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12 Jan 2022 07:00
InnovaDerma PLC
("InnovaDerma" or the "Company")
Trading Update
InnovaDerma (LSE: IDP), a leading digitally focused UK beauty brand developer, is pleased to provide a trading update for the six months ended 31 December 2021.
H1 Trading Statement
Our strategy of driving increased profitable sales through gross margin improvement, radical simplification of business operations, rigorous cost control and the prioritisation of our Skinny Tan brand, is working.
· Financial performance is markedly improved vs H1 2020 as our previously announced strategy is implemented with a disciplined approach to marketing and overhead costs.
· Short-term impact on revenue (revenues of c. £3.7m versus H1 20: £4.1m) primarily driven by ceasing loss-making sales promotions and reducing marketing investment in lower priority brands such as Nuthing.
· Gross margin improvements and operational cost reductions remain robust despite global raw material pricing pressures. We are also benefitting from stronger control over warehousing and logistics costs.
· Over the period, we have further improved our return on marketing spend and have adopted a strategy of reducing less efficient marketing spend during the low tanning season to ensure we have the right ammunition to maximise returns over the peak H2 tanning season (UK + US).
· Our Liberty Poole collaboration continues to yield benefits and is helping to increase the share of our business in the key 18-25 age group. We expect this collaboration to be further enhanced when Liberty appears as a contestant on ITV's hit TV series, Dancing On Ice, which starts on the 16th January.
Skinny Tan is the Company's largest (84% of revenue) and highest priority future growth driver. The previously communicated strategic decision to move away from certain loss leading sales led to a reduction in sales but is consistent with the Group's strategic focus on longer-term profitability. Amazon is now the Company's 3rd largest retailer, with further significant future growth anticipated as we enter the peak tanning season. This sales channel is becoming increasingly significant whilst allowing us to achieve a healthy margin.
Charles + Lee has shown excellent retail sales growth though revenues of c. £0.3m remain slightly below last year (H1 20: £0.4m). Positioned around 'No-nonsense, high-performance Aussie-made male grooming' we are successfully focusing the brand at the entry premium tier, adjusting pricing up c.10%, and with excellent growth potential.
Investment in Roots and Nuthing has been deprioritised as we focus on Skinny Tan and Charles + Lee as the Company's priority growth brands.
As previously announced, the Company entered into a Joint Venture for the Prolong brand in Dec 2021. We believe this will maximise shareholder value in the mid-term and we are very optimistic for its future. Prolong revenues prior to the partnership agreement are included in our consolidated figures. Revenues after the partnership agreement are excluded from our consolidated figures and from future forecasts, however, InnovaDerma will directly benefit from any future dividends which are paid by the Joint Venture and/or any proceeds achieved by a future sale of the business.
Over the past month, the Joint Venture has made good progress and has recently launched an interim US website re-design which better represents the brand and improves the consumer experience. During this quarter, the Joint Venture will execute upon its digital marketing strategy across Facebook, Instagram and TikTok whilst also utilising Googles Ad network to drive website traffic and revenue growth.
Outlook
The Board remains optimistic that the transformation plan enacted this year, as well as underlying improved consumer consumption and retail momentum versus last year will enable the business to continue its improvement trajectory with a return to profitability this year remaining the Board's intention. The recent and fast rise of Omicron, with the associated reduction in social contacts, has had a cooling effect on pre-Christmas trade in the UK. We continue to monitor this closely but have already begun to see the start of a "bounce back" which we believe will continue into the peak tanning season in the UK, the second half of our financial year has historically been stronger than the first and this is expected to be the case again this year.
Blake Hughes, CEO InnovaDerma PLC, commented:
"We are making strong progress in simplifying and reshaping our business as we focus on delivering sustainable, profitable revenue growth. We are delivering against our profit improvement plans as set out in this update and I am pleased to see the focus on Amazon and our exciting Liberty Poole collaboration are already delivering strong benefits, even before peak tanning season. In addition, Charles + Lee has had another record-breaking season at Myer despite Australian lock downs. Whilst Omicron has presented some short-term uncertainty, I believe that we will see a significantly stronger tanning season in the six months ahead. We have a strong foundation for the second half of the year which will be further supported by exciting new product launches on Skinny Tan which have already received excellent retailer support. The Board and I are confident of the future and our focus on returning the Company to profitability, as described in this update."
Further enquiries
InnovaDerma Blake Hughes |
c/o TB Cardew |
finncap Ltd Geoff Nash/Kate Bannatyne Alice Lane - Corporate Broking |
+44 (0)207 220 0500 www.finncap.com |
TB Cardew |
|
Shan Shan Willenbrock/ | + 44 (0)7775 848537 |
Olivia Rosser | + 44 (0)7552 864250 |
| innovaDerma@tbcardew.com |
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