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.

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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

..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

I'm not sure that buying today is ideal. Chart support looks to be at 200p.

may also be 226 if blues will manage close at it.

U.S. healthcare reform bill has been passed, so hopefully this will impact on HLO turnover over the next few years.

exactly.the best day traders managed today 5% on way down and 5% on way up,10% in 4 hours, just because of fear amateurs..hope just we not follow that bedlam

got feeling that update after close,new day new hope,too much not necessery blood today :)

Not sure you are right. 2009 was probably a tough year for these guys.
Presumably there is provision for currency fluctuations from their U.S. revenue (as well as Australia, Canada & Mid East)? Will be interesting to see how much of their revenue is U.S. derived.

i can't wait for update too but to see what Kate say about future, the most.that what happened to 31 Dec she said 25th Jan

Final Results.

Financial Highlights



Revenue increased by 5% to 172.1m (2008 restated: 164.5m)

Gross margin increased by 23% to 52.9m (2008 restated: 43.1m)

Adjusted operating profit* increased by 31% to 25.2m (2008 restated: 19.3m), despite adoption of longer term permanent placement income accounting policy

Operating profit increased by 18% to 19.7m (2008 restated: 16.7m)

Net margin as a percentage increased by 13% to 11.5% (2008 restated: 10.2%)

Adjusted net margin** as a percentage increased by 25% to 14.6% (2008 restated: 11.7%)

Adjusted profit before tax*** increased by 41% to 23.2m (2008 restated: 16.5m)

Profit before tax increased by 27% to 17.7m (2008 restated: 13.9m)

Adjusted basic earnings per share**** increased by 37% to 16.0 pence (2008 restated: 11.7 pence)

Basic earnings per share increased by 24% to 12.3 pence (2008 restated: 9.9 pence)

Net debt has fallen to 17.3m (2008: 26.9m)

Second interim dividend of 1.5p announced to be paid on 1 April 2010

Final proposed dividend of 1.9p per share to be declared by the Board bringing total dividend for 2009 to 5.0p (2008: 2.0p per share)

Although the figures look reasonable, they must be way below expectations for the sp to fall 20% to 178p.

It depends on how you look at them Harry but at the moment panic rules :-)

It seems due to a change in accounting procedures, which has therefore produced figures below analyst's forecast. Revenue growth was lower due to change of accounting treatment.