MDS books big gain from Cornwall Medical deal
The acquisition of Cornwall Medical & Dental Supplies Limited by Medical Disposables & Supplies Limited was a $275-million deal that gave MDS a 60 per cent stake in the Montego Bay business.
Although Kingston-based Medical Disposables has previously said the deal is not expected to close until around September after its initial disclosure of the purchase, it booked the transaction in March, at the close of its financial year. The company subsequently acquired a $121.5-million loan from National Commercial Bank in April to help pay for the acquisition, MDS said in its newly released year-end results.
MDS also booked a $62-million gain from the transaction, which helped double its pre-tax earnings for the year to $76 million. After-tax profit was $69 million. Without the boost from the one-off item, pre-tax profit would have shrank from $35 million to $14 million.
“This is actually a positive situation. Given that last year we had negative cash flow, this year, it is an improvement on what obtained before,” said CEO Kurt Boothe, who recently succeeded his mother at the company’s helm.
At year-end, MDS was running deficits in both operating cash and its net cash flows, albeit at improved levels. Operating cash improved tenfold from negative $91 million to negative $9.6 million, while net cash improved from a deficit of $124 million to negative $28 million.
“We upgraded our IT infrastructure by adding other modules to the existing system that we have and we hired the people with the necessary expertise to make it work. That comes at a cost, but if you don’t do it, you don’t want the alternative,” Boothe said.
MDS has formed a subsidiary called Cornwall Enterprises Limited to hold the new business, which includes three pharmacies. The purchase gives MDS wider reach into western Jamaica, and entry into a desired market segment, dental supplies.
“It fits with our strategy. The dental area is one where we have done extensive research to the point where we had opportunities to represent overseas companies and the plans remained in the pipeline until now with this transaction,” Boothe said.