Bubs Australia Limited (ASX: BUB) has released the findings of its Strategic Review conducted over the past two months.
The review focused on the company's operations in the USA, Australia, and China, and aims to responsibly manage capital and drive growth to deliver shareholder value.
Katrina Rathie, Chairman of Bubs, stated, "The Strategic Review sets out a 5-point plan to responsibly manage capital and to grow and maximise shareholder value."
The key points of the plan include:
- USA Growth Engine: Bubs aims to expand further into major retailers, including Grocery & Pharmacy, and increase sales velocity. The company will continue to drive growth and scale through e-commerce platforms and secure permanent access to the US market by obtaining FDA approval.
- China Reset: Bubs has initiated a reset in its China operations, implementing a multi-channel go-to-market strategy with new leadership and trade partners. The company will focus on areas where it has a clear competitive advantage, such as goat infant milk formula (IMF) and goat adult milk powder.
- Portfolio Optimisation: Bubs is a market leader in its hero goat product segment, pioneering the IMF category in the USA and China. The company's strategic focus will be on premiumization, repositioning bovine IMF products, product rationalisation, innovation, and investment in core brands.
- Sweat Existing Assets: Bubs' state-of-the-art manufacturing facility in Deloraine, Victoria is currently underutilised, operating at approximately 31% capacity. The company plans to boost utilisation and improve shareholder returns by exploring opportunities such as obtaining State Administration for Market Regulation (SAMR) registration for China, toll manufacturing, and selective private label partnerships.
- Working Capital: Bubs has successfully reduced annual operating expenses by approximately $10 million and expects to halve the monthly cash burn from approximately $5 million to $2 million starting from Q2 FY24. The company's growth plans are fully funded, and efforts will be made to liquidate excess inventory. Bubs will maintain its marketing investment at 15% of net sales, supporting its growth markets and core brands.
Reg Weine, Independent Non-Executive Director at Bubs, emphasised the need to arrest the decline in shareholder value and refocus the company.
"With a greater focus on working capital and tighter control on costs, we will quickly reduce the monthly cash burn, extend the runway, and deliver sustainable shareholder value," Weine said.
Looking ahead to FY24, Bubs is committed to delivering growth for shareholders, including net sales revenue of $80 million, representing a 35% increase from the previous year, and a gross profit margin of 40%.
The company will continue to make progress with FDA approvals, refocus on infant and adult goat nutrition, improve working capital, enhance transparency and governance, and achieve positive cash flow in FY25.
