Sunday, October 1st 2023

Love Hemp Group PLC

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Time to give some Love to Love Hemp Group?


“…Given the company’s evident ambition to extend the reach of its already recognisable brand, boosted by its recent fund-raising, the Group is well placed to take advantage of the sector’s shifting dynamics…”


We have taken an in depth look at the UK’s emerging cannabis sector over the past few weeks, following our market overview in March with case studies of Kanabo Group (LON:KNB) and FastForward Innovations(LON:FFWD), and interviews with Apollon Formularies (AQSE:APOL) and Love Hemp Group (AQSE:LIFE).

Love Hemp Group, which is also listed on the US Venture Market (OTCQB:WRHLF), was originally known as World High Life Plc, a medicinal cannabis and cannabinoid (CBD) focused investment vehicle which acquired Love Hemp, one of the UK’s best known CBD product suppliers, in October 2019.

The £9m acquisition gave World High Life the opportunity to support the growth of the Love Hemp brand and its product lines, which now includes oils, sprays and tinctures, and a variety of edible and water-based CBD products, a retail network of over 2,000 UK stores, and an online distribution network. World High Life underlined its focus on building the brand by renaming itself as the Love Hemp Group in March 2021.

On signing the agreement with World High Life, Love Hemp co-founder, and now Group CEO Tony Calamita, a serial entrepreneur in the health and wellness space, declared an ‘ambition is to become the most recognisable and sought-after CBD brand in the world’.

Building the Love Hemp brand


As we discussed in our March article, the UK market stands at the threshold of rapid growth after the Financial Conduct Authority finally gave the green light for cannabis-related companies to list on the LSE last autumn, more than two years after the UK legalised medicinal cannabis. The ruling led to a surge in companies applying to list, and, of course, intense investor interest: retail investors have poured more than £300m into cannabis stocks since companies began to list in February.

The new UK rules further strengthen a flourishing European cannabis market. Thirteen countries allow – or are currently discussing – the use of cannabis for medical reasons, with some forecasts estimating that the European CBD market will be worth more than €13.6bn by 2025. Money has flowed into international cannabis-tracking ETFs this year, reaching an all-time high of $1.9bn in February. In Canada the medicinal cannabis market is expected to reach CAD$2.35bn dollars by 2025, up from CAD$600m in 2017.

We highlighted Love Hemp as one to watch in our March feature, citing the strong news flow the company generated around the turn of the year. Just before Christmas the Group expanded its commercial reach in the UK and Ireland, announcing agreements to launch a new product line across 880 Holland & Barrett stores, andbring the Love Hemp brand to some 200 Boots stores.

In March the Group announced that it expected to move into new facilities in London by the middle of the year, which will have the capacity to manufacture up to 500,000 CBD products a month, and that it had agreed a five year global partnership with the mixed martial arts organisation UFC (Ultimate Fighting Championship), the largest pay-per-view event provider in the world. The partnership will take effect next month, allowing Love Hemp to access UFC’s physical and digital assets and use UFC trademarks, logos and brand, enhancing the Group’s international visibility. UFC has more than 625 million fans, broadcasting to over 170 countries and territories. The agreement was followed by confirmation that Love Hemp’s relationship with current UFC Welterweight Champion, Kamaru Usman, who has acted as a brand ambassador for several years, will be extended for at least another year.

Last month the Group enhanced its financial firepower  through a £5m fundraise,  alongside an additional £2m raised through a Broker Option. The Group also announced its intention to seek admission to the LSE Main Market ‘during the course of 2021’ to open its access to institutional investors focused on the LSE’s primary index.

The company has taken advantage of the increased demand for cannabis products during lockdown to ramp up its sales. In February it reported Q2 sales – from October to December – of £1,562,000, up 97pc compared to Q1 revenue of £793,500. Q2 gross profit was £764,000. Interim results for the six months ended 31 December 2020, published in March, reported gross revenue of £2,379,144, a 557pc increase on the previous year’s £426,465. Pre-tax loss was down to £962,171 from the previous year’s £9,835,551 (following the Love Hemp acquisition). The Group’s net cash balance as at 31 December 2020 was £78,977.

Moves towards further regulation of the CBD wellness industry


Despite all of the investor interest and commentary it has generated these are still very early days for the UK’s cannabis sector. The sector offers an exciting but volatile new investment opportunity. Just now the London market consists of a few small caps trading well above their revenue and an expanse of private CBD companies with little to no regulation.

In a move to provide a regulated standard of practice in the budding CBD industry, the Food Standards Agency (FSA) announced in early 2019 that CBD had novel foods status, meaning it is a substance which has not been widely consumed by people in the UK or EU before May 1997.

Following the announcement, cannabis-related businesses in the CBD wellness space needed to submit novel food authorisation applications by 31 March 2021. After this date, only products which were on the market at the time of the announcement and for which the FSA has received an application, which is subsequently validated, will be allowed to remain on the market.

In February, Love Hemp, submitted a ‘Novel Food’ dossier to the FSA in support of the Agency’s move to regulate a currently unregulated CBD market in the UK. The submission made available pre-clinical results based on the company’s proprietary study protocols, investigating the effects of Love Hemp’s finished product formulations on the body’s absorption of CBD.

Love’s Hemp’s prospects


Like other cannabis-related businesses stocks, Love Hemp’s price spiked in early February when investor interest reached its early high, touching 13p. It fell back with the rest of the sector, and has stabilised at just under 4p. Given the company’s evident ambition to extend the reach of its already recognisable brand, boosted by its recent fund-raising, the Group is well placed to take advantage of the sector’s shifting dynamics. Love Hemp may offer a particularly good access point for investors seeking exposure to this promising new sector.