ECS Botanics has unveiled a major strategic shift which will see it sell its Tasmanian operation and hemp food and wellness division to focus on medicinal cannabis production at its Victorian facility.
As part of the restructure, founder and managing director Alex Keach will be replaced by executive general manager Nan-Maree Schoerie, with Keach moving into the role of head of corporate relations.
In an announcement to the ASX, ECS said the new strategy will see it reduce operating expenses by around A$1.3 million per annum and become a pure-play medicinal cannabis company.
It said growing demand for dried flower among patients has resulted in its Victorian operation becoming its “flagship asset”, with medicinal cannabis sales representing 86% of group revenue in the last quarter. It clones, cultivates and manufactures dried flower into EU-GMP licensed finished product and produces oils from biomass via contract manufacturers.
Following the acquisition of the Victorian operation, ECS has shifted its strategy away from extraction in Tasmania and entered a cannabis supply and tolling agreement with Sun Pharma.
It will now increase cultivation and manufacturing in Victoria to offset the reduction in Tasmania, having lodged an application with the Office of Drug Control to double the size of its cultivation footprint at the facility.
The firm has engaged CBRE to manage the sale of its Tasmanian assets and commenced plans to divest its Hemp Food and Wellness division, with savings expected from operating a single facility with one set of regulatory expenses. It has also applied for debt funding “through a major Australian bank”.
ECS said it is not anticipating any material impact on sales, and predicted continued quarterly revenue growth and improved margins.
Keach’s new role will see him leading corporate strategy, investor relations and strategic partnerships while remaining on the board as an executive director.
He said: “Nan and I have a strong friendship and business relationship, as the largest individual shareholders we are motivated to realise the value in the company which is representative of our efforts.
“I am looking forward to spending more time selling, promoting and uncovering corporate and strategic opportunities for ECS both locally and overseas.”
Schoerie added: “It is never easy to divest business assets. However, as we are in the enviable position of having demand for our medicinal cannabis products substantially exceeding our capacity to supply, the strategy is well founded.”
As part of the shake up, non-executive chairman David McCredie has stepped down to be replaced by board member Jeremy King, while Arthur Sun joins as financial controller reporting to Schoerie.