Little Green Pharma (ASX: LGP) has capped off an impressive half-year to 30 September 2024, reporting record revenue growth of 36.8% to $17.5 million and achieving a positive operating cash flow of $738,000—a stark turnaround from a $1.8 million outflow in the prior period. While the company posted a net loss of $3.5 million, largely driven by non-cash expenses, its underlying operational improvements and strategic investments highlight its upward trajectory in the competitive medicinal cannabis market.
Little Green Pharma CEO, Paul Long
Revenue Reaches Record Highs
Revenue surged to $17.5 million, up from $12.8 million in the prior corresponding period, reflecting growing demand for medicinal cannabis across Australia and Europe. Flower products led the way, contributing $10.8 million, with oil products generating $5.7 million and vaporiser sales tripling to $0.6 million.
The company’s European operations, particularly in Germany, the UK, and France, continued to gain momentum. Germany’s legalisation of cannabis and the UK’s expanding medicinal cannabis market have validated LGP’s strategic focus on high-potential territories. Domestically, LGP’s “House of Brands” strategy yielded robust growth, with CherryCo products standing out amid increasing market competition.
Non-Cash Costs Weigh on Bottom Line
While the company reported a net loss of $3.5 million, up from $2.2 million a year earlier, this figure was heavily influenced by non-cash accounting items. These include:
- Depreciation and Amortisation: $1.8 million, reflecting prior investments in production infrastructure and intangible assets.
- Share-Based Payments: $1 million for employee retention and performance incentives, essential in a competitive and dynamic industry.
- Inventory Write-Downs: $798,000 due to adjustments aimed at optimising stock levels.
Excluding these non-cash costs, LGP’s operational performance showcased significant improvement. Adjusted EBITDA swung to a $268,000 profit, compared to a $511,000 loss in the prior year, demonstrating effective cost management and economies of scale.
Positive Cash Flow Marks a Milestone
One of the standout achievements for the period was LGP’s return to positive operating cash flow, generating $738,000. This marks a significant shift from the $1.8 million outflow recorded in the previous half-year and reflects both strong revenue growth and disciplined cost controls.
The company’s cash balance of $4.8 million, combined with low debt of $3.3 million, positions LGP well to continue funding its strategic initiatives without over-reliance on external financing.
Strategic Moves Support Growth
LGP’s “House of Brands” strategy remains central to its market success. The September launch of the Indicare brand, alongside new flower, oil, and vaporiser products, demonstrates the company’s ability to meet evolving patient needs and capitalise on market trends.
A strategic decision to subcontract its Australian cultivation operations has reduced fixed costs while enabling the company to focus on expanding sales and enhancing its product portfolio. This move is expected to deliver long-term efficiency gains without compromising supply chain flexibility.
Innovation and Clinical Research Fuel Growth Potential
LGP’s commitment to research and development continues to set it apart. Its CBD 200 product is central to France’s Pandora trial at Gustave Roussy, a leading cancer hospital, which is exploring treatment options for chemotherapy-induced symptoms in breast cancer patients.
Meanwhile, its subsidiary, Reset Mind Sciences, is progressing a psilocybin-assisted therapy clinical trial for treatment-resistant depression in collaboration with the University of Western Australia. Early data is promising, and the company has completed the setup of its Perth clinic, which is ready to support patient treatment as part of this groundbreaking initiative.
Navigating a Competitive Landscape
LGP’s European markets are benefitting from regulatory shifts that favour compliant operators, and the company has cemented its position as France’s largest commercial supplier in the post-trial phase of its medicinal cannabis program. Domestically, it has adapted to intensifying competition with innovative products and strategic pricing.
Confidence from Investors and Management
Thorney Investment Group’s recent move to increase its stake to 19.8% highlights growing confidence in LGP’s long-term strategy. At the corporate level, LGP relocated its headquarters to Shenton Park in Perth, saving $200,000 annually in rental costs, further reflecting its focus on cost discipline.
CEO Paul Long described the results as a turning point:
“Achieving record revenue and positive operating cash flow underscores the strength of our strategy and the value of our investments in growth. We are positioning ourselves not just for near-term success but for long-term leadership in the medicinal cannabis and psychedelics sectors.”
Outlook
Little Green Pharma’s ability to deliver record revenue and positive cash flow, despite non-cash accounting impacts, highlights its operational strength and growth potential. With a clear strategy, robust product pipeline, and expanding market presence, the company is well-positioned to capitalise on emerging opportunities in the global medicinal cannabis and psychedelics markets.
For investors, LGP offers a compelling mix of immediate revenue growth and a forward-looking focus on innovation, setting the stage for sustainable long-term success.
