Tuesday, May 26, 2015

News: Inditherm to scale up with £7.2m reverse acquisition

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Innovative Rotherham company, Inditherm, is proposing the acquisition of Inspiration Healthcare Limited, a privately owned global medical device distribution company, allowing the medical business to grow with fewer constraints.

Manvers-based Inditherm has developed products using low voltage carbon polymer technology to provide heat. Its systems are used for patients undergoing operations which carry risk of inadvertent hypothermia and in neonatal wards.

Inspiration was founded in Leicestershire in 2003 as a medical device distribution company focused on innovative products for critical care. It holds a number of distribution agreements and also has a range of own-branded products focused on critical care which are sold in over 40 countries. In the year ended January 31 2015, Inspiration recorded revenue of £9.5m, with adjusted earnings of £800k.

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AIM-listed Inditherm shifted its focus to the medical market and scored sizeable NHS contracts in 2013 but revenue in 2014 reduced by 10% compared to 2013 to £1.8m and this resulted in an operating loss of £356k.

Uncertainties in the NHS resulted in the performance with Inditherm believing that the apparent slowing of growth is caused in the UK by ever-tightening financial constraints, particularly with regard to capital expenditure in the NHS, rather than a dampening of enthusiasm for its products. A trend that is set to continue.

In a report to the stock exchange Indtherm said: "The company's lack of scale has meant that the level of overheads has prevented profitable trading in any full year. The overheads include, inter alia, costs associated with the public company status, management costs and development costs.

"Accordingly, the Inditherm directors identified the need to make the business part of a larger entity, thereby allowing the medical business to grow with fewer constraints. As a result, in September 2014 the company announced that it was reviewing strategic options with the objective of creating shareholder value.

"The Inditherm directors have reviewed many potential options, most of which have now been eliminated. Of those remaining, the Inditherm directors are of the opinion that the proposed Acquisition is substantially the most attractive with regard to potential shareholder value."

Considered a reverse takeover, Inditherm would acquire the entire issued share capital of Inspiration with the vendors receiving 83.3% of the share capital when the new, enlarged group is readmitted to the stock market. The acquisition values the issued share capital of Inspiration at £7.2m.

A proposed new board would see Mark Abrahams, chairman of Inditherm, become non-executive chairman of the new group, which is set to see Inditherm renamed Inspiration Healthcare Group plc. Nick Bettles, who joined Inditherm in 2004, is set to stand down as chief executive of the company.

The new group is set to strengthen its market position in the UK and overseas through organic growth, new distribution arrangements and introducing new own-branded products. The group will also be in a position to offer more products to distributors, gaining economies of scale and competitive advantages.

Mark Abrahams, chairman of Inditherm, said: "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. 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."

The proposals are set to be approved at the company's general meeting in June.

Inditherm website

Images: Inditherm

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