Good morning!

Let’s see what the RNS has in store for us today.

Today's report covers:

Finished at 3pm.

What Went Wrong at Woodford

This is a popular topic. I was calling out a few of Woodford's terrible companies years ago (Allied Minds (LON:ALM), discussed here yesterday, and RM2) but I never took the time to examine the structure of his entire portfolios.

Ed Croft has done that for the Woodford Equity Income Fund, and the results are fascinating. It turns out there were huge style shifts in this fund, and inconsistencies between the strategy that Woodford said he was going to employ, versus what he actually did.

The online webinar is here and Tamzin at PI World has also published the presentation of the results at Mello last week: here's the link. If you look carefully, you'll see myself and Mark Simpson (@DangerCapital) in the crowd!

Innovaderma (LON:IDP)

A quick note on Innovaderma, which I've been covering recently - most notably on 6 Nov, when I remarked that the company's capitalisation of its marketing expenses was "highly suspect". By capitalising these costs, and not amortising them, reported profits are higher than they would otherwise be.

The CEO, Kieran Callan has been in touch to offer me some insight on this point.

He told me that historically, the company capitalised about £3.50 per customer in terms of marketing spend, which was just a fraction of the total customer acquisition cost. They did this on the basis of the company's predominantly direct-to-consumer strategy involving lots of repeat purchases (i.e. they expected to get a healthy payback from the expense).

He acknowledged that there hasn't been any amortisation of this database yet, but said that this would change going forwards. He also said that the capitalisation of marketing costs would be lower this year, and in future, as the company has found diminishing returns from marketing spend as it grows.

As far as the auditors are concerned, he assured…

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