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Freshwater UK PLC (FWUK)

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Tuesday 17 August, 2010

Freshwater UK PLC

Trading Update

RNS Number : 1572R
Freshwater UK PLC
17 August 2010
 

Freshwater UK PLC

("Freshwater" or the "Company")

 

Trading update

 

 

The Board of Freshwater UK PLC ("Freshwater" or the "Company"), the AIM listed public relations, public affairs and marketing services group, announces that trading in the final quarter of the current financial year has been adversely affected by the Government's policy on the National Health Service ("NHS").

 

The decision by the new Government to abolish strategic health authorities, primary care trusts and some specialist health agencies combined with an across-the-board freeze on spending on external consultancies has disrupted normal trading relationships between the NHS and companies such as ours.

 

As a result, Freshwater's quarterly revenue from stakeholder communications and social marketing projects on behalf of NHS clients has dropped from approximately £225,000 for H1 2010 (16% of revenue) to management's forecast of approximately £25,000 for Q4 2010.

 

Although the Board froze recruitment in our healthcare team prior to the General Election in anticipation of pressure on public spending, the structural reforms announced by the Government were not anticipated by the Company. The directors strongly believe that these reforms reverse pre-election commitments by both parties not to conduct a major NHS reorganisation.

 

In spite of this, Freshwater is continuing to trade profitably, having made good progress over the last nine months to align costs with changing market conditions and to focus on growth areas, such as digital marketing/social media and stakeholder communications for major infrastructure projects.

 

In the past few weeks, the company has taken additional action to make cost savings and generate revenue from other quarters, but it is now clear that the efforts the Board is making will not be sufficient in the very short time available before the Company's year-end on 31 August 2010 to mitigate the loss of NHS revenue. As a result overall profit before taxation for the year ended 31 August 2010 will be below market expectations.

 

While disappointed by this setback, the Board continues to be encouraged by the progress the Company as a whole is making and the organic growth/recovery which has been evident in some divisions during H2 2010, particularly the Waterfront Conference Company, Merlin Creative & Marketing and regions focused on the energy sector.

 

The Company's public affairs business is also seeing revenue pick up following the election, and the Company's two most recent acquisitions - Life Communications and Profile Plus - are both trading in line with management's expectations.

 

The Board will provide further details of trading for the year ending 31 August 2010 in due course.  

Enquiries to:

Freshwater UK


Steve Howell, Chief Executive

Haydn Evans, Finance Director

 

 

Tel: 02920 545 383

 

Charles Stanley Securities (Nominated Adviser)

Mark Taylor

 

Tel: 0207 149 6000

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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