Elixinol Wellness delivers best EBITDA and earnings since first half 2019

Elixinol Wellness Ltd (ASX:EXL, OTCQB:ELLXF, FRA:E8M) has tabled its interim financial results for the 2021 financial year, recording a 53% improvement in adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) on the previous corresponding period (PCP).  The hemp-focused ASX-lister recorded a narrower A$7.1 loss over FY21’s first half from the A$15.2 million tabled at the same time last year, and marking the best EBIDTA result since the first half of 2019.  The company’s net loss after tax was also significantly narrower, coming in at A$10.8 million compared to the A$90.3 million loss tabled in the PCP.  At the end of the period, Elixinol had nearly A$19 million in the bank to support its future operations.  “Highest margins since the first half of 2019” Elixinol Wellness Global CEO Oliver Horn said: “Despite a highly challenging economic and regulatory environment, Elixinol Wellness has delivered the best half-yearly EBITDA result and highest margins since the first half of 2019 and continued to deliver on its strategy to build a consumer-centric, high margin branded consumer goods company through the first half of the year. “We have worked hard to reposition the business for turn around and, as a result of enterprise-wide optimisation initiatives, are now in a strong position to capitalise on the improving US market outlook and Hemp Foods Australia’s (HFA) dominant market position in the growing plant-based foods category. “The UK remains challenging as a result of the uncertain regulatory environment and we are being prudent in our approach there – adjusting our investment levels and continually evaluating how best to deploy our efforts and capital. “We are especially delighted to have attracted crucial new leadership talent to accelerate our turnaround and deliver an aggressive new product development agenda. “With our tightly controlled and reducing cost base, healthy performing HFA business, improving US trading conditions and an optimised product range, we are feeling increasingly positive about our outlook.” Next on the agenda Because of growing stability in the US’ CBD market, improved store traffic and the growth of the plant-based food and cannabidiol spheres, Elixinol is looking forward to what it believes will be an even more positive second half. The ASX-lister maintains new product launches and improved eCommerce capabilities will contribute to new revenue growth, while costs will continue to be managed down as Elixinol completes the transition to a fully outsourced supply chain. In the short term, the company will focus investment in the US and Australia while keeping an eye on the evolving UK landscape and regulatory process. Ultimately, EXL believes its product and brand development positions its Elixinol and Hemp Foods Australia product ranges in line with consumer growth trends. Financial performance Following a busy first half, EXL has tabled its interim financials, revealing that its business brought in just over A$5 million in customer receipts in FY21’s first half. However, the company’s A$4.8 million revenue result is down 39% on the PCP, which Elixinol attributes to a decrease in foot traffic at brick-and-mortar retailers because of the pandemic and regulatory uncertainty stifling trade in the UK. Around 40% of revenue came from eCommerce channels of FY21’s first half, while Elixinol continues to pursue online retail opportunities in the financial year’s second half. Operating expenses, excluding non-cash impairment charges and share-based payments, for the period totalled $10 million — down 44% from the A$17.7 million recorded at the same time last year. Ultimately, Elixinol says a substantial cost reduction program has driven performance improvement across all of its business units. The company moves into second half FY21 with an annualised cost base that is 44% lower than that recorded in the first half of FY20. Second-quarter highlights Speaking to its business’ performance over FY21’s June quarter, Elixinol noted that its Hemp Foods Australia arm continued to improve, tabling a 19% revenue increase on the previous quarter. Through the second quarter, another Hemp Foods Australia product was listed in Costco (NASDAQ:NA:COST) for distribution and a new Asian export customer for the business’ Hemp Gold Seed Oil was onboarded, further contributing to the quarter’s growth profile. On June 9, 2021, Elixinol appointed Health House International Limited (ASX:HHI) as the exclusive distributor for its medicinal cannabis products, formulated for the Australian pharmacy channel. The distribution agreement, which runs for a two-year term, will expand Elixinol’s reach into Australian doctors and 5,700 pharmacies and is aimed at providing products under the Therapeutics Goods Administration’s (TGA) Special Access Scheme. In light of the Health House Agreement, Elixinol decided to terminate its distribution agreement with PharmaCann Pty Ltd in late July. Meanwhile, over in the Americas, Elixinol’s business recorded a 4% improvement on the previous quarter, with brick-and-mortar retail distribution and eCommerce performance driving the modest growth. Looking ahead, the ASX-lister claims recent market data shows an improving market and category outlook for its Americas business. Although the CBD category has not yet returned to pre-pandemic levels, Elixinol expects an increase in consumer acceptance and use of CBD products, combined with improving retail foot traffic. Finally, after a stronger end to the March quarter, dynamics in the UK market shifted again during the second quarter of FY21, driven by a stalled UK regulatory process, which created uncertainty for CBD products. As a result of long-suppressed trading periods due to COVID-19, Elixinol’s European business recorded $117,000 in revenue over the June quarter, compared to the $215,000 tabled at the end of March. Elixinol Europe maintains it is taking action by reducing consumer price points and lowering operating costs to navigate through this challenging period.