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InnovaDerma – from “confident in meeting market expectations” to “expect… below our earlier expectations” in less than a month!

By Steve Moore | Thursday 8 March 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Writing on InnovaDerma (IDP) in January with the shares towards 230p, I concluded at least ahead of further comfort of the second half weighting expected actually being delivered, I avoid. Now a 10:13 “Trading Statement”. Uh oh…

“The board continues to expect the second half year to outperform the first half significantly, however revenue growth for the year will now be less than anticipated at the time of the interim results… The profit before tax is now expected to be similar to FY17”. This is stated to be as “significant investment made across the business over the last six months” and “lower than expected orders placed by Superdrug for Skinny Tan despite the brand's continued growth”.

The company notes its “direct to consumer platform for Skinny Tan is performing well… The group is in discussions with several new distribution partners for the ranging of Skinny Tan” but this all compares to it in January stating it “remains confident in meeting market expectations for the current financial year and has much greater revenue visibility for the second half than in prior years” and reiterating in half-year results less than a month ago; “the board remains confident in meeting market expectations for this financial year”!

Those saw house broker finnCap looking for adjusted pre-tax profit of comfortably over £2 million, comparing to £1 million last year. I noted the valuation only became more interesting on strong earnings growth forecast, but with the profit warning seeing this at best now delayed, I’ll continue to monitor trading progress but, even with the shares currently down below 150p, continue to avoid.

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