Sativa Group (NEX:SATI) has today provided a trading update for the year ended 31 December 2019, along with a general business update.
2019 was a year of significant progress for the Group. The strategic focus and reorganisation that has taken place since the arrival of Henry Buckley has enabled progress to be made across all aspects of the Group. In 2019, the focus was to build a solid platform for growth and allocate resources to the best opportunities.
The Company’s flagship brand, Goodbody Botanicals, was created and launched in the second half as a result of the experience from the George Botanicals brand and customer focus group input. The resounding message from these focus groups was that consumers are seeking a brand in which they can trust, and the Goodbody Botanicals brand was created to deliver that. Our products are tested to be THC free and come with QR codes linking the products to laboratory tests. The packaging was developed to provide consumers with all of the important information needed.
The goal of Goodbody Botanicals is to be the leading CBD brand for the major UK high street pharmacies and grocers, as well as thousands of independent UK pharmacies countrywide. An optimal go-to-market strategy was developed to deliver products effectively to retailers, and we have since partnered with the top distribution firms in the UK- SHS Distribution, a leader in distribution to high street grocers and pharmacies, and Alliance Healthcare, the leader in distribution to independent pharmacies across the UK. The strategy launched in the second half of 2019 is already bearing fruit, with new business being won including numerous independent UK pharmacies. We continue to see very strong interest from the high street retailers and our team expects to win new customers.
Our Goodbody Wellness brand piloted three retail stores in 2019, as a basis to test the model to enable franchising. The retail stores have to date not delivered to our expectations but we have learned a significant amount from the pilot program and now plan on modifying the model to introduce smaller and lower cost concession locations, while expanding our product range.
Additionally, we are now launching the Goodbody Wellness brand to the health and beauty segment. We believe that this premium range will fit ideally into customers such as high-end retail, spas, health and wellness centres. We are expanding this product offering, with this range to be sold through our sales team and online.
At Tessellate Collective, our direct selling platform, we have seen solid growth in 2019. We have now built a new scalable back-end support system to enable significant growth in 2020 and beyond. The beginning of 2020 has already seen a significant increase in the product range, strong sales and the addition of new sales advocates.
In the area of supply chain, we continue to expand our product range, formalise processes and deliver on our quality commitment. Although compliance is not an exciting term, it is at the heart of our supply chain, as we are committed to delivering high quality products each and every time. We batch test both our own and externally sourced products within the Group’s PhytoVista Laboratories and then regularly externally test for verification and calibration purposes. We believe our commitment to quality is a core success factor for our business and is consistent with our desire to build brands in this sector that will be trusted.
Product line expansion continues with numerous products, including a new sports range nearing completion.
PhytoVista Laboratories has enjoyed a very strong year with sales in line with management’s expectations. The laboratory has now performed over 3,000 tests on cannabis-based products. On the technical side, we are in the final stages of achieving ISO accreditation and the outlook continues to be bright, with 2020 off to a good start.
In 2019 we entered into a research partnership agreement with King’s College London and received a Home Office Licence to cultivate cannabis for research. Under the partnership agreement, Sativa provides Kings’ College with the cannabis product it need. We are pleased to announce that we successfully completed our first cannabis harvest this month and look forward to continuing to fulfil Kings College’s research needs.
Veterinary and Human
We are making good progress on the medicinal front, with our efforts currently focused on the veterinary space. Our Scientific Advisory Board is adding significant value as we develop the needed medicines in the space. As always, we strictly adhere to all the regulatory requirements on development.
As an early mover in the industry, we continue to be nimble and to take advantage of areas that are delivering results and, equally, can pivot when things are not. 2019 was a year when the platform for growth was established and, as we look to the rest of 2020 and beyond, our focus is on continuing to build on our solid sales efforts to date. Management continually monitors the Group’s cost base and is ready to recognise as and when business elements require alteration. As a result of this approach, when the Group reports its final results for the year to 31 December 2019 in April 2020, the Group expects to show gross profit and EBITDA slightly ahead of expectations on marginally lower revenue than forecast, which increased by greater than five-fold on the revenue reported in the prior-year.
Henry Lees-Buckley, Chief Executive Office of Sativa Group, said: “2019 was a year of progress for Sativa, with the focus being on building a strong foundation for growth. The strategy is in place and the team is focused on execution. As always, we are taking the high road in ensuring that we not only deliver high quality compliant products but also deliver best in class customer service. I am confident 2020 will be a breakout year and will solidify our position as a leading UK CBD wellness and medicinal cannabis company”.