Tribal wins £214m NHS clinics contract

Henry Pitman, the chief executive of the public service consultancy Tribal Group, announced yesterday that a long-awaited NHS day-patient-clinic contract, worth £214m, had finally been signed.

Henry Pitman, the chief executive of the public service consultancy Tribal Group, announced yesterday that a long-awaited NHS day-patient-clinic contract, worth £214m, had finally been signed.

Two weeks ago the company warned that profits for the current year would be below market forecasts, sparking a sell-off which saw the shares trading as low as 142.5p. Mr Pitman, speaking at the time, said he was confident the contract would be signed "within the next few weeks".

Mercury Health, a fully-owned subsidiary of Tribal, will build and operate five non-acute treatment clinics in the Southeast, which the company hopes will be performing 16,000 operations per year when operating at peak capacity. Tribal is contributing £56m to the cost and will build the clinics in partnership with Amec. The first, in mid-Sussex, is scheduled to open next autumn.

Originally the contract was to be worth £190m, but some procedural changes, including more expensive treatment for patients, were made, increasing the total value by £24m.

Mr Pitman said yesterday: "It is a great relief that this is signed and completed. This is the largest NHS contract signed by any UK plc, giving us a 10 per cent market share in an industry that could see a five-fold increase by 2009. It also makes us incredibly well positioned to challenge for new contracts."

For many analysts, weakness at the education and asset management sides of the business was less a cause for concern than the delay in signing the NHS contract. Some even expressed concerns that the contract, for which Tribal has been the preferred bidder since February, may fall through completely.

Mr Pitman rejected concerns that the company would struggle to recruit enough staff to manage the contract effectively. Tribal expects to employ 220 people across the five clinics, with approximately half that number coming on secondment from the NHS. The balance is expected to be recruited from northern Europe, Australia and New Zealand.

Hector Forsythe, of Evolution Securities, continues to rate the stock a "sell". "This NHS contract is very different to their usual business, which is short-term projects with clearly defined rewards. The signing of this contract was well flagged but there is no indication of what might happen when it is completed - and seeing as there is only one customer [the NHS] I expect to see margins come under increasing pressure," he said.