LONDON, ENGLAND / ACCESSWIRE / March 31, 2022 / Love Hemp Group PLC, the brand-led consumer goods company focussed on CBD health and wellness solutions, is pleased to announce its unaudited interim results for the six months ended 31 December 2021 (the "Period").
Highlights:
- Revenue of £1,736,817, down from £2,379,144 for the previous period.
- Gross margin of 20% down from 48% for the previous period, (see notes below).
- Reduction in Revenue because of repositioning product line and brand away from discounting.
- Reduction in gross margin due to some one-time costs and due to increased costs with brand building.
- Increase in Operating Loss for the Period to £5,085,143 compared to the previous period of £1,019,858, (see notes).
- Robust product delivery despite supply chain issues caused by the pandemic.
- Launch of first national media campaign (the "Campaign") starring Anthony Joshua, OBE, across TV, print and outdoor advertising.
Chairman's Statement:
This update outlines the progress that Love Hemp has made during the first half of this financial year.
The financial performance of the Company in the first half of FY22 is disappointing but reflects the planned and significant investment Love Hemp has made in marketing and brand building. Included in this are the administration costs associated with the Licensing Agreement with the UFC and the agreement with Anthony Joshua as Brand Ambassador amongst additional key product and brand development costs. The quantum of these costs are a long term investment which the Board has approved to build Love Hemp into one of the UK's best known CBD and Wellness companies. As a consumer, brand based product, this investment is expected to build value during the next five years and early signs of this value were seen with significant sales growth towards the end of the reporting period and as a result of the media campaign the Company ran in November and December 2021.
In addition to the marketing and brand investments made, a number of operational actions were also taken during the period which, when combined, will result in substantial ongoing operational and marketing cost savings. The Company has now established a system to measure the success of its marketing efforts which it will use to measure the return on investment going forward. All of these cost savings going forward better position the Company for future sales growth expected on the back of these marketing investments. One such action has been the consolidation and move from 2 facilities to 1 centralised manufacturing and office facility based in Croydon which is expected to save over £300,000 through direct and indirect savings per annum.
The Gross Margin of 20% is an unacceptable financial performance for the Group and is currently subject to a detailed review by the Board of the sales channels, pricing, promotional activities and the cost of sales associated with each product and sales channel. Some of the impact on the Gross Margin is as a result of cyclical activity and weaker economies of scale. This will naturally evolve as the Company grows, however the outcome of this review and subsequent actions will be reflected during the second half of FY22 and reported by the Company in due course.
The total loss of £5,128,456, of which approximately £2.4m are non-cash and accounting treatments, for the Group reflects the investments described above and some of the operational restructuring to reduce operating costs going forward. The Board is committed to driving profitability through higher sales growth and improved operational performance and looks forward to updating shareholders of these plans.
The cash position of the Company has been significantly improved following the post-period financing announced on 8 February 2022 with a total of £2.060m being raised. During this time the Company also secured further distribution deals with Deliveroo and eBay UK to add to the high-profile deal announced with Amazon. Love Hemp has also been recognised in the Commercial Cannabis Awards and Beauty Shortlist Awards for our quality products.
The Company continues to work towards an up-listing to the London Stock Exchange Main Market and will update shareholders with the timing for this once the Board has completed its strategic and operational review. As part of these preparations the Company has been able to attract additional independent non-executive directors to the Board in Graham Mullis and Garry Cook who are already having an impact by providing strategic and operational challenge with additional rigour and governance to the Company
I, along with the Board, look forward to steering Love Hemp through the significant number of growth opportunities that the Board believes exist for the Company and I would like to thank our shareholders and employees as we progress on this journey.
Financials
Love Hemp is a growth company in the FMCG space and as such is still developing its infrastructure for growth in the future. The gross margin during the period ended 31 December 2021, was 20%. This was low compared to the previous period ended 31 December 2020, which had a gross profit margin of 48%. The reduction in gross margin is partly as a result of a few one-time items. In the annual accounts which were presented for the period ending 30 June 2021, the gross margin had reduced to 29%, a more realistic ratio. One-time events impacting this period include;
a. Bad debts of £100,000 which accounting treatment required to be placed in the cost of goods.
b. Surplus inventory carrying over into the second half of the year, or January 2022, has the effect of surplus raw materials to that period. Estimated £150,000 as part of the declared inventory.
Reducing these amounts from Costs of Goods in turn has an adjusted positive impact on the gross profit and demonstrates an improved underlying gross margin of 35%. This performance, however, will be reviewed by the Board and actions taken to drive improvements going forward. The company had £484,641 of raw materials and finished product in inventory as of 31 December 2021.
- Gross revenue for the six-month period ended 31 December 2021 was £1,736,817 or 20% gross margin, (six months ended 31 December 2020: £2,379,144 or 48% gross margin)
- For the six-month period ended 31 December 2021 the Group reported a pre-tax loss of £5,128,456 of which approximately £2.4m was non cash attributes, (restated loss reported for the six months ended 31 December 2020: £1,153,750).
- The Group's net cash balance as at 31 December 2021 was £83,113 (30 June 2021: £925,921).
Responsibility Statement
We confirm that to the best of our knowledge:
- the interim financial statements have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, in conformity with the requirements of the Companies Act 2006;
- the interim financial statements give a true and fair view of the assets, liabilities, financial position and loss of the Group;
- the Interim report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
- the Interim report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being the information required on related party transactions.
The interim report was approved by the Board of Directors and the above responsibility statement was signed on its behalf by:
Andrew Male
Chairman and Director
31 March 2022
For further information please contact:
Andrew Male | |
AQSE Corporate Adviser | Financial PR |
Financial Advisor
Rupert Fane
Nilesh Patel
H&P Advisory Limited
+44 (0) 20 7907 8500
rf@hannam.partners
nilesh@hannam.partners
For more information on Love Hemp Group please visit: www.lovehempgroup.com
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SOURCE: Love Hemp Group PLC
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