Healthcare Locums Getting Critical?
Healthcare Locums Getting Critical?
The Board of Healthcare Locums plc, a leading provider of staffing solutions in the health and social care sectors provides the following update for the 52 weeks ended 30 December 2012.
On 28 September 2012 the Company announced its interim results for the 26 weeks ending 1 July 2012 (the "Interims"), which highlighted the key issues facing the business. The Company had suffered difficult trading conditions in both of its two geographic markets, the UK and Australia. In addition, and as a result of the poor trading conditions, the Company had agreed with its lending banks that they would reset covenants and defer the start of the repayment of the loan principal until June 2013.
Since that date, trading has continued to be difficult. In particular:
· In the UK, delays in NHS framework renewals have continued to constrain the Group's ability to capitalise on its strategy of moving to higher volume lower margin framework contracts in the UK. This uncertainty is expected to continue into 2013. This has depressed the performance of both the Doctors and Allied Health Professional divisions. In the second half, the Nursing division successfully implemented a new IT system, however this necessary diversion delayed the business's ability to capitalise on the significant demand in this market and impacted its short term results. Further, the Social Care division has remained under margin pressure as Local Authorities continue to reduce budgets
· In Australia, weakness in demand in the private and public sectors has continued as the macro economy has deteriorated. Although the Company has made senior management changes and placed a renewed focus on key public sector clients, the current uncertainties in demand make Australia a challenging market in which to operate and as a result revenues have been impacted in the second half of the year
· The Company continues to be involved in litigation:
*the first, regarding the former Executive Vice Chairman Kate Bleasdale and
* the second, in respect of US based proceedings against the Company.
Since the Interims there have been no further material developments with respect to this litigation other than the initial rejection of Ms Bleasdale's application for an appeal. As allowed in such an instance, Ms Bleasdale has requested a hearing in front of a Judge to challenge this decision. The Board remains confident of its defence in both claims and will strenuously defend its position.
At 30 December 2012, the Group had A$60m (£39m) of term bank loans and £9m cash at bank.
While the Group has met its 30 December 2012 banking covenant tests, having updated its forecasts and projections to reflect the current trading conditions, the Board has identified that in order to deliver these projections there is likely to be a requirement for additional capital funding in the next 12 months. The forecasts also indicate that the financial covenants for March and June 2013 may not be met. The Company is in constructive negotiations with its banking partners regarding resetting the covenants for 2013 and the Company believes that the banks remain supportive of the business.
The Board is exploring a number of options to safeguard the strategy of the business, including ways in which to further reduce the Group's cost base and improve its profitability. The Board remains convinced that the Company is pursuing the correct strategy and is considering all options for the best way forward and the options regarding access to additional capital for the Company. In this regard the Board has approached its two substantial shareholders to ascertain their appetite to provide additional capital to the Company and, while these discussions are on-going, they have indicated that they are supportive of the business going forward. However, no guarantee can be provided until the Company is able to ascertain the quantum of the fundraising needed and any terms on which such fundraising could be undertaken. A further update will be made in due course.