London listed Innovaderma PLC specialises in the manufacture, research and marketing of clinically proven products in the fields of life science, beauty and personal care. The company’s products span the globe and they currently have a presence in Europe, US, Australasia, Asia and Africa. Innovaderma’s portfolio of brands contains several well known names including lead products Skinny Tan and Roots.

Skinny Tan, a highly rated self tanning brand is the crown jewel in Innovaderma’s portfolio with it currently accounting for 90% of group revenue and sales are still growing strongly. In a testament to Innovaderma’s ability to develop and market new products in house the companies latest personal care product Roots is gaining traction quickly. Roots is a topical hair care range which aids hair regrowth and thickening, the range is highly rated with consumers and sales are growing quickly. Innovaderma recently announced that Roots will be stocked in 432 of Tesco’s 3,000+ UK stores from November, this follows on from an earlier announcement that the range will be listed in 359 of Boots largest UK stores from August. The listing in Tesco’s and Boots looks set to significantly increase Roots sales and exposure and it seems likely to contribute a significant portion to group revenue going forward. Prior to these announcements UK retail sales of Roots were restricted to Superdrug due to an exclusivity deal which expired recently. Long term, analysts expect Roots sales to grow exponentially and believe it has the potential to over take Skinny Tan revenue due to the size of the target market.

One significant thing to bear in mind with Innovaderma’s recent Tesco and Boots news for Roots is that Innovaderma’s lead product Skinny Tan is also currently constrained by a similar exclusivity deal with Superdrug, meaning UK sales are restricted to Superdrug and the companies own DTC website. The Skinny Tan exclusivity deal expires in February 2019 and with Innovaderma now already having a presence in both Boots and Tesco it looks like a near certainty that Skinny Tan will be stocked in both these once the exclusivity deal expires. Whilst the Superdrug exclusivity deal was beneficial in getting the product launched Skinny Tan has now outgrown such a deal and it’s expiration should provide a major boost to Skinny Tan sales through 2019 and beyond. It’s worth noting that Skinny Tan is already stocked in Boots Irish stores, in addition it seems highly likely that we will see further announcements with other retailers between now and the end of the Superdrug exclusivity.

Innovaderma is forecast to post revenue of £11, £14.4 and £17.5 million for 2018, 2019 and 2020 respectively and earnings per share of 2.6p, 7.4p and 12.4p, one thing to note with these forecasts is they were issued before recent Roots news so they are on the conservative side. The shares are currently sitting at 140p resulting in a very undemanding p/e ratio 11 for 2020. There are several catalysts on the horizon which could propel forecasts higher so now seems like it could be a good time to hop on board.

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