Blackfriar: Investors wish for surgical strike on beleaguered board

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​BLACKFRIAR has recently been contacted by a number of investors in keyhole surgery instruments maker Surgical Innovations​ asking why it was taking so long for CEO Graham Bowland to step down.

But on Tuesday he did step down, prompting the same investors to call for a board overhaul and some fresh blood at this former small cap darling whose shares ​are languishing at just 2p – down 85 per cent on their value three years ago.

On Tuesday the Leeds-based company put out a terse statement saying that Mr Bowland was to leave with immediate effect. The group’s chief financial officer Mike Thornton has been appointed as the company’s interim CEO.

Mr Bowland’s departure follows the news last week that Surgical made a £3.2m pre-tax loss for the six months to June 30, down from a £600,000 profit last year.

The group also said there was a “strong likelihood” it will shelve plans to relocate to a state-of-the-art clinical training centre in Leeds.

​Oh how the mighty have fallen. Surgical was so proud of its role as a key player in the creation of a new medical park of international standing in Yorkshire.

The group had secured a £5m Regional Growth Fund grant to build a 10,000 sq ft clinical training centre in Leeds, as part of a project to relocate to the 58,000 sq ft facility.

Last week Mr Bowland said a decision over the park will be taken in the next few weeks. ​It’s fairly obvious the answer will be no. However right until the end Surgical was insisting there was a chance it would go ahead – a case of the whole board sticking their heads in the sand.

To give him credit, Mr Thornton did have the guts to say it was highly unlikely.

​“The project is at risk,” he told The Yorkshire Post. “We wouldn’t flag it up unless there was a strong likelihood it will be terminated. It is very much at risk.”

M​aybe​ one board member ​was able to remove his head​ ​for long enough to see what any outsider would think was fairly obvious.

So is Mr Thornton the man for the top job? Investors think not.

One said: “There are no complaints about Mike, but what they really need is for Mike to stay as FD and steady the ship and make sure the banking arrangements are in place. They don’t need someone else like Graham Bowland, who was promoted from FD to CEO. They need someone with commercial nous.”

Another investor said: “They need someone with fire in their belly, but they will have to pay them the right money. Do they have the right money? My fear is that Chris Rea will take it private.”

Mr Rea is the highly regarded founder of AES Engineering,​ who​ bought a nine per cent stake in Surgical for £1.6m​ four months ago. ​

​He has taken on a ​non-executive director role at the firm and investors are curious as to how much of the recent changes have been down to him.

In an odd announcement on Tuesday, SI said that the company’s non-executive directors had unanimously decided to forego any pay until further notice as the firm focuses on cost savings and cash generation.

What? They’re going to work for free?! That has to be an admission they’ve made some fairly serious mistakes.

“There has to be an element of guilt for them to say that,” said one investor.

The problem with SI’s non-execs is they should have gone a long time ago.

They’ve been in situ for too long and they’re now way past their sell-by date.

“I think it’s good practice that they do go, all of them,” said one disgruntled investor.

​As one wag put it: “The non-execs are trying to keep their jobs – they’re just not getting paid now.”

Mr Rea is said to be good friends with a number of them, which could make it difficult.

But as one investor said: “In the end Chris Rea has invested a lot of money at 4p a share. Now the share price is half that. Friends have to be realistic with each other.”