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

Healthcare Locums Plc
("HCL" or "the Company")


HCL announces that the ordinary shares of the Company have been suspended from trading on AIM with immediate effect.

The Board has strong reason to believe that the financial performance of HCL for the year to 31 December 2010 will be materially below market expectations.

Serious accounting irregularities have been brought to the attention of the Board as a result of which the Company will be carrying out an immediate investigation to consider the financial implications.

The Company also announces that both Executive Vice Chairman, Kate Bleasdale and Chief Financial Officer, Diane Jarvis have been suspended pending the outcome of the investigation.

A further announcement will be made in due course.

Oh crap!

It is crap from the start.

we warned in 283, what a bunch of.......

Kate Bleasdale and friends perform with Abba tribute band, Bjorn Again at her wedding.

Write up in todays Daily Mail SD

.

Telegraph report:

http://www.telegraph.co.uk/finance/newsbysector/pharmaceuticalsandchemicals/8282267/Healthcare-Locums-suspends-founder-Kate-Bleasdale-for-serious-accounting-irregularities.html

Healthcare Locums suspended executive vice-chairman Ms Bleasdale and finance director Diane Jarvis on Tuesday amid allegations of "serious accounting irregularities". The company also suspended its shares and warned financial performance for 2010 could be materially below expectations.

Although the company would not give details, the investigation is expected to look back to March 2010 when Healthcare Locums' shares plunged 30pc after it restated the prior year's accounts. The Telegraph understands the company could be facing further material readjustments to financial results.

With Ms Bleasdale at its head, Healthcare Locums has been one of the most closely followed companies on the Aim market. A steady stream of acquisitions pushed the shares up from 127p at the start of 2009 to 282p a year later. Since then they have fallen back to 112p, where they were suspended.

During that time the company saw one of its corporate brokers, Peel Hunt, walk away; it carried out acquisitions including the 6.7m purchase of Redwood Health, a company belonging to Ms Bleasdale's husband John Cariss; it also announced a bid approach from an unnamed suitor.

As The Telegraph reported in July, the business and assets of Redwood Health were bought by Healthcare Locums despite carrying a going concern warning.

The company's most recent acquisition, Healthcare Australia Holdings, was completed in December for 77.8m. The purchase made making Healthcare Locums the largest medical staff company in the world.

The flurry of events has not stopped Healthcare Locums enjoying almost unquestioning support from the City. Acquisitions were supported by shareholders, and analysts have consistently rated the company a "buy" or "hold".

Evolution Securities analyst Adrian Kearsay has been the only analyst in recent months to buck the trend by advising clients to sell. Hedge fund Cartesian Capital was one of the few fund managers to have a significant short position.

Other shareholders include Tosca, Lloyds, JP Morgan and Credit Suisse. Ms Bleasdale is reported to have a near-10pc stake in the company, worth about 12m. She holds it through a limited liability partnership.

Speaking on Tuesday, Ms Bleasdale said she was not aware of her suspension until the stock market announcement was made. She said: "I am absolutely devastated. I am just amazed. I grew this company from nothing to being the largest healthcare staffing company in the world."

Her suspension from Healthcare Locums is not the first setback in a colourful business career. She shot to prominence in 2002 after winning a 2.2m sexual harassment case against another healthcare recruiter she set up, Match Group, and the chairman she helped recruit, Sir Tim Chessells.

After taking some time out she returned with Healthcare Locums in 2003, growing the company into a publicly listed giant of the medical staffing market with a turnover of 172.1m last year.

Despite the apparent success she has continued to be dogged by disputes and litigation. Last year former business partner and inventor Debbie Forster alleged Ms Bleasdale and her husband had tried to oust her from a company she set up, Stayput Solutions.

23 February 2011
Healthcare Locums plc announces that Kathleen Veronica Bleasdale has resigned from the Board of Directors of the Company with immediate effect. This does not affect her status as an employee of the Company.

HLO also announces that Healthmark UK LLP has formally withdrawn its notice requisitioning a general meeting of the Company, details of which were announced on 8 February 2011.

As a result of the withdrawal of the general meeting requisition, the Company is no longer required to send a circular to shareholders convening a general meeting.

Healthcare Locums Plc

Directorate Change

The Board of Healthcare Locums Plc, ("HCL" or "the Company") announces that it has accepted the resignation of Mo Dedat as an Executive Director of the Company. While Mr Dedat will step down from the Board with immediate effect, he will remain in his full time role as the Company's Chief Operating Officer.

Peter Sullivan, Chairman, said: "It is important to restructure the Board to introduce new and independent talent. Mo's in-depth knowledge of the medical recruitment marketplace means his contribution is very important to HCL and I am pleased that, while he has stepped down from the Board, he will remain in his operational role and be fully engaged in taking the business forward.

By Jonathan Russell 11:50PM GMT 19 Mar 2011 Sunday Telegraph:
The ex-nurse no stranger to the courts during her 20-year business career is in dispute with former business partner Debbie Forster. The case which started as a simple employment dispute at Leeds Employment Tribunal has escalated into a High Court showdown due to start at the end of this month. Costs and damages for the losing party after the three-week trial will run to millions of pounds.

The case relates to Ms Bleasdale's involvement in Stayput Solutions a company set up by Ms Forster to market her invention a button that can trace clothes back to their owner. After investing hundreds of thousands of pounds in the company for a majority stake Ms Bleasdale and husband John Cariss sacked Ms Forster alleging gross misconduct. The pair claim Ms Forster duped them into investing by falsely claiming Stayput had a 750,000 contract with a major care home an allegation Ms Forster denies.

The court case is the latest storm to hit Ms Bleasdale in a turbulent few months. In January she was suspended as executive vice-chairman of Healthcare Locums after the company said it had discovered serious accounting irregularities. The company also suspended finance director Diane Jarvis and temporarily halted trading in its shares. Without revealing the outcome of its investigation or resuming trading in its shares the company sacked Ms Bleasdale earlier this month. It has not revealed the reason for the dismissal. Ms Bleasdale is understood to have engaged lawyers to protect her rights with regard to Healthcare Locums.

She is also engaged in dispute with another former business partner, recruitment company Xchangeteam, which is claiming hundreds of thousands of pounds in damages for breach of fiduciary duty when Ms Bleasdale sat on the Xchangeteam board. Ms Bleasdale has described the claim as "opportunistic".

Both Ms Bleasdale and Ms Forster declined to comment.

Directorate Change
The Board of Healthcare Locums plc (the "Company") has accepted the resignation of Diane Jarvis as Chief Financial Officer of the Company with immediate effect. Ms Jarvis' employment by the Company has also ceased with immediate effect.

Ms Jarvis' resignation follows an investigation by the Company into financial irregularities that occurred during her tenure as Chief Financial Officer and for which she has accepted responsibility.

5th May '11
Healthcare Locums plc ("HCL" or "the Company") is pleased to announce that it has appointed three Executive Directors to the Board, all with immediate effect.

"Stephen Burke is appointed as Group Chief Executive Officer. Mr Burke has approximately 30 years experience of working in international recruitment companies, since 2001 at senior Board level. Mr Burke was previously Managing Director of Michael Page UK and a main Board Director of Michael Page International plc ("Michael Page"). He joined Michael Page in the early 1980s shortly after graduation, and spent the following 24 years with the group, during which time he worked across many of its business units as a divisional Managing Director, both in the UK and in Europe. He was responsible for significant growth in each of the business units and was appointed to the Michael Page Board in 2001 as one of four Executive Directors. He played a central role in the group's full listing in 2001 and subsequent position in the FTSE 250. Mr Burke left Michael Page in 2005 to develop his career as a Non-Executive Director on the boards of both listed and private companies. He has most recently been a Non-Executive Board Director for Matchtech Group, the AIM listed technical and professional services recruitment company, a post he has held since 2006.

In addition, Colin Whipp is appointed to the Board as Interim Chief Financial Officer and Chief Restructuring Officer. Mr Whipp, a Chartered Accountant, has played a significant role in advising HCL since March and is taking up his interim role while both he and the Company consider options for a permanent appointment in due course. Mr Whipp has extensive senior experience in multinational companies in the health sector and has worked in a number of turnaround situations in the public and private sectors.

The final Board appointment is that of Andrew McRae, who continues as Managing Director of Healthcare Australia Holdings Pty Ltd ("HCA"). Mr McRae was instrumental in overseeing the successful integration into HCL of HCA, which was acquired in December 2010. Formerly Managing Director of international operations at Hays Plc, and an Executive Director of HCL, Mr. McRae is a Chartered Accountant and has worked in the human capital sector for the last 16 years and in the specialist recruitment sector for the last six years.

The Board of HCL believes that the creation of an entirely new, strong, well regarded and experienced management team is an important milestone in the progress being made in stabilising the business since its statement of 25 January 2011 and the suspension of its shares from trading on AIM. The Board of HCL now comprises three Executive Directors and two Non-Executive Directors.

In addition the Board states that it is in the final stages of appointing an additional independent Non-Executive Director and will update the market in due course.

It is the Board's present intention to announce a comprehensive update to shareholders by the end of June 2011, which will include the 2010 financial results, details on current trading and the outcome of the ongoing investigations into accounting irregularities. The Board's priority is to ensure that the suspension of the Company's shares from trading on AIM is lifted as soon as possible."

This is still suspended, right?

Yes, but an update will be officially issued by the end of June '11.

presumably sp will tank when financials and accounting irregularities are eventually revealed.

Initially I would agree. Should then find a base from which to consolidate, hopefully.

6th June 2011
Dear Shareholder, Notice of AGM

"As you are no doubt aware, on 25 January 2011, the Board announced the discovery of serious accounting irregularities within the Group and trading in the Company's shares on AIM was suspended. An immediate investigation was launched to establish the circumstances surrounding the commission of, the extent of and the financial implications of these accounting irregularities. Since then, the entire personnel of the Board has changed. Considerable progress has been made in the investigation and it had been the Board's intention to lay the audited 2010 accounts before the Company's Annual General Meeting. Our aim is to ensure that the investigation is as thorough as possible. However, aspects of the accounting irregularities are taking longer to resolve and unfortunately this is currently preventing us from finalising the audited accounts.

The Company is obliged to hold its Annual General Meeting by the end of June 2011 and is therefore convening this meeting in the absence of the 2010 financial statements. It is the intention of the Board to complete the 2010 audited accounts as soon as possible and then to convene a separate Extraordinary General Meeting to consider these and conduct other business which would normally be considered at the Annual General Meeting together with the accounts.

The uncertainty created by the investigation has been frustrating for the Group's employees as well as your Board, the shareholders and the Group's other stakeholders. In the circumstances, I am grateful to our employees for the dedication they have shown. It should be noted that the Australian business which the company acquired in December 2010 has been trading well and appears to be unaffected by the accounting irregularities which occurred in the UK. I am also grateful for the cooperation of the Group's lenders who have been supportive of the Group and the work of the Board in its efforts to normalise the situation.

I am pleased to have been joined on the Board by colleagues with a breadth of experience in both managing and resolving complex business issues. Your Board's priority is to finalise the audited annual accounts and I look forward to being able to give shareholders a more detailed update as soon as possible."

Letter from the Board of Directors, which should provide some comfort for the future of HLO.
http://moneyam.uk-wire.com/cgi-bin/articles/201106291100013507J.html