MDS reports a 14% decline in nine months net profit

Date: February 14, 2019

Revenue amounted to $1.58 billion, an increase of 6%, relative to $1.49 billion booked the previous year. For the third quarter, revenues totalled $538.67 million up 3% year over year (2017: $521.09 million). MDS indicated that, “the revenue reflects a positive change in the sales mix with the introduction of additional medical and consumer business lines.”

MDS indicated that, “the Company’s strategic response is to broaden its product offerings of, not only higher margin items, but also its customer base.”

Cost of sales went up 5% to close the period at $1.21 billion relative to the $1.16 billion reported for the same period last year. This resulted in gross profit which increased 11% to a total of $366.08 million relative to the $329.69 million for the corresponding period in 2017. Gross profit for the third quarter amounted to $124.56 million, a 3% improvement compared to the $121.21 million reported in 2017.

Total operating cost closed the period at $263.56 million, up 8% (2017: $244.41 million). Of this, selling and promotional costs increased by 5% to $103.10 million (2017: $98.48 million). In addition, administrative expenses increased by 13% to $146.82 million from $130.13 million last year. Notably, the company booked other operating income of $4.08 million for the period ended December 31, 2018 relative to $3.23 million for the same period in 2017. Depreciation for the nine months amounted to $18.34 million, 6% more than the $17.35 million reported in 2017. Management highlighted that, “in order to sustain the current growth, development, and continued expansion of business, the Company increased its investment in human capital as well as improvement to its existing infrastructure.”

The company’s loss on foreign exchange was reported at $20.10 million compared a gain of $4.68 million in 2017. The Company noted that, “this impact stemmed from the rapid devaluation of the Jamaican dollar in relation to the United States Currency within this period; which in turn disturbed the improved year over year position to this point.”  Finance cost increased by 11% to total $29.29 million (2017: $26.44 million). Gain on disposal of property, plant & equipment for the period amounted to $1.51 million relative to nil in 2017.

As a result, MDS reported profit before tax of $54.66 million, a 14% decrease relative to the $63.52 million in 2017.

Consequently, net profit for the period amounted to $54.63 million relative to $63.46 million in 2017, a 14% decline after a tax charge of $30,000 (2017: $60,000) for the period. Net profit for the quarter amounted to $19.79 million (2017: $31.89 million). It was stated that, “this shortfall was directly related to the impact of the foreign exchange loss of $20.1M. Assuming the absence of this adverse volatility, the Company would have realised an increased net profit position year over year. Going forward, the Company strives to implement more proactive measures to better manage the adverse impact of foreign exchange volatility on the business.”

MDS stated that, “during the quarter, the Company was challenged to overcome the impacts of unavailability of stock of key items from manufacturers, as well as downtime in our communication systems and accessibility, due the continuing road works disrupting the Hagley Park Road area.”

Earnings per share for the period amounted $0.22 (2017: $0.24). EPS for the quarter amounted to $0.08 relative to $0.12 in 2017. The trailing twelve-month EPS amounted to $0.38. The number of shares used in the calculations is 263,157,895. MDS last traded on February 14, 2019 at $5.54.

Balance Sheet at a glance:

 As at December 2018, total assets amounted to $1.52 billion 11% more than $1.36 billion the year prior. ‘Property, Plant and Equipment’, ‘Inventories’ and ‘Receivables’ contributed to the overall increase in total assets closing the period at $547.49 million (2017: $500.73 million), $521.75 million (2017: $444.67 million) and $308.61 million (2017: $304.92 million), respectively. MDS stated that, “This was due mainly to the introduction of new business lines, which resulted in an overall growth in sales revenue.”

Shareholders’ Equity totalled $700.39 million (2017: $627 million) resulting in a book value per share of $2.66 (2017: $2.38).

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2019-02-14T21:24:13+00:00