Surgical Innovations shares dive on profit warning

Surgical Innovations shares dive on profit warning

Minimally invasive surgery technology company Surgical Innovations Group Plc (LON: SUN) has seen its share price dip dramatically on Friday morning, following their announcement that their annual profits were likely to fall.

The Company said that its predictions of a fall in profit were driven by Brexit uncertainty and NHS funding pressures, both of which had weighed sales down.

Surgical Innovations said that the UK market had remained relatively muted by the degree of activity in the NHS, but also more widely, the Company added that the modest sales growth that it saw in Q1 had been offset by lower-than-expected orders in Q2 across UK and EU markets. Further, new entrants were facing new challenges with regulatory approvals proving harder to achieve.

With all pressures considered, the Company reported that it was unlikely that H2 revenue growth would be able to fully mitigate the effects of a to-date stagnant second quarter.

Surgical Innovations Group comments

Following the investor update, the company said in its statement,

“The disruption to order patterns by distributors and end users caused by Brexit uncertainties has made visibility of true demand more difficult than normal,” Surgical Innovations said.

“It is anticipated that this volatility is likely to continue until matters are resolved.”

“Whilst a funding crisis was largely avoided last winter, hospitals continue to deliver a reduced level of elective procedures,”

“They also place an increasing burden on operational and technical resources, and we continue to build a strong and expert team in this area.”

“Recent redeployment of key personnel to support this activity has inevitably had a short-term impact on the introduction of new products, as well as line extensions of our current range.”

“Delays in the regulatory approval process are symptomatic of the severe contraction in the number of approved regulatory bodies in Europe.”

“In addition, extra resources will be put in place as we move towards medical device regulation.”

“This is likely to affect both the cost and timescale of introduction of new products across the industry.”

“Full year expectations for revenue will exceed those of the prior year by a more modest rate of growth than previously anticipated,”

“Whilst margins are expected to remain in line, overheads will reflect the investment in additional resources devoted to operational and regulatory matters.”

“Accordingly, adjusted profit before tax is expected to be below the level achieved in 2018.”

“The group currently holds net cash and continues to be cash generative.”

Trading notes

After diving below 30% shortly after markets opened on Friday morning, the Company’s shares are now down 26.83% or 1.1p to 3p a share.