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For the current financial year, analysts expect 15 per cent higher revenue of £44mn to generate cash profit of £3.1mn, operating profit of £1.5mn and pre-taxprofit of £0.7mn. However, with the benefit of ongoing efficiency savings and operational leverage, analysts are forecasting a step-change in profitability nextyear. Panmure Liberum predict a £1.2mn improvement in both cash profit and operating profit to £4.3mn and £2.7mn, respectively, will more than double pre-tax profit to £1.8mn on revenue of £47mn in the 12 months to 31 January 2027.

Stakebuilding

Interestingly, shareholder Mennen Medical has doubled its stake to 15 per cent since August 2024. Mennen develops and markets cardiac catheterisation andelectrophysiology systems, as well as patient monitoring and clinical data information solutions.

If the recovery continues to gain momentum, Inspiration is likely to attract predatory interest given that analysts believe the business should ultimately bemaking cash profit margin of 15 per cent, or double the margin forecast in the current year. Also, as margin and earnings rebuild, the rating will becomeincreasingly attractive, as highlighted by enterprise valuation to cash profit multiples of 9.3 times and 6.3 times, respectively, over the two-year forecast period.

So, having last rated shares in the £16.6mn market capitalisation company a hold at the current price (

‘

Inspiration Healthcare’s turnaround will take time’, 2October 2024

), it’s time to buy into the recovery. Please note that Panmure Liberum’s 30p target price doesn’t include a bid premium. Buy.

SMALL COMPANIES & AIM

This medtech’s turnaround is gaining momentum

Simon Thompson: A ‘back to basics’ approach is delivering results

• Annual revenue edges up to £38.3mn

• First half cash loss wiped out in second half

• Sales momentum building

• Potential for takeover interest

Crawley-based

Inspiration Healthcare

(IHC:18.5p)

is starting to reap the rewards of the ‘back to basics’ approach initiated under the leadershipof chair and interim chief executive Roy Davis.

Having recently appointed a new chief executive, Raffi Stepanian, the medical technology company is building real sales momentum fromcustomers in its neonatal intensive care and infusion therapies markets. Importantly, it also has the building blocks in place to improveprofitability and cash generation.

Although full-year revenue only increased 2 per cent to £38.3mn, this masks a 16 per cent first half decline which was more than offset by 23 per cent secondhalf growth. Second half cash profit of £1.1mn wiped out a first half loss of £0.9mn, although full-year cash profit of £0.2mn was still 90 per cent below theprior year.

Importantly, the new financial year has started well. Prior to the year-end, the group secured its largest contract to date, a $6mn (£4.5mn) ventilator order from aglobal humanitarian aid organisation focused on child and infant welfare. Two-thirds of the contract has already been shipped. Moreover, the first phase of apreviously delayed order from a Middle East client has finally shipped and the cash is due imminently. Analysts at Panmure Liberum estimate year-end net debt of £8.3mn has since been reduced to £7mn and note that Inspiration passed its April covenant tests, so balance sheet concerns are easing.

Strategic priorities and growth drivers

Increasing revenue from high-margin consumables for neonatal products, accounting for a third of the neonatal segment’s revenue of £24.6mn, is a key strategic priority. That’s because it improves recurring revenue, quality of earnings and reduces the reliance on large tenders. A new consumables range will be launched later this year.

Inspiration is already seeing the benefits of investment in its infusion therapies business unit, which increased revenue by almost a third to £11.2mn. Theoperation focuses on infusion pumps and associated consumables in the UK where Inspiration is an active distributor in multiple therapy areas. In 2024, thegroup sold the highest number of pumps to homecare providers in the last five years, with devices now being used by all homecare providers in the country.

Furthermore, with the NHS increasingly looking to treat patients out of hospital, it is important that new devices have remote monitoring capability. The new pumps from Inspiration’s partner, Micrel, make this an attractive option for the group’s existing customer base and have been well received in the market. Also, previously hard to reach accounts are now engaging with Ins

I think the report today did have negatives, but also the green shoots I was hoping for. Doubled my position today.

Also great analysis on investors chronicle after the report today, echoing what you’ve been saying about mennen.

Hopefully the buying at close today will keep momentum up