The AIM-quoted medical products group is due to announce its interim results for the six months to 30 June next Wednesday, 15 September, and we believe this could prove to be the catalyst for a jump in the share price. Subscribers will be aware that we tipped the shares as one of our Shares for 2021 back in January when the share price was 2.15p and the share price has been as high as 3.55p since then. That was soon after the results for 2020 were announced but the lack of any really significant news since then has caused the price to drift lower. We are hopeful that a solid set of interim numbers together with an encouraging trading statement could reverse this decline and spark some interest in the stock.
The company specialises in the design, manufacture and sale of innovative, high quality medical products and these are mainly used in minimally invasive (keyhole) surgery. The medical instruments are sold not only in the UK, through its Elemental Healthcare subsidiary, but also overseas through a number of distribution partners. In addition to selling the group’s products, Elemental also distributes complementary products from other suppliers.
In the latest financial year to 31 December 2020, revenues fell by 41% compared with the previous year to £6.3m s the company suffered from the effect of the pandemic. This clearly affected the number of surgical procedures that were undertaken by surgeons and so demand for the group’s products fell sharply. After hitting a low point in May 2020, the second half of last year saw an improvement in trading and this has continued in the early months of 2021. There is clearly pent-up demand for surgery and, as the country continues to open up, it is clear that demand for the group’s products will continue to increase. At the group’s AGM in June, it was reported that sales in May 2021 were the highest since September 2019.
Clearly, buying the shares ahead of next week’s results is a bit of a gamble, but the group has been steadily growing its distribution network in the USA. It also continues to introduce new products and it has a strong balance sheet with £2.41m of net cash at 31 May 2021. The company has also announced that it is to give a live presentation to investors on Thursday 16 September at 4.30pm on the Investor Meet Company platform and subscribers can register to attend this by using the link below.
We believe that the shares are a BUY.
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