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GBP58m
Research: Healthcare
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.
Written by
Creo Medical |
Solid FY23 lays the groundwork for 2024 |
Trading update |
Healthcare equipment |
8 February 2024 |
Share price performance
Business description
Analysts
Creo Medical is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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.
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Research: Industrials
Babcock’s capital markets day reaffirmed its transformation over the past two years, facilitated by a series of disposals and a focus on core defence expertise (69% of H124 revenue). It is well positioned to capitalise on growing global defence budgets stemming from geopolitical tensions, and to continue developing its overseas partnerships. With a strengthened balance sheet (H124 gearing of 1.1x), cash flow visibility, a healthy order backlog of £9.6bn (more than 90% of FY24 revenue covered) and improved relations with the UK Ministry of Defence (MOD), which is favouring more British SME suppliers, there appears to be plenty of upside potential.