I’m pretty excited this week. I’ve got a completely new company to look at. The business in question operates in a defensive sector where the SIF fund is seriously underweight - healthcare.

I should point out that Medica (LON:MGP) floated on the LSE Main Market in 2017, so has been around for a while. But this £140m company is not one I’ve looked at before. Prior to writing this article, my knowledge of the business was limited to Graham Neary’s March 2019 SCVR report, covering Medica’s 2018 results.

I suspect some of you will have taken an interest in this company already, so please feel free to share your insights in the comments below.

What does Medica do?

Medica’s business is in ‘teleradiology’. Essentially, it provides an outsourced pool of radiologists who work remotely for the NHS, reporting on scans such as MRI, x-ray and CT scans. The group’s revenue is divided into three reportable segments:

  • Nighthawk (50% revenue): emergency out-of-hours service, 24/7 response in under 60 minutes
  • Routine cross-sectional scan reporting (38% of revenue): supplementing or enhancing in-house radiology expertise for CT and MRI scans
  • Routine plain film (10% of revenue): Less urgent x-ray reports (I think!).
  • Specialist services: revenue isn’t yet being reported for this segment, but Medica appears keen to develop expertise in areas such as specialist MRI and CT scans, nuclear medicine and DXA reporting.

The business appears to be enjoying structural growth tailwinds as NHS Trusts are faced with “growing demand for diagnostic reporting, limited in-house capacity and ongoing financial constraints”.

Medica only serves UK hospitals at the moment. According to the firm’s website, it works with more than 80 NHS Trusts. The group generated revenue of £39m in 2018, during which it reported on 1.66m “body parts”. That’s an average of £23.50 per body part, which doesn’t seem a huge amount -- I guess many routine reports must be very quick to complete.

At the end of February, the company had 375 consultants on its books. These work through an IT system that gives them access to patient records. Medica undertakes to ensure that the scan workstations used by consultants are equivalent to those they’d use in an NHS hospital.

Historically, the consultants retained by Medica were all practicing UK-qualified consultant radiologists with at least two years’ NHS experience in this role. However, the company is beginning a process of…

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