GWest shocking financial status

GWest went to market in 2017, presenting a picture to investors of a prosperous future but within less than two years of listing on the Junior Market of the Jamaica Stock Exchange, the picture is bleak.
The company’s auditors issued a qualified report casting doubts on the ability of the company to continue in business as a going concern. According to the company’s auditors Calvert Gordon and Associates, “the company recorded a net loss of $135.876 million during the year ended March 2019 and a net loss of $88.109 million in the previous year.”
These conditions along with other matters as set out in note 28, indicate the existence of an uncertainty which may cast doubt about the company’s ability to continue as a going concern.
Note 28 of the financial statements reads “The above factors indicate a material uncertainty that may cast doubt on the company’s ability to continue as a going concern and to therefore realise its assets and discharge its liabilities in the ordinary course of business.  The continuation of the company as a going concern is dependent on the availability of the third party financing and on future sustained profitable operations.”
“Management is committed to continue operations as a going concern and is pursuing a number of strategies to return to profitability, which include: – sale of investment property units – commencement of operations of planned new surgery centre –  increased marketing and promotion of new services being offered – continue rationalisation of expenses – obtaining additional third party financing for improved working capital “
“ At the date of these financial statements, the company was in an advanced stage of negotiations with its bankers regarding the restructuring its current borrowing arrangements and to obtain further financing for its strategic plans.

Dr. Konrad Kirlew, chairman of GWest.

Additionally, subsequent to the year end, the company has signed sale agreements for two units of its investment property.”
“The ability of the company to generate sustained profitable operations is dependent on the successful implementation of the strategies being pursued.  Based on these plans and strategies, the directors and management believe that the company will generate adequate cash flows and return to profitability.”
GWest presented a rosy forecast at the time of the IPO, to suggest a highly profitable future with revenues from medical services rising sharply in the 2018 fiscal year. The results to March that year, last year showed revenues well below forecast of $86 million from the new operations with only $17.4 million generated. Admittedly, the company had projected a loss to March of $110 million but came up much lower, with a loss of $88 million. The audited accounts show revenues from patients fess at just $77 million well up on the $17 million generated in the 2018 fiscal year but below the forecast for 2018 and mere 11 percent of the forecast of $710 million for 2019.  With losses exceeded revenues for the 2019 fiscal year, the company will need to grow gross income considerably in the current year to prevent another year of losses. GWest reported revenues of $130 million and $66 million in 2018 with expenses of $228 million up from $119 million.
The company has just $465 million in shareholders’ equity owes $980 million in interest bearing debt and virtually has no free cash left on hand. The sale of some units owned by the company will go a far way in easing the crunch but it must generate a lot more income to stem the cash out flow that has plagued it.
The writing was on the wall for this stock from the start, it had no track record in the business it hoped to make most of its profit from, projections had no credible foundation and management exposed there weakness with the manager they handled the conversion of shareholders loans to preference shares. The stock that was sold to the public at $2.50 and rose to a high of $4 after listing but is now down to $1.05 just above the net book value of 95 cents and seems heading lower.

About IC