LOVE Hemp has issued its first financial update to investors since its stock was suspended on the Aquis Stock Exchange nearly three months ago.
The CBD retailer published its unaudited financial results for the year to June 30 2022 on Tuesday, revealing falling revenues and dwindling sales via its own website.
It comes as the company continues to undergo a major strategic review in a bid to slash costs, which has also seen it make some major changes to its board room, reducing ‘board costs’ in the process.
Though the company says it is ‘taking aggressive steps to capitalise on the opportunity’ presented by having 34 of its products added to the FSA’s Novel Foods public list, it offered little in the way of news or progress on re-listing its stock or its uplisting to the LSE’s main market.
For the year to June 30, Love Hemp said it is ‘expecting to report total revenues of £3.6m’, marking a 16% year-on-year decline from the £4.3m recorded in the previous period.
It cited a number of reasons for the decline, including ongoing pandemic-related hurdles, rising prices following the war in Ukraine, and ‘extensive delays in the publishing of the UK Novel Foods product register which also impacted the working capital of the business’.
This working capital was also hampered by ‘lower than expected financing’, which is understood to have ‘resulted in significant reductions in marketing programmes’, a core but contentious focus for the company throughout the last year.
Its hit to financing has also had a far wider impact, playing a key role in seeing Love Hemp’s shares suspended from trading.
After announcing that it had successfully completed a £2m fundraising on February 4, it revealed in May that an investor had failed to complete an investment of £1.2m, thought to have led to the resignation of Peterhouse Capital as its corporate advisors, thus seeing it suspended from Aquis and unable to raise any further funds from public investors.
Last month, it told investors that it had ‘commenced discussions with a proposed new AQSE Corporate Adviser’, adding this week simply that it ‘remains in discussions’.
Its lack of marketing budget has also impacted its ‘direct-to-consumer’ (DTC) sales via its own online channels, adding just 7437 new customers throughout the year.
Love Hemp said DTC sales ‘continue to be slow’ via its own online channels, seeing its total share of sales more than half from 59% to 26% during year-on-year.
On a more positive note, sales in major retail stores reportedly jumped 19%, rising from £1.78m to £2.15m this year, thanks to ‘greater distribution’ and the establishment of two new retail partnerships during the period.
Despite the drop in revenue, it reportedly achieved ‘record sales’ in terms of units sold, also rising 19%. The company has not yet provided any clarification as to why sales are up but revenues are down.
Love Hemp CEO Tony Calamita said: “I am delighted that we have continued to expand our footprint with greater distribution into major retail stores and delivered record sales of product units so more consumers than ever are benefiting from our products. This has been achieved whilst undertaking a significant operational review and I am confident this growth will continue.”
While the update made no reference to the company’s profitability, Mr Calamita told Proactive Investors that ‘cash is tight but we’re managing it exceptionally well’.
Outlook & Ongoing Strategic Review
In early July, the company announced a major overhaul of its board ‘as part of its ongoing internal review’ launched following the suspension of its shares.
This saw Andrew Male, previously the Executive Chairman, switch to Non-Executive Director, while the former Non-Executive Director Graham Mullis, who was appointed as a director in February, was promoted to Non-Executive Chairman.
It also saw former chair of the Audit Committee Gary Cook resign after just four months on the job, to be replaced by Anthony Dire.
According to the company’s accounts, it also removed Westend Corporate LLP as its company secretary, appointing its former CCO James Martin in its place.
The company also announced this week that it has appointed a new Head of Digital commerce, aimed at ramping up its struggling online DTC sales.
While the company did not name its new Head of Digital, according to LinkedIn ecommerce ‘specialist’ Mark Wallice has been working at Love Hemp since April.
Its new ‘Interim Managing Director’, revealed in July but who also had not be named in the company’s official RNS, is understood to be Philip Small, who has worked for the company since December.
According to the company, ‘board costs through the restructure announced on 8 July 2022 have been significantly reduced.’
In March 5% stakeholder Pershing called an investor vote on a number of resolutions, including the pay of ‘all directors and any board members to be reduced by 75% and benchmarked against similar companies’. All 5 resolutions were voted against overwhelmingly.
Costs have also reportedly been cut across the rest of the company’s operations, seeing ‘group operating costs being reduced significantly in H2, whilst achieving growth in the same period’.
Looking ahead, the company believes its more efficient framework and uplift in sales in the second half of the year, up 11% on the first half and 15% in Q4 compared to a year earlier, will drive organic growth across both its DTC and retail sales channels.