Interim Report 2018

Integumen (LSE: SKIN), the non-animal-testing, skin care and cosmetic businesses developing and commercialising technologies and products for consumer use today announces its interim results for the 6 months ended 30 June 2018.

Performance Highlights

  • During the first half of 2018, Innovenn’s Labskin, the non-animal-testing platform, transitioned from single sales of laboratory grown human skin test kits, to a fully integrated clinical test service provider. Service contracts are now in place with multiple clients ranging from £6,000 up to £35,000, in the first half of 2018 on a 50% upfront and 50% payment on completion later in the 2018. Medium to long term clients, that have taken some time to close are now capable of generating more than 25 times the average price of a Labskin test kit.
  • One medium size biotechnology company contracted Labskin to assist in the development of a formulation for maximum efficiency for non-medical biological ingredients to treat eczema.
  • A global hygiene and health company has engaged Labskin to address the odour causing bacteria on their products, along with alternative ingredients to reduce irritation. This is an ongoing service provision project that has allowed that client company to move away from the difficult and inconsistent human volunteers and animal testing in laboratories.
  • 2 of the top 10 cosmetic corporations in the world have engaged Innovenn’s Labskin team to test their products with skin friendly bacteria. This allows the client companies to check that their existing and future launch products keep a good skin balance and reduce the incidence of irritation reactions to their formulations. This is vital to their consumer customers.
  • Sales and marketing efforts of Visible Youth failed to meet expectations.
  • TSPro sales forecasts did not meet the expectations of the Board.
  • Stoer Skincare has seen sales commence after receiving an award for best Facial Cleanser/Exfoliators at Shortlist Men’s Grooming Awards 2018.

Financial Results for the 6 months ended 30 June 2018

  • Revenues of £149,000, EBITDA loss of £729,000, amortisation and depreciation of assets of £165,000 and an intangible asset impairment of £500,000;
  • Operating loss of £1,454,000;
  • During the period the Group raised £500,000 (before expenses) through a share placing, which we are using for product development, sales & marketing and working capital;

Post Period end

  • A Share Purchase Agreement to conditionally acquire a 9.35% stake in Cellulac plc was signed on 2 August 2018 from Gerard Brandon and Camillus Glover in exchange for shares representing c19% of Integumen. Completion of this investment is expected at the end of September.
  • In detailed RNS announcements of 16 July 2018 and 19 July 2018 the Company announced that it had conditionally raised £719,500 in aggregate, by way of a conditional placing to raise £219,500 and a conditional subscription to raise £500,000. £229,500 of the placing and subscription shares were allotted on 6 August, with the balance of £490,000 scheduled to complete on or around 24 of September.
  • Gerard Brandon also subscribed for an additional c2% of Integumen shares in the above mentioned subscription.
  • Integumen and Cellulac plc entered into a commercial agency agreement where:
    • Cellulac granted Integumen an exclusive licence to sell Cellulac’s Algzym-branded and white labelled products (including Omega 3 and bioplastic ingredients) and to license Cellulac’s technology to third parties;
    • Integumen has been granted exclusive 5-year licences for the territories of the United States, Canada and Mexico; and
    • Integumen and Cellulac will share revenues equally (after production costs) from Integumen’s sales and licensing activities under the Licence Agreement.
  • Gerard Brandon, who is CEO of Cellulac PLC joins the Board and took over as CEO of Integumen PLC on 6 August 2018.
  • Camillus Glover the CFO and COO of Cellulac PLC joins the Board and took over as head of operations of Integumen PLC on 6 August 2018.
  • Chris Bell the current CFO of Integumen, will step down as CFO but will remain to support the transition through to the end of September. Chris is stepping down from the Board of Integumen, effective immediately.
  • Camillus Glover is today appointed the new CFO of Integumen plc. Camillus will also remain as COO. Camillus was a former Operations Director at Campbell Bewley Group and COO at Alltracel Pharmaceuticals PLC. He is a member of the Institute of Chartered Accountants and has been COO and CFO in Cellulac plc since 2012.
  • The Board has received an offer from director Donald Nicholson to acquire the Company’s skin care businesses. Donald has resigned as a director and steps down as an advisor to the skin care divisions of Integumen with immediate effect, to avoid the conflict of interest that arises in relation to the Board’s consideration of his offer.
  • The Board, after reviewing the indicative terms, has declined the initial offer, however management remain in discussions on potential offers for one or more of the skin care assets.

Since his appointment the new CEO has undertaken a strategic review of the different businesses within the Group. It is expected that  the Board will seek to  divest the Group of under-performing assets or those requiring significant funding. Such a course of action is likely to result in a charge to the statement of comprehensive income, so an impairment of £500k has been provided for, in anticipation of this outcome. Further announcements will be made shortly.

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