Interim CEO promises GWest turnaround

Wayne Gentles, the interim chief executive of medical company GWest Corporation Limited, is promising a financial turnaround for the loss-making firm, whose business is the sale and rental of units at its multistorey Fairview complex in Montego Bay and the delivery of a range of healthcare services there.

GWest’s latest financials suggests it is possible. Beyond that, the company, which entered into an arrangement with diagnostic services provider Microlabs Limited in March, is actively hunting other partnerships to build out the business into a comprehensive, one-stop healthcare facility.

Having posted losses over 12 consecutive quarters, up to last December, GWest made a profit of $2.94 million – tax credits further boosted its bottom line to $22 million – for the year ending March 2021.

The company’s cash flows also improved somewhat, but operating flows remained in deficit at negative $16 million, notwithstanding a near fivefold improvement. Net cash, however, grew from $37 million to $45 million.

“Our costs were a bit high and there are synergies with our healthcare, especially our urgent care and in-patient services. Now we have cut our costs and started construction of our surgery centre, which was always planned as a major driver of revenue for the business,” Gentles told the Financial Gleaner in an interview this week.

The finance director and a major shareholder in the business through his investment management firm, Bull Investments, Gentles has been GWest’s interim manager since earlier this year, when co-founder and former executive chairman Dr Konrad Kirlew, himself a major investor in GWest, gave up day-to day management as CEO as well as the chairmanship.

Board mentor Wayne Wray became interim chairman.

Kirlew’s exit had raised questions in the market, but Gentles said that in light of the perennial challenges to the business and the founding executive chairman having given significant time and effort to the GWest operations, the board of directors, including Kirlew, agreed on the need for fresh management after Kirlew indicated his desire to spend more time attending to his other enterprise, North Coast Imaging Limited, which operates as Radiology West.

The GWest 2021 profit outturn from tighter management and cost containment came despite lower revenue at $113 million, compared to $129 million for the year ended March 2020.

A breakdown of the revenue streams shows lease rental income up by $6 million to $64.8 million, while medical services contracted significantly, dropping by $27 million to $48.2 million.

But the company still got a profitable outcome due to two factors: a larger-than-usual fair value gain of $101 million on its investment properties – those gains in 2020 amounted to $66 million; and reduced operating and debt financing costs.

GWest staff cost was nearly halved, to $28.4 million from $46.4 million, which Gentles said reflected a reduction of contract staff that was no longer needed due to discontinuation of the 24-hour service the facility provided, in light of COVID-19 restrictions.

GWest also clipped finance costs to $37.1 million for the period, down from $45.4 million. The company is carrying a $224-million debt to National Commercial Bank from a $270-million debt consolidation loan taken out last year on which the medical company pays interest annually of 9.75 per cent, with a one-year moratorium on principal repayments. The loan is repayable in 28 equal quarterly payments ending 2028.

Gentles notes that the pandemic restricted opening hours and patient numbers at the medical centre, while curtailing its usually brisk business providing medicals for persons recruited for overseas work programmes. These effects, however, GWest said in its published results, “do not create a material uncertainty that casts significant doubt on the company’s ability to continue as a going concern”.

Cash coming in from the ongoing sale of investment units on the building is earmarked to fund capital expenditure for a nine-bed surgical centre and overnight facility, estimated to cost some $150 million and slated for completion by October.

The occupancy level at the complex is about 78 per cent, according to Gentles, with several new tenants scheduled to bring their business to the centre. Jamaica Customs Agency, he said, is now outfitting space there that is intended to become operational by August.

The company also entered into a partnership outsourcing its testing operations to laboratory operators Microlabs under a lease and commission arrangement that took effect on March 2.

Gentles, an accountant and investment manager, says he is ensuring a better financial footing for the business, with succession plans to be put in place to ensure a seamless transition to a new CEO within the next two years.

“The outlook is positive and we are looking forward to even better results going forward. We are moving in the right direction. We have cut our costs and are now looking to improve income,” he said.

The market itself appears willing to continue backing GWest, which listed on the junior exchange in late 2017, having traded up the stock’s value by 36 per cent year to date on Wednesday.

“We are trying to regain our pre-COVID revenue figures and once the surgery centre is opened, that will be a new revenue stream which should improve our bottom line significantly. It is a high-value item for us that was projected to account for some 50 per cent of our income from health services, and it is a needed facility in western Jamaica, with not a lot of competition in that area,” Gentles said.

huntley.medley@gleanerjm.com