Surgical Innovations Group plc (AIM: SUN), the designer, manufacturer and distributor of innovative medical technology for minimally invasive surgery, reports its unaudited financial results for the six-month period ended 30 June 2019.
· Revenues of £5.10m (2018H1: £5.28m)
· Gross margin up by 4.1% to 43.1% (2018H1: 39.0%)
· Adjusted EBITDA* of £0.65m (2018H1: £0.93m)
· Adjusted operating profit* of £0.22m (2018H1: £0.42m)
· Adjusted earnings per share of 0.02p (2018H1: 0.05p)
· Net cash at end of period of £0.34m (31 Dec 2018: £0.38m)
* Adjusted EBITDA and Adjusted operating profit are stated before deducting non-recurring exceptional costs of £0.18m (2018H1: £nil),
amortisation of intangible acquisition costs of £0.18m (2018H1: £0.22m) and share based payment costs of £0.10m (2018H1: £0.06m).
The results reflect a difficult trading environment, which has been adversely affected by constraints in UK health spending and widespread uncertainty. We have continued to invest in people and product development, gained in market share, and ensured that the business is well placed to benefit from an upturn.
As explained in the 7 June 2019 trading update, the year began positively but this momentum was not carried into the second quarter as orders in the UK and Europe were lower than expected. Revenues in the US and key Asian markets continued to show expected levels of growth, as did those to our major OEM partners. Overall, the Group has made gains in market share and generated increased gross margins, demonstrating that our product range offers attractive benefits to end user customers.
Following David Marsh becoming Chief Executive in March, we have further strengthened the executive team, including the recruitment of senior managers with functional responsibility for Operations and Compliance. The additional investment and overhead directed towards new product development and quality assurance will continue to strengthen our ability to navigate the complex regulatory environment as we move towards MDR in coming months.
Our commitment to further expanding the product portfolio, and our close association with the surgical community and partner organisations worldwide, will continue to provide us with opportunities for both organic growth and further M&A activity.
The headwinds faced since the end of the first quarter of the year are unlikely to abate in the short term, and we anticipate that the UK and EU markets will continue to be challenging. We expect to deliver continuing success in the US market, working closely with our distribution partners to further increase market share and with the launch of YelloPort Elite®. The Board has reassessed its outlook for the rest of the financial year based on the continuing challenging market conditions and reduced revenue expectations, anticipating relatively modest growth in the second half of 2019 compared to the first half. These trading conditions are primarily driven by what we believe are temporary factors, and we are more optimistic beyond the present political uncertainty that NHS funding and activity levels will rise in response to growing pent up demand.
As a result of the reduced revenues, the Board also anticipates that adjusted operating profits will show an increase in the second half of the year, albeit significantly lower than previously expected and the business will continue to be cash generative.
Chairman of SI, Nigel Rogers, said:
"We have continued to adapt to challenging circumstances, which are both industry-wide and transitory in nature. Whilst trading conditions in the short term are very disappointing, the investment made in people and products position us well to take advantage of market opportunities. Our executive team has been strengthened, and has the drive, expertise and experience to achieve future success."