Little Green Pharma (ASX: LGP) is on a roll, emerging as a standout player in the medicinal cannabis sector. Its latest quarterly report for September 2024 tells a compelling story of record revenues, strategic market positioning, and a bright outlook, especially in Europe. In an industry where many competitors are struggling to stay afloat, LGP is proving that a disciplined approach to growth and cost management is a winning formula.
Record-Breaking Financials
In the September 2024 quarter, LGP achieved record revenue of $10.2 million, a 40% jump from the previous quarter and an eye-watering 60% increase year-on-year. This growth in revenue was matched by cash receipts of $10.8 million, up more than 30% compared to the prior quarter. Impressively, this surge resulted in a net operating cash inflow of over $1 million, helping LGP turn in a positive cash flow of $0.6 million.
While many companies in the cannabis space are burning through cash, LGP's ability to generate positive cash flow is no small feat. What’s more, the company managed to scale efficiently, with operating cash costs rising by less than 15%, despite a 30% increase in cash receipts. The cash in the bank climbed to $4.8 million, providing the company with a solid liquidity position heading into the next quarter.
Little Green Pharma CEO Paul Long
Domestic and International Growth Drivers
LGP’s remarkable growth is being fuelled by strong performances in both domestic and international markets. Domestically, the company saw a 30% rise in flower sales and a 35% increase in oil sales, reflecting the growing acceptance of medicinal cannabis in Australia.
However, it’s in Europe where LGP is really hitting its stride. European sales shot up 60% in the quarter, led by a whopping 110% increase in French oil sales. Germany, now revitalised by its cannabis legalisation, accounted for more than 25% of all Australian cannabis exports in 2023, with LGP playing a significant role. This bodes well for the company, as Germany’s medicinal cannabis market is only expected to expand in the coming years.
France and the UK also hold great potential. LGP has strategically placed itself to capture demand in these markets, with UK medicinal cannabis sales expected to make up 27% of European sales by 2028. The company’s diverse portfolio and wide geographic reach ensure that it can capture this growing demand.
Expanding Product Portfolio
LGP isn’t just growing geographically; it's also expanding its product range. Oil sales surged 45%, and flower sales increased 35% over the previous quarter. These results were driven not only by the company's branded products but also by white-label agreements that boosted its presence across Europe and Australia.
The launch of the "Indicare" brand in September 2024 further highlights LGP’s commitment to meeting patient needs with innovative products. Featuring THC 22 Sativa and THC 20 Indica products, the new brand has added to the company’s already expansive portfolio. LGP is also keeping the innovation wheels turning with the introduction of new offerings like the LGP Classic THC 50 Indica oil.
Standing Out Among Peers
In an industry crowded with players struggling to stay afloat, LGP shines. A 2022 analysis of the top 20 cannabis companies shows that LGP is one of only two players to post positive operating cash flow. Even more impressive, LGP recorded the highest revenue growth among its peers with revenue exceeding $25 million.
By contrast, many of its competitors are finding it tough to balance growth with cash management. LGP’s enterprise value, at just 0.75x annualised revenue, is also more favourable than that of its peers. The company’s careful cost management, which includes subcontracting Australian cultivation operations to save $0.5 million annually, has helped keep it on a positive growth trajectory.
A Bright Future
Looking forward, LGP’s prospects remain bright. Its foothold in Europe, particularly in Germany and the UK, positions it well to capitalise on the surging demand for medicinal cannabis. Additionally, its ability to continually expand its product offerings keeps it ahead of the curve.
Little Green Pharma has cemented its place as a leader in the medicinal cannabis sector, distinguishing itself through strong financial performance, strategic market expansion, and product innovation. While many of its peers are grappling with cash flow challenges and market uncertainties, LGP’s disciplined approach to scaling its operations and managing costs has set it up for continued success. With eyes on Europe and an expanding domestic presence, LGP is a company that will likely remain at the forefront of the medicinal cannabis industry.
