The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
I agree with Morbox, a CFO does not retire with immediate effect. Personal or family reasons would be in the statement if that was the case. Something's not quite right here.
My hunch is it'll be good for the business overall and reassuring to have an experienced non-exec temporarily takeover before a permanent replacement is found. Though I wonder if financial insects are about to crawl out of the woodwork.
The covenant dropping to a 2.25x ceiling at the end of December instead of September makes me question how much others already knew. Mr Thompson’s IC article was either incorrect at the time or he already knew more than other investors had been told.
I am unsure whether to be optimistic or pessimistic following this RNS. The next update will be interesting.
Would this suggest a big sell order from a while back is now complete? It did not take much trading activity for the price to rise so quickly. INHC could do with piecing together a steady stream of positive RNS to keep that going.
I do not know for sure Jason but I did consider scenarios when Labour/Mr Corbyn and co. had a chance at power and were proposing to nationalise water as well as most everything else.
The plan, as I understood it then, was to buy water companies at a "fair" price. It would not be a Venezuela-esque seizure of assets. The uncertainty is around what would be "fair". Of course the share price would fall in the run up to an election and nose dive after the result. An ensuing legal battle with each water company would presumably make it impossible to achieve nationalisation in a government term. Unless the price was fair. I think that protects from severe downside, and, of course, it is often all hot air with politicians, who would row back on their proposed plans once in office. Too much like hard work.
£2bn is allegedly available: https://www.digitalhealth.net/2022/06/digital-health-and-care-plan-2billion-digitise-sector/
The article quotes the NHS as having completed this by March 2023. I guess this did not happen, proving Slick's point that wasting time and money is the NHS' modus operandi.
I found the Patient Knows Best platform on the GOV.UK website to understand how much one of these things costs a hospital:
https://assets.applytosupply.digitalmarketplace.service.gov.uk/g-cloud-13/documents/92960/876804355359888-pricing-document-2022-05-13-1242.pdf
The license for this platform would cost the Bournemouth and Poole area £350,000 each year based on their model that assumes 70p per person per year.
Money being handed to an institution infamous for wasting money and lots of companies popping up to take that money. Why is the zesty platform not growing faster than £700,00 in annual sales growth or the equivalent of two large hospitals a year?
To go back to Slick's point, maybe they are wasting time first.
I agree with your analysis unhooked but the covenant drops to 2.25x at the end of September rather than the end of the year. I see Mr Thompson's article in IC was wrong on this by saying it resets in 2024. The CEO appeared very relaxed by the situation. He confirmed there was "plenty of headroom" going forward and said their banks were supportive if there was a small technical breach. Mr Bartlett followed that up with a share purchase the next day, albeit £30k of shares when taking a c.£500k pay packet. It would have been reassuring to see the CFO do the same.
Interesting insight Razza, I had not thought of it like that.
The top team may not seek out a buyer but I think the market will consolidate as more of these patient platforms are popping up. I found patients knows best, my health call, doctor doctor, buddy healthcare, Wellola, patient access.
There is a list apps using NHS login that seems to be different from the NHS app.
https://www.nhs.uk/nhs-services/online-services/nhs-login/websites-and-apps-you-can-access-with-nhs-login/
If the plan for virtual wards is to connect everything into one NHS login/app the NHS will want to deal with a few providers rather than hundreds. With money to be made the market will be ripe for the bigger fish to gobble up the small fry.
I agree with you RazzaB. What is the most likely scenario here.
INHC runs out of cash?
INHC is acquired?
Other?
It would not surprise me to see offers double the current market cap to acquire them. CISCO bought the parent company of patient platform market leader healthcare communications in 2021. INHC appear to be the market leader in patient video calls.
With a pinch of salt... Broker Shore Capital: 'We expect net debt to remain within the 2.75x covenant threshold. The company delivered £15.6m in H1 and would only need to deliver EBITDA roughly in line with H1 in the second half to be within the limit if net debt remains close to £87m (we expect some reduction in net debt).'
The dividend has cost £16/£17m each of the last two years, albeit using debt, so they could just cut the dividend completely if needed. I'd prefer them to do that.
Unless I'm mistaken, the maximum interest they will pay on the majority of their debt is 4% and likely to be 2.85% or 3.5%.
I did not see that coming, although it fits my summation that this CEO was too over confident in his predictions and therefore a poor captain of the ship. Typically expect the share price to fall significantly on this news.
I think it positive for the company, though I wonder what has triggered this. I suspect the over confident predictions on revenue are not coming to fruition. Maybe some lost contracts too. Time to research Chris and Paul.
I am of the opinion that my outlook carries a considerable margin of safety. I look at what I think a competitor would be prepared to pay for the business if it did not perform particularly well.
Do we think the current occasional sellers are MMs or people who think this is over valued at £21m. I welcome any perspectives to argue why this is a sell.
That seems reasonable. They need to deliver on something though. We will soon see whether zesty is appealing to hospitals with Oracle and System C.
The company could be valued over £100m if they reach the £30-35m ARR the CEO claims is doable in the annual report. I'll call over confidence on that now.
Here's a conservative scenario: video ARR declines over the next few years and is replaced with an increase in zesty ARR to maintain £15m ARR - a more reliable £15m ARR with less churn risk. The cost base settles around that, with 75% gross margin and something like 20% EBITDA. I could put a £33m/36p valuation on that conservative scenario. Then again, typical valuations on SaaS based on ARR multiples might value that same business at over £100m/110p.
Mrs Davy appears to have eaten too many fantasy fruit pastilles that Pennon is a force for good, checking all the necessary boxes to virtue signal to an unknown audience.
You won't need management consultants in to learn that residents in the South West, Bournemouth, and Bristol will want clean, safe drinking water, consistently and at a good price. This is the force for good. Maybe I am too old in the tooth for today's corporate social responsibility world.
SWW trust pilot 2.2 rating may suggest spending on customer service skills and training would do more good than TV commercials showcasing their limited electric fleet.
The cash committed to a buy back is now allegedly going into the renewable energy projects.
Fantasy and reality continue to diverge here. Ofwat criticised the usual bad six for paying excessive dividends when they are not meeting expected performance. Surprise, surprise South West Water was one of them.
H1 profit down over 70%. I thought H1 last year was down YoY. Although increases in finance costs totalled £40m and increases in energy costs totalled £50m. These are high and unusual costs so the underlying business appears to be performing quite well.
Will South West Water just increase customer bills next year? Or does Ofwat control that? Never paid much attention to the bill from Thames Water. Assume it increases annually like poll tax.
The strategy to partner with the two computer systems that have almost half the acute hospital market is a good one as that gives them direct access to customers.
Gross profit margin should reach 75%. The patient platform will be more of a challenge to change suppliers than video software, thus giving a more reliable revenue base. The combined offer with video gives them a USP.
Over confidence will probably strike again and that is my primary concern with this business. I cannot make up my mind if the CEO is too optimistic with his passion for the business or if he knowingly over sells. Neither is good for investors. I will give him his due though, he does seem to know his business.
Nevertheless the INHC finds itself in the right place at the right time. The business looks well positioned as the zesty platform will almost certainly win more contracts and will almost certainly grow its % of total revenue within 1-2 years. The attend anywhere video will almost certainly be used by most hospitals over the next 1-2 years even if that declines over time.
Overall I come to the conclusion that this business is undervalued based on the opportunities right now.
I thought I would post my thoughts in case they are useful to anyone else.