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The Sunday Times article: NHS work should be healthy for Medica

Sabah Meddings writes about why it's a good time to buy Medica shares.

25 July 2021 – The Sunday Times

As restrictions are relaxed, a key focus for hospitals will be the record lists of patients awaiting elective operations and scans. The most gloomy estimates suggest that these could take years to clear.

This backlog is likely to boost demand for Medica Group’s services. The supplier of teleradiology, which allows radiologists to view images remotely, steps in when the NHS can’t keep up with demand, which is an increasing problem.

Demand for radiologists in the UK is growing by between 5 and 6 per cent a year, but there is no spare capacity in the NHS. That’s where Medica comes in, offering teleradiology to hospitals that outsource about 20 per cent of their cases — a figure that has doubled over the past five years.

It employs about 500 radiologists — often retired or who want to fit work around caring responsibilities. They read scans remotely, easing the pressure on busy hospitals.

Medica began life in 2004 and floated on the London Stock Exchange in 2017 at 135p a share. Soon after, pricing pressure in the NHS nearly halved that value. But under new chief executive, Stuart Quin, Medica has invested in its software and recruited new radiologists. It has also teamed up with the artificial-intelligence firm Qure.ai to improve efficiency.

In November, it expanded with the €16 million acquisition of Global Diagnostics Ireland, its counterpart there. And a recent joint venture with an Australian business, Integral Diagnostics, means Medica can use radiologists there when it’s night-time in the UK.

All of this has put Medica’s share price on the road to recovery — it closed on Friday at 163p, valuing the business at £199.5 million. Revenues are expected to revive to £61.4 million this year, according to investment bank Liberum — up from £36.8 million in 2020.

As hospitals have focused on Covid patients, demand for Medica’s services has been hit. Now, hospitals are addressing their backlog in elective activity — and that is likely to boost demand this year and next.

In the UK, elective operations and scans have recovered to 75 per cent of pre-Covid levels. It should be busier during the summer as NHS radiologists go on holiday — meaning Medica can pick up the slack.

Part of the shortage in radiologists is down to the ten years’ training required to be a consultant radiologist — of which there are currently about 4,000, although only 3,750 full-time as part-time working has increased.

So there is a good chance Medica will be in demand in the months ahead. Buy.


See the original article on The Sunday Times here.