“The journey, however, has just begun as we prepare to launch multiple new brands that we have either successfully developed in-house or acquired during the past 12 months,” he said after the release of full-year results.
“The strength in our proven international DTC [direct to consumer] platform and retail distribution channels should allow us to replicate the success we are experiencing with Skinny Tan.”
The numbers bear out the commentary with revenues more than doubled at almost £8.9mln for the period ended June 30 as pre-tax profit soared by 325% to £1.03mln. Factoring back in one-off costs £287,000, ‘normalised’, or underlying profit would have been £1.32mln.
The City broker finnCap expects InnovaDerma’s revenues to grow to £13.9mln in the current year and then £19.9mln, giving adjusted pre-tax profit of £2.4mln and £4mln.
“Exclusive agreements with a growing and established network of retailers/e-tailers have created a global network ready to support new product launches,” said analyst Roger Tejwani.
“Management has also developed a platform to scale newly acquired brands.”
It has acquired a number of new brands, including the Stevie K makeup line and Charles + Lee, a men’s skin care range.
At the same time, Skinny Tan is going global with a launch in Korea and a roll out in Regis salons.
The firm has also launched its hair loss/hair care brand Roots both direct and via Superdrug stores.
READ: Skinny Tan firm InnovaDerma isn’t a one-product, one-hit wonder, but a paradigm-shift in the way products are marketed
"This new chapter of becoming a true multi-brand global business in life science, beauty and personal care will be exciting, challenging and I believe very rewarding,” said chairman Chaudhry.
“Our successful journey thus far has been underpinned by agility, razor-sharp focus on outcome and enabling our core team of decision makers to merge their creativity and commercial acumen using technology and social media to monitor market dynamics and create value for our shareholders.”
How DTC works
Skinny Tan is available in Superdrug, and InnovaDerma has products in Boots, GNC, Woolworths, Target and Chemist Warehouse.
Gaining shelf space in these outlets provides third-party validation, and appeases the City, which wants to see the firm’s goods stocked in bricks and mortar establishments.
But the real magic has been woven online with its direct-to-consumer approach. It has become a marketing machine.
In the past if you had the money (it required a big budget) you could dominate Google Adwords and buy web banners and skyscrapers on high traffic sites.
Chaudhry and his growing team of innovators, which now includes Amy Newman as head of sales and marketing for the UK and Ireland, have eschewed the traditional approach by creating an international brand.
Going toe to toe with the big brands
“You don’t have to be a L’Oreal, Coty or Rimmel to have a really good product," said Chaudhry in a recent interview.
“You can have a really good product and articulate the message, find a core audience, have them as the lead adopters and then build on those campaigns.”
In other words the InnovaDerma DTC team has turned the marketing via social media from an art-form into an exact science.
The finnCap analyst Tejwani pointed out that InnovaDerma’s customer conversion using DTC channels is high with the company earning £4 for every £1 it spends on campaigns.
To get to this level required creating campaigns that engaged and resonated with the likely buyers of Skinny Tan, a self-tanning product that also claims to “contour and reduce the visible appearance of cellulite”.
It was quickly realised the content had to be relatable and that women, the core market for the product, buy only when they receive a recommendation from another female they trust.
Fine tuning the model
The team struggled early on finding its core market. They had assumed, wrongly as it turned out, that the main body of buyers would be young women. In fact they turned out to be a little older: in the 44-55 years age bracket.
Finding that core market took time, experimentation and money, but the effort was worth it in the long run.
That’s because the cost per acquisition plummeted once the company found the right demographic and was able to create multiple campaigns that appealed to that audience.
The shares, up over 300% in the last year, succumbed to a bout of profit-taking as they fell 9%.
finnCap’s price target is 400p, which represents a 16% premium to the current share price of 345p.