Innovaderma Share Discussion Threads

[jonny_five111] 28/2/2020 06:56

Lol. You've already been proved to be a pillock with your posting history. We dont need any more evidence thanks!

[boonboon] 28/2/2020 06:56

A large part of inventory increase will be for Nuthing as well as building up to Boots more than doubling it's shelf space for Skinny tan and Tesco about to launch in 714 stores.With Nuthing and Boots skinny tan expansion likely to already have shipped, stock is likely to already be significantly lower than at the half year point.

[mbcontrarian] 28/2/2020 06:52

If you assume the DTC revenue is settled by cash then you can assume all receivables are those which derive from distribution.

[mbcontrarian] 28/2/2020 06:49

Inventory is contentious in that they do not provide the composition at the half year point. The bulk is anticipated to be Skinny Tan product, granted. But with the deterioration of roots and some new additions, we expect the inventory to be materially higher this year end.

[boonboon] 28/2/2020 06:45

What's your source for receivables being 120 days. The vast majority of their business is with stable companies such as Boots, Superdrug, Tesco, etc. So I doubt there will be big impairments if any.Anyway if that article is written by a reputable company I'm sure you won't mind sharing the link.BTW I think the article is bordering on being libelous.

[jonny_five111] 28/2/2020 06:43

Also what detractors never seem to address is if the company hadnt spent money on developing and marketing a new product that was yet to launch in the reporting period and increased their inventory by a huge amount in prep for the busy H2, wouldn't they be sat on significantly more cash than they have and reported a profit? And that would be in the first half that is well.known and proved to be the much quieter in terms of revenue. 50% so....

[jonny_five111] 28/2/2020 06:37

Sorry I mean H2

[jonny_five111] 28/2/2020 06:35

Lol ok!Er anyway thats a very selective article which also appears to have large parts omitted. Perhaps the positive elements that you didnt want to highlight here? Theres actually a couple of interesting points in there and good to have a constructive view from all sides. However the cash issue isnt the concern they are making it out to be in my opinion. They have a large inventory which will see largecrecenue for little overhead in Q2. 7 weeks in and I'd be surprised if the cash postion isnt already better than that. I very much doubt they would have bought so much stock if they had a large tax bill looming that they couldn't afford to pay.The comments about the directors time of life and HC are rather laughable though. Pure hyperbole.

[jonny_five111] 28/2/2020 06:17

No. I mean who wrote that peice?

[teddy boy1] 28/2/2020 06:04

KEmCHE I am actually in New Zeland for a few weeks (3rd visit) Hence the time different!

[mbcontrarian] 28/2/2020 06:01

Company accounts.

[jonny_five111] 28/2/2020 05:58

What source is that from?

[mbcontrarian] 28/2/2020 05:47

Full disclosure, at time of writing we hold no positions in this stock.

[mbcontrarian] 28/2/2020 05:45

I did attend the presentation earlier this week and surprised no one has mentioned managements response to a couple of tricky questions. Thought I would elaborate on that and then lead on with a bit of information in the public domain investors should consider.

First one surrounding the company’s aggressive capitalisation of development expenditure (currently capitalises around £300k per annum) and continues to push to investors that the business is heavily into R&D etc. Turns out they only have one member of staff managing the R&D process and they have no facilities themselves. They manage this process through outsourced providers, meaning the IP associated with their products is not exclusive to them. They're purely a marketing company which is easily disrupted.

They were questioned about the fact that the business has grown from £4m TO to £13m TO from 2016 to 2019 but the audit fee has remained low £30k... suggests the auditors do not have scope to deliver a full and sufficient audit. Plus, they use an obscure firm in Australia when 85% of revenues derive from UK / c.70% of assets too.

The other points I think you should all be aware of are:

Where's the FD?....
We're also surprised that the company still has no Finance Director and the business has not even mentioned its intentions to recruit the right individual. This organisation lacks balance, impartiality and diversity of opinion. We're uncomfortable with the current arrangements and feel that the representation of Finance not only at the board level (aside from the exec chair) and lower down in the organisation.

Who is driving this business?
We remained unconvinced that Joseph Bayer and Kieran Callan are driving this business. After all they were bought in as experienced heads to balance out the infamous Haris Chaudary and in fairness to them, I doubt they would have expected to have had to become this involved. They’re of an age and stage in their career where they’ve accumulated wealth, this is just something to do. InnovaDerma’s products, branding and the demographic of the end customer suggest either this is a wholly outsourced operation (which is why the marketing costs etc. are sky high) or potentially Haris Chaudry retains some form of involvement as a now unrelated party – we have no proof of this at this stage but it remains a possibility. He has the cash, freedom as an unrelated party and protection of the murky legal structure to enable this. It seems hard to fathom he would disappear so easily.
International subsidiaries & structure
The business is operated from Australia, most of the production and incorporation status for the group is in the UK, with several staff in the Philippines. This structure offers huge opportunity for certain transactions to be
US
The US office is a virtual office, which any of us can rent for $99 / month - check it out! hxxps://www.davincivirtual.com/loc/us/california/marina-del-rey-virtual-offices/facility-815. We suspect that InnovaScience Inc. (its US subsidiary), was established to purely create an overly complex legal structure to enable greater flexibility and opportunity to avoid scrutiny. Think about it, all UK companies must file accounts that are easily accessible and enable investors to validate the consolidated figures.

Aged receivables
The group accounts make no disclosures surrounding the ageing profile of its trade receivables. Excluding its DTC customer base, it takes the business c.120 days to collect its debts. This suggests that a large portion of its receivables have not been impaired, when they likely should have.

Profit overstatement – Development expenditure and customer lists
The business became highly aggressive in its accounting for the acquisition of customer data in 2018 and its accounts disclosed the following;
“Costs have been recognised with the specific task of customer acquisition and include the relevant costs from digital suppliers and other avenues where the intention is to grow the lists.”
These lists are subject to impairment, but none whatsoever has been recognised, which suggests the business has zero customer attrition…
But even from a technical standpoint, this is highly aggressive accounting and is only masking marketing spend that should be attributable to revenue generation and therefore reflected in the profit and loss account. If the company were to adopt standard accounting practice (which reflects the reality of its business) we believe true profit before tax to be (£000’s):
2016 £410.30
2017 £680.41
2018 £(1,118.48 )
2019 £157.99
This indicates that profits were reported at 2.7x and 8.9x higher than reality. This has implications for cash flow as these inflated earnings create tax liabilities that require real cash to settle, which is running out. Fast.
Cash flow outlook
Our projections suggest the company has a high probability of running out of cash within the next six months. The launch of new products significantly heightens the risk associated with current inventory levels, increased taxes to settle on inflated profits and as its DTC revenue share continues to dilute vs its distribution channel partners, unfavourable terms will see an inevitable cash squeeze. The business will not be able to raise cash and we anticipate it will be taken private by the infamous individual who flogged this vehicle to honest investors in the first place, having achieved what he set out to.

[kemche] 27/2/2020 22:51

Jason, He is still up because he is writing a book. Or so I am led to believe.

[kemche] 27/2/2020 22:49

It's been "got at" by the corona virus and the market malaise.

[jason_scrap] 27/2/2020 22:48

Lol... trolling 10:46pm!

[teddy boy1] 27/2/2020 22:42

Yeh,I think that IDP has got bigger problems than the stock markets reaction to the uncertainty brought about by the Coronavirus.!

[backtogo] 27/2/2020 22:07

40p incoming

[boonboon] 27/2/2020 14:05

Main bit about that interview we've grown from 8700 points of distribution within Boots to over 18,000 that's significant growth.

[matt] 26/2/2020 14:05

The Nuthing went to dollars for me too until I switched in the top left. They should have it default GBP.

[bad gateway] 26/2/2020 12:29

Low volume trend but its held so far today and even bounced a little so the higher lows are intact. Not the worst result for such markets. Had just a few will see where it goes from here.

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