NHS Professionals Limited Interim Results for the Six Months Ended 30 September 2010
Highlights: First monthly profits from August 2010; profits we expect to be sustainable on current revenues of approaching 300m per annum Performing significantly ahead of forecast for the year to 31 March 2011; expect to be close to breakeven for the full year (Year to 31 March 2010: 6.2m loss) Strong like-for-like 1 revenue performance in a weak healthcare staffing services market: only 2.7% reduction compared with 2009 Cash balances of 12.3m as at 30 September 2010; free cash 2 of 4.8m and net current assets of 29.6m New account business, plus additional staff groups and services at existing clients added an estimated 54m to outstanding recurring revenues 3 ; three major four year contract extensions have added 88m Including the additions above, estimated outstanding recurring revenue stands at 440m Awarded place on London Procurement Programme Managed Services Framework Pricing held for all clients over the period as profits achieved through cost efficiency; operating cost reduced by 18.1% to 11.8m (2009: 14.4m) Client satisfaction increased: 93% of Acute & Mental Health clients would recommend NHS Professionals 4 Neil Lloyd, Chief Executive, commented: I am delighted that the business is now profitable. As we no longer receive any central funding, it is essential that we generate sufficient cash from profitable trading to allow us to fund our operations and service improvements. We have made our first profits and should achieve a sustainable cash position during next year. Our clients tell us that they rate our services highly; now they can have the confidence that we can continue to support them for the longer-term. Our clients can also be assured that we are doing all we can to minimise our costs in order to maintain the lowest possible charges for them in tough times; our overhead costs fell to 7.9% of revenue, which compares favourably with healthcare staffing agencies, where the ratios average 15-20%. A sustainable business can be built in healthcare staffing services, without the need to charge excessive margin on supply. At a time when our NHS clients are under the most intense pressure to reduce their own costs, our staffing service is proving to be a valuable solution to the problem. We will continue to innovate and work with clients to ensure that we can maintain the highest safety standards whilst offering the lowest possible cost per temporary assignment to the NHS. 1. Like-for-like sales growth is defined as core business income growth excluding one off revenue streams.i.e. National Pandemic Flu Line 2. Free cash is defined as total cash balance less VAT creditor and unpaid weekly payroll at month end 3. Outstanding recurring revenues are our estimate of revenue receivable from clients over the remaining term of their contracts 4. 70% of acute and mental health clients responded to our survey 1
NHS Professionals Limited ( NHSP ), the leading provider of outsourced temporary staff bank services to the NHS today announces its results for the six months to 30 September 2010. NHSP is not obliged to report Interim Results but has chosen to do so in order to provide information and assurance to its stakeholders. Results Like-for-like revenue declined by only 2.7%; a strong performance in a severely cost restrained NHS market where revenue at healthcare agencies has fallen substantially. The major adjustment to arrive at like-for-like revenue is the non-recurring Pandemic Flu Line service provided in the six months to 30 September 2009. Shift demand fell by 15.4% to 1.1m shifts (2009: 1.3m shifts); however, the number of shifts we fill declined by only 12.5% as bank fill rates increased. Headline revenue fell by only 4.4% as we secured a greater proportion of higher value shifts, traditionally the preserve of agencies. Our revenue performance demonstrates that as NHS spend comes under tighter control, Trusts are actively seeking the best value for their temporary staffing spend. Gross profit was 11.1m, 2.8% ahead compared with the comparative period, after subtracting the effect of the oneoff Pandemic Flu Line. Improving gross margins has been achieved not through price increases, but more efficient calculation and recovery of on-cost per shift. Over the period, operating costs (incl. depreciation) reduced by 18.1% to 11.8m (2009: 14.4m). Our focus in the last two years in improving service quality and achieving sustainable profit has been the automation of our business processes; reducing operating cost and improving client and flexible worker experience. Project Repair, our overhead cost reduction programme will be largely complete in the year to 31 March 2011; however, we will continuously strive to minimise costs for the benefit of our clients. The annual recurring effect of cost reductions achieved this year so far is approximately 3m. NHSP Operational Cost Reduction Actual at 31st March 2010 to Forecast at 31st March 2011 8% 8% 17% 29% Staffing re-structure Supplier contracts Technology developments 38% Property reconfiguration Other All restructuring costs have been expensed in the period they arise. Cash and Balance Sheet As at 30 September 2010, cash balances stood at 12.3m; free cash balances are estimated to be 4.8m. Net current assets were 29.6m. EBITDA during the period was a loss of 0.3m (2009: 1.8m loss). We expect EBITDA to be positive for the full year and thereafter. We will generate cash at an operational level; however, new business does absorb cash resources as we fund new clients payroll over the collection period. 2
New Business & Contract Extensions Implementation of South West London & St George s Mental Health Trust our largest win since 2006/7 was completed during the period. In addition, we added new staff groups and services with existing clients (e.g. Doctors Bank and e-rostering services) adding 19m to estimated recurring revenues under contract. Shortly before the transfer of the business from NHS Professionals Special Health Authority to NHS Professionals Limited on 31 March 2010, all our clients were asked to extend their contracts and agree to assign contracts to NHS Professionals Limited. All bar two of eighty clients agreed to do so, most for an additional period of two years. Since that date, we have agreed further extensions of four years with four of our larger clients, adding 88m to estimated recurring revenues under contract. Service Developments We continue to develop our NHSP Online platform and our services for the benefit of our clients and flexible staff. During the period, developments included the MAPS Healthroster and Staff Bank interface that was developed by our strategic software partner, Allocate Software; fully tested and now in pilot. In response to client demand, we also extended our spot doctors business to encompass Doctors Bank. Many of our clients want to extend NHSP Online capability to cover the supply of locum doctors to achieve greater control over cost and quality, with two large clients already doing so. We provided outsourced bank services, including recruitment, for nursing, doctors, A&C and AHP staff groups; however, our online service is a comprehensive platform that can be used for any temporary staff groups. Current Trading & Prospects Current trading is steady with levels of shift demand weak but stable. We expect shift demand to increase with usual Winter Pressures but to stay at similar levels below the previous year s comparative numbers. We expect the trends of higher fill rates and higher average revenue per shift to continue through the second half and that, coupled with our reduced cost base, should ensure that we get close to breakeven for the full year. Going forward, we do not expect a comparative increase in demand for any staff group as Trusts focus on increasing the productivity of permanent staff and reducing temporary spend; expensive agency spend in particular. However, Trusts are less certain about future income and they are examining how they can build a more flexible cost base. With payroll representing 65-70% of costs at most Trusts, many are considering a more contingent workforce to increase productivity through flexibility. We believe this may drive increased temporary staff demand going forward. As we have an inherently lower cost per shift than any Trust, developing a more contingent workforce based on an NHSP bank operation allows the same productivity gains to be banked but at a lower cost per shift. We expect that the major part of revenue growth through next year will come from new account business as we have over 150 target Trusts and an increasingly compelling cost saving and quality proposition for new clients; however, we also expect to continue to consolidate additional staff groups on our platform in existing clients. Despite a tough market for temporary staffing, we believe that we have every reason to look forward with confidence. I would like to thank our clients for their continued custom. The last two years has demanded great dedication from our staff; so I would also like to thank them all for their hard work in support of the NHS. Neil Lloyd, Chief Executive. 11th November 2010 3
Financial Statements Statement of Income For the 6 months ended 30 September 2010 6 months ended 30 September 2010 6 months ended 30 September 2009 12 months ended 31 March 2010 Revenue 150.1 157.0 316.0 Cost of Sales 139.0 145.3 292.7 Gross Profit 11.1 11.7 23.3 Operating Cost 11.4 13.5 27.3 Earnings Before Interest, Taxation, Depreciation & Amortisation ("EBITDA") -0.3-1.8-4.0 Depreciation 0.4 0.9 2.2 Profit Before Tax -0.7-2.7-6.2 Tax on Profit - - - Profit After Tax -0.7-2.7-6.2 Statement of Financial Position (Extract) As at 30 September 2010 30 September 2010 30 September 2009 31 March 2010 Non-Current Assets 2.7 2.5 1.4 Current Assets 59.6 54.9 52.5 Total Assets 62.3 57.4 53.9 Current Liabilities 30.0 30.6 28.0 Net Current Assets 29.6 24.3 24.5 Non-Current Liabilities 1.1 0.7 2.5 Total Net Assets 31.2 26.1 23.4 Total Equity 31.2 26.1 23.4 Source: management accounts and Annual Report & Accounts 2009/10 Decrease in Deficit Year Deficit ( m) Total Deficit Forecast Deficit 4
NHS Professionals 2010 This information has been supplied by NHS Professionals. All rights reserved. NHS Professionals Ltd 3rd Floor Edward Hyde Building 38 Clarendon Road Watford WD17 1JW www.nhsp.co.uk