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Optos share boost as it defies sceptics

SHARES in Fife-based optical imaging company Optos gained as much as 13.9% yesterday after it defied City sceptics by raking in $196.4 million (£123.2m) in revenue this year and posting a 15.9% rise in underlying pre-tax profit to $26.3m.

VISION: Roy Davis, Optos chief executive, said he expected sales of Daytona retinal scanners to increase in 2013.
VISION: Roy Davis, Optos chief executive, said he expected sales of Daytona retinal scanners to increase in 2013.

Optos's income for the 12 months to the end of September was 37.1% ahead of 2011 and substantially better than market expectations, which were around $188m for the year.

The City had been worried there was muted demand for Optos's new-generation Daytona devices following slow initial sales, and was also concerned about cost control at the Dunfermline-based company.

But Optos chief executive Roy Davis said the share surge "reflected confidence in the business" after a "very strong second half".

He added: "I am not surprised by the top line because that was what we were shooting for. But it is ahead of expectations".

The news gave a massive boost to Optos's shares, which changed hands for as much as 188p, having previously fallen to a 52-week low of 160p on Tuesday following months of downbeat City commentary.

But after closing at 173p, up 8p or 4.9% on the day, its shares are still 38.2% below the 52-week high of 280p they reached in April before the concerns about Daytona started to ratchet up.

Optos has now shipped 329 of its Daytona devices to customers. This alone brought in $21m of revenue to the company.

The Daytona ultra-wide-field retinal scanner is smaller than Optos's existing scanners, weighing some 25 kilogrammes. It is designed to widen the company's market beyond its core US customer base .

However Mr Davis said that more than half of sales so far had been to North America, even though it is not marketing it there. "As we go forward I would expect to see more sales into international markets outside North America," he said.

Optos's gross margin contracted by seven percentage points to 55.3% as it scaled up production of its Daytona devices, with output peaking at 200 machines in September. Mr Davis said Optos has received another 250 orders for Daytona devices that it has yet to ship.

Staff numbers at Optos rose from 364 to 426 over the year. It has some 160 employees in Scotland.

Mr Davis, who joined Optos in 2008, said that as the company grows, he would expect to add more posts in Scotland.

The company is also making a push to sell more of its top-end 200Tx in hospital opthalmology clinics, as well as its core optometrist market.

The re-election of Barack Obama of US President has ensured that his healthcare reforms will remain intact. This will see a 2.3% levy on sales of medical equipment, including optical imaging devices. This pushes up the cost of Optos equipment in the US by as much as $1500 but Mr Davis added that he did not expect it to hit sales.

Julie Simmonds, analyst at Canaccord Genuity wrote in a note for clients: "2012 was focused on commercialising Daytona, 2013 is about expansion into new geographic territories and volume delivery. This should result in continuing revenue growth and improved margins, as Daytona volumes increase and manufacturing efficiencies become a focus."

Savvas Neophytou, analyst at Panmure Gordon, said: "Optos should be a core holding to investors looking to have healthcare in their portfolio."

Optos was founded in 1992 by director Douglas Anderson after his son's retinal problems went undetected.

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