Surgical finds success with US relationships

The Leeds-based medical device maker, whose products are used in keyhole surgery, said it is increasingly coming onto the radar of groups such as Telflex and Olympus.

Surgical makes devices under these groups’ brands, but retains the intellectual property over the technology, helping it earn higher margins.

The company, listed on the Alternative Investment Market, said it is now considering acquisitions to help maintain this momentum.

Surgical added its growth is being helped by pressure on healthcare providers to cut costs.

“We’ve welcomed the cost pressures around the world that are coming into play,” said chief executive Graham Bowland. “As hospital budgets get tighter in the US where reimbursement levels are dropping, we come into our own.

“We’ve got a real reputation in the market place for being a world-leader in minimally invasive. We’ve got a lot of people visiting the factory.”

Surgical has developed a range of its own brand ‘Resposable’ devices which include disposable and re-usable elements. Sales of its own brand products in 2010 increased 30 per cent to £3.9m, driven by these devices.

Sales to big medical device original equipment manufacturers (OEMs) soared 71 per cent to £2.5m. Surgical was also boosted by a £616,000 industrial order.

“We’ve created a blend of quality and cost-effectiveness that fits very well with the economic pressures on hospitals around the world,” said chairman Doug Liversidge.

“We’ve continued to invest heavily in the business while research and development capability has undergone a step change to speed up new product development and improvements to our existing technology.

“This has proven to be very appealing to potential OEM customers and as a result we are seeing an influx of enquiries for a range of minimally invasive devices.”

The group’s pre-tax profits increased 55 per cent to £7m, with the group generating £2.2m of net cash from operations.

Operating margins soared to 22 per cent from six per cent in 2009.

However, the group is not paying a dividend. “The board believes at this stage in the group’s development it would be more appropriate to continue its focus on strong inward investment,” it said.

Mr Liversidge said the group is looking at possible acquisitions around arthroscopy – minimally invasive surgery on joints. “We’ve got so many opportunities for organic growth that acquisitions are not high on our agenda,” said Mr Liversidge.

He added the group came close to buying a company last year, but balked at the high price demanded.

“We will continue to look around but we will be very choosy,” he said.

Surgical derives about 39 per cent of its sales from the US, with another 37 per cent coming from Europe. The remainder are sold in the UK and the rest of the world.

It now has a network of 45 dealers around the world, and its development team attend exhibitions across the globe.

Surgical said its future growth depends on continued investment in research and development. Its R&D team now employs 30 staff. Of these, eight are employed on thinking up concepts.

This unit has three months to create concepts, then nine months to turn these into finished products.

The team is developing tools for the increasingly popular cosmetic surgery market, including a range of 3mm Resposable instruments.

“We’re passionate about innovation,” said Mr Bowland. “It’s at the heart of the company and it’s the heart of Government strategy if you look at the R&D tax credits.

“It’s a really attractive proposition for the large US medical companies. They are looking for niche specialists like ourselves. We will design a prototype and put it on their desk, ready for selling.”

During 2010 the group invested £628,000 in tooling, plant and machinery, adding plastic injection moulding, allowing it to make whole instruments in-house.

As a result, the group’s workforce grew from 70 to 121 staff.

“It’s something Leeds and Yorkshire can be very proud of,” said Mr Liversidge. “We’re creating quality jobs and wealth for the region.”

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