Cronos Australia will explore further acquisitions and merge the operations of its two clinic businesses after reporting its first financial results since merging with CDA Health.
Net profit for the combined group hit almost A$3.4 million in the first half of FY22, with revenues of $27.4m.
But under accounting rules which identify CDA Health as the “acquirer” for financial reporting purposes, the results only include CDA’s performance over the full six-month period to December 31 and the two weeks of Cronos Australia’s operations following completion of the deal on December 16 2021.
As a standalone entity in the 2021 financial year, Cronos Australia reported year-end revenues of $1.7m and total losses of $4.2m.
Sales of medicinal cannabis products contributed 96% of first-half revenue for the newly merged group, with clinic fee revenue of $940,000 and just under $30,000 generated from non-medical consumer products in Australia and Asia.
“While all three revenue streams increased compared to the previous corresponding half-year, the growth in sales of medicinal cannabis products was particularly strong, recording growth of almost 300%,” the company said.
Its consumer goods brands include Bathing Shed, Saiph and FCTR, pronounced factor. Cronos said it has faced “issues” with social and digital payment networks which it described as “erratic” in supporting the promotion and sale of CBD-based products.
Work is underway to address the problem, Cronos said.
CDA’s distribution subsidiary, Burleigh Heads Cannabis (BHC), sold around 190,000 medical cannabis units during the period through online platform CanView, exceeding total sales in 20/21 by 45% and “well exceeding” management forecasts.
It now lists 130 cannabis products on CanView having added 35 from seven suppliers over the past six months.
The group said 492 pharmacies and 150 doctors have signed up to the platform since July 1, taking the numbers to 2,433 and 649 respectively.
In addition to BHC, sales of Cronos’s Adaya line of medicinal cannabis climbed to $2.5m, more than double the figure for FY21. But the firm stressed that only revenue generated since the merger was completed in mid-December are included in the first half financials.
On its clinic operations, the combined group is set to merge the back office functions of CDA Clinics – of which it has three locations in Queensland as well as a nationwide telehealth service – with Cronos’s Victoria-based Cannadoc.
While both brands will be retained, administrative functions will be integrated to “harmonise back office systems and processes and create operational efficiencies and cost savings”, the company said.
The two clinics will also share anonymised data “to provide improved patient outcomes”.
With industry consolidation expected to continue – Zelira last week announced plans to acquire Health House International – Cronos made it clear the merger with CDA did not signal the end of its ambitions.
In addition to driving organic growth, the group said it “continues to review and evaluate potential opportunities for the acquisition of complementary businesses and assets”.
Meanwhile, Cronos confirmed plans to enter the schedule 3 over-the-counter market with in-house clinical trials and collaboration with regulatory experts underway.
Shares in Cronos slipped 1.5% to $0.33c at close of trade on Friday.
