The Elixinol Global Ltd (ASX: EXL) share price is pushing higher on Thursday despite it announcing an $83.5 million full year loss.
In afternoon trade the cannabis company's shares are up 3.5% to 44.5 cents. They were up 9% at one stage to 47 cents.
How did Elixinol Global perform in FY 2019?
For the 12 months ended December 31, Elixinol reported a 16% year on year decline in revenue from continuing operations to $27.2 million.
Management advised that this was due to a 34% decline in bulk sales due to the influx of cheap, poor quality product and a 56% decline in private label sales due to the termination of low margin private label contracts.
One positive was that the company delivered a 35% increase in high margin Elixinol branded and co-branded product sales during the 12 months. Elixinol branded product sales now represent 59% of total revenue, up from 37% in FY 2018.
The company's continuing operations reported an EBITDA loss of $22.9 million and a loss after tax of $83.5 million. This reflects non-cash asset impairment charges of $48.8 million due to a reset of expectations. These include $39.4 million goodwill and $8.4 million for excess inventory provisions.
Elixinol had cash and cash equivalents of $20.4 million at the end of the period.
Management commentary.
Elixinol's CEO, Stratos Karousos, was pleased with the performance of Elixinol branded products in FY 2019, but acknowledged that its overall performance was disappointing in the second half.
He said: "It's pleasing to see sales of Elixinol branded products have increased 35% in FY2019. This highlights Elixinol's leadership team are executing on our refined strategy of focusing on high margin Elixinol branded hemp-derived CBD products. Although revenues in Q3 and Q4 FY2019 were disappointing, we undertook swift action to divest non-core assets and simplify the business model."
Mr Karousos appears confident that its cash burn rate will improve greatly in the future.
He added: "With a continued focus on cost control and the execution of various working capital reduction initiatives, the future quarterly cash burn rate is planned to be lower than historical run rates. Additionally, our operating budget, which is not predicated upon regulatory development in the US and Europe & UK, provides a pathway towards positive cashflow and increased gross margins."
Outlook.
No guidance was provided for FY 2020, but management appears optimistic thanks to new product launches.
Mr Karousos said: "I am excited about our total brand refresh which will be launched in March 2020. Our Elixinol branded product range has been optimised to suit customer demands and we have a pipeline of new and innovative products which will be launched during 2020."
"We will continue to focus on return on investment to enable the company to leverage the significant capital that has been deployed in operations, eCommerce, raw materials and key people. Elixinol's refined strategy on hemp derived CBD in the US, Europe & UK ensures Elixinol is well positioned to grow its high margin branded products, despite prolonged regulatory developments, with a pathway to positive cashflows and will be able to capitalise on the expected global growth in the hemp derived CBD market in 2020 and beyond," he concluded.
