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Australian-founded medicinal cannabis company Althea Group (ASX: AGH) has announced staff redundancies that have shaved $1.5 million from its cost base as the first phase of a planned restructure in the wake of a challenging time for the sector.
Althea, which has operations in Europe, North America and Africa as well as Australia, says further initiatives are also under way to cut overheads expenses and optimise its supply chain to enhance cashflow management.
The move follows material uncertainties raised about Althea and Cann Group (ASX: CAN) earlier this month after the companies, which are among the largest medicinal cannabis groups listed on the ASX, incurred December-half losses of $16.6 million and $14.3 million respectively.
In tandem with its latest half-year result released in February, Althea announced that it had completed an “extensive organisational review” that had identified cuts to its administrative, operational and supply chain expenditure.
While the results of the review were scant on details, the company today reveals that it has successfully completed phase one of its cost-reduction program, which largely focused on restructuring staff – a move that will generate annual savings of about $1.5 million.
Althea has not detailed how many jobs it has cut from its team which comprises more than 100 globally.
Further initiatives comprise renegotiating or exiting office leases, along with optimising the company’s IT spend. Phase three consists of optimising its supply chain through improved cost pricing and payment terms.
In a bid to scale back corporate debt, Althea completed the sale and leaseback of its Canadian facility during the December half, with the proceeds used to repay borrowings of $3.879 million reported at the end of June.
“Today's update on our organisational review reflects management’s focused commitment to enhancing operational efficiency and driving financial performance,” says Althea Group’s CEO Joshua Fegan.
“As we continue to adapt to dynamic market conditions and execute on our strategic initiatives, we remain confident in our ability to strengthen our financial position and deliver sustainable value to our valued shareholders.”
Althea operates in both the medical cannabis and recreational cannabis sectors.
Through Althea, the company produces a range of cannabis-based medicines which are made available to patients via prescription, while its Peak Processing Solutions subsidiary produces legal cannabis products, including cannabis-infused beverages, for adult consumers in retail stores.
Despite a challenging first half, Fegan told shareholders in February that Althea Group is “well placed for a successful second half of FY24” based on improvements in its operations, revenue and margins.
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