Sumary of SMALL CAP IDEAS: Medica to benefit from resumption of elective surgeries:
- The decision whether to invest in Medica Group, the provider of services to hospital radiology departments, largely comes down to how fast you think elective surgery rates will recover to pre-pandemic levels.
- In a recent trading update covering the first half of the year, the company reported ‘a sustained recovery in activity in diagnostic services’.
- It seems obvious, however, that the ability of healthcare organisations to clear this backlog of operations (and thus spark increased demand for Medica’s teleradiology services) is dependent on them not being overwhelmed with emergency care for Covid-19 sufferers.
- Before the coronavirus pandemic changed everything, things had been going fairly swimmingly for the group, with double-digit percentage revenue growth each year for ten years.
- The group has a stated ambition to double revenues from 2020’s level by 2025 by consolidating what it believes is a leadership position in UK teleradiology services while branching out into allied areas of growth.
- Medica’s bespoke information technology platform is described as ‘robust and secure’ and is scalable, which is to say the company can take on new clients without significantly requiring heavy capital expenditure.
- Of equal importance to the elective surgery business to Medica is its Nighthawk out of hours radiology reporting business, which also generates around 35 per cent of group revenues.
- Dr Stuart Quin, the chief executive of Medica, told investors in July that the recovery of elective scanning activity in health services is now well underway and Medica is seeing a sustained recovery in elective scanning volumes as a result.