Star Combo Pharma (ASX:S66) CEO, Su Zhang discusses FY18 results, growth in its branded products, Ausway acquisition and FY19 outlook.
Rachael Jones: Hello I’m Rachael Jones for the Finance News Network. Joining me today from Star Combo Pharma Limited (ASX:S66) is CEO, Su Zhang. Su, welcome back to FNN.
Su Zhang: Hi Rachael, how are you?
Rachael Jones: Star Combo Pharma is an Australian TGA manufacturer of vitamins, supplements and skincare products. Can you tell me more?
Su Zhang: Star Combo Pharma Limited is an Australian Stock Exchange listed company under the ticker code S66. The company was established in 2004 and we are just headquartered over at Sydney’s Smithfield, over 15,000 square metres of warehouse and production site. Exactly like you said, it is a TGA licensed manufacturing site and at the moment, we turn out about one to two million capsules per day.
Rachael Jones: Now let’s look at your financial year 2018 results. What were the highlights?
Su Zhang: We have had quite a remarkable year in financial year 2018. The biggest thing for us was that we changed from a private company, to a publicly listed company. Now our first official financial year report for 2018, demonstrated a great result for us. Our revenue stream was up at $10.9 million and our gross profit was up at $4.49 million. And statutory loss at $1.9 million, partly contributed to some one-off costs related to the IPO. And then also some non-cash payment of share option expenses. Now we ended up with the year at $8.9 million with cash reserve and no debt.
Rachael Jones: Still on the subject of your own brands. How did you increase those sales figures?
Su Zhang: In relation to our own branded products, the increase was largely due to a targeted marketing program and also increased distribution channels. We’ve actually got a contract in place with Symbion, one of the largest pharmacy wholesalers in Australia. And on top of that, we have also recently entered into major China e-commerce websites, such as Suning, JD.com, Kaola, NetEase. This has significantly boosted the sales of our own brand of products.
Rachael Jones: Now to your purchase of Ausway, can you tell me the rationale behind that purchase? (subject to Due Diligence and board approval)
Su Zhang: Ausway has quite a longstanding relationship with the business itself. We have been traditionally engaged in the contract manufacturing of some of their vitamins range. Now the business is intended to add synergy with the current business we are in, because not only do they have a branded portfolio of products under their own range, currently exported to markets that we haven’t entered into. On top of that they have also got a small e-commerce platform, which will further aid our products, our own brand of products, going into the China market.
Rachael Jones: Could you give me a comment on your offshore sales?
Su Zhang: For offshore sales, the major market that we are currently looking into is the China market. So up until today, in fact just this morning, we received some positive news from the China regulatory bodies. To approve and grant us with registration for entry into China, which will allow us to sell in the mass markets, such as supermarkets pharmacy in store.
Rachael Jones: Last question now Su. What is the outlook for your financial year 2019?
Su Zhang: We have got some big expectations for our financial year 2019. Now that we have got the IPO out of the way and taking our tractions from the management team, we can really focus on the core business and the growth of this business, into the next step. We continue to expect growth in the current business that we have. And also expect positive cash flow to be generated from the further acquisitions that we will be taking on board.
Rachael Jones: Su Zhang, thanks for the update.
Su Zhang: Thank you Rachael.