Creo Medical: Market discount overlooks core technology growth potential

In a market that rarely gives second chances, Creo Medical Group PLC (AIM:CREO) is quietly building a case for one. The medical device company, known for its advanced surgical endoscopy tools, reported full-year results that confirmed strong momentum in its core product portfolio, but a market valuation that still prices in little credit for the underlying technology.

Revenue from core products rose 74% in 2024 to £4.0 million, underpinned by the uptake of its Speedboat UltraSlim device, which has now been used in over 3,000 procedures.

The range was expanded further with the launch of Speedboat Notch in April and the SpydrBlade Flex, both expected to drive growth in 2025. Creo aims for 40–60% revenue growth this year, targeting around £6 million from core products.

Cavendish, which advises the company, retained its 70p price target and noted that the group’s £45 million market capitalisation undervalues its core technology.

By comparison, the sale of a 51% stake in Creo Medical Europe to Micro-Tech for €72 million (£60 million) suggests the market is applying a steep discount to the remainder of the business. The retained 49% stake will now be held as a balance sheet asset.

That disconnect is one reason Cavendish remains bullish.

The FY24 results were restated to reflect the discontinued European and Aber Electronics units, which masked the 74% underlying growth in core products. While total revenue was flat year on year, the reported figure excluded £1.7 million in one-off income from 2023.

Gross profit came in at £1.9 million, with gross margins on core products improving from 40.2% to 44.5%.

The business remains loss-making, reporting a £23.5 million EBITDA loss, but has implemented cost reductions expected to yield £5 million in annualised savings.

These will support a narrowing of losses as core product revenues scale. Administrative expenses have been held flat, and the headcount has been reduced.

The start to 2025 has been encouraging. Management reported a strong first quarter, led by demand for UltraSlim and Notch.

There is also growing interest in its MicroBlate Flex product, which has now entered commercial use via a paid purchase order from a hospital using Intuitive Surgical’s Ion platform.

With £8.7 million in year-end cash and further funds from the asset sale to come, Creo has sufficient resources to pursue its commercialisation strategy.

Cavendish expects the group to reach profitability using internal funds. The investment case now rests on execution, translating device uptake into margin and cash flow improvement. If that happens, the current market discount could prove hard to justify.

Investors seem to be catching on with the shares up 9% at 12p.