Pre 8 a.m. comments

It will be interesting to see how the market reacts to today's Trading Update for the year ended 31 Dec 2012 from Surgical Innovations (LON:SUN). SUN make equipment for minimally invasive surgery, and at 7.2p per share have a market cap of £29.2m.

Of the £5.6m orders intended for delivery in H2 of 2012, £1m slipped into the first week of 2013, due to capacity constraints at their Leeds factory, and a delay in US regulatory approval in Dec 2012. Those sound like valid reasons for 2012 falling short of expectations, so turnover will now be £7.6m, against forecast of £9.1m (according to Stockopedia's market consensus figure shown in the StockReport here).

The shortfall in 2012 will be a flying start to the 2013 figures of course, so given that we're in a bull market, this might be seen in a glass half full way? Gross margins have improved 3 points to 50.3%, which is positive. They only mention adjusted EBITDA, and not profit, which is slightly ahead of 2011 at £2.85m (versus £2.8m).

So at a 50% margin, £1m of sales would equate to delayed profit of £0.5m, and by my calculations that means they would have hit market consensus profit had it not been for the one week delay. So if I held these shares, I wouldn't be panicking over this.

Interestingly, they are increasing capacity, part funded by the award of a £5m RGF, which I think stands for Regional Growth Fund.

These shares had an amazing run from 2009 to 2011, ten-bagging from 1p to over 10p, but have since fallen back to 7p. With EPS having been fairly static for 3 years around 0.45p, which puts them on a PER of about 15, in my opinion they look fully priced. Also there is no dividend, which I see as a significant drawback. So this one's not for me at this price.

 

Structural steelwork company Severfield-Rowen (LON:SFR) got itself into a bad position by losing control of some contracts, warning on profit, and having issues with too much debt. The shares have got off lightly so far in my view, since a fall to 77p gives it a market cap of £70m, which given the uncertainty and likely losses for 2012 seemed generous.

It looks…

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