Elixinol Global (ASX:EXL) key messages from 2020 AGM

Interviews

by Rachael Jones

Elixinol Global (ASX:EXL) CEO and Executive Director, Oliver Horn talks about measures to reposition the business, initiatives in E-commerce and distribution, its decision to retain Hemp Foods Australia and outlook for Hemp and CBD based nutraceuticals.

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

Oliver Horn: Thank you very much, Rachael, for having me.

Rachael Jones: Now Elixinol Global is a hemp and CBD nutraceuticals brand with global distribution. What range of products does this cover?

Oliver Horn: Yeah, think about three predominant categories. So though we have a CBD digestible, so ingestible products, which are nutraceuticals basically, then we are having a CBD based skincare range, which just has been introduced into the European market, and thirdly, we're very proud to also have one of the most established hemp foods brands in Australia with Hemp Foods Australia. So three broad categories, all catering to different health and wellness needs, really.

Rachael Jones: Thanks Oliver. Now you recently held your AGM. What were the key messages that came out from that? Let's talk first about financials.

Oliver Horn: Sure. Look, first, the Q2 unaudited revenues were at $3.4 million down on approximately 24% in the quarter of the previous quarter. And that's really down to a really tough trading environment in the US predominantly due to the COVIT impact that we're seeing there. However, on the flip side of that, we're seeing very strong growth from our European businesses, which was up a healthy 39% in the first quarter, so that's a great result for us. And what's really been encouraging them importantly for us is that we're shifting our revenue to much more, Elixinol branded consumer products, which are now accounting for 65% of our revenue, which are generating us a higher margin. Then I think, which is really topical given the COVID environment and the top line performance that we're seeing at the moment, we also dramatically reduced our quarterly operating cash outflows by almost 50% or $8.3 million in Q2 versus Q4 last year. So significant cost out and we're seeing some revenue growth returning.

Rachael Jones: And what can you tell me about e-commerce and your distribution?Oliver Horn: Yeah, so we are not resting until we have full distribution everywhere, that's our ambition. But given also the COVID environment and the fact that we are building a strong consumer brand, we're really focusing now on the consumer channel to build the most resilient in a COVID environment. That for us really means focusing on e-commerce, so we rolled out globally, our new eCommerce technology. It's now implemented across the globe in Europe, UK, and the US. And we're constantly optimizing that investing, driving traffic to our sites, which is really, really exciting. But then we are also investing heavily into our pharmacy distribution, where we just launched into UK pharmacy markets at the big advance , as pharmacies remain open, they're an essential business, and they can explain the CBD benefits greatly. And then they're really, really successful in Europe with a TV shopping channel for in home shopping. You don't have to leave the home to shop and that's been a great success. So we have sort of multichannel strategy. That's really starting to work for us to great effect.

Rachael Jones: And what can you tell me about your new range of products?

Oliver Horn: Yeah, it's like we are pretty much a new company all around. I would argue because in March we released our new nutraceutical range, the CBD range and seven out of our top 10 best selling products are already from those new range, that has only been launched literally four months ago. So it's great results, they're working well. Then we launched our new skincare range, CBD skincare range literally last week, it went up for sale and that is a fresh new range, which is really exciting and opening up new opportunities because skincare CBD is very differently regulated, or allows us access to new channels. And then we have the Hemp FOods Australia product range, which has a number of new products that are hemp based with great health and wellness benefits as well. So pretty much everything that you see from Elixinol at the moment it's new, fresh, and highly relevant given the environment that we're in.

Rachael Jones: And you decided to retain ownership of Hemp Foods Australia. Can you talk me through the decision around this?

Oliver Horn: Yes. So Hemp Foods Australia, it's one of our foundation businesses actually, we've been operating it for a very long time. It's one of the most established hemp food businesses in Australia was a very strong consumer brand. And we are really proud that we've seen on the audited revenues in the first half growing by 25%, despite a challenging context. And importantly, we've improved our profitability to a great, great extent. So it was for us a pretty easy decision to retain it when after the sale didn't go through, particularly in light that we are making a play for Australia to bring our Elixinol branded CBD products to Australia later in the year, with changing regulations. And that means we can use Hemp Foods Australia as a platform, as a route to market platform to bring our products to market here. And that's a really exciting prospect for us.

Rachael Jones: Now let's talk about the regulatory environment and the outlook for growth. You've mentioned previously, the need for better regulation. What is the current situation and will this benefit Elixinol?

Oliver Horn: Yeah, there's two aspects that I want to talk about. One is, we need to give consumers assurance that they consume quality product. And I think that only happens with increased regulation in the market. And certainly we, as a trusted player who focuses greatly on transparency, compliance, and quality, we welcome any regulations that create a higher benchmark for consumer safety and efficacy of products. So we're firmly positioned to participate in this regulatory environment. The regulatory environment is very different around the world. In the US it's pretty much status quo, nothing has changed. It's very unregulated. Europe, very dynamic, there's another food application process, which the EU currently put on hold, but in UK, it's progressing. We are firmly progressing in the UK to continue trading throughout the next year, when the regulation comes into play. And then very excitingly for us, the TGA is assessing through D schedule CBD to schedule three, which means as of next year, we expect that CBD becomes available in pharmacies. And that is a huge opportunity for us that we are now working actively towards realizing.

Rachael Jones: That's great news Oliver. Now, to finances and strategy recently raised around $11 million to grow the business globally. What metrics can shareholders look out for in the coming quarters?

Oliver Horn: We don't really publish a forecast, but I think for shareholders, it's really important to know that as of the June quarter, we ended the June quarter with $16.8 million of cash in the bank. So that's a really strong position to be in. But we also significantly reduced our operating profit, as I mentioned before, and we're seeing some good growth coming from our markets outside of the US. And couple that with a very new range and a portfolio lineup. We talked about the digestibles, skincare range. And a good global distribution. We are thinking that we are in a very strong position for a second half of the year, which will hopefully see some improvements.

Rachael Jones: And to the last question now Oliver. Is there anything else you'd like to add?

Oliver Horn: Yes, I like to share with everyone that at Elixinol, our mission is to make a positive contribution to people's health and wellness, and the planet through the power of hemp product. And that's really the reason why we get up every morning and go to work. Everybody, yeah, the paycheck is one thing, but it's about having a purpose and making a difference. And that's what we here to do with our product every day. And with a strong brand and a fresh portfolio, we're also well positioned to succeed in the really globally high growth category of CBD and wellness products. And so I firmly believe that despite some of the really short term challenges that we see, we are very optimistic and looking forward to what the future holds. And look, we haven't played all of our cards. We've got still surprises up our sleeve. So second half and new product. And I can't wait to talk to you again in a couple of months' time.

Rachael Jones: Oliver Horn, great to catch up again today. And thanks so much for that time.

Oliver Horn: Thank you, Rachael. It's been a pleasure. Have a good day.


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