MDS’ Hemorrhage Continues in FY2025

• Medical Disposables & Supplies Limited (MDS) reported a net loss of $201.83Mn for the twelve-month period ended March 2025, marking the second consecutive year of losses. The sustained underperformance was largely driven by elevated operating expenses, which continued to constrain the company’s ability to convert revenue growth into profitability.
• During the financial year, revenue grew modestly by 4.7% to $3.88Bn, up from $3.71Bn in the previous year. Stronger performance in the second half of the year, underpinned by improved sell-through across the pharmaceutical, medical, and consumer divisions, accounted for the growth in MDS’ topline.
• Cost of sales rose slightly by 0.4%, increasing at a much slower pace than revenue. This reflected the absence of a large inventory write-down seen in the prior year, which had stemmed from slow-moving and near-dated stock. Consequently, gross profit improved by 22.8%. However, when adjusted for non-recurring effects, gross profit from core operations actually declined, primarily due to temporary sales disruptions at a subsidiary undergoing rationalisation, including changes in supplier relationships.
• Operating expenses surged by $138.92Mn (15.62%), largely due to a one-off provision totaling $144Mn within Cornwall Enterprises, a subsidiary. This included $18Mn for slow-moving inventory and $126Mn for related-party balances. This was the primary driver of the weaker earnings.
• Other contributors to the rise in costs included: Emergency repair expenses and hurricane preparedness measures (Hurricane Beryl), higher insurance premiums, costs related to new business acquisitions, increased staff turnover and strategic investments in sales and merchandising staff to drive distribution growth. That said, these increases were partially offset by improved cost discipline in marketing and promotional spending.
• Looking ahead, MDS has begun diversifying its product mix and expanding regionally. The company has entered the fast-moving consumer goods (FMCG) space by becoming a non-exclusive distributor of True Pet Food in Jamaica. It is also establishing MDS Cayman, a new subsidiary aimed at distributing pharmaceutical and medical supplies across the Cayman Islands and the broader Caribbean, signaling a push toward new markets and revenue streams.
• Despite the softer earnings, MDS’s stock price has declined by 18.2% year-to-date, closing at $1.35 as at Tuesday. At this price, the stock is trading at a price-to-book (P/B) ratio of 0.59x, which is lower than the Junior Market Health Sector’s average of 1.94x.

(Sources: JSE & NCBCM Research)