Advanced Medical in growth spurt

8th Sep 2010 13:30

Wound care specialist Advanced Medical Solutions (AMS) had a strong first half of the year with the recent acquisition of polyurethane foam business Corpura providing an extra boost.Revenue from continuing operations in the first half of the year rose by 47% to £14.5m from £9.9m last year, though with the contribution from Dutch firm Corpura excluded the rise shrinks to 25%.Profit before tax and exceptional items grew to £2.1m from £0.9m in the first half of last year. With exceptional items factored in the first half pre-tax profit this year was £1.4m versus a loss of £53,000 the year before. The group is in the process of rationalising its operations at its two sites in Winsford, Cheshire, into a single new "world-class" facility in Winsford and the costs associated with this are being treated as exceptional charges. In the first half of this year the rationalisation costs put a £0.64m dent in profits as against expenditure on the site move of just £0.19m in the first half of last year."We were getting into capacity issues," chief executive officer Don Evans told Sharecast, when asked about the new facility. "Leases were running out on the existing facilities so it seemed like a good time to move to something bigger. We reckon we could treble the production of the wound care business if required when we are consolidated in the new facility," Evans added.The rationalisation should lead to the "adding of a couple of margin points over the next few years," Evans reckons.In the first half of 2009 the group also took an exceptional charge of £0.76m relating to an aborted acquisition, but this has not put management off the idea of further acquisitions, to add to the Corpura purchase, which it completed in October of last year.Corpura is now fully integrated into AMS's wound care operations and is performing strongly. Strategically, it was important for AMS to get access to Corpura's foam technology, which will be an intrinsic part of the company's research and development activities in the future.The acquisition, together with the spending on the new production facility, has put the company in the unusual situation of owing money to its bankers. It had net debt at 30 June 2010 of £0.3m, compared to net funds of £4.2m at the end of June 2009, but Evans said the business is cash generative and would get out of hock soon. "It was just a timing issue, really," he explained.There is even the prospect of a maiden dividend when the company announces its full year results, though it is unlikely to be of a magnitude that would make income investors sit up and take notice. "It's more the message than the quantum," Evans said. "We still see ourselves as a growth company."