Buy Healthcare Locums - argues Rob Cullum, editor of TrendWatch

One key principle that underlies the TrendWatch investment strategy is that we normally only ever recommend shares that have just started a new uptrend. For the first time since the global credit crisis blew up, weve been forced to research more mature uptrends to find shares that satisfy our high standards. Fortunately, weve found a good un.

It wont be news to many investors that healthcare staffing in the UK is big business, but its quite an eye-opener nevertheless to be reminded just how big. The most recent figures available indicate that the staffing market was on course for an annual total of 5 billion.

Apart from the sheer size of the NHS, a number of factors contribute towards this huge figure: the desire for more flexible working conditions by staff, past failures to invest in the training of a sufficient number of specialist staff, the implementation of the Working Time Directive. But lying behind all of these are the demands of an ageing population, medical advances and also the fact that the vast sums sucked into administration actually seem to boost the need for external support, rather than the reverse.

The NHS accounts for around 45% of the total spend, but with another figure of 45% emanating from the provision of homecare staff. Demand for recruitment services provided by private-enterprise intermediaries such as Healthcare Locums is unlikely to be threatened by superbly organised and far-sighted direct recruitment policies of the client organisations such as the NHS, if you catch our drift.

Healthcare Locums, now four years old, is a group supplying specialist healthcare professionals to both the NHS and the private healthcare sector.

Its ruling ethos is the focus on higher-margin, longer-term specialist staff such as doctors, social workers and allied health professionals (AHPs), rather than the placement of nurses, for example. Working from two call-centres the group avoids the requirement for a costly high-street presence. The admission document argued that being able to supply staff nationwide without a local branch network enabled higher margins still.

This ethos means that, whilst it has lower volumes, there is a higher average transaction value and, in general, placements are longer term. Demand is not as immediate; and the overheads to service this market are therefore lower. It has an expanding database of registered locums across all specialties. Nearly half of these placed by the company at the time of its original flotation were from overseas; and the company had established an international recruitment division with 23 international partners across Europe, the Middle East, Australia, South Africa, New Zealand, the USA and Canada. This is a two-way trade placement outside the UK is a growing area of business.


On flotation, it comprised four discrete significant entities, brought together through acquisition.

the decade-old Thames Medics, a specialist in providing GPs, doctors and psychiatrists to the NHS and private hospitals. This was followed by
Eurosite Medical, a provider of AHPs to the same client groups. Then came
Medical Technical, a specialist in support staff (plaster technicians, sterile services technicians, phlebotomists and the like). This added scale, and also reach, enabling the group to access the supply of operating theatre technicians. Finally
Recruitment Specialist Group extended coverage to qualified social workers.
In November 2005 the company raised 13m at 55p. Six months into public life, it bought BBL for a total consideration of 10.5m, with 5.0m immediately payable in cash (financed by banking facilities) and a further 3m to be satisfied at completion by the issue of ordinary shares. 75% of BBL's income came from recruitment of hospital doctors; most of the rest came from recruitment of GPs.

After almost exactly a year as a public company, it raised 16m in the market at the same 55p price to acquire Blue Group, one of the leading qualified social-work agencies in the UK, for a maximum of 14m - with 10m payable in cash on completion. Blue Group's turnover in 2006 was 36m, and it was reckoned to have 15% of the market in Qualified Social Work (QSW) agencies. The acquisition was a three-way fit: First, Blue also had no branch network; the plan was to integrate the call centres. Second, the back-office integration was expected save 1m a year, starting in 2007. Third, it would help Healthcare Locums' intent of achieving a 33% split between its three core markets - AHPs, doctors and QSWs.

*The value of investments can go down as well as up. Investing in equities can lose you part or all of your capital. Smaller company shares can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares. Cornhill Asset Management Limited is an Appointed Representative of Argyle Investment Advisors Limited which is Authorised and regulated by the Financial Services Authority. UK-Analyst.com is owned by t1ps.com Ltd which is authorised and regulated by the FSA and can be contacted at 5-11 Worship Street, London EC2A 2BH or on 020 7562 3370.

This history makes the most recent figures for the 100m company irrelevant but the forecasts compelling (see table below).

2006 2007 2008*
Revenue (m) 64.63 144.1 169.50
Pre-tax profit (m) 1.08 12.40 16.90
Earnings per share (p) 7.10 9.00 12.30
Dividend per share (p) - 1.50 2.60

*Forecast
The main figure of interest in the 2006 accounts was the 16% organic growth. But the picture was clouded because it coincided with another substantial acquisition, JCT Locums, for 5.5m cash.

Current trading is robust and in line with management expectations, with one of the key drivers still being that of organic growth. The company is now market leader in each those three specialist divisions (AHPs, doctors and QSWs), and is very close to delivering the one-third income split targeted by the board. It says it will now cease strategic acquisitions so as to concentrate on integration.

The chief executive and 10% shareholder is Kate Bleasdale, a former nurse (ironic, given that her company avoids the nursing recruitment market). More importantly, however, shes a first-class businesswomen with a distinguished entrepreneurial history, and (by way of a footnote) a record-holder for the award of 2.2m damages when she sued her previous company for sex discrimination.

Performance to date has been dazzling; but it we should recognise that, with 13 acquisitions all told, this has, in a sense, been the easy bit. And with debt now running at 34m, up to nearly 6m to be paid out by way of deferred consideration and 67% of sales emanating from the NHS, the company may be a bit boxed-in.

Nevertheless, heading for earnings per share of 9p this year and 12.3p next works out to 12 times earnings in immediate prospect, falling to about 8.5 next year. These numbers leave plenty of medium-term price headroom. BUY

Looks like both DMA's are going to be needed to provide support. Heading in the right direction now though.

big part of buyers 10Feb may sell today at 10:11, 1mil at 247 , wonder if this halt rally

slow down for sure but not stop yet, good

Results 22nd March.

these two for 1.5 mil each today put breaks on, just 8 sessions to go

still a bit of momentum upwards,sweet

Just hoping that the DMA's continue to provide good support. Breaking down through both would not be good.

agree, would be bad,but i think will go north,nothing bad with business, future good,just some big boy took out his money out for some reason known just for him and put in other, few bit panicked too but they calm down now, looks. also check about 400k bought just after close, so someone sneaking in quietly.not bad

Healthcare Locums plc
("Healthcare Locums" or the "Company")

Second Interim Dividend Declaration

As previously announced the Company's final results for the year ended 31
December 2009 will be released on 22 March 2010.

In the meantime, the Board of Healthcare Locums is pleased to announce that a
second interim dividend of 1.5 pence per ordinary share will be paid on 1 April
2010 to shareholders on the Company's register as at the record date of 26
March 2010. The ex-dividend date will be 24 March 2010.

That's damn decent of them.

It is clearly designed to circumvent the 50% tax rate next tax year. Maybe final divi will be in jeopardy.
It also appears that a number of funds think HLO may be vulnerable to cut-backs depending on the outcome of the next general election, so sp may suffer until after the voting.

..but bottom line is that using agency temporary staff is much cheaper than employing people full-time. So more pressure on NHS and local authorities,better for HLO anyway,cause they'll switch to using more flexible staff.

Healthcare Locums plc

('The Company')

Statement re Publication of Full Year Results for the year ended 31 December
2009

The Company announces that its full year results for the year ended 31 December
2009 will be published later today, Monday 22 March 2010.

healthcare reform passed so girls partying and not hurrying with results, here in other hand a little drama..214!..ughh..:)wish i got more spare cash now

Down 10% which presumably means the brokers have already seen the results and are acting accordingly???

true,but some of them don't know ,there is huge game going on and im not suprise that some of them shout fire-in-a-hole to set some panic to make a killing.someone is still lot buying on the way down so i assume that this one know the best

just wish i could buy at today lows, would be dream..

Looks like a delay while they update results with US Healthcare results, cant see any other reason.
MMs having fun beforehand?????????

Surely results are just that - results? The only changes they can make are to future outlook and projections, or am I missing something?

this is the point