TWST: Give us a brief summary of the company, what you see as your business and your company today?

Mr. Jewitt: Nestor Healthcare Group PLC is a health care people business, focused primarily on the U.K. health care market, with a particular speciality in the provision of nurses and doctors for temporary and permanent assignments within the U.K. We see the marketplace itself as being driven in the U.K. by an ageing population, together with very strong funding both publicly and privately, and therefore demand is going to be for more professionals and paid carers to deliver health and home care throughout the U.K.

Key Trends

TWST: What are the key trends or issues that the industry is facing today?

Mr. Jewitt: An aging population drives up demand to an extent that's almost unmeasurable. Why? It's because, with state-funded health care, being free at the point of access, any improvements in delivery capability are immediately picked up by the next disease or the next process of ageing that the population actually reaches. With the UK's population reaching over 20% beyond the age of 65 over the next 20 years, and over 5% over the age of 85 in the next 20 years, you're going to see more complex geriatric health care and home care requirements. So you've got that drive on demand. On the second aspect, we have got a problem with supply. In other words, the ageing population drives up demand, but it also reduces the available young persons, i.e., between the ages of 20 and 40, who are capable of delivering care, or even training to become deliverers of care. So at the time when health care increases in demand, you actually have a reduction, potentially, in the availability of the capacity to deliver that care. That's really what the U.K. is facing, and indeed, I'd suggest most of the mature Western economies are facing. The only differential being how much can be switched on or off in terms of the funding for the health care system, and that's where we come back to the positive aspect of the U.K., where government funding relative to elsewhere is reasonably low, and therefore can only increase. Indeed, over the next three years government funding has already committed to increase, whilst the rest of the non-government-funded health care is also rising. So those are the two key factors.

TWST: As industries look for efficiencies, technology and management information systems enter that mix, can they have an impact on these problems, in staffing without too much administrative cost?

Mr. Jewitt: Technology can be harnessed to actually plan the management and rostering of the health care professionals to a much greater extent. That's where our breakthrough has been over the last four to five years, with the use of in-house systems to deliver better management programs of people for hospitals and other health care organisations within the U.K. Rostering systems using in-house computer programs enhances the availability of individuals that we actually manage or organise. It also enables us to operate over a much wider geographic area, but with fewer people. So our branch network spread - and Nestor has got the largest in the U.K., of branches, combining all of our companies we have over 210 branches throughout the four countries in the United Kingdom. The speed of information that we manage from that is quite critical to us. IT makes that possible.

TWST: As you look at the European Union and the levelling of pricing and employment in that environment, will that have an impact on you, in staffing or other areas of service that you can provide?

Mr. Jewitt: In demand terms, the European Union has no beneficial or negative effect to us, because we're totally U.K.-focused with our U.K. health care businesses. In cost and performance terms, however, the European Union has got various different requirements for self-employed temporary staff that actually have raised the cost of that staffing process for our clients. But the nature of our business has been and will be that we will always pass through those costs to our clients. The cost-effectiveness of the flexible staffing programs that we provide still means that despite that cost increase, they are very cost- beneficial, in service terms, to the final client. The Working Time Regulation that was introduced in October '98, brings in three weeks' paid holiday for temporary staff, and that moves up to four weeks per year in November next year. Just as a caveat to that, I realise that's very different to the U.S. experience, where I think two weeks' holiday is the norm after one year. Obviously in European terms there's a greater expectation. But until now, temporary staff have received no holiday, because they've been self-employed.

TWST: What emphasis is going to be needed on the training part of the equation? Is that an area that you have to take control of or form alliances in which to provide and to certify basic skills, and to retain individuals who are offering them upgrades to their skills?

Mr. Jewitt: U.K nurses and other health care professionals are responsible, as individuals, for their own professional development. However, we are active in providing programs of post-registration education, for nurses, and indeed post-registration General Practitioner training, as well as basic and more advanced care assistant training in order to enhance the skills and knowledge of non-qualified staff. All of this training is of significant importance in trying to shape a work force ready for the future as well as meeting current needs.

Competition

TWST: As you look ahead over the next three to five years, what will allow your company to distinguish itself from the competition? Are there significant areas where you feel you will diverge from the pack?

Mr. Jewitt: We're already the largest of our size and nature in the U.K., and therefore, probably the world, of temporary staffing of health care professionals. We have in excess of 120,000 people capable of working through us. That critical mass gives us a very good springboard to develop added-value business services into health care, as well as the basic supply of people over the next one to three years. Our differential against others is our geographic expansion as well as our historic position. We've been in business for 50 years, nearly, and are the only organisation to be in all four countries of the U.K. We find that local relationships with local health care professionals, being managed by our own local health care professionals, gives us an added value over our competition. We believe that we have the benefits of sophisticated IT systems operating from a central location, that's disseminated through local relationships, managing local people, in a variety of local branches.

Management

TWST: Can you give us a description of top management - the key skill sets, the key strengths that you have at your management table, and the areas you might be focusing on over the next year or two for changes or additions, given the market today?

Mr. Jewitt: In the major businesses, which are our nurse agencies, the key aspect is the level to which nurses in our organisation have developed as management. We have that right the way up to board level, with the main operators, all, bar the managing director, being nurses. This is a fundamental quality control that gives us the quality control needed to continue our significant growth rate. What's of paramount importance to us is our internal training and development programs, to bring our nurses and our other employees through, in their capabilities as businesspeople, in order to run a health care business. We have, as I say, our own internal programs; we've also involved external training programs. At any one time, we probably have between 40 and 50 of our management either on or attending in-house or external programs of development.

TWST: How could the investment community better review this industry? Do you see misperceptions, or insights that get skewed, as they review the current state and the next two to three years' performance?

Mr. Jewitt: I think there is a growing understanding that the health care market is probably the most stable market in the U.K from the point of view of fighting recession, and indeed the most dynamic market from the point of view of growth. We have a market estimate of the middle 50 billion pounds market value across health care, which probably makes it one of the largest industrial sectors in Western Europe. There is a massive proportion of that 55 billion pound market value in people, and the use of people. How much of that will be flexible staffing and permanent staffing is up for debate. The knowledge and understanding of the size of the marketplace, its dynamics, its stability and its recession proofing has been a challenge for us and others of our industry to make sure it is understood.

TWST: When you look at this industry in the year 2003, what will the ideal company look like?

Mr. Jewitt: Bigger. The size of any company is going to reflect the size of the marketplace, and the marketplace will be significantly greater in health care in the U.K. So therefore any company of our size will certainly look to be substantially larger, but still maintain the local differential strengths with good technology. I think a good company will have a series of different structures inside it to reflect not just the provision of people for health care businesses but also the provision of services for health care businesses. That, I think, is really the broad picture for that sort of timing, 2003. Outside of that, there could be some significant changes in between then and now, such as the outsourcing of local government social service requirement. The increase in occupational health activity, due to external legislation, that could also revolutionise the market and the nature of businesses that operate in that market.

TWST: When you look at that size criterion, how much of that do you feel will be through companies growing internally and how much through consolidation or changes in alliances within the industry?

Mr. Jewitt: I think the organic opportunities are almost unlimited in the U.K. People who get into mergers should do so to enhance their organic opportunity, rather than just to deliver additional earnings for a temporary period. The key challenge that anyone has to grow in this business is to get the management structure and the quality of management that's capable of managing the best growth that is available to them. We face major growth opportunities in almost every segment of the health care sector that we operate in, so therefore we have to almost 'ration' ourselves to the best opportunity for the best set of resources.

TWST: What then would you issue as a summary statement for investors, both individual and institutional? In 2003, what will be the advantages that your company will have as an investment today?

Mr. Jewitt: I think we will be the leading provider, as we are today, of temporary health care personnel and services throughout the U.K. to a wide range of organisations and individuals. The emphasis will be on quality and quick response, to be the first-choice partner of organisations providing short- or long-term health and social care for the community.

TWST: On the capital side, the investment necessary to support this growth, is that an issue, or is there sufficient cash flow and funding available?

Mr. Jewitt: Because we are a people organisation, we have very little capital, or very little capital requirement. As such we see that to be no constraint whatsoever. The position on our balance sheet is such that we have excellent borrowing capabilities, which are nowhere close to being utilised, and we have got the ability to cover interest payments on borrowings that are way above 50 million sterling. Yet our debt position, as we reported at the end of the first half, was around 2 million sterling. So we see no constraint in working capital or capital for the development of any infrastructure. That's obviously significantly different if you are actually involved in a nursing home, private hospital or residential home market, where you have to have significant amounts of capital to set up the infrastructure before delivering care to any patient.

TWST: Thank you.

JUSTIN JEWITT CEO Nestor Healthcare Group PLC The Colonnades Beaconsfield Close Hatfield, Hertfordshire AL10 8YD England 1707 255 605 1707 272 250 - Fax

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