Flu misery has a silver lining as Axis-Shield forecasts spike in profit

Influenza levels returned to normal over the winter, following a quieter spell in 2009-10 that dented Axis-Shield's sales and profits.

But, in its brief pre-close update ahead of August's interim results, the Scottish firm revealed that it had bounced back, driven by sales in Germany, Switzerland and the United States.

Ian Gilham, chief executive of Axis-Shield, told The Scotsman: "We're pleased with progress in the first half, especially with the performance of our Afinion machine, following our investments in the US. We're optimistic about our full-year results."

Gilham said the firm's distribution division had overcome problems last year with supplying Scandinavian hospitals and that revenues from the unit had now "improved considerably".

He added that Axis-Shield had been successful in moving its smaller UK distribution business from Cambridge to Dundee at the turn of the year, adding "a couple of jobs" to its headcount of 110 people in the City of Discovery, compared to a group total of about 550 staff.

Gilham also hailed the recent regulatory approval to sell the Afinion machine in China to test for diabetes.

Gilham added: "Diabetes is a major growing problem with around 10 per cent of the adult population affected - it's not just a health problem but also a health economics problem if it goes undetected and people get sick and can't work."

Axis-Shield said it was on course to introduce a new lipid test - which would measure cholesterol levels and other indications of heart and lung disease - in Europe before the end of the year, with Gilham expecting a US launch by the end of 2012.

The firm estimated the global lipid testing market is worth $1 billion (621 million) annually.

Analysts welcomed the predicted 10 per cent rise in half-year turnover, which would beat forecasts for an increase of between 4 per cent and 9 per cent.

Mike Mitchell, a healthcare researcher at stockbroker Seymour Pierce, now expects Axis-Shield to turn over about 56m in the first half of its financial year.

But Mitchell cut his full-year revenue prediction from 141m to 120m and his profit forecast from 16.9m to 14m because of foreign currency effects relating to the strong Norwegian krona.

Axis-Shield was created in 1999 through the merger of Dundee-based Shield Diagnostics and Norway's Axis Group and Scandinavia is still an important market for the company.

Mitchell retained his "add" recommendation on the company but lowered his target price from 340p to 330p.

Peel Hunt analyst Stefan Hamill added: "While [sales] growth is ahead [of forecasts], the Norwegian krona is on track to be to be 7 per cent stronger for the full year and represents 60 per cent of the cost base so this limits scope for an upgrade at this stage."

Charles Weston, an analyst at Numis Securities, estimated that successfully introducing the new lipid test in Europe could take Axis-Shield's shares up to 500p, while approval from the US Food & Drug Administration for distribution in America could take the stock as high as 700p.

Shares closed up 16.5p at 335p.