Healthcare Locums in dire straits

The fragile financial state of Healthcare Locums , which provides healthcare staff, was finally laid bare by these results. Despite a reduction in its crippling debt pile – from £104m to £26m – through selling £20.3m in assets and raising £60m in August's placing, the group's auditors could well raise questions about the company's ability to continue as a going concern. That's before getting to the issue of whether some past dividend payments were actually legal. With that backdrop, the shareholders should sell.

Just scrambling to the edge of the precipice proved expensive, with refinancing fees paid to banks and advisors amounting to more than £5.5m. Moreover, the group is still subject to undefined costs from two different sets of litigation – one for £12m from former executive vice chairman Kate Bleasdale for unfair dismissal and sex discrimination, and the other from US funds Permian and Arundel for unlimited punitive damages. That needs to be set against the background of ongoing uncertainty in the company's core UK market, as complicated framework contracts come up for renewal and tightening NHS budgets squeeze profit margins. Indeed, the potential delay or loss of contracts – quite possible given last year's investigation at the group into accounting irregularities – could create a situation where banking covenants come under pressure.

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