Keyhole surgery firm hit by challenging trading conditions

Keyhole surgery instruments maker Surgical Innovations has had to release its half year results a day early after "very disappointing" trading conditions led it to reassess the outlook for the rest of the financial year.

Surgical's products being used when a surgeon carries out a laparoscopic cholecystectomy
Surgical's products being used when a surgeon carries out a laparoscopic cholecystectomy

The Leeds-based group said that based on challenging market conditions and reduced revenue expectations, it anticipates relatively modest growth in the second half of 2019.

The firm's chairman Nigel Rogers said: “We have continued to adapt to challenging circumstances, which are both industry-wide and transitory in nature.

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"Whilst trading conditions in the short term are very disappointing, the investment made in people and products position us well to take advantage of market opportunities.

"Our executive team has been strengthened, and has the drive, expertise and experience to achieve future success.”

Revenue fell from £5.28m to £5.10m in the six months to June 30.

Surgical innovations said the results reflect a difficult trading environment, which has been hit by constraints in UK health spending and widespread uncertainty.

It said the year began positively, but this momentum was not carried into the second quarter as orders in the UK and Europe were lower than expected. Revenues in the US and key Asian markets continued to show expected levels of growth.

The firm said the headwinds faced since the end of the first quarter of the year are unlikely to abate in the short term, and it anticipates that the UK and EU markets will continue to be challenging.

Mr Rogers said: "These trading conditions are primarily driven by what we believe are temporary factors, and we are more optimistic beyond the present political uncertainty that NHS funding and activity levels will rise in response to growing pent up demand."

Analyst Chris Glasper at N+1 Singer said:"It has been a challenging trading period for Surgical Innovations, with the UK facing significant pressures resulting in many elective surgeries being postponed or cancelled.

"The company is directly exposed to these trends, which unfortunately show no signs of abating in the short term.

"We reduce our 2019 revenue expectations by £1.5m, which flows through to a £700,000 reduction in pre-tax profit.

"More positively, good progress is being made in opening new accounts (both in the UK and internationally), which should leave the group well placed once conditions improve. Importantly, the group remains profitable, cash generative and with net cash on the balance sheet."

The British Medical Association has reported high levels of cancellations of elective surgical procedures and the number of patients awaiting treatment has risen to near record levels.

This has been exacerbated by surgeons working restricted hours due to the effect of capping tax relief on their pension contribution, although individual NHS trusts and central government have committed to find solutions to this issue.