An important year which saw a major new product launch and continuing progress in the manufacturing transformation programme
King Systems is a leading US developer and manufacturer of disposable medical devices used to establish and maintain patient airways. Its strategy is to grow through new product launches and international expansion. King Systems is two years into a three year programme to increase margins through the automation and improvement of its core manufacturing processes.
King Systems delivered revenue and operating profit growth in an important year which saw a major new product launch and continuing progress in the manufacturing transformation programme. Revenues increased by 6% (3% at constant exchange rate) to £43.4m, driven by growth in circuits, masks and airway products. However, an element of the growth was a result of distributor restocking in the first half following supply issues in early 2010. Underlying markets have continued to remain weak. Operating profits increased by 5% (5% at constant exchange rate) to £4.8m. Operating margins were flat at 11.1%, notwithstanding exceptional manufacturing costs to meet first half backlog demand, higher raw material prices and duplicated manufacturing costs as new processes were commissioned.
In April 2011 Steve Davis was appointed as CEO of King Systems. Steve has extensive experience growing high quality manufacturing businesses in Motorola and, more recently, Plexus Inc where he was responsible for the scale up and launch of medical device technologies.
Launch of King Vision
In October 2010, King Systems launched the King Vision video laryngoscope at the conference of the Anaesthesiology Society of America (ASA), the main US conference for anaesthetists. The King Vision is the most sophisticated product launch in the history of King Systems and is expected to drive organic growth in the medium term. The King Vision allows anaesthetists and other clinicians to see precisely where they are placing an endotracheal tube when establishing a patient airway. It consists of a reusable handle containing an OLED screen and a disposable blade containing a camera which allows the clinician to easily position the tube in the throat. It has market-leading optics, but is being offered at a cost that will allow its use in routine intubations as well as for the management of difficult airways. The King Vision is therefore expected to address one of the major unmet needs of the airway market. The King Vision is also expected to open up new channel opportunities for King Systems outside the operating room in new areas where clinicians have an interest in safe and quick establishment of airways, such as EMS and respiratory. Shipments of King Vision are commencing in June 2011, with an encouraging order book having been established in advance of product delivery. Initial feedback from clinicians and the US sales force has been extremely positive, and the opportunity is significant, although the rate of adoption is expected to be measured as anaesthesia is a conservative market.
King Systems continued to make good progress with its transformation plan which aims to eliminate $5m of cost by April 2012. Progress was hampered somewhat in the first half of the year due to the disruption created by the manufacturing issues experienced in early 2010 and the working down of the order backlog created at the time. Nevertheless, the Flex 2 automation line was installed in late 2010 and after four months of commissioning and testing was validated for manufacture on schedule at the end of April 2011. Operational efficiencies on the new automated line are steadily increasing, which will allow a phased reduction in the associated manual production. The line is ultimately expected to manufacture over 3 million Flex 2 circuits per annum, to an even higher degree of quality than the existing product. Orders have been placed for automated mask and breathing bag manufacturing lines which will be installed towards the end of 2011 and commissioned by April 2012. Once these lines are fully operational in the main factory at Noblesville, Indiana, then the existing manual operations which take place at the H&M Rubber subsidiary in Kent, Ohio, will cease and the site will close. The workforce has been notified and a charge of $2.4m taken to special items, which is contained within the previous guidance.
Growing overseas markets
King Systems is a market leader in the US, with its own sales force covering all major territories. Expansion of international sales offers a major opportunity to grow at faster than market rates. The strategy to achieve this has included increasing the number of international distributors, improving the business processes to support them, and development of new products that will be appropriate for international markets. In the year to 30 April 2011, King Systems grew international revenues by 19% to $8.5m – reflecting 12% of total sales, up from 10% in 2008/09. Six new distributors were appointed, including new representation in India. The King Vision will be the first visualisation device which King Systems is able to promote world-wide and this is expected to be a flagship product for the business in the future.
King Vision A digital video laryngoscope that helps clinicians see where they are placing an endotracheal tube when establishing a patient airway. The Vision consists of a reusable display handle with an OLED screen and market-leading optics. This is connected to a camera mounted in a disposable channelled or unchannelled blade.
Breathing circuits and masks Used by anaesthetists to administer anaesthetic gases and oxygen to a patient during an operating procedure.
Airway devices King Laryngeal Tubes (KLTs) and King Laryngeal Airway Devices (KLAD) are supraglottic airway devices, used to establish an airway without entering the trachea. These are most often used in emergency settings or for brief procedures.
2010/11 in brief
The first lightweight, cost-effective video laryngoscope with a clinician-friendly design, disposable channeled and non-channeled blades and reusable, integrated OLED video display.
the design, development
and supply of innovative
devices for delivery of injectable drug products.