Blackfriar: Pretzel logic will help point the way ahead for Surgical

The Leeds-based group, which makes devices for use in minimally invasive surgery, blamed the fall on tough comparisons with last year when the company received a large order that wasn’t repeated this year.

Maybe Surgical wasn’t as clear as it could have been for the reasons for the downturn.

Chief executive Graham Bowland said in the interim statement: “Revenues at the half year were lower on a like-for-like basis primarily because of the lack of repeat orders from the industrial business, which had a significant one-off impact on the prior period in 2010, as well as a smaller temporary reduction in OEM revenues, due to the phasing of larger orders.”

In an interview with the Yorkshire Post, Surgical’s chairman Doug Liversidge said: “There is a very sound reason for the reduction in the first half performance. The first half of last year had a very large industrial order. That takes account for all the revenue downturn. The reduction in profits is directly a result of the impact from that order.”

The slump in profits and revenues overshadows what is at heart a sound company with good potential.

Analyst Eric Burns at WH Ireland in Leeds said: “The market can sometimes become obsessed with short-term performance.

“That is not what this business is about – it’s about Surgical punching above its weight in laparoscopic and other medical instrumentation where it comes up against some pretty impressive global names.

“Surgical has some pretty compelling drivers – increasing use of laparoscopy in surgical procedures with better patient outcomes, a move towards 3mm tooling from 5mm and an increasingly obese worldwide population driving demand for bariatric procedures.”

The market has also overlooked the fact that sales of SI branded products increased 29 per cent to £2.05m in the six months to June 30.

During the half year the group established new markets in Australasia and Saudi Arabia, as well as the engagement of a new distributor in South Africa.

Of great significance to the company is the news that Surgical has signed an exclusive five-year agreement with medical device company CareFusion to distribute its new keyhole device, Pretzel-Flex.

Pretzel-Flex is an innovative new instrument that can reposition large organs, such as the liver, during keyhole surgery.

A common use of the device is to safely shift the liver out of the way during a gastric bypass.

For this type of operation, the liver must be moved in order to obtain access to the upper stomach.

Surgical said the Pretzel-Flex makes it much easier for doctors to shift large or swollen livers that are common in obese individuals.

Under the distribution agreement, CareFusion has acquired exclusive US rights to Pretzel-Flex for five years. Surgical will manufacture the device for CareFusion and it will be marketed in the US under the CareFusion brand.

Surgical will retain the right to manufacture and distribute the device under its brand name in all other markets.

The Pretzel-Flex can be inserted into the abdomen through a tiny hole, measuring no more than 5mm. The surgeon can then activate it so it assumes a pretzel shape.

It is initiatives like this that will help Surgical to up its game over the coming months.

n The news that high street bellwether John Lewis has finally fallen prey to the retail slump might sound doom and gloom for the company.

Yes, an 18 per cent drop in first-half profits is never to be welcomed after the group decided to stick to its ‘Never Knowingly Undersold’ promise to match price-cutting by rivals.

John Lewis said its pledge to shoppers cost an additional £9.3m in the six months to July 30, equivalent to around £50,000 a day.

It meant the 32 John Lewis stores and website saw a 55 per cent fall in operating profits to £15.8m, despite a one per cent increase in like-for-like sales.

However this news is very reassuring for the group’s customers.

The fact that John Lewis has stuck to its guns and not been tempted to renege on its promise to match rivals, however severe their promotional discounts have been, will stand the company in good stead when the market does pick up.

John Lewis said it expects the tough trading conditions to persist into 2012.

But when this slump finally does end, customers will remember that John Lewis stood by them when times were tough.