Skin Elements Ltd
Multi-award winning natural & organic sunscreen – Soléo Organics (including rated #1 by Environmental Working Group out of over 1700+ brands
- Dear Investor
On behalf of the board of Skin Elements Limited (Skin Elements or Company), I am pleased to present this Prospectus and to invite you to become a shareholder of the Company.
Skin Elements is a developer of natural skin care technology and formulae and holds a portfolio of skin care products including the award winning Soléo Organics natural sunscreen (Soléo Organics) and the Elizabeth Jane NaturalCosmetics (EJNC) brands. The Company aspires to become a significant national and international participant in an increasingly health conscious consumer market and in doing so aims to become the number one recognised national and
international sunscreen brand. Protection from the sun’s harmful rays has been an age-old pursuit by people all over the world. The development of Soléo Organics sunscreen formula began with the idea of offering consumers an alternative to synthetic-based sunscreens.
Soléo Organics uses only organic and natural ingredients laden with antioxidants and vitamins that nourish the skin while it protects. Skin Elements has since taken the same concept and applied the same science and technology gained to create a comprehensive range of skin care products under the Elizabeth Jane Natural Cosmetics brand.
The Company is currently in the final stages of market testing Soléo Organics in Australia and internationally which is showing consistent positive market feedback. During its development, Soléo Organics has enjoyed multiple international product awards.
At this stage of the Company’s development, Skin Elements is seeking funding for the market launch and expansive marketing and product development of Soléo Organics and future product development, including its natural cosmetics range under the EJNC brand.
In an increasingly health conscious consumer market, Skin Elements has a significant opportunity to establish itself as a significant player in a market segment that is expected to grow. Increased brand awareness together with the formalisation of anticipated distribution arrangements and establishing a digital presence will provide a platform to develop growth in sales revenue which will drive the value of the Company.
The Prospectus contains detailed information about the Offers and the current and proposed operations of the Company, as well as the risks pertaining to an investment in the Company. Potential investors in the Company should carefully consider those risks (detailed in Section 5 of the Prospectus). I strongly encourage you to read the Prospectus carefully and in its entirety before deciding whether to invest in the Company and, where necessary, consult with your professional advisers.
On behalf of the board of directors of the Company, I look forward to welcoming you as a shareholder of the Company.
Mr Peter Malone – Executive Chairman
Skin Elements Ltd was incorporated on 4 September 2015. The business is currently carried on by SE Operations Pty Ltd (previously called Skin Elements Pty Ltd) (SE Operations). At the time of Admission (to the Australian Stock Exchange at the completion of this capital raising), SE Operations will be a wholly owned subsidiary of the Company.
SE Operations is an Australian based developer of natural and organic skin care products. The Group holds a portfolio of skin care products comprising its leading brand, the Soléo Organics natural sunscreen (Soléo Organics) and it’s nearly developed Elizabeth Jane Natural Cosmetics (EJNC) product range, which are made from organic and natural ingredients.
The Company’s mission is to promote and support organic and natural lifestyles. Following Admission, the Company will provide consumers high quality skin care using all-natural ingredients as an effective alternative to synthetic chemical based products. It aspires to become the number one national and international participant in an increasingly health conscious consumer market.
The Company has a research program to formulate, develop and commercialise a range of skin care products made from organic and natural ingredients.
Over the past 8 years, SE Operations has developed a multifaceted Intellectual Property portfolio of skin care products and has spent over $8 million on research and development programs. As a result, Soléo Organics has been advanced to a point ready for market launch and commercialisation having been test marketed and having receiving a number of major international awards during its testing phase.
Sales to date from market testing of the natural sunscreen and skincare product range have exceeded 345,000 units over the test marketing stage through distributors in more than 15 countries. During the test marketing period SE Operations has been carrying out selective pre-market sales in different countries during different periods.
Soléo Organics has key regulatory approvals (refer to Section 3.2(b) in Prospectus) in place and has been developed to a stage that is ready for market launch with initial focus on the Australian market, then to be followed by New Zealand, North America, Canada, Japan, Europe and Brazil (application pending). Test marketing of the Elizabeth Jane Natural Cosmetic products has commenced and the Company is planning for further market testing.
The Group has an experienced management and technical team responsible for the development of the Group’s product range which will continue to develop the business.
Sales to date from test marketing have been generated through a sales distribution model whereby its revenue is predominantly derived from sales to wholesale distribution agents (who then on-sell direct to retailers such as pharmacies, health stores and other outlets). The Group will continue with this model and also develop its online store for web based sales capacity with plans to create a website and social media base for its customers.
It is anticipated that the majority of the Company’s revenue will come from Soléo Organics in the short to mid-term as the Company looks to launch, produce (contract manufacturing), distribute and grow this product range and brand. Following this, the Company aspires to grow as it carries out the further development and test marketing of its EJNC product range and develops further products.
THE COMPANY AND ITS BUSINESS
SE Operations has been successful at developing its effective sun protection technology (the SE Formula) using only minerals, botanical, plant extracts and antioxidants. SE Operations has been very stringent about avoiding ingredients, such as synthetic chemicals, titanium dioxide, petroleum by-products, artificial flavours and fragrances and animal derived products.
Soléo Organics Ingredients
(All Organically Sourced) grapeseed oil, macadamia oil, green tea extract, roman chamomile extract, sunflower oil, capric/caprylic triglycerides (plant oil derived), beeswax, theobroma butter, candelilla wax, lecithin, vegetable oils, cucumber extract, natural vitamin E oil.
Active ingredient: Zinc oxide (Skin DE) 22.3%
NO Chemical UV Absorbers, NO Titanium Dioxide, NO Synthetic Preservatives, NO Octyl Methoxycinnamate, NO Oxybenzone, NO Padimate O, NO Benzophenone, NO Butyl Methoxydibenzoyl Methane, NO 4 Methylbenzylidene Camphor, NO Phenylbenzimidazole Sulfonic Acid, NO Parabens, NO Diazolidinyurea, No Synthetic Colours or Fragrances.
In Australia, sunscreens are regulated by the TGA to ensure quality, safety and efficacy and have strict controls for independent SPF testing and use of GMP. Similar regulations framework exists in most countries such as the USA with the FDA. Soléo Organics has been approved for sale by main key regulatory bodies such as the Therapeutic Goods Administration (TGA – Australia/NZ), Food and Drug Administration (FDA -USA), Health Canada (Canada) and Ministry of Health (Japan) and approvals to sell into the United Kingdom and the European Union to allow free sale of the products. SE Operations is currently seeking approvals from ANVISA (Brazil).
In Australia, sunscreens are required to be manufactured in accordance with the principles of the Good Manufacturing Practices regulations (GMP) which describe a set of principles and procedures which, when followed, help ensure that therapeutic goods are of high quality. Australian based manufacturers of medicines and biologicals are required to hold a licence to manufacture. Soléo Organics is manufactured by a TGA and GMP accredited laboratory in Victoria, Australia, which is conveniently located for raw ingredient and packaging supply as well as distribution nationally. The manufacturer works on a contract basis in high class, modern production facilities.The factory has capacity to manufacture cream, lotions and serums and fill tubes, bottles and jars with automated production lines capable of producing approximately 50 million units of sunscreen or other products per year. The current annual full manufacturing and filling capabilities of the factory for all topically applied pharmaceutical, sun care and skin care products total 3,120 batches or 6,739,200 kg and annual filling capacity of 49,985,000 units. The factory presently has significant spare capacity to manufacture the Company’s products.
Elizabeth Jane Natural Cosmetics (EJNC)
The EJNC product range has undergone phases one and two of its research and development program and the testing of manufacturing processes to ensure they would meet the requirements of large scale production. The Company is in a position to follow on from the initial test marketing program having taken place so far in the UK, the Middle East and Asia to further test the market with the aim to market launch this product range.
EJNC contains only natural ingredients, plant extracts and vitamins with proven effective results. All EJNC products are ideal for sensitive skin and provide an effective alternative to synthetic chemical-based skin care products.
The EJNC product range includes the following, with plans for further expansion:
Purifying foam cleanser; Daily revival moisturising cream; Intensive recovery night cream; Snowhite brightening essence; Hydra-fresh revitalising spritzer; Gentle micro-dermabrasion facial polish; Age-defy renewal cream; Ultra c+ serum; and Delicate eyes rejuvenation gel
EJNC has been developed with:
no synthetic chemicals; scientifically proven ingredients used in effective doses; special combinations of highly active ingredients; andsuitability for all skin types
The need for skin care
The latter half of the 20th Century saw the widespread documentation and acceptance of the relationship between ultraviolet (UV) radiation, the environment and skin damage. Unprotected exposure to sunlight is a major cause of skin cancer, wrinkles, skin blemishes, inflammation and sunburn.
This knowledge has also resulted in a significant increase in the use of sunscreen and sun care products. In Australia the majority of the population regularly use sunscreen, and this trend is being followed in the USA and Europe. These products have traditionally used a range of synthetic chemical combinations to absorb or reflect UV radiation along with chemical preservatives and emulsifiers in the formulation.
Evolution of natural skin care
There is a fast growing group of consumers now seeking natural and organic skincare products and sunscreen for everyday usage.
The development of Soléo Organics sunscreen formula began with the idea of offering consumers an alternative to synthetic-based sunscreens. The commercial release of this sunscreen – Soléo Organics – is an SPF 30+, 3-hour water resistant broad-spectrum formula. Soléo Organics was invented and is manufactured in Australia.
Soléo Organics uses only organic and natural ingredients such as antioxidants, plant extracts and vitamins which are known to moisturise while providing the broad spectrum sun protection.
SE Operations has since taken the same science and technology and has created a comprehensive line of skin care products under the brand of Elizabeth Jane Natural Cosmetics which includes advanced anti-wrinkle treatments.
The personal care and beauty products industry worldwide is a growing industry and generated global sales revenues of approximately $465 billion in CY2014 and grew at a compound annual growth rate (CAGR) of 4.3% in current value terms between CY2009 and CY2014. Euromonitor has projected this market to grow at a CAGR of 2.6% and will generate sales of US$529 billion in CY2019 globally.
The skin care segment contributed US$111 billion of the overall revenues generated in the personal care and beauty products industry in CY 2014. Global sales values in skin care are expected to grow at a CAGR of 3.4% and consumers are expected to spend over US$131 billion in CY2019.
Sun care products are now considered one of the most important factors in safeguarding skin from the hazards of the environment particularly the sun. Protection from the sun’s harmful rays is a rapidly growing sector of the personal care industry all over the world.
According to Euromonitor, retail sales of sun care products segment globally contributed US$9.87 billion of the overall sales generated in the personal care and beauty products industry in CY2014 and grew at a CAGR of 5.3% in current value terms between CY2009 and CY2014. Consumers globally are expected to spend over ~US$10.1 billion in CY2015. Sun care products are forecasted to grow further to ~US$11.3 billion by CY2019 at a CAGR of 2.8%.
The Australasia sun care market experienced a CAGR of 9.1% in current value terms between CY2009 and CY2014. Euromonitor forecasts the Australasia market to continue to grow at 3.4% CAGR over the CY2014 to CY2019 period.
The sun care segment of the beauty and personal care market can be further broken down into the categories of sun protection, aftersun and self tanning products. Sun protection remains the largest category in sun care and is estimated to make up nearly 90% of total sun care market by 2018.
While there are thousands of sunscreens sold internationally, they typically have been based on chemical UV absorber blends and synthetic preservatives. Soléo Organics by comparison is a completely natural and organically sourced alternative which utilizes only micronized zinc oxide.
The sunscreen sector is a highly diverse mix of brands with major brands such as Banana Boat, Nivea, Sunsense and Hamiltons being common brands known to Australian consumers. For the most part, sunscreens use formulations based on standard chemical UV-absorber combinations, and therefore have to market themselves by high cost branding to consumers. “Green” and “organic” trends are a very powerful growth segment in the marketplace. Soléo’s uniqueness of being naturally sourced and free from chemical UV-absorbers has already proven to be a selling differentiator to the major existing industry brands. While the above competitors have solutions for certain market segments, there is no dominant market leader in any segment. Natural sunscreens are a growing segment in the marketplace, and the Group feels that it has been leading the drive in the development of such products.
Global Sales of Sun Care Products US$m
Approval from the Therapeutic Goods Administration (TGA) and the Food and Drug Administration (FDA)
Conducted market testing in the USA, Japan and Canada. Awarded #1 sunscreen by Environmental Working Group, ELLE Magazine and Sprig.com
Increase in international market testing with testing beginning in Singapore, Hong Kong, Indonesia, Portugal and the United Kingdom
SE Operations focused on further R&D improvements to increase shelf life, manufacturing process improvements and conducted patch tests.
SE Operations and its Brazilian distributor commenced the Brazilian government market approval process and targeted pre-release market test.