IDP.L Regulatory News (IDP)

InnovaDerma PLC

("InnovaDerma" or the "Company")

Trading Update and Directorate change

InnovaDerma (LSE: IDP), a UK developer of beauty, personal care and life sciences products, provides a trading update for the six months ended 31 December 2020.

Trading in H1

The continued impact of COVID-19 and tighter restrictions imposed in the UK over the important festive season has affected our performance.

We expect revenue to be c.£4.1m (H1 19: £5.1m). A decline in UK sales (H1 20: £2.9m, down c.32%), was partially offset by encouraging growth in our key international markets (H1 20: US £0.4m, up c.17%; and Australia £0.8m, up c.52%) led by Skinny Tan. Both Retail as well as Direct-to-Consumer ("DTC") sales have been impacted by a reduction in beauty category consumption, particularly in the tanning category, due to Covid-19. DTC remains our priority channel and represents c.62% of the Company's sales (H1 19: 60%). We expect the tanning category consumption to significantly improve as Covid-19 restrictions ease, and moreover as we enter the peak tanning season from April to June.

Skinny Tan sales have declined across both Retail and DTC to £3.4m (H1 19: £4.4m). Both channels have been severely impacted by the reduction in consumer consumption of the tanning category as mentioned above. However, the launches of Notox Beauty Elixir and Strawberry & Cream Pink Whipped Gradual Tanner have been very successful on our UK DTC platform in December. Notox Beauty Elixir was sold at full retail price and was our best-selling item. Skinny Tan remains well positioned to perform with a strong roster of new products to be launched during 2021.

Charles & Lee continues to grow and show its scale potential in Australia across both Retail and DTC, (£0.3m, up c.39%), despite the pandemic. Key drivers have been new product introductions as well as a very successful Retail multipack promotion, particularly in Myer and David Jones. The brand was launched in the UK through our DTC channel last year and we will expand further the brand internationally in 2021.

Roots revenues declined 29% due to its predominant UK Retail focus. The new brand packaging is now being rolled out in the UK and the pricing repositioning will be fully implemented in January 2021.

Nuthing sales have been subdued as the UK hair removal category is very reliant on physical Retail and has been severely impacted by category consumption decline. The 2020 brand launch coincided with the UK March lockdown and we are therefore planning further instore enhanced visibility over 2021. The Nuthing Black Cherry & Kiwi scented hair removal Wax Strips, our first product in the largest hair removal category, will launch in February 2021 in Superdrug.

Life Sciences revenues remain relatively modest and the Board is focusing on the US market while we await CE accreditation which has been delayed by Covid-19.

Cash and Balance sheet

The cash position of the Company has been materially impacted by COVID-19. The Company has agreed in principle to enter into a loan agreement in the amount of £500,000 with M.Ward, a Non-executive Director and the largest shareholder of the Company. A further announcement will be made shortly providing details of the agreement once it has been signed.

The Board will also be undertaking an impairment review exercise on certain intangible items on the balance sheet to reflect the impact of Covid-19 and recent trading. This impairment is likely to be substantial but will have no material impact on the Company's prospects, trading outlook or working capital position. The Board expects to conclude this review ahead of the financial year end (30 June 2021).

Board Update

On 2 December 2020, the Company announced that Joe Bayer will resign as a Director of the Company with effect from 31 January 2021. The Board has now agreed to dismiss Joe Bayer as an employee of the Company with immediate effect and, as such, he will cease to be a Director of the Company with immediate effect.

The Board is pleased to announce that Ross Andrews, an existing Non-executive Director of the Company, has accepted the position of Non-executive Chairman of the Company and will assume this position with immediate effect.

Outlook

As in previous years, the Company expects revenue and EBITDA to be strongly weighted to H2 FY2021. This reflects the peak tanning season in the UK and US as well as an anticipated recovery in the last quarter of the financial year as Covid-19 restrictions ease and it is therefore expected that the business will be EBITDA positive in H2. The Company will be exploring options to strengthen the balance sheet to ensure it is in a strong position to benefit from the substantial growth opportunities anticipated once restrictions begin to ease.

Blake Hughes, CEO InnovaDerma PLC, commented:

"I have now been the CEO of InnovaDerma for a little over seven weeks and I am very positive about the future growth potential of the business. Whilst it is disappointing to be reporting the extent of the continued impact that Covid-19 has had on the beauty category, and therefore our business, particularly over the last quarter, I believe our results in the US and Australia, as well as the strong growth of Charles & Lee, show the significant international growth potential of the business. I remain confident that UK beauty category consumption will quickly improve once Covid-19 restrictions ease.

"Over the coming weeks I will be formalising our sharpened strategic focus for future growth. In addition, we will be exploring options to strengthen the balance sheet to ensure the business is well positioned for the future. InnovaDerma was performing well going into the pandemic and with the support of our major shareholders, I have every confidence in the prospects of the Company which has some excellent brands with substantial potential, underpinned by our strong customer following and our broad DTC platform."

This announcement contains inside for the purposes of Article 7 of EU Regulation 596/2014.

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