implement and achieve the longer-term growth strategy of the Group.
Financial Statements
55
Foreign currency risk
Foreign currency risk arises when companies of the Group enter into transactions denominated in a currency other than their functional
currency. The transactional exposure arises on trade receivables, trade payables, and cash and cash equivalents. These balances are
analysed by currency in notes 18, 19 and 24. The Group maintains a natural hedge, where possible, by matching cash inflows (revenue) and
cash outflows (inventory and operational expenditure) in the respective currencies.
Management considers that the most significant foreign exchange risk relates to Australian dollar and United States dollar. The Group’s
sensitivity to a 5% strengthening in £ Sterling against each of these currencies (with other variables held constant) is as follows:
2021
£‘000
2020
£‘000
Decrease in adjusted EBITDA (at average rates)
United States dollar
3
9
Australian dollar
7
5
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group
has adopted a policy of assessing creditworthiness of counterparties as a means of mitigating the risk of financial loss from defaults. This
information is supplied by independent rating agencies where available, and if not available, the Group uses other publicly available financial
information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are
continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is
controlled by counterparty limits that are reviewed and approved annually.
Trade receivables consist of a small number of customers, spread across diverse industries and geographical areas. Ongoing credit
evaluation is performed on the financial condition of accounts receivable.
The Group’s standard credit terms are 30 to 60 days from date of invoice. Invoices greater than 60 days old are assessed as overdue. The
maximum exposure to credit risk is the carrying value of each financial asset included on the statement of financial position as summarised
in note 18.
The Group’s management considers that all the above financial assets that are not impaired or past due for each of the reporting dates
under review are of good quality.
Interest rate risk
Interest rate risk arises when the Group is exposed to variable interest rates on borrowings secured. The current exposure to interest rate
risk relates to the CBILs government loan facility, drawn down after the reporting date, which is tied to the bank of England interest rate. See
note 30 to the consolidated financial statements for detail of the CBILS loan facility.
Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty settling its debts or otherwise meeting its obligations related
to financial liabilities. Responsibility for liquidity risk management rests with the Board of Directors, who has established an appropriate
liquidity risk management framework for the management of the Group’s short-, medium- and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by
continuously monitoring forecast and actual cash flows, and through careful cash management policies.
As all liabilities of the Group are current liabilities, maturity analysis has not been prepared.
Significant accounting policies
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement and
the bases for recognition of income and expenses) for each class of financial asset, financial liability and equity instrument are disclosed in
note 2.16.
Categories of financial instruments
2021
£’000
2020
(restated)
£’000
Financial assets
Cash and bank balances
2,338
1,241
Trade and other receivables
1,530
1,092
Financial liabilities
Trade and other payables
2,247
2,239
Financial liabilities are measured at amortised cost.
56
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
28. Ultimate controlling party
As at 30 June 2021 the Directors consider there to be no ultimate controlling party by virtue of the fact no one holds a majority shareholding
in the Group.
29. Related party transactions
On 11 January 2021 Mark Ward, a Director of the Group, entered into a loan agreement to provide the Group with a working capital loan
facility of £500k. The loan was converted to shares as part of the Open Offer concluded on 29 April 2021, and no amount remains due. No
interest was charged on the loan.
Other than those disclosed within this note, shareholding transactions with directors are noted in the Directors Report page 14 and Directors
remuneration noted in the Remuneration Committee Report on pages 19 to 22, there have been no other transactions with related parties.
30. Events after the reporting date
On 27 May 2021 SkinnyTan UK Limited entered into a CBILS loan facility for £950,000. The fellow subsidiaries of the InnovaDerma group
are guarantors under this agreement. The loan facility was drawn down in full on 2 July 2021.
On 2 September 2021 the Board approved the grant of options over 125,000 Ordinary shares to Blake Hughes and 95,500 Ordinary shares
to Andrew Dunderdale. Both grants have an exercise price of £0.35 and will be exercisable on or after the third anniversary of the grant date
subject to share price performance of the Company and conditions defined in the share option plan.
One third of the options may be exercised when the market price of the Ordinary Shares is equal to at least 25% increase over the grant
price for a period of not less than one month; one third when the market price of the Ordinary Shares is equal to at least 50% increase over
the grant price for a period of not less than one month; and the balance may be exercised when the market price of the Ordinary Shares is
equal to at least 75% increase over the grant price for a period of not less than one month.
On 3 December 2021 Ergon Medical Limited, a wholly owned subsidiary of InnovaDerma plc, subdivided its 3,614 £1 Ordinary A shares
into £0.10 Shares and re-designated them as Ordinary B shares and issued 51,060 new Ordinary A shares to Mark Ward, Non-Executive
Director of InnovaDerma plc. The issue of new shares dilutes InnovaDerma plc's shareholding in Ergon Medical Limited to 45%. The
transaction is an effective step disposal and as such Ergon Medical Limited is now an associate rather than a subsidiary of InnovaDerma plc.
The funds raised by Ergon Medical Limited will be used to further promote the expansion of the Prolong device in US markets.
The impact of the step disposal removes Ergon Medical Limited and the trade of Prolong US from the consolidated financials of
InnovaDerma plc going forward. In the year ended 30 June 2021, Ergon Medical Limited and the trade of Prolong US generated revenue
of £153k (2020: £93k) and profit before tax of £31k (2020 restated: loss before tax £145k). As at 30 June 2021, the business unit had net
liabilities excluding intercompany of £58k (2020 restated: net liabilities excluding intercompany of £109k).
The Directors confirm that there are no other events after the reporting date which require disclosure.
Financial Statements
57
31. Prior period restatement
The comparative figures for the year ended 30 June 2020 have been restated to correct the prior period accounting errors disclosed in note
2.3. The following tables show the financial impact of the restatements by comparing the previously stated and the now restated Statement
of Comprehensive Income and Statement of Financial Position.
As reported
2020
£’000
Restatements
2020
£’000
As restated
2020
£’000
Continuing operations
Revenue
13,259
(47)
13,212
Cost of sales
(5,974)
(1,267)
(7,241)
Gross profit
7,285
(1,314)
5,971
Other operating income
108
(108)
–
Marketing expenses
(4,231)
(969)
(5,200)
Wages & salaries expenses
(1,759)
(129)
(1,888)
Administrative expenses
(1,780)
(950)
(2,730)
Impairment of goodwill
–
(1,198)
(1,198)
Operating loss
(377)
(4,668)
(5,045)
Finance cost
–
(1)
(1)
Operating loss before tax
(377)
(4,669)
(5,046)
Income Tax expense
68
415
483
Net loss for the period
(309)
(4,254)
(4,563)
Other comprehensive Income
(19)
19
–
Exchange income on foreign currency net investments
–
84
84
Total comprehensive income for the period
(328)
(4,151)
(4,479)
Attributable to:
Owners of the parent
(335)
(4,095)
(4,430)
Non-controlling interests
7
(56)
(49)
Loss per share
– basic and diluted (£)
(0.02)
(0.29)
(0.31)
58
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Consolidated Financial Statements
Notes to the Consolidated
Financial Statements (continued)
£’000
As reported
2020
£’000
£’000
Restatements
2020
£’000
£’000
As restated
2020
£’000
Non-current assets
Goodwill
3,660
(3,221)
439
Other intangible assets
4,150
(4,026)
124
Property, plant and equipment
149
–
149
Deferred tax asset
402
(18)
384
8,361
(7,265)
1,096
Current assets
Cash and cash equivalents
1,241
–
1,241
Inventories
3,116
(1,841)
1,275
Trade and other receivables
1,510
80
1,590
5,867
(1,761)
4,106
Current liabilities
Trade and other payables
(3,891)
421
(3,470)
Net current assets
1,976
(1,340)
636
Total assets less current liabilities
10,337
(8,605)
1,732
Non-current liabilities
Borrowings
(1)
1
–
Net assets
10,336
(8,604)
1,732
Equity
Share capital
1,736
2
1,738
Share premium account
8,288
–
8,288
Merger reserve
(721)
–
(721)
Foreign exchange reserve
(221)
483
262
Share-based payment reserve
–
78
78
Accumulated losses
999
(8,940)
(7,941)
Equity attributable to owners of
parent
10,081
(8,377)
1,704
Non-controlling interest
255
(227)
28
Total equity
10,336
(8,604)
1,732
Financial Statements
59
£’000
As reported
2019
£’000
£’000
Restatements
2019
£’000
£’000
As restated
2019
£’000
Non-current assets
Goodwill
3,511
(1,874)
1,637
Other intangible assets
3,068
(2,743)
325
Property, plant and equipment
53
(1)
52
Deferred tax asset
234
–
234
6,866
(4,618)
2,248
Current assets
Cash and cash equivalents
2,043
–
2,043
Inventories
2,364
(413)
1,951
Trade and other receivables
3,628
(452)
3,176
8,035
(865)
7,170
Current liabilities
Trade and other payables
(4,160)
983
(3,177)
Net current assets
3,875
118
3,993
Total assets less current liabilities
10,741
(4,500)
6,241
Net assets
10,741
(4,500)
6,241
Equity
Share capital
1,736
2
1,738
Share premium account
8,288
–
8,288
Merger reserve
(721)
–
(721)
Foreign exchange reserve
(172)
350
178
Accumulated losses
1,291
(4,681)
(3,390)
Equity attributable to owners of
parent
10,422
(4,329)
6,093
Non-controlling interest
319
(171)
148
Total equity
10,741
(4,500)
6,241
60
InnovaDerma plc Annual Report & Accounts 2021 I Company Statement of Financial Position
Company Statement of Financial Position
As at 30 June 2021
Note
£’000
2021
£’000
£’000
2020
(restated1)
£’000
£’000
2019
(restated1)
£’000
Non-current assets
Investment in subsidiaries
4
1,013
954
1,643
Other intangible assets
5
120
9
126
1,133
963
1,769
Current assets
Cash and cash equivalents
778
436
977
Trade and other receivables
7
1,258
658
4,440
2,036
1,094
5,417
Current liabilities
Trade and other payables
8
(912)
(2,633)
(12)
Net current assets
1,124
(1,539)
5,405
Total assets less current
liabilities
2,257
(576)
7,174
Net assets
2,257
(576)
7,174
Equity
Share capital
10
2,859
1,738
1,738
Share premium account
11
11,193
8,288
8,288
Share-based payment reserve
12
10
78
–
Accumulated losses
(11,805)
(10,680)
(2,852)
Total Equity
2,257
(576)
7,174
1 See note 2 to the Company financial statements for a description of the prior year restatement.
The Company loss for the year ended 30 June 2021 was £1,125k (2020 restated: Loss for the year £7,828k).
The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 20 December 2021.
Blake Hughes
Director
Company registration number 09363606
The notes on pages 62 to 67 form part of these financial statements.
Financial Statements
61
Company Statement of Changes in Equity
For the year ended 30 June 2021
Share
capital
£’000
Share
premium
£’000
Foreign
exchange
reserve
£’000
Share-based
payment
reserve
£’000
Accumulated
losses
attributable
to owners of
parent
£’000
Total equity
£’000
Balance at 1 July 2019 as
previously reported
1,738
8,288
(109)
–
(1,209)
8,708
Restatements
–
–
109
–
(1,643)
(1,534)
Balance at 1 July 2019 (restated1)
1,738
8,288
–
–
(2,852)
7,174
Loss for the period
–
–
–
–
(7,828)
(7,828)
Total comprehensive income for
the year
–
–
–
–
(7,828)
(7,828)
Share-based payment expense
–
–
–
78
–
78
Balance at 30 June 2020 (restated1)
1,738
8,288
–
78
(10,680)
(576)
Loss for the period
–
–
–
–
(1,125)
(1,125)
Total comprehensive income for
the year
–
–
–
–
(1,125)
(1,125)
Share-based payment expense
–
–
–
(68)
–
(68)
Issue of new shares
1,121
3,379
–
–
–
4,500
Issue costs deducted from equity
(474)
–
–
–
(474)
Balance at 30 June 2021
2,859
11,193
–
10
(11,805)
2,257
1 See note 2 to the Company financial statements for a description of the prior year restatement.
62
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Company Financial Statements
Notes to the Company
Financial Statements
1. Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006. For the financial year ended
30 June 2021, the Company elected to prepare the financial statements in accordance with UK GAAP Financial Reporting Standard 101
Reduced Disclosure Framework. The financial statements for the year ended 30 June 2020 were prepared in accordance with International
Financial Reporting Standards (“IFRS”). The purpose of this was to align the Company's accounting policies with the Group's policies. This
transition is not considered to have had a material effect on the financial statements.
The financial statements have been prepared under the historical cost convention as modified in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101") and the Companies
Act 2006.
The principal accounting policies adopted are the same as those set out in note 2 to the consolidated financial statements except as noted
below.
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
The Company’s financial statements are included in the consolidated financial statements of InnovaDerma plc. Accordingly, the Company
has taken advantage of the exemption from publishing a Statement of Comprehensive Income, and the losses for the Company are shown
within the Company Statement of Financial Position. The Company has also taken advantage of the following disclosure exemptions in
preparing these financial statements, as permitted by FRS 101:
•
IAS 1 Presentation of Financial Statements
•
IAS 7 Statement of cash flows
•
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
•
IAS 24 Related Party Disclosures
•
IAS 36 Impairment of Assets
•
IFRS 1 First time adoption of International Financial Reporting Standards
•
FRS 2 Share-based payments
•
IFRS 7 Financial instruments
2. Prior year restatement
The Company has restated the prior year comparatives to correct the following prior period accounting errors:
•
An impairment charge of £1,524k relating to investments in subsidiaries, to correctly reflect note 2.11 of the Group consolidated
financial statements. An impairment of £798k was charged in the year ended 30 June 2020 and £757k was charged in the years
ended 30 June 2019 and prior.
•
An amortisation charge relating to intangible assets held by the Company totalling £224k relating to capitalised product development
and £104k relating to intellectual property rights, to correctly reflect note 2.11 of the Group consolidated financial statements.
Amortisation of £117k was charged in the year ended 30 June 2020 and £211k was charged in the years ended 30 June 2019 and
prior. These intangible assets do not arise on as part of business combinations.
•
An impairment charge, of £6,300k for the year ended 30 June 2020 and £550k for the year ended 30 June 2019, relating to amounts
due from subsidiaries, to correctly reflect note 2.16 of the Group consolidated financial statements. These amounts due from
subsidiaries are unlikely to be repaid by the subsidiaries in full on a timely basis.
•
Register accruals totalling £37k relating to audit and tax fees for the prior year.
•
Write down £12k VAT asset to nil as irrecoverable.
•
Recognise expenses totalling £21k incorrectly recorded as prepayments in the year ended 30 June 2019.
•
Reclassify the £109k foreign exchange reserve, arising prior to 30 June 2019, to accumulated losses.
3. Auditor’s remuneration
The auditor’s remuneration for audit and other services is disclosed in note 7 to the Group consolidated financial statements.
Financial Statements
63
4. Subsidiaries
Details of the Group’s direct and indirect subsidiaries as at 30 June 2021 are as follows:
Name
Place of
incorporation
(or registration)
and operation
Class of
shares held
Proportion
of
ownership
interest%
Activity
InnovaDerma UK Limited
England & Wales
Ordinary
100%
Development, distribution and sale of
skin & beauty and haircare products
SkinnyTan UK Limited
England & Wales
Ordinary
96%1
Development, distribution and sale of
skin & beauty products
Ergon Medical Limited
England & Wales
Ordinary A &
Ordinary B
100%
Development, distribution and sale of
life science products
InnovaDerma AUS & NZ Pty Ltd
Australia
Ordinary
100%
Development, distribution and sale of
skin & beauty and haircare products
Skinny Tan Pty Ltd
Australia
Ordinary
96%1
Development, distribution and sale of
skin & beauty products
Innova Science Pty Ltd
Australia
Ordinary
100%
Development, distribution and sale of
life science products
Bach Brands Pty Ltd
Australia
Ordinary
100%
Development, distribution and sale of
skin & beauty products
InnovaDerma, Inc
USA
Common
stock
100%
Development, distribution and sale of
skin & beauty and haircare products
Innova Science, Inc
USA
Common
stock
100%
Development, distribution and sale of
life science products
InnovaDerma Philippines Inc
Philippines
Common
100%
Group support services
1 The Group shareholding in Skinny Tan Pty Ltd and SkinnyTan UK Limited increased from 95.5% to 96.0% in the year ended 30 June 2021.
£’000
Cost
At 1 July 2019
1,643
Additions
109
At 30 June 2020
1,752
Additions
59
At 30 June 2021
1,811
Accumulated impairment
At 1 July 2019
–
Impairment in year
(798)
At 30 June 2020
(798)
Impairment in year
–
At 30 June 2021
(798)
Carrying amount
At 1 July 2021
1,013
At 30 June 2020
954
At 30 June 2019
1,643
The investments in subsidiaries are all stated at cost less impairment.
64
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Company Financial Statements
Notes to the Company
Financial Statements (continued)
5. Other intangible assets
Intellectual
property
rights
£’000
Product
development
costs
£’000
Capitalised
software
£’000
Total £’000
Cost
At 1 July 2019
104
216
–
320
Additions
–
17
–
17
Disposals
–
–
–
–
At 30 June 2020
104
233
–
337
Additions
–
–
123
123
Disposals
(104)
(233)
–
(337)
At 30 June 2021
–
–
123
123
Amortisation
At 1 July 2019
(46)
(148)
–
(194)
Charge for the year
(58)
(76)
–
(134)
On disposals
–
–
–
–
At 30 June 2020
(104)
(224)
–
(328)
Charge for the year
–
(8)
(3)
(11)
On disposals
104
232
–
336
At 30 June 2021
–
–
(3)
(3)
Carrying amount
At 1 July 2021
–
–
120
120
At 30 June 2020
–
9
–
9
At 30 June 2019
58
68
–
126
The disposals in the year ended 30 June 2021 represent intellectual property and development costs relating to brands which are no longer
active and for which the Group expects no further sales.
6. Staff costs
The average monthly number of employees, excluding Non-Executive Directors, was as follows:
2021
Number
2020
Number
Management
1
–
Other staff
–
–
1
–
Staff costs for all employees during the year, including Non-Executive Directors, were as follows:
2021
£’000
2020
£’000
Wages and salaries
152
–
Social security costs
18
–
Pension scheme contributions
14
–
184
–
On 1 April 2021, the employment contracts of three Directors were transferred to the Company under the Transfer of Undertakings
(Protection of Employment) regulations (TUPE). Prior to that date the current and former Directors were paid via subsidiary companies of the
Group.
Financial Statements
65
7. Trade and other receivables
2021
£’000
2020
(restated)
£’000
Prepayments and accrued revenue
19
8
Social security and other taxation
63
10
Deferred tax asset
–
113
Amounts due from subsidiary undertakings
1,176
527
Other debtors
–
–
1,258
658
Amounts due from subsidiary undertakings are unsecured, interest free and repayable on demand.
Amounts due from subsidiary undertakings have been reviewed for impairment in accordance with note 2.16 of the Group consolidated
financial statements.
8. Trade and other payables
2021
£’000
2020
(restated)
£’000
Trade payables
66
36
Accruals and deferred income
159
33
Social security and other taxation
22
–
Amounts due to subsidiary undertakings
649
2,564
Other creditors
16
–
912
2,633
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk
management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
9. Financial instruments
Categories of financial instruments
The Company’s principal financial instruments are cash and trade receivables. The Company’s exposure to risk is in line with the group and
have been detailed in note 32 to the Group financial statements.
Intercompany balances
The carrying amount of these assets have been reviewed for impairment in accordance with note 2.16 of the Group consolidated financial
statements.
Cash and cash equivalents
These comprise cash at bank held by the Company. The carrying amount of these assets approximates their fair value.
Financial liabilities
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade
purchases is 30 days. The carrying amount of trade payables approximates to their fair value.
10. Share capital
Details regarding the share capital of the Company are disclosed in note 20 to the Group consolidated financial statements.
11. Share premium account
Details regarding the share premium account of the Company are disclosed in note 21 to the Group consolidated financial statements.
12. Reserves
Details regarding reserves of the Company are disclosed in note 22 to the Group consolidated financial statements.
66
InnovaDerma plc Annual Report & Accounts 2021 I Notes to the Company Financial Statements
Notes to the Company
Financial Statements (continued)
13. Ultimate controlling party
As at 30 June 2021 the Directors consider there to be no ultimate controlling party by virtue of the fact no one holds a majority shareholding
in the Group.
14. Related party transactions
Details regarding related party transactions of the Company are disclosed in note 29 to the Group consolidated financial statements.
15. Events after the reporting date
Details regarding events after the reporting date of the Company are disclosed in note 30 to the Group consolidated financial statements.
16. Prior period restatement
The comparative figures for the year ended 30 June 2020 have been restated to correct the prior period accounting errors disclosed in
note 2 of the Company financial statements. The following tables show the financial impact of the restatements by comparing the previously
stated and the now restated Statement of Financial Position.
£’000
As reported
2020
£’000
£’000
Restatements
2020
£’000
£’000
As restated
2020
£’000
Non-current assets
Investment in subsidiaries
2,582
(1,628)
954
Other intangible assets
233
(224)
9
2,815
(1,852)
963
Current assets
Cash and cash equivalents
436
–
436
Trade and other receivables
4,983
(4,325)
658
5,419
(4,325)
1,094
Current liabilities
Trade and other payables
(89)
(2,544)
(2,633)
Net current assets
5,330
(6,869)
(1,539)
Total assets less current liabilities
8,145
(8,721)
(576)
Net assets
8,145
(8,721)
(576)
Equity
Share capital
1,738
–
1,738
Share premium account
8,288
–
8,288
Foreign exchange reserve
(109)
109
–
Share-based payment reserve
–
78
78
Accumulated losses
(1,772)
(8,908)
(10,680)
Total Equity
8,145
(8,721)
(576)
Financial Statements
67
£’000
As reported
2019
£’000
£’000
Restatements
2019
£’000
£’000
As restated
2019
£’000
Non-current assets
Investment in subsidiaries
2,312
(669)
1,643
Other intangible assets
216
(90)
126
2,528
(759)
1,769
Current assets
Cash and cash equivalents
977
–
977
Trade and other receivables
5,201
(761)
4,440
6,178
(761)
5,417
Current liabilities
Trade and other payables
2
(14)
(12)
Net current assets
6,180
(775)
5,405
Total assets less current liabilities
8,708
(1,534)
7,174
Net assets
8,708
(1,534)
7,174
Equity
Share capital
1,738
–
1,738
Share premium account
8,288
–
8,288
Foreign exchange reserve
(109)
109
–
Accumulated losses
(1,209)
(1,643)
(2,852)
Total Equity
8,708
(1,534)
7,174