MDS reported 69% decrease in year end net profits

July 17, 2020

Medical Disposables & Supplies LTD (MDS), for the year ended March 31, 2020 reported $2.48 billion for revenue, an increase of 12% relative to $2.22 billion booked the previous year. For the quarter, revenues totalled $755.50 million, up 18% year over year (2019: $641.26 million). The Company stated that, “This was mainly attributable to a combination of an increase in product offerings, price increases and above average growth in the pharmaceutical division.”

Cost of sales went up 15% to close the period at $1.92 billion relative to the $1.67 billion reported for the same period last year. This resulted in gross profit of $558.93 million, a 2% increase compared to $548.51 million reported last year. Gross profit for the quarter amounted to $160.04 million (2019: $182.43 million). MDS noted “The Company experienced a reduction in margin from a major supplier which contributed to a higher than normal cost of goods sold and therefore affected the profitability of that division. During the current year, the Company made several changes to its operations to reduce the level of inefficiencies, particularly to treat with expiring and damaged inventory, this also had an impact on profitability.”

Total operating costs closed the period at $465.83 million, up 27% (2019: $367.35 million). MDS indicated that the increase in operating expenses was, “due mainly to the costs associated with the growth in sales and talent acquisition and retention.” Of this:

  • Administrative expenses amounted to $244.24 million (2019: $194.82 million).
  • Selling and promotional costs totalled $184.65 million (2019: $145.10 million).
  • Depreciation cost closed the period at $29.34 million (2019: $25.38 million).
  • Other operating expenses totalled $7.59 million (2019: $2.05 million).

Additionally, “The increase in staff related expenses was due to the activation of the Company’s long-term strategic plan to build out the expansion model which will guide the Company into the future. This required the hiring of talent in several strategic positions. The Company was restructured into three divisions, thereby requiring persons at the management level to oversee the operations and drive the growth in each segment. Described as a reset year for MDS Ltd, the Company is systematically equipping itself to take on the challenges that will inevitably present themselves once the expansion takes shape.” MDS Noted.

However, total operating cost for the fourth quarter closed at $153.58 million (2019: $103.79 million), reflecting a 27% increase when compared to 2019 fourth quarter.

The Company’s loss on foreign exchange was reported at $19.48 million compared to $23.26 million in 2019. Management noted that, “Several mitigating strategies were employed to negate the effects the depreciation on the Jamaican dollar was having on the operations of the Company.” Finance costs and income increased to total $48.14 million (2019: $41.55 million) and $2.85 million (2019: $20,993), respectively. Gain on disposal of property, plant and equipment for the period amounted to $1.50 million (2019: $1.51 million).

As a result, MDS reported profit before tax of $35.49 million, a 71% decrease relative to the $123.35 million in 2019. For the quarter, profit before tax closed at $2.15 million (2019: $68.69 million).

Consequently, net profit for the period amounted to $34.56 million relative to $112.76 million in 2019, a 69% decrease after incurring a tax charge of $920,775 (2019: $10.58 million) for the period. Net profit for the quarter amounted to $5.39 million (2019: $58.13 million).

Earnings per share for the period amounted to $0.13 (2019: $0.43). EPS for the quarter closed at $0.02 relative to $0.22 in 2019. The number of shares used in the calculations is 263,157,895. MDS last traded on July 17, 2020 at $5.86.

Balance Sheet at a glance:

As at March 2020, ‘Total Assets’ amounted to $1.74 billion, relative to $1.65 billion reported in the prior year. This increase was primarily due to an upward movement in, ‘Trade and other receivables’ by 36% or $139.20 million to $529.40 million (2019: $390.21 million). Also, ‘Property, Plant and Equipment’ contributed to the growth closing at $611.07 million (2019: $557.72 million).

Shareholders’ Equity totalled $833.76 million (2019: $759.21 million) resulting in a book value per share of $3.17 (2019: $2.89).

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