Keyhole surgery instruments maker Surgical Innovations, the firm that was awarded a £5m Government grant to build a state-of-the-art clinical training centre in Leeds, has issued a profits warning saying that full year results will fall significantly short of market expectations.
The Leeds-based company is seen as a key player in the creation of a new medical park for Yorkshire, but the group’s shares tumbled as the market reacted badly to what is the group’s second profit warning in under a year.
The company, which is building a 58,000 sq ft facility at Thorpe Park in Leeds, said a reduction in OEM revenues, slower than expected US sales and a decision to reduce inventories would hit full year revenue and profit. OEM stands for original equipment manufacturer (manufacturers that make products for other companies to sell under their own brand name).
Surgical said that in light of current trading, the board has decided the group should focus on growing the SI Brand, cash conversion and OEM products that add value to the Surgical Innovations (SI) brand.
As a result, Surgical said it has undertaken a review of all OEM assets, which resulted in an exceptional non-cash impairment charge of £2.2m.
The profits warning comes less than a week before the company was due to announce its half year results. The group said it will provide further details with the interim results on Thursday.
Analyst Mike Mitchell at Panmure Gordon said: “On the back of this morning’s announcement, we place our recommendation and forecasts under review. The combined impact of the continued reductions in OEM revenues and slower-than-anticipated revenues from its US dealer network means full-year performance will be significantly below market expectations.”
Dr Mitchell had previously estimated the company would make a full-year profit of £900,000.
The news raises the possibility that the group could announce a half year loss.
The profit warning follows a statement in January that said annual earnings would be “significantly below” the previous year’s.