Good morning from Paul & Graham!


Paul's Section:

Superdry (LON:SDRY) - I ponder the S.Times article about its bank facilities, and the response from SDRY this morning. I'm worried about this, it is starting to look like a financially distressed situation, so I'm inclined to give it a wide berth until the necessary borrowing facilities have been secured. More detail below. EDIT: I'd forgotten about the long-running warnings in SDRY's Annual Reports, about its apparently chaotic accounting functions, and the auditors resignation. Maybe this has had a bearing on the apparent unwillingness of its banks to renew facilities? I covered the issues in detail here in Oct 2022.

Cerillion (LON:CER) - excellent results, as expected. I rummage through the figures, and see nothing of concern, just strong organic growth, lovely profits & cashflows. Shares aren't cheap, but this looks an exceptionally good company. Thumbs up from me. 

Graham's Section:

Inspiration Healthcare (LON:IHC) (£41m) - this medical technology company has issued a severe profit warning. The current year’s profit forecast is reduced by 85%, and next year’s profit forecast is reduced by 45% (per the latest broker note). The timing of orders is blamed, and this in turn is blamed on economic uncertainty and on lockdowns in China. These are diplomatic ways of saying that demand for the company’s products is weaker than anticipated, but we have seen many other companies referring to recent difficulties in China. While I’m not in a position to say this with any certainty, I’m inclined to think that these shares are getting into value territory at a P/S ratio below 1x.

Induction Healthcare (LON:INHC) (£30m) - I take an initial look at another small healthcare company. This is a software business providing a range of products used by patients and healthcare professionals. It competes with the likes of Microsoft Teams but attempts to differentiate itself with a healthcare-focused product. While it lacks a financial track record worth mentioning, it does report £13.5m of ARR as of April 2022, which is interesting to me given the modest market cap. It’s not clear when this company might generate a profit but at least it is aiming for results that are close to breakeven (on an adjusted basis) in the short-term. Anchored by a good net cash position of £7m - £10m, I think it could be…

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