A NURSERY provider that was featured in a damaging BBC exposé issued a profits warning last night when it revealed a sudden drop in occupancy levels.

Nord Anglia, which owns Leapfrog, Jigsaw and Petits Enfants nurseries, saw its shares collapse by 35 per cent to 152½p on the news.

In a statement, the company blamed industry-wide low levels of occupancy, caused by a building boom in the nursery school sector two to three years ago.

The education specialist denied categorically that its low occupancy levels were linked to a BBC film featuring one of its Petits Enfants branches, where a reporter working undercover found a number of practices relating to hygiene.

Only two months since the company gave an update on trading at its annual meeting, Nord Anglia said that it had seen a “sudden and marked decline” in occupancy levels. A spokeswoman said that levels averaged about 65 per cent across the group.

The company added that it had been selectively cutting fees for certain nurseries and had been forced to defer planned fee rises at others.

“The combination of low occupancy levels, underperformance in average fee rates and the high fixed-cost base of a nursery business will result in a material reduction in the nursery division’s contribution to group profits for the current financial year,” the statement said.

The company said it was in discussions with its principal lender, over its £40 million debt.

“The principal lender has been supportive and on this basis the directors are confident that they will be able to resolve any banking issues that might arise,” the statement said.

A spokeswoman for the group also refused to comment on whether the group was about to breach its lending covenants.

NordAnglia quit the domestic schools market last year to focus on nurseries, international schools and outsourcing.

The group said yesterday that its international schools unit was performing strongly and its outsourcing business was trading in line with expectations.

The group reported pre-tax profits for the year to August 31 2004, of £3.4 million on turnover of £94 million.

Nord Anglia had been expected to report pre-tax profits of around £9.4 million in the current year.