Mediwatch on course to meet market expectations

WARWICKSHIRE medtech firm Mediwatch has said it remains on course to meet market expectations after a programme of rationalisation and cost savings helped to stabilise the firm during the first half.

The Rugby company, which develops a range of medical equipment for the diagnosis of urological disorders, saw H1 group turnover reach £5.084m (H1 2011: £5.095 million) with revenue split 50/50 between the US and the UK, Europe and the rest of world (ROW).
 
The product mix was similar to that seen in the H1 period last year and was in line with management expectations.

The group achieved an EBITDA before exceptional items of £295,000 for the six months to April 30, 2012 (H1 2011: £272,000).  It said the rationalisation and cost saving measures had resulted in a one-off outlay of £50,000 but it said that even taking this into account, profit was slightly ahead of the same point last year.

In its trading update it said: “Whilst there has been a significant amount of cost cutting, some benefits of which will start to become apparent in the second half of the year, the real benefits will flow through in the next financial year.  

“The flat nature of the market has meant that there continues to be pressure on margins in certain areas although the board have taken a number of initiatives to reduce production costs which again should show some product by product margin improvements as they come through.”

Omer Karim, Mediwatch chairman, said that while H1 sales were similar to last year he was pleased that sales volumes were growing, although impacted by the firm’s more aggressive approach to margins.

“We have continued to take action to reduce our cost base and to change our methods of operation and this has necessitated us incurring some reorganisation expenses. However, we believe that the benefits of this restructuring will start to become evident in the second half of the year with the full benefit coming though in the next financial year,” he said.

It said that in the UK there had been a very strong performance in the domestic market, while European dealers continued to perform well. However, lower Middle East sales brought the Rest of World numbers down.

In the US it said gross margin was ahead of expectations with the gross margin percentage exceeding budget by 3%, primarily due to cost reductions.  The higher margins more than offset lower sales incurred due to customers delaying purchases into the second half.
 
Overall, while US sales were down on last year, the gross margin they produced was ahead of 2011.