Melodiol Global Health Ltd (ASX:ME1) has finalised the acquisition of international pharmaceutical distributor Health House International (HHI).
The wholly-owned Australian subsidiary distributes medicinal cannabis products in Australia and medical supplies in the UK and has reported remarkable financial performance throughout CY2023.
Health House plays into Melodiol’s strategy to significantly increase the scale of its business: combined Q1 revenues of Melodiol and HHI represent A$33.6 million on an annual basis, with HHI financials beginning to be captured in Melodiol consolidated financials from Q2 2023.
HHI generated combined currency-adjusted unaudited revenues of A$9.55 million from January 2023 through May 2023.
Top-line revenue growth flowed through to an unaudited adjusted EBITDA in its operating units for the five-month period of A$897,000, reflecting an adjusted EBITDA margin of 9.3%.
Melodiol's CEO William Lay voiced his satisfaction with the company's performance, attributing the successful quarter to the perseverance and dedication of the existing HHI management team. He highlighted the robust demand for HHI's medicinal cannabis products in Australia and the UK, expressing optimism for the company's ongoing growth.
“The company is very pleased to have delivered such strong results on behalf of Health House’s Australian and UK operating businesses, which are now the second and third Melodiol business divisions to achieve a quarter of cash flow or adjusted EBITDA break-even position,” Lay said.
“The results follow a considerable amount of hard work from the existing HHI management team and I would like to congratulate them for their persistence and determination since joining the Melodiol group of companies.
“HHI continues to witness very strong demand for its medicinal cannabis products in Australia and the UK and we are confident that the company’s growth trajectory will continue over the coming months.”
Increased efficiency
The acquisition of HHI was finalised by Melodiol in May 2023, marking a period of notable growth and increased operational efficiency for the company. The recent financial outcomes from HHI underscore a consistent increase in revenue and adjusted EBITDA throughout 2023 for the company's operating divisions in Australia and the UK.
Health House Australia and UK operating units are the second and third Melodiol Group business units to achieve a cash flow or adjusted EBITDA positive result.
This follows recent growth via wholly-owned Canadian subsidiary Mernova Medicinal Inc., which was cash flow positive for Q1 FY2023. This was based on ME1 Q1 revenue of A$2.3 million and HHI Q1 revenue of A$6.1 million (using a GBP to AUD exchange rate of 1.87), multiplied by 4 to demonstrate a hypothetical annualised result.
Melodial notes that this is not a financial forecast and that there is no guarantee that the same results will be achieved each quarter moving forward.
Further, the HHI acquisition closed on May 15, 2023, and the results of HHI will only be consolidated in the accounts of ME1 from that date.
The results from Melodial’s growing business units provide considerable validation of its strategy to grow revenue with a strategic focus on cost management at the business group level to achieve cash flow breakeven.
Melodial is confident that it will continue this trajectory across other business units in the coming quarters.