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Why the Paragon Care share price is rocketing 83% today

The Paragon Care Ltd (ASX: PGC) share price is a standout performer on the market today as investors react to a business update.

At the time of writing, Paragon Care shares have rocketed 83.33% to 22 cents apiece.

Paragon Care is a provider of medical equipment, devices and consumables for the Australian and New Zealand healthcare market.

The company also offers equipment repair, maintenance and total equipment management through its service and technology division.

Over the years, the primary way Paragon Care has grown its business has been through acquisitions. As such, the company has a many number of brands under its banner, including Insight Surgical, REM Systems, MediTron, and Immulab.

Why is the Paragon Care share price spiking?

This afternoon, Paragon provided an update regarding the impact of COVID-19 on its business.

In prior trading updates, Paragon noted demand for its products and services were being affected by restrictions and the cancellation of non-essential elective surgery.

As such, Paragon’s revenue in April 2020 tracked at 30% less than the prior year, allowing the company to be eligible for JobKeeper payments.

When Paragon disclosed these developments to the market in late April, it expected the significantly lower revenues to continue throughout the remainder of the June 2020 quarter.

However, the company announced today it has seen a “solid” improvement in its May and June revenues. Paragon attributed this to a higher than expected level of elective surgery cases due to recent favourable policy changes by the Federal Government.

As a result, the company is expecting its FY20 revenues to exceed $220 million. For context, Paragon delivered full-year revenues of $236 million in FY19.

Other developments

According to today’s release, Paragon has made “significant progress” towards its previously announced strategy of delivering a more efficient cost structure. 

To date, the company has achieved more than $4 million of permanent annualised cost savings. It expects this amount to double over the next financial year.

Additionally, Paragon advised that its rationalisation of 14 individual businesses into four main pillar businesses is “well advanced”. This rationalisation has seen the company integrate its businesses into the four pillars of devices, diagnostics, services, and capital & consumables.

Paragon said it will provide more details of this restructure, along with the associated costs, when it reports its full-year FY20 results in late August 2020.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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