REG - Surgical Innovations - Year-end Trading Update

Surgical InnovationsAnnouncement

23/01/2023 07:00

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RNS Number : 4658N  Surgical Innovations Group PLC  23 January 2023

Surgical Innovations Group plc

("Surgical Innovations", or the "Group")

 

Year-end Trading Update

 

Significant improvement in sales, ahead of market expectations and a return to
profitability in H2

New accounts won on basis of product quality and sustainability

 

Surgical Innovations Group plc (AIM: SUN), the designer, manufacturer and
distributor of innovative technology for minimally invasive surgery, provides
a positive update on trading for the year ended 31 December 2022, with sales
exceeding pre-pandemic levels and ahead of market expectations, and a return
to profitability in the second half of the year.

 

Unaudited Financials

Revenues for the year are expected to be approximately £11.3m, an increase of
more than 20% compared with the prior year (2021: £9.1m) and 6% ahead of the
pre-pandemic reference year (2019: £10.7m). Sales for the second half of the
year were approximately 10% higher than the first half.

 

The Group also expects to report underlying gross margin (before net
manufacturing costs) that remains within the target range of 40% to 45%
despite inflationary cost pressures, reflecting a focus on efficiency savings
and by passing on price increases into revenue where necessary. Supply chain
disruption continued to present challenges in the second half of the year and
across the industry, but these were overcome by maintaining adequate buffer
inventories, and consequently customer back orders were managed down to normal
levels by the end of the year. Inventories remain above normalised levels to
provide ongoing protection, although it is anticipated that supply chain
pressures will abate and reductions in inventory will be achievable during
2023.

 

Overall, the Group expects to report adjusted EBITDA(1) of approximately
£0.7m in line with market expectations, and to return to overall
profitability in the second half of the year, with a modest adjusted profit
before tax(1) for the full year.

 

The Group generated cash from operations for the full year and took the
opportunity to invest in further capital expenditure (£0.5m) in the second
half of the year, alongside continued investment in recruitment of high
calibre people and new product development. The closing net cash(2) balances
of the Group stood at approximately £0.9m at 31 December 2022 (30 June 2022:
£1.5m), with available gross cash resources at 31 December 2022 of £3.2m (30
June 2022: £4.0m) including an undrawn invoice discounting facility of £1.0m
(30 June 2022: £1.0m).

 

Revenues continue to grow and strengthen

The UK had a strong finish to the year with H2 sales up 10%. New hospital
conversions were underpinned by the Company's sustainability strategy and led
to annual sales for the UK (excluding OEM) tracking 30% above 2021 and 20%
above pre-pandemic levels.

 

SI-branded sales (excluding UK) had increased 14% in H2 compared with H1, in
part due to clearing the back orders in H1. However, overall activity levels
have improved, with sales for the year 10% up on 2021 and close to 90% of
pre-pandemic levels.

 

OEM sales have grown overall up 45% on 2021, and are now close to pre-pandemic
levels, with the underlying growth coming from both new and existing
relationships.

 

Current trading and outlook

The strong UK sales growth highlighted in Q4 has continued into the current
year, with new business wins contributing to year-on-year growth. While the
Company is mindful that strike action and other winter pressures upon the NHS
have the potential to slow down the positive effect of these opportunities in
the early part of 2023, the underlying UK business remains strong. New account
conversions and closer involvement in the private sector which delivered
robust growth in 2022 validate the investment in sales and marketing through
the year, and are expected to continue into the current year.

 

Whilst the international business was slower to recover than anticipated last
year, key strategic indicatives are in place to have a positive impact on
2023. The launch of a key new addition YelloPort Elite(TM) 5mm Optical
Trocar to the portfolio along with the completion of sales training in the
USA provides opportunity for the access devices to gain significant traction
over the coming year. In addition, the signing of a distribution agreement
with Peters Surgical India allows access to this important healthcare
market. OEM sales continue to recover and, by building closer relationships
with key partners, AMS, CMR and Becton Dickinson/Carefusion, this is expected
provide stability in this sector going forward.

 

The supply chain and people challenges of 2022 still remain but are under
better control and it is anticipated that these obstacles will gradually
recede through 2023. The regulatory environment continues to be fluid,
including a recent change to the deadlines for most of the Company's
competitors to achieve certification under MDR from 2024 until 2028. The
Company has, however, been quicker to adapt to the changing landscape and
remains well placed to achieve MDR on key products by March 2023.

 

David Marsh, CEO of Surgical Innovations Group Plc said: "We are pleased with
the 2022 performance achieving strong sales, led by the UK, and we have
demonstrated that the Company has effectively managed the headwinds of the
pandemic. The Company continues to win new accounts, with quality and
sustainability the key catalyst for these hospital conversions.
Internationally our sustainability messaging is beginning to resonate and 2023
will see the introduction of some important additions to our portfolio
allowing a more complete offering for key markets. Our successful
collaboration with OEM partners, especially in robotics, is a further exciting
opportunity for the business to leverage our expertise in instrument design
and be part of this growing development in surgery. We look forward to
updating shareholders in March at the time of our final results."

 

1    Adjusted EBITDA is earnings before interest, tax, depreciation and
amortization adjusted by deducting non-recurring exceptional costs, impairment
of intangible acquisition costs and share based payment costs. Adjusted loss
before tax is the loss before tax adjusted by non-recurring exceptional items,
impairment of intangible acquisition costs and share based payment costs.

 

2    Net cash equals cash less bank debt and finance lease leases, excluding
IFRS16 lease obligations

 

For further information please contact:

 

 Surgical Innovations Group plc                                                www sigroupplc com (http://www.sigroupplc.com/)
 David Marsh, CEO                                                              Tel: 0113 230 7597
 Charmaine Day, CFO

 Singer Capital Markets (Nominated Adviser & Broker)                                                     Tel: 020 7496 3000
 Aubrey Powell / Oliver Platts

 Walbrook PR (Financial PR & Investor Relations)      Tel: 020 7933 8780 or si@walbrookpr.com (mailto:si@walbrookpr.com)
 Paul McManus / Lianne Applegarth                                              Mob: 07980 541 893 / 07584 391 303

 

About Surgical Innovations Group plc

The Group specialises in the design, manufacture, sale and distribution of
innovative, high quality medical products, primarily for use in minimally
invasive surgery. Our product and business development is guided and supported
by a key group of nationally and internationally renowned surgeons across the
spectrum of minimally invasive surgical activity.

 

We design and manufacture and source our branded port access systems, surgical
instruments and retraction devices which are sold directly in the UK home
market through our subsidiary, Elemental Healthcare, and exported widely
through a global network of trusted distribution partners. Many of our
products in this field are based on a "resposable" concept, in which the
products are part reusable, part disposable, offering a high quality and
environmentally responsible solution at a cost that is competitive against
fully disposable alternatives.

 

Elemental also has exclusive UK distribution for a select group of specialist
products employed in laparoscopy, bariatric and metabolic surgery, hernia
repair and breast reconstruction.

 

In addition, we design and develop medical devices for carefully selected OEM
partners and have also collaborated with a major UK industrial partner to
provide precision engineering solutions to complex problems outside the
medical arena.

 

We aim for our brands to be recognised and respected by healthcare
professionals in all major geographical markets in which we operate and
provide by development, partnership or acquisition a broad portfolio of cost
effective, procedure specific surgical instruments and implantable devices
that offer reliable solutions to genuine clinical needs in the operating
theatre environment.

 

Further information

Further details of the Group's businesses and products are available on the
following websites:

www.sigroupplc.com (http://www.sigroupplc.com)

www.surginno.com (http://www.surginno.com)

www.elementalhealthcare.co.uk (http://www.elementalhealthcare.co.uk)

 

To receive regular updates by email, please contact si@walbrookpr.com
(mailto:si@walbrookpr.com)

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