Cann Group Limited (CAN.AX) Earnings Call Transcript & Summary

Good morning, all, and thanks for joining us for the Cann investor webinar this morning. Today's presentation and all the relevant documents are available on the Cann website, which, as I'm sure many of you realized was lodged on the ASX this morning, including the unaudited revenue results for the 12 months ending June 30, 2023. In terms of how we're going to run today, following the formal presentation, there'll be a Q&A session, and we'll try to answer as many questions as we can. And some have been sent to us directly as well. So -- but to submit questions during the session, just use the Q&A tab at the bottom or top of your screen and then just enter those. And as I say, we will endeavor to get through them. So just to the disclaimer slide -- okay, thanks, Sam. So just a reminder to read the details of the disclaimer and the complete information in the prospectus which should be with you and has certainly been lodged with the ASX as well. So -- but at this time, I'd like to hand over to the CEO of Cann Group, Peter Koetsier, following this short video. So if we get the video going firstly. [Presentation]

Good morning, everyone. And hopefully, the video came through the Zoom call. If it didn't, it will appear on our web page. I really urge you to take a look, and we'll be sharing more video footage through the next few weeks over some of the exciting things that are happening. If -- the video clearly shows that with the support and the capital provided by our shareholders, the Cann state-of-the-art facility in Mildura has become a reality. It also shows that the Cann Group have moved to a new phase that sees our facility beginning to rapidly scale up to maximize production. Today, I'm really excited to share with you our plans for this next phase and to outline how we're going to accelerate production in the next 18 months, talk a little bit about our continued efforts to accelerate revenue and that our focus can now begin to shift to reaching profitability. Specifically today, I'll cover a few topics, including how the Australian medicinal cannabis market is sizable and rapidly growing, that we have a high-quality management team that are now executing the growth opportunity, that we have already commenced to significantly scale the Mildura production to optimize business operations and to generate operating leverage. I'll also share some significant opportunities for incremental growth, including the proprietary Satipharm platform. And I want to reinforce that this equity raise is focused on OpEx, and helping us to accelerate our scale up to secure our first-mover and competitive advantages. But before I start getting into the detail on these topics, I really want to make sure that I mention that patients remain at the center of everything we do. Since joining Cann Group, I had the opportunity to speak with many patients helped by medicinal cannabis. Their stories remind me that each day we come to work, we need to work hard to provide quality medicinal cannabis products to improve the quality of life for people in need. But the Australian medicinal cannabis market is moving so quickly. It can be difficult to have definitive, up-to-the-date data on the exact size. One source I look to is this, the Penington Institute, who makes estimates based on real data they collate from Freedom of Information applications to the Therapeutic Goods Administration, the agency task with managing access. Their estimates show that the 2022 medicinal cannabis prescription market in Australia at a retail level is around about $200 million to $250 million already. Importantly, this market grew a huge 41% between the first half of 2022 and the second half, which, on an annualized basis, is nearly a doubling. If this level of growth where to continue for the next 2 years, '23 and '24, the market would approach AUD 1 billion. Now even if the market slows to half the rate that we saw in 2022, we're still going to see a doubling in the market by the time we get to '24. And all of this without factoring in potential near-term legislative changes that are appearing in some states. Looking at the market in more detail. The biggest segment in the market is inhalable flower, which the quality of flower meet -- which means the quality of flower needs to be high. At present, only around 80% of brand -- only about 20% of brands, sorry, in the market are actually Australian-grown products. That means 80% of brands selling in Australia are made from overseas-grown flower. This week, the TGA amendments came into effect, which means overseas products must now meet the same high standards, local manufacturers like us have always had to achieve. This is good news for patients, clearly, but this also levels the playing field. All of this means every month, local Australian companies are announcing plans to add capacity to build facilities to meet this growing demand. And Cann is in a unique position in Australia because not only is our Mildura facility capable of amongst the biggest volumes of any facility in Australia planned but importantly, we are also scaling to that level right now. As we enter this new era for Cann, our ambition and vision is to be Australia's largest and most innovative cultivator and manufacturer in Australia. And this vision is made possible by our state-of-the-art facility in Mildura that you saw and accelerating production right now. Our teams in cultivation, production and our new leadership structure, and already loyal customer base that we can build on, and we can add more and better products to. We've already -- we are fully licensed and TGA approved, and our laboratory capabilities and scientists are on-site at Mildura, working right there with the production and cultivation teams. Whilst cannabis companies come and go, Cann has years of experience as the first Australian company to be granted a medicinal cannabis license and a long-established R&D partnership with universities, government agencies and overseas experts. The new management team bring experience and expertise to allow us to evolve to a future where we are renowned for being customer-centric, operationally excellent and to drive revenue volumes. In my career, I've had roles with focus on creating strong commercial focus and to drive strong growth in revenue. And this opportunity at Cann is a strong fit for that experience, and I'm very confident we have the people in place to meet our objectives. As you also saw from the video, we now have a functioning state-of-the-art facility. Every day, computers under the expert supervision of the team in Mildura, modify the light, the temperature, humidity and nutrient levels in our facility to ensure ideal growth conditions 24/7. This allows us to target really high yields and quality and to grow all year round. Unlike many other facilities in Australia, cultivation, production and our scientists are all on the same site. This allows us to constantly look for improvement and target better and better quality, meeting or exceeding the highest standards demanded by the TGA and our customers, and our Satipharm manufacturing is also right there in the same facility. So now we have the facility at Mildura ready, it's time to change the organizational focus to scaling production and selling the high-quality products we're making. Consistent with this change, we're moving from capital expenditure to operational expenditure. In fact, we're planning to drop our CapEx by around 80% this year compared to the last few years as we dramatically increased annual yield of high-quality, consistent product of our cost per gram of product falls significantly. Put simply, scale means more product to sell and lower cost per unit. Ultimately, when we do this, our forecast see us reaching EBITDA profitability. As part of this new era for Cann, the team and I are fully committed to reaching that point within the next 2 years. Our plans for scaling our production are aggressive and are happening right now. Since the first commercial crop was produced in Mildura 1 year ago, the team has used experience, adjustments and innovation to hit the kind of metrics that has given us all the confidence now is the time to scale. In May, the first big step in scale have happened. The team planted our biggest crop so far. And as that is harvested and processed from mid-July, it will set the new level at an annualized production of 8 tonnes, a big step from the 3 tonnes we did last financial year. From here we move to 10 tonnes annualized rate in the second half of this financial year. And then as we begin the next financial year, we will be at an annualized rate of 12.5 tonnes, which we forecast to deliver completely in FY '25. This is an incredibly exciting time as we realize the dream of the enormous facility and achieve what it was designed to do. Importantly, at this level, as I've discussed, cost per units fall dramatically, and we can deliver our key -- the goal of being EBITDA profitable. So how does the scaling actually produce efficiencies and margin benefits to drive operating leverage? Well, as you can imagine, once you turn on such a high-tech cropping facility and you have the systems and processes in place to meet ODC and TGA regulations, many of the costs are actually fixed. Our company and facility have important systems and functions that exist regardless of the crop size such as our sophisticated security and IT systems, our base electricity requirements, the laboratory services and the regulatory and administrative functions. So this explains why the capital raise is being directed mostly to operating expenses -- and the capital expenditure, albeit 80% less than the previous year, is primarily targeting automation of our operation, all of that for greater efficiency and speed of production. Generating more production and faster output will drive operating leverage and margin. But as you will have seen in the announcements today, we're not waiting for the 12.5 tonnes to enhance our commercial growth. I've already talked about having the right team and improving our customer focus. And a few hours ago, we're pleased to announce we closed the last financial year with unaudited revenue of around $13.5 million. This represents more than 2x our revenue from the previous financial year. And I'm sure you would agree, this helps to give us much more confidence in our future growth. I'd also like to highlight that out of this more than 100% growth, sales of our inhalable flower increased by around 250% in the same period. And this is really important for 2 reasons. Firstly, in the market, inhalable flower has more than 70% of sales, which means we're moving towards the area of biggest volume growth at a much faster rate than the market. And secondly, inhalable flower is a great measure of quality. So it's a strong indicator of our rapid improvement at Mildura. As exciting as these results are, they're just the first step as we scale our company. As you've seen, our future has far bigger potential, and the Cann team are focused every day on getting better and better at meeting the customer needs. Considering how much we plan to increase production and deliver consistent quality product, I'm even more excited about how far we can go in the next few years. Seeing the key elements for our success coming together and the path forward to realizing our vision is extremely motivational for me and my team. So whilst such big increases in production and that production having a higher percentage of inhaled flower is the key driver of our future revenue, it isn't the whole story. Being customer-centric means exceeding the expectations of our existing customers and attracting new ones. And to do this, we've undertaken a plan to expand our portfolio, offering to meet more customer needs. The good news is that is far advanced. And some of our new products were tested with patients last month. And we have even more exciting new products being developed right now in our R&D facility. Our enhanced future range also includes new formulations of the Satipharm platform that I'll discuss in a moment. Furthermore, our plans over the coming months to augment and automate our manufacturing area will allow us to generate revenue by offering GMP contract packing to other companies, something that we have already begun. And as we achieve scale production levels, we'll also consider new lucrative markets outside Australia. And we've already been in discussions with several overseas customers keen to access a consistent supply of quality Australian flower. And as you saw in the announcements earlier this year, we've already successfully produced small batches for the German market, which patients are taking right now. This has been a great learning, and the team are actively planning for other European countries and working to meet their regulatory requirements. And of course, Cann is blessed to have the Satipharm platform. And as a pharmaceutical guy for more than 30 years, when I arrived at Cann, I immediately saw this as a potentially huge opportunity, a product that is unique, has important bioavailability benefits and is presented in a more familiar pharmaceutical form. Plus, we have patents across the world, including the U.S.A. Whilst the S3 trial results didn't allow us to immediately target an over-the-counter registration as we hoped, we remain in conversation with Haleon as both organizations still see a strong future opportunity in that part of the market. And the Satipharm platform has the potential to do so much more. Currently, we are developing an extended range of strengths, including those with THC. This allows us to target more medicinal cannabis indications. We also see this future range as the basis of possible clinical trials in multiple conditions. And I'm looking forward to sharing more on these plans as they become more concrete over the coming months. So in summary, why invest in Cann? Well, we have a valuable first-mover advantage opportunity to immediately scale to large quantities of quality product. And as we achieve scale, we can better meet the unmet demand in the market for locally grown quality GMP supply. The era of building has become an era of scale and selling. Capital will now be focused on accelerating towards maximum capacity in financial year '25. And with this scale, we'll also become more efficient and have strong operating leverage. All of this adds up to a pathway to being EBITDA profitable, which is a crucial goal for my team. We're already demonstrating our ability to drive strong revenue growth, unaudited sales up 111% on last year, and we're expanding and improving our portfolio offering to capture more of the market going forward. And lastly, and importantly, we have the team in place to make all this happen. I'm really excited about the very bright future for Cann. And I hope this information that I've shared with you is enough for you also to be part of this next era. So before I go to questions, I thought it might be useful to have a quick reminder on some of the key points in our equity raise. I urge you to read the full details of the offer in the prospectus. But in summary, we're seeking to raise $11.7 million before costs with a 1-for-4 nonrenounceable rights issue and a free attaching option exercisable at $0.22. Very importantly, I would also remind you the entitlement offer closes on July 18. So act now. Do not miss out. And before I go to Q&A, I think it's important to say, using shareholder money for me carries a big responsibility. And I wanted to say a few words of how we're planning to use the funds, which is consistent with our move to scale production and to move to OpEx from CapEx. And firstly, in order to speed up and create efficiencies in the production area, particularly, we're enhancing the automation, not only -- that not only benefits our own product as we scale, but it also gives us greater capacity to potentially get revenue from third parties. And even with automation as we scale to big quantities, we're going to need more staff. And you can see the size of the production change. And with more staff in the -- particularly in the production area, even with that automation. More product also means more testing to ensure TGA compliance. So we'll have a greater need for laboratory and QC. I've outlined our plans to expand our portfolio, including the Satipharm platform, and these funds will help to bring this to market quicker. I did want to make mention of an area that I'm very passionate about, although it's not the biggest number on the sheet, and that is our environmental footprint. In our plans are some key projects, particularly focused on the area of increasing our energy supply from solar and to consider how our waste is being used. So as you can see, these funds are planned to be directed towards increasing production, improving speed and efficiency. And now that this amazing facility is built, it's time to take the next step and realize the plan to be high capacity, high quality, profitable Australian company. And I hope I've convinced you to come on the journey with us. And Deb and I are here ready to answer any questions. Over to you, Adrian, to help us.

Thanks, Peter. [Operator Instructions] So Peter, I may start with -- we had some questions that were sent through directly. And this has got a bit of a preamble, and there are 3 questions. But let me start with this one. So shareholders lack confidence that as revenues grow, profits will come, in particular looking at some larger overseas players whose losses only got bigger as production and revenue scaled up. The fear is that Cann does the same over the next 12 to 24 months. While scaling up to maximum production capacity, that losses are going to be -- to deepen and further capital raises and shareholder dilution will be necessary. The other fear is that Cann will not be able to manage large debt levels, and rising interest rates will only make this more difficult over the next 2 years. Now the question, Peter. Can you give some reassurance to shareholders that Cann have a path to profitability? And that you are confident that as you scale the production, you were able to keep production costs below sale costs and can be competitive against other domestic lower-cost producers?

There's a lot in there to unpack in terms of many things to comment on. I would caution people to purely extrapolate what's happened in other markets. There isn't really any market that's the same, both in terms of the regulations, the legalization and the time line. So we're not a complete copy of any market that's further advanced than us. They've all evolved very differently already. So from that point of view -- but I hear the concerns. And first and foremost, I would say, our team feels the responsibility of making this company profitable. And it's something that we talk about all the time. And particularly Deb and I, I think, every hour, it's a focus of our attention. To me, the pathway to success, first and foremost, is to drive revenue. And that part of it is the key in the short term for me with -- particularly with production coming up. And to drive production -- to drive revenue from that production, we have to be really excellent in the market. And that's obviously a factor of improving our range, improving our quality and meeting the needs of the market as quickly and as best we can. So those are things that I'm very familiar with. It's part of what I've always done in my roles. I would say additionally that there is a growing market. The market is very big and is growing very rapidly in Australia. So -- and actually, the biggest concern and complaint we hear from current and potential customers is the ability to get sustainable, quality products that they can count on month in, month out. And scale brings that, particularly with quality product that we've got now. So that part of it, I feel pretty confident about and the team as well. I think the other thing to say is, it's -- if you have a look at the facility, as you've seen in the video and in this picture here, there are a lot of fixed costs in this facility. And actually improving operating cost per gram of production, improving margins isn't very difficult when you scale production. It doesn't mean that we're just simply doing that. We are looking lots of different ways to improve margin across the board. And it is part of our plan as in parallel with driving revenue. So I want to say we've already, in this financial year, dramatically improved margin, although it's really not much of a benchmark considering we've been in startup mode, but there is a lot of room to move as we go forward. Maybe, Deb, if you want to add any comments on the rest of the very complicated question, which is a very, very good question.

[indiscernible]

Yes, sorry, Deb. So it was -- so the question was, can you give some reassurances to shareholders that Cann have a path to profitability, and that you are confident that as you scale, you're able to keep production costs below sale costs and can be competitive against other domestic lower-cost producers?

I think as Peter mentioned, the economies of scale that we see form scaling up make a big difference to our business. And we're already seeing that now. When we look at our costs from this time last year to today, we already see an improvement. And that's just on producing 2.2 tonnes at Mildura. So we're able to spread those fixed costs over a bigger base. And as we scale up to 12.5 tonnes, that's an even bigger base to spread those costs out and improve our margins. So that's our path to profitability going forward.

Thanks, Deb. And perhaps while you've got the stage, just the next question was, can you give some reinsurance to shareholders that Cann have a viable plan for managing debt levels?

Yes, we absolutely do. I mean we have a very strong relationship with our bank at the moment, the NAB. And I will say that it's a pleasure dealing with them because they're a bank that really understands our business well. It's very satisfying to deal with them. We meet with them on a regular basis, we keep them fully informed of everything that we do. And so there -- we've got a very, very strong relationship with them. Most of the debt that Cann took out was for the building of the facility in Mildura. Now that that's up and running, our focus is on grow -- getting our facility to its full capacity and taking the benefits of that and translating that to [indiscernible].

That's great. Thanks, Deb. So -- and just a final question within this group. So can you give some guidance on what you expect revenues, cost of production and earnings to be once at maximum production capacity?

Look, landing on specific numbers at this point in time is a very dangerous thing to do because everybody writes that down. It's also, I don't think, aspirational enough to give guidance and specific numbers at a point where we are turning -- we are pivoting. So at this point in time, I'm very excited about our ability to improve revenue and hopefully, I've shared some of the reasons why. I'm very, very sure that we are going to improve our operating margins. So all of those things come together. But we are in a constant battle to improve all of those things. And at the point -- this point of inflection is a really critical time to start to capture every single opportunity we have. So as we move from start-up and build to scale and sell, it's a different era for the business. So at this point in time, to give very specific guidance, I think, is a mistake. But we're very confident about getting to EBITDA profitability with what we have in our plans right now. With an average scenario, I, of course, come to work not having an average scenario in my brain. I think there's always more there. There's more opportunity. So that's what's driving us every day when we come to work.

Thanks, Peter. A very specific question here. Will the future Satipharm clinical trial still be within the S3, example, 150 milligrams per day range? Or will they be prescription-only?

Look, I'm not really ready to go prime time on the Satipharm platform plans. But you can imagine that having worked in pharmaceuticals for most of my life, from prelaunch, preclinical work all the way through to end-of-life cycle, I have a lot of strong opinions about what we're going to do with this platform. And I think whilst S3 low-dose CBD, I think, is, in some ways, inevitable because it's critical that patients have access to it in pharmacy and they are relatively safe products -- I think there's so much more for Satipharm. So watch this space. I do have plans, but I'm not ready to really go prime time just yet.

A really quick question. I think I know the answer to this one. Do Cann export to Thailand?

Not as yet. And the Thai market is becoming increasingly complicated, to be honest. But we do -- Thailand, like every other market, to be honest, we keep one eye on. Whilst our focus at the moment is scaling to meet the Australian market demand, which is really, really strong at the moment, we, of course, think a little bit ahead as we get into even bigger production levels. And we do keep an eye on a lot of the European markets, not just Germany, but the Poland, the Czech Republic, the U.K., but markets like Thailand are also in our scope.

Okay. So Peter, next question. Great to see the numbers today reported, but can you sustain the current rate of growth?

Well, I hope the answer is pretty clear from what we talked about today. To be honest, the market is growing so quickly. And even if it slows down a little bit, it's still -- there's still huge growth potential in the market. That's #1. We are scaling to production super quick because we're ready. And that creates more product, more opportunity to do more, and we are improving the range. So I think the momentum that we've built before all of the other plans were in place on revenue should be an indicator that we could do it on its own, but there is so much more left to do. And we -- I see lots of opportunity for a lot of revenue growth going forward.

Thanks, Peter. Simple question here. There have been lots of capital raises. Is this the last one?

Well, maybe I'll start, and then I can throw to Deb. But it's a great question. And capital raises are something that we don't enter into lightly. We have structured this deal specifically with the intent that all the elements together combined to get us to EBITDA profitability, and that's kind of what and how I'd answer that question. But maybe, Deb, you got...

I got them. In [indiscernible] revenue results. Cann is a very different company today than it was 12 months ago. It's in a transition phase where the company is now commercializing its products and [indiscernible] anymore. So our focus is, I guess, we're not a construction company anymore. We're actually -- the company is selling products and we're making [ products ]. So our focus today is growing at revenue and improving our margins because we're doing well. And we're already doing it now. As Peter mentioned, we've structured the current capital raise to help us achieve the objectives that are just mentioned -- Peter mentioned in the presentation. We're completely focused on meeting objectives in the time frame we mentioned, and we believe we offer the right structure will be the key element to achieving these objectives as we move forward with the scalar process.

And I think it's a great -- I mean, honestly, Deb and I and the rest of the team come to work every day, understanding that we need to meet the goal of being a profitable Australian company. And we do have plans to do it. And we are -- we -- as we said before, we are pushing at this capital raise towards accelerating production and quality product, which ultimately is what we'll be selling.

Thanks, Peter. Just a couple of questions I can combine here around margins. So what platform do you use to sell the product in Australia? And what gross margin do you sell through this product? And just further on that, how much further margin improvement can be achieved through improving marketing efficiencies?

I'm not sure I understood the first part of the question, sorry.

So what platform does Cann Group use to sell product in Australia? And...

Our primary focus is B2B. So our biggest customers have their own brands. And hence, the reason why more range and more supply is critical. So our platform is actually just face-to-face contact with our key customers. And we do have people in the field. We do have people in constant contact with our customers. But we don't -- there isn't any particular platform. But our products ultimately, with many brand names, end up on lots of different platforms. What was the second part of the question?

Yes. Just with respect to the margin improvement through further manufacturing efficiencies.

Yes, I think we've kind of hopefully got to this. But in all honesty, look at the video and tell me when you think about costs, so much of the cost is already built into that place, whether we -- regardless of the size of the crop. There is obviously cost post-harvest and, hence, the reason why the capital raise is directed towards mostly that. But whether you plant one row of plants or you plant the whole thing out like is on the picture at the moment, it's remarkable how fast efficiencies come through. You've got lighting costs, you've got facility costs, and you've got a basic staffing function, both in HQ and beyond. So -- and the ODC require all cannabis growers and manufacturers to have some of the higher security systems in Australia. And as a consequence, they're always turned on. So whether or not we're planning crops or not, the ODC demand that that is live, the whole time. So there is a lot of fixed costs built into Mildura, and we need to basically make that work as efficiently and effectively as we possibly can. And I can tell you, at full capacity, we have a dramatic change in margin.

Thanks, Peter. So actually, probably on that same theme. So how confident are you that at 12.5 tonnes per annum output, you can generate sales to achieve EBITDA profitability?

Well, I'm very confident. We've done the scenarios. We haven't set ourselves a ridiculous aggressive pathway in those scenarios. There are obviously loads of variables that go into what happens over the next couple of years. So we have lots of very different pathways that we can see in scenarios. But if you pick what seems reasonable with what we know today, I feel extremely confident.

Thanks, Peter. Sort of a question relating to the fixed costs. So given the current electricity cost increases and the high use of electricity in such a hybrid facility, how can reduced selling prices, and the reference here is to Cannatrek low-priced product, and higher electricity costs be married? Your fixed costs are just going to get higher. Question.

Well, it's a good question. And we're all suffering personally from high cost of electricity. Interestingly and perhaps coincidentally we've just renegotiated our electricity contracts, and we've actually reduced our costs. So part of that you could argue is fortuitous. But the team has worked really hard on something as important as electricity costs, and we've got benefit from it. And maybe, Deb, you can comment [ there ].

I was just going to say, at this point in time, we probably [indiscernible]. We're looking at other options, more environmental options, such as solar and things like that -- so that's the way of reducing our costs [indiscernible].

Yes. One of the great things about being in Mildura is, there's a lot of sun up there. And whilst the providers are already probably providing a lot of our electricity from solar source, there is opportunity for us to contemplate what else we do, hence the project on environmental -- that's also potentially has cost benefit.

We're also going to create other efficiencies through [ this way as we move into ] automation -- to be about that to reduce costs in other areas to offset some of the increases that [ we've built ].

Yes. I mean, it's a great point. I mean if you look carefully at the video, you can see the really great team hand filling our jars and weighing them, which they do for every single jar at the moment. And a great example of sort of the automation that we can put in is we've already got the jar sealing process and labeling process automated. The next phase is to actually automate the filling of the jar with an exact weight. So those sorts of automations dramatically improve what happens. And that -- those great -- that great team then can be liberated out to do other things rather than something that a machine can do.

Thanks, Peter. Next question goes to product. Is there any information we're able to obtain when it comes to what products have been grown at Mildura?

Well, all ours. The great thing about being in a company that has such a great heritage and a great R&D process is, we have multiple genetics running through our facility right now. And as I said, I alluded to, we're in a phase of greatly expanding our genetic offering, both through using our own developed genetics, but also input from other sources, specifically designed to grow product in our facility that meets all customer needs. So at the moment, we can -- we're so keen to keep up with demand that we're growing everything we can. But I would say in the phase of product development, we've got a brand-new cultivar that's coming through for sale right now, which is getting great reaction in the marketplace. We've got a number of other ones that have just gone through patient testing, one of which looks like a winner, which will add to the range. And then we're actually in the process of developing 17 -- developing and testing 17 new ones as we do typically. So our range in the next 12 months as we exit '24 will be dramatically different to what we've got now. But all with our own R&D know-how and with our facility. And the important part of it is, when we plan our big trades like you can see in this photo, these are products that -- these are plants that have been developed genetically and in terms of growth in a way that we know succeed in Mildura. And that's part of the other part of our confidence and successes. When we put genetics into Mildura, we know they work.

Thanks, Peter. Interesting question here. So are doctors generally accepting the multiple use of cannabis against the stigma we've seen in the past?

I think that the use -- the number of doctors prescribing is clearly going up. And there are -- that's probably mostly around the edge of people who are doing occasional prescribing, who are putting their toe in the water. But we're far from capturing all the prescribers in Australia, far from that. Part of that is driven by, obviously, the stigma, part of -- both with themselves and their patients. Part of it is the industry needs to get better at providing information and data, I think, to doctors because they are data driven. They're not -- thankfully not -- don't tend to be, as a rule, exciting and innovative people. They tend to be driven by data, which is nice. So we need to get better at doing that. And then I can't -- not leave this topic without mentioning the Satipharm platform again. I really believe that it looks, feels and potentially will have the data that is expected for the people who perhaps are slow to start. But having said that, there are still loads of prescriptions so coming into the market, and it's growing very fast.

So good timing on one question with respect to Satipharm. So do you anticipate that Satipharm business to make a meaningful contribution. I think I know your answer there to revenue. And are you disappointed that Haleon has not elected to continue working with you?

Actually, I'm not disappointed because they are still working with us. They obviously didn't take up the rights to the trial, which seems pretty logical. But following all of that, we have had a number of conversations, and we do speak to them regularly, but we are coming back together in the not-too-distant future to actually reexamine what the strategies may be. I think both of us believe and have done enough work to realize that the S3 opportunity is big, and the patients are looking for it, right? I think the biggest disappointment is for patients. I think there are a lot of people who could have accessed and would have accessed the benefits of CBD had the trial being positive. And that is -- that kind of reminds us a little bit of responsibility that there are probably people in need out there that aren't getting it for various reasons, and it sort of doubled down on the asset.

Yes. Thanks, Peter. Next question. How do you think revenue will be affected if state governments will legalize the growing of 2 plants per household?

You tell me. I mean, I think, a couple of things I'd say on that. I think the impact will be a lot less than people might suspect in the sense that there is still, probably in Australia, more people taking cannabis every year illegally than legally currently. So I don't see there will be this massive change because the behaviors are already there and well entrenched. The other thing I'd say is it's not a hard plant to grow. It's a very easy plant to grow. It's a very difficult plant to grow well and consistently with -- and know what's in it. And I'll give you one simple example. I don't know that people will -- even if they get the best products and the best genetics -- will know how much CBD, how much THC is in their plant. The other thing I'd say is, if the guy next door is spraying pesticide on his garden, it could be blowing into your plants. So we do not use pesticide. And we are forced to test for that as well as heavy metals and a number of other things. And then -- so there's a bit more of a guarantee with quality that you get with our product. So I think much as -- of course, there will be some people that will take this up as they have in other places. I don't see it as a major impact in the short term on the market.

Thanks, Peter. Next question on capacity. So FY '25 expected 12 to 13 tonnes. What is the maximum capacity of the current infrastructure?

The total infrastructure? Well, the total -- the great thing about Mildura is we have lots of space and lots of land. And our focus at the moment is 100% on the first stage build that everyone's paid for, which is around about 7,000 square meters. That gives us about 12.5 tonnes. And I know I'm not the cultivator agricultural guy, but I look at some of the numbers, and I think 12.5 tonnes is the average. It's not the best. So I still think even in under that 7,000-odd square meters, could we do a little bit better. So that's just to offset the people in Mildura probably if they're on the call. But the wonderful thing about our Mildura facility is, actually there is huge scope for increased size in the future as we go. So we are already targeting more than 12.5 tonnes and looking for opportunities. And in fact, Russell and I were talking about it yesterday. Any extra tonnage that we can put through will obviously be better on all fronts. But as we go further into the future, there is huge scope. And there's -- if you add it all up, there's something like 4 to 5x as much space up in Mildura that we could also be growing in eventually. So -- but at the moment, I don't really want to get caught up in what's happening 3 or 4 years from now. The money has been put in. The investment is there. We need to take what we've got, what we've built, the machine that's ready to go, scale it and get what everybody is looking for, which is a profitable Australian company. At that point, I'll be more than excited about coming back to everybody about what's next.

Yes. Thanks, Peter. Very clear. It just goes to your passion that you referred to in the use-of-fund slide. So can you give us more detail about the sustainability initiatives that Cann is undertaking?

Well, sustainability -- look, clearly, when you're just starting out, sustainability is less of a focus area. But as you go to scale, sustainability becomes a key component of what we do. And it's not just because we're forced to. It's because all of us working for the company want to feel really happy with what we're doing environmentally. Now if you look at sort of the CSR standard measures for companies -- and my daughter actually works in this area, so I'm constantly reminded each time I talk to her about this. We are working in an area that's obviously creating benefit for patients and people in Australia. So that's a big tick. It is an agricultural product. So even the waste that comes out of it is from natural sources. So that's a big tick. But I would say that the 2 areas that we're focused on are how do we get better with the power that is put into the place. And as I said, there's a lot of sign up in Mildura and that needs to be harnessed better. So we're working on that in a project. That's not a simple easy thing to turn around, but it's -- the potential of the future is there. And then the other area that I think sort of stands out is more scale, more product means more waste. That waste is largely natural, but we do need to do something with it. And it's not just actually an issue for Cann. It's a conversation that I've had with other local growers. Could we do a collaborative project? Could we look at technologies? There are a number of people that are talking about a variety of different technologies, whether it's changing -- turning the plant waste to animal feed or fertilizer and the [ rock will ] that things grow in into concrete. There are a number of different projects. But these are things that we're unwavering in our commitment to get to.

Thanks, Peter. I'll combine these next 2 questions. So are the plants subject to diseases, fungal, ticks? And what do you do to prevent such damage? And just simply systems that you have to ensure no product is lost through theft as well?

Okay. Well, the third one first is an easy one. If you come to Mildura, there are cameras everywhere, there are fences everywhere, it is extremely difficult. I don't even imagine how you could access the facility without permission because someone -- even if you came up with a crane to get over, someone would see you. At that point, things would swing into action. So the security one, I'm 100% confident and -- because someone is always watching, and our fences are pretty scarily high. So -- and there's 2 barrier system between us and the plants so -- when you're on the outside. So the -- what was the other part? Sorry, the first part was about...

Diseases, with respect to disease.

Oh, disease. Look, diseases -- because we're not allowed to spray pesticides around, because we're not allowed to do a whole host of things that maybe other people would do, you might do in your backyard, it is a constant battle for us to make sure that we do things right because there is always the potential. But part of -- the great part about having the laboratory, the scientists, the entomologists up in Mildura, in this facility, is that, they're able to walk around and look at the plants every single day. They're able to monitor levels. And remembering that unlike being out in the open, in the elements, our facility has a computer controlling everything that's going on in the facility. So we can dial up and down the conditions in order to mitigate some of these risks. So it's one of the great parts about having such a high-tech facility.

And just back on that security question. So does it also include staff as well?

The staff. Well, all of us are subject to fairly extensive police checks and a number of other checks. So yes is the answer.

Thanks, Peter. And I've just got one final question. So thank you to all for all those questions that I've had. So what is your strategy for increasing the customer base?

Well, to begin with, like, I have -- I spent all my career building customer bases. I think it comes down to a few things. First and foremost, you need to go and listen to customers really carefully, not just necessarily what they tell you, but what you can infer or understand from what they're telling you. That's absolutely critical. So staying customer-focused and customer-centric is critical. And customer centricity runs through the whole organization. That means that everybody that works here is focused on making the customer happy, making the customer experience as good as it can possibly be. And perhaps in the past, I can say I wasn't here, but in scale up, it's very difficult to do that. But at scale, it's much, much easier. And then the other part of it is customers love great products. No matter whether you're a patient or one of our B2B customers, they love great products. So -- and in fact, I have experienced situations where even though customers didn't necessarily love us, they still bought product because it's so great. So that's the other part of it. Those 2 components, which is, are we really meeting and exceeding customer expectations, with everything we do as a company? And importantly, do we have such excellent products that they can't go anywhere else?

That's great, Peter. We've exhausted the group. So I'll hand back to you now for any closing remarks.

This night, I think I've done a lot of talking. And hopefully, you've sensed the passion and excitement we have about the new era that we're entering into right now. And I would ask each of you to contemplate coming on the journey with us. If what we've said today makes sense to you, if it's exciting to you like it is to us, then come on the journey with us. Join in because I see the future of Cann to be so, so rosy and so bright compared to where we are now. We've done the hard heavy lifting, the work, the [ build ], it's now time to make this place do what it was designed to do, which has become the powerhouse of innovation, a leading manufacturer of medicinal cannabis in Australia. So if at all, you have any questions, if anything that came up today didn't make sense to you, we urge you to continue to ask questions. But I'm looking forward very much to spending more and more time talking to shareholders as I already have been and hopefully passing on some of the excitement and enthusiasm we have for the future. So with that, thank you, and thanks for everyone for your attention and time.