Investment column: WHC can get over this glitch

WESTMINSTER Health Care has got itself into a pickle. To issue a profit warning is bad enough. But when your finance director sells a big chunk of shares just two weeks before it is announced to the Stock Exchange it raises a serious concerns about the management of the company.

If, as sources close to the company maintain, Philip Easterman acted on his own then he was at best misguided; at worst he faces further action by the Stock Exchange. The fact that he failed to inform the group's other executives about the profit progress of some of its subsidiaries suggests internal controls were found wanting.

In any case he had to go and if the company can salvage any credit from this situation is was by the way it organised a quick replacement. This unsavoury episode has undoubtedly tainted the reputation of WHC in the City. The profit warning came because it failed to attract the number of patients it forecast to its secure homes and suffered delays in opening new psychiatric units. But at least the end to these problems are in sight. Government cutbacks and intense competition has also hit revenues from its brain injury business.

In other words the string of problems have put WHC's plans back a year. But they have done little to affect the group's long-term potential.

The nursing home market has suffered from over-supply but occupancy levels are finally on the rise with demand rising sharply. Rising wage costs have kept margins in check but prospects are still encouraging.

Specialist health care analyst Laing & Buisson forecasts current-year profits of pounds 16.5m, which should recover to pounds 21m for the following 12 months putting the shares on a prospective p/e ratio of 15.

WHC's problems look like a glitch, albeit it a rather substantial one. It may take some time for the company to drag itself out of the sick ward but in the long term the shares do not look expensive.

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