TIDMHLO
RNS Number : 3507J
Healthcare Locums PLC
29 June 2011
Healthcare Locums plc
29 June 2011
AGM Statement
Healthcare Locums plc advises that at 11.00 a.m. today (UK time)
it will be holding its Annual General Meeting.
The following is the text of the statement that will be made by
Peter Sullivan, Chairman:
Background
On 25 January 2011, the Company announced the suspension of its
shares from trading on AIM with immediate effect. The announcement
stated that the Board had strong reason to believe that the
financial performance of HCL for the year ended 31 December 2010
would be materially below expectations. Serious accounting
irregularities had been brought to the attention of the Board as a
result of which the Company announced that it would be carrying out
an immediate investigation to consider the financial
implications.
On that date, Kate Bleasdale, Executive Vice-Chairman, and Diane
Jarvis, Chief Financial Officer, were suspended. Subsequently, Alan
Walker, Diane Jarvis, Alasdair Liddell and Mo Dedat resigned from
the Board. Kate Bleasdale also resigned from the Board on 23
February 2011 and was later dismissed as an employee.
I was appointed to your Board as Chairman on 18 February 2011
together with David Henderson as senior independent director. We
were pleased to have been joined in May by Stephen Burke as Chief
Executive Officer, Colin Whipp as Interim Chief Financial Officer
and by Andy McRae, who is Managing Director of Healthcare Australia
Holdings Pty Limited ("HCA").
The lifting of the suspension of trading in the Company's shares
and the production of the 2010 audited accounts have regrettably
taken longer than we would have hoped. I will be taking this
opportunity to explain to shareholders the main reasons for the
delay.
We have made good progress over the past few months in the face
of many challenges and I am hopeful that the 2010 accounts can be
published and trading in the Company's shares resumed, soon.
Accounting irregularities and corporate governance
Upon suspension of the shares in January, the Board launched an
immediate internal investigation into the serious accounting
irregularities, the circumstances surrounding their existence and
the financial implications for the Group. To support the internal
investigation, Grant Thornton was brought in to assist with the
forensic examination of the accounts. The Board believes, in the
light of these investigations, that there was a breakdown in
controls within the Group and that previous accounts were
misstated.
One area of focus of the investigation is the use of what your
current Board consider to be aggressive accounting practices
regarding revenue recognition, capitalisation of costs and
impairment of fixed assets. We are in discussions with our advisers
over the appropriateness of these practices and the way they should
be dealt with in the accounts for 2010. A further area of focus is
whether the breakdown in controls led to any other accounting
issues. Whilst the investigation and the audit of the 2010 accounts
are both unfinished your Board considers it likely that there will
be a restatement of prior year figures, but at this stage it would
not be appropriate to comment on the extent of that restatement.
Clearly, all of this has made the process of producing audited
accounts for 2010 far more complex than originally anticipated.
When I first became Chairman of HCL, I was struck by the
extremely poor levels of corporate governance. For example, there
was a lack of normal business policies and procedures, insufficient
management of costs and the level of record keeping surrounding
major decisions taken by the Board was well below the standard
shareholders would expect from a publicly listed company.
Our investigations have revealed many cases where the accounting
treatments adopted by the Company were incorrect. In light of the
investigations to date and a review of appropriate accounting
treatment, your Board is of the opinion that it is probable that a
material amount of profit which the Company recognised over recent
years will need to be written back. When published, the 2010
accounts will quantify this for each of the affected years.
I am sure that the results of the investigations to date will
come as a shock to Shareholders - as the situation has to the
current Board, the Company's advisers and the Group's lenders,
National Australia Bank, Commonwealth Bank of Australia and Ares
Capital (the "Banks"). The Banks lent a substantial sum of money to
the Group in December 2010 before finding out just a month later
that the Group's true financial position was materially different
from that which had been represented to them. However, the Banks
remain supportive and the Board is in constructive, ongoing
dialogue with them.
Against this backdrop, it remains the Board's priority to
stabilise the Group's financial situation and reduce its levels of
debt.
Outlook
Despite these difficulties, there are certain matters which have
provided comfort to the new Board.
We believe that the HCA business in Australia, which was
acquired in December 2010 shortly before the financial year end, is
fundamentally a good business and is capable of sustainable growth.
We are also of the view that synergies can be achieved over time by
owning both the UK and Australian healthcare recruitment
businesses.
The majority of HCL's operations in the UK are sound, where our
dedicated employees deliver an excellent service to our customers.
I would like to emphasise that despite the recent difficulties we
remain in the top three locum providers to the NHS. HCL is a well
established business in the UK and is capable of earning
substantial profits by delivering a high level of service to the
NHS and private sector customers on competitive terms.
Your Board believes that it is a priority to further develop our
productive long term relationship with NHS customers. As you will
be aware, the NHS is under substantial pressure to reduce costs.
This is a mixed blessing for HCL. On the one hand it encourages the
need for flexibility of resource which temporary staff can provide.
On the other hand it has led to substantial pressure on NHS Trusts
to reduce the margins paid to locum providers. This has resulted in
an increased focus upon framework contracts with preferred
providers. These frameworks carry lower margins, but can benefit
locum providers by giving greater revenue volumes. Until recently,
HCL had focused insufficiently on framework contracts which now
apply to a much larger share of the temporary staff recruitment of
the NHS.
Your new executive team is committed to re-engineering the
business, where needed, to address these changing market dynamics.
We are paying particular attention to stabilisation, the
integration of previous acquisitions, realising synergies and
improving business efficiencies and productivity.
Current trading
The Board has been pleased with the trading performance of HCA
in Australia since it was acquired in December 2010. In the UK, the
situation is more challenging but we are encouraged by the
opportunities as we adapt the shape of our business model.
On 27 June 2011, we were pleased to announce the sale of the
Homecare Division of HCA for A$34 million (approximately GBP22.2
million). The transaction is expected to complete during July 2011
and the net proceeds will be used to reduce the Company's debt.
Finally, we are currently considering a number of refinancing
alternatives to stabilise the capital structure of the Group. We
will keep you appraised of further developments at the appropriate
time.
In the light of the above, I must therefore ask you to bear with
us a little longer. I assure you that we are doing all we can to
restore the fortunes of the Company.
Thank you for your patience.
Contact details:
Healthcare Locums Plc
Peter Sullivan, Chairman
Tel: 0207 451 1451
Fairfax I.S. PLC
Nomad and Joint Broker
Simon Bennett/Ewan Leggat/Laura Littley
Tel: 020 7598 5368
Pelham Bell Pottinger
David Rydell/Emma Kent/Duncan Mayall
Tel: 020 7861 3232
This information is provided by RNS
The company news service from the London Stock Exchange
END
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