Elixinol Expects 10-15% Revenue Growth in Q3

Oliver Horn goes off to a flying start as Elixinol looks to deliver growth in revenue in Mr Horn's first full quarter of operating as CEO.

Elixinol Global Limited (ASX:EXL) is pleased to announce a trading update for the September quarter (Q3 FY2020). Despite the COVID-19 situation impacting Elixinol's markets, the Company expects to deliver 10-15% quarter on quarter revenue growth in Q3 FY2020. The September quarter is the first full quarter through which Elixinol has operated under Group CEO, Oliver Horn and all regions are on track to deliver revenue growth for the September quarter, whilst having materially reduced operational and corporate costs, resulting in a cost base 45% lower than FY2019.

We are delighted to be seeing very encouraging results across all our key reporting metrics and through each business unit as a result of the decisive repositioning efforts implemented through H1 FY2020. Elixinol's Group CEO Oliver Horn

Mr Horn went on to say "Our strategy to focus on Elixinol branded consumer goods and higher-margin consumer channels, such as eCommerce, is translating to revenue growth and margin improvement. Our reduced cost base has significantly reduced operating cash outflows."

"Elixinol's US business has returned to a state of growth, despite very challenging trading conditions. We are pleased with the substantial progress made in Europe, where we secured broad in-store distribution with the Well Pharmacy chain and are currently launching our new elixinolSkin range with Boots Ireland. I am now confident that we have made the right strategic choices to create a sustainable growth business and we are looking forward to leveraging the solid foundations we have built as we approach key seasonal trading periods."

Repositioning leads to margin and performance improvements Under new group leadership and with a renewed board, in H1 FY2020, Elixinol's business was aggressively repositioned, leading to substantial cost reductions and improved cash-flows.

Key initiatives included:

• Extensive leadership changes at Board and operational level, bringing new strategic, commercial and governance disciplines

• Substantial operational and corporate cost reduction program completed in June 2020, leading to an annualised cost base which is approximately 45% lower than FY2019

• Implementation of a sophisticated e-commerce backbone via a customised Magento, to drive higher-margin sales and support expected increased demand for Elixinol branded products

• Successful relaunch of the Elixinol brand along with a new global product line-up

• Development of key new listings in pharmacy and TV shopping channels

• A review was conducted of the Hemp Foods Australia (HFA) business. The improved performance led to the decision to retain HFA within the Group The above initiatives have led to increased revenues across all of Elixinol's regions, higher margins and a significantly reduced cost base. As a result, the Company is on track to report 10-15% revenue growth for Q3 FY2020 versus Q2 FY2020. While these are encouraging improvements, Elixinol operates in regions where COVID-19 continues to impact trading conditions, particularly in traditional retail environments

America's business returns to growth

Revenue for Elixinol Americas has returned to growth in Q3 FY2020 versus Q2 FY2020. Elixinol has repositioned itself towards the higher-margin, consumer-led branded nutraceuticals category and is exiting lower-margin bulk and private label. The Company's focus on the use of e-commerce for driving sales through the COVID-19 operating environment, and the sale of high-margin Elixinol branded products, has shifted the margin mix, leading to a positive impact on overall profitability.

To support this growth, Elixinol created leaner, more agile teams and significantly reduced cost whilst remaining focused on its strategy to create a profitable global nutraceuticals brand. Given the Company's strong inventory position and in line with a capital-light strategy, in-house manufacturing was temporarily decommissioned while the economics remain in favour of an outsourced manufacturing model.

European business gathers pace

In August, it was announced that Well Pharmacy, the UK's third-largest pharmacy chain with 760 stores, had launched 5 Elixinol branded CBD products (blended capsules: Dreams, Serene, Turmeric, Immune Boost and Digest) across 80 stores. As of late September, Well Pharmacy will expand distribution to more than 500 stores and add three new custom-developed products into the range. The new products are water-soluble tinctures (Serene; Turmeric and Dreams) containing active ingredients.

The elixinolSkin range is being launched in Boots pharmacies across Ireland, with the complete range of 8 CBD-derived skincare products to be available in 74 of Boots' major stores across its network of 87 stores. The launch is being supported by an extensive Christmas gifting program and an integrated marketing campaign across radio, print and digital media formats. This launch is a breakthrough which follows over a year of extensive research and development. The elixinolSkin range offers new growth opportunities for Elixinol in the high growth, global skincare category.

Hemp Foods Australia (HFA) update

HFA continued to grow with improved margin performance throughout Q3 FY2020. In tandem with marketing HFA branded products, the team's capability is being leveraged to develop bespoke Elixinol products for distribution in Australia. These new products will support the 3 agreement through which PharmaCann will distribute Elixinol products under Schedule 4 of the Therapeutic Goods Administration's (TGA's) Special Access Scheme. The Company continues to monitor for emerging profitable opportunities following the TGA's preliminary conclusion on 9 September 2020

For the latest news and updates on Elixinol, click here

Disclaimer: Past performance is not an indicator of future performance.

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Mark Page
Mark Page

Mark is a UK born investing enthusiast based in Sydney. He has a keen eye for technical analysis and is paying close attention to the ongoing legalisation of cannabis for the health benefits, opportunities, and emergent industries that will follow.

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