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Myriad devises growth strategy

Johannesburg - AltX-listed Myriad Medical Holdings remains optimistic about its future but is wary of decreased margins if the higher cost of imported products and the uncertain economic environment persist.

Myriad is South Africa's only listed exclusive supplier of medical devices, single-use consumables and medical capital equipment to both the public and private hospital sectors.

Myriad's financial statement for the six months to end-November 2008 shows an 18% increase in operating profit to R17.2m; earnings per share are up 16% to 6.5c. Turnover increased by 23% to R132m.

The operating margin contracted by 60 basis points to 13% for the period when compared to the same time in 2007.

Myriad financial director Barry Budler said the weaker rand had resulted in higher landed costs of goods.

Myriad's cash flows were negative. The company attributed this to a sharp increase in inventory, which was up 40% from the previous corresponding period.

"We will be a cash-generative business at the end of this financial year," says Budler.

About 90% of Myriad's revenue is derived from single-use medical equipment such as anaesthesia, wound care products, drapes and surgical gloves. Over half of Myriad's current assets comprise stock. "We took advantage of a 10% supplier discount and stocked up for expected high December sales," says Budler.

Another reason stock has increased is the acquisition of four new agencies: Uroplasty (a urology product), women's health products Caldera and Thermablad and Heinen & Lowenstein anaesthetic machines.

Since November 2008 two further agencies - one for sports medicine and a second for surgical products - have been secured but not yet announced to the industry.

"We will continue to monitor stock levels, but are looking to maintain current levels despite the increased number of agencies," says Budler.

Myriad welcomes the Medicines & Related Substances Amendment Bill, which will regulate the devices sector when passed by parliament this year.

The company believes changes in the healthcare sector regulatory environment "will result in a more transparent and level playing field for the medical device industry".

CEO Jack Shapiro says: "Myriad is a defensive stock; when people get ill, they have no choice but to seek medical help. Our products will always be in demand."

By 12:00 on Tuesday, shares in Myriad were unchanged at 50c apiece.

- Fin24.com

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