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Healthcare Locums in rescue cash call
Troubled staffing firm Healthcare Locums (HLO) is raising £64.25 million to secure its future and provide a stable footing for future growth.
The refinancing includes a £60 million placing and open offer of £4.25 million at just 10p - a savage discount to its share price, which was suspended at 112.5p back in January. There is also a £22.4 million debt for equity swap with Ares Lux, an equitisation of £2.5 million of debt to equity and a write-off of £6.5 million of existing debt and accrued interest.
In an interview with Growth Company Investor chairman Peter Sullivan said 'there were no other alternatives and without the cash the debt in the business was unsustainable.' Indeed the cash generated from its operations was insufficient to cover the interest burden.
Healthcare has also finally released its results for the year to 31 December 2010 which revealed a 6 per cent dip in revenues to £157.2 million, and a loss of £56.5 million (2010: £5.8 million pre-tax profit). The lurch into the red was not helped by a £46 million goodwill charge, however the underlying trading position has been very difficult.
Sullivan argues that the UK business had expanded too quickly leaving Healthcare with debts of £130 million. A new management team has helped steady the ship, leaving the operation as the third largest player in its market. In Australia it recently sold its homecare division for £22.2 million, which leaves it as the leading operator of nurse staffing down under. This business is trading 'very well' and has good expansion opportunities.
A chunky £33.6 million of the placing is being provided by major shareholder Toscafund, and ACE Limited has agreed to subscribe £13.16 million. Without the cash Healthcare would be 'unable to satisfy its existing financial covenants and/or service its existing borrowings.'
Following a major review the AIM counter will now recognise revenue only when it is invoiced. The findings also revealed that Healthcare had capitalised its software costs and they remained on the balance sheet, despite not being used by the business.
The shares are due to relist following the General Meeting on 8 September - expect a sharp correction in the price, but at least Healthcare has been rescued.
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