Keyhole surgery firm reports strong growth

The firm told shareholders at its AGM in Leeds that its trading performance is in line with the board’s expectations with gross margins on target.

​Chairman​ ​Nigel Rogers​ said: “Product innovation continues to be a priority, with focus on the further development of the YelloPort Elite range, our next generation Resposable port access system and the launch of further products to enhance our ranges of retraction and ligation solutions. The overall level of expenditure on product development has been maintained at a similar proportion of revenue as last year, demonstrating our ongoing commitment to innovation.”

He said the group continues to be cash generative, with net cash resources building whilst maintaining investment in development, and a modest increase in working capital due to the increased activity level.

“Overall, the board is satisfied with progress,” he told shareholders.

Analyst ​Chris Glasper at N+1 Singer said: “T​he AGM statement confirms that trading ​in the year to date​ has been in line with the ​b​oard’s expectations, highlighting strong ​year on year​ revenue and an improving cash position.

​“​As outlined in our initiation of coverage on May​ 30​, we believe that the company is entering a new growth phase following the change in management, and that the valuation discount to peers is unwarranted. We reiterate our ​‘b​uy​‘​ recommendation.​“​

Surgical Innovations​ returned to the black in ​2016 in ​what it described as a​ ​breakout year for the grou​p​​​. It reported strong results which were ahead of market expectations​.

Surgical ​said revenue rose 11 per cent to £6.09m​ during the year to December 31​​.

The group said its balance sheet ​had ​moved to a healthy net cash position.

After reporting a pre-tax loss of £2.1m in 2015, Surgical made a £280,000 profit in 2016.

​At the time Mr Rogers said the group is back on track.

“It’s a very solid set of results,” he said.

“Things are going well in 2017 and we see that continuing. It’s not clear how the Brexit scenario will play out. We have a very high degree of exports.

“The short term benefits of currency mean that longer term uncertainties are something we have time to manage.”

Chief operating officer and CFO Melanie Ross said 70 per cent of Surgical’s products are exported and this may grow as the group moves to other territories.

​Mr Rogers said that r​ecent regulatory changes have increased barriers for new market entrants, and strengthened the market position of ​firms with the skills and experience to meet more stringent requirements.

Analyst Eric Burns at WH Ireland said: “Increasing regulation in the market will likely play into the hands of the​ ​better established businesses like S​urgical​.”

Ms Ross said regulatory changes will make it harder for Surgical, but new players will find it extremely difficult “or decide it’s a game not worth playing”.

Talking about the Brexit impact, she said: “We don’t see the medical arena as somewhere wehere tariffs are imposed but we can’t tell.

“We see an uplift in laparoscopic (keyhole) surgery. Patients are in hospital for a lot less time and it’s a lot simpler.”

​The group is looking at future acquisitions.