Elixinol Global Ltd (ASX:EXL) (OTCMKTS:ELLXF) (FRA:E8M) is accelerating its growth strategy following a global re-set of initiatives boosted by a strong balance sheet and lower costs with improved operational efficiencies as well as new development catalysts through its brand relaunch and Hemp Foods Australia.
Under new group leadership and with a renewed board, Elixinol’s business has been substantially repositioned to a more focused business with substantial cost reductions and improved cashflows.
A substantial operational and corporate cost reduction program was completed in June 2020, leading to an annualised cost base approximately 45% lower than FY2019.
Channel growth in e-commerce
FY2020 has also seen a shift in strategy towards ‘digital first’.
Owning this direct consumer relationship has become an essential attribute to generating value and improving profitability.
Elixinol’s focus on building e-commerce capabilities has been rewarded, with this channel contributing to 33% of overall group revenue in FY2020, up from 26% in FY2019.
The company bedded down the Magento e-commerce platform and progressed its transition to an integrated in-house, web services and digital marketing team.
This enables Elixinol to reduce external agency costs and provides the agility needed to successfully compete in a digital environment with rapid content creation.
Advancements in marketing and web services improved e-commerce customer acquisition with a 10% increase in new website users and 20% higher conversion rate in Q4 FY2020.
Americas reported revenue of A$8.5 million for the financial year ended December 31, 2020, and adjusted EBITDA losses of A$14.2 million loss for the year.
A significant reduction of losses was achieved in the second half of A$4.6 million compared with A$9.5 million in the previous half, bringing the company a further step closer towards profitability.
Revenue for Elixinol Americas declined in FY2020, especially in the last quarter, as sales were impacted by enforced lockdowns related to COVID-19.
An entirely new leadership team was put in place to accelerate the US business transformation towards a leaner consumer goods model.
Crucially, Elixinol enhanced its digital marketing capabilities, both in terms of leadership capabilities as well as through an improved agency roster.
To further optimise the business and adjust to a COVID-19 environment, Elixinol also expanded its out-bound calling and telemarketing capability providing a cost-effective way to service retailers.
Elixinol branded capsules and tinctures continue to be Elixinol Americas’ top selling products with Daily Balance being the best-selling capsule product.
European business growth
Revenue for Elixinol Europe improved slightly over the year. Expected growth was impacted by enforced COVID-19 lockdowns experienced during the key trading periods in the December quarter.
However, very positive progress was made throughout the year winning new distribution agreements.
The European segment, which includes Elixinol BV and Elixinol Limited (Elixinol Europe), reported revenue of A$2.3 million for the year ending December 31, 2020, as well as EBITDA losses of A$4.5 million.
Leading UK CBD provider
With resilient pharmacy and TV shopping channel relationships in place, Elixinol is emerging as a leading UK CBD provider.
Enabled by the recent over-subscribed capital raise, the rapidly developing market puts Elixinol in a favourable position to also pursue M&A opportunities to create a global business of scale.
Hemp Foods Australia
HFA achieved strong growth with improved margin performance throughout FY2020 and now, with leaner operations, accounts for one third of Elixinol’s Group revenue. It is the largest and one of the most recognisable hemp foods brands in Australia.
Australia reported revenue of A$4.2 million for the year ended December 31, 2020, (vs FY2019 loss of A$3.5 million) and EBITDA loss of A$300,000 (vs FY2019 loss of A$2.2 million).
The strong EBITDA improvement was driven by shifting the portfolio mix to higher margin segments, new cost optimisation measures and an increasing overall productivity.
Under a new agreement, HFA also started supplying global retailer and warehouse club, Costco in Q4 FY2020 with its new line of Australian grown hemp seeds.
Throughout Q4 FY2020, HFA also launched a new Organic Hemp Gold™ Protein Powder and Seed Oil range aimed at further premiumising HFA’s portfolio.
Elixinol Group’s FY2021 priorities will continue to reflect the company’s transformation into a leading global hemp derived health & wellness consumer goods company with a strong reputation for quality and innovation.
The year ahead will be one of further global market expansion, seeking profitable scale opportunities, an accelerated shift towards digital channels and a heightened emphasis on R&D and Innovation initiatives.
After resetting its entire global business and with favourable regulatory developments across the globe, Elixinol is now in an enviable position to be able to create a sustainable global consumer goods business with a purpose.