Wound and surgical dressings maker Advanced Medical Solutions (AMS:AIM) advances 4.1% to 121.75p as strong first half figures stoke earnings upgrades. Pre-tax profit improved 18% to £7.1 million in the six months ended 30 June, while AMS' net cash has nearly doubled to £10.2 million since December, giving it the firepower to acquire or in-license assets.
Demand for the Winsford-based £243 million cap's higher margin products helped drive the pleasing performance, including group sales up 7.5% to £29.4 million, or 11% ahead at constant exchange rates. These include tissue adhesive range LiquiBand, a glue that fixes wounds, delivered 64% sales growth to £1.3 million in the US and for which AMS is seeking approval in China.
Letting the side down was the bulk materials division, which includes AMS' foam product used to close up wounds, didn’t perform as strongly, with revenue falling 14% to £1.9 million.
AMS is confident of meeting full-year forecasts and armed with its healthy cash pile, says it will hike the half-time dividend 15.5% to 0.22p.
With new product launches expected to sustain sales momentum and tax rate reductions anticipated, Investec Securities nudges up its earnings per share forecasts for 2014 and 2015 to 6.1p and 6.2p respectively. Upgrading its recommendation from 'add' to 'buy' and published price target from 129p to 133p, the broker writes: 'We believe these results demonstrate that AMS remains on track to deliver strong sales growth and margin expansion over the next five years. We see plenty of opportunity for upgrades through further market share gains as the product portfolio expands.'