MR MONEY MAKER: X-ray specialist Medica Group comes up trumps

What’s happening? 

We are beginning to look at life after the pandemic, or rather, more treatments for life after the pandemic. 

The Medica Group is a computerised tomography (CT-imaging) and X-ray specialist, and is now seeing a recovery in its scanning business in diagnostic services. 

Medica’s business is concentrated primarily in the UK and Ireland, with some overseas activity in the US and Australia. 

Recovery: Medica’s business is concentrated primarily in the UK and Ireland, with some overseas activity in the US and Australia

Not unsurprisingly, the business was hit hard when the concentration was on Covid and other healthcare was put to one side. However, as the storm passes, those other areas are finally picking up. 

Why does it matter? 

As our leaders erratically bluster their way in the aftermath of the pandemic, the fast-growing list of delayed operations and procedures is now receiving greater attention. So the group has seen a significant increase in its radiology reporting business. As a measure, ‘elective’ medical activity is now at 75 per cent of pre-Covid levels. 

As the months go by, this pressure to tackle the backlog of medical treatments will grow and so Medica finds itself very well positioned to support and develop its operations here. This is something that no politician can be seen to duck. Its latest business report showed that margins have improved year on year. 

With recent acquisitions in both the US and Ireland, the benefits of its increased earnings have yet to be fully reflected in the business figures.

What should I do? 

Floated in 2017 at 135p, the shares rose to a peak in June 2017 of 231p. 

However, they hit a low of 101p in March last year but have since risen to 172p. To me, this is a company in the right place at the right time. Add in some existing tried and tested products and this tells a good story. Medica has seen strong growth in Ireland, where the increase in scanning is putting pressure on radiology department capacity. Medica’s ophthalmology screening contract has turned a strong performance in the first half.

Any suggestions? 

Buying small companies is always riskier than larger ones, as they can often be illiquid, which in English means harder to trade. Therefore, the price can be erratic and it is sometimes difficult to find a buyer. 

However, bearing that in mind, this looks like a good company to put away for a medium-term hold. 

As an alternative you could take less risk by buying into the overall sector of healthcare innovation, via a tracker fund (ETF). One which would fit is the iShares Healthcare Innovation fund, which would allow you to spread your bets. 

Justin Urquhart Stewart co-founded fund manager 7IM and is chairman of investment platform Regionally. 

This post first appeared on Dailymail.co.uk