Surgical Innovations recovers in second half ahead of tough winter

(Sharecast News) - Medical technology company Surgical Innovations said on Monday revenues in its second half had recovered in line with management expectations, with group revenue for the full year now expected to exceed £6m.
The AIM-traded firm said in its trading update that direct gross margins before manufacturing volume variances had been maintained at around 44% of revenues.

Production restarted in October to service ongoing customer requirements, and direct costs and overheads were being managed "under close control", the board said, enabling it to trade close to the cash break even level.

The company raised equity of £2.05m net of associated costs in September, to provide investment capital and additional financial headroom.

As at 30 November, net cash balances totalled £3.38m - an increase of £2.69m since its interim report as at 30 June.

The firm said the global healthcare market was still building "some resilience" to the ongoing effects of the Covid-19 pandemic, with improved pathways for treating patients with coronavirus enabling elective surgery to resume "to some degree" in most markets in the second half.

It said elective surgery in the NHS, while still reduced compared to pre-pandemic levels, had been less impacted by the second wave compared to the first.

The United States remained "strong", despite the Covid-19 situation, with the company continuing to see sales at levels close to those seen last year.

Asia-Pacific had performed well in 2020 despite Covid-19, and was on plan for the year, with the company expecting the region to be another key area in 2021.

Europe was still slower to recover than most markets, but Surgical Innovations said it was seeing consistent, albeit lower, levels of ordering by key partners.

While the various Covid-19 vaccines were "welcome news", the board said it was expected that the roll-out of the jabs would take "some months".

Recent developments suggested that it was reasonable to anticipate greater seasonal pressure on beds, and further reductions in elective surgery over the winter.

The company said it was "well-positioned" to conserve resources during the period of continued subdued demand, and then benefit from an expected recovery, with a return to normalised activity levels towards the end of 2021.

"We are pleased with the work we carried out to mitigate against the challenges of the Covid-19 pandemic, taking advantage of the production hiatus to streamline operational and regulatory processes," said chief executive officer David Marsh.

"This has been beneficial for the Group as we continue to be at the forefront of the sustainability agenda with our 'Resposable' product portfolio.

"Recent progress suggests our product portfolio is well aligned with the needs of healthcare practitioners and providers and so, notwithstanding the ongoing effects of the pandemic, we are optimistic for the medium to long term outlook."

Surgical Innovations said it expected to release its audited results for the year ending 31 December in late March.

At 1521 GMT, shares in Surgical Innovations Group were down 2.94% at 1.65p.