It was not supposed to be like this. A year ago, few investors would have predicted that coronavirus would still be casting such a long shadow over our lives.
Add in rising inflation, falling economic growth and widespread uncertainty about the future and the omens do not seem propitious.
And yet, many company bosses remain upbeat and, if the past two years have taught us anything, it is that businesses can be both clever and creative when they need to be.
Fresh hope? A year ago, few investors would have predicted that coronavirus would still be casting such a long shadow over our lives
The Midas top picks for 2022 are three such firms – companies that have shown their mettle in recent months and should deliver robust returns this year and beyond, whatever happens in the market more widely.
When Rory MacDonald was young, he would spend many an evening helping his mother to fill out NHS forms on her computer.
She was a district nurse, he was an IT-whizz and it was obvious to both of them that technology was making her job harder, not easier.
Today MacDonald is chief executive of Made Tech, which helps the public sector to use technology to best effect. The business was founded in 2008 and floated on the stock market last September at £1.22 a share.
The stock is now £1.12, a decline that is undeserved and should reverse this year and beyond. The Government is spending billions of pounds a year making its services more digital, Made Tech works with key departments including the DVLA, Revenue and Customs and the Ministry of Justice, and the company is expanding fast.
Revenues more than doubled last year, sales soared 131 per cent to £11.7million in the six months to November 30 and further strong growth is expected, as Made Tech continues to win contracts from central government and local authorities.
Many people shudder when they hear about government departments ‘going digital’. Past projects were notorious for costing billions and delivering nothing but disappointment. Today however, contracts are increasingly awarded to companies like Made Tech – small, agile firms that keep costs down and deliver on their promises.
At the start of the pandemic, for instance, Made Tech launched a virtual visiting service so that families could see their loved ones online while they were in hospital. Set up within weeks, the scheme was adopted by several NHS Trusts and continues in some areas to this day.
Made Tech is also helping the DVLA to make provisional driving licences digital and working with the Department for Housing to streamline the UK’s convoluted planning process. Recent projects include enabling the Department for Education to advertise teaching jobs for schools online, and working with local councils to improve their digital services. In each case, Made Tech’s aim is to make life easier for everyday citizens, help public sector bodies become more efficient and save millions of pounds of taxpayers’ money.
MIDAS VERDICT: MacDonald is 38 years old, a 28 per cent shareholder in Made Tech and highly ambitious for the business. He should be. The company is well regarded within government departments, there is a huge need for its services and demand is growing fast. At £1.12, the shares are a buy.
Traded on: AIM Ticker: MTEC Contact: madetech.com or 020 3757 6767
More than 90 per cent of NHS Trusts outsource emergency out of-hours X-rays and scans to private firms and many send off images for elective work as well.
Medica Group is the UK’s leading provider of teleradiology services, working with more than 100 hospital trusts to ensure that scans are examined quickly and accurately whatever the time of day or night.
Medical services: More than 90% of NHS Trusts outsource emergency out of-hours X-rays and scans to private firms
The company’s shares are £1.63 and should increase substantially in price as it performs a valuable service that can, in critical cases, mean the difference between life and death.
Scans and images are sent electronically to the firm, which dispatches them instantly to the relevant specialists. Conditions range from bone scans for hip or knee replacements – which are returned within hours or a couple of days – to emergency brain or heart scans for patients who have suffered a stroke or heart attack. Here, every second counts, and Medica can send diagnoses back in less than 15 minutes.
When chief executive Stuart Quin arrived in 2019, Medica had been through a rough patch. After floating on the stock market at £1.35 a share in 2017, the price soared to £2.20 before sinking back as management overpromised and underdelivered.
With a PhD in immunology, a business degree from INSEAD in Switzerland and decades of healthcare experience, Quin set about launching a new strategy for Medica, based on upgrading its core business and expanding into new areas.
The group has since completed two acquisitions, signed a joint venture and invested millions in a significant technology upgrade.
In late 2020, Quin bought Ireland’s leading teleradiology group, a business that also offers retina screening for diabetes patients. In February 2021, Medica launched a joint venture with a diagnostics business in Australia and, the following month bought Philadelphiabased RadMD, which helps drug companies to use radiology services so they can develop treatments for conditions such as breast cancer and dementia.
Closer to home, Medica is investing up to £6million in a new software system that will allow radiologists to upload images and report their results faster and more effectively than ever before.
Much of this work took place against a difficult backdrop, with hospitals focusing on coronavirus almost to the exclusion of everything else.
As a result, Medica’s sales and profits fell in 2020 but they have since staged a strong recovery with brokers expecting sales to rise 66 per cent to £61million this year, with profits more than doubling to £10.3 million.
The company generates plenty of cash as well so a 2.6p dividend has been pencilled in for 2021, even as Quin invests heavily in future growth.
MIDAS VERDICT: Ensuring that scans are completed quickly can save lives and Medica helps the NHS to do just that. As hospitals slowly return to normal, the backlog of delayed procedures should make Medica’s services more important than ever, while recent acquisitions should allow the group to expand its services here and abroad. Quin is ambitious too, hoping to reach £100million of sales within three to five years. At £1.63, the shares should go far.
Traded on: Main market Ticker: MGP Contact: medica.co.uk or 0333 111 222.
Lyndon Davis has spent his entire career in the toy and hobby industry, starting out as a 16-year-old apprentice at Mettoy, the Swansea-based toy company.
Now 61, Davis is chief executive of Hornby, the company behind Scalextric and Airfix kits, Corgi cars and numerous overseas brands, as well as the famous Hornby train sets.
Despite this enviable portfolio, Hornby had been making losses for five years and its entire future was in jeopardy when Davis joined in 2017. He restructured the company from top to bottom and set about recreating what Hornby had always been known for – making trains, planes, ships and cars beloved by children and adults alike.
Fresh: Hornby customers can download an app so they can control their trains online
Today, models include a No Time To Die Scalextric kit, the Airfix Supermarine Spitfire, and Harry Potter, Coca-Cola and Beatles train sets. Customers can even download a Hornby app so they can control their trains online.
The group has moved into e-commerce too, so customers can buy goods directly as well as via third party retailers.
Davis even opened a pop-up Hornby store at St Pancras station in London before the pandemic and more may follow in time. Hornby makes most of its products in Asia so the group was hit by supply chain issues and soaring shipping costs last summer. Davis has since raised prices and ensured that manufacturing is spread over several sites so logistics should be easier this year and beyond.
Critically too, demand is strong here and in overseas markets, which account for around 60 per cent of sales. Hornby is backed by Phoenix Asset Management, which owns 75 per cent of the company and sees itself as a long-term, supportive shareholder.
MIDAS VERDICT: Hornby shares were more than £1 a decade ago. Today, they are 42p. The stock should recover strongly from here. Davis is highly experienced, the company has been transformed under his tutelage and oldfashioned hobbies have come back into fashion. Small companies with large shareholders can be hit by share price volatility but, for long-term investors, Hornby is a buy.
Traded on: AIM Ticker: HRN Contact: hornbyplc.co.uk or 01843 233 500