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UK – HCL facing more challenges as profits fall

28 September 2012

Staffing specialist Healthcare Locums (HLO:LSE) today reported a slide in profits and revenue, following legal proceedings in the UK and outstanding litigation in the US.

The firm is working on stabilising the business through a restructuring of all operations and processes, but is still facing risks from possible lawsuits and securing sufficient funding.

This follows a high-profile case in the UK this year filed by former vice chairman Kate Bleasdale, who is now planning to appeal against a decision by a London tribunal.

In the US, proceedings against HCL and ex-directors were reported, but the company does not “propose to participate in the US proceedings”, informing plaintiffs that “if they wished to pursue a claim, they should do so in the proper jurisdiction, namely, the English High Court of Justice.” 

Amid this legal turmoil, the healthcare provider reported a -13% fall in half-year revenue which was down to £101.1 million from £116.8 million.

Gross profit dropped to £20.7 million from £26.3 million, with a lower gross margin of 20.5% compared to 22.5% a year ago.

The firm improved its loss from operations to £4.8 million compared to a loss of £6.8 million at the same time last year.

“Whilst delays in the NHS framework renewal procurement have adversely impacted our ability to generate UK revenue growth in the short term… There remain a number of risks and challenges, including the outcome of the outstanding litigation and the sufficiency of funding in the medium term,” said chairman, Peter Sullivan.

“However, the business has strong support from its bankers and other stakeholders and the board believes that the group will prosper as the initiatives that have been undertaken to set the business up for future sustainable growth begin to deliver results.”

In the UK, revenues were down by -25% to £45.2 million, reflecting the move to a framework supplier to the NHS, which resulted in lower margins. Gross profit also dropped by -32% to £10.0 million with the gross margin falling to 22.1% compared to 24.5% a year ago.

In the UK there is still general uncertainty in the market and delays in the renewal of the NHS frameworks continue, which is particularly impacting the firm’s Doctors and Allied Health Professionals divisions.  

In Australia, slowing activity in the private sector has led to a fall in revenue to £55.9 million from £56.8 million. Gross profit dropped to £10.7 million from £11.6 million with the gross profit margin slipping to 19.1% from 20.4%.

In trading today, the company’s share price dropped by -8.1% to 1.75 pence, a -70.8% decrease from a year ago and +2.9% above the 52-week low of 1.55 pence seen last month. Shares have plummeted since 2010 and the firm now has a market value of £16.15 million.  

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