Elixinol share price edges higher on half year earnings release

The Elixinol share price has edged 3% higher today after the company released its half year financial results. We take a closer look.

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The Elixinol Global Ltd (ASX: EXL) share price surged 6.25% higher to 17 cents today after the company released its half year financial results. This was followed by a slight pullback in the Elixinol share price which is currently trading at 16.5 cents at the time of writing.

Elixinol operates in the hemp-derived, also known as cannabidiol or CBD, industry. The company's major businesses are located in Australia, Europe, the United Kingdom and the United States.

What's moving the Elixinol share price?

Investors were driving the Elixinol share price higher this morning despite the company reporting that revenues from continuing operations came in at $7.9 million for the six months to June 2020. This was a sharp 51% decline on revenues in the first half of FY 2019. The impact of the coronavirus pandemic was particularly hard for the company in the US retail market.

There has been a transition during the six month period to Elixinol branded products that have a much higher operating margin. The latter now constitute 64% of overall revenues, compared to only 50% in the prior corresponding half.

Operating expenses for Elixinol declined by 12% to $19.6 million for the six month period. Meanwhile, adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at $14.8 million compared to an EBITDA loss of $11 million in the prior corresponding period.

Elixinol ended 30 June with a relatively solid balance sheet. It had $16.8 million of cash and almost no debt on its books. The company also has a significant amount of existing inventory to support its growth strategy for more than a year.

Market outlook

While not providing any specific revenue guidance, Elixinol Global has highlighted some positive market trends already evident during FY 2021.

Executive Director and Group CEO, Oliver Horn, commented:

Post period, in July, we've seen the business improving across all divisions. All business units achieved internal EBITDA forecasts, demonstrating that revenue and cost have been well managed. 

With the European and UK business having secured extended distribution, an encouraging order book and launch of our new Elixinol Skin range, we are seeing a positive continuation of this trend in August. We have not yet realised full benefit from our cost reduction program – this will positively impact the business from H2 FY2020. 

Following its slight pull back, the Elixinol share price is now trading 3.1% up so far today. The company has had a challenging year to date with the Elixinol share price falling 67% in 2020. 

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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