Nestor takes the axe to 1,200 jobs after £53m loss

Nestor Healthcare, the medical staffing company, is laying off 1,200 people after its failed bet that changes to the contracts of GPs would lead to more private sector work covering out-of-hours calls.

Nestor Healthcare, the medical staffing company, is laying off 1,200 people after its failed bet that changes to the contracts of GPs would lead to more private sector work covering out-of-hours calls.

The company admitted that its misjudgment would wipe almost £60m from profits this year, as it unveiled a restructuring plan that will result in the closure of a fifth of its branches across the country and its state-of-the-art call centre in Sheffield. The workforce will shrink from 4,700 to 3,500.

Local health trusts are taking over responsibility for out-of-hours cover and have opted to make in-house arrangements rather than rely on the private sector. Instead of the expected ramp up in demand for its services, Nestor's Primecare has lost half its existing business.

The company is also facing difficulties in its nursing business, after the National Health Service has reorganised to reduce its reliance on expensive private agencies.

In total, 51 Nestor branches will close, with the bulk of the job losses - 800 - falling at the Primecare branch network. Some 250 jobs will also go in Sheffield with the closure of one of two call centres built to accommodate the expected demand for out-of-hours doctors. Nestor is keeping open the centre in Birmingham.

Justin Jewitt, Nestor's former chief executive, has already paid with his job for the debacle. He championed the £113m acquisition of Primecare in 2001, paying in part with a share issue at 475p. The shares were up 4.5p yesterday to 102.5p.

A £48.6m write-down of the value of Primecare was the main reason for Nestor's plunge into the red at the interim stage. Pre-tax losses were £52.9m, compared with a £6.2m profit last year. The total of exceptional charges in 2004, when redundancy costs are added in the second half, will be £58.3m. The company also passed on its interim dividend.

Stephen Booty, who has been acting chief executive since Mr Jewitt's departure in May, said that trading in the nursing division had been stable for the past four months, now that changes to the NHS have bedded down.

And he said that the group remained committed to Primecare and optimistic that it could win new business when the primary care trusts have settled on their new out-of-hours arrangements.