TIDMSPI
RNS Number : 2777D
Spire Healthcare Group PLC
25 April 2017
Spire Healthcare Group plc
25 April 2017
Annual Report and Notice of Annual General Meeting
Spire Healthcare Group plc (the "Company") released its
preliminary announcement of its annual results for the year ended
31 December 2016 ("Preliminary Announcement") on Thursday, 1 March
2017.
Further to that Preliminary Announcement, the Company confirms
that its Annual Report and Accounts for the year ended 31 December
2016 ("2016 Annual Report"), 2017 Notice of Annual General Meeting
and Form of Proxy have now been published. Printed copies have been
posted to shareholders who have requested hard copies.
The Annual General Meeting of the Company will take place at
11.00am on Friday, 26 May 2017 at the offices of J.P. Morgan at 60
Victoria Embankment, London EC4Y 0JP.
Documents are available on the Company's website as follows:
2016 Annual Report: www.spirehealthcare.com/AR2016
2017 Notice of Meeting: www.spirehealthcare.com/Notice2017
In accordance with Listing Rule 9.6.1, the Company will submit
its 2016 Annual Report and other shareholder documents to the
National Storage Mechanism. These documents should then be
available for inspection within two working days at
www.hemscott.com/nsm.do.
The Appendix to this announcement contains information required
for the purposes of compliance with DTR 6.3.5 (1) of the Disclosure
and Transparency Rules, including a Statement of Directors'
responsibilities This information is extracted, in full unedited
text, from the 2016 Annual Report and should be read in conjunction
with the Preliminary Announcement, which contained other
information required by DTR 6.3.5 (1), released to the market on
Thursday, 1 March 2017.
Enquiries:
Antony Mannion, Director, Strategy and Investor Relations
Philip Davies, Deputy Company Secretary
Tel: +44 (0) 20 7427 9000
Appendix
Principal risks
Principal risks
The Group's financial and operational risks, how they have
changed and how they are managed are shown below.
Risk Theme Risk description and impact How we manage the risk
---------------- -------------------------------- --------------------------------------
Availability Growing demand for healthcare, The Board focuses on staff
of key medical changes to the working retention, evidenced by high
staff requirements and a limited levels of staff satisfaction
supply of appropriately and, hence, low staff turnover.
Risk increased qualified key medical Management deploy productivity
staff, leads to a shortage tools and pursue opportunities
of medical staff. Profitable to reduce clinical nursing
growth, in line with the time spent on non-clinical
Group's strategy, requires activities to optimise the
an expansion of clinical effectiveness of its clinical
services in hospitals, staff base.
particularly including We have introduced a new
more complex surgical solution for the recruitment
procedures and ongoing of clinical staff, partnering
treatment of higher-risk with an external provider.
patients, which could The Group believes consultants
be impacted by a shortage are attracted by its advanced
of key medical staff. facilities, technology and
In order to expand our equipment, excellent brand
directory of services and reputation, the availability
at hospital level, in of a broad range of treatments,
line with our strategy, skilled nursing staff and
it is vital to have access medical support staff, and
to appropriately qualified, the efficiency of administrative
clinical staff. support. The Group undertakes
The market may see salary continuous investment in
rates rise as competition its equipment, facilities
for staff increases and, and services to retain high-quality
as a result, the Group's consultants and also provides
costs may increase and theatre capacity to new consultants.
its profits may reduce. This is confirmed by high
consultant satisfaction levels.
---------------- -------------------------------- --------------------------------------
Clinical The Group's future growth Spire Healthcare continually
care depends upon its ability monitors its clinical standards,
to maintain its reputation policies and procedures through
Risk remained for high-quality services the Board's Clinical Governance
stable by meeting its quality and Safety Committee.
goals. Poor clinical outcomes, During 2016, regular management
negative media comment information and associated
or patient, GP and/or reporting has been provided
consultant dissatisfaction to the Executive Committee.
could reduce the quality Management information is
ratings, which could lead subject to continuous improvement
to a loss of patient referrals to best leverage underlying
and lost earnings. clinical data.
A number of key performance
indicators are used in the
assessment of clinical standards
and these may be found in
the Clinical review.
The Group reviews and maintains
insurance to mitigate the
possibility of a major loss.
Adequacy of cover is reviewed
annually with the Group's
brokers.
---------------- -------------------------------- --------------------------------------
Macroeconomic Approximately 68% of the The Board manages this risk
conditions Group's revenue is dependent by regularly reviewing market
on private patients having conditions and economic indicators
Risk increased private medical insurance to assess whether actions
(PMI), paid by their employer are required.
or paid by the individual, As successfully employed
or being able to afford in the recent economic downturn,
its services (Self-pay). if the private market contracts,
In an economic downturn, the Group can try to reduce
the number of insured costs and future investment
individuals falls with to improve profit and cash
the level of employment flow, and may be able to
and individuals have reduced offer the released capacity
real income to fund insurance to the NHS at its lower tariff,
or Self-pay for procedures. reducing the impact on profit.
This would have an adverse
effect on the business,
the results of its operations
and prospects.
---------------- -------------------------------- --------------------------------------
Risk theme Risk description and impact How we manage the risk
---------------- ------------------------------------- --------------------------------------
Government Change in the medium-term The Group believes that the
policy public funding of NHS private sector has become
services provision, and/or a fundamental partner of
Risk remained the prioritisation of the NHS across the UK. The
stable this funding to particular continued use of private
service lines over time facilities is, in Spire Healthcare's
(elective healthcare, view, the best way to meet
A&E, community care, etc.), the challenges facing the
could adversely reduce NHS, particularly as there
the flow of NHS patients is limited capacity within
to Spire Healthcare. the NHS to take back work
Changes in the service currently undertaken by the
level requirements for private sector.
providers of NHS services, The Group's service levels
and service level commitments are confirmed by regular
to members of the public surveys of patients, GPs
served by the NHS, could and consultants, which provide
adversely impact the attractiveness ongoing feedback to ensure
of privately funded treatment. NHS requirements (whether
Changes in fiscal policy as providers or as commitments
could increase the burden to its patients) are met.
of welfare resulting in In addition, the Board regularly
a reduction of NHS-funded reviews the competitiveness
options. of its patient offering (both
A fundamental change in NHS and private patients).
the tariff structure (pricing The Board continually monitors
arrangements) associated Government policy, NHS requirements
with the provision of and associated tariff structures
services to the NHS could to consider the need for
result in reduced access cost and/or investment reduction,
to patients, reduced tariffs, whether in the short, medium
or reduced prices leading or long term.
to reduced revenues and/or
margins.
---------------- ------------------------------------- --------------------------------------
Compliance The Group operates in The Group continues to strengthen
with laws, a highly regulated environment, its Group-wide risk management
regulations including complying with framework (and associated
and other the requirements of, for policies and procedures)
applicable example, the CQC, Monitor to ensure that risks are
requirements and the CMA. mitigated as far as possible,
Failure to comply with the Executive Committee has
Risk increased laws, regulations or regulatory appropriate visibility to
standards may expose the ensure robust decision-making,
Group to patient claims, and the Group has the ability
fines, penalties, damage to monitor and react to the
to reputation, suspension changing regulatory framework
from the treatment of of a listed company in the
NHS patients, loss of healthcare sector.
hospital licence and loss The Group has a significant
of private patients, such centralised clinical team
that the Group may not which assists hospitals in
be able to operate one establishing and maintaining
or more of its hospitals, a high level of clinical
causing a significant performance.
reduction in profit. Emerging legal or regulatory
The CQC has continued changes are monitored by
its new inspection regime the Board, the Executive
which assesses and rates Committee, the Audit and
hospitals and makes these Risk Committee and the Clinical
results publicly available. Governance and Safety Committee,
If a hospital fared badly in addition to consultations
in one of these inspections, with external advisers and
it could result in that industry briefings.
hospital being assessed
as 'Inadequate' which
could have significant
regulatory and reputational
impacts. As at the end
of 2016, no Spire Healthcare
hospitals have received
an 'Inadequate' rating.
In addition, the Group
could fail to anticipate
legal or regulatory changes
leading to a significant
financial or reputational
impact.
---------------- ------------------------------------- --------------------------------------
Risk theme Risk description and impact How we manage the risk
---------------- ------------------------------------ -------------------------------------
Competitor Spire Healthcare operates The Group maintains a watching
challenge in a highly competitive brief on new and existing
market. New or existing competitor activity and retains
Risk remained competitors may enter the ability to react quickly
stable the market of one or more to changes in-patient and
of our existing hospitals, market demand.
or offer new services. The Group considers that
The potential impact would a partial mitigation of the
be the loss of market impact of competitor activity
share due to a new competitor is ensured by providing patients
and reduced profitability with high-quality care and
and cash flow. by maintaining good working
relationships with GPs and
consultants.
---------------- ------------------------------------ -------------------------------------
Insurance Healthcare companies, The Group holds third-party
including Spire Healthcare, liability insurance to partially
Risk remained are sometimes subject cover patient, third-party
stable to actions alleging negligence, and employee personal injury
malpractice and other claims, and is partially
legal claims that may self-insured up to predetermined
involve large potential levels, above which its third-party
damages and significant liability insurance applies.
defence costs, whether The Group reviews and maintains
or not the defendant insurance adequacy of cover
is ultimately found liable. annually with the Group's
The Group could be subject broker.
to litigation for actions
by third parties or may
be found liable for damages
which may not be covered
by its insurance policies,
if the claims are in
excess of cover or claims
are not covered by the
Group's insurance due
to other policy limitations
or exclusions or where
it has failed to comply
with the terms of the
policy.
The Group's insurance
premiums may increase
and, if there is a significant
deterioration in its
claims experience, insurance
may not be available
on acceptable terms.
---------------- ------------------------------------ -------------------------------------
Cybersecurity The Group's information Spire Healthcare's technical
technology platform supports, IT teams continually monitor
Risk increased among other things, management these developments as a business
control of patient administration, as usual activity. Working
billing and financial with a number of specialist
information and reporting and industry leading technical
processes. In common partners, Spire Healthcare
with other corporate has created multiple layers
organisations, the Group of business protection through
faces the challenges the use of advanced intrusion
of a continually evolving detection and protection
external cyberthreat systems, web access firewalls
landscape, and could and advanced content filtering
become vulnerable to to combat denial of service
computer viruses, break-ins attacks.
and similar disruption Business processes are also
from unauthorised tampering. kept under review and user
The Group's business education regularly carried
could be disrupted if out to minimise the possibility
its information systems of ransomware incidents.
fail or if its databases Regular third-party penetration
are breached, destroyed testing is performed on Spire
or damaged. This could Healthcare's core IT systems.
cause financial and reputational New IT system developments
impacts. are subject to rigorous penetration
The level of risk to testing prior to release.
Spire Healthcare's IT
architecture and systems
continues to grow as
the volume of cybersecurity
threats are increasing
and becoming more sophisticated.
---------------- ------------------------------------ -------------------------------------
Risk theme Risk description and impact How we manage the risk
---------------- ---------------------------------- -------------------------------------
Concentration The PMI market is concentrated, The Group works hard to maintain
of PMI market with the top four companies good relationships and a
(Bupa, AXA, Aviva and joint product/patient health
Risk remained VitalityHealth (formerly offering with the PMI companies,
stable PruHealth)) having a which, in the opinion of
market share estimated the Directors, assists the
at over 85%. healthcare sector as a whole
Loss of an existing contractual in delivering high-quality
relationship with any patient care.
of the key insurers could The Board believes continuing
significantly reduce to invest in its well-placed
revenue and profit. portfolio of hospitals should
Further consolidation provide a natural fit to
of the PMI market could the local requirements of
adversely impact Spire all the PMI providers.
Healthcare's relative The Group has looked to ensure
bargaining power in any that all significant contracts
ongoing commercial arrangements. run for a minimum of a year
to avoid co-termination of
contractual arrangements
across its PMI base.
---------------- ---------------------------------- -------------------------------------
Investment The capital investment The Group conducts a detailed
plans and programme (which includes financial and operational
execution IT system developments appraisal process to evaluate
and the construction the expected returns on capital
Risk increased of two new hospitals) during the evaluation phase
at any time consists of the project.
of a number of individually Robust project management
significant projects is employed throughout the
simultaneously in progress. project, from the evaluation,
With any major project to the bid process, agreement
there are risks, such of contract terms and conditions,
as major cost overrun cost forecasting, as well
or substantial delay as regular monitoring and
in delivery, which could management of progress.
impact upon the expected Regular reporting of all
returns, the Group's significant projects to the
planned profit growth executive sponsor and the
and future cash flow. Board is provided.
---------------- ---------------------------------- -------------------------------------
Liquidity The Group may have insufficient The Group actively monitors
and covenant liquid resources to meet and manages its liquid asset
risk its financial liabilities position, its financial liabilities
as they fall due, or falling due and the cover
Risk remained breach financial covenants against its loan covenants.
stable linked to its borrowings. The Board has considered
Failure to meet its obligations the risk in detail as part
or covenants would have of its assessment of the
a substantial adverse viability of the Company
effect on the Group's (see page 49).
reputation and may lead
to borrowings becoming
repayable earlier than
contracted for.
---------------- ---------------------------------- -------------------------------------
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and Accounts for the year ended 31 December 2016, including the
Consolidated financial statements and the Parent Company financial
statements, Directors' Report, including the Directors'
Remuneration Report and the Strategic Report in accordance with
applicable law and regulations. Under that law, the Directors are
required to prepare the Group financial statements in accordance
with International Financial Reporting Standards ('IFRS') as
adopted by the European Union and Article 4 of the IAS Regulation
and have elected to prepare the Parent Company financial statements
in accordance with IFRS, as adopted by the EU.
Company law requires the Directors to prepare such financial
statements for each financial year. Under company law, the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company on a consolidated and individual basis, and
of the profit or loss of the Company on a consolidated basis for
that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies in accordance with IAS 8:
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS as adopted by the EU is insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the Group's and
Company's financial position and financial performance;
-- state that the Group's and Company's financial statements
have complied with IFRS as adopted by the EU, subject to any
material departures disclosed and explained in the financial
statements; and
-- prepare the financial statements on a going concern basis,
unless it is not appropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions, and disclose, with reasonable accuracy at any time,
the Company's financial position and enable them to ensure
compliance with the Companies Act 2006. They are also responsible
for safeguarding the Company's assets and for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Each of the Directors, whose names and functions are listed on
pages 54 and 55, confirms that:
-- to the best of their knowledge, the Consolidated financial
statements and the Parent Company financial statements, which have
been prepared in accordance with IFRS as adopted by the EU, give a
true and fair view of the assets, liabilities, financial position
and profit of the Company on a consolidated and individual
basis;
-- to the best of their knowledge, the Strategic Report and the
Directors' Report include a fair review of the development and
performance of the business and the position of the Company on a
consolidated and individual basis, together with a description of
the principal risks and uncertainties that it faces; and
-- they consider that the Annual Report and Accounts for the
year ended 31 December 2016, taken as a whole, is fair, balanced
and understandable, and provides the information necessary for
shareholders to assess the Company's performance, business model
and strategy.
Related party transactions
Transactions with key management personnel
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly. They include the
Board and Executive Committee, as identified on pages 54 to 57.
Compensation for key management personnel is set out in the
table below:
(GBP million) 2016 2015
============================= ==== ====
Short-term employee benefits 3.2 2.6
Retirement benefits 0.4 0.4
Share-based payments 0.3 0.7
============================== ==== ====
Total 3.9 3.7
============================== ==== ====
Further information about the remuneration of individual
Directors is provided in the audited part of the Directors'
Remuneration Report on pages 76 to 91.
There were no transactions with related parties external to the
Group in the year to 31 December 2016 (2015: nil).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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