Love Hemp Group PLC - Interim Results
RNS Number : 8443G
Love Hemp Group PLC
31 March 2022
 

31 March 2022

 

Love Hemp Group PLC / Market: AQSE

 

 

 

LOVE HEMP GROUP PLC

("Love Hemp" or the "Company"; together with its subsidiary, the "Group")

Interim Results

 

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
Chairman & Director

+44 (0) 7926 397 675

andrew@lovehempgroup.com

 

 

 

 

 

AQSE Corporate Adviser

Mark Anwyl

Peterhouse Capital Limited

+44 (0) 20 7469 0930

ma@peterhousecap.com

Financial PR

Tim Blythe

Alice McLaren

+44 (0) 207 318 3205

lovehemp@blytheray.com

 

 

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

 

 

 

LOVE HEMP GROUP PLC                                   CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

PERIOD ENDED 31 DECEMBER 2021

                UNAUDITED

 

 

 

Group

 

 

As at 31 December 2021 (Unaudited)

As at 30 June 2021

(Audited)

 

Note

 

£

Non-current assets

 

 

 

Property, plant and equipment

 

373,125

310,324

Right of use assets

 

1,140,355

1,084,463

Goodwill

 

400,000

400,000

Intangible assets

5

1,465,454

1,658,408

Other receivables

6

3,097,915

4,191,297

 

 

6,476,849

7,644,492

Current assets

 

 

 

Inventories

 

484,641

572,033

Trade and other receivables

6

3,150,185

4,167,093

Cash and cash equivalents

 

83,113

925,921

 

 

3,717,939

5,665,047

Total assets

 

10,194,788

13,309,539

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

7

2,492,375

1,609,266

Lease liability

 

218,391

180,930

Borrowings

 

359,216

67,329

 

 

3,069,982

1,857,525

Non-current liabilities

 

 

 

Lease liability

 

828,526

821,431

Borrowings

 

152,256

231,245

 

 

980,782

1,052,676

Total liabilities

 

4,050,764

2,910,201

Net assets

 

6,144,024

10,399,338

 

 

 

 

Equity

 

 

 

Share capital

 

9,422,486

8,291,450

Share premium

 

17,007,570

16,285,464

Shares to be issued

 

-

980,000

Share option reserve

 

2,160,226

2,160,226

Retained earnings

 

(22,446,258)

(17,317,802)

Total Equity

 

6,144,024

10,399,338

         

 

The accompanying notes are an integral part of these consolidated interim financial statement

 

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

PERIOD ENDED 31 DECEMBER 2021 UNAUDITED

 

 

 

 

 

 

 

Six months ended

Six months ended

 

 

31 December 2021

(Unaudited)

31 December 2020 (Restated) (Audited)

 

 

£

£

Revenue

 

1,736,817

2,379,144

Cost of goods sold

 

(1,378,965)

(1,228,502)

Gross profit

 

357,852

1,150,642

Administrative expenses

 

(5,472,563)

(2,772,614)

Other gains / (losses)

 

15,079

597,780

Foreign Exchange

 

14,489

4,334

Operating Loss

 

(5,085,143)

(1,019,858)

Finance Costs

 

(43,313)

(133,892)

Loss before taxation

 

 (5,128,456)

(1,153,750)

Income tax

 

-

-

Net and comprehensive loss for the period

 

(5,128,456)

(1,153,750)

Basic and Diluted Earnings Per Share attributable to owners of the parent (expressed in pence per share)

 

(0.61)

(0.59)

         

 

 

 

 

 

 

 

Six months ended

Six months ended

 

 

31 December 2021

(Unaudited)

31 December 2020

(Audited)

 

 

£

£

Other Comprehensive Income:

 

 

 

Items that may be subsequently reclassified to profit or loss

 

 

 

Currency translation differences

 

-

-

Other comprehensive income for the period, net of tax

 

(5,128,456)

(1,153,750)

Total Comprehensive Income attributable to owners of the parent

 

(5,128,456)

(1,153,750)

         

 

 

 

The accompanying notes are an integral part of these consolidated interim financial statements. The consolidated statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
 

 

 

LOVE HEMP GROUP PLC                CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

PERIOD ENDED 31 DECEMBER 2021

UNAUDITED

 

 

 

Share

capital

Share premium

Shares to be issued

Share option  reserve

Retained earnings

Total

 

£

£

£

£

£

£

Balance as at 1 July 2020

1,456,007

4,661,576

2,251,845

         968,568

(12,751,059)

(3,413,063)

Prior period restatement

-

-

-

(268,736)

(268,736)

Balance as at 1 July 2020 (restated)

1,456,007

4,661,576

2,251,845

        968,568

(13,019,795)

(3,681,799)

Loss for the period

-

-

-

(1,153,750)

(1,153,750)

Total comprehensive loss for the period

-

-

-

-

(1,153,750)

(1,153,750)

Issue of shares and shares to be issued

845,191

3,775,116

(2,251,845)

-

-

2,368,462

Share-based compensation

-

-

-

887,248

-

887,248

 

Total transactions with owners, recognised directly in equity

845,191

3,775,116

(2,251,845)

887,248

-

3,255,710

Balance as at 31 December 2020 (Restated)

   2,301,198

   8,436,692

                   -  

     1,855,816

 (14,173,545)

  (1,579,839)

 

 

 

 

Share

capital

Share premium

Shares to be issued

Share option  reserve

Retained earnings

Total

 

£

£

£

£

£

£

Balance as at 1 July 2021

8,291,450

16,285,464

980,000

2,160,226

(17,317,802)

10,399,338

Loss for the period

-

-

-

-

(5,128,456)

(5,128,456)

Total comprehensive loss for the period

-

-

-

-

(5,128,456)

(5,128,456)

Issue of shares and shares to be issued

1,131,036

862,106

(980,000)

-

-

1,013,142

Issue costs

 

(140,000)

 

 

 

(140,000)

 

Total transactions with owners, recognised directly in equity

1,131,036

722,106

(980,000)

-

-

873,142

Balance as at 31 December 2021

   9,422,486

17,007,570  

-  

2,160,226

 (22,446,258)

  6,144,024

 

 

 

 

 

 

 

                 

 

 

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

 

LOVE HEMP GROUP PLC                                                                                                        STATEMENT OF CASH FLOWS

                                                                                                                                      SIX MONTHS ENDED 31 DECEMBER 2021

UNAUDITED

 

 

 

 

 

 

 

 

For the period ended 31 December 2021

(Unaudited)

For the period ended 31 December 2020 (Restated) (Audited)

 

 

 

£

£

Cash flows from operating activities

 

 

 

 

Net loss for the year

 

 

(5,128,456)

(1,153,750)

Adjustments for:

 

 

 

 

Depreciation and amortisation

 

 

314,917

214,310

Other losses

 

 

-

8,465

Other gains

 

 

-

(82,534)

Share based payments

 

 

-

887,248

Accretion and interest

 

 

33,874

180,716

Shares issued for services

 

 

951,939

49,697

Derivative fair value adjustment

 

 

-

(449,831)

(Increase)/decrease in trade and other receivables

 

 

1,807,939

(346,685)

(Increase)/decrease in inventories

 

 

87,393

446,340

(Decrease)/increase in trade and other payables

 

 

1,007,089

(239,366)

Net cash flows from operating activities

 

 

(925,305)

(485,390)

 

 

 

 

 

Investing activities

 

 

 

 

Purchase of property, plant and equipment 

 

 

(106,182)

(58,259)

Net cash used in investing activities

 

 

(106,182)

(58,259)

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from share issue

 

 

99,570

381,143

Lease payments

 

 

(109,414)

(90,460)

Loans received

 

 

273,369

178,687

Loan repayments

 

 

(74,846)

(47,290)

Net cash used in financing activities

 

 

188,679

422,080

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

 

(842,808)

(121,569)

Cash and cash equivalents at beginning of period

 

 

925,921

200,546

Cash and cash equivalents and end of period

 

 

83,113

78,977

           

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

Major non-cash transactions:

On 22 November 2021 the Company issued 23,746,371 Ordinary shares of £0.01 each for £0.016 per share for a total consideration of £402,500. Further the Company issued 3,833,342 Ordinary shares of £0.01 each for £0.035 per share for a total consideration of £134,166 to the same service provider.

On 22 November 2021 the Company issued 8,257,143 Ordinary shares of £0.01 each for £0.035 per share for a total consideration of £289,000.

On 21 December 2021 the Company issued 65,000,000 Ordinary shares of £0.01 each for £0.015 per share for a total consideration of £975,000 in order to settle the final portion of the deferred consideration outstanding to the vendors of Love Hemp Limited.

 

1.            GENERAL INFORMATION

 

Love Hemp Group Plc (formerly World High Life plc) was incorporated by in England and Wales on 30 January 2019 with registration number 11797850 under the Companies Act 2006. The limited company reregistered as a public company on 6 August 2019, and thus became World High Life PLC (the "Company") on the same date.  The Company changed its name to Love Hemp Group PLC on 27 February 2021. The Company's head office and registered and records office address is Suite 1, 15 Ingestre Place, London, W1F 0DU.

 

The Company is focused on developing business opportunities in the CBD Health and Wellness market, as well as the Regulated Medicinal Cannabis market in the UK and Europe. The Company's wholly owned subsidiary Love Hemp Ltd is a leading CBD products company based in the UK.

 

2.             BASIS OF PRESENTATION

 

The condensed consolidated interim financial statements for the six-month period ended 31 December 2021 have been prepared in accordance with IAS 34 "Interim Financial Statements" as adopted by the United Kingdom and the Disclosure and Transparency Rules of the UK Financial Conduct Authority. The condensed interim financial statements should be read in conjunction with the annual financial statements for the period ended 30 June 2021, which have been prepared in accordance with International Financial Reporting Standards (IFRS) in conformity with the requirements of the Companies Act 2006.

 

The interim financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 2006. It has been prepared on a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) in conformity with the requirements of the Companies Act 2006.

 

The condensed consolidated interim financial statements for the six-month period ended 31 December 2021 were approved by the Board of Directors on 31 March 2022.

 

3.            SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies applied in preparing these financial statements are in terms of IFRS and are consistent with those applied in the previous annual consolidated financial statements for the year ended 30 June 2021.

 

It has been prepared assuming that the Group will continue as a going concern in accordance with the recognition and measurement criteria of IFRS in conformity with the requirements of the Companies Act 2006.

 

Under this assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor necessity of liquidation, ceasing trading or seeking protection from creditors for at least 12 months from the date of the signing of the financial statements.

 

An assessment of going concern is made by the Directors at the date the Directors approve the interim financial statements, taking into account the relevant facts and circumstances at that date including:

 

• Review of profit and cash flow forecasts;

• Review of actual results against forecast;

• Timing of cash flows;

• Financial or operational risks; and

• The impact of COVID-19

 

The Directors have reviewed forecasts which display significant growth in sales transforming the business into cashflow profitability over the following period. The Directors believe funds can continue to be raised from the capital markets to support any working capital shortfalls and expect to do so in the next 12 months. The Group has adequately planned and, where relevant, put in place mitigation strategies for the impacts of COVID-19. On the basis of the above, and with the expectation of external financing being sourced, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the interim financial statements.

 

The statutory consolidated financial statements for the period to 30 June 2021, approved by the Board of Directors on 12 December 2021, have been reported on by the Group's auditors and delivered to Companies House. The report of the auditors on those financial statements was unqualified. The auditors made reference to the existence of a material uncertainty in relation to going concern within that audit report, to which we draw your attention.

 

4.             ADOPTION OF RECENT ACCOUNTING PRONOUCEMENTS

 

(a) New and amended standards mandatory for the first time for the financial periods beginning on or after 1 July 2021

 

As at 1 July 2021, there were no Standards, Interpretations and Amendments which had been issued but were not effective for the period ended 30 June 2021 that are expected to materially impact the Group's Financial Statements.

  

b) New standards, amendments and interpretations in issue but not yet effective or not yet endorsed and not early adopted 

 

Standards, amendments and interpretations that are not yet effective and have not been early adopted are as follows: 

Standard  

Impact on initial application

Effective date

IFRS 3 (amendments)

Reference to Conceptual Framework

1 January 2022

IAS 37 (amendments)

Onerous contracts

1 January 2022

IAS 16 (amendments)

Proceeds before intended use

1 January 2022

Annual improvements

2018-2020 Cycle

1 January 2022

IAS 8 (amendments)

Accounting estimates

1 January 2023

IAS 1 (amendments)

Classification of Liabilities as Current or Non-Current.

1 January 2023

 


 The Group is evaluating the impact of the new and amended standards above which are not expected to have a material impact on future Group financial statements.

 

5.             INTANGIBLE ASSETS

 

 

Customer Relationships

£

Brand

£

Trademarks

£

Total

£

30 June 2021

591,169

1,056,937

10,302

1,658,408

Amortisation

(68,750)

(122,916)

(1,288)

(192,954)

31 December 2021

522,419

937,021

9,014

1,465,454

 

 

In the year ended 30 June 2021 a purchase price allocation exercise relating to the purchase of Love Hemp Ltd by the Company was completed as per the requirements of IFRS 3 which valued the Group's customer relationships and brand at £2,300,000. This has been adjusted for as a restatement as disclosed in Note 8.

 

6.             TRADE RECEIVABLES AND OTHER RECIEVABLES

 

Current:

Group

 

31 December

2021

£

30 June

2021

£

Trade receivables

369,282

189,869

Prepayments

              2,330,612

3,119,691

Placing proceeds receivable

105,000

279,753

VAT receivables

223,355

498,260

Other receivables

121,936

79,520

 

3,150,185

4,167,093

 

Non-Current:

 

Group

 

31 December

2021

£

30 June

2021

£

Prepayments

3,097,915

4,191,297

 

 

 

 

3,097,915

4,191,297

 

 

7.             TRADE PAYABLES AND OTHER PAYABLES

 

Current:

Group

 

31 December

2021

£

30 June

2021

£

Trade payables

1,849,112

979,174

Accrued liabilities

              395,134

352,861

Tax and payroll

168,844

248,211

Other creditors

79,285

29,020

 

2,492,375

1,609,266

 

 

8.             RESTATEMENT FOLLOWING PURCHASE PRICE ALLOCATION EXERCISE

 

During the year ended 30 June 2021, a purchase price allocation exercise relating to the purchase of Love Hemp Ltd by the Company was completed. This exercise led to two separate classes of intangible fixed assets, the Love Hemp brand and its customer relationships, being assigned a total value of £2,300,000.

 

As required under IFRS 3, the comparative figures have been amended to account for the identified intangible fixed assets as if the purchase price allocation exercise took place on the date of acquisition.

 

As a result, goodwill has been reduced by £2,300,000 and amortisation has been recognised in respect of the intangible fixed assets for the period from acquisition on a straight line basis based on the intangible fixed assets having a useful economic life of 6 years.

 

The impact of the restatement for the year ended 30 June 2020 in respect of the classification of the goodwill and intangibles are as follows:

 

 

30 June 2020 as presented

£

 

Restatement

£

30 June 2020 restated

£

Goodwill

2,700,000

(2,300,000)

400,000

Intangibles

-

2,031,264

2,031,264

Amortisation through profit or loss

-

268,736

268,736

 

The impact of the restatement for the six-month period ended 31 December 2020 is as follows:

 

 

31 December 2020 as presented

£

 

 

Restatement

£

31 December 2020 restated

£

Amortisation through profit or loss

-

191,579

191,579

 

 

9.             SUBSEQUENT EVENTS

 

On 8 February 2022, the Company issued 206,000,000 Ordinary shares for a price of £0.01 per share for a total value of £2,060,000 for cash.

 

On 21 February 2022, the Company issued 50,555,750 Ordinary shares at a price of £0.01 per share for a total value of £505,557 in lieu of debt repayments.

 

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