CML Healthcare’s recent deals to expand its core lab business are “modest” but give the Mississauga company a bigger foothold in the growing hospital sector, CEO Tom Wellner said Wednesday.
CML’s lab services contracts with Trillium Health Partners in Mississauga and the Brant Community Healthcare System in southwestern Ontario will help boost revenues and provide future growth potential for the company, the CEO told shareholders.
“The values of these contracts is modest initially,” Wellner said at the annual meeting. “But it reconfirms our capability of being able to expand in this area.”
Wellner estimated there’s a $2 billion opportunity within the total lab sector just in Ontario and about $1 billion of that within the hospital market. “With our team, with our capabilities, with our micro-platform that we’ve got we think we have opportunities to participate in this area,” he said.
At the shareholders meeting, Wellner spoke about the Courtneypark Dr. company’s strategy to grow the business, offer a variety of services and expand operations. “Keep in mind we are providing an essential service from a laboratory diagnostic perspective that is involved in 75-80 per cent of all healthcare decisions,” he said.
CML operates 114 labs and 84 x-ray centres, but it hopes to sell the x-ray business by the end of the year. In the past year, the company has also heavily invested in hiring, investing in new technology and acquisitions.
CML has also expanded into allergy testing with its MELISA blood test and contract with the medical company Somagen Diagnostics. “We believe there are strong margins there,” Wellner said, citing the creation of a new subsidiary, CML Bioanalytics, led by Dr. Nicola Hughes. “This division will complement our core clinical testing business.”
CML is also getting into private executive health clinics through a partnership with Executive Health Centre. “There’s a whole series of services we are now able to provide,” Wellner said.
Before the annual meeting, CML reported weaker profits and lower revenues, reflecting last year’s restructuring of the company.
Net earnings dropped to $12.1 million from $18.1 million and included a pre-tax restructuring charge of $3.1 million.
Meanwhile, revenues fell more than four per cent to $62.2 million from $64.9 million.
In other developments, CML sad it is renegotiating new contracts effective April 1 with the Ontario health ministry to pay for lab and testing services.
The company also said it is proceeding with the sale of its x-ray businesses in Ontario and B.C. and hopes to have that completed by the end of the year.
Wellner told analysts and investors there were bids for every location and reconfirmed the total expected sales proceeds of between $70 and 100 million for these assets.
“Given the pipeline of opportunities we are currently reviewing, we expect to be able to redeploy the net proceeds from the sale into new ventures with an improved growth profile and less capital intensive than diagnostic imaging.” Wellner said.
CML started from a single lab in Simcoe, Ont., 41 years ago and currently has 2,100 full- and part-time employees in Canada. In late 2011, the company also left the American market and sold its medical imaging business for US$51.5 million.