Panmure Liberum has upgraded Inspiration Healthcare, the medical technology group, from 'hold' to' buy', saying a three-year extension of its bank facility has cut the risk of a financing squeeze.
The broker kept its 24p price target, about 30% above the 18.5p closing price on Monday.
Analyst Seb Jantet said the most important news in the half-year results was improved forecasts for the year to January 2029, driven by cost cutting, and that Inspiration is on track to renew its revolving credit facility, a flexible bank borrowing line.
The bank has granted credit approval to renew the facility for another three years on the same terms.
Jantet said this suggests the lenders are confident the company will not breach its covenants, the financial tests attached to its borrowing.
Inspiration now expects revenue of at least £43m this year, against Panmure's forecast of £41.4m and consensus of £41m.
First-half revenue was £22.0m, 5.4% ahead of Panmure's forecast, though 8.1% lower than a year earlier. Earnings before interest, tax, depreciation and amortisation (EBITDA) were £1.2m, 20.8% ahead of forecast.
Gross margin was weaker than expected at 41.9%, against Panmure's 44.9% forecast and 46.2% a year ago. Jantet blamed price pressure in infusion, lower margins on international sales of its SLE products and high-cost stock left over from the pandemic.
SLE revenues fell 18% on a reported basis, but rose 35% once one-off export contracts are stripped out. Service revenues rose 21%.
Panmure raised its full-year EBITDA forecast by about 5% to £2.0m and doubled its estimate for the following year to £1.0m, reflecting cost savings after the loss of the Micrel contract.
Jantet said the shares should start to recover over the next few months. His target values the company at about one times forecast sales for the year to January 2029, against a peer rating of about two times.
