Incanthera PLC (AQSE:INC) earlier this week discussed its latest achievements and strategic goals in an interview with Proactive.
Chairman Tim McCarthy announced a substantial production order for 250,000 units of Skin+Cells for Marionnaud.
This follows earlier orders, which have doubled multiple times, now totaling 350,000 units. McCarthy highlighted the importance of this order for the company's upcoming September launch in Switzerland and Austria.
McCarthy also elaborated on the potential expansion into the Asian market.
The company is in discussions with Marionnaud’s parent company, AS Watson Group, to explore this significant opportunity. The initial focus remains on Europe, with a phased rollout in Switzerland and Austria, followed by broader European distribution as inventory builds.
Here’s what McCarthy told us.
Proactive: Hello, you're watching Proactive. Joining me is Incanthera PLC (AQSE:INC) Chairman Tim McCarthy. Tim, always good to speak to you. And you're out with more positive news from the company. You've launched another large production order for your Skin+Cells for Marionnaud, and that's on top of the previous order that was doubled and doubled again. Tell us more about the new order.
McCarthy: Well, firstly, hello again, Stephen, and thank you for the introduction. Yes, this news just keeps coming through, doesn't it? And we're delighted, of course. So, this is a result of us continuing to work with Marionnaud and preparing for our launch in September, that's going to sell a range of luxury skincare products.
The announcement we put out last week was that we had confirmed a production order for 250,000 units, and that's following on, as you just said, from orders we announced earlier in the year, which have doubled and then doubled again because they started at 25,000 and climbed up to 100,000. And that in total clearly is, do your math, 350,000 units, which is a lot of units, certainly for us as a small company to produce.
But more importantly, what that translates to in the launch in September, in the revenues that it generates for the company and ongoing profits. Yeah, so we're delighted.
Proactive: Of course. Marionnaud, whose parent company is AS Watson Group, is also targeting Asian markets for Skin+Cells. So, will this extended order help to meet some of that demand?
McCarthy: Well, the initial launch is in Europe in September, and that will be in Switzerland and Austria initially, approximately 30 stores in each. And these will be the high-profile stores for obvious reasons. And then we will work with Marionnaud to make sure the inventory is there for them to pull in from us, to ensure that those stores are replenished as and when they sell the products.
Then we will roll out in conjunction with Marionnaud to more stores in the European network as we build inventory. They obviously want to roll out on that. They continue to be very keen, very positive about all this. So, it is almost a matter of how much inventory can we supply them, and they will stick it on the shelves and sell it. In parallel to that, there's obviously the Asian market, which in the bigger scheme of things is the big market. I mean, Europe is enormous in its own right, especially for a company like ours. But the launch into Asia at some point is going to be very important for us and also, I should say, very important for Watsons as well.
Watsons are very keen for us to progress stock as quickly as we can. So, I think we've alluded to in previous releases that there are conversations going on with Watsons in the bigger group for Asia and other territories. So yes, that's active in the background. Quite where the inventory gets allocated as we produce it into Europe or Asia is, in a sense, a bit of a moot point. But the objective for us is to clear up that inventory as quickly as we can, and then we can supply it into the wider group, whether it be Europe or Asia.
Proactive: Does this put you firmly on track for the £10 million in revenue you were targeting for this year, Tim?
McCarthy: Well, that's interesting. We've just had a note produced by Stamford Capital, a second research note which follows on from the first note. And I think the numbers you're quoting are probably coming from that first note, which was March, and those revenue projections have just been updated and upgraded by Stamford Capital. Before this last note came out, whenever anybody asked me that question, I would say we will certainly meet the £10 million revenue target for this year. And when I say this year, that is our financial year, so that ends in March 2025. I would expect that we would exceed it. But whenever I was asked the question, can you put a number on what that means to exceed it, I wasn't drawn to do that. There's a little bit more clarity, a little bit more forecasting, if you like. That's been done by Stamford in the note that's just been released. We see an upgrade from just over £10 million up to almost £12 million.
It's almost a 20% upgrade in revenues, which is fantastic. And that is very much the analyst there working out what we have confirmed to date in terms of the production orders, which is 350,000 units, and then extrapolating that out to the expected revenue per unit. And that's how that number has been calculated. Then what he's done in this second note is put a little bit more detail on how that translates into margin and EBITDA, which I think is very useful for investors generally and obviously for shareholders in particular. And there's a lot of detail in the second note, which I think, as I say, would be very useful. In this current financial year, the financial year 2025, we've got just under £12 million revenue. It drops down to just over £3 million EBITDA. And that's a pretty good result in our first year of revenue generation. Not immediately profitable.
Just to remind everybody, we still continue to run a very, very lean operating model. There's very few number of staff, we outsource everything. For example, the production of all the Skin+Cells products is being done externally with our manufacturer, Frike Cosmetic A.G.. So that gives us enormous leverage in that as we increase the revenue going forward this year and next year, we continue to maintain the gross margins. But those gross margins then drop straight to the bottom line. And you see in the projections in the note that came out, that you get an increasing EBITDA percentage on that bottom line. Because essentially, once you've got past the first year, we've already met our underlying overheads, how we run the company day to day. And that is very small. So as the revenues increase, the EBITDA percentage increases and obviously the absolute EBITDA increases as well. So the model and the way that it's presented in the business, our business model, I should say, and how it's presented in the research note, is very stark, in a good way. And I think that's what investors are seeing. That's what certainly shareholders and the community of the company are seeing, that this is very much going to gear itself up for the next two or three years. And some of the projections in the note, if you just look at the top line, there's tremendous growth just in the next three years. So that is driving, I think, sentiment, the positive sentiment, it's driving the share price, which has had a good run recently. And the other thing which came out in that note for the very first time was a share price projection.
A target price is probably the best way to put it. And he's done a comparative valuation model against similar companies in the sector and this sort of cosmetic sector. Based on next year's earnings, he's putting a target price on at £2. So for any of your listeners and viewers that are immediately familiar with our share price, we're currently trading around £0.30, £0.32. And his current target price is £2. So that helps to put things in perspective. I think to say there's a long way for this to go, and it's all based on everything that everyone knows we've talked about before.
Proactive: And of course, he also points out that you have a highly scalable business model. So with 16,500 stores across Europe and Asia, I suppose as you generate this very strong cash flow, you'll be able to produce more inventory to supply those stores in the future.
McCarthy: Yes. And you hit on a key sort of financial strategy that we have because we're keen not to be using more equity monies and diluting shareholders. We've alluded before to maybe bringing in some external trade finance, which will be non-dilutive, but help us to drive the engine to build. But the absolute core strategy is to be recirculating revenue, as I call it. So as we're pulling in those revenues from each order that we deliver through to the group, we are generating quite a lot of cash. And that cash then gets put straight back into inventory build and you get a multiplier effect.
It's as simple as that. So each time we recirculate that revenue, we get a multiple of extra units from what we produced before. And that is one of the core financing strategies to build the inventory growth. And then that turns into revenue, and the quicker that's sold, the quicker that we build that inventory, then that's how you push the revenue. So, I'm very pleased with the projections that we've got in the Stamford note. I'm not going to sit here and say any more than I, you know, I do really believe that we can achieve those that say, you know, we might be able to do a little bit better, who knows?
Proactive: Well Tim, I hope you'll keep us updated on any progress as you head towards that launch in September. But thank you very much for the update today.