Surgical takes hit from the winter flu crisis

Surgical Innovation's instruments being used in a gallbladder removal
Surgical Innovation's instruments being used in a gallbladder removal
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K​eyhole surgery instrument​s​ maker​ Surgical Innovations​ reported strong annual results for 2017, but said it took a hit from the winter flu crisis and its impact on NHS hospitals at the start of 2018.

The Leeds-based firm said 2018 revenue is well ahead of last year, although it has been affected by the constraints experienced in NHS hospitals.

​SI's executive chairman Nigel Rogers said: "It was widely reported during January that winter illnesses caused most UK hospitals to reach abnormally high capacity levels, resulting in the cancellation of many elective surgical procedures.

"When the NHS delays or cancels elective surgery, all suppliers feel the pain of that. There was an extremely high incidence of winter flu."

However, the group said there are now clear signs of a return to a more normal level of activity.

"It's just the weather. We've been through rough weather and we're getting back to normal now," said Mr Rogers.

Surgical said revenue rose 44 per cent to £8.75m in 2017, with the acquisition of Elemental Healthcare contributing for five months of the year.

Analysts welcomed the results.

N+1 Singer said in a note: "This is a strong set of results, as expected, with the transformational acquisition of Elemental Healthcare contributing for five months of the year.

"We continue to expect a further step change in reported revenues and profits in 2018 as the acquisition contributes for a first full year. No material changes to forecasts expected after some swings and roundabouts in the first quarter, with softer UK patient volumes in January (now recovering) and the loss of a small distribution deal offset by the new agreement with Bariatric Solutions, the renewal of the Microline deal and compensation."

Analyst Eric Burns at WH Ireland added: "The acquisition of Elemental has, as expected, given Surgical greater scale and a UK distribution channel from which it will build a larger medtech business – the renewal of a key distribution agreement with Microline and a new product range secured last month being early proof points of the strategy.

"Core underlying growth of 11 per cent - 8 per cent on a constant currency basis - outstripped the long-term industry (and our own) forecasts but a nod in the statement to a tougher winter for the NHS means we leave 2018 forecasts unchanged."

Mr Rogers said the group was very pleased with the integration of Elemental.

"It's going extremely well. We are very pleased with how things have progressed," said Mr Rogers.

SI said its international business has started the year on a more positive note and the group doubts that Brexit will have much of an impact.

"It's obviously extremely difficult to say at this stage," said Mr Rogers.

"It's hard to say anything constructive until the outcome, but the likelihood of trade barriers on medical products is extremely unlikely. It's very hard to see a scenario where we'd be affected."

Revenues from SI branded products increase​d​ 15​ per cent​ to £5.35m ​in 2017​ and adjusted pre-tax profit doubled from £540,000 to £1.1m.

Following the acquisition of Elemental Healthcare, SI has the exclusive UK distribution rights to a range of premium medical devices. These products offer a wider field of use including bariatric and metabolic surgery, breast and abdominal wall reconstruction and abdominal hernia repair.

“The acquisition has been well received by third party manufacturers served by Elemental Healthcare, and looking​ ​ahead there are further opportunities to enhance the scope of our UK distribution business​," said Mr Rogers.