Nestor Healthcare Group (LSE: NSR) was forced to issue a profit warning today after admitting that certain 'trading issues' first flagged up in the interim results on July 31 2007 has persisted. As a result, Nestor said it was revising market expectations for 2007 and 2008 full year operating profits of £16.7 million and £21 million respectively, to 15-20% below those levels.
Nestor's Social Care division continued to see a 'tightening' in Local Authority budgets and that tender activity had been subdued. The division's Goldsobrough and Medico businesses also suffered from a net negative impact on contracts won and lost. Nestor's second division, Primary Care, also disappointed with additional management failing to 'deliver a return'.
The net effect of the downward revision in operating profits also meant that Nestor would breach one of the banking covenants on its banking facilities. Nestor has current borrowing of £59 million and a facility with a maximum drawdown of £80 million. Nestor said it would be seeking a revision to its banking covenants.
Shares in Nestor fell 41% to 50 pence per share giving the group a market cap of £56 million - less than its total outstanding debt.