Elixinol Wellness Ltd (ASX:EXL, OTCQB:ELLXF) has initiated a cost reduction program which is expected to reduce annualised operating costs by about A$3.2 million.
The company is implementing the program following a comprehensive organisational review which is being undertaken to address challenges resulting from the current status of the CBD sector and to position the company to achieve maximum value for shareholders from current and future opportunities.
Elixinol’s new initiatives are predominantly focused on reducing corporate costs and further right-sizing the Elixinol Americas operations.
These new US initiatives are expected to contribute about A$2 million on an annualised basis in OPEX reduction and are in addition to savings of ~A$1 million annualised following the transition to an outsourced third-party logistics model in the US which was completed in Q1 FY22.
Reducing corporate costs
Throughout the strategic review, emphasis has been placed on optimising the company’s corporate cost structure.
This has led to the decision to reduce corporate costs by substantially reducing the size and cost of the group executive team and integrating the group’s standalone corporate functions across the group’s entities.
These initiatives are expected to reduce corporate overheads by ~A$1.2 million on an annualised basis.
These new savings are also in addition to previously communicated savings of ~A$2.5 million annualised from the transition to a licensing model in the UK which was completed in Q4 FY21.
Importantly, these new cost efficiencies have been enabled by the work put in place over the previous 24 months, where the board has focused on moving Elixinol Wellness to be an asset-light, e-commerce led business.
Changes in executive leadership
As part of the strategic review, the board has accepted the resignation of Oliver Horn from the role of global chief executive officer (Global CEO) and executive director, effective 8 April 2022.
He will remain with the business as a non-executive director after that date.
Horn has led the company through a significant transformation over the last two years, delivering continued EBITDA improvements and moving the business model towards a higher margin, capital-light consumer wellness products business.
The board considers that Horn’s ongoing leadership in a non-executive role is critical at this juncture for the company to maintain momentum and to deliver on its strategic review initiatives.
Current global CEO Oliver Horn said: “I am tremendously proud of our team and the progress we have made in repositioning and transforming our global business despite the most challenging economic circumstances.
“Today’s announcement marks yet another resolute move to improve shareholder value and I am now looking forward to continuing our strategic transformation as member of the board with the welcome addition of David Fenlon who brings with him fresh thinking and an extensive industry network to create new opportunities.”
Appointment of interim global CEO
In line with the focus on continuing the ongoing strategic transformation, the company has appointed Mr Ronald (Ron) Dufficy, the company’s current global chief financial officer (Global CFO), as Interim Global CEO of Elixinol Wellness, effective 8 April 2022.
Dufficy has been with Elixinol Wellness since 2017, prior to the company’s IPO, and in previous roles has led large international teams and driven growth initiatives across highly regulated markets including as general manager, global shared services, at Aristocrat and chief financial officer, Aristocrat Americas.
With his extensive senior leadership and strategy experience, Dufficy is the natural appointment to lead this transition period whilst the strategic review of the company is completed.
New global CFO
The current group financial controller, Josephine (Jo) Lorenz, will step into the role of global CFO from 8 April 2022.
Prior to joining Elixinol Wellness in 2017, Josephine was group financial controller for Network Ten, and before that for Nine Entertainment Co.
Dufficy said: “I am delighted to be stepping into the role of interim global CEO, taking over from Oliver to lead the company through the completion of its strategic review process.
“I also would like to congratulate Jo Lorenz in her promotion to the global CFO position.
“Jo has been an outstanding leader through this period of significant change.
“I look forward to continuing to work with Jo in this new capacity.
“The business remains in a strong funding position, and we are working our way through the various opportunities ahead of us.”
Appointment of David Fenlon to the board
David Fenlon has been appointed to the board of Elixinol Wellness as an independent non-executive director, effective 28 March 2022.
Fenlon has over 30 years of experience in the FMCG and consumer sectors.
He is currently CEO of The Platform Alliance Group, non-executive chair for Nutritional Growth Solutions and non-executive director of Quest for Life Foundation.
Chair comments
Elixinol chair Helen Wiseman said: “Throughout his period as Global CEO, Oliver has demonstrated exceptional leadership, focus and integrity.
“He has led the company through a full-scale transformation towards a leaner, capital light consumer products wellness business with a strong culture and sound foundations.
“On behalf of the board, I would like to thank him for his immense contribution as global CEO.
“We are very fortunate to retain his knowledge and strategic skillset on the board.
“I look forward to continuing to work with him in his capacity as non-executive director of Elixinol Wellness.
“The board is also pleased to have in Ron Dufficy a very experienced leader who intimately understands the Elixinol Wellness business and all the opportunities surrounding it.
“I congratulate Ron on his appointment, which we’ve termed interim while we work through the remainder of the strategic review process.
“He will be supported by Jo Lorenz, who is a highly capable finance leader, also with a longstanding history with Elixinol Wellness.
“Through his appointment as non-executive director, Dave Fenlon brings with him both directly relevant category knowledge from his time at Blackmores, NGS and BWX, as well as distribution, regulatory and M&A expertise.
“His appointment also fulfils our objective of adding another independent director to the board.”