Why did Advanced Medical Solutions plunge another 10%?

Down 30% since May and with 2019 gains all but wiped out, insiders remain optimistic.

Shares in former AIM 10-bagger Advanced Medical Solutions (LSE:AMS) remain in a rocky patch after results today failed to lift market sentiment towards the woundcare specialist.

Half-year figures revealed a 6% fall in adjusted profits to £12.8 million, with a 27% drop in revenues for its LiquiBand product in the United States the biggest concern for investors.

Cheshire-based AMS expects a recovery for US LiquiBand next year, having blamed the downturn on destocking as some customers failed to replenish inventories built ahead of the original Brexit deadline of March 31. Competitor activity and delayed product launches also impacted sales of the skin adhesive range used for closing trauma and surgical wounds.

Investors remain wary over the outlook, having sold the stock heavily in June after a trading update highlighted the US LiquiBand challenges. The continued Brexit uncertainty isn't helping, given that AMS is having to hold higher stocks to mitigate possible supply risks.

Shares today fell another 10% to 253p and are down from the 350p seen in May, although the company still attracts a lofty price/earnings (PE) multiple of 26.8 times following strong growth over recent years.

It ranks alongside the likes of ASOS (LSE:ASC), Hutchison China Meditech (LSE:HCM) and Scapa Group (LSE:SCPA) as AIM stocks to have increased in value by 10 times - hence the term 10-bagger. AMS was quoted for around a decade before it made a modest profit in 2005, but since then profit has grown significantly - both organically and via acquisition - as revenues have improved.

Source: TradingView Past performance is not a guide to future performance

Sales were up 2% to £48.7 million in today's results, or by 10% when excluding US LiquiBand. CEO Chris Meredith said progress across the rest of the business had been strong, with the outlook set to improve as one-off items unwind next year.

His optimism was underlined by a 19% jump in the half-year dividend to 0.5p, to "reflect the board's confidence in the future of the group". At the end of the June, the group had net cash of £63.9 million compared with £76.4 million at the end of December.

AMS's valuation is supported by a fragmented marketplace, with AMS seen as a potential candidate to take part in the consolidation of the industry. Following on from January's acquisition of Sealantis for US$25 million, the group said today it continued to explore options to acquire other businesses to accelerate growth and deliver value for shareholders.

Octopus Investments, which owns the fast-growing energy business Octopus, is listed as the company's biggest shareholder with a 10.5% stake.

AMS started trading in 1991 and first floated on the USM (unlisted securities market) in 1994 before moving to a full LSE listing in 1996 and then AIM in 2002.

Its products, including bandages made from silver and seaweed, are manufactured out of two sites in the UK, one in the Netherlands, two in Germany and one in the Czech Republic. They are sold in 75 countries via a network of multinational or regional partners and distributors.