Here’s to you ECS investors: Shares rise as ECS delivers 300% surge in half year revenue

Aussie medicinal cannabis and hemp company group ECS Botanics has recorded a massive jump in revenue amid growing global demand for its unique set of products, here’s to you ECS investors.

ECS Botanics (ASX:ECS) has been justly climbing the ASX on Wednesday after the outward looking Aussie cannabis play revealed an impressive 312% increase in first half revenue for H1 FY22 to ~$2.4m, on the previous corresponding period (pcp).

The rise in revenue was driven by strong demand for ECS’s cannabis oils and dried flowers in Australia and globally, along with increased sales through its hemp food and wellness division.

Loss after income decreased 10% on pcp to ~$2.7m, while costs of goods sold increased to ~$1.65m from ~$578k on pcp due to the scale up in production of medicinal cannabis products.

Total costs also included ~$698k associated with inventory write offs, which ECS has linked to its focus on exceptionally high standards.

“We believe there may be an alternative use for this product and if so, we may recognise the benefit in subsequent reporting periods,” the company said.

ECS Investors: Investment in future growth

ECS’s compliance and regulatory expenses increased due to work undertaken with the Office of Drug Control, Therapeutics Goods Administration (TGA) and Department of Health.

The company said the ongoing work with regulatory bodies has enabled ECS to broaden its operations and increase output from its current harvest.  The company plans to also scale its post-harvest production capacity.

Wages and superannuation costs also rose, reflecting the appointment of 11 more staff as ECS scales up. The company plans to also scale its post-harvest production capacity.

ECS held cash and cash equivalents of more than $7m at the end of H1 FY22, providing financial flexibility to advance its growth trajectory and accelerate the supply of its medicinal cannabis and hemp products.

Cash is included in the company’s tangible assets of ~$19.4 million, which also includes farmland, buildings, plant and equipment in Victoria and Tasmania along with inventories and trade receivables.

Perhaps best of all – and hats off to the CFO – the company’s only debt is $21k. For motor vehicle leases.

Demand for products

ECS Managing Director Alex Keach said ECS was experiencing strong demand for its products and with a quality sales team and production base was expecting revenues to continue their upward trajectory.

And ECS this month completed its first shipment of Australian dried cannabis flower to Lyphe Group, the largest distributor of medicinal cannabis in the UK.

The shipment partially fulfills purchase orders from Lyphe totalling more than $500k, to be delivered as current harvest becomes available now and in the coming months.

“The significant increase in revenue during the first half highlights the strong demand that ECS continues to witness for its high quality GMP cannabis products as well as our range of hemp food and wellness products,” Keach said.

Shares in ECS are 4% higher in afternoon trade.

This article was developed in collaboration with ECS Botanics, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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