General Medical Clinics – Trading Update

General Medical Clinics (GenMed) has revealed that revenues for the quarter ended 31st August were ahead year-on-year, and that clinic running costs and head office costs were down due to efficiency savings. The group, which currently operates 10 clinics in the City of London, added that the resolution to approve the payment of a final dividend of 0.6p per share has been passed and that it is in the process of integrating the newly acquired business Medicentres (UK).

For the year ended 31st May 2011, the firm posted a pre-tax loss of £328,932, which compares to a loss of £296,288 a year earlier, as turnover fell by 9.29% to £6.15 million. This was after the firm was hit by the non-renewal of its NHS contract at the Liverpool Street walk in centre. While this financial performance is disappointing, the aggregate savings arising from all of the company’s subsequent actions are expected to amount to at least £800,000 on an annualised basis. The balance sheet remained strong at the period end, with net cash of £1.27 million and net assets of £2.16 million.

Currently trading at 17.25p, General Medical Clinics is capitalised at £2.9 million. It is positive to hear that revenues are growing but we question the company’s decision to issue a dividend after making a loss for two years in a row, despite the strong cash position. We believe that the cash should be used to improve the business, rather than rewarding shareholders for the group’s poor financial performance. Despite this, we continue to see GenMed as a well run company but we would like to see further signs of improved operational performance before upgrading our stance. Avoid for now.