Wellnex Life Limited reports 57.6% revenue decrease for the half-year ended 31 December 2023

Wellnex Life Limited (ASX: $WNX) reported a 57.6% decrease in revenue for the half-year ended 31 December 2023, amounting to $5.70 million, down from $13.23 million in the prior corresponding period. The company attributed the revenue decrease to its strategic decision to solely focus on company owned brands and contract manufacturing. The acquisition of the Pain Away asset in December 2023 expedited the decision-making process to exit from representing and growing third-party brands, redirecting internal resources and finances to grow Wellnex Life brands. The delay in the settlement of the Pain Away asset severely impacted the financial performance plans of the business in the first half of FY24, but the company anticipates reaping the benefits of the acquisition in the second half of FY24. IP licensing orders also slowed down during this period but are expected to accelerate through CY24 with distribution being expanded into the Middle East and Europe and the launch of additional products in the company's pipeline.

Executive Commentary on Financial Performance and Outlook

The company's loss after income tax for the half-year of $9.752 million was up 131.47% on the prior corresponding period, primarily due to non-recurring costs associated with the acquisition of Pain Away, inventory provision of non-continuing brands, and non-cash expenses. The company also increased its inventory investment by circa $1.9 million to circa $5.0 million, including Pain Away inventory. However, the company expects revenue to be much stronger in the second half of FY24, driven by the completion of the Pain Away acquisition, continued growth in existing brands, expansion of the company's brands into new territories and distribution channels, and revenue from additional IP licensing arrangements. The company posted an operating profit for February 2024, with the majority of revenue coming from the company-owned brand, giving the company a net margin of circa 40%.

Outlook and Financial Position

Wellnex Life Limited reported a net asset increase to $6.5 million at 31 December 2023, mainly attributable to the completion of the Pain Away acquisition and recognised intangible assets related to the acquired brand. The company is also completing a $3.0 million equity placement with Pearl Funds Management, providing a strong cash platform to execute its business plan of driving revenue growth and margin improvement. As at 6 March 2024, $1 million of the equity placement has been received, with $2 million to be received during March 2024. The company anticipates continued growth in its key brands and expects revenue to be much stronger in the second half of FY24, driven by the completion of the Pain Away acquisition, continued growth in existing brands, expansion into new territories and distribution channels, and revenue from additional IP licensing arrangements.