Interim results
05/05/2023 07:00
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RNS Number : 4969Y Cellular Goods PLC 05 May 2023
The information contained within this announcement is deemed by the Company to
constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014, as retained as part of the law of England and Wales. Upon
the publication of this announcement via the Regulatory Information Service,
this inside information is now considered to be in the public domain.
Press release
5 May 2023
Cellular Goods PLC
("Cellular Goods" or "the Company")
Interim results
Cellular Goods (LSE: CBX), a UK-based skincare and wellness company providing
premium consumer products formulated with lab-produced cannabinoids, announces
its unaudited half-year results to 28 February 2023.
Highlights
· Implemented a major streamlining programme reducing the Company's annual cost
base by 56%, or £3.2m, and refocused marketing expenditure from brand
advertising to targeted online marketing activity to drive revenue growth;
· Operating loss reduced by 24% to £1.81m (H1 2022: £2.39m) and by 50%
compared with H2 2022;
· Revenue for the half-year almost tripled to approximately £31k (H1 2022:
£13k);
· Expanded product range with the introduction of three new rejuvenating
skincare products on 21 September 2022, followed by the launch of a gift set
collection for the festive season;
· Signed international supermodel Helena Christensen to be the face of the
Company's 'Rejuvenating Skincare Campaign' with more than one million social
media followers;
· Entered a new market with Cellular Goods' products shipping to the USA from
September 2022;
· Terminated negotiations in relation to the Company's proposed acquisition as
the proposed terms were not in our shareholders' interests;
· Net cash as at 28 February 2023 amounted to £2.93m (H1 2022: £7.41m).
Post-period highlights
· Expanded marketing and influencer outreach strategy including month-long
campaign on premium lifestyle magazine, SheerLuxe;
· Agreement with Helena Christensen continued to generate high-profile
visibility for the Company at no further cost, publicity generated included
Company mentions in Vogue and Glamour magazine interviews.
Outlook
· Successful cost cutting and revenue growth achieved despite challenging
industry conditions, in a highly fragmented market where expected
consolidation has not occurred;
· Right-sizing of business now completed, substantial cost-cutting gives the
Company an increased runway with further cost optimisation ongoing;
· Current trading remains encouraging and sales in March set a new record, as
such the Company remains focused on achieving further progress in the full
year.
Commenting on the results, Darcy Taylor, Chairman, said: "Despite industry
headwinds, we have benefitted from a positive sales momentum in the first half
that has continued into the second half. In combination with a significant
rationalisation of our cost base and cash burn, we have defined a path to
drive our brand business forward.
"We are continuing to assess strategic opportunities to deliver long-term
shareholder value and will assess each opportunity on its merits. In the
meantime, our focus will continue to be to execute the Company's existing
business model and position it for long-term growth. With high-quality
products, expanding sales channels, and positive responses from our targeted
marketing campaigns, the Board looks forward to further progress being made
for the full year."
For further information please contact:
Cellular Goods
Darcy Taylor via Tancredi +44 207 887 7633
Chairman and interim CEO
Neil Thapar +44 787 645 5323
Investor Relations
Tennyson Securities
Corporate Broker & Adviser
Peter Krens +44 207 186 9030
Alan Howard
Novum Securities
Corporate Broker
Colin Rowbury
Jon Belliss +44 207 399 9427
Tancredi Intelligent Communication
Media Relations
Helen Humphrey +44 744 922 6720
Charlie Hobbs +44 789 755 7112
cellulargoods@tancredigroup.com (mailto:cellulargoods@tancredigroup.com)
About Cellular Goods PLC:
Cellular Goods develops and markets premium quality skincare and wellness
products based on proprietary formulations incorporating lab-made
cannabinoids. Our branded products are efficacy-led and research-backed and
available online in the UK and US. The Company is incorporated in the UK and
listed on the Main Market of the London Stock Exchange. For more information,
visit www.cellular-goods.com (http://www.cellular-goods.com) .
Forward-looking statements:
This document contains forward-looking statements which are subject to known
and unknown risks and uncertainties because they relate to future events, many
of which are beyond the Company's control. These forward-looking statements
include, without limitation, statements in relation to the Company's financial
outlook and future performance. No assurance can be given that future results
will be achieved; actual events or results may differ materially as a result
of risks and uncertainties facing the Company.
You are cautioned not to rely on these forward-looking statements, which speak
only as of the date of this announcement. The Company undertakes no obligation
to update or revise any forward-looking statement to reflect any change in its
expectations or any change in events, conditions or circumstances. Nothing in
this document is or should be relied upon as a warranty, promise or
representation, express or implied, as to the future performance of the
Company or the Group or their businesses.
INTERIM MANAGEMENT REPORT
Despite continued challenging market conditions, the growth momentum seen in
the second half of last year has continued into the first half of this year,
albeit from a low base. Revenue grew from approximately £13k for H1 2022 to
approximately £31k for H1 2023. The growth was attributable to a
sales-focused marketing strategy which leveraged last year's investment in
brand awareness, as well as the expansion of product lines and sales channels.
At the same time, the Company implemented a major rationalisation programme
which has reduced its annual cost base by £3.2m. Although the streamlining
led to one-off charges of approximately £0.57m in the first half, their
positive impact is expected to benefit the full year outcome.
First-half operating loss declined by 24% to £1.81m for February 2023
compared with £2.39m for the corresponding period last year and by 50%
compared with the previous six months (H2 2022: £3.6m loss). Net cash was
£2.55m as at 31 March 2023 (£4.37m as at 31 August 2022).
Merger discussions
The Company announced its intention to acquire Cannaray Brands Ltd. and Love
CBD Health Ltd. from Cannaray Brands Ltd. ("Cannaray") on 26 September 2022.
The Board of Directors entered into negotiations with the intention of
generating value for Cellular Goods' shareholders by creating an enlarged
business with significant growth opportunities and an enhanced market
presence.
As negotiations progressed and changes to the deal were made, it became clear
to Cellular Goods' Board and senior leadership team that the updated
transaction terms were not in the best interests of the Company's
shareholders. The negotiations were not able to reach a deal structure and
terms that worked for both parties, and as such we decided to terminate
discussions.
Cellular Goods is continuing to assess strategic opportunities to generate
long term shareholder value and is open to consider proposals which deliver
value and accelerate the development of the business. Moreover, the Company's
expertise across biosynthetic production, which is emerging as a viable
commercial-scale production technology for numerous compounds, opens up a
number of options across multiple sectors beyond cannabinoids.
Marketing and product strategy
A significant expansion to Cellular Goods' 'Look Better' (skincare range) was
made in the first half, with the launch of three new products in a campaign
fronted by international supermodel Helena Christensen in September 2022. The
three new products joined Cellular Goods' Rejuvenating Range of skincare
products, containing the Company's proprietary blend of cannabigerol (CBG) and
cannabidiol (CBD). The products were formulated to protect skin from UV damage
and inflammation, providing an effective countermeasure to visible ageing.
Cellular Goods released a whitepaper titled 'The 5 A's of cannabinoid
skincare' near the launch which detailed the scientific benefits of
cannabinoids in more depth.
International supermodel Helena Christensen was selected to front the
rejuvenating marketing campaign because of her significant social media reach
of more than one million followers on Instagram, in addition to her large
US-based following. The Company began shipping its products to the USA
immediately following the launch. Helena Christensen remains an important part
of Cellular Goods' marketing strategy, most recently posting about the
Company's face serum on 31 January 2023. Her strong following in the US has
assisted the Company in generating 11% of its sales in this territory in the
first half.
The first half revenue growth also reflects good progress in working round the
arbitrary and unjustified bans imposed by some leading online and social media
platforms, such as Facebook and Instagram. In response, the Company increased
its focus on other platforms including Google, Pinterest and online content
channels to reach its target audience.
Last year Cellular Goods invested in a broad-scale, 'above-the-line' campaign
to raise awareness of the brand, which is widely considered a prerequisite to
driving revenues for new consumer products. Having significantly raised
awareness, the Company decided to refocus its marketing strategy this year to
targeted online campaigns that drive near-term sales with lower acquisition
costs. The Company has taken a two-pronged approach to this campaign, focusing
on increasing trialling of its core products and expanding its sales channels,
to encourage conversion of the consumer recognition of our brand into an
initial purchase.
An additional product line, the 'Gift Better' (gifting) range, was launched in
October 2022, enabling Cellular Goods to introduce its premium-quality
skincare products containing lab-produced cannabinoids to a wider group of
consumers at attractive price points. The launch was timed to capitalise on
festive period sales, but the range continues to allow the Company to offer
seasonal gifting bundles to capitalise on a number of celebrations, including
Mother's Day.
Product pipeline
The Company has decided to postpone the launch of the 'Function Better'
(movement) range to focus resources on strengthening its market presence
behind its existing 'Look Better' and 'Gift Better' ranges before further
expansion. The total addressable market for high-end beauty products is large
with strong margins and, as a result, provides ample opportunity for strong
growth in the short-to-medium term. The Company is in communication with
potential distribution partners for the launch of the Function Better range
and will provide an update in the event an agreement is reached.
The roll-out of the Look Better skincare product line extensions is in line
with the Company's strategic focus on its skincare offering. Cellular Goods'
exceptional product quality gives the Company an important differentiation
from its competitors, and there remains a market opportunity for a cannabinoid
brand with trusted, effective products. Moreover, these products allow
Cellular Goods to widen its reach and meet demand for products that
effectively address the huge age-prevention market. The Company's products are
able to tackle the visible signs of ageing without the side effects of other
products available, owing to CBG's soothing properties. The global anti-ageing
products market is projected to reach US$93 billion by 2027 (Source: Statista
(https://www.statista.com/statistics/509679/value-of-the-global-anti-aging-market/)
, 2023). Until now, this bourgeoning segment has been dominated by active
ingredients like Vitamin C and retinoids. However, despite their proven
efficacy for addressing signs of aging skin, these ingredients are notorious
for causing irritation and photosensitivity.
Management structure
For the current scale of operations, Cellular Goods has the right size of
management team and to add to the leadership team would increase recurring
expenditure unnecessarily. In the longer term, as the business develops, the
Board intends to bring in a permanent CEO to drive the business.
Current trading and outlook
The Company has made a solid start to the second half as we navigate through
ongoing industry headwinds to drive revenue growth while maintaining a tight
rein on costs, which have been reduced by £3.2m on an annual basis.
The brand investment and marketing strategy, together with an expanded
skincare range, has contributed to our sales momentum with March 2023
recording the Company's strongest month for sales to date.
Online sales from www.cellular-goods.com (http://www.cellular-goods.com)
remain the key driver of the business, and Amazon sales have shown positive
momentum. The Company has also seen good early results from the launch on
Pinterest and will be watching this closely moving forwards.
With the positive momentum from early 2023 continuing, the Board looks forward
to further progress being made for the full year.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Notes Six months to 28 February 2023 Six months to 28 February 2022
Year ended 31 August 2022
£ £ £
Revenue 4 31,022 13,058 28,904
Cost of sales (13,332) (7,529) (10,787)
Gross profit 17,890 5,529 18,117
Administrative expenses (1,827,329) (2,391,722) (6,009,375)
Operating loss 5 (1,809,439) (2,386193) (5,991,258)
Finance income 3,983 164 1,301
Loss before taxation (1,805,456) (2,386,029) (5,989,957)
Taxation - - -
Loss after taxation (1,805,456) (2,386,029) (5,989,957)
Other comprehensive loss Translation of foreign operations (25) (3,756) 1,284
Total comprehensive loss for the period (1,805,481) (2,389,785) (5,988,673)
Basic and diluted loss per share - pence 6 0.36 0.47 (1.183)
All transactions arise from continuing operations.
The accompanying accounting policies and notes form an integral part of these
unaudited interim financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 28 As at 28 February 2022 As at 31
February 2023
August 2022
Notes £ £ £
ASSETS
Current assets
Trade and other receivables 7 139,847 1,289,360 251,104
Cash and cash equivalents 2,930,032 7,408,349 4,376,134
Inventory 525,533 579,585 251,104
TOTAL ASSETS 3,595,412 9,227,294 5,131,365
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 8 (392,889) (1,007,510) (279,133)
TOTAL LIABILITIES (392,889) (1,007,510) (279,133)
NET ASSETS 3,202,523 8,269,784 4,852,232
EQUITY ATTRIBUTABLE
TO SHAREHOLDERS
Share capital 9 507,250 504,750 507,250
Share premium 12,513,101 12,490,601 12,513,101
Accumulated losses (11,536,345) (6,126,960) (9,730,889)
Share-based payment reserve 1,719,842 1,403,733 1,564,070
Foreign translation reserve (1,325) (6,340) (1,300)
TOTAL EQUITY 3,202,523 8,269,784 4,852,232
The accompanying accounting policies and notes form an integral part of these
unaudited interim financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share-based payment reserve
Ordinary share capital Foreign currency translation
Share premium Retained earnings
Total
£ £ £ £ £ £
Balance at 1 September 2021 504,750 12,490,601 (2,584) 1,295,918 (3,740,931) (10,547,754)
Loss for the period - - - - (2,386,029) (2,386,029)
Other comprehensive income - - (3,576) - - (3,576)
Total comprehensive income for the period - - (3,576) - (2,386,029) (2,389,785)
Share-based payments - - - 111,815 - 111,815
Total contributions by owners - - - 111,815 - 111,815
Balance at 28 February 2022 504,750 12,490,601 (6,340) 1,407,733 (6,126,960) 8,269,784
504,750 12,490,601 (6,340) 1,407,733 (6,126,960) 8,269,784
Balance at 1 March 2022
Loss for the period - - - - (3,603,929) (3,603,929)
Other comprehensive income - - 5,040 - - (5,040)
Total comprehensive income for the period - - (1,300) - (3,603,929) (3,605,229)
Shares issued 2,500 22,500
Share-based payments - - - 156,337 - 156,337
Total contributions by owners 2,500 22,500 (1,300) 156,337 - 156,337
Balance at 31 August 2022 507,250 12,513,101 (1,300) 1,564,070 (9,730,889) 4,852,232
Balance at 1 September 2022 507,250 12,513,101 (1,300) 1,564,070 (9,730,889) 4,852,232
Loss for the period - - - - (1,805,456) (1,805,456)
Other comprehensive income - - (25) - - (25)
Total comprehensive income for the period - - (25) - (1,805,456)
(1,805,481)
Share-based payments - - - 155,772 - 155,772
Total contribution by owners - - - 155,772 - 155,772
Balance at 28 February 2023 507,250 12,513,101 (1,325) 1,719,842 11,536,345 3,202,523
The accompanying accounting policies and notes form an integral part of these
unaudited interim financial statements.
CONDENSED STATEMENT OF CASH FLOWS
Six months to 28 February 2023 Six months to 28 February 2022 Year ended 31 August 2022
£ £ £
Cashflow from operating activities
Loss before income tax (1,805,456) (2,386,029) (5,989,957)
155,772 111,815 268,152
Share-based payment charge
Increase in inventory (21,406) (522,507) (466,950)
Increase in trade and other receivables 111,257 (921,013) (117,243)
Increase in trade and other payables 113,756 807,263 78,886
Foreign exchange differences (25) (3,756) 1,264
Finance income (2,682) (358) (1,301)
Net cash flows used in operating activities (1,448,784) (2,914,485) (5,972,643)
Cash flows from investing activities
Finance income 2,682 358 1,300
Net cash flow from investing activity 2,682 358 1,300
Cash flows from financing activities
Proceeds from issue of shares, net of issue costs - -
-
Net cash inflow from financing activities - - -
Net movement in cash and cash equivalents (1,446,102) (2,914,128)
5,946,342
Opening cash and cash equivalents 4,376,134 10,332,476
10,332,476
Closing cash and cash equivalents 2,930,032 7,408,349
4,376,134
The accompanying accounting policies and notes form an integral part of these
unaudited interim financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. Information on the Company
The Company is incorporated in England and Wales (registration number 11537452) and has a Standard Listing under Chapter 14 of the Listings Rules, trading on the London Stock Exchange with ticker CBX.
Cellular Goods is a UK-based provider of premium consumer products based on lab-made cannabinoids, independently tested, targeting the expanding but fragmented CBD sector.
2. Basis of preparation and principal accounting policies
This condensed consolidated interim financial information was approved for issue by the Board on 3 May 2023.
The Company's directors are responsible for the preparation of the unaudited
interim financial statements.
The preparation of unaudited interim financial statements in conformity with
IFRSs requires the use of estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the unaudited interim
financial statements and the reported amounts of expenses during the period.
Although these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately may differ from those
estimates.
The Directors consider that in the proper preparation of the unaudited interim
financial statements there were no critical or significant areas which
required the use of accounting estimates and exercise of judgement by
management while applying the Company's accounting policies.
This condensed consolidated interim financial information has not been audited
and does not include all of the information required for full annual financial
statements. The financial figures included within this interim report have
been computed in accordance with IFRS applicable to interim periods, and this
report constitutes an interim financial report as set out in International
Accounting Standard 34: Interim Financial Reporting.
There is no material difference between the fair value of financial assets and
liabilities and their carrying amount.
The functional and presentational currency is UK Sterling.
3. Going concern
The Directors have assessed the current financial position of the Company,
along with future cash flow requirements, to determine if the Company has the
financial resources to continue as a going concern for the foreseeable future.
The conclusion of this assessment is that it is appropriate that the Company
be considered a going concern. For this reason, the Directors continue to
adopt the going concern basis in preparing the unaudited interim financial
statements.
4. Revenue
The Company generated revenue from the sales of its products during the period of £31,022 (28 February 2022: £13,058 and 31 August 2022: £28,904).
5. Operating loss
Total administrative expenses include share-based payments of £155,772 (28
February 2022: £111,815). The related credit to equity is taken to retained
earnings.
6. Earnings per share
Basic earnings per share is calculated by dividing the loss attributable to
equity holders of the company by the weighted average number of Ordinary
Shares in issue during the period.
28 February 2023 28 February 2022 31 August 2022
£ £ £
Loss used to calculate basic and diluted earnings per share (1,805,456) (2,386,029) (5,989,957)
Weighted average number of shares used in calculating 507,250,000 504,750,000
505,989,726
basic earnings per share
Weighted average number of shares used in calculating 507,250,000 504,750,000
diluted earnings per share 505,989,726
Basic loss per share (pence) (0.36) (0.47) (1.183)
Diluted loss per share (pence) (0.36) (0.47) (1.183)
7. Trade and other receivables
28 February 2023 28 February 2022 31 August 2022
£ £ £
Trade receivables 683
VAT debtor 38,654 313,429 94,556
Prepayments 99,376 974,708 153,697
Share capital unpaid - - -
Other debtors 1,134 1,223 2,852
139,847 1,289,360 251,105
There were no receivables that were past due or considered to be impaired.
There is no significant difference between the fair value of the other
receivables and the values stated above.
8. Trade and other payables
28 February 2023 28 February 2022 31 August 2022
£ £ £
Trade creditors 259,392 920,512 125374
Accruals 36,891 86,998 84,222
Other creditors 96,606 - 69,537
392,889 1,007,510 279,133
All liabilities are payable on demand or have payment terms of less than 90
days.
9. Share capital
28 February 28 February 31 August
2023 2022 2022
£ £ £
507,250 504,750
507,250,000 Ordinary shares of £0.001 each 507,250
The Ordinary Shares have been classified as Equity. The Ordinary Shares have
attached to them full voting and capital distribution rights.
On 4 March 2022, 2,500,000 Ordinary shares of £0.001 each were issued, on
conversion of warrants over 2,500,000 shares at 1p each, increasing the number
of Ordinary shares to 507,250,000.
10. Capital and reserves
Share capital represents issued Ordinary shares of £0.001 each, all of which
are fully paid.
Share premium is the amount subscribed for share capital in excess of nominal
value less attributable share issue expenses.
Retained earnings is the cumulative loss of the Company attributable to equity
shareholders.
11. Share-based payments
The Company has a total of 50,460,000 warrants to subscribe for additional
share capital of the Company. Each warrant entitles the holder to subscribe
for one ordinary equity share in the Company. The right to convert each
warrant is unconditional.
The right to subscribe for ordinary shares in the Company is subject to
minimum vesting periods of up to three years. Relevant warrants are subject to
a lock-in period of 12 months from 26 February 2023, the Company's date of
admission to trading on the London Stock Exchange. This restriction applies to
all warrants, exercised or otherwise.
No new warrants were issued in the period.
Warrants issued Weighted average exercise price (pence) 28 February 2023 28 February 2022 31 August
2022
Number Number Number
At the beginning of the period 3.05 50,460,000 52,960,000 52,960,000
Issued in the period - - - -
Exercised in the year - - - (2,500,000)
At the end of the period 3.05 50,460,000 52,960,000 50,460,000
In the period, the Company issued share options to employees as follows:
Share options issued Weighted average exercise price (pence) 28 February 2023 28 February 2022 31 August
2022
Number Number Number
At the beginning of the period 7.63 22,550,000 - -
Issued on 28 October 2021 7.06 700,000 700,000
Issued on 6 December 2021 7.64 20,000,000 20,000,000
Issued in year 7.47 - - 2,350,000
Lapsed in the period 6.35/7.06 (5,218,406) (500,000) (500,000)
At the end of period 7.63 17,331,594 20,200,000 22,550,000
Equity-settled share-based payments are measured at fair-value (excluding the
effect of non-market-based vesting conditions) as determined through use of
the Black-Scholes technique, at the date of issue.
Volatility for the calculation of the share-based payment charge in respect of
the options issued was determined by reference to movements in the relative
share prices of a selected peer-group of companies listed on the London Stock
Exchange up to the date of admission and also proportionately on post
admission share-price movements of the Company where relevant.
The total share-based payment charge in the period was £155,772, which has
been charged to administrative expenses (six months to 28 February 2022:
£111,815, all of which was charged to administrative expenses; year to 31
August 2022: £268,153, all of which was charged to administrative expenses).
The share-based payment charge was calculated using the Black-Scholes model.
All warrants and options have an exercise period between one and three years
from the date of issue.
The total of the share-based payment charge has been simultaneously credited
to retained earnings.
The total number of warrants issued to directors (including former directors)
is 21,500,000 and the total number of share options issued to directors is
Nil.
Share-based payment charge for the period 28 February 2023 28 February 2022 31 August
2022
£ £ £
Administrative expenses 155,772 111,815 268,153
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