Little Green Pharma Ltd (LGP.XA) Q2 FY2026 Earnings Call Transcript & Summary

All good afternoon, depending on where you are, and welcome, everyone, to today's investor webinar for and with Little Green Pharma ASX code LGP. I'm David Tasker from Chapter One Advisors, and I'll be your host for today's session. Joining us shortly will be Paul Long, Managing Director of Little Green Pharma, who will take us through the company's September quarterly results and provide an update on operations across Australia and Europe. After the presentation, we'll open up for a live Q&A session. [Operator Instructions] As I welcome Paul, I'd like to highlight it's been another strong quarter for LGP with revenue of over $10.1 million, up more than 10% on the previous period. Growth was driven by Australia flower sales and continued demand from European markets, especially in the U.K. The company also recorded its first edible sales, advanced cost-saving initiatives and continue to make progress on key regulatory reforms that position it well for future expansion. Paul will now walk us through the results in more detail, including performance across the major markets and what's ahead for the company. Paul, over to you.

Thank you, David, and good morning and good afternoon for everyone, and thank you for joining today. Thanks, David. We'll jump down to Slide 3. A quick snapshot of the company. And for those that are on the call, I'm sure you're across this slide and the detail. I will highlight in the presentation a few of the changes that we've made in the last quarter, but probably at a high level, the capacity production out of Denmark. We're now up to operating at 10 tonnes. So that means we've opened up another room based on demand. So that's what we've done from day 1 of Little Green Pharma is really scale up any CapEx or any scale-up of our capacity relying on demand. So we're just now up to 10 tonnes. And that's really off when we purchased that site a few years ago, we were starting down, I think, 2 or 3 tonnes. So some really positive news out of the Danish site. We've really -- the quality of the flower that we're producing out of that site now is really meeting expectation in the market. We've been working really hard at that. And we've got some interesting new genetics that we're working on there, both in-house through our pheno-hunting program, but also through some external pathways as well. And I'll talk a little bit later around some of our -- some of the measures in one of our -- part of our strategy in the business is to focus on cost efficiencies. So we've made a few changes on some offshoring, some automation and some voluntary redundancies to ensure that we're refining our margin inside the business in this market as well. So I'll talk a bit more about that later. Thanks, David. As David mentioned, it was a solid quarter for us. So revenue of $10.1 million unaudited, which was up 10% on the prior quarter. Cash receipts were down 5%, but that came off a record quarter for cash receipts in Q1 of FY '26. And I think interesting to note with all of the -- whenever we look at these quarterly numbers is timing, and I will talk a little bit more about this particular quarter, we had a shipment due to go through into our German customer. That will roll into this quarter. So the timing just wasn't quite there. So it would have had a relatively material impact on those numbers. So yes, we're really comfortable with the strength of this quarter. Thanks, David. So if we break this down and have a look on this slide at the different categories. So obviously, flower, oil and the primary categories for us, vaporizers has been relatively consistent in this market, albeit a smaller base. But the big growth that we're starting to see in this industry is the edible category. So you still really can't see edibles on that FY '26 Q2 graph on the right-hand side there, but we do expect that edibles will continue to be one of the growth categories for us here in Australia, and we just launched those products in September. So we've got a number of edible products, and they come in the form of gummies. And we are seeing a fairly large growth across the board in that space, albeit off a low base at this stage. But our flower sales were up, which was encouraging for us -- and largely, that was driven by a 25% growth in Australia and a relatively consistent return for our sales into the European market. Our oil sales were marginally up, but we will, in this quarter, also have a large shipment into France. So that should -- we should see another growth period for our oils in the coming quarter, marginally up, as I said, for vaporizers and some other services. And if we look at what that means for us, if we annualize the position on the bottom graph there, what we -- the trend that we can see there is a growth in the -- obviously, we've seen a continued growth in that international market. And a continued growth in other parts of the business as well. So flower, we're expecting a continued growth for the full year. That was positive. And I'll talk you through on the next slide. We've seen a little bit of a rebound inside the Australian market, which is positive given there's been a slight downward trend on that in the last few quarters. Thanks, David. So as I mentioned, revenue by segment, if we look at Australia versus Europe on that top graph, we can see that in the previous 4 quarters, we had a downward trend for revenue inside Australia. So very, very encouraging to see that we've had that Q2 growth in Australia. And that hasn't happened by luck. That's happened by meticulous planning on looking at the market, understanding how we can capture market share and our strategy specific marketing and sales targets through some of the clinic network across Australia. And that has been sort of a 9- to 12-month process to really be focusing on that included a really key change inside our sales thinking and a couple of key hires in that space. And so yes, we're thrilled to see that we're seeing a bit of a rebound inside Australia. Now if you overlay that with the Australian market, it is certainly a very flooded market out there in terms of the brand varieties. We do think this consolidation play, we're seeing it day upon day at the moment with companies either organically falling over or looking to sort of partner up in this industry and come together in this industry. So there's a little bit of that happening in the market and our brand is really well positioned to capture parts of those that are moving out of the market. But equally, we're not sitting here just hoping on that. We are definitely focused on a strategy to implement and capture more market share. So within our core strategy, we have 4 pillars and Pillar 1 is about market share in fast-moving markets and Australia being the absolute core of that. The U.K., we had a really strong quarter, relatively flat in Germany or slightly down in Germany. But like I mentioned at the start, we did have one shipment that just fell over the quarter. If we look at the revenue by segment, obviously, Australia continues to dominate the total of our sales. But if you go from FY '25 into FY '26, we can see that significant increase inside the European market. That is certainly where we expect to see the growth, and I'll capture -- I'll go through sort of our top 5 or 6 markets in this presentation and give you a short update as well. Thanks, David. Revenue by brand, as I mentioned, we can see the LGP brand, again, very encouraging, largely driven by the increase in flower sales in Australia. So LGP brand up by 15%, and that was driven by a 35% increase in the flower sales on the right-hand side of that graph, the green section. Off a low base, one of our brands, Indicare, which focuses on DVA patients, we had a really good strong quarter. What was really interesting was the CherryCo quarter. So we had about a 35% -- sorry, a 35% overall increase, which was 20% inside the Australian market. And that is significant because if you look at the sort of trend of that graph from a few quarters previous, when we first entered the budget category in Australia with CherryCo, there was a handful of competitors in that space, and we've seen more and more competitors step in there as we've seen price compression. So we probably and hopefully saw the bottom of that compression in FY '26 Q1 last quarter and a resurgence this quarter. So a 20% increase in that is great. We're seeing a really good consistent return on that brand at the moment, which is strong. And we've also launched the CherryCo brand now into the German market, and we have actually sold out -- we sold out our first 2 shipments, and we've got a number of other new flower strains entering that German market under the CherryCo brand and also looking at other markets such as the U.K. for that brand. Thanks, David. Now this slide has been relatively consistently in our slides over the time. And certainly, for shareholders, the focus on this slide is obviously the net cash from operating activities to ensure that we're in a strong position for growth. But certainly, for us, our -- if you look at that blue line, our cash costs between the quarters was consistent with revenue slightly up, but obviously, the cash receipts was just really to do with timing as it often is with cash receipts. So a slight decrease. And like I said, that German shipment may have made a material difference. So an absolute focus for the business in our strategy is the financial acumen to ensure that we are focusing on the net cash position for the business. We think we continue to be in a really strong position, and I'll jump into a bit more detail around that in the next few slides. Thanks, David. So you can see here that we continue to have a really strong net tangible asset position, and that is important to always highlight because if you look at the black section there of the graph, our net tangible assets is still up over $70 million and our market cap in the $40 million at the moment. So we believe that, that represents value. And a lot of that net tangible asset sits in property. So property both in Western Australia, but a large property up in Denmark in Europe, which includes, obviously, the site we're manufacturing in the GMP side, the cultivation site, a couple of houses and properties that neighbor the cultivation site along with the farm next door. And all of those have really minimal debt. So cash at bank at $2.3 million at the end of the quarter and minimal debt position, long-term debt of only $3 million and around about $5 million of unused credit facilities. So coupled with that focus on the cash position, access to credit facilities and minimal long-term debt puts us in a really, really strong position, particularly when we compare our position to some of our peers and the debt positions that we know that they're in and the transition of this industry towards consolidation, we think that we're in a very, very strong position. Thanks, David. Okay. So I'll jump now through a couple of the key European markets. And the reason why I decided to focus a little bit more on the European markets in this presentation. Often, we give a bit of a snapshot. I'll take a bit of a deeper dive today really on the basis that, as I mentioned before, it's where -- it's certainly where we see the kind of organic growth inside the business. So in the German market, we are certainly seeing, particularly in that white label space, some strong growth. So we had $3 million worth of shipments between July and September. And obviously, that one shipment pushed into the December quarter. We had 6 new products that were granted for permitting into Germany. So thing called an radiation license to get an application to get product into that market. It typically takes about 6 months to follow through. We have had a real focus on our cherry product, and we launched cherry products about 6 months ago into that market. So we've only had a few deliveries to date. And as I said, we have actually sold out. So super encouraging to see that we've had a positive response. And -- but overall, we can see that the German market is continuing to grow. There are some changes potentially coming to that market, but we can see -- you can see there in that graph actually that there was 43.3 tonnes and a continued growth into that market. It's an interesting one in that there's certainly potentially a trend to move towards some changes inside that market that may impact volume in the short-term. So there's still legislation to actually pass through the regulator. But if it does pass, there is a chance that the telehealth part of that market may look a bit different, whereby the patient has to actually attend the clinic, a face-to-face clinic in their first -- for their first deployment and then they can transition across to telehealth and that the delivery via pharmacy is no longer -- potentially no longer possible as well. So we would expect that -- we would definitely expect that to have an impact on volumes in the short-term. We actually saw in Poland that 1.5 years ago, similar legislation come in, and it did certainly have an impact on total volume in that market. But within -- I think it might have been 9 to 12 months, there was a full recovery on that volume. And at the end of the day, we're talking a patient cohort that are now transitioning and inside the medical market in the German market. And so yes, a slight change to that pathway will have an impact, but the patient cohort still exists. So it's a bit of a wait and see on that. We -- our view on that market is that we're there. We're well positioned. We've got the site 2 hours from the border. We've got other access markets now in Europe that are beginning to show some really solid growth. And if the requirement is to bear with the market as we see a slight downturn, then so be it. But at the end of the day, like I said, it's a bit of a toss of the coin at the moment whether that -- whether there is some changes. So we'll wait and see on that one. Thanks, David. The Spanish market is one that's been on our radar for a long time. We do, actually, have a small investment in a company that's doing some R&D cultivation work. I think we hold just over 6% in that company. And so that's kept us pretty close to the market, but there was recently a monograph or there's expected to be a monograph release with the launch of a Royal Decree in the coming weeks. And so the framework we're expecting to see is quite similar to what we've seen in France in that it would be specialists only. It wouldn't be flower to begin with. So to be really focused on extracts. And it would be very, very medical and dossier driven. So that for us is an area we excel and an area that on the foundation of what we've built here in Australia is -- enables us to be early movers in those types of markets. So it's certainly a big focus of ours. And the dossiers that we have built will transition and should hopefully transition straight into that market. So it's a big market. What we have seen in others when they start with specialists or start with oils, even in the Australian market, it was for the first few years, it was an oil-driven market. It was a specialist-driven market, and it wasn't until the regulator and the health authorities actually saw that this product was not -- was relatively safe that we then saw the market begin to grow and move and then a transition from specialists into doctors. The French market, we've been inside that market in the trial for a long time. We continue to go through this transition of -- as it moves towards a regulated market. That is progressing, but the political disruption has been quite significant. So for anyone that follows their international politics, they'll know that there's been many changes of leadership inside the French government now over the last 2 years. So that each time we see that disruption, it just slowly slows down the process of moving towards legalization. For us, yes, we want legalization. And yes, we want to see our dossier submitted and yes, we want to be one of the first on the market. However, because we're positioned at the moment and we're delivering products under the extension of the trial, we continue to see some really good revenue out of there with decent margin as well. So as I mentioned before, there's another shipment due this month to head out to the French market as well. Thanks, David. The Polish market, we've got a number of dossiers. We've got a dossier that is submitted a number of dossiers lined up to be submitted. So we do like that market. It's 40 million-plus people inside that market, limited number of companies globally that have built the capacity to submit dossiers and actually meet the expectation of pharma-grade products. So we're pretty excited about the future, but it is a slow process. The Danish regulator and the time of which they normally accept submissions is at least 12 months. I know we've got an anticipated 12-month lead time, but often there's a stop clock scenario when there's questions asked. I mentioned for Denmark, we have actually fitted out now up to a 10-tonne capacity. And as we've spoken about previously, there are some changes coming in 1st January next year, which will transition Denmark as a country from one that was in a trial phase into a full-blown medical phase. And one of the key things that will change in that market for us is actually the ability to potentially use Denmark as a processing hub for the whole of Europe. So the site that we acquired up there, the investment that we've made with minimal debt enables us to genuinely look at that site as something that could service a much broader portfolio of customers inside the European market. So we're working through some strategic plans to look at those options at the moment to really fully utilize the capacity of that site. U.K., as I said, we had a really good quarter. So -- and we're definitely seeing this sort of gradual rise to the point where the U.K. is really a material country for us to be focusing on. We've been talking about the U.K. for a long time, but it is still a specialist access inside the U.K., but we're now seeing, as you can see on screen there, there's more than 260,000 prescriptions as last measured. So we're very well positioned for growth there. We've got some really good close connections inside that market. And we would, in the future, like to see, in particular, that market and then the French market to be more physically present as we continue to see the growth in those markets as well. Thanks, David. A quick update on Health House. We're now 7 or 8 months into the acquisition, so well and truly through the phase of integrating those businesses. The really good news, I think, is there was some hesitation from an -- obvious hesitation from the customers because they are competitors to Little Green Pharma within the Health House range of wholesaling. We haven't really seen any drop off. I think maybe 1 or 2 that have decided to drop off, but we've also onboarded a number of new customers in that space. So that's been really, really positive. One of the key strategies for Health House was to bring on a Victorian site to enable delivery across the country. It was being done out of Western Australia previously. So that site, and we've partnered up with a third party over there to use a part of their safe and manage that centrally from here, but a staff member over there that now gives our customers inside Health House the capability to have an East Coast presence as well. The actual location is positioned in a premium location from a delivery perspective. So it's a Tier 1 premium location, which means same-day deliveries inside that Tier 1 level are possible in Victoria and potentially even into New South Wales. One of the things that we're seeing in this market of wholesaling is this real transition towards -- as we see price compression in the market and the volume of products in the market, a lot of brands are saying, how do we get direct to clinics, how do we squeeze margin to ensure that we can compete in price compression. So we're really having to think through at Health House, how do we play inside that pathway. So 3PL is really interesting in that what we can provide for other brands in this market is a location where we can do -- we bring product in, we can store their product for them for a fee and then we can send out essentially full shippers to a whole box. So rather than picking and packing 1 or 2 products, we send a whole box of products in through a clinic pathway that's doing higher volume, but they have connected to a pharmacy, and that enables us to do a much better margin and they can pass that margin on to the end patient, which enables them to compete in the market as well. So there's a few people in that space, but we've managed to capture a few decent brands that are working with Health House now in that capacity, and we see a really interesting opportunity there. And then the other thing I think that's been really critical for us has -- is aligning our clinic, which is myQuest and aligning that really closely with Health House to ensure that our clinic is without influencing doctors, but to ensure that our clinic is supporting the brands that are working within the Health House pathway as well. So we're seeing some good success, and we've got some very structured strategies to continue to grow the patient base inside myQuest, which will continue to grow the position in the market for Health House. So we're looking at other parts of opportunity in Health House. And as you can see on screen there, we've recently implemented a cloud-based software to work within the Schedule A pathway for pharmacies to remove paper records, a number of other technology stack conversations happening at the moment that would connect slightly better the health House experience with the pharmacy with our clinic in myQuest and the patient. So there's a bit happening there and a bit to talk about in the next few quarters. Thanks, David. I mentioned at the start, so we have -- our strategy is very clear inside the business. So Pillar 4 of our strategy inside the business is around financial performance and ensuring that we are constantly looking at ways to automate what we do to streamline what we do and to ensure that we're focused on profitability inside the business as well as top-line revenue growth, which is driven by our sales engine. So a part of that strategy, we've had a number of things that have happened in the last quarter or probably in the last few quarters. Automation has been key. We've made some significant steps in some of the automation through both our packing, but even in our cultivation site up in Denmark. Offshoring has been significant. So we've been successfully offshoring. I think now we've offshored about 5 -- 4 or 5 roles and very, very successfully. And the nice thing they've stated in a time zone that works between both Australia and Europe. And more recently, we've just gone through a voluntary redundancy program to really streamline the org chart, and we expect that to be -- to save us about $0.5 million annually. Obviously, there's a cost that comes with that process, but we've managed to negotiate that to be flattened out over an 8-month period. So no impact on that cash cost position on a monthly basis, but a net impact of $0.5 million. And I think really streamlining and focusing the operations and refocusing the strategy to ensure that we're really zoning in and zooming in on the top 3 strategies in any particular quarter for the business. Thanks, David. So in Australia, there is some reform that is currently being processed through the TGA. So I'm sure for those on the call today, that would have had some exposure or seen this if you're following the market at all. And so we're really positive actually on what this looks like. And purely from a foundation of where we sit and how we comply with the legislation, we've been calling for a long time on the need to really tighten up this industry. In many ways, parts of the industry has kind of got out of hand and hasn't been well managed and well regulated. So for us, lifting the benchmark and lifting the quality standards around the pharmaceutical good inside this country is really important for -- to ensure we see the consistent growth that we expect in this market. And I think the subscription of new brands and products inside this country has really come about from a lack of compliance in this space. So we've been calling this for a long time, but the TGA came out to everyone in the industry or anyone to make a submission. So it was over 750 submissions from prescribers to patient advocates to obviously, industry partners, industry bodies. And so there was a relatively aligned view that particularly from industry that the companies that are doing the right thing and particularly those that are aligned up with the industry committees and industry boards were well and truly aligned to lifting the standards. So we do expect by the -- I think by the end of this year or maybe even in the next few weeks, we expect to hear the first round of feedback from the TGA that, that then goes into another round of review and then it goes back to the regulator for further review before any recommendations are then made. We do believe there may be some grandfather clauses in there. But we -- as a business, we've set up our business to operate in a farmer sense for -- since day 1. And we firmly believe, based upon what we're hearing and conversations in the industry that the bar will be lifted. And so when we look at who we are as a business, we think we're really well positioned. So you couple the brand position, you couple our pharmaceutical know-how and knowledge with that benchmark increasing in the industry, consolidation happening. And if we look at the Australian market, we think all of those things work well for us and our continued growth inside this market and really then aligns to Pillar 1 of our strategy around capturing more market growth here in Australia. Thanks, David. So this -- I'm sure you would have all seen the Gartner hype curve previously, and it's important to just highlight -- I've got 2 slides actually on this, I'll zoom in a little bit more on where we think we are right now. But if we sort of zoom back out in -- I think it's probably -- if you look at the LGP share price and then the U.S. cannabis index in red -- sorry, the U.S. cannabis index -- I actually see the -- yes, sorry, in red and Little Green Pharma in green. So what you see, if you go back sort of right to the start of the early growth phase 5 years ago, what you see is Little Green Pharma share price actually just following this U.S. index. And this is -- we've used the U.S. index to overlay here. You could grab the Canadian cannabis index as well to give you an indication of what's happening in the industry. And what's really, really interesting is if you overlay both Little Green Pharma and the U.S. or the Canadian, it really does look like it's following this Gartner hype curve. And we have been talking about this growth phase and then shakeout phase and then moving into maturity for a long period of time and the reason why we think we're really well positioned for that. Who knows how long this trough of disillusion that you see inside a Gartner hype curve is a bit that is frustrating for everyone, executive and staff and shareholders alike. But we are -- we do really feel that we're starting to see a bit of movement into the growth phase. And largely, if you overlay what happens in the U.S., we've seen a bit of a reaction in the Australian market on our price. So something happens in the U.S. -- on the U.S. or Canadian index and then the Australian index or Little Green Pharma price tends to follow. So it's not always a perfect pattern, as you can see on the screen there, but it's well and truly enough of a trend there to make the assumption. So on the next slide there, David, we'll zoom in a little bit more on what this looks like more recently. So over the last 6 weeks, we've heard President Trump talk at least twice about downscheduling cannabis for medical use in the U.S. And so that is a material comment to make. It hasn't resulted in any physical changes yet, obviously. But on the back of that, those conversations we've seen, we believe, is why we've seen that the move up the curve of the U.S. index. And now Little Green Pharma, we've had relatively flat for the last 3 or 4, 5 months, we've had relatively flat but a slight trend upwards. And so if we look historically, typically, U.S. index goes, Australian index follows or we have followed historically. I still firmly believe that this global movement and a re-rating of the industry will come from -- firstly, driven from the U.S., but secondly driven from what we're seeing in the European market as well. So positive signs there, early signs that perhaps we might be moving out of this trough of disillusionment back into a growth phase before we move into a mature phase as well. And I think the point to make here is, as a shareholder or a potential shareholder, if you believe in the Gartner curve and the fact that there is movement happening in the market, who do you back in this market? If we believe that there is some upside to that, who you going to back in this market. And obviously, my job is to convince shareholders that Little Green Pharma is the one to back. But I firmly believe that for all the reasons I've mentioned before, and I'll summarize that at the end. Thanks, David. Not a huge amount to report, no changes really on this slide. So we continue to have Thorney investment as our #1 shareholder, just under the 20% mark, supportive of the business, has invested in the business over a number of rounds over the years. Fleta Solomon continues to be on the Board and a major shareholder of the business. And importantly, the Board ownership is over 10%. So as directors and as a Board, we are very well aligned to extracting value for shareholders inside this business, both in the short, medium and long-term. Thanks, David. And so I think what you'll see from us over the next 6 months, I've put a few points in here to really highlight. I think the -- we're absolutely at a point now where the French market will be transitioning into a registered market. So from our side, dossiers are being finalized, final partnerships, go-to-market strategies. We are at that very late stage of what is -- what has been at least a year or probably 18 months of planning. We are obviously still waiting on the French government to have a bit of consistency so that we can actually finalize and move into that market. We -- it's now just a matter of time. We're well positioned for that. The Spanish market opening up. We're looking at some opportunities in the Italian market that we haven't spoken about today, but some really interesting opportunities in the next probably 3 to 6 months there. And continued growth inside the European market. Strategy one for us being or Pillar 1 in strategy being Australia, no doubt, absolutely, we want to continue to grow market share. Great to see that we were able to show that in this quarter. But where we see the future growth, and this is not -- don't have to be a rocket science to figure that out. If you look at the pure population and the stage of the market, the EU market is really where we continue to see that growth. So there's a big focus up there. The -- there will definitely be some really interesting opportunities, as I've mentioned, inside Denmark to service Europe. There is a lack of broader capability in terms of that centralized processing for the European market. So we see a really, really interesting opportunity. We are definitely working on plans behind the scenes, and we look forward to talking more about that in the coming 6 months. M&A, I haven't really spoken much about that today, but -- and sorry, I keep talking about our pillars of strategy, but it's really key to who we are and how we drive this business. But Pillar 3 of our strategy is consolidation and exploring M&A opportunities. We've actively spoken about wanting to do that in this market. We've actively been in many conversation and discussion and watch this space. We see opportunity out there to wrap together businesses, whether it be here or in the markets that we're trying to focus on. So some -- we expect to be talking about that in the next 6 months as well. The TGA changes I've spoken about and then -- and I've certainly spoken about how we think that we're incredibly well positioned for a re-rating. And one of the questions that may -- I'm not sure it may gets asked, and I'll just jump in now, but I have been asked it before, why would Little Green Pharma be positioned for U.S. downscheduling? Why is it well positioned to get a re-rating from a broader industry? And I guess the very simple answer is what we will see in that market if we -- if there is a downscheduling or hopefully when there's a downscheduling, we'll see an emergence of capital go into that market. We will see a big re-rating on the U.S. talks. There's no doubt about that. That capital, really what they'll be looking for in that market is how do we utilize that capital for international growth. And if you think about if you're a U.S. company that is currently trading at a, call it, $1 billion market cap and you go to $3 billion or $4 billion or $5 billion and you raise significant capital and you've got the support from the U.S. market to now send products outside of your borders and potentially even internationally, the obvious opportunity for growth will be in international markets. And those 2 markets -- 2 markets will be Europe and Australia. There's no doubt about that and Germany and Australia particularly. And so we're one of the few companies that are very, very well positioned, I think, for that conversation. We know and talk to all those big U.S. companies. The comments I'm making today are based upon what I know they will be looking for when there is a re-rating. So that's kind of the high level as to why we think that is -- we are well positioned and very logical for us to be in that conversation. But like you saw on that earlier slide, even in this market, we expect to -- that there has been a trend from day 1. And if we look back at that trend we followed, the exposure for us to a U.S. stock through 5 years ago was nil. But I look at it today and think that we're very, very well aligned to what their strategy will be moving forward. So David, I think that was it from my slides. So I'm happy to take some questions if we've got some time.

Thanks, Paul. Great overview and another great quarter from Little Green Pharma. We do have a few questions that come through during your presentation. So we'll jump on to those. But I would like to remind them [Operator Instructions]. First question we had was in relation to the European regulatory pathways. How are they shaping up the opportunities for LGP in the coming 6 months?

Yes. So I think, I did speak about the German -- obviously, the German market and potential challenges of the telehealth pathway and the pharmacy delivery. We have -- for at least 6 to 9 months now, we've had a big focus on Little Green Pharma brands. So we continue to deliver some strong volumes into our white label partnerships inside the German market. We would like to see a continued shift in our percentage volume across to our own brand, in particular, CherryCo, we -- as I said, first few shipments sold out. So for us, the -- that will certainly be a focus in the next 6 months. And if we need to ride a bit of a change in regulatory pathways, that's just part of the course for us in a global medicinal cannabis market. The French market I've spoken about will be significant for us once that transitions into a medical market. Our clear goal is to be one of the first to have product on market when it opens up. We have the advantage because we've been under the trial phase of the market. We have this distinct advantage of our dossiers basically being submitted and reviewed first by the regulator. So the likelihood of us being able to be one of the first, if not the first, is higher. And we know from history inside this industry that first mover inside that market is critical and even more so in the French market because it will be a fixed reimbursed amount inside that market. So the competitive tension on price won't be there because it's a fixed amount, the competitive tension on sort of product differentiation won't necessarily be there because if a product is working for a patient, doctor prescribing it's being reimbursed and it's the same price, why would a doctor look to shift. So really interested there probably the highlights, but I've run through a few of the others.

Touching on Australia, you did touch on this during your presentation, but how could the TGA consultation outcome change the playing field? And what does it mean for LGP?

Yes. I mean, we don't know. I think we'll know more in the next 2 to 4 weeks once we see that first version of what the TGA is thinking. There has been a consultation with the regulator back to the industry. So I personally haven't been involved in those conversations, but I'm a director of the MCAA, which is one of the industry boards at the moment. So certainly, the feedback that we're getting is that reform will be coming. Largely, this has been driven off kind of a negative sentiment of just a few poor actors in this industry over the last 12 to 24 months. And so yes, that there will be change. But like I said, I think I've already been through the detail. I personally take the view that this will be positive. We've been -- even before this reform was coming out, we had already made some submissions and recommendations around how to regulate this industry at a -- with a higher benchmark. And so this was a great opportunity. We submitted an application of dossier a submission into the TGA for that reform. We knew we had already made some of those recommendations in the past, and it was well aligned to the industry. So it's a bit of a wait and see, that one, David, but we'll know very soon where they're potentially heading. What that means in terms of time line, I suspect there might be a bit of a -- with any big regulatory change. So this will be the biggest regulatory change since 2016 when it was regulated. It's important to note that this is significant. But what it looks like, I wouldn't speculate too much until we have more detail and the likelihood of it being grandfathered is probably quite high. So in the medium-term, and we're talking a number of years maybe, perhaps not a huge change. But yes, there will be more to come in this space.

You touched on during your presentation, automation, offshoring and restructure. How will those activities that have largely occurred in recent times affect cash flows and productivity. But what's the ultimate benefit going to look like?

Yes. So I think pretty simple for us. We -- the global market -- the Australian market, and the global market, some markets are a bit different, but the French market will be slightly different. But certainly, those fast-moving markets. So if you look at Australia, U.K., Germany. We are trending towards a highly competitive market. We're already there in terms of the number of products in the market. Price compression and quality is key. So we need to continue to remain competitive. We also need to continue to drive a return for our shareholders and continue to have top-line growth and bottom-line growth. So it's just logical that part of our strategy is to have the right financial backing and really look at our business through the lens of saving cost and efficiency, whilst also having the top line growth. And all of those things sometimes contradict each other. But what we've successfully started, so about a year ago, we tried our first offshore into South Africa actually because of the time zone and the level of understanding of pharmaceutical quality. So we started that about a year ago, and we've been building on that. So I think we've got 4 or 5 there now, and it's working incredibly well. So that's been a big step for us. The voluntary redundancies was a part of a -- primarily out of our Australian operation and really just looking to sort of refine the sort of headline, have a bit of a refresh of of thinking, we're not -- a number of those roles that we're moving on. Like I think I said in my presentation, there's about $0.5 million savings there, but also an opportunity just to refine our thinking and strategy. Automation is key. AI is obviously critical in this market. We're looking -- we're always looking at pathways to utilize better technology to whether that's on a customer acquisition side for our clinic or whether that's on a great example of something we've trialed and we're about to implement is a bit of software that delivers us a global regulatory solution. So for example, if we wanted to go and enter a new market, in Europe, let's say, Czech Republic, we would need to go to an expert person who knows the regulations in that market, and we would need to get them to do some consulting work and come back with a recommendation and guide us on the way through and how we understand to get product into the market and what that process is. And so we've been trialing a bit of software that's going to do that for us. And so the savings on that at a consulting level is significant, and it's a SaaS-based model where we pay a monthly fee and enables us to ask those questions at a closed AI environment and deliver us the answers that we would need. Obviously, we will overlay that with the person to ensure that we've got the right answers. But so far, we've trialed that to great success. So little things like that, I think David will be a big -- well, not little things, but they're a big part of our focus to ensure that we remain cost competitive and really focus on margin.

You touched on again in your presentation that the Denmark facility remains a strategic asset and has been for some time. What are the near-term deliverables to achieve the dream of an EU processing hub?

Yes. We're still working through what that will really, really look like. Obviously, we scaled that site up now to 10. We've still got capacity to grow that. We want that site largely in our own right to be driven in a significant way under our own brands. So we've got capacity there. The processing hub for anyone that's seen any images or videos of the actual GMP site. So there's huge cultivation site on one side and then a massive GMP side. So the company we bought the asset of cannabis spent $100-something million on building this gold plated site in -- perfectly positioned inside the European market. And obviously, we paid cents in the dollar, and we now have very little debt, if not no debt actually on that site. So yes, the GMP site is really interesting in that we're utilizing maybe 30% to 40% of the capacity and you walk in to build a building like that is significant. And then to implement SOPs and farmer-grade equipment to actually -- for example, you can see on one of the last photos there, I think there's a picture of an automated flowering packing machine. And so the ability for us -- we're only using that packing machine at a guess, maybe a day a week. And so could we turn that packing machine on for third parties and have it running 5 days a week and then take a margin off other people's product and deliver that into the market. So they're the types of things we're looking at. The absolute clarity on what that looks like from a Danish level is still yet to be determined, but that will all kick off from next year. So more to come on that.

And just touching again on the U.S. So if the U.S. formally downschedules cannabis to Schedule III, what practical tailwinds could flow to Australia?

Yes. I think what we'll find, as I said before, is that's largely driven by sentiment to begin with. So I think sentiment will drive value in the U.S. market. Practically, I think what happens is there's cash that comes back into that market once there's a bit of a re-rating and that those investors are going to be looking at those businesses for growth. Now some of that will be U.S.-based growth because they can then trade across border, but I genuinely think that they're going to be looking for opportunity. I know from conversation that they will be looking for global opportunity. I know what's on their radar. And I know Germany, the U.K. and Australia and broader Europe is on the radar. And so if you look at who's best positioned for us, one of the first into Germany, one of the first in the U.K., really strong brand presence in there, largest site in Europe, just 2 hours from the German border that's debt-free, one of the only products in the French market and likely the first, if not one of the first into a regulated market, competitive advantage on our dossier capabilities and pharma capabilities inside of French or an Italian market or those new emerging markets. So yes, I think practically, that's probably what's driving it, David. I'm not sure I really answered that one, but.

I think you answered it well within the presentation itself as well. And if -- clearly, it's been a time for everyone in the sector to sort of hold their pennies close, and there hasn't been a massive influx of cash into the sector and funding into the sector. But how is the business positioned if that changes and there is a global capital rotation back into the sector?

I think this kind of phase that we've gone through, we go back to the Gartner curve, the trough of disillusionment, it's taught the industry, and it certainly taught us that really looking at this industry to treat it like any regular business where we must drive the fundamentals of a business and not drive hype. So really focused on margin, really focused on managing costs, really focused on at a sales level, what's really driving that growth and market share, consolidation conversations because of what's happened in the market. So I think there's all positivity in this phase. But yes, I think like any industry, there will be -- if we look at the fundamentals of where we sit today, it doesn't -- the value doesn't make sense to me, and I know to a lot of people out there, particularly if you look at our net tangible position. So yes, I think in a practical sense, whether we believe that we're moving into that next phase or not, time will tell. Early signs look promising. But we're not planning on that. We don't sit here as a business and say we're just waiting for this global re-rating. It's certainly not what we're doing. It's in the background and it will be a nice to have. But we have a very clear strategy and not one part of that strategy says, let's wait for global rerating. It's absolutely not even in our day-to-day thinking for the entire team. That will be a nice to have for the industry, and we firmly think that it's coming, but it's not what we're looking at. So for us, it's just the fundamentals. We believe even outside that, we just continue to grow a business that is providing great product to patients, making -- changing lives for patients, doing great deals into new markets, leveraging the know-how that we have. And I think the rest will follow. I mean we've seen a nice little bit of a flattening, but a nice little -- small increase in sort of what our share price and market cap looks like of late. I still think it's still under where my expectations are and our Board, and I'm sure our shareholders. But the fundamentals are there, and we'll continue to just drive those fundamentals. We don't -- we think with the days of investing in a cannabis company just for hype where you might get a 2x or 3x return, but then lose your money are probably gone. You've got to -- if you're an investor in this space, back a company that has a 5-year vision and plan with the right people, the right strategy, the right structure, the right position in the market as it grows to deliver long-term returns. So that's really our focus.

Last few questions. The presentation you mentioned -- within the presentation, sorry, you mentioned exploring M&A or consolidation opportunities. Now there's 2 questions have come on this. I'm going to put them together, and I'm definitely not trying to trip you up. What characteristics would you look for in potential acquisitions? And then the next question that came in was, is the company currently in active discussions on either the acquisition or the merger side? Now I don't want to trip you up on that. And I would like to remind everyone on this call of the ASX listing rules. So I would just want to make that clear before Paul answered that question. Let's maybe start with characteristics.

Look, I think for us, if you look at the fundamentals of our business at the moment, we've got a site in Denmark that's now scaled up to 10 tonnes, but it's got significant capacity to go from there. So if we look at some of the brands -- most brands, say, in Australia don't have -- they're really white label. So they go to a third-party cultivator and they put a label on it and they market it into doctors and they sell their product that way. So they don't -- they're not vertically integrated. So the obvious one is we've got capacity. Every time we put on a new room and go from 10 to 12 to 14, our cost per gram comes down. And so it's logical for us that then we're more competitive in a price compressed market. So that's kind of the first and obvious one. We go, well, is there opportunity for brands that are buying product elsewhere where we get margin on margin and we come together. Is there companies that are undervalued in that space in this market? Absolutely. And so that's the first obvious. I think geographically is interesting, like looking at some of our key European markets, there's opportunity to make sure we consolidate the position that we've grown to date. And then I think there's a really interesting kind of opportunistic part of the market where there's companies that are either going into administration or close to administration where we just look at opportunity. And I mean Health House is a really good example of a company that was struggling, and we saw a baseline opportunity that even wholesaling our own products made sense for us given the value of what we paid for it. But any upside from that would be significant, and we're supporting a brand that we knew well in this market. So that's a really obvious one. I think the thing we've been able to hopefully show shareholders, and I think internally, we've now got confidence that we purchased the site in Denmark. We didn't just purchase the site. That was like purchasing a business, and we integrated that business along -- when we acquired them, they had 80 staff. We had to refine it down to about 25 staff, and we scaled it up a little bit now. But that was a full integration really of a business and a culture from Australia to Europe, and we did it through COVID. So we've learned a lot through that. We weren't perfect and it's taken time, but we think we're in a good position. And then we've done it again here locally with Health House. So yes, knowing how to do that is something that we think we've built a bit of knowledge and expertise on. And we're pretty clear on the types of businesses that make sense to us, but we're not -- it's not a closed door because I think there's opportunities popping up the front and center at the moment because they're in a position where they need to look for partnerships in this space. And the second question, David?

I'm not sure you want to answer. Is the company currently in an active merger or acquisition discussions?

What I can say is that we're proactively talking to the market and not only shareholders, but to the industry to say we believe in consolidation. We believe that it makes sense for the industry, and we want to talk. So you can obviously -- if you think through that, it makes logical sense that conversations will happen because I think there's almost no one in the industry that thinks differently now. I think I've been saying that for about a year. But at a recent industry event, there was lots of conversation, people saying the same thing. I think everyone knows, everyone sees what's happening in the market, understands that we're probably going through a phase where consolidation needs to happen. And if you look at the top 10 businesses, and that became the top 3 or 4, then there's some big cost savings as you go from Board to executive to operational functions to supply chain integration. So even just the cost base savings that are potential to pulling those types of deals together make a lot of sense. But I sort of perhaps make it sound a little bit too kind of easy in that scenario. What we've done at Little Green Pharma for 8, 9 years now is build a trusted brand and one that we've made some decisions based on our values as a business that may not have always been given us the absolute top-line growth that we could have chased if we weren't a values-driven organization. And so we're not going to compromise on that. Like there's places we won't go because we -- our core values are really clear. And one of those core values is trust, and building that trust is something that only has taken us years to build. So it's critical that we get value alignment. It's critical to get cultural alignment, and that's the hard bit, right? So the opportunities are there, but whether we get that full alignment is -- and then on top of that, it's value alignment as well. I think there's an expectation if you look at private companies that they've managed to perhaps still raise a bit of capital at some inflated valuations that may be through crowd funding or whatever that looks like. And so their own version of a valuation is not aligned to what's happening in a capital market sense. And for us, we're only going to do a deal that makes sense for our shareholders that gives us value uplift that accounts for the fact that we're massively undervalued and we're in a strong position. So yes, there's lots of moving parts to that conversation. But yes, there's lots of positive conversations.

On that note, I'd like to thank you, Paul, for the presentation and for openly answering all the questions that came through. So thanks, Paul.

Thank you, David, and thanks to everyone for joining again, as always. Appreciate it. Thank you.

Thanks, everyone, for your questions and participation. A recording of today's webinar will be available shortly. On behalf of Little Green Pharma, thank you for joining us and for your ongoing support of the company. Thanks, everyone, and have a great day.