Elixinol Global (ASX:EXL) new focus, capital raising


by Rachael Jones

Elixinol Global (ASX:EXL) CEO, Oliver Horn talks about its strategy to create a global nutraceuticals brand, with a focus on higher margin, consumer branded products, new management team, capital raising and FY 20 outlook.

Rachael Jones: Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Elixinol Global is newly appointed CEO, Oliver Horn. Oliver, welcome to FNN.

Oliver Horn: Thank you, Rachael. Good to be here.

Rachael Jones: Now, first off Oliver, could you start by giving us an introduction to Elixinol Global and what attracted you to the role?

Oliver Horn: Of course, Rachael. Look, Elixinol is a global expert in hemp-derived CBD supplements and CBD skincare products. Since entering the nutraceutical industry some years ago, I've been watching the advances in CBD and the wellbeing applications with really great interest. Elixinol is a trusted brand and CBD has good global reach into the Americas and into Europe, actually, making it an obvious choice for me to enter the category and joining this great company.

Rachael Jones: Thanks Oliver. The question a lot of investors are asking these days, what impact is COVID-19 having on your company?

Oliver Horn: Besides the very obvious challenges in managing a global workforce remotely, we've seen also a very significant channel shift in the sector. Insta-restrictions have really slowed our sales in the classical bricks and mortar environment and prevented us from expanding our distribution to some extent.

But on the flip side, we've seen in-home shopping channels, whether it's TV or online, taking a much larger percentage of our sales. We're now expecting insta-restrictions to ease in the upcoming months. For the second half of the year, we are expecting, really, sales to rebound.

Rachael Jones: Now let's talk about your strategy and products. Could we start by you telling us some more about your products?

Oliver Horn: Of course. Look, we're really excited. We've just relaunched our new Elixinol range in Europe and the US, and this new range is really repositioning Elixinol from a CBD specialist brand into a nutraceutical mainstream CBD brand. The range contains 12 products in different formats, capsules, oils, tinctures, and even skincare formats. We've combined the new range with very powerful active ingredients and made it very easy for consumers to find the right product based on their wellness needs.

Rachael Jones: What about the markets?

Oliver Horn: Yeah, we have a very good global reach. Our priority markets are the US, Germany and the UK, which are really the lead markets in global CBD sales. Our channel priorities are firmly focusing on the pharmacy channel and direct to consumer eCommerce channel. In the US, we're actually the second most trusted CBD brand and enjoy very wide distribution. In Europe, we entered around two years ago, invested about $10 million to build our business there. Have now a team of 18 on the ground, and we produce, sell and market through a network of distributors.

Rachael Jones: Excellent. Can you tell us about your product development?

Oliver Horn: Yes, we're really stepping up our innovation and new product development capability. Obviously we just launched a new range with 12 products, but we are already hot on the heels developing a new specialist CBD skincare range, consisting of eight products, really designed to harness the power of CBD in all kinds of its topical formats. That will launch in the second half of the year, with a priority going to Europe.

Rachael Jones: Now let's talk about your financials. Could you provide us with a snapshot?

Oliver Horn: We are at the moment conducting a non-renounced civil rights offer to raise up to 11 million Australian dollars, to really fund our strategy in creating a global nutraceuticals power brand. As the institutional component of this raise has already raised $5.3 million, and the retail component which is 50% underwritten, is seeking to raise another $5.6 million at 20 cents per share. So that one opens on the 12th of May and closes on the 21st of May.Oliver Horn: Following that capital raise, we got approximately $20 million in cash in the bank, plus $25 million in sellable inventory and absolutely no debt so we are really well-capitalized to execute on our strategy. Obviously, cash is only one thing, we have to have a really lean operating model and we we'll continue to get leaner and continue to focus on reducing our cash burn.

Oliver Horn: But nevertheless, while we do that, we are doing a great balancing act to continue to invest in our consumer marketing programs, to establish our brand and really drive inventory reduction, to get into a profitable position and return the company to an EBITDA profit at some stage.

Rachael Jones: Thanks Oliver. Now we understand you are new to the role, however, could you provide a comment on the share price?Oliver Horn: Yes. The sector has been hit hard due to regulatory uncertainty, predominantly in the US, but we remain absolutely optimistic that this will eventually be resolved. Our commitment to compliance ensures that we are really well-positioned to thrive in the new regulatory environment. But in the interim, we focus really on the controllables, and that means growing our Elixinol brand in the current regulatory environment and focusing on the biggest global CBD markets, US, UK, and Germany, first and foremost.

Rachael Jones: To the last question now, is there anything else that you'd like to add?

Oliver Horn: CBD is really just in an infancy in the entire category. Look, every week, every month, there's going to be new information and new research published into the efficacy of CBD. What I'm really excited about and Elixinol is really looking forward to is taking a leadership position in an emerging industry and a consumer health trend that is going to be one of those macro consumer trends that determines how consumers invest in their own personal wellbeing. That's something that we as Elixinol are looking forward to and will absolutely take a leadership role in.

Rachael Jones: Oliver Horn, thanks for the update.

Oliver Horn: Thanks for giving me the opportunity, Rachael, and have a great day.