BioScience turnaround on track
Posted on 11. Mar, 2010 by admin in Business-Financial Results, News-Pharmaceutical, Research
When AltX listed pharmaceutical and wellness stock Bioscience Brands was re-listed, we at ManufacturingHub.co.za were quite upbeat on its prospects. We retain this confidence in the overall offering.
At the time we wrote that BioScience would be “A slog then a steal” with us saying: “BioScience needs to prove that its management have a plan”
CEO Mike Allan and his team were put through the ringer in 2009 with an absolutely torrid year for smaller consumer businesses and it showed in the interim results that were released yesterday.
Salient numbers for the six months ended 31 December 2009:
Turnover: Declined from R38m to R28.5m
Operating loss: R69000
Net loss: R1.3m
Cash & cash equiv: Decreased by R800000 to R7.6m
Net asset value per share: 1.95c (trading at 2c)
All in all some grim numbers but if you drill a little deeper there were one or two figures which need to be watched a bit more closely:
Cash flows from operating activities: Swung from a negative R4.7m to a positive R1.4m
Short-term borrowings: Down from R17m to R2.6m
Gross profit margin: Stayed stable year on year
We believe that the improvement in the operating cash-flows are the first signs that the business is turning although we have some concerns that there may need to be some form of capital injection in the coming months unless operating conditions improve. The group has said it expects to be profitable by June 2010.
Plan unfolding
Our key takeaway in 2008 was that management needed to show they had a plan and in follow-up interviews with Mike Allan we were convinced that the group had in fact worked out a sustainable turnaround strategy, even if some of it was a bit touch-and-go given the operating environment.
This was evident in:
A) Clear-cut strategy around reducing manufacturing and packaging costs
B) Improved cash flow
C) Identifying and “fleshing out” their cornerstone brands – BioHarmony and Muscle Science
An important point to highlight for the firm was that in 2009 there was no build-up around the Patrick Holford / BioHarmony product lines as had been experienced in 2008. Wellness guru Holford did not come through to South Africa which meant that BioHarmony lost out on its key anchor marketing tool for the year.
On this front, Allan commented: “Bioharmony`s 13-part television series `Naturally You`, featuring Patrick Holford, is a first for the nutritional supplement industry in South Africa and initial indications are that it is indeed having the desired effect.”
Other moves taken by management to over the year to rejuvenate the company include:
- Xplode launched as a brand with ready-to-drink beverages and shots
- Staminade launched as a brand with ready-to-drink beverages and bars
- Muscle Science re-launched in new packaging and re-formulated
- Muscle Science bars launched
- Herbology, re-formulated and re-branded, has increased its listings into additional customers
Conclusion
We make no secret of the fact that we are fans of this company in the long run and that we intend to add to our shareholding here.
When Allan spoke to ManufacturingHub.co.za last year he looked tired and it was apparent that the tough economic conditions were taking their toll. However he came across well and it was apparent he was working to a plan.
We conclude that the turnaround at Bioscience is well underway and remain upbeat about the prospects for the group going forward.