Rising costs put the squeeze on Mediwatch

RISING manufacturing and component costs have put the squeeze on margins at Warwickshire medtech firm Mediwatch.

The Rugby firm, which manufactures urological diagnostic equipment, said gross profits were down 1% for the six months to April 30, 2011 when compared with the second half of 2010.

Nevertheless, the board said that despite the challenging market, turnover during the first half of the current financial year was ahead of the same period last year.

The company said it was now mounting a “concerted effort” to improve margins by implementing measures designed to cut manufacturing costs. A reduction in overheads was already proving effective, it added.

In a trading update, the firm said: “Gross margins have come under pressure due to increases in component and manufacturing costs and increased industry competition.

“The company has been actively pursuing a strategy of reducing overhead expenses over the last six months and the current level of overheads is 11% below that for the second half of 2010. “

Management said it expected the savings would continue throughout the rest of the financial year. In addition to this, research and development costs have also been reduced by 19% in the first half of the financial year when compared with the same period last year. 

Positive signs of growth have been seen in the US, where its wholly owned subsidiary, Mediwatch USA has executed a three year contract with Amerinet to supply the Portascan+ unit to the Amerinet hospital network. The Amerinet network consists of over 41,000 hospitals, institutions and healthcare providers. 

In the UK, new products are expected to contribute to revenues during the second half. These include Urinewatch, a comprehensive urinalysis system and a new bladder ultrasound platform which is expected to be available from July. 

 “Overall, the company’s performance for the first half of the 2011 financial year is in line with management’s expectations and the reduction in costs has enabled the company to continue to be profitable in difficult markets,” added the statement.

“With the introduction of new products the board is optimistic for the second half of the 2011 financial year.”

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