Medica reports double digit growth but Covid-19 outbreak impacts short-term prospects

Medica Group reports double digit revenue growth

Medica Group has said it is confident it can face down the challenges presented by the Covid-19 outbreak after announcing another year of double-digit revenue growth.

The London-listed teleradiology company reported a 19.4% jump in revenue to £46.5m for the year ended 31 December 2019 driven by strong performance from its emergency reporting service NightHawk and cross-sectional radiology reporting services.

Recruitment of radiologists, which is seen as a key metric by the company, remained strong with a net increase of 73. And demand continued to increase with the total number of reported body parts across its service lines rising to 1.94 million from 1.66 million in 2018.

However, activity has slumped in the wake of Covid-19 and Medica said it was difficult to forecast the full impact on revenue growth.

To date, NightHawk out-of-hours reporting activity has fallen by around 50% since the outbreak and the group expects decline of as much as 70% as typical A&E admissions continue to reduce.

The impact on routine reporting has been even greater as NHS hospitals suspend elective procedures. So far, Medica said routine reporting had declined by 90% and could rise to 100% as the NHS shifts entirely to dealing with Covid-19 cases.

To mitigate the impact, the group has tailored its Nighthawk service to support NHS clients with dedicated Covid 19 care pathways. In addition, it said it expects deferred elective cases to accumulate in the health system leading to increased pressure to report routine cases later in the year.

The company’s business model is focused around reporters working from home, making it well-placed to continue service delivery in spite of the lockdown. It is also working closely with its NHS clients to offer a pro bono ‘pass through’ service enabling their radiologists to report from home.

The board said it will defer its decision on dividend payments until later this year and is taking steps to maximise short-term cash flow, including the possible postponement of discretionary CAPEX until Q3/Q4. However, it said the company ‘has a strong balance sheet and is well-placed to continue to deliver its high-quality service to support the NHS’.

Adjusted operating profit was up almost 6% to £11.3m but margins reduced from 27.4% to 24.3% due to investment in people in processes to ensure the long-term growth of the business.

CEO Dr Stuart Quin said: ‘I am pleased to report a strong financial and operational performance in 2019. Since joining in September, we have refocused our strategy to support the future growth and development of the business, as well as continue to improve the quality of our service offering. The market for teleradiology remains strong and we are increasingly supporting our clients with our high quality and responsive service both for urgent cases during out of hours and an increasing level of routine scans. I am particularly proud of the way our team has performed to innovate and respond to an increasing level and complexity of work and I would like to thank them for their continued efforts to provide a reliable service for our customers and their patients. With a strong balance street and leadership in a growth market, we are very optimistic about the long-term prospects of the business, notwithstanding the significant short-term impact on revenues from Covid-19. We are highly focused on executing our strategy to double our revenues in the next five years.’