Midlands-based Corin Group said the second half of the year began "steadily" as the medical device maker revealed a 22-per-cent decline in interim profits, dented by declining sales of spinal and trauma products as it focuses on new knee and hip replacement technologies.
Reporting under new international accounting standards for the first time, pretax profit in the six months to June fell to £2 million from £2.6 million in the same period last year.
Group sales were largely flat at £13 million compared to £12.9 million last time. The interim dividend was maintained at 0.48 pence.
Over the last two years, Corin has steadily reduced its involvement in spine and trauma areas, which are dominated by low margin generic devices. It has been investing in building its business around the more profitable patented hip and knee devices. The refocus has dented sales and profits, and the Cirencester-based company warned in August that annual results would miss forecasts.
New technology in hip and knee replacement means arthritic patients can lead a much more active life following surgery than traditional products allowed.
Corin and other manufacturers in the field are hoping to tap growing demand from the baby boomer generation which has now reached an age where joint replacements are increasingly becoming a necessity.
Sales of its new mobile-bearing knees, called Uniglide and Rotaglide+, rose 17 per cent in the first half, as Cormet, its metalon-metal hip advanced 21 per cent.
These products now represent almost two-thirds of turnover, up from 54 per cent in the first half last year.
Sales of the group's generic trauma, spinal and disposable devices fell by 29 per cent over the first half of 2004.
Alongside the August profit alert, Corin announced a long-awaited deal with US orthopaedics giant Stryker to distribute the hip resurfacing product. Stryker, with more than $4 billion in annual sales, is the world's number three in hips and knees, number one in the US for hips and has a 17 per cent share of the global orthopaedics market. Cormet will be marketed by the company's 600-strong US sales force.
The product is waiting for a review by US regulators. Approval is widely expected.
Chief executive Ian Paling said: "We are now in a much stronger position to exploit the opportunities around the world and particularly in the US."
Corin has been investing in direct sales operations overseas and strengthening management in regulatory, product development and administration to bolster sales of its core products.
Distribution costs rose 15 per cent to £290,000, while administrative expenses climbed eight per cent to £6.8 million, hurting profit margins.
In the UK the decline in generics sales and slow growth in knees offset advances in hips, leaving overall sales flat.
US sales fell 30 per cent, largely due to the planned withdrawal from the spinal fusion market. In Japan a sales decline has been arrested. The company reported good trading in Germany, South Africa and Australia, and a strong performance by its distributor in Turkey.