StockMarketWire.com - Medical devices maker Gyrus Group reported 20% growth in underlying earnings for 2006, a touch better than forecast.

The group predicted further improvement in profit margins this year.

Adjusted earnings per share climbed to 17.1p from 14.2p the previous year. Analysts were expecting 16.16p, according to an average of six forecasts collated by Thomson Financial.

'We have delivered earnings ahead of expectations reflecting the group's improved trading and leaner cost base, chairman Brian Steer said.

'Although the weakness of the US dollar remains a translation concern, we anticipate further improvement in our operating margin and the continued strengthening of our business in 2007.'

Keyhole surgery specialist Gyrus is benefiting from the acquisition of American Cystoscope Makers Inc (ACMI) in 2005, which doubled the size of the business, and the launch of new ranges of surgery tools. The group has been expanding into the general surgery market, beyond its traditional core gynaecology and urology fields.

Sales of the more profitable product range and substantial cost savings made since the ACMI acquisition, combined with the introduction of 'lean' manufacturing systems and the ongoing transfer of production to Mexico, are all helping to improve profitability.

Underlying operating margins, which exclude one-time items, improved to 16.5% from 14.2% across the year. And while restructuring charges will continue this year and next, the company said it is on course to meet its goal of improving underlying operating margins to 20%.

It is also on track to book $25m in cost savings. Restructuring costs stemming from the integration of ACMI reached £5.8m.

Meanwhile, underlying operating profits, which exclude one-time items, amortisation and restructuring costs, surged 65% to £35.2m.

As reported, operating profits jumped 84%.

As disclosed in a prior trading statement, revenues advanced 42% to £213.3m, which includes a full year contribution from ACMI.

Underlying proforma revenue growth, which assumes a full year contribution from ACMI in 2005, came in at 7%.

Gyrus said trading ticked up in the second half of the year, and revenue growth began to improve towards the group's target of 10% per annum.

The company added that it has started looking for a CEO, and anticipates that a decision will be made by the time of the group's interim results in September this year.