Myr­iad – ev­ery­thing but cash flow

Finweek English Edition - - Companies & markets - MARC HASENFUSS

THE AM­BI­TIONS OF ALTX con­tender Myr­iad Med­i­cal Hold­ings are clear when you mea­sure the in­terim turnover of R47m to the R95m raised ahead of list­ing in Oc­to­ber last year.

It’s abun­dantly clear that Myr­iad raised much more cap­i­tal than its ex­ist­ing busi­ness – com­pris­ing the sup­ply of med­i­cal de­vices to the pub­lic and private hospi­tal sec­tors through six busi­ness units – needed to fund any or­ganic growth as­pi­ra­tions.

In­deed, com­ments ac­com­pa­ny­ing the in­terim re­sults con­firm that Myr­iad – which is cur­rently un­der cau­tion­ary – is dead set on ex­pand­ing its reper­toire ex­ten­sively. Direc­tors even ad­mit that “ ne­go­ti­a­tions and dis­cus­sions are tak- ing place with cer­tain med­i­cal de­vice com­pa­nies. Should th­ese trans­ac­tions be suc­cess­fully con­cluded, they should have a sig­nif­i­cant im­pact on the prof­itabil­ity and size of Myr­iad.”

Cur­rently Myr­iad holds the rights to 26 in­ter­na­tional med­i­cal de­vice agen­cies, cov­er­ing brands like: BD, Molnly­cke, Stat­lock and New­port Med­i­cal In­stru­ments.

A com­par­i­son with de­funct Macmed Health Care is al­most in­evitable, re­mem­ber­ing how suc­cess­fully Macmed bolted on new busi­nesses be­fore cor­po­rate mat­ters got ( way) out of hand.

Of the R95m ( be­fore costs) raised by Myr­iad at list­ing, about R75m has al­ready been spent on ac­qui­si­tions. The group now com­prises Manta Med­i­cal and Foren­sic di­vi­sion, ICU Med­i­cal di­vi­sion, Callen di­vi­sion, Vi­talCal, the Crit­i­cal Care di­vi­sion and the Train­ing Academy.

Cash on hand is re­flected as R14,3m in the in­terim state­ments, which means – un­less pa­per can be is­sued as set­tle­ment – there’s not ma­jor fire power in terms of hit­ting ac­qui­si­tion tar­gets.

The big is­sue then is cash flow. And Myr­iad’s in­terim re­sults show that op­er­at­ing profit of R11m is re­flected in the all im­por­tant cash flow state­ments, which shows a pal­try R940 000 gen­er­ated by op­er­a­tions.

Direc­tors ex­plain that cash gener- ated by op­er­a­tions dur­ing the pe­riod was utilised to fund the net build- up of debtors in the busi­nesses the group ac­quired be­fore list­ing. The bal­ance sheet shows ac­counts re­ceiv­able and in­ven­tory stand­ing at R40m ( equiv­a­lent to about 20c/ share). Con­ser­va­tive ( read: pru­dent) in­vestors are very par­tic­u­lar about be­ing re­as­sured by strong cash flows, es­pe­cially in a newly listed com­pany that’s clearly in­tent on grow­ing rapidly into a med­i­cal sup­ply con­glom­er­ate.

The share price – which is at a slight pre­mium to the 85c/ share is­sue price at list­ing – sug­gests some mar­ket cir­cum­spec­tion around Myr­iad’s bulk­ing- up strat­egy.

The group, how­ever, has cited a num­ber of new ten­ders and ro­bust busi­ness lev­els in both the private and pub­lic hospi­tal sec­tors – which all points to a strong( er) sec­ond half ’s trad­ing.

Nev­er­the­less, Fin­week – at this junc­ture – would pre­fer to be an ob­server rather than an in­vestor – de­fer­ring our opin­ion on ( by then prob­a­bly an en­larged) Myr­iad’s prospects un­til we can re- ac­cess the cash flow sta­tus at fi­nan­cial yearend.

MYR­IAD... RATHER OB­SERVE THAN GET IN

Source: I-Net Bridge

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