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Advanced Medical Solutions beats expectations

Revenues rose 8 per cent and margins expanded at the medical devices company in the first half
September 15, 2017

It is tough to find justification for a 5 per cent intra-day share price fall in half-year results from Advanced Medical Solutions (AMS). Adjusted pre-tax profit rose by over a fifth to £11.5m after better-than-expected constant-currency revenue growth of 8 per cent. But investors scarpered from the stock on results day – as they did at the time of the full-year results – having perhaps taken the opportunity to bank some profits after a 30 per cent one-year share price rise.  

295p

Management has consolidated the business into two operating divisions – Original Equipment Manufacture (OEM) and Branded – which experienced different fortunes in the reported period. In the branded business, revenue rose 15 per at constant currency thanks to excellent sales momentum from the LiquiBand and Resorba product ranges, which are used for hernia treatment and wound care, respectively. In contrast, revenue at the OEM business was flat at £18.6m due to a big order in the first half of 2016, which was not repeated this year.

With margins ticking up by more than 2 percentage points to 59.9 per cent, analysts are bullish on the profit outlook. Broker Numis has forecast pre-tax profit of £28m, giving EPS of 14.8p for the year to December 2017 (from £20.6m and 11.4p in 2016). That said, a £4.4m increase in working capital and £2.3m of investment sent operating cash flows before exceptional items down slightly to £9.1m.

ADVANCED MEDICAL SOLUTIONS (AMS) 
ORD PRICE:295pMARKET VALUE:£626m
TOUCH:295-295.5p12-MONTH HIGH:330pLOW: 199p
DIVIDEND YIELD:0.3%PE RATIO:35
NET ASSET VALUE:65.5p*NET CASH:£55.2m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201639.29.023.510.30
201745.911.414.320.35
% change+17+27+23+17
Ex-div:28 Sep   
Payment:27 Oct   
*Includes intangible assets of £41.4m, or 20p a share