companies

Sutherland Health Group*

EPIC: SHGP
Mid-price: 2.375p
Spread: 2.125p – 2.625p
Total no. of shares: 63,688,060
Market cap: £1.51 million
12 month range: 2p – 3p
Website: www.sutherlandhealth.com
Sector: Health

Background

Sutherland Health Group is a national supplier of sexual health, patient hygiene, and diagnostic products. The group, which was founded in 2000, created the well known Condomania brand of condoms and supplies all of its products to major professional customers such as the NHS. It also developed the Sutherland brand of patient hygiene products and Sutherland lubricating jelly. The firm’s strategy is to bring a pipeline of new products in sexual health, patient hygiene and diagnostics to the UK Market.

The company has been focusing on the development of its relationship with the NHS, and has developed its profile through this relationship. This will remain as a major part of its strategy for growth.

Financials & Current Trading

For the year to 31st March 2010 Sutherland Health reported a maiden annual profit of £29,336. During the year the group achieved a 6% increase in revenues to £0.96 million on gross margins that were 5.4 basis points higher at 52.3%. This improvement in margins alongside an 8% reduction in administrative expenses saw it reverse last year’s losses per share of 0.18p to 0.05p of earnings. No dividend payment was recommended for the year.

At the year-end the company held net current liabilities of £85,127 and net liabilities of £2,154 – a situation that has been transformed by the raising of £217,000 via a placing since the 31st March year-end.

Since the year-end the business had made further progress with it receiving funding in order to research the development of new products and winning NHS contracts for the supply of its Thixo-D nutritional supplements. Furthermore, the second-half performance is set to be boosted by the launch of new gynaecology diagnostics products. The first product in the range of Vision branded diagnostics is a pregnancy diagnostic, that is also supplied to the NHS.

Management

John French – Non-Executive Chairman – French has had extensive experience in many aspects of corporate management and fundraising with a demonstrable forty year track record in advising and leading public limited company’s and growth businesses within a variety of sectors. With six current directorships held at companies operating in industries ranging from defence through to healthcare coupled with a position on the PLUS Advisory Panel, he has provided regular commentary and opinion at both Trade and City forums, as well as to the National and International media.

George Sutherland – Chief Executive – Sutherland has worked for several fast moving consumer goods companies in sales, sales training, sales management, divisional management, and ending up as Director of Sales of Mates Healthcare and Ansell Limited before starting his own business in 1991. Earlier employers include: Associated Biscuits; Nabisco Foods, Bristol-Myers Squibb, Chesebrough- Ponds, Elida Gibbs (Unilever); Mates Healthcare; and Ansell.

David Bretel – Finance Director & Company Secretary – In addition to his wide experience as a management accountant, David has held a broad range of positions in a number of technology based businesses during the last thirty years. His experiences qualify him not only to serve as finance director and company secretary of AIM-listed Croma Group, but also to assist materially in other aspects of its development. David joined the board of Sutherland in October 2004.

Sheena Sukumaran – Marketing Director – Sukumaran has 9 years experience in marketing. Sheena previously worked for Taylor & Francis as promotions manager before joining Condomania in 1996. She was responsible for creating and developing the Condomania range of condoms, and contributed to the strategic development of the group. Sheena joined the board of Sutherland in October 2004.

Investment Recommendation

At the current 2.375p mid-price the firm is capitalised at £1.5 million. The significantly stronger balance sheet, improved second-half prospects and management’s focus on controlling the cost base mean that we expect a good set of interim results, which should be released in November. What’s more the company’s operational gearing should mean that profits advance further as revenues grow. Long-term buy.

*Sutherland Health Group is a corporate client of Rivington Street Holdings(RSH), the owner of UnQuoted-Analyst.co.uk and RSH owns shares in the company. The SF T1PS EIS Fund, which is advised by a subsidiary of Rivington Street Holdings, owns shares in Sutherland Health Group.