Interactive Investor

Why Inditherm rallied 132%

26th May 2015 15:09

Harriet Mann from interactive investor

It is expensive being a small company on AIM, just ask Inditherm. However, a reverse takeover by privately-owned global medical device distributor Inspiration Healthcare will lighten the load. It has certainly engineered interest in Inditherm shares which rocketed as much as 132% Tuesday.

Heating solutions firm Inditherm will change its name to Inspiration Healthcare Group once the reverse takeover - which means £7.2 million Inspiration can list without having to fork out expensive IPO fees - completes. Usually a private firm will buy a controlling stake in a public company in this kind of arrangement, and the two will then merge.

"We have believed for some time that there is underlying value in Inditherm, but the combination of small scale and overhead costs have been a constraint," said Inditherm chairman Mark Abrahams. "This transaction has the potential to unlock shareholder value and represents an excellent outcome to our review of strategic options which we have undertaken over the last year."

Inditherm shares traded as high as 6.4p Tuesday compared with Friday's close at 2.75p. That, however, is still only back to levels last seen in September, just before Inditherm announced a dip in half-year revenue and doubling in pre-tax losses. In 2002, they were above 200p.

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Founded in Leicestershire in 2003, Inspiration provides devices for critical care in the UK and Republic of Ireland, with own-branded products available in 40 countries. Sales rose 8% in 2014 to £9.5 million and adjusted earnings jumping two-thirds to £1 million. In fact, it has an unbroken record of annual sales growth since launch. Offering technical support provides a reliable source of revenue to the group.

Inditherm, meanwhile, provides heating solutions for medical - operating theatres, neonatal and obstetrics - and industrial applications. Management reckon synergies between the pair's product ranges will help bolster its position as a technology supplier to the NHS and overseas markets.

Abrahams will be Inspiration's non-executive chairman. Inditherm finance boss Ian Smith keeps his job, too. But chief executive Nick Bettles hands over to Neil Campbell who has run Inspiration since he set up the business with Toby Foster in 2003. Foster becomes sales director.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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