Creo Medical — Solid FY23 lays the groundwork for 2024

Creo Medical (AIM: CREO)

Last close As at 15/06/2024

GBP0.36

−0.25 (−0.70%)

Market capitalisation

GBP130m

More on this equity

Research: Healthcare

Creo Medical — Solid FY23 lays the groundwork for 2024

Creo Medical has released a trading update for FY23, an active year for the company, with progress made across all business segments. Traction improved in H223, following Speedboat Inject’s European clearance for upper gastrointestinal (GI) procedures and the accelerated approval and launch of Creo’s slimmest electrosurgical device, Speedboat UltraSlim. Top-line growth was supported by continued streamlining of the cost structure, resulting in a better-than-expected underlying EBITDA loss (improving to £16.4m vs our £17.0m estimate) and slower cash burn. Gross cash at end January 2024 was £22.8m, which we estimate will take Creo to net profitability in H126 (compared to management’s target of FY25). We await the release of the final FY23 results to update our estimates.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

creo05

Healthcare

Creo Medical

Solid FY23 lays the groundwork for 2024

Trading update

Healthcare equipment
and services

8 February 2024

Price

41.75p

Market cap

£151m

Gross cash (£m) at 31 January 2024

22.8

Shares in issue

361.5m

Free float

87.7%

Code

CREO

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

Creo Medical is a UK-based healthcare company focusing on the development and commercialisation of minimally invasive electrosurgical devices. It has six products in the flagship CROMA platform, all of which have been CE marked and four of which have been cleared by the FDA. In 2020 Creo acquired Albyn Medical, which provides it with profitable products and a direct salesforce in Europe.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Creo Medical is a research client of Edison Investment Research Limited

Creo Medical has released a trading update for FY23, an active year for the company, with progress made across all business segments. Traction improved in H223, following Speedboat Inject’s European clearance for upper gastrointestinal (GI) procedures and the accelerated approval and launch of Creo’s slimmest electrosurgical device, Speedboat UltraSlim. Top-line growth was supported by continued streamlining of the cost structure, resulting in a better-than-expected underlying EBITDA loss (improving to £16.4m vs our £17.0m estimate) and slower cash burn. Gross cash at end January 2024 was £22.8m, which we estimate will take Creo to net profitability in H126 (compared to management’s target of FY25). We await the release of the final FY23 results to update our estimates.

Year, end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/21

25.2

(29.7)

(14.6)

0.0

N/A

N/A

12/22

27.2

(31.0)

(14.9)

0.0

N/A

N/A

12/23e

30.8

(24.3)

(6.6)

0.0

N/A

N/A

12/24e

40.8

(14.8)

(3.5)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Creo’s FY23 trading update highlighted the growing scope and reach of its proprietary Kamaptive technology and its core electrosurgical device suite. Revenues grew c 13% y-o-y to £30.8m, led by 2.5x growth in the core portfolio sales to c £2.3m, a c 28% growth in Kamaptive licensing income to £1.8m and a solid 8% growth in the mature consumables portfolio (to £26.8m).

In FY23, the total number of Speedboat users increased to 175, representing a 120% increase from 80 at the end of FY22 and a 30% increase from 115 at the end of H123, reflecting a favourable conversion rate from its training programme. We see this growing user base as a positive indicator for uptake and assimilation of its novel devices in hospital procedures. Management notes that December 2023 was a ‘record’ month for orders and shipments and we believe this to have been driven by the launch of Speedboat UltraSlim, Creo’s slimmest device to date (making it compatible with most endoscopes), which is reported to have been receiving positive feedback from users.

The Speedboat Inject European CE mark extension for upper GI procedures is another area of opportunity, nearly doubling the scope for Creo’s product in the geography. Management has indicated that it will now focus on clinical development of Creo’s MicroBlate range of products (which provide flexible microwave ablation for soft tissue, where flexibility and a small diameter are required), which we expect should provide further impetus to top-line growth in the medium term.

Partnering to establish and expand the applicability of its Kamaptive technology is likely to remain another focus area for Creo and we expect further updates in 2024 related to its existing partnerships with robotics leaders Intuitive Surgical and CMR. Creo recently announced a research collaboration with Khalifa University to leverage its research capabilities and tap into potential commercial opportunities within the MENA region.

General disclaimer and copyright

This report has been commissioned by Creo Medical and prepared and issued by Edison, in consideration of a fee payable by Creo Medical. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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London │ New York │ Frankfurt

20 Red Lion Street

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Creo Medical and prepared and issued by Edison, in consideration of a fee payable by Creo Medical. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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