RNS Number : 1626C<fipBR>

Nestor Healthcare Group PLC<fipBR>

28 August 2008<fipBR>

<fipBR> <fipP> </fipP> <fipP>28 August 2008</fipP> <fipP><fipBR> </fipP> <fipP>Nestor Healthcare Group plc</fipP> <fipP>Half year results for the six months to 4 July 2008</fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>Results summary</fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

2008 2007 <fipBR> <fipBR>

Revenue £84.5m £89.7m <fipBR>

Operating profit £5.3m £6.9m <fipBR>

Profit before tax £3.4m £5.6m <fipBR>

Profit after tax £2.5m £3.9m <fipBR>

Earnings per share 2.2p 3.8p <fipBR> <fipP><fipBR> </fipP> · Half year results are in line with management expectations reported at<fipWRAP> the time of the Interim Management Statement in May.<fipBR>

<fipBR> · The Social Care business delivered a much improved margin of 10% (2007:<fipWRAP> 7.7%) on revenue slightly down in a difficult market as Local Authorities<fipWRAP> budgets remain under some pressure. Operating profit rose to £5.9m from £4.7m on<fipWRAP> revenue of £59.2m (2007: £60.8m). Steady progress is being made in improving<fipWRAP> performance under a new management team as focus continues on under-performing<fipWRAP> branches in the Goldsborough / Medico network. The Hertfordshire contract is<fipWRAP> performing in line with original expectations. The Carewatch franchise network<fipWRAP> and the private homecare providers all performed satisfactorily.<fipBR>

<fipBR> · The Primary Care business, still facing a market undergoing<fipWRAP> significant change, has continued to prepare for the range of opportunities<fipWRAP> expected in the forseeable future, whilst maintaining a high level of service to<fipWRAP> its existing customer base. Revenue fell slightly to £25.3m (2007: £28.9m) but<fipWRAP> the contract base has remained broadly stable since the loss of two out-of-hours<fipWRAP> contracts in H1 2007. These also impacted profits which were £0.3m (2007:<fipWRAP> £2.2m). Tender activity in recent months has been at an unprecedented level both<fipWRAP> for GP practices and health centres under the Darzi programme and new 24 hour<fipWRAP> Urgent Care Centres. A new MD for Primecare with extensive relevant experience<fipWRAP> joins in September. Tender activity is also increasing in the police forensic<fipWRAP> and prison healthcare businesses.<fipBR>

<fipBR> · Cash flow from operations, before pension enhancements, was strong in<fipWRAP> the first half totalling £9.1m (2007: £1.0m).<fipBR>

<fipBR> · Previously announced negotiations on the potential sale of a part of<fipWRAP> the Group continue but there can be no guarantee that agreement will be reached.<fipWRAP> In connection with this potential transaction, the Company is negotiating with<fipWRAP> its debt providers about suitable facilities going forward. The Directors<fipWRAP> anticipate making a further announcement in September.<fipBR> <fipP><fipBR>

</fipP> <fipP><fipBR> </fipP> <fipP>Commenting on the results, John Rennocks, Chairman, said:</fipP> <fipP><fipBR> </fipP> <fipP>"The challenges facing Nestor's two business streams are quite different.<fipWRAP> In Social Care, we must continue the initiatives currently underway to improve<fipWRAP> the performance of Goldsborough / Medico and spread the good practice of many of<fipWRAP> our branches across the network, while also continuing recent successes in new<fipWRAP> business opportunities, to ensure we add further growth to our market leading<fipWRAP> position. The prospects for Primary Care remain very positive, but difficult to<fipWRAP> predict in terms of timing and quantum. By the time of our full year results<fipWRAP> announcement it is expected that the direction of the service requirement will<fipWRAP> be better defined and many of the current tender opportunities will have been<fipWRAP> finalised."</fipP> <fipP> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

Enquiries:<fipBR> <fipBR>

John Rennocks Martyn Ellis Toby Mountford<fipBR>

Chairman Finance Director Citigate Dewe Rogerson<fipBR>

Tel: 01784 221600 Tel: 01784 221600 Tel: 020 7638 9571<fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>Interim management report</fipP> <fipP>Introduction</fipP> <fipP>The Group's results for the six months are in line with management<fipWRAP> expectations reported at the time of the Interim Management Statement in May.<fipWRAP> </fipP> <fipP>The Social Care business has delivered a much improved margin on revenues<fipWRAP> slightly down in a difficult market. Steady progress is being made in improving<fipWRAP> its performance further. Meanwhile, the Primary Care business, facing a market<fipWRAP> undergoing significant change, has continued to prepare for the range of<fipWRAP> opportunities expected in the forseeable future, whilst maintaining a high level<fipWRAP> of service to its existing customer base. </fipP> <fipP><fipBR> </fipP>

2008 2007 2007<fipBR>

Half year Half year Full year<fipBR> <fipBR>

Revenue £84.5m £89.7m £179.6m<fipBR>

Operating profit £5.3m £6.9m £13.1m<fipBR>

Profit before tax £3.4m £5.6m £8.9m<fipBR>

Profit after tax £2.5m £3.9m £5.8m<fipBR>

Earnings per share 2.2p 3.8p 5.4p<fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>The segmental analysis below illustrates the trading performance of the<fipWRAP> two business areas of Social Care and Primary Care.</fipP> <fipP><fipBR> </fipP> <fipP>Segmental analysis </fipP> <fipP><fipBR> </fipP>

2008 Half year 2007 Half year 2007 Full year<fipBR>

Revenue Operating Revenue Operating profit Revenue Operating profit<fipBR>

profit<fipBR>

Social Care £59.2m £5.9m £60.8m £4.7m £124.2m £10.4m<fipBR>

Primary Care £25.3m £0.3m £28.9m £2.2m £55.4m £3.4m<fipBR>

Termination costs (£0.9m)<fipBR>

Bank fee (£0.7m)<fipBR> <fipBR>

Totals £84.5m £5.3m £89.7m £6.9m £179.6m £13.1m<fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>Social Care</fipP> <fipP><fipBR> </fipP> <fipP>Our Social Care businesses provide community services, primarily<fipWRAP> homecare, to local authorities and private patients through a network of 120<fipWRAP> owned branches with a similar number of franchised operations branded as<fipWRAP> Carewatch.</fipP> <fipP><fipBR> </fipP> <fipP>Social Care profits have increased by £1.2m compared to last half year,<fipWRAP> accounted for mainly by the increased profitability of the Hertfordshire<fipWRAP> contract, £0.6m, and the full year impact from last year's acquisitions, also<fipWRAP> £0.6m. Social Care margin was reduced in 2007 as the then new Hertfordshire<fipWRAP> contract was loss-making at the time and the margin in 2008 benefits from the<fipWRAP> increased input from acquisitions which are operating at a higher profit margin<fipWRAP> than the "core" Goldsborough / Medico branches. Revenue is slightly down on last<fipWRAP> year, despite the inclusion of the benefit of acquisitions made during the<fipWRAP> second half of 2007. The volume of hours worked by Goldsborough / Medico<fipWRAP> declined, due in part to the continuing pressures on Local Authority budgets,<fipWRAP> with many of the more domestic care packages being cancelled. However there<fipWRAP> remains considerable variation in the performance of individual branches within<fipWRAP> the Goldsborough / Medico network. Certain of our branches show good growth year<fipWRAP> on year and tend to be those where there is stability in branch management and<fipWRAP> where the recruitment of careworkers is most effective. There is considerable<fipWRAP> and sustained effort being applied to underperforming branches where a number of<fipWRAP> operational issues led to a shortage of work from certain Local Authorities. The<fipWRAP> new management team, in place for less than a year, have made significant<fipWRAP> progress in resolving these issues and expect to see the benefit from this work<fipWRAP> begin to emerge in the second half of the year. Those branches supporting the<fipWRAP> Hertfordshire contract continue to provide an excellent service and the contract<fipWRAP> now delivers returns in line with our expectations at the time of its<fipWRAP> commencement in February 2007. </fipP> <fipP><fipBR> </fipP> <fipP>There is no shortage of opportunities available to the Goldsborough /<fipWRAP> Medico business evidenced by the fact that the Carewatch franchise network has<fipWRAP> satisfactorily maintained its volume whilst operating in the same marketplace.<fipWRAP> The variability in the Goldsborough / Medico performance clearly demonstrates<fipWRAP> the potential for improvement and management remain confident that progress will<fipWRAP> be more evident in the near term. </fipP> <fipP><fipBR> </fipP> <fipP>Our two private homecare providers, Country Cousins and Patricia Whites,<fipWRAP> have continued to grow both revenue and profitability in line with our<fipWRAP> expectations. </fipP> <fipP><fipBR> </fipP> <fipP>Primary Care</fipP> <fipP><fipBR> </fipP> <fipP>Primary Care provides general practitioner out-of-hours and other primary<fipWRAP> care services to Primary Care Trusts (PCTs), secure institutions and police<fipWRAP> forces through the Primecare Primary Care, Cornelle, Primecare Forensic Medical<fipWRAP> (PFM) Secure and Police brands. </fipP> <fipP><fipBR> </fipP> <fipP>The market for our Primary Care services continues to undergo significant<fipWRAP> change with in-hours and out-of-hours provision becoming increasingly integrated<fipWRAP> into a 24-hour urgent care requirement. The reduction in turnover and profit in<fipWRAP> Primary Care is largely due to the loss of two out-of-hours contracts in the<fipWRAP> first half of 2007, where PCTs elected to organise an in-house provision of the<fipWRAP> service. The contract base has remained broadly stable in the last twelve months<fipWRAP> with this period's revenue being 4% down on the second half of 2007. Whilst the<fipWRAP> majority of our traditional out-of-hours contracts are due for renewal in the<fipWRAP> spring of 2009, a number have already extended a further six months, and others<fipWRAP> are expected to follow suit as PCTs finalise their plans and the impact of the<fipWRAP> Darzi initiative in particular, becomes apparent. </fipP> <fipP><fipBR> </fipP> <fipP>Recognising the changing shape of the market, Primecare has continued to<fipWRAP> invest in business development management to ensure the many opportunities<fipWRAP> available are effectively addressed. The level of tender activity in recent<fipWRAP> months has been at an unprecedented level. Primecare has tendered for many of<fipWRAP> the GP practices and health centres under the Darzi programme, which are due to<fipWRAP> be operational by the start of 2009. To date our pre-qualification<fipWRAP> questionnaires have been well received and whilst it is early days in the<fipWRAP> process, we are encouraged by the positive responses received. The fact that<fipWRAP> Primecare opened the first such extended hours service in the North East of<fipWRAP> England in February 2008, serves as a valuable reference site for the bids now<fipWRAP> being submitted elsewhere. In addition, Primecare is short-listed to manage a<fipWRAP> number of Urgent Care Centres in the North of England, which will operate on a<fipWRAP> 24-hour basis and are designed to reduce Accident and Emergency admissions. We<fipWRAP> are also in discussion with commercial organisations to provide telephone-based<fipWRAP> services, but with a clinical element, which will enable better utilisation of<fipWRAP> the Birmingham clinical response centre.</fipP> <fipP><fipBR> </fipP> <fipP>The new Managing Director of Primecare joins the business in early<fipWRAP> September and one of his first challenges will be the delivery of profitable new<fipWRAP> business from this very broad range of opportunities.</fipP> <fipP><fipBR> </fipP> <fipP>Tender activity within the Forensic Medical business has also seen growth<fipWRAP> in the first half with a number of Police forces expected to outsource their<fipWRAP> medical provision in the coming months. The Department of Health recently<fipWRAP> announced an additional £23m funding for Prison healthcare and a number of<fipWRAP> significant tenders are expected in the near term. </fipP> <fipP> </fipP> <fipP>Chief Executive role </fipP> <fipP> </fipP> <fipP>The operating profit for the six months to 4th July 2008 has borne<fipWRAP> termination costs totalling £851k, including that of Stephen Booty who stood<fipWRAP> down as the Group's Chief Executive on 30th April 2008. The termination costs<fipWRAP> for Stephen Booty amounted to £626k, being his contractual entitlement. A major<fipWRAP> element of this cost related to payments totalling £226k in respect of the final<fipWRAP> salary pension scheme of which he is a member.<fipBR> </fipP> <fipP>A search process for a successor has commenced, in the short term I have<fipWRAP> assumed an executive role until an appointment is made.</fipP> <fipP><fipBR> </fipP> <fipP>Interest costs</fipP> <fipP><fipBR> </fipP> <fipP>The Group has entered into interest rate hedging arrangements which have<fipWRAP> the effect of fixing £60m of its borrowing until October 2010 within a range of<fipWRAP> LIBOR interest rates between 4.50% and 7.00%, upon which a margin is paid. At<fipWRAP> the 2007 year-end these contracts had a negative value of £421,000; however this<fipWRAP> position has reversed by 4 July 2008 when the value was £40,000 positive. This<fipWRAP> has led to a reduction of £461,000 in the reported net interest charge in the<fipWRAP> first half of 2008. </fipP> <fipP><fipBR> </fipP> <fipP>Cash flow</fipP> <fipP><fipBR> </fipP> <fipP>Cash flow from operations, before pension enhancements, was strong in the<fipWRAP> first half totalling £9.1m (2007: £1.0m). In addition to the profit earned in<fipWRAP> the period, the main contributor to the debt reduction has been the<fipWRAP> effectiveness of controls over debtors where days outstanding have reduced to 39<fipWRAP> days, down from 43 days at the end of 2007. The Group continues to make<fipWRAP> additional contributions to its defined benefit pension schemes, which totalled<fipWRAP> £2.0m in the first half. Closing net borrowings were £54.1m (year-end 2007:<fipWRAP> £58.0m).</fipP> <fipP><fipBR> </fipP> <fipP>Taxation</fipP> <fipP><fipBR> </fipP> <fipP>The tax charge for the period was £1.0m (2007: £1.7m) stemming from an<fipWRAP> underlying average tax rate on trading profit of 28.2%.</fipP> <fipP><fipBR> </fipP> <fipP>Dividends</fipP> <fipP><fipBR> </fipP> <fipP>With the earnings reduction in the first half of the year, the Board does<fipWRAP> not propose to pay an interim dividend (2007: 1.0p). The final dividend position<fipWRAP> will be considered by the Board when the full year results are known and the<fipWRAP> prospects for 2009 have been considered. </fipP> <fipP><fipBR> </fipP> <fipP>Risks and uncertainties</fipP> <fipP><fipBR> </fipP> <fipP>Details of the principal risks and uncertainties are set out in note 16<fipWRAP> and are followed by a Directors' Responsibility Statement. </fipP> <fipP><fipBR> </fipP> <fipP>Outlook</fipP> <fipP><fipBR> </fipP> <fipP>The challenges facing Nestor's two business streams are quite different.<fipWRAP> In Social Care, we must continue the initiatives currently underway to improve<fipWRAP> the performance of Goldsborough / Medico and spread the good practice of many of<fipWRAP> our branches across the network, while also continuing recent successes in new<fipWRAP> business opportunities, to ensure we add further growth to our market leading<fipWRAP> position. The prospects for Primary Care remain very positive, but difficult to<fipWRAP> predict in terms of timing and quantum. By the time of our full year results<fipWRAP> announcement it is expected that the direction of the service requirement will<fipWRAP> be better defined and many of the current tender opportunities will have been<fipWRAP> finalised.</fipP> <fipP><fipBR> </fipP> <fipP>John Rennocks</fipP> <fipP>Chairman </fipP> <fipP><fipBR> </fipP> <fipP>28th August 2008 </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

Group income statement (unaudited)<fipBR>

for the six months ended 4th July 2008<fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR> <fipBR>

Revenue 84,465 89,719 179,623 <fipBR>

Cost of sales (54,219) (59,726) (116,681)<fipBR> <fipBR>

Gross profit 30,246 29,993 62,942 <fipBR>

Administrative expenses (24,937) (23,101) (49,794)<fipBR> <fipBR>

Operating profit 5,309 6,892 13,148 <fipBR>

Finance income 573 852 213 <fipBR>

Finance expense (2,461) (2,136) (4,447)<fipBR> <fipBR>

Profit before taxation 3,421 5,608 8,914 <fipBR>

Tax expense (966) (1,670) (3,085)<fipBR> <fipBR>

Profit for the period 2,455 3,938 5,829 <fipBR> <fipBR> <fipBR>

Earnings per 10p share<fipBR>

Basic 2.18p 3.80p 5.39p <fipBR>

Diluted 2.18p 3.80p 5.38p <fipBR> <fipBR> <fipBR>

Equity dividends (1,128) (2,254) (3,382)<fipBR>

Dividends per share 1.00p 2.00p 3.00p <fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

Group balance sheet (unaudited)<fipBR>

as at 4th July 2008<fipBR> <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR> <fipBR>

Non-current assets<fipBR>

Goodwill 96,462 94,993 97,191 <fipBR>

Other intangible assets 291 699 485 <fipBR>

Property, plant and equipment 2,946 3,538 3,558 <fipBR>

Deferred tax assets 3,292 3,982 2,964 <fipBR> <fipBR>

Non-current assets 102,991 103,212 104,198 <fipBR> <fipBR>

Current assets<fipBR>

Trade and other receivables 26,516 29,856 29,611 <fipBR>

Derivative financial instruments 40 882 - <fipBR>

Current tax asset - - 71 <fipBR>

Cash and cash equivalents 275 615 536 <fipBR> <fipBR>

Current assets 26,831 31,353 30,218 <fipBR> <fipBR>

Current liabilities<fipBR>

Borrowings - bank overdrafts (4,407) (6,049) (4,504)<fipBR>

Derivative financial instruments - - (421)<fipBR>

Trade and other payables (19,149) (17,193) (19,501)<fipBR>

Current tax liabilities (372) (1,735) - <fipBR>

Employment benefit liabilities (2,430) (2,412) (3,122)<fipBR>

Property provisions (1,205) (938) (1,091)<fipBR> <fipBR>

Current liabilities (27,563) (28,327) (28,639)<fipBR> <fipBR>

Net current (liabilities)/assets (732) 3,026 1,579 <fipBR> <fipBR>

Total assets less current liabilities 102,259 106,238 105,777 <fipBR> <fipBR>

Non-current liabilities<fipBR>

Borrowings - bank loans (50,000) (54,000) (54,000)<fipBR>

Employment benefit liabilities (3,832) (2,972) (3,250)<fipBR>

Property provisions (1,139) (1,085) (1,279)<fipBR> <fipBR>

Non-current liabilities (54,971) (58,057) (58,529)<fipBR> <fipBR>

Net assets 47,288 48,181 47,248 <fipBR> <fipBR> <fipBR>

Equity<fipBR>

Called up share capital 11,284 11,282 11,284 <fipBR>

Share premium account 71,439 71,405 71,439 <fipBR>

Share payment reserve 1,080 1,219 931 <fipBR>

Other reserves 864 864 864 <fipBR>

Retained losses (37,379) (36,589) (37,270)<fipBR> <fipBR>

Total equity 47,288 48,181 47,248 <fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

Statement of recognised income and expense (unaudited)<fipBR>

for the six months ended 4th<fipBR>

July 2008<fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR> <fipBR>

Actuarial (losses)/gains arising (1,994) 5,272 3,267 <fipBR>

in defined benefit pension<fipBR>

schemes <fipBR>

Deferred taxation 558 (1,476) (915)<fipBR>

credit/(charge) arising on<fipBR>

actuarial (losses)/gains<fipBR>

Adjustment to deferred tax asset - (181) (181)<fipBR>

for change in rate of UK<fipBR>

corporation tax <fipBR> <fipBR>

Net (expense)/income recognised (1,436) 3,615 2,171 <fipBR>

directly in equity<fipBR>

Profit for the period 2,455 3,938 5,829 <fipBR> <fipBR>

Net recognised income 1,019 7,553 8,000 <fipBR> <fipBR> <fipBR> <fipBR>

Group cash flow statement<fipBR>

(unaudited)<fipBR>

for the six months ended 4th<fipBR>

July 2008<fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR> <fipBR>

Operating activities<fipBR>

Cash generated from/(used in) 7,105 (1,603) 8,010 <fipBR>

operations<fipBR>

Interest paid (2,486) (2,060) (4,233)<fipBR>

Interest received 2 21 31 <fipBR>

Income taxes paid (231) (392) (2,277)<fipBR>

Net cash generated from/(used 4,390 (4,034) 1,531 <fipBR>

in) operating activities<fipBR> <fipBR>

Investing activities<fipBR>

Purchase of property, plant and (129) (666) (1,475)<fipBR>

equipment<fipBR>

Purchases of businesses and (425) (6,481) (8,841)<fipBR>

subsidiary undertakings<fipBR>

Sale of subsidiary undertaking - - 162 <fipBR>

Net cash used in investing (554) (7,147) (10,154)<fipBR>

activities<fipBR> <fipBR>

Financing activities<fipBR>

Issue of ordinary share capital, - 30,699 30,735 <fipBR>

net of expenses<fipBR>

Equity dividends paid to - (2,254) (3,382)<fipBR>

shareholders <fipBR>

Decrease in loans from banks (4,000) (16,000) (16,000)<fipBR>

Decrease in bank overdrafts (97) (741) (2,286)<fipBR>

Net cash (used in)/generated (4,097) 11,704 9,067 <fipBR>

from financing activities <fipBR> <fipBR>

Net (decrease)/increase in cash (261) 523 444 <fipBR>

and cash equivalents<fipBR> <fipBR>

Cash and cash equivalents at the 536 92 92 <fipBR>

beginning of the period<fipBR>

Net (decrease)/increase in cash (261) 523 444 <fipBR>

and cash equivalents<fipBR> <fipBR>

Cash and cash equivalents at the 275 615 536 <fipBR>

end of the period<fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>Notes to the condensed financial statements</fipP> <fipP>for the six months ended 4th July 2008</fipP> <fipP> </fipP> <fipP>1. Basis of preparation</fipP> <fipP><fipBR> </fipP> <fipP>The unaudited interim condensed financial statements for the six months<fipWRAP> ended 4th July 2008 have been prepared in accordance with International<fipWRAP> Reporting Standard 34 "Interim Financial Reporting" (IAS 34) and have been<fipWRAP> prepared on the basis of International Reporting Standards (IFRS), International<fipWRAP> Accounting Standards (IAS) and Interpretations (SICs and IFRICs) which have been<fipWRAP> adopted by the European Commission for use in the EU (collectively "Adopted<fipWRAP> IFRS").</fipP> <fipP><fipBR> </fipP> <fipP>The financial information contained within the interim statement does not<fipWRAP> constitute statutory accounts as defined in section 240 of the Companies Act<fipWRAP> 1985. A copy of the statutory accounts for the year ended 31st December 2007 has<fipWRAP> been delivered to the Registrar of Companies. The auditors' report on those<fipWRAP> accounts was not qualified and did not contain statements under section 237(2)<fipWRAP> or (3) of the Companies Act 1985.</fipP> <fipP><fipBR> </fipP> <fipP>The Annual Report is available on the Group's website:<fipWRAP> www.nestorplc.co.uk; and on request from the Company's registered<fipWRAP> office.</fipP> <fipP><fipBR> </fipP> <fipP>Except as noted below, the accounting policies and methods of computation<fipWRAP> adopted in the preparation of the unaudited interim financial statements are<fipWRAP> consistent with the policies applied by the Group in its consolidated financial<fipWRAP> statements for the year ended 31st December 2007. In the current year the Group<fipWRAP> has adopted IFRIC 11 "IFRS 2 - Group and Treasury Share Transactions", IFRIC 12<fipWRAP> "Service Concession Arrangements" and IFRIC 14 "IAS 19 - The Limits on a Defined<fipWRAP> Benefit Asset, Minimum Funding Requirements and their Interaction". None of<fipWRAP> these have had a material impact on the results of the Group.</fipP> <fipP><fipBR> </fipP> <fipP>Estimates and judgements</fipP> <fipP><fipBR> </fipP> <fipP>The preparation of accounts in accordance with Adopted IFRS requires<fipWRAP> management to make estimates and assumptions that affect the reported amounts of<fipWRAP> assets and liabilities at the date of the accounts and the reported amounts of<fipWRAP> revenues and expenses during the reported period. These estimates are based on<fipWRAP> historical experience and various other assumptions that management and<fipWRAP> directors believe are reasonable under the circumstances, the results of which<fipWRAP> form the basis for making judgements about the carrying value of assets and<fipWRAP> liabilities that are not readily apparent from other sources. Areas comprising<fipWRAP> critical judgements that may significantly affect the Group's earnings and<fipWRAP> financial position are bad debt provisioning, valuation of intangibles including<fipWRAP> goodwill, tax enquiries, provisions for pensions, income taxes, property related<fipWRAP> items and share-based payments.</fipP> <fipP><fipBR> </fipP> <fipP>2. Segmental information</fipP> <fipP><fipBR> </fipP> <fipP>For reporting purposes, the Group's results for the period ended 4th July<fipWRAP> 2008 have been analysed between Social Care and Primary Care.</fipP> <fipP><fipBR> </fipP> <fipP>Costs have been allocated on a specific basis where possible, and certain<fipWRAP> central costs allocated on a reasonable and consistent basis.</fipP> <fipP><fipBR> </fipP> <fipP>The operational analysis of revenue and operating profit is as<fipWRAP> follows:</fipP> <fipP><fipBR> </fipP>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Revenue by business segment<fipBR>

Social Care 59,211 60,846 124,204 <fipBR>

Primary Care 25,254 28,873 55,419 <fipBR> <fipBR>

Total revenue 84,465 89,719 179,623 <fipBR> <fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Operating profit by business<fipBR>

segment <fipBR>

Social Care 5,266 4,735 10,054 <fipBR>

Primary Care 43 2,157 3,094 <fipBR> <fipBR>

Total operating profit 5,309 6,892 13,148 <fipBR> <fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Profit for the period<fipBR>

Operating profit by business<fipBR>

segment <fipBR>

Social Care 5,266 4,735 10,054 <fipBR>

Primary Care 43 2,157 3,094 <fipBR> <fipBR>

Total operating profit by 5,309 6,892 13,148 <fipBR>

business segment<fipBR> <fipBR>

Finance income 573 852 213 <fipBR>

Finance expense (2,461) (2,136) (4,447)<fipBR> <fipBR>

Profit before taxation 3,421 5,608 8,914 <fipBR>

Tax expense (966) (1,670) (3,085)<fipBR> <fipBR>

Profit for the period 2,455 3,938 5,829 <fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

3. Finance income and expense<fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Finance income<fipBR>

Bank interest receivable 2 21 31 <fipBR>

Net finance credit on defined 110 91 182 <fipBR>

benefit pension schemes<fipBR>

Fair value gain relating to 461 740 - <fipBR>

interest rate derivative<fipBR>

contracts<fipBR> <fipBR>

Total finance income 573 852 213 <fipBR> <fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Finance expense<fipBR>

Unwinding of discount in (79) (49) (126)<fipBR>

property provisions <fipBR>

Interest payable on bank loans (2,382) (2,087) (4,302)<fipBR>

and overdrafts<fipBR>

Fair value loss relating to - - (19)<fipBR>

interest rate derivative<fipBR>

contracts<fipBR> <fipBR>

Total finance expense (2,461) (2,136) (4,447)<fipBR> <fipP><fipBR> </fipP> <fipP>4. Taxation</fipP> <fipP><fipBR> </fipP> <fipP>Tax expense recognised in the financial statements comprises UK<fipWRAP> corporation tax charges or credits together with deferred tax charges or<fipWRAP> credits.</fipP> <fipP><fipBR> </fipP> <fipP>The overall tax expense of £966,000 represents 28.2% of the profit before<fipWRAP> taxation. This tax rate is based on an estimate of the tax rate that will apply<fipWRAP> to the full year results (2007: 30.00%).</fipP> <fipP><fipBR> </fipP> <fipP>5. Earnings per share</fipP> <fipP><fipBR> </fipP> <fipP>Basic earnings per 10p share is calculated by dividing the earnings<fipWRAP> attributable to ordinary shareholders by the weighted average number of ordinary<fipWRAP> shares in issue during the period.</fipP> <fipP><fipBR> </fipP> <fipP>For diluted earnings per share, the weighted average number of ordinary<fipWRAP> shares in issue is adjusted to assume conversion of all potentially dilutive<fipWRAP> ordinary shares. The Group has only one category of potentially dilutive<fipWRAP> ordinary shares: those share options granted to employees where the exercise<fipWRAP> price is less than the average market price of the Company's ordinary shares during the period.<fipWRAP> In the first half of 2008 no options qualified under this test. Diluted earnings<fipWRAP> per share is therefore the same as basic earnings per share for this<fipWRAP> period.</fipP> <fipP><fipBR> </fipP> <fipP>The weighted average number of shares in issue in the six months ended<fipWRAP> 30th June 2007 and in the year to 31st December 2007 reflect the rights issue<fipWRAP> and also the effect of other share issues in the periods. No shares were issued<fipWRAP> in the six month period to 4th July 2008, with the number of shares in issue<fipWRAP> therefore remaining unchanged throughout the period at 112,844,209.</fipP> <fipP><fipBR> </fipP> <fipP>The weighted average number of shares used in the calculations is set out<fipWRAP> below:</fipP> <fipP><fipBR> </fipP>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

thousands Thousands Thousands <fipBR>

Weighted average number of shares - in issue 112,844 103,694 108,243 <fipBR>

Dilutive effect of options - 227 44 <fipBR> <fipBR>

Weighted average number of shares - diluted 112,844 103,921 108,287 <fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Earnings being the net profit attributable to equity holders of 2,455 3,938 5,829 <fipBR>

the parent<fipBR> <fipBR>

Earnings 2,455 3,938 5,829 <fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

pence Pence Pence <fipBR>

Earnings per share - basic 2.18p 3.80p 5.39p <fipBR>

Dilutive effect of options - - (0.01p)<fipBR> <fipBR>

Earnings per share - diluted 2.18p 3.80p 5.38p <fipBR> <fipP><fipBR> </fipP> <fipP> </fipP> <fipP>6. Dividends</fipP> <fipP><fipBR> </fipP> <fipP>The final dividend for 2007 was 1.00p per 10p share, costing £1,128,000.<fipWRAP> This was approved by shareholders at the Annual General Meeting on 20th June<fipWRAP> 2008, and was paid on 25th July 2008 to those shareholders on the register on<fipWRAP> 27th June 2008. </fipP> <fipP><fipBR> </fipP> <fipP>No interim dividend for 2008 is being declared (2007: 1.00p per 10p<fipWRAP> share, costing £1,128,000).</fipP> <fipP><fipBR> </fipP> <fipP>7. Purchase of businesses and subsidiaries</fipP> <fipP><fipBR> </fipP> <fipP>No acquisitions have been made in the six months to 4th July 2008. In the<fipWRAP> year to 31st December 2007 six companies and one unincorporated business were<fipWRAP> acquired. All were in the Social Care business segment.</fipP> <fipP><fipBR> </fipP> <fipP>The provisional fair values of assets and liabilities acquired in 2007,<fipWRAP> and goodwill arising thereon, together with subsequent adjustments are outlined<fipWRAP> in the table below. All values of assets, liabilities and goodwill arising on<fipWRAP> the 2007 acquisitions will be finalised in the 2008 financial statements when<fipWRAP> detailed reviews of businesses acquired are completed. The payment of deferred<fipWRAP> consideration is in part dependent on future performance of the businesses<fipWRAP> acquired. In the six months to 4th July 2008, £425,000 of deferred consideration<fipWRAP> was paid. On review of performance, a further £1,450,000 of deferred<fipWRAP> consideration has been written back in relation to two acquired<fipWRAP> businesses.</fipP> <fipP><fipBR> </fipP> <fipP>Intangible assets acquired represent the capitalised value of customer<fipWRAP> contracts. These have been capitalised at fair value and amortised over the<fipWRAP> remaining life of each contract. Contract lives so amortised vary between one<fipWRAP> year and five years.</fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

Fair value<fipBR>

As at Adjustments As at <fipBR>

31.12.2007 made in 2008 04.07.2008 <fipBR>

£000 £000 £000 <fipBR>

Fixed assets 15 - 15 <fipBR>

Intangible assets 570 - 570 <fipBR> <fipBR>

Non-current assets 585 - 585 <fipBR> <fipBR>

Current assets and liabilities<fipBR>

Debtors and prepayments 1,788 - 1,788 <fipBR>

Creditors and accruals (3,161) 29 (3,132)<fipBR>

Net cash 1,102 - 1,102 <fipBR> <fipBR>

Net current assets (271) 29 (242)<fipBR> <fipBR>

Provisions (250) - (250)<fipBR> <fipBR>

Net assets acquired 64 29 93 <fipBR> <fipBR> <fipBR>

Purchase consideration 13,020 (1,450) 11,570 <fipBR>

Costs of acquisition 64 - 64 <fipBR> <fipBR>

Total cost 13,084 (1,450) 11,634 <fipBR> <fipBR>

Total goodwill 13,020 (1,479) 11,541 <fipBR> <fipBR> <fipBR>

As at Cash flows As at <fipBR>

Cash flows in respect of purchase of businesses 31.12.2007 in 2008 04.07.2008 <fipBR>

£000 £000 £000 <fipBR>

2007 acquisitions:<fipBR>

Total consideration 13,020 (1,450) 11,570 <fipBR>

Costs of acquisition 64 - 64 <fipBR> <fipBR>

13,084 (1,450) 11,634 <fipBR>

Less: deferred and retained consideration<fipBR>

accrued, not yet paid (3,250) 1,875 (1,375)<fipBR> <fipBR>

9,834 425 10,259 <fipBR>

Less: net cash acquired (1,102) - (1,102)<fipBR> <fipBR>

8,732 425 9,157 <fipBR> <fipBR>

2005 acquisitions:<fipBR>

Deferred and retained consideration, previously accrued, paid in 109 - 109 <fipBR>

2007<fipBR> <fipBR>

Total net cash flows in respect of purchase of businesses 8,841 425 9,266 <fipBR> <fipBR> <fipBR>

Goodwill<fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Net book value at the beginning of the period 97,191 84,369 84,369 <fipBR>

Arising on 2007 acquisitions - 10,818 13,029 <fipBR>

Subsequent reductions relating to acquisitions made in prior (729) (194) (203)<fipBR>

periods<fipBR>

Disposals - - (4)<fipBR> <fipBR>

Net book value at the end of the period 96,462 94,993 97,191 <fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>8. Derivative financial instruments</fipP> <fipP><fipBR> </fipP> <fipP>Counterparties to the financial instruments entered into by the Group are<fipWRAP> major international financial institutions with high long term credit ratings.<fipWRAP> The Group monitors its credit exposure to its counterparties via their credit<fipWRAP> ratings (where applicable) and through its policy thereby limiting its exposure<fipWRAP> to any one party to ensure that they are within Board approved limits and that<fipWRAP> there are no significant concentrations of credit risk.</fipP> <fipP><fipBR> </fipP> <fipP>At 4th July 2008 the Group has entered into interest rate swap contracts<fipWRAP> to hedge its exposure to changes in interest rates. These derivative financial<fipWRAP> instruments are initially recognised at fair value at the date each contract is<fipWRAP> entered into and are subsequently remeasured to their fair value at each balance<fipWRAP> sheet date. The resultant gain or loss is recognised within the income statement<fipWRAP> within finance income or expense. Hedge accounting has not been applied. This<fipWRAP> practice is considered to be consistent with the requirements of IAS 39<fipWRAP> "Financial instruments: Recognition and Measurement".</fipP> <fipP><fipBR> </fipP> <fipP>The fair value of the interest rate derivatives is obtained using<fipWRAP> quotations supplied by the counterparty banks.</fipP> <fipP><fipBR> </fipP> <fipP>At 4th July 2008 the Group has entered into two such derivatives with a<fipWRAP> combined notional value of £60,000,000. One, for a notional sum of £45,000,000,<fipWRAP> has the effect of restricting LIBOR rates on that level of borrowings to a range<fipWRAP> between 4.50% and 7.00%, whilst the other, for a notional sum of £15,000,000,<fipWRAP> has the effect of restricting LIBOR rates on that level of borrowings to a range<fipWRAP> between 4.85% and 7.00%. At 4th July 2008 the fair value of these two products<fipWRAP> combined was positive £40,000; this fair value has been accounted for within<fipWRAP> current assets. By reference to the negative fair value of £421,000 of the same<fipWRAP> derivatives as at 31st December 2007, a favourable fair value adjustment of<fipWRAP> £461,000 has arisen in the six month period to 4th July 2008, which has been<fipWRAP> recognised within finance income. Both open derivative contracts expire in<fipWRAP> October 2010.</fipP> <fipP><fipBR> </fipP> <fipP>9. Employment benefit liabilities</fipP> <fipP><fipBR> </fipP> <fipP>The actuarial deficits on the Group's two defined benefit pension schemes<fipWRAP> total £6,262,000. A reconciliation of the movement between the beginning and end<fipWRAP> of each period is as follows:</fipP> <fipP><fipBR> </fipP>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

At the start of the period 6,372 11,990 11,990 <fipBR>

Contributions paid (2,220) (1,529) (2,742)<fipBR>

Current service cost 226 286 573 <fipBR>

Finance credit (110) (91) (182)<fipBR>

Actuarial loss/(gain) 1,994 (5,272) (3,267)<fipBR> <fipBR>

Total liability at the end of 6,262 5,384 6,372 <fipBR>

the period<fipBR> <fipBR>

<fipBR>

Liabilities estimated to be 3,832 2,972 3,250 <fipBR>

settled after more than one year<fipBR>

Liabilities estimated to be 2,430 2,412 3,122 <fipBR>

settled within one year<fipBR> <fipBR>

Total liability at the end of 6,262 5,384 6,372 <fipBR>

the period<fipBR> <fipP><fipBR> </fipP> <fipP>The factors affecting the reduction in the combined deficits from<fipWRAP> £6,372,000 at 31st December 2007 to £6,262,000 at 4th July 2008 were deficit<fipWRAP> reduction payments made of £1,952,000 plus other net reductions of £152,000,<fipWRAP> offset by the actuarial loss of £1,994,000.</fipP> <fipP><fipBR> </fipP> <fipP>10. Property provisions</fipP> <fipP><fipBR> </fipP> <fipP>The Group has a number of properties that are either vacant or sublet at<fipWRAP> a discount. Provision has been made in these cases for onerous lease costs<fipWRAP> taking into account estimates of the length of time properties will be vacant<fipWRAP> (net of any potential sublease income where this can be estimated with a high<fipWRAP> degree of probability), together with any dilapidation costs and other costs<fipWRAP> associated with the termination or disposal of leases. In determining the<fipWRAP> provision for vacant properties, the cash flows have been discounted using the<fipWRAP> Group's weighted average cost of capital. The estimates used in determining the<fipWRAP> appropriate level of provision represent management's best view of likely market<fipWRAP> conditions after taking external advice. Actual activity may differ from these<fipWRAP> estimates due to the effect of changes in the property market or subsequent<fipWRAP> business decisions. These differences may have a material impact on the<fipWRAP> provisions established for these matters.</fipP> <fipP><fipBR> </fipP> <fipP>Provision has also been made in respect of lease dilapidation obligations<fipWRAP> relating to properties that continue to be occupied.</fipP> <fipP><fipBR> </fipP>

The composition of the property provision is as follows:<fipBR>

04.07.2008 30.06.2007 31.12.2007<fipBR>

£000 £000 £000<fipBR>

Relating to vacant or sublet<fipBR>

properties:<fipBR>

Onerous lease provision 989 976 894 <fipBR>

Dilapidations 200 161 285 <fipBR>

Closure costs - 8 - <fipBR> <fipBR>

Relating to vacant or sublet 1,189 1,145 1,179 <fipBR>

properties<fipBR>

Relating to properties that continue 1,155 878 1,191 <fipBR>

to be occupied<fipBR> <fipBR>

Total provisions at the end of the 2,344 2,023 2,370 <fipBR>

period<fipBR> <fipBR>

Analysed as:<fipBR>

Provisions estimated to be settled 1,139 1,085 1,279 <fipBR>

after more than one year<fipBR>

Provisions estimated to be settled 1,205 938 1,091 <fipBR>

within one year<fipBR> <fipBR>

Total provisions at the end of the 2,344 2,023 2,370 <fipBR>

period<fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>11. Contingent liabilities</fipP> <fipP><fipBR> </fipP> <fipP>By the nature of the operations carried out by the Primary Care business<fipWRAP> segment, the Group from time to time receives notification of medical incidents<fipWRAP> which could conceivably lead to claims for damages being made against the Group<fipWRAP> on the grounds of negligence or other reasons. In the majority of cases such<fipWRAP> incidents, having been notified, do not in fact lead to a claim being made. Even<fipWRAP> if claims are made, they may be laid against parties other than the Group. In<fipWRAP> any event, even if claims are ultimately laid against the Group, they will<fipWRAP> generally be covered by the Group's insurers subject only to relatively minor<fipWRAP> excesses. Nonetheless it is possible that in certain circumstances the Group<fipWRAP> could face a material liability when presented with such claims. Time lags<fipWRAP> between an original incident and a claim being submitted could typically be long<fipWRAP> so at any point in time the likelihood of the Group facing such a liability may<fipWRAP> be difficult to assess. As at 4th July 2008, the Group is aware of one such<fipWRAP> claim which may possibly cause the Group to ultimately face a material<fipWRAP> liability.</fipP> <fipP><fipBR> </fipP> <fipP>12. Share capital</fipP> <fipP><fipBR> </fipP> <fipP>The total number of 10p ordinary shares in issue, and also the number of<fipWRAP> total voting rights, was 112,844,209 at both 1st January 2008 and 4th July<fipWRAP> 2008.</fipP> <fipP><fipBR> </fipP> <fipP>13. Changes in equity</fipP> <fipP><fipBR> </fipP>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Net recognised income 1,019 7,553 8,000 <fipBR>

Shares issued during the period, - 30,699 30,735 <fipBR>

net of expenses<fipBR>

Dividends to equity shareholders (1,128) (2,254) (3,382)<fipBR>

Increase/(decrease) in share 149 268 (20)<fipBR>

payment reserve<fipBR> <fipBR>

Increase in total equity 40 36,266 35,333 <fipBR>

Total equity at the beginning of 47,248 11,915 11,915 <fipBR>

the period<fipBR> <fipBR>

Total equity at the end of the 47,288 48,181 47,248 <fipBR>

period<fipBR> <fipP><fipBR> </fipP> <fipP>14. Notes to the cash flow statement</fipP> <fipP><fipBR> </fipP>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Reconciliation of profit to cash generated from operations<fipBR>

Profit for the period 2,455 3,938 5,829 <fipBR> <fipBR>

Adjustments for:<fipBR>

Tax expense 966 1,670 3,085 <fipBR>

Finance income (573) (852) (213)<fipBR>

Finance expense 2,461 2,136 4,447 <fipBR>

Share-based payments 149 268 (20)<fipBR>

Amortisation of intangible assets 194 245 493 <fipBR>

Depreciation of property, plant and equipment 738 690 1,573 <fipBR>

Loss on sale of property, plant and equipment 3 212 4 <fipBR>

Gain on sale of subsidiary undertaking - - (156)<fipBR> <fipBR>

Changes in working capital:<fipBR>

Decrease in provisions (2,099) (2,008) (2,903)<fipBR>

Decrease/(increase) in trade and other receivables 3,033 (414) 610 <fipBR>

Decrease in trade and other payables (222) (7,488) (4,739)<fipBR> <fipBR>

Cash generated from/(used in) operations 7,105 (1,603) 8,010 <fipBR> <fipBR>

Six months to Six months to Year to <fipBR>

04.07.2008 30.06.2007 31.12.2007 <fipBR>

£000 £000 £000 <fipBR>

Reconciliation of net cash flow to movement in net debt<fipBR>

(Decrease)/increase in cash and cash equivalents (261) 523 444 <fipBR>

Decrease in loans from banks 4,000 16,000 16,000 <fipBR>

Decrease in bank overdrafts 97 741 2,286 <fipBR> <fipBR>

3,836 17,264 18,730 <fipBR>

Net debt at the beginning of the period (57,968) (76,698) (76,698)<fipBR> <fipBR>

Net debt at the end of the period (54,132) (59,434) (57,968)<fipBR> <fipP><fipBR> </fipP> <fipP>15. Related party transactions</fipP> <fipP><fipBR> </fipP> <fipP>Transactions between the Company and its subsidiaries, which are related<fipWRAP> parties, have been eliminated on consolidation and are not disclosed in this<fipWRAP> note. The Group had no material transactions with other related parties during<fipWRAP> the period. There have been no material changes to the nature of the related<fipWRAP> party transactions as described in the last Annual Report.</fipP> <fipP> </fipP> <fipP>16. Risks and Uncertainties</fipP> <fipP><fipBR> </fipP> <fipP>The principal risk factors, which could materially affect the Group's<fipWRAP> business, financial condition and/or results of operations were described on<fipWRAP> page 22 of the Annual Report and Accounts for 2007. In summary, these risk<fipWRAP> factors were as follows:</fipP> <fipP><fipBR> </fipP>

<fipLI>* <fipP>cuts in government spending may have a material adverse effect</fipP> <fipLIend> <fipLI>* <fipP>that part of Primary Care's revenue that is derived from Primary Care<fipWRAP> Trusts is subject to risks relating to carrying out business with them</fipP> <fipLIend> <fipLI>* <fipP>that part of Social Care's revenue that is derived from the social<fipWRAP> services departments of Local Authorities is subject to risks relating to<fipWRAP> carrying out business with such departments</fipP> <fipLIend> <fipLI>* <fipP>the Primary Care business is dependent on its ability to recruit and<fipWRAP> retain suitably qualified doctors and other medical professionals</fipP> <fipLIend> <fipLI>* <fipP>the Group could be at risk of being found deficient in recruitment<fipWRAP> standards required by regulators and the Group's customers</fipP> <fipLIend> <fipLI>* <fipP>the Group operates a branch network and is dependent on exerting proper<fipWRAP> centralised management over its branches</fipP> <fipLIend> <fipLI>* <fipP>increased use of technology in people's own homes may lead to a decrease<fipWRAP> in the requirement for the Group's services</fipP> <fipLIend> <fipLI>* <fipP>any necessary increase in employer contributions to the Group's pension<fipWRAP> schemes or a liability to make good the deficits in the schemes may have an<fipWRAP> adverse impact on the Group's financial condition</fipP> <fipLIend> <fipLI>* <fipP>competition for the Group's services may increase and may limit the<fipWRAP> ability of the Group in future to maintain market share or revenue levels. The<fipWRAP> main barriers to entry in the Group's businesses are (i) rigorous quality<fipWRAP> assurance standards, regulations and inspections; and (ii) business awarded<fipWRAP> under contracts in relation to which the tendering process is costly and<fipWRAP> rigorous.</fipP> <fipLIend>

<fipP> </fipP> <fipP>In the opinion of the directors, there has been no material change in<fipWRAP> these risk factors in the first six months of the current year, and neither is<fipWRAP> there expected to be any material change in them in the second six<fipWRAP> months.</fipP> <fipP><fipBR> </fipP> <fipP>The directors continue to operate a comprehensive process for managing,<fipWRAP> evaluating and reporting on these risks. Key elements of this process include<fipWRAP> the following:</fipP> <fipP><fipBR> </fipP>

<fipLI>* <fipP>each of the risks identified is reviewed in detail by the executive<fipWRAP> directors and senior management on a semi-annual basis</fipP> <fipLIend> <fipLI>* <fipP>the formal process for identifying discipline-specific risks across the<fipWRAP> Group's operations encompasses financial, IT, human resources, legal, property<fipWRAP> and clinical risks. A mechanism also exists to extend the risk management<fipWRAP> process to any significant new business either acquired or begun by the<fipWRAP> Group</fipP> <fipLIend> <fipLI>* <fipP>A register of all key risks facing the individual businesses within the<fipWRAP> Group is completed and signed by the managing directors of each business at<fipWRAP> least annually.</fipP> <fipLIend>

<fipP><fipBR> </fipP> <fipP>The Group has exposure to certain risks arising from its use of financial<fipWRAP> instruments, these being categorised as market risk, credit risk, liquidity risk<fipWRAP> and capital risk. The Group's use of financial instruments in general, and<fipWRAP> exposure to these associated risks in particular, are described in full in note<fipWRAP> 24, on pages 58 to 62, of the Annual Report and Accounts for 2007. In the<fipWRAP> opinion of the directors the nature of these risks has not significantly changed<fipWRAP> in the first half of 2008, and is likewise not expected to change significantly<fipWRAP> in the second half.</fipP> <fipP><fipBR> </fipP> <fipP>The Group's Annual Report and Accounts for 2007 was distributed to<fipWRAP> shareholders in early May 2008. It is available on the Group's website<fipWRAP> www.nestorplc.co.uk, or on request from the Group Company Secretary at the<fipWRAP> registered office.</fipP> <fipP><fipBR> </fipP> <fipP>Statement of directors' responsibilities</fipP> <fipP><fipBR> </fipP> <fipP>This interim report is the responsibility of, and has been approved by,<fipWRAP> the directors of the Company. It complies with the requirement laid down within<fipWRAP> the Disclosure and Transparency Rules ("DTR") of the UK's Financial Services<fipWRAP> Authority to prepare a half-yearly management and financial report.</fipP> <fipP><fipBR> </fipP> <fipP>The directors confirm that, to the best of their knowledge:</fipP> <fipP><fipBR> </fipP>

<fipLI>* <fipP>the condensed set of financial statements within the report has been<fipWRAP> prepared consistent with the requirements of IAS 34, Interim Financial<fipWRAP> Reporting;</fipP> <fipLIend>

<fipP><fipBR> </fipP>

<fipLI>* <fipP>the interim management report includes a fair review of the important<fipWRAP> events during the six month period ended 4th July 2008 and a description of the<fipWRAP> principal risks and uncertainties for the remaining six months of the year, as<fipWRAP> required by DTR 4.2.7;</fipP> <fipLIend>

<fipP><fipBR> </fipP>

<fipLI>* <fipP>the interim management report includes a fair review of disclosure of<fipWRAP> related party transactions, (note 15) as required by DTR 4.2.8.</fipP> <fipLIend>

<fipP>17. Announcements</fipP> <fipP><fipBR> </fipP> <fipP>This announcement is being sent to all shareholders and is available at<fipWRAP> the Company's registered office: Allen House, Station Road, Egham, Surrey, TW20<fipWRAP> 9NT, and on the Company's website: www.nestorplc.co.uk.</fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipBR> This information is provided by RNS<fipBR> The company news service from the London Stock Exchange<fipBR>

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