June 4C should be out in the next couple of weeks. A quick snapshot of where the 4 cannabis companies (including ECS) I'm tracking are at in the three quarters to March is below.
Some things that may be of interest:
- AGH managed to get rid of all of their debt which isn't a bad thing, however they sold their assets to do so... Given the sale would have decreased long-term assets by a decent amount it's disappointing to see they used some accounting trickery to plump this figure up by including ~$8m in right-of-use assets for their leases. Why anyone would consider the lease of a property as an asset is dubious, if they break the lease it's not like they get paid $8m (they get nothing and instead have to pay the lease out).
- CAN... where do I even start with this one! If you're looking to lose your money this would be a pretty safe bet. Despite paying back $10.5m their debt still grew to $65.8m by end of March. They are busy trying to bucket water off the titanic by selling whatever they can and refinancing debt under even worse terms. Borrowing from Peter to pay Paul except Peter is demanding the financial equivalent of a night with your spouse in interest (depending on how much you like your spouse).
- ECS is a breath of reasonably fresh air amongst the stench of mismanagement from other companies (looking at you ME1). I think a few of us noticed the quality of the air improved measurably when AK exited stage left. The capital raise left a bad taste in a lot of our mouths, but it means they had the second highest cash balance amongst the companies listed below at the end of March and a funded growth plan that should boost net operating cash flow based on prior periods. It's really hard to say what to expect for the June quater as there was so much going on - large stockpile of inventory waiting to be converted to oils by SunPharma and sold as they entered April, largest harvest ever wrapped up by end of May, new sales team that needs to be paid for B2C which means these expenses will front-run revenue from this channel as it's just getting started. I'm excited about the immediate future of ECS as activity has really ramped up in the last 6-12 months and we should all start seeing the benefits of this in FY25.
- LGP looks like it could be turning the corner under the new CEO. They posted positive operating cash flow for the three quarters but this was due to the receipt of $5m in government grants and tax incentives in the March quarter. Without this payment they would have lost about $1m in the March quarter in operating cash flow so have definitely still made progress compared to prior quarters.
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