25th Sep 2014 07:35
LONDON (Alliance News) - Surgical Innovations Group PLC saw almost a quarter of its market value wiped off early Thursday, after it said revenue dropped and it swung to a first-half pretax loss, hit by asset write downs and costs associated with the Regional Growth Fund project, as it warned that it will report a "significant" loss for the full year.
Surgical Innovation shares dropped 23% to 2.375 pence at the market open Thursday, but have since recovered some of the losses, currently down 10% at 2.81 pence.
The designer and manufacturer of innovative medical devices, posted a pretax loss of GBP3.2 million for the six months to June 30, compared with a profit of GBP567,000 in the first half of 2013, as revenue declined by almost 55% to GBP1.8 million, down from GBP3.9 million a year earlier. The company is facing problems with an excess of inventory within its sales supply chain.
It also booked GBP2.6 million in exceptional costs during the period, relating to manufacturer asset write downs, as demand from its international manufacturer products weakened further, and costs from the Regional Growth Fund project.
It said the revenue decline was partly due to its strategic plan to commence a global reduction in inventory levels throughout the company's sales supply chains and continued reduction in manufacturer revenues.
"We intend to continue our policy of inventory reduction with our key dealers which will undoubtedly have a significant detrimental impact on our performance for the second half of the year. Excluding exceptional items described above, regrettably we expect to report a significant loss before taxation for the full year," the company said in a statement.
Surgical Innovations had previously secured a GBP5.05 million Regional Growth Fund grant from the UK government as part of a project to relocate to new premises, and develop a state of the art research and development facility and clinical training centre.
"However, given the recent performance of the business, this project will be critically reviewed with key stakeholders over the coming weeks which may lead to it being terminated. Given this uncertainty, we have written off in these results the total amount invested to date of GBP420,000 as an exceptional item," the company said in the statement.
The company said that once its reduced its inventory levels and cost base, it expects to see improves profitability.
"The board believes that, following its strategic review, a renewed focus on cash generation will provide greater shareholder value in the long term and deliver a stronger business better able to exploit emerging opportunities," said Non-Executive Chairman Doug Liversidge in the statement.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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