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MMJ Group investee Harvest One anticipates further sales volume and revenue improvements

Last updated: 08:37 05 Nov 2020 AEDT, First published: 15:06 04 Nov 2020 AEDT

MMJ Group Holdings Ltd -
Harvest One remains optimistic regarding its strategic review to refocus on its core strengths

MMJ Group Holdings Ltd (ASX:MMJ) (OTCMKTS:MMJJF) investee Harvest One Cannabis Inc (CVE:HVT) anticipates sales volumes, net revenues and adjusted EBITDA to improve this fiscal year due to a full year of new cannabis 2.0 derivative products sales in Canada, improvements in gross margin and a continued focus on reducing costs.

Harvest One’s initial Cannabis 2.0 product offerings include a selection of pain relief topical creams, oils and vape pen cartridges.

In April 2020, initial load-ins of the LivReliefTM cannabis-infused topical creams were shipped to Shoppers Drug Mart, making the company one of the first to market with infused topicals in Canada.

As well, Cannabis 2.0 offerings were listed in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario, with the first shipments made in April 2020.

The cannabis-infused topical creams utilise Delivra’s transdermal technology designed to penetrate the skin, enabling effective, fast absorption and controlled release of active ingredients directly to the target area.

Harvest One plans on selling its LivReliefTM cannabis-infused topical creams in the US marketplace when regulations permit.

Impact of COVID-19

Government measures to limit the spread of COVID-19, including the closure of non-essential businesses, have negatively affected the company’s operations as total net revenue for continued and discontinued operations have contracted by an average of 20%.

However, net revenue of continued business for the fiscal year ended June 30, 2020, improved by 35% compared to the same period last year.

For the time being and until economies stabilise, Harvest One has shifted its strategic approach in the manner in which it operates its business, provides affordable and high-quality products to its customers, and ensures that its workplaces have appropriate measures put in place to limit social interactions and enforce social distancing measures.

At the same time, the company has also taken steps to alter its marketing methods, conserve cash and maintain an overall strategic direction to improve the quality of life of its consumers.

Strategic approach

Harvest One has defined its strategic approach with its business continuity plan during this global crisis as follows:

  • Prioritising the physical and mental health of employees;
  • Prudent cash management by limiting expansion and altering marketing efforts to focus on the already established markets of the company;
  • Ensuring the safety and cleanliness of all of its products and workplaces;
  • Ensuring continuity of health services and treatment for consumers, following appropriate safety guidelines;
  • Maintaining continuity of production operations and the ensuing supply chain; and
  • Building a strong strategic position and ensuring sales growth in the Cannabis 2.0 market.

The production and sale of cannabis and cannabis-related products were deemed an essential service in Canada and Europe, following for the continued operations of the cultivation and medical and nutraceutical segments, respectively.

Pharmacies, grocery stores and convenience stores where Dream Water and LivReliefTM products are sold are considered essential retail in North America.

Harvest One implemented a strategic plan to refocus on the company’s core strengths of product development, brands and distribution, while also committing to cost reductions prior to the pandemic in the second quarter of fiscal 2020.

This strategic plan remained in place and the company was successful in reducing operating expenses during the fourth fiscal quarter ended June 30, 2020.

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