Bespak results held back by Clinton reform worries: Cautious customers destock because of proposed reforms

DESTOCKING among US customers has led to a halving of profitability at Bespak, the medical instruments company. Bob King, chairman and chief executive, blamed healthcare reforms being contemplated in the US.

The shares fell 173p to 300p at one point yesterday before recovering in the afternoon to 318p. Even so, the stock is trading at well below half the level achieved before doubts about the group's US operation began circulating in March.

Mr King said the US healthcare reforms were making medical equipment manufacturers and users more cautious. In response Bespak customers were running down inventories, reducing demand for its products.

He said the problems were compounded because the company had been expecting increased sales and had allowed the operating cost base to expand. Action had been taken to cut costs back again, but the benefits would not accrue in the first half of the year.

Mr King said the US business also suffered from tougher competition. Rivals were driving prices down, trying to buy market share.

Bespak's main US business is Tenax, a company it bought in February 1992 for pounds 28m. Tenax moulds plastic into components for laparoscopy equipment - 'keyhole' surgical implements that only require small skin incisions.

Tenax's main customer is US Surgical. The company said yesterday that interim results to 31 October would show slowing sales.

'In the US, principally due to a decrease in business with US Surgical, together with uncertainties among other healthcare customers, sales in dollar terms were lower than in the first half of 1992-93,' it said.

About half of total group turnover is in North America and half in Britain. In the UK, Bespak is best known for making plastic applicators like those used by asthma sufferers to take Ventolin. The company said UK sales were up on the comparable period.

Yesterday's profits warning shattered an impressive period of profits growth. Bespak made interim profits of pounds 5m for the six months to 31 October 1992 but the comparable figure this year will be pounds 2.5m.

In the last full year to 30 April taxable profits rose from pounds 6.9m to pounds 11.5m. Analysts expect this year's profits to be back at pounds 6m.