The O'Shea interview, from a very hardworking person on RB:
By: dbfwelch
Reply To: 17027 by dbfwelch
Monday, 13 Sep 1999 at 12:27 PM EDT
Post # of 17067
For those of you who are interested, I have finished transcribing the interview and will now post it on RB.
This is Steve Delucia with Wall Street Reporter and joining us today is Michael O'Shea, President of Chester Holdings, LTD.
Delucia: Thanks for joining us today, Michael.
O'Shea: Oh, thank you, good morning Steve.
Delucia: Why don't you start off by telling us a little bit about your background and give us some information on the history of the company, as well.
O'Shea: OK. My background is actually in accounting and financial investigations. I spent a lot of years doing workouts of companies and that is how I initially got involved with Chester in
late '94. The management of the company hired me to attempt to solve some problems that the company was having and sell off a lot of the operating divisions that it had . Since '94 or early '95 the company has, in essence, been a shell and just this year myself and some of the shareholders decided to get the company cleaned up and get it back into the business of being a holding company.
Delucia: And the company has recently announced a couple of acquisitions. Could you talk about what is going on in that area?
O'Shea: Yes. What we have done is two acquisitions, one is completed, the other is due to be completed within the next fifteen days, but is well on the way. We've decided to focus the
company on the Internet area, not as a new Internet site, but rather items that either bolt onto or enhance the Internet businesses that already exist. The first acquisition that we did and completed is a company called PharmaOnline. PharmaOnline is an ordering and distribution system whereby large quantity pharmaceutical buyers such as pharmacy chains, hospitals, nursing homes can go online and find pricing on mainly generic-type drugs and also process
those orders over the Internet and have them immediately shipped out. The other company that we are just completing is called Probity International. Probity is a company that provides,
through a system called Probity Gradient, for the identification of vulnerabilities, development of policies and solutions to Internet crime. This system is currently being used by the Philadelphia Stock Exchange, for example, and very successfully, for the last two years and has in the last six months sold a number of contracts to U.S. Military operations. The Probity system, in essence, identifies vulnerabilities within a company's Internet business and
provides solutions to that business.
Delucia: OK. If we look first at the PharmaOnline business, could you give us more detail on your plans in that area?
O'Shea: Yes, we're actually somewhat of a unique system in that what we're allowing is our customers, there's no charge to the customers, by the way, for example, say a large national pharmacy chain. We allow them to go online and search out the best prices and availability
for whatever particular drug that they're looking for, immediately enter an order and have that particular pharmaceutical fulfilled and sent out, via overnight. We think that it is going to have
a very large following in the very near future. We've combined forces with Gladstone Consulting Group in New Jersey, and they and they're staff are the originators of some of the initial Internet buyer, and prior to that, mail-order type pharmacy operations. We see a real strong potential for that business over the coming six months to a year. As a matter of fact, I'm leaving tomorrow on a trip to Europe to attempt to sign several large contracts with large
end-users in the UK and in Germany.
Delucia: And how do you derive revenues from that business?
O'Shea: In essence, what happens is that PharmaOnline, as a subsidiary of Chester, receives a percentage of it's total sales, that percentage coming from the suppliers who supply the various pharmaceuticals to the system. We've got several large national wholesale firms that are participating in the program now. We've beta-tested it and it's gone very well and we are preparing, during the month of October, to sign our first customers on and go
full-scale with the program. There are substantial numbers, even though our percentages are quite small. One nursing home chain, for example, could easily spend thirty - forty million dollars a year in prescription purchases, so the numbers are quite large.
Delucia: And if we look at the Probity side of the business, what are your plans on that side?
O'Shea: Probity has already made a number of inroads, as I mentioned, into areas like the Philadelphia Stock Exchange. They have also sold a number of systems to the military in the last six months, almost a million dollars worth, actually. Again, my trip to Europe is going to combine a number of contacts for that. We've had a large demand for that product and we need, at this point, to do nothing more than roll it out and begin the marketing. We have a large telecommunications company in Italy that we'll be meeting with next week that has expressed a strong interest. We've also got several insurance companies who want to use our system in order to attempt to offset some of the risk that they occur in insuring Internet
businesses.
Delucia: And where are you today in terms of ramping up revenues with these two divisions?
O'Shea: We're anticipating that the company's first revenues will begin in the fourth quarter of this year, October, November, December, but that full-scale revenue results will not appear
until fiscal 2000. We do expect, minimally, to be looking at four and a half million in revenue during the twelve months beginning January of 2000. The last 6 months have been devoted mainly to getting the company reorganized and completing, which we are almost there with now, all of our filings with the SEC to bring the company current and up to date.
Delucia: And as we look ahead into the coming year and beyond, what do you see as some of the major challenges and opportunities ahead of you?
O'Shea: I think the biggest challenge, particularly with anything connected with an Internet business, is to try and stay ahead of the competition. Fortunately, at this point in time, we don't have a large amount of competition in either area, but we do expect that over the next year or two that that will change, particularly in the area of PharmaOnline. There have been a lot of online-type pharmacy retail businesses come about and I think that a lot of them are going to see that the wholesale business is the way to go, so one of our challenges is to stay ahead of it. The upside to it is that pharmacy is the largest growing sector of health care in the US, and, for that matter, in the world and we think that we will be in the position, on a wholesale basis, to take a large piece of that. Probity, on the other hand, is in a very unique position. The staff of Probity has a tremendous background in both corporate and military fields. There were numbers out last year that fully thirty percent of Internet crime occurred even when firewalls were present and Probity sort of transcends the standard firewall and designs an entire system, or bubble around the corporate entity and continues to review and
monitor it, assuring a much higher level of security than can be achieved just buying off-the-shelf-software.
Delucia: If we look at how the company is viewed by the investment community, what are some of the key points that you would like to stress for potential investors?
O'Shea: I think that the main thing is that an investor should understand that Chester is going to be here as a holding company, not just for a short-term play, but over a three to five year
window. For example, on Probity we're conservatively projecting revenues four years out at eighty million dollars a year, so we're not the type of stock that would be a play, if you will, for
the next two weeks or three weeks or something of that nature. We do have a focus, we do have a plan, and that is to stay within these Internet businesses and I think that is the main thing for people to understand that when you do plan something like that it takes a bit of time and we've met all of our goals so far, and I think that we will continue to going into the coming year.
Delucia: And could you foresee the potential for other acquisitions down the road?
O'Shea: Yes. We're very aggressively going to look at doing that, and, in fact, are doing that at this time. As I mentioned, Chester is looking to be a holding company, acquiring not only companies, but management to run those businesses and we have plans, as we go along, to, in turn, package and spin some of these businesses back out and distribute the results of those spin-outs to the Chester shareholders. So we think it's going to be an exciting year,
going forward, not only in the acquisition area, but also how we manage to package them and market them and spin them back out again.
Delucia: And if people want more information on the company, where could they turn to?
O'Shea: They can contact us via telephone or fax, it's the same number, at (864) 962-8638 and they can ask to speak to me. They can also send a fax, as I mentioned, to that number and we will be happy to send out some information on the company to them.
Delucia: OK. Thank you very much for joining us today.
O'Shea: Well, thank you.
Delucia: That was Michael O'Shea, President of Chester Holdings, LTD and this has been the Wall Street Reporter. |
