ECS Botanics Holdings Ltd (ECS) Earnings Call Transcript & Summary

[Audio Gap] join the meeting as an attendee, and will be muted throughout the meeting.

On the call today, we've got ECS Managing Director, Nan-Maree Schoerie. I'll pass you across in a moment to Nan to kick off our discussion of ECS' updates and their progress. We'll have a presentation from Nan today, followed by an opportunity for Q&A with investors. [Operator Instructions] So, to kick things off, I'll hand over now to ECS Botanics' Managing Director, Nan Schoerie. Go ahead, Nan.

Hi. Thanks, everyone, for joining, and thank you, Tim. Just to let you all know that Tim actually arrived after a 30-hour flight from Europe in the middle of the night last night. So, if he falls asleep during the presentation, it's not because I'm bad, it's because Tim will be jetlagged.

I'll turn off the screen and then no one will know. That will be my secret.

All right. So again, welcome, everyone, and thank you very much for joining. I've put quite a lot of effort into this presentation to sort of provide some feedback to questions that I think some of the shareholders are asking. Obviously, it's been a big year for ECS, certainly not our best year. And I just wanted to really talk about where we're positioning ourselves and where we're going and why things look the way they are. So just in terms of the agenda itself -- sorry, I'm supposed to switch my phone off. Apologies for that, guys. I'm going to talk about the sales strategy. I'm going to talk about the trends. I'm going to talk about why we're doing the brand strategy we're doing, where our brands sit in the market. And then I'm going to switch gears a little bit and talk about really more of the whole of last year, but just where we ended up in terms of cash flow management and cost control, showing you the impact on salaries and wages, also what our cash flow looks like and what it looks -- what it will be looking like going forward. I'll just touch on some of the initiatives because I think sometimes we go quarter-to-quarter, we don't normally talk about some of the things we spoke about a few quarters before. So just bringing all that -- tying that all up and bringing it all in. And then there have also been similar questions around related entities. So I thought I would talk about that very briefly as well. So the picture on your right is, we're very proud of our Bling Blaow. That's one of our most recent genetics that we've been growing at the farm and certainly something we're very, very proud of. And I think you can see by the look of it, it's a beautiful flower. So as I mentioned, I just want to talk a little bit about the sales strategy. If you look at the chart on the right-hand side, you'll see that sort of towards -- we're tracking really well on our B2B model. And then we had a fantastic second quarter 2023. And then what happened at that point in time is one of our largest oil customers actually decided to start buying oils in from Canada directly. So they stocked up and then switched off. So that was kind of like a positive and a negative. But also, we saw the impact of all the imported flower coming into the country. How that impacted us. We didn't lose any other customers other than that oils customer, but all the other customers we've retained. However, they've started mixing their purchasing, but also they've had a lot of pressure themselves in terms of competing in a very, very busy congested market. It's very difficult for some of our B2B customers to actually differentiate themselves in the market. So in June last year, we made a decision to go B2C. And so that was our response to what was happening in the market. And if anything, I'd say I'm really pleased we did what we did. I'm only disappointed in myself that I didn't have the courage to do it earlier. It was something that I was wanting to do. We certainly spoke a lot about it at a number of Board meetings, but I was pretty nervous about the impact that it would have on our B2B customers. And I can assure you that the impact you're seeing on the growth of the B2C is not because we're losing B2B customers. It is actually really around price sensitivity of the B2B customers as well as them struggling to compete in the market where it's so congested. There are hundreds of products in the market. And as I said, some of our B2B customers don't really have any way to differentiate themselves in the market. We prioritized exports as well. That was because Germany and the U.K. are very growing markets. We have good customer relations there. But that in itself doesn't come without any challenges. We have to supply unirradiated flower to Germany, and it's not the easiest thing to achieve. So it does come with challenges. And we have to put a lot of effort to make sure that the flower we send them is the best quality we can provide and the cleanest flower. We also then started to introduce other products, we introduced capsules, and that is also doing really well. And we feel capsules are part of the future, particularly some of you will be aware of the issues in the market at the moment with AHPRA. A capsule, a THC or CBD capsule is certainly not a recreational product. And so we feel if AHPRA pushes everyone more towards having a more medical approach or more pharmaceutical approach, then our capsules will be very well positioned, and we certainly have a leading position in that space already. We also partnered on the other side with a global California -- with a Californian brand to bring those very high-quality genetics into Australia, and that was something around the Terphogz, which I'll talk a little bit about later, but certainly, it's kind of the other end of the strategy. And I'll show that when I show you the brand positioning that we've got in the market. There's a cost of change. There's always a cost of change, and that might have also been why I was so nervous about changing in the first place. The one change that's really impacted us is the market for flower is significant, and therefore, we have to produce as much flower as we possibly can. And that meant, as I've said on many of these webinars, we are short -- we do have a limitation on A-grade flower, particularly from the polytunnel. So building those additional polytunnels or PCEs has been really, really valuable to us to be able to meet the demand for our flower. And then obviously, that additional flower takes more resources, and I'll talk about that later. The B2C model meant that we had to provide sales resources. We also needed to do branding and promotional work. And then also, we have to provide consignment stock to the distributors and the pharmacies. The one thing that I've learned since we switched to B2C, and I've been speaking to doctors and also to my sales team, the single biggest mistake you can make is to have a stock out, but it's very, very common. So if the patient requires your product and the pharmacy doesn't have it in stock, they have 2 choices depending on what state they're in. They either have to go back to the doctor and get a new script, which everybody finds extraordinarily frustrating or secondly, the pharmacy can switch it out. And when they switch it out, you've always got that risk that somebody won't come back to you. So having stock in pharmacies and with our distributors is absolutely critical. And the good thing about that is we're one of the few companies that as we get this right and as we build going forward, we can always make sure we have inventory of flower in stock because we are the manufacturer. We're not waiting for it to get through customs or we're not waiting for it to come from another country. We literally have control over that, and we can manufacture to pretty much to demand, and we do. Just looking at the trends. I think you would have seen the slide on -- I mean, the chart on the bottom left. You can see that B2C is now more than 50% of our sales. And if I just go back to that previous slide, if I can, sorry, you can see that -- you see the trend that we saw with the growth in B2B. I have no doubt that we're going to see a similar growth in our B2C business. So we'll be back on that same trajectory. And so that 50% will become more and more. Having said that, we have seen some reemergence in our B2B market. You can see on the top right slide, the little lime green box has got smaller and smaller and smaller. That's our B2B market. And clearly, that's where the pain has been coming from. But because we have had an exceptionally good outdoor crop this year, we now have more flower to sell, and we're very competitively priced. And so we don't -- we see that B2B being a lot bigger. And in fact, some of our customers that sort of trended off last year have started to come back. So we're really pleased to see that, not -- again, not to say that they stopped buying, but there was a long time between drinks and now that's sort of changing and they're starting to come back to us more quickly. I do want to also add that there is risk around the B2B business because we absolutely can tell there's some stress in some of our B2B customers as they're struggling to compete in this very competitive market, which is very different to us, where you can see our B2C products are growing beautifully. The bottom chart there is just the trend on our international sales. I expect that to have an uptick. I know I've been saying this for years, but the [indiscernible] Poland registration is now hopefully in its final stages. We've submitted everything to the regulator, and we expect that to come through soon. And once that comes through, we'll have another European customer. And we get -- it's packaged products, so we get more money. Talking about packaged products, just so everyone understands, we make more margin on our exports. We sell them at about 25% higher than what we sell locally. However, they take bulk flower. They don't take pack flower. So the revenue is lower because most of our customers here, we actually pack. But where you send bulk flower, you don't get the revenue from packaging. So we make more margin on our flower, but less revenue overall for our export business. Why brands matter? So obviously, I've been learning this, particularly over the last 6 months or so. But for us, what we saw was how easy it was for our large customer to switch to another supplier for oils without any –- without their patients actually knowing that anything had changed. And so that's the value of a brand is that the brand didn't change, only what was in the bottles or in the white label bottles changed. So that was a real eye opener for us. And as I said, that happened in December '23, sorry. So there's also -- with all of our B2B customers, they don't really differentiate in the market based on us. They differentiate in the market based on whatever their value proposition is. And so our value proposition is easy to switch out as far as they're concerned. What we have seen as well is that people are loyal to brands. It's quite amazing. And my sales manager was telling me the other day that one of the companies that is actually now no longer a brand, they had actually sold their business, they are still selling relatively good volumes of their products in the market, even though they've disappeared. So their brand is still there, but the company has disappeared and the sales are still going through. So interesting to see how strong brands are. And certainly, that's why we've done the Terphogz thing as well. We do believe that, that brand actually also carry value, particularly if you get the brand promise. I think there's -- it would be very easy for us to say, well, do we really need salespeople? And believe me, all of these discussions have been had. The way ECS or the ECS model is we don't have a clinic. And so we -- again, we think it's a more sustainable model. We think that it's a very ethical model, but we sell to doctors in the same way other pharmaceutical companies sell to doctors. And with all the noise that's going on in the medicinal cannabis industry, I think it's a very, very good strategy that we have. Where we actually have individual doctors who believe in our products, love that it be Australian, have come to the farm in many cases. They're very loyal to ECS. And therefore, when they prescribe products, they know the quality of our products. They've visited the farm. They know the heritage. And they're very comfortable prescribing our products. And that carries a lot of value. And so the more and more we do this and the more we introduce local doctors to the ECS company and the farm, there's a certain amount of brand Australia, which goes quite a long way as well. And then what we have done, which is the final point there is we've introduced the OzSun brand. So for those patients who can't afford the more sort of reasonable normally-priced products, I guess, like our Avani range, they would be looking for cheap range. So they're often buying flower from imported flower. And now with OzSun, we can compete very, very well in that space, and we are with the OzSun flower sells really, really well. And then also with the OzSun oils, what we've just done very recently is we've actually started to deliver -- to manufacture them in bulk. So we have a 50 mil THC product and 100 mil CBD product, which is typically in the market at the moment, everything is 30 -- 20, 30 or 50 mils. So on the right-hand side -- I don't know if you can see it because my face is on the way. On the right-hand side, I just want to show you the massive growth in sales of flower. That chart doesn't do it really justice. In 2024, we sold $9 million worth of flower, and in 2025, we sold $12.5 million. So a significant increase in the amount of flower we sold. And then you can see at the bottom, the production. So that 10.6 tonnes that we've harvested in 2025, that flower, some of it was from polytunnels, probably about 40% of it comes from our polytunnels. So that we have been selling throughout the year. The balance, we harvested from our outdoor crop. And just so -- so you can put some sort of numbers around this, we lose roughly 50% to 60% of the product in processing. So we record, and we have to record for the Office of Drug Control, how much did we harvest. But once you've trimmed it, you've dried -- well, it's already dried, that's a dried weight. But once you've trimmed it and you put it in a drier, you lose about 45% to 50% of the flower. So what we actually have available to sell, you could say is about 5 tonnes of that. I spoke earlier about doing brand positioning. So you can see in this chart, I just thought it would be interesting for you to see. What we're trying to do is cover all our bases, within reason. So we've got a highly expensive, very, very premium product, the Terphogz product. We priced it probably double the market. It's selling through well. It's a 5-gram jar as opposed to a 10- or a 15-gram jar. And it really is -- it is connoisseur, top product, and it is -- I've got to be careful what I say, but there's certain discerning customers that want to buy the Terphogz product because of their genetics really. Right at the other end, you can see the OzSun, which is our outdoor – typically, the product that we would have turned into biomass and made oils out of it. But with the oil market dropping off significantly, it is a lot better for us now to be able to sell that as flower and make more money. Patients are happy because they've got a really good quality value brand. So that one is going really well for us, and literally doesn't require too much selling. The RAP brand that you can see there, that is our veterans brand. It is sold exclusively through a veterans channel. So it's not in the market as such. And then you'd be aware of the Avani and the Avani Advanced. The Avani Advanced has taken us a long time to get it into the market. We now have the CBD and one THC product. Unfortunately, the capsules, we've had a technical issue, so we -- not the capsule, sorry, we pastilles, we've had a technical issue that we're working through with the manufacturer. But the products that we have got in the market are selling through really well. And so that is working well for us. In the top left quadrant, that's pretty much where all of our B2B sits. So good quality, but we don't get as much price, obviously, as we do from our retail brands. Right. So I'm going to switch gears a little bit and talk about some of the concerns that the shareholders rightly have around what's happening and why are we spending so much money on wages and salaries. So on the top right, you can see that these are the wages or direct labor that is included in wages and salaries. It's directly related to producing the flower. So where we would buy in oil and we would just pay in terms of COGS, we're now paying in terms of wages and settling in terms of wages really. So that's the direct labor. So everybody who's involved in cultivating or manufacturing the product is actually sitting in that bucket. The only people that don't sit in there are actually the management and the quality team who are also obviously actively involved in running those divisions but they sit under our admin. So you can see it's actually a good story. We've reduced the cost per gram, for want of a better word, by a significant amount because the flower has increased, I think that number is 34% and the sales increased by 34% and the costs have only increased by 10%. Having said that, we have a lot of work that we're doing in that space to bring those costs down further. And so we've got a number of initiatives, which I'll talk about. The bottom chart is really where you would very rightfully say what the hell is going on, how can you go from $2.8 million up to $4.2 million without really understanding what is the rationale. So I have done a waterfall chart for you. I think the important thing to mention there is $428,000 of that was related directly to labor to construct the new PCEs. So they were pretty much all constructed in FY '25, except for a couple that are getting finished off now. So that was a big chunk of that additional cost. And that at the end of October, we will have finished all our construction projects -- I'm sorry, by October, we'll have finished all our construction projects. So that one will disappear. The other one was obviously the investment in the B2C channel. And we do get additional margin for our B2C product. And then as I mentioned to you earlier, there's all the other value adds that we have in terms of the sustainable business model and our ability to build a brand and brand equity within the company. So I think it's very important. We had to increase our quality resources also directly related to the amount of production that's coming out of the facility. Our quality team was absolutely overrun. And we are a GMP facility, so quality is a big part of what we do. So we had added an additional resource there. And then we also added -- as per announcements that were made, we added Nick to the team as COO. And I think there's a lot of pressure on me from the Board to do that, and it's made a huge difference to the business, having someone who is going to look after operations. I'm spending a lot more time now actually working with salespeople as well as overseeing operations. And we actually have no longer got a person in Europe. So that will all sort of switch out as well as we go forward because our European salesperson has left, and we haven't replaced them because we feel like we've got enough business and I -- but I'm actually looking after that together with one of our people here in Australia. Really apologize. I have to plug my computer in. Don't know why, it's not --

No problem, Nan, just take your time. We'll wait for it.

No, it's the charger that I've got plugged in is not charging correct. I will just plug another charger in. Otherwise, you are going to lose me. My apologies. Right, we are back. Sorry about that, I've got 2 chargers and one of them is a bit temperamental. Okay. So I think I've explained that. What I was saying then was that we don't have that person in Europe anymore. So that will reduce our cost. It was -- he was also a relatively expensive resource. But part of what I'm doing now is also looking after those European customers together with one of our local staff who actually works flexible work hours, so she works in the evening when Europe is online to help them with order fulfillment and things like that. And so far, it's working really well. So I think I've mentioned earlier that we had to do a lot of -- we had to build up a lot of inventory or consignment stock. So we're now in the position where it's mainly replacement. The only time that we really have to stock up is if we bring a new product online, or obviously, if the sales are ramping up, then we have to get more inventory, but that's a good problem to have. The other thing is, as I mentioned before, we had a record harvest. So that is really good because we have now a lot of product to sell. And it's good product. So we have a similar amount of, I guess, product in terms of now with biomass, you don't trim it, so it's pretty much the same quantity, but the value of the flower over the biomass is significantly different and particularly in a market where biomass is now almost unsalable. I guess it's very hard unless you're using it for yourself, there are not too many people that are buying biomass. The capital works are coming to an end, as I mentioned, by the end of this quarter. I've got a picture on the right there. That is our new curing room. Given all the additional production that we've had, we had to have some way to store flower, and rather than build another vault, which would have cost 3x or 4x the price, we built a curing room. It's refrigerated. It means that we can cure the flower in there and retain and preserve its quality for as long as we need to. Having an outdoor crop, it's very important that you have somewhere where you can store flower without damaging. So that's -- it was a relatively -- I think it cost us about $90,000 for that. And the reason why it was so much less expensive than what it would have been if we -- is because we used our own contractors. Right. What else. In terms of sales, as I mentioned earlier, we expect this to continue to grow. We expect the B2B to pick up, export to step up and then Terphogz has only just been launched as actually is the Avani Advanced. So Avani Advanced is still very much in the infancy stage, and that business is growing nicely as well. But not only are we expecting the sales to go up, we're also working very, very diligently on operational efficiencies. We've got a project underway at the moment to digitize batch documents. Now you might well ask, well, why don't you -- why haven't you done that already? It's a very, very expensive process. Because of GMP, you have to have validated computer systems. However, there is new technology that's come out that will allow us to have digitized batch documents without having to go through a computer validation and hundreds of thousands of dollars that costs. We're also looking to implement AI to do some of the repetitive tasks that we have like data entry and calculations. So that project has just started. But we -- before we even started that, we're reviewing all of our processes to make sure they're as lean as possible. I put here that we're going to maintain the headcount whilst realizing growth. We actually have a philosophy at the moment that we're not going to replace people if they leave. Having said that, if the growth is what we expect it to be, we probably will need to add people again. I don't think that we are actually overstaffed. When I look at how busy everybody is and how hard everybody is working, as much as I sit back and go, how can we reduce staff, I think it's really a case of no, we just have to focus on taking out waste and also making sure that our sales are where they need to be. We've also done the -- we've invested in a drone last year. It's quite large. It's probably like 1 meter x 1 meter. I think it cost us about $35,000, and that's going to make a huge difference because we had people coming in, in the evening. You can't spray the flowers or the outdoor crop during the day. You have to wait until it's cool. And so I've had teams every year, 3 or 4 people working until midnight, spraying crops. And obviously, that adds to overtime and also just the stress for those individuals. So that's a real positive. A couple of other initiatives, just to quickly update you on Sun Pharma. You might all wonder what happened about Sun Pharma. As I mentioned earlier, the oils market has really dropped off for us. But Sun Pharma struggled to get the extractor installed. Part of the issue was they struggled to get people down in Port Fairy who had the skill set to do the installation, and they had some other challenges. But we haven't -- we've been working with them, and we've been relatively sympathetic because we know that the demand for oils is not that high. And so it's kind of like a trade-off. We don't want to put pressure on them and then we need to keep them fed. So it's working out well. We've got a contract with them, which we will fulfill. And then once that contract ends, we'll decide what we're going to do. But I guess there's 2 ways of looking at this. As you -- some of you will be aware, this extractor was bought in the old ECS days from MediPharm, and all I can say is, thank God, we didn't buy -- we didn't keep it because the market is so congested again for resin and oils. VESIsorb, I mentioned earlier, is doing well. It's -- like all these new technologies, they take a little bit of time to be picked up, but the support is definitely there from our doctors, and our sales management are really pushing those products higher than anything else. And the reason for that is because it's very difficult to change them out once a patient is on a unique technology. So there's a double advantage. I mentioned earlier, we actually have received a batch of gummy -- our first batch of gummies. So we're very excited about all pastilles, but unfortunately, they're just not the quality that we were hoping they would be, something has gone wrong. They're fine in Canada, but they're not fine when they've arrived here. So, we're working with the supplier or the manufacturer on that. Terphogz, we've launched in Australia. It's going really, really well. The feedback, particularly for the Z is extremely good. In Germany, we've had a massive issue because, as most of you are aware, we're importing this flower from Thailand, from an indoor grower in Thailand, and Germany won't accept the flower from Thailand. So we're working around that. We expect that regulation to change. Obviously, that's a mix basing as well because having Thai flower in Germany is also not ideal. But we are also talking to other customers about being that GMP exporter of Thai flower into Europe. So we're following down those opportunities as well. The U.K. partner decided to decline due to volume commitments. I think -- well, we're not 100% sure, but it might have been cash flow issues. So we're looking at an alternative model, which is that ECS is a sponsor of the product in the U.K. So it will be a B2C model. I think that is the right model, but we're still working through that at the moment just to make sure that we got the right partner who can pack the flower in the U.K. for us. And the New Zealand contract has been agreed. So we'll be launching there. They've registered the product and that should -- launch should happen soon. I just want to very quickly touch on related entities. I suggest these slides are already on the ASX page on our website, you're very welcome to look at those. But just there have been some questions. You can see that in PharmOut, we spent $24,000 in '25 and $32,000 in '24. PharmOut does -- was the designer of this facility initially. Trevor's provided us with unlimited support. We get free GMP training from PharmOut. We get preferential service. So for example, when I had -- Letitia was on maternity leave and [ Matt leave standing ] left us literally 2 or 3 days' notice, we had no GM -- no qualified quality person on site and PharmOut was able to send us someone within sort of 48 hours. If we didn't get that sort of support, we would have been -- we wouldn't have been able to release products. So we've had a huge amount of benefit from having our association with PharmOut. Trevor is obviously a shareholder, same as me. We know it. He is very passionate about helping the company and making sure the company is successful. So I really feel like it's a blessing. It really is. We do get a lot of support. There is an asterisk there. We have one employee who was [ conveyed ] to us from PharmOut. There's technical reasons for that. But we basically pay that person's wages and on costs directly through PharmOut. There's no margin involved. Qiksolv. So that is my son's business, Matt. Matt is also involved from the start. He implemented our quality management system at no cost. He supports that quality management system regularly. It works really, really well. It would cost us hundreds of thousands of dollars to get a really good quality management system in place. He provides us with all our IT support, laptops, passwords. You would know what it's like. He does all of that. He looks after our CRMs. He looks after our domains. And I would say that at least twice a week or 3 times a week, somebody says to me, I'm going to ask Matt to help me with that. So he really is a very, very valuable resource to us, and he does work for us every Friday in addition to being on call during the week and supporting us, obviously, outside those hours as well. So I hope that clarifies for everyone. I think the benefits that my family -- and it's true that all my family brings to the company is significant. These contracts -- Matt's business is managed by Nik and PharmOut's business is really managed through -- in the past through [ Arthur ] and Matt and [ maintenance guy ]. So we don't -- I don't actually engage these people, although having said that, I do find Trevor when we were in trouble and say, can you please help, but then I don't sign the agreements. So that is –- anybody got any questions around that, I'm happy to answer. I think the last one is also there's been some things about me living in a company house. And again, I feel it's quite extraordinary. I have a home in Melbourne. And also we have a property in Heathcote. And so I live here, away from my family, and travel backwards and forwards to Melbourne or to Heathcote on the weekends at my own cost. And yes, I don't pay rent to stay here, but I think the benefit to ECS, I would far rather from a family perspective, live in my own house. So I hope that clears that up as well. The last slide is just the road map that we've had time and time again. I just keep showing it. You can see that I put some ticks there today. We've achieved most of the things we set out to achieve between 2024 and 2026. I've added the launch of the Californian brand, and I've removed the vertically integrated manufacturing oils, capsules, vapes and pastilles. We just don't have the amount of capital that would be required to do that. We are doing some work around vapes actually. We're doing Live Resin project at the moment. We've got a grant from the government, and so we're working on that. But other than that, we won't be doing any more manufacturing in the short term. And that's it, done. Any questions? Over to you, Tim.

Very good. Thank you, Nan. Lots of detail there and great transparency. So thanks for the presentation. As I said from the outset, we'd love to have questions from attendees that we can delve into live on the call. I'll jump into some that have come through during Nan's presentation. One shareholder has mentioned, thank you for the detailed questions and taking shareholder queries on board. So just to clarify a few factors, this -- so one question about the property up at Swan Hill. So the question is, given that the landholding for ECS is much larger than what is currently utilized for growing outdoor medicinal cannabis, can you talk about any plans or potential to utilize the remaining land to grow any other annual crops while waiting for the B2C market to meet the capacity to supply the medicinal cannabis?

We've often looked at it, but very lightheartedly. The problem where we live is water. It's a very dry climate up here. So in order to cultivate anything, you need to have a high-value crop to be able to pay for the water. So all the dairy farmers have gone. They're really the only utilization you can have of the land that pays back for the cost of the water is a high-value crop. That's why cannabis is great. We might -- we were talking it about the other day, maybe we should build more tunnels and grow orchids. But at the moment, I think we've got to focus on using the money we've got to really get the business back to where it was 12 months ago.

Just to clarify a few specifics in the presentation. One investor just asked, and I think you touched on this in terms of the timing, but Slide 7, we note the PCEs and the store projects will be completed in October. And then in Slide 8, we say Q1 FY '26. So when we say the projects will be completed October '26, that's October of FY '26. That's what that meant?

Sorry, yes. It's Q1 '26 or October, yes, October '25. My apologies. Yes. So we have -- the last 2 PCEs are in final construction. We held off just because there was no real point in constructing them during winter. So we got the guys to work on the store, but that will be finished. And there's also some additional work that's been done. I didn't show a picture, but we divided a room to build a clean room to have another room that we could pack flower in. And then we're also building another dry room. But those -- the costs have already been incurred. So it's just the construction cost. Now we've really got all the panels and everything. And so that would be, I think, by the end of this quarter. And certainly, that's the timelines I've given the team is by the end of September this year, it all needs to be done. And then there's no major projects. And all that $498,000 we spent last year will no longer be required.

So just also with the presentation, a question has been asked, just on Slide 4, we've got a chart showing exports to Europe and the U.K. And just if we can just -- if we can reconcile that with the numbers in the quarterly for B2B. So that chart shows March exports is $8 million and June $6.75 million. The question is, does that marry up with what we've put in the quarterly that those month-by-month figures on Slide 4, I think it is?

We can go back to Slide 4 and see back in Slide 4.

Yes. So bottom right.

Yes. The answer is that chart is not million. So it's a mistake on my side. I'll have to fix it. We certainly don't sell $8 million in a month. It's more like probably $800,000. So I apologize, it's a good pick up, but no, that would be in -- I assume that's $800,000. I'm pretty sure. What I did was I just took the results out of Power BI and put them on a chart and then I'm afraid I've labeled it incorrectly. So the graph [indiscernible] is correct. And you can see in April, there was a negative. So that was actually a batch that was returned to us. So although we sold flower in the month of April, we also had to get some return because it didn't meet [ macro ], and so that's why it's a negative sale. I'm happy to clarify that or reissue this presentation with a correction to the chart.

Okay. All good. It sounds like a decimal point issue. No problem. So Nan, you've been quite open just regarding the, I guess, the cost base and the staff figures and all the rest of it. The question asked by an investor is just noting that you don't have plans to scale back the staff figures at this point. The question is, do we require the full sales team after the initial push for prescribing doctors has been achieved? And can you make any comment about sort of the portion of wages being paid to the sales team and I guess, the sales strategy more broadly?

Yes. So the wages paid to the sales team is reflected there in the -- in that waterfall. We started hiring in August. So there'd be a little bit of a difference, but pretty much that's the B2C sales team there. So that's the cost. So in terms of would we reduce it, what I'm really keen on is -- well, and this is the message I give to my sales manager is, B2C is our future, and I will not stop investing in B2C until I don't see a return on the investment. At the moment, I can see it. I can see it coming. I can see the value not only to the business in terms of the sales growth, but also to the value in terms of we are developing a reputation in this market that is really, really positive. It is a very turbulent market. And I think any shareholder in the medicinal cannabis industry should be concerned about what's happening. But I actually feel very optimistic about what's happening because I think a lot of the things that have been happening that I've been talking to the Office of Drug Control and the TGA and the Minister of Health about my concerns about the industry. We have always played by the rules. And we've always had this very sort of, I guess, pharmaceutical approach to the industry and making sure that we do things the right way. And I think this is going to hold us in good stead. A lot of things that have been going on in the industry have been extraordinarily frustrating for the legal -- well, not legal is the wrong word, the law-abiding local cultivators who've been trying to build the business, and I think some of these changes. Doctors will prefer to buy from Australians if they can. We just can't meet the market. We can't meet the demand.

Yes. It's a great point, the changes going on industry-wide. And I mean, this ties in with one question investor has, which is just asking for more detail on sort of the factors that have led ECS to find cash flow generation difficult in FY '25 and sort of asking what has changed. What changed last year to make that harder, and what will cash flow generation look like going forward? And I think you did touch on this sort of at the outset of your presentation, the market shift in your response. And then towards the end of the deck, you've got a whole slide here on the road to cash flow positive. So maybe --

No, I could just add to that and say, obviously, last year was a tough year, and it was an investment year, right? It was an investment and we had to change strategy. I also feel like it's tough. It's tough when you have to make these decisions and you have to make sure you're making the right decisions. But I can tell you now, if we didn't make the decisions we made, we would have been in a world of pain. So yes, sometimes it would have been really nice in perfect world that trajectory would have just kept going and we would have been cash flow positive and everything would have been gone fine. I think the difference between ECS and many of the other companies in the industry is we actually manufacture something. We actually have assets. And it allows us resilience, it allows us to build that brand equity I was talking about. And a lot of those things provide a sustainable business. It's very hard to be sustainable when you're competing with someone else's product in the market. You're worried about FX, you're worried about customs, you're worried about regulators. So I think at the end of the day, it was the right decision. And I can see the value that Avani and the OzSun brands have in the market already, and they've only been there for 8 or 9 months, probably 8 months, 9 months, and they really have brand recognition. We are #13 in terms of the largest brands in Australia, the largest selling brands in Australia in a market where there's 100 brands, and that's in 9 months. I have no doubt that with our sales team and the quality of our product that, that will move us into the top 10 and hopefully, in the top 5 within the not-too-distant future.

Okay. Come a long way in a short amount of time. So that's great. A question from an investor on the product definition. So is the quality of the outdoor flower for Australia sufficient to not be irradiated, giving the example of Sun Pharma, which is noted on the packaging is getting organic certification?

Okay. Two different things. The flower in the outdoor is absolutely not suitable for Australia unirradiated nor is our PCE flower. The Australian macro level of specification is extremely low. But that's fine because everybody irradiates their flower in Australia. Your question around Sun Pharma and the organic is Sun Pharma, if they get organic certification and we work with Epsilon, who actually do the manufacturing, we'll be able to sell our oils as organic, and that will be really beneficial. We are exploring different ways of reducing the bioburden of flower, particularly for our German customer so that we can confidently batch after batch after batch at least meet the European market unirradiated. The Australian market, as I said, is a little bit more difficult, but it's not impossible. And I think everybody is working towards that. And if we did that, then we'd have another feather in our cap because we'd be one of the very few organic flower suppliers. But it's an aspirational goal at this stage.

Sounds good. And just further to that, the question has been asked about the VESIsorb gummies not being released to market. I think you did give some background on this on Slide 9 as to the reasons behind that. But the question being asked was, were they just not going to meet expectations but you are not ready the market. It sounds like that was your explanation really.