The volume of activity of cannabis companies traded on the stock exchange is increasing and the outlook in parallel with the increase in cannabis use is positive, but most of the companies’ shares in the field lost tens of percent last year and are trading at a low.
Medical Discourse
+1.61%
Base:348.3
opening:360
High:370
low:350.1
change:283,843
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One of the most prominent in the field lost almost 50% of its value and is traded at a value of NIS 117 million. The financial statements released today show an improvement, especially in the fourth quarter. On the face of it, excluding non-recurring expenses, the company has a profit rate of over NIS 10 million and a profit multiplier of about 10, given the fourth quarter, the profit multiplier is lower).
Revenues in 2021 grew by about 83% compared to 2020 and amounted to about NIS 67.3 million. Revenues in the fourth quarter amounted to an increase of approximately 29.5 million, an increase of approximately 168% compared to the corresponding quarter last year. The improvement in activity is due to organic growth as well as acquisitions and expansion into the field of pharmacies. The dramatic increase in activity was as stated in the fourth quarter. Gross profit before the effect of changes in the fair value of a biological asset in the quarter amounted to NIS 11.1 million, an increase of 89% compared to NIS 5.9 million in the corresponding quarter last year. Operating profit amounted to NIS 4.3 million compared to an operating loss of NIS NIS 2.4 million in the corresponding quarter last year. Adjusted EBITDA amounted to NIS 5.3 million in the quarter (out of NIS 13.3 million in 2021).
The net profit attributed to the company’s shareholders in the quarter amounted to NIS 2.3 million, compared with NIS 3.6 million in the corresponding quarter last year.
For the entire year, the revenues amounted to NIS 67.3 million. Revenues mainly include revenues from wholesale sales of NIS 53.3 million and retail sales of NIS 10.7 million, respectively. The increase in revenues was mainly due to sales of the company’s products in the Israeli market, including the launch of a number of products, as well as revenues from exports.
The gross profit before the effect of changes in the fair value of a biological asset amounted to NIS 27.3 million, compared with NIS 21.1 million in the corresponding period last year, an increase of 29%.
Operating profit amounted to NIS 5.9 million, compared with NIS 8.6 million in the corresponding period last year. The change is mainly due to an increase in marketing and sales expenses due to the growth in the company’s operations and support for the company’s sales line as well as the consolidation of the pharmacies’ operations. Operating profit was also affected by a decrease in other income compared to 2020 (mainly revaluation of contingent consideration).
Adjusted EBITDA in the period amounted to NIS 13.3 million, compared with NIS 12.1 million in the corresponding period last year, an increase of 9%. For the approach of the company’s management and as is customary in this given world, it constitutes an appropriate index for evaluating the business results of cannabis companies while focusing on the core of the activity. The net profit attributed to the company’s shareholders in 2021 amounted to NIS 5.3 million, compared with NIS 12 million in the corresponding period last year.
The company estimates that in 2022 the growth trend will continue in both wholesale and retail sales. The company is prepared for 2022 with an upgraded logistics infrastructure, operational flexibility, strengthening the brand and increasing working capital.
The company continues to implement the strategy, which focuses on the growing Israeli market with an emphasis on:
Maintaining and strengthening contact with the end customer by deepening the grip on the entire value chain
Establishment of a pharmacy chain with about 10 branches within about two years (currently the company has 3 pharmacies).
Nir Zichlinsky, Medical Group Discourse Chairman: “We are concluding a record quarter and a record year. These results were achieved thanks to hard work at all levels of the company, with an emphasis on implementing the strategy focused on the Israeli customer. During the year, we improved our grip throughout the entire value chain, especially in the last link – the pharmacy link, with the acquisition of 3 branches, which will form the infrastructure for the emerging pharmacy chain. We are prepared and maintain managerial, operational and financial flexibility in order to deal with developments in the cannabis market and take advantage of business opportunities that we believe will be created in the market.
“We expect continued growth in 2022 in both the company’s wholesale and retail sales. All the moves we make are in line with the long-term strategy we have built. “We are implementing the ‘heel-to-toe’ strategy while adapting to the cannabis market, which is dynamic and changing at a faster pace than many other industries.”
Yogev Sarid, Sheikh Medical Group CEO: “I am happy and proud of the record results presented today which are the result of hard and strenuous work over the years. We have made significant marketing moves by combining the entry into pharmacies, which is synergistic and has led to the expected results, also in terms of changing the sales mix in them. It is important to note that the pharmacies we purchased meet our early expectations and their progress is in line with work plans with an emphasis on synergy with discourse products and brands. The Israeli market continues to grow at a rapid pace, our early preparation with inventories of the right mix of products and brands, has made a significant contribution to the excellent results.
“Starting in 2020, we have seen the medical cannabis market undergo a change, with increasing competition from new and small companies whose activities are characterized by aggressive penetration efforts. These have naturally affected market shares and consumer behavior.
“We believe that in the medium term the cannabis market will stabilize with a number of strong and significant players, so the capabilities, infrastructure, products and overall benefits of the company will be reflected in the entire value chain, as part of being one of the leading companies in the industry.