Shares in Freshwater Uk Plc (LON:FWUK) slumped by nearly 16% to 12p today on reports that revenues have been hit by Government changes to the National Health Service and a warning that full year profits will be below market expectations. The public relations, public affairs and marketing services group said the decision 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 had "disrupted normal trading relationships between the NHS and companies such as ours".
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. Freshwater said the board froze recruitment in the healthcare team prior to the General Election in anticipation of pressure on public spending. But it said the structural reforms announced by the Government were not anticipated. The directors strongly believe that these reforms reverse pre-election commitments by both parties not to conduct a major NHS reorganisation.
Freshwater says it continues 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. 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 these efforts will not be sufficient in the very short time available before the year-end on 31 August to mitigate the loss of NHS revenue. As a result overall profit before taxation for the year will be below market expectations.
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