IDP.L Regulatory News (IDP)

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InnovaDerma PLC

("InnovaDerma" or the "Company")

Trading Update

Roots secures Boots and new international distribution deals

InnovaDerma (LSE: IDP), a UK developer of life sciences, beauty and personal care products, announces a trading update ahead of its year end close on 30 June 2018. Revenue for the period increased strongly by 23.5% on a constant currency basis to approximately £11m (FY2017: £8.9m). However, partly owing to the significant one-off investments made across the business in launching new brands in the last quarter including the launch of Prolong, stock availability issues for Roots, and lower than expected revenue out of the US in June, profit before tax will be approximately £0.65m, lower than previously expected. The Company's balance sheet remains strong with sufficient working capital to fund the anticipated growth of the business.

As expected, InnovaDerma's performance was weighted towards the second half, and in May the Company achieved its highest ever monthly revenue, which contributed to the record quarterly revenue recorded in Q4. The rise in revenue has been driven by the Company's innovative Direct to Consumer ('DTC') digital channel that enables the business to leverage its creative social media campaigns and engage directly with consumers. The DTC platform has been further strengthened by recent product launches and, as a result, it delivered a record number of orders in the second half of the year alongside the successful launch of multiple new sub-brands of Skinny Tan.

The demand for Roots has consistently outstripped supply in retail as a number of the brand's best-selling products were out of stock for significant periods throughout this HY contributing to lower revenue and profit. The Company has taken significant steps to resolve the supply chain and is adding new inventory to meet expected future demand from retailers including Boots, the UK's leading pharmacy-led health and beauty retailer. The Company is pleased to announce that Roots will be ranged initially in 359 of the largest of Boots' 2,500 stores from August. Additionally, Roots which is currently available in just over 500 of Superdrug's stores, will be ranged in all 779 stores from July reflecting the strength and performance of the brand. With the addition of new product lines, this will approximately double the retail shelf space within Superdrug stores. Securing Boots eliminates the dependence on a single retail chain and creates a significant footprint for the in-house developed brand, supporting future revenue growth.

The business is growing rapidly across several continents with new distributors and retail partners (as outlined below) secured to range its expanding product portfolio. In order to manage the strong growth expected in FY2019, the Company is seeking to appoint a UK based Chief Executive Officer and has commenced the search process. Haris Chaudhry, will remain as Executive Chairman, and will focus on strengthening the Life Science Division with the planned launch of the hair loss helmet and expansion of Prolong into various markets globally. The new CEO will be responsible for the global performance of Skinny Tan (and its associated brands), Roots, Charles + Lee and StevieK Cosmetics. The Company will make a further announcement as and when appropriate.

New Distribution Deals

The Company has secured multiple new international distribution deals across its product portfolio. These include:

Europe

· Aspire Brands, a leading retail distribution business headquartered in Norway has executed a distribution agreement with the Company to supply Skinny Tan across its retail networks in Norway, Denmark, Sweden, Finland, Netherlands, Belgium and Luxembourg

· Douglas Beauty, one of the largest beauty retail chains with more than 1,900 stores throughout Germany and Europe, launched Skinny Tan online in May

· Skinny Tan is now available to buy online with Sephora France, as the Company has developed a new French DTC platform to replicate its UK success in creating product demand

· Captain-Tan, an online retail specialist for self-tanning products based in the Netherlands, has recently launched Skinny Tan

· Salons Direct, one of the largest distribution companies to professional salons in UK (with more than 50,000 trade customers) was secured, in June, as a new distribution channel to distribute Skinny Tan's Professional range into salons throughout the UK

Canada

· In May, the Company secured Beler Brand Management, a leading beauty product distribution company in Canada as an exclusive distributor for Skinny Tan, Roots and Prolong This marks the Company's first entry into Canada and discussions are under way to launch these brands in the coming months

Australia and New Zealand

· Charles + Lee's product range has been further extended to incorporate a men's shaving range, oil-free moisturiser and after shave balm. CS & Co, a leading beauty product distributor in New Zealand has secured the launch of Charles & Lee in 65 independent pharmacies from August this year

· Myer, Australia's largest department store chain, will be extending Charles + Lee's ranging from the current 30 to 46 stores from July this year

· Terry White Chemmart, one of the largest pharmacy chains in Australia with over 500 stores, will also range Charles + Lee in August in approximately 250 stores

· Debenham Australia will range Skinny Tan and Charles + Lee online and in-store from August

India, Japan and South Africa

· This month, the Company secured a distribution agreement with 1908 EVenture's, a subsidiary of the Indian conglomerate Ador Group, to market and distribute Prolong, Roots and Charles + Lee in one of the fastest growing consumer markets globally

· Dream Media LLC, a leading distributor for beauty and personal care products in Japan, has been secured to distribute Prolong and Skinny Tan products in the country from September 2018

· The Company has also launched Roots and Charles + Lee in South Africa through its South African distributor after the successful launch of Skinny Tan into Clicks and DisChem, the two leading retail chains in the country

The Company remains focused on product innovation and brand extensions. With Skinny Tan, the Company successfully developed Bum Booster, Skin Blur range and the FACE by Skinny Tan range which has added to the fast-growing product portfolio, completing Skinny Tan's transition into a beauty brand from a bronzing-only brand. The Roots range of products now include Heat Protect Spray, Conditioning Spray and Conditioning Mask which were launched successfully in the last quarter of the FY. New category and new product developments are expected to be launched for both brands throughout FY19. Prolong is delivering consistent sales on the DTC channel since launch and the Company is exploring distribution opportunities for the product in multiple jurisdictions globally.

As the Company expands the Skinny Tan and Roots range, together with a substantially wider distribution network, it gives the Board much confidence for the future. The Board expects 2019 to be a year of substantial revenue and profit growth as its key brands continue to flourish alongside new product launches, all underpinned by the strength of the DTC platform. The Company is still finalising budgets for 2019 and 2020, but expects FY19 revenues to be in excess of £14m with profit before tax in excess of £1.6m. The Company will announce its full year results on 19 September 2018.

Haris Chaudhry, Executive Chairman said

"We have delivered a strong revenue performance and it is pleasing that our DTC platform, which has been key to driving sales, delivered record number of orders and revenue during the peak tanning season. While our profit for the year will be below earlier expectations, in part due to supply chain issues and launch related costs in H2, I am encouraged by our good progress in implementing our strategy and creating a solid business platform to enable significant growth in the new financial year and beyond. Roots continues to grow in popularity and I am particularly delighted that it will be ranged in some of the largest stores of Boots UK and almost all of Superdrug stores, underlining our ability to develop products in-house and turning them into well-recognised beauty brands. This, together with our recent successful product launches and global expansion through new retailers and distributors, means the Company is strongly positioned for future growth."

Further enquiries

About InnovaDerma:

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

www.innovaderma.com