UPDATE 2-Smith & Nephew ups dividend 50 pct as margins grow
* Benefits of restructuring boost profit margins 80 bps
* S&N still eyeing acquisitions, despite big dividend hike
* Q2 revenue $1.03 billion vs consensus $1.04 billion
* Q2 trading profit $234 million vs consensus $229 million
* Shares up 2 percent
By Ben Hirschler
LONDON, Aug 2 (Reuters) - Smith & Nephew, Europe's leading maker of artificial hips and knees, hiked its half-year dividend 50 percent on Thursday as the benefits of a restructuring lifted profit margins and boosted its confidence in the future, despite the tough economy.
The orthopaedic implant sector has been hard hit for a couple of years by patients delaying elective medical procedures because of the out-of-pocket cost of surgery and the time off work required.
News of the big dividend increase cheered investors and the shares rose 2 percent by 0800 GMT in a broadly flat London market.
Chief Executive Olivier Bohuon said the company's performance had been "good", with trading profit margins in the second quarter up 80 basis points on an underlying basis to 22.7 percent, keeping it on track to hit its full-year targets.
He said the decision to boost the dividend reflected management confidence in the balance sheet, rather than pressure from shareholders, and the move would not deter his team from pursuing attractive acquisition opportunities.
"It doesn't change at all - and I want to insist on this - our ability to make acquisitions and our focus on acquisitions," Bohuon told reporters.
"It can go from a bolt-on acquisition at $10 million to something much more significant, depending on what we find on the market. We have worked very hard this quarter to investigate different areas."
Future acquisitions might include businesses to improve Smith & Nephew's position in minimally invasive surgery and emerging markets, he added.
Smith & Nephew, which also makes wound therapy products, is paying an interim dividend of 9.9 cents and will in future adopt a progressive dividend policy of increasing pay-outs.
"This will not constrain the ability of the company to grow, but could put it among the more high-yielding medtech companies in Europe," analysts at Jefferies said in a note.
The group said it generated broadly flat revenue of $1.03 billion in the second quarter compared with $1.08 billion a year ago, as currency factors weighed, yielding trading profit of $234 million versus $236 million.
Analysts, on average, had expected revenue of $1.04 billion, according to Thomson Reuters I/B/E/S, while the company-collated consensus for trading profit was $229 million.
Adjusted earnings per share were unchanged from a year ago at 18.1 cents, against analyst expectations of 17.8 cents.
U.S. rivals Stryker and Zimmer disappointed with quarterly results last month, underscoring sluggish demand in key markets due to economic weakness.
Bohuon said the United States was showing some signs of stabilisation, while Europe's economic environment was challenging. Emerging markets continued to perform strongly.