Surgical returns to profit in breakout year

S​hares in ​the Leeds-based group rose 8 per cent​​ after the firm reported strong results ​for​ 2016 which were ahead of market expectations​.

Surgical reported ​healthy export-led revenue growth​ as revenue rose 11 per cent to £6.09m​ during the year to December 31​​.

The group said its balance sheet ​has ​moved to a healthy net cash position with ample unutilised banking facilities.

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

Executive chairman Nigel Rogers said the group is now 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, hence there is the potential for the top line to​ ​outperform the expected worldwide market growth rate of 6.5​ per cent​.

​“​Nonetheless, our ​20​17​ ​and ​20​18 forecasts are predicated on revenue growth of 6.5​ per cent​ for both years.​”

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.”

Mr Rogers added: “Our core market in laparoscopic surgery is not completely immune from the effects of economic uncertainty, but health spending in this area in the UK and other developed markets is forecast to continue to grow ahead of inflation.

​“​We aim to outperform the sector as a whole by increasing market penetration through opening new territories and introducing additional products and ranges, both organically and through additional partnerships and carefully selected acquisition activity.”

T​he US and the UK make up a third of Surgical’s revenues. Trading in Europe is ​static at the moment, but the group sees this improving. It sees Asia as a key opportunity going forward.

​The group is looking at future acquisitions.

“We are usually looking at two or three companies,” said Mr Rogers.

“We are looking at relatively small bolt-ons.

The group said it will look at paying a dividend in 2018.

The shares closed at 4p.