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

Wondered when someone would ask that :-)

To use a technical term - "Come on my son" :-)

About to blow.

We have lift off.

Interims due Monday 7th September.

I'm looking for 10.0m PBIT and 7p EPS, which would confirm we are inline for full year.

3.00 by xmas !!!!!!!!!

Pleased with interims today, loads of positive in statement, a very interesting read.

Yep excellent results. Looks like these got a long way to run yet spitfire.

Sp down 7%, which implies the market wasn't over impressed, or am I missing something as buys outweigh sells 65/35?

The old "sell on news" thing I would imagine. I expect the sp to move up slowly during the day.

Probably a few jumped in before results looking for a quick buck and are getting their stop losses hit.

Results look fine to me harry.

The Adj PBIT and EPS were slightly above what I was expecting. No negatives in the statement that I can see.

Very pleased with continued net debt reduction to 21.2m from 26.9m, and also 100% increase in dividends to 1.6p which shows confidence in the future.

Lets hope not too many investors have set their stop/losses too close and are stopped out today.

It'll be the traders not the investors that have bailed spitfire , be back to normal soon.

Very true, but very decent of mms to lower the sp and allow investors to buy in at lower levels.

Back to normal now , 260p next stop.

:-)

... at least :-)

Healthcare Locums Grant of Options





TIDMHLO

RNS Number : 7105Y
Healthcare Locums PLC
08 September 2009

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


Granting of Options
The Board of the Company announces that on 8 September 2009, the Company has
signed option agreements to grant options to certain directors and senior
employees of the Company to subscribe for an aggregate of 510,000 ordinary
shares of 10p each in the capital of the Company.

Options over 350,000 ordinary shares exercisable at 207p per ordinary share have
been granted to directors of the Company as follows:


+-----------------------------------+--------------------------------+
| Director | Number of options granted on 8 |
| | September 2009 |
+-----------------------------------+--------------------------------+
| Kate Bleasdale, Executive vice | 100,000 |
| Chairman | |
+-----------------------------------+--------------------------------+
| Diane Jarvis, Group Managing | 100,000 |
| Director | |
+-----------------------------------+--------------------------------+
| Mo Dedat, Chief Operating Officer | 100,000 |
+-----------------------------------+--------------------------------+
| Alan Walker, Non-executive | 25,000 |
| Chairman | |
+-----------------------------------+--------------------------------+
| Alasdair Liddel, Non-executive | 25,000 |
| Director | |
+-----------------------------------+--------------------------------+

Options over 160,000 ordinary shares exercisable at 207p per ordinary share have
been granted to certain senior employees of the Company.


The options vest on the third anniversary of the date of grant and in each case
the final exercise date of the options is ten years from the date of grant.

Just been announced that 5 of the above directors bought shares in the market today.

Am I correct in saying ex-divi date is 16th Sept '09?
Not on MoneyAM's forward diary list, but on Digitalook as that date.

Harry - yes - the forward diary feature is as good as useless, with much info missing!