Myriad – everything but cash flow
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.