Surgical’s overhaul of manufacturing processes hits profit

Keyhole surgery instrument maker Surgical Innovations said annual profits fell 34 per cent following the cost of manufacturing improvements and the weak US dollar.

The group, which is moving to a new state-of-the-art clinical training centre at Thorpe Park in Leeds, said pre-tax profits fell to £800,000 after it streamlined production.

Chief executive Graham Bowland said the group is increasing sales to the US, a key target market as it accounts for half of the world’s instrument market.

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US revenues rose by 73 per cent over the year to December 31.

“Our manufacturing processes couldn’t cope with the increased demand and they fell over,” said Mr Bowland.

“We had to stop the lines and reinvest in them. We’ve learned from that. We’re sorting out the manufacturing side. It cost us a lot of money, but it’s important to do it as it sets us up for the future.”

He estimated about 75 per cent of the profits shortfall was due to investment in manufacturing and in the US and 25 per cent was due to the weak dollar.

Analyst Mike Mitchell, at Panmure Gordon, said: “Management’s decision to drive US sales of SI Brand products is the correct strategy. However, progress in driving volumes unfortunately highlighted shortcomings in the company’s manufacturing processes.

“This has taken some work to resolve, but with the recruitment of a director of manufacturing only recently we have to assume this is still a work in progress.”