TIDMSPI
RNS Number : 1020B
Spire Healthcare Group PLC
18 September 2018
CORRECTION interim results webcast link
This announcement amends the webcast link for Spire Healthcare's
Interim Results announcement issued by the Company at 07:00 on 18
September 2018 under RNS number 0474B. The correct link is
http://webcast.openbriefing.com/spire_hyr_2018/
Spire Healthcare Group plc
Interim results for the six months ended 30 June 2018
London, UK, 18 September 2018, Spire Healthcare Group plc (LSE:
SPI), one of the UK's leading independent hospital groups, today
announces its interim results for the six months ended 30 June
2018.
SUMMARY GROUP RESULTS FOR THE SIX MONTHSED 30 JUNE 2018
Six months ended 30 June
(Unaudited)
=============================
Variance
(GBP million) 2018 2017 %
===================================== ======== ======= ==========
Revenue 475.6 481.0 (1.1%)
Operating profit before exceptional
and other items 31.6 53.9 (41.4%)
Exceptional and other items (15.3) (32.1)
Operating profit after exceptional
and other items 16.3 21.8 (25.2%)
Profit after tax 8.2 8.9 (7.9%)
Adjusted profit after tax (2) 16.4 34.7 (52.7%)
EBITDA (1) 66.1 83.2 (20.6%)
Adjusted, basic earnings per share,
pence (3) 4.1 8.7 (52.9%)
Interim dividend per share, pence 1.3 1.3 -
Operating cash flows 59.4 75.7 (21.5%)
Capital investments 33.5 59.5 (43.7%)
Net debt (4) 458.1 436.1 5.0%
===================================== ======== ======= ==========
1. Operating profit, adjusted to add back depreciation, loss on
disposal of PPE and exceptional and other items, referred to
hereafter as 'EBITDA'.
2. Adjusted profit is calculated as earnings after tax adjusted
for exceptional and other items and related tax.
3. Calculated as adjusted profit after tax divided by the
weighted average number of ordinary shares in issue. Adjusted
profit is calculated as earnings after tax adjusted for exceptional
and other items and related tax.
4. Net debt is calculated as total debt (comprising obligations
under finance leases and borrowings), less cash and cash
equivalents.
GROUP FINANCIAL HIGHLIGHTS
-- Underlying(1) H1 performance down on previous year reflecting
significantly declining NHS admissions , lower than anticipated
growth in Private admissions and planned investment in Clinical
quality and Consumer engagement
-- Revenue declined by 1.1% to GBP475.6m (H1 2017: GBP481.0m),
while underlying revenue(5) decreased by 2.4% to GBP445.6m (H1
2017: GBP456.6m)
-- EBITDA (1) declined 20.6% to GBP66.1m (H1 2017: GBP83.2m),
while underlying EBITDA(5) decreased by 21.1% to GBP65.3m (H1 2017:
GBP82.8m)
-- Underlying EBITDA(1) margin of 14.7% (H1 2017: 18.1%),
including an adverse margin impact of NHS tariff of 0.6% in the
period
-- Strong cash flow performance with EBITDA conversion to cash flow of 94.1% (H1 2017: 97.6%)
-- Invested GBP33.5m (H1 2017: GBP59.5m) in capital expenditure
funded by operating cash flows, with net debt at 30 June 2018
reduced to GBP458.1m (31 December 2017: GBP462.8m)
-- Interim dividend maintained at 1.3p per share payable on 11 December 2018 (H1 2017: 1.3p)
1. Excludes the impact of Spire Manchester, Nottingham and St
Anthony's hospitals (referred to as 'underlying' in this
announcement further details are shown on page 16).
OPERATING HIGHLIGHTS
-- Overall private income up 2.5%
-- Completed the roll-out of Spire GP service in all Spire's
hospitals with a view to adding digital Spire GP service in due
course
-- Good progress with quality improvements - Spire Nottingham
achieved a CQC rating of "Outstanding" (Spire now has four
"Outstanding" hospitals out of only 14 in the entire independent
hospital sector) and Spire St Anthony's and Spire Wellesley were
rerated by the CQC to "Good"
-- Implemented new central online marketing strategy
Senior management appointments
-- Appointed Jitesh Sodha as Chief Financial Officer and as an
Executive Director with effect from 1 October 2018
-- Appointed John Forrest as Chief Operating Officer with effect from 8 October 2018
updated Outlook FOR FY 2018
-- EBITDA will be in the range of GBP120 to GBP125 million,
after charging non-recurring items of approximately GBP5
million
-- Year end net debt will be broadly in line with 31 December 2017 and 30 June 2018
Comment from Justin Ash, Chief Executive Officer of Spire
Healthcare
"We presented at our Capital Markets Day in April a
comprehensive reset of our approach to the market, setting out our
corporate vision "To become the go-to UK independent healthcare
brand, famous for clinical quality and customer care" and the two
core strategies underlying that vision- to focus on clinical
quality and to increase the private share of our business to at
least 80% of our revenues. Events in the year so far have
absolutely confirmed the appropriateness of our new approach.
Government, regulators and payor groups have all upped their
requirements on clinical quality from healthcare providers - not
only is this of course the correct approach as far as patients are
concerned, but it also provides Spire with the opportunity for a
genuine commercial advantage.
On the payor side, the unprecedented decline (both in scale and
speed) in NHS admissions has led to Spire having to announce
disappointing H1 2018 results and a revised outlook for the
financial year as a whole. Nonetheless our overall revenues are
broadly flat as the growth opportunity in our private business,
2.5% in the period, continues to support our shift in strategic
focus.
While the prolonged decline in NHS volumes had negative margin
implications for us, overall our H1 2018 costs were in line with
our budget, even after the previously indicated increases in spend
on the clinical quality and our private proposition.
We continue to review our non-clinical costs to ensure optimal
efficiency. We have also robustly reviewed our previously proposed
capital expenditure plans, and now expect to maintain the quality
and capability of our asset base with a reduced level of
expenditure.
More broadly, the headwinds that Spire is facing, as the largest
company in the sector by revenues and EBITDA, appear to be
translating into significant business challenges for many sector
participants, which in turn may lead to opportunities for
Spire.
I believe our reset strategy is absolutely the right one for
Spire and that Spire continues to be well positioned to reinforce
its leading role in the independent sector and indeed in UK
healthcare as a whole."
For further information please contact:
Spire Healthcare
Antony Mannion, Investor Relations Director
+44 (0)20 7427 9160
Instinctif
Damian Reece
Guy Scarborough
+44 (0)20 7457 2020
REGISTERED OFFICE AND HEAD OFFICE :
Spire Healthcare Group plc
3 Dorset Rise
London
EC4Y 8EN
Registered number 09084066
ABOUT SPIRE HEALTHCARE
Spire Healthcare is a leading independent hospital group in the
United Kingdom, with 39 private hospitals, 11 clinics and one
Specialist Cancer Care Centre across England, Wales and
Scotland.
Spire delivered tailored, personalised care to approximately
134,000 in-patients and daycase patients in the six months ended 30
June 2018, and is the leading private provider, by volume, of knee
and hip operations in the United Kingdom. Spire is uniquely
positioned to capture a growing share of the expanding private
healthcare market. The Group's well positioned and scalable
hospitals have earned reputations as centres of excellence,
delivering successful and award winning clinical outcomes,
positioning the Group well with patients, consultants, the NHS, GPs
and Private Medical Insurance ("PMI") providers. Spire treats
patients through a variety of routes including PMI, Self-pay and
the NHS, providing the Group with diversified access to the
expected growth opportunities in the UK healthcare market, which
faces significant supply challenges as a result of NHS operating
constraints and increasing demand from a growing population with
longer life expectancy.
CAUTIONARY STATEMENT
This interim announcement contains certain forward-looking
statements relating to the business of Spire Healthcare Group plc
(the "Company") and its subsidiaries (collectively, the "Group"),
including with respect to the progress, timing and completion of
the Group's development, the Group's ability to treat, attract, and
retain patients and customers, its ability to engage consultants
and GPs and to operate its business and increase referrals, the
integration of prior acquisitions, the Group's estimates for future
performance and its estimates regarding anticipated operating
results, future revenue, capital requirements, shareholder
structure and financing. In addition, even if the Group's actual
results or development are consistent with the forward-looking
statements contained in this interim announcement, those results or
developments may not be indicative of the Group's results or
developments in the future. In some cases, you can identify
forward-looking statements by words such as "could," "should,"
"may," "expects," "aims," "targets," "anticipates," "believes,"
"intends," "estimates," or similar words. These forward-looking
statements are based largely on the Group's current expectations as
of the date of this
interim announcement and are subject to a number of known and
unknown risks and uncertainties and other factors that may cause
actual results, performance or achievements to be materially
different from any future results, performance or achievement
expressed or implied by these forward-looking statements. In
particular, the Group's expectations could be affected by, among
other things, uncertainties involved in the integration of
acquisitions or new developments, changes in legislation or the
regulatory regime governing healthcare in the UK, poor performance
by consultants who practice at our facilities, unexpected
regulatory actions or suspensions, competition in general, the
impact of global economic changes, and the Group's ability to
obtain or maintain accreditation or approval for its facilities or
service lines. In light of these risks and uncertainties, there can
be no assurance that the forward-looking statements made in this
preliminary announcement will in fact be realised and no
representation or warranty is given as to the completeness or
accuracy of the forward-looking statements contained in this
interim announcement.
The Group is providing the information in this interim
announcement as of this date, and we disclaim any intention or
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
ANALYST AND INVESTOR MEETING
There will be an analyst and investor meeting today at 9.30am at
Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y
1HT.
A live audiocast of the presentation will be available at 9.30am
from the Spire website at
http://webcast.openbriefing.com/spire_hyr_2018/
.
Operating Review
PERFORMANCE IN PERIOD
Group revenue decreased in the first six months of 2018 by 1.1%
to GBP475.6 million (H1 2017: GBP481.0 million), while EBITDA
declined 20.6% to GBP66.1 million (H1 2017: GBP83.2 million).
In-patient and daycase admissions reduced by (4.1%) to 133,700
cases (H1 2017: 139,400 patients). Two of our "new" hospitals
(Manchester and St Anthony's) have improved their profitability
while there were continuing start-up losses from our new hospital
in Nottingham.
Group underlying (1) revenue performance in the first six months
of 2018 decreased by 2.4% to GBP445.6million (H1 2017: GBP456.6m).
This has resulted in underlying EBITDA decline of 21.1% to GBP65.3
million (H1 2017: GBP82.8 million), with In-patient and daycase
admissions decreasing by 5.3% to 126,500 patients (H1 2017: 133,500
patients).
Underlying (1) self-pay revenue growth was 7.0% for the period.
Including the average 3.9% reduction in NHS tariff for Q1 2018 over
the corresponding Q1 2017, NHS revenues declined 10.0% in the
period. PMI performance was stable.
The main drivers of the Group's lower Operating profits between
H1 2018 (GBP31.6m) and H1 2017 (GBP53.9m) were GBP5.4m of lower
revenue, higher depreciation of GBP5.8m, GBP11.8m increase in other
costs and GBP0.6m in lower loss on asset disposals. Of the increase
in other costs the main drivers were, GBP7.2m was planned clinical
staff cost and GBP3.6 million was the cost of drugs.
Revenue
-- Overall, In-patient/daycase admissions declined and there was
also a change in admissions mix in terms of type of procedure, with
proprtionally less orthopaedic work and proportionally more
oncology.
-- The increase in Self-pay admissions and in the Private Payor
Average Revenue Per Case was not sufficient to offset the
significant decline in NHS revenue.
-- NHS admissions and revenue were negatively impacted by
widespread NHS cost constraints and referral management schemes
which have undergone a shift change in severity in H1 2018.
Costs
-- Planned increases in Clinical Staff cost due to Spire's drive to enhance Clinical Quality.
-- Clinical Staff costs did not proportionately flex down with
lower NHS activity levels due to (i) Spire's Clinical Quality
agenda creating more governance and assurance overhead, and (ii)
lower levels of theatre activity creating short term gaps in lists
for which staff costs cannot be fully flexed.
-- Drug costs rose, linked to the increased amounts of oncology admissions
-- Planned investment in corporate costs to support strategic
objectives; in recruitment and training, Clinical and other
assurance (Health & Safety, Internal Audit, Engineering)
activities.
Cash flows
Our robust operating cash flows enabled us to continue to invest
in our estate and our systems, as well as maintain the interim
dividend. During the period, we invested GBP33.5 million (H1 2017:
GBP59.5 million) in various projects, including the conclusion of
the developments of the new Spire Manchester Pathology Centre, and
major upgrades of the facilities at Spire Bushey, Spire Hull, Spire
Cheshire and Spire Cambridge Lea Hospitals. Despite this, net debt
fell slightly to GBP458.1 million (31 December 2017: GBP462.8
million).
1. Excludes the impact of Spire Manchester, Nottingham and St
Anthony's hospitals (referred to as 'underlying' in this
announcement further details are shown on page 16).
MARKET TRS
The demand for healthcare in the UK continues to rise,
underpinned by a growing ageing population and advancement in
medical technology. The NHS continues to experience a significant
and growing funding gap, which many observers believe is likely to
be at best only partly alleviated by productivity improvements,
cost efficiencies and recently announced funding increases over the
coming years.
The NHS continues to target available funding towards treatment
of acute A&E care and chronic medical conditions and has
continued to have relaxed management of performance within elective
care in the last 12 months. Waiting lists have now grown to 4.3m
patients , and are particularly impacted by further rationing of
elective treatment.
We therefore remain of the view that, in the medium to long
term, Spire will benefit from its inherent 'payor hedge' as growing
numbers of individuals - recognising the resulting increases in NHS
waiting lists and/or rationing or restricting of certain procedures
- are likely to elect to pay for their healthcare.
Against this general healthcare sector background, in H1
2018:
-- Our results indicate that the Self-Pay market continued to
grow with a growth in the number of individuals requiring elective
care increasingly choosing a private alternative over the NHS.
-- The underlying dynamics of the PMI market also prevailed with
the number of lives covered remaining stable and insurers actively
managing their claims volumes tightly.
-- For private providers, the impact in the NHS market has been
unpredictable, with particular variation in certain localities.
Overall NHS e-referral business has recovered in the later part of
the first half, however orthopaedic work remains adverse, impacted
by the growing influence of NHS triage applied by Clinical
Commissioning Groups.
Although the Brexit referendum took place two years ago, it is
still too early to assess the medium to long term impact of the
result on future NHS funding levels, the UK healthcare sector as a
whole (including clinical staffing levels) and Spire's position
within that sector.
STRATEGIC RESET
At our Capital Markets Day presentation in April 2018, we set
out in detail our evolving strategy. The basis of this is our
ambition for Spire "to become the go-to UK independent healthcare
brand, famous for clinical quality and customer care".
To achieve this we will focus on six core areas, which we term
our Strategic Goals and Key Enablers
Strategic Goals and What we are changing What it delivers
Key Enablers
First choice for private Improve services Step-change in private
patients Digital, marketing growth
and telephony upgrade
------------------------------- ----------------------------
Plan and deliver operational Data driven, granular Stronger performance
excellence operations focus Leverage scale
Use hospital clusters Deliver on new sites
to drive efficiency
------------------------------- ----------------------------
Become best place to Support consultants Growing Spire share
practise to grow their business of consultant practice
Targeted equipment
/ facility investments
------------------------------- ----------------------------
Become best place to Central recruitment High performance culture
work focus High capability people
Step change in communications
and development
------------------------------- ----------------------------
Most recommended customer Digitalise the patient Number 1 in customer
experience journey recommendations and
Targeted investments referrals
in facilities
------------------------------- ----------------------------
Become famous for quality Robust clinical governance A strong pull for customers
and clinical care at all levels to select Spire
Meet new exacting CQC First choice for referrers
standards
Data driven, embedded
quality culture
------------------------------- ----------------------------
In terms of progress, we stated that FY 2018 would be overall a
year of consolidation for Spire, focusing on Clinical quality,
developing Self-Pay, driving recent hospital developments,
investing in delivery infrastructure and minimising the impact of
the volatile NHS market.
We also stated that the next five years would see rapid
increases in growth, with a continuing focus on Clinical quality,
an accelerating Self-Pay business, growth in PMI market share,
reduction of NHS business to a selective basis, improving margins,
lower but more targeted Capex, stronger free cash flows and a
reduction in net debt.
We have also set ourselves the following three key targets in
the next five year period:
-- Private (i.e. non-NHS) revenues to be 80% of Spire's total revenues.
-- All Spire hospitals to be rated "Good" or "Outstanding" by the CQC.
-- Spire's EBITDA to be at least GBP200 million.
BUSINESS DEVELOPMENT
Investing in our businesses
-- Work continues at Spire Cambridge Lea Hospital, comprising
the expansion and refurbishment of the daycase unit, a new JAG
accredited endoscopy suite and the upgrade of the Level 1 Critical
Care extended recovery area - completion is expected in Q3
2018.
-- Development work completed on the medical centre based in
Elstree, Hertfordshire, designed as a 'satellite centre' to Spire
Bushey Hospital, and which will increase our capacity to see
patients for diagnostic and outpatient appointments.
-- Development work began on Spire Bushey Hospital to provide a
6th theatre, new larger recovery unit and TSSU, as well as 10 new
patient bedrooms. Work is due to complete in Q2 2019.
-- Development work at Spire Methley Park (refurbishment of
administration areas, bedrooms and theatres, and creation of a new
day care suite and theatre) has completed and is opened for
business.
-- At the end June 2018, the Group has 134 operating theatres,
including the new theatre at Spire Methley Park.
-- We have closed the Spire Radiotherapy Specialist Care Centre
at Baddow and are seeking buyers for the site.
Developing our service offering for growth
-- We continue to update and extend our diagnostic network with
investments in new MRI scanners.
-- Our new Spire GP service has now been rolled out to all our
hospitals and we are looking to grow this service offering further
- we will also add (in due course) a digital Spire GP service to
this physical GP service.
-- We continue to finesse the design and responsiveness of our
recently revamped website, which is key to attracting new patients
to Spire.
-- We have finalised and deployed our new central online marketing strategy.
Developing operational excellence
-- We are seeking to improve the utilisation of spare theatre
capacity to provide the opportunity to improve the recovery of
fixed and semi-variable costs in the business.
-- We continue to focus on delivering economies of scale in
procurement, distribution and logistics and other in-house support
services such as pathology and sterilisation.
-- We are reducing staff numbers in several areas. Areas where
actions have already been taken or are planned in FY 2018 include
in H1 2018, procurement and purchasing and in H2 2018 central
overhead and mainly non-clinical hospital costs. The estimated run
rate savings from these actions for FY 2019 are in the high single
digit GBP millions. From FY 2019 onwards we expect to continue
restructuring the cost base through further cost optimisation in
central functions, procurement and the hospital cost bases.
-- We retained our focus on recruitment and retention -
improving the employer proposition to make Spire Healthcare an
employer of choice plus introducing development programmes to 'grow
our own'. We also hired a new specialist recruitment organisation -
Cielo - to assist us in external recruitment across the
country.
-- We continue a major programme to review and simplify end to
end processes to deliver a better customer experience alongside
ease of doing business and process efficiencies.
senior appointments
In July, the Company announced the appointment of Jitesh Sodha
as Chief Financial Officer and an Executive Director from 1 October
2018. He replaces Simon Gordon who stood down from the Board on 2
March 2018 and left Spire at the end of that month. Jitesh will
join Spire on 1 October 2018, bringing specific skills that will
greatly benefit Spire including his track record in helping
companies execute ambitious transformation plans. David Lomas has
fulfilled the role of interim Chief Financial Officer since Simon's
departure and will continue to do so until Jitesh joins. We would
like to thank David Lomas very much for his contribution during his
time with Spire.
In September, the Company announced the appointment of John
Forrest as Chief Operating Officer from 8 October 2018. John's
extensive experience, knowledge and relevant skills built up at
Greene King and Premier Inn will make a significant and positive
difference to Spire's operational aspirations.
Spire received notification from Mediclinic Jersey Limited, the
Company's principal shareholder and a wholly-owned subsidiary of
Mediclinic International plc, that its nominated Non-Executive
Director to Spire's Board, Danie Meintjes, would not stand for
re-election at the Company's annual general meeting on 24 May 2018
and would be replaced by Dr Ronnie van der Merwe (Mediclinic
International's CEO). Ronnie was appointed a Non-Executive Director
from the conclusion of the 2018 AGM.
REGULATION AND GOVERNANCE
As we strive to become famous for Clinical Quality and Customer
Care, Spire continues to respond to areas of care identified as
requiring improvement by the Care Quality Commission ('CQC') in
both 'The state of care in independent acute hospitals' report, and
within our own hospitals. We have increased our scrutiny of
specialist service areas in our internal peer review programme, and
have invested in championing best practice in these areas and wider
practice.
Every Spire hospital and two Spire clinics in England have a
rating under the revised CQC framework. Of those sites, four
hospitals - Spire Sussex, Spire Cheshire, Spire Montefiore and
Spire Nottingham - have received a rating of 'Outstanding', and
those hospitals whose Children and Young People's services have
been re-rated since the hospital's original inspection have
demonstrated strong improvement. Following Spire St Anthony's
review of Children and Young People's Services and Critical Care in
June 2017, 22 hospitals and clinics have a rating of 'Good' and 11
hospitals have a rating of 'Requires Improvement'. Where CQC have
advocated improvements, immediate actions have been put in place to
address recommendations and progress is monitored on both a local
and national level, with more recent CQC inspections indicating
that these have been effective.
We have also invested in governance processes and information.
This includes introducing "Freedom to Speak Up" guardians in all
our hospitals, enhanced Root Cause Analysis, broader group quality
KPIs and a monthly Learning from Deaths review.
Proving our commitment to transparency in our progress on
continuous improvement in our quality and safety,
The Competitions and Markets Authority Private Healthcare
Investigation Order requires doctors to send patients information
regarding their fees with respect to their consultation and
subsequent treatment as of February 2018. Spire Healthcare has
worked with our Consultant community to successfully comply with
these requirements as well as to review and approve their activity
data prior to publication by the Private Health Information Network
("PHIN"). We continue to fund and support PHIN's objectives of
improving transparency of private healthcare quality and have
materially improved data quality to enable PHIN to publish accurate
information regarding Spire hospitals. The next milestone is April
2019, by which PHIN intends to publish Consultant fee data
online.
Dividend
The Board is pleased to announce the payment of a 1.3p interim
dividend reflecting its confidence in the Company's strategy and
future prospects.
Outlook
As set out above in detail, Spire's trading performance for the
first 6 months of the year was disappointing, based on a
combination of lower than expected revenues and adverse changes in
mix. Having reviewed results for the period 1 January 2018 to 31
July 2018, and assessed likely market conditions for the balance of
the financial year, the Company announced on 6 August 2018 that it
now expected EBITDA for the full financial year 2018 to be
materially lower than for 2017, to which it had previously guided.
For the financial year as a whole we have reviewed (i) the market
for payor trends (particularly in the NHS business) and (ii)
Spire's cost base and (iii) August trading.
August trading has seen:
-- Overall revenues flat year on year
-- NHS revenues declining by a mid-single digit percentage,
offset by growth in private payor revenues
-- Costs in line with the trend seen in the seven months to 31 July 2018
For the Financial Year 2018 as a whole, we now expect the
following revenue performance:
-- Self-pay: Continued good growth
-- PMI: Moderate increase over H2 2017.
-- NHS: eReferral and Local Contract work will be significantly lower than H2 2017
There will also be a change in mix, with continuing reduction in
NHS orthopaedics, and some PMI shift from orthopaedic to
cancer.
For the Financial Year 2018 year as a whole we now expect the
following outcome:
-- EBITDA will be in the range of GBP120 to GBP125 million,
after charging non-recurring items of approximately GBP5
million
-- Year end net debt will be broadly in line with 31 December 2017 and 30 June 2018
The Board believes that the medium term outlook for Spire
remains positive:
-- The overall demand for healthcare in the UK continues to rise
ahead of the ability of the NHS to service it.
-- The NHS is choosing to prioritise available funding towards
treatment of acute and chronic conditions and as a consequence we
expect the demand and supply gap within NHS secondary elective care
services to continue to expand rapidly. This is in our view highly
likely to enable Spire to continue to benefit from the growing
numbers of individuals that are likely to elect to fund their own
care in the future
-- Spire's focus on clinical quality and care will give it a
significant competitive advantage in the medium term.
-- The sector is facing significant headwinds which appear to be
translating into business challenges for many participants, which
in turn may lead to the opportunity for consolidation. Spire, as
the largest company in the sector by revenues and EBITDA, and with
a growing reputation for clinical quality, will monitor sector
developments and look to take advantage of opportunities.
--
Financial Review
SELECTED FINANCIAL INFORMATION
Six months ended 30 June
(Unaudited)
============================================================================
2018 2017
==================================== ======================================
Variance
(on
Total Exceptional Total Exceptional total
before and other before and other after
exceptional items exceptional items exceptional
and other (note and other (note and other Underlying
(GBP million) items 7) Total items 7) Total items)% % (1)
=============== ============ ============ ======== ============ ============ ========== ============ ===========
Revenue 475.6 - 475.6 481.0 - 481.0 (1.1%) (2.4%)
Cost of sales (251.6) - (251.6) (249.5) - (249.5) 0.8%
=============== ============ ============ ======== ============ ============ ========== ============ ===========
Gross profit 224.0 - 224.0 231.5 - 231.5 (3.2%)
Other
operating
costs (192.4) (15.3) (207.7) (177.6) (32.1) (209.7) (1.0%)
=============== ============ ============ ======== ============ ============ ========== ============ ===========
Operating
profit 31.6 (15.3) 16.3 53.9 (32.1) 21.8 (25.2%)
=============== ============ ============ ======== ============ ============ ========== ============ ===========
Net finance
costs (11.2) - (11.2) (9.7) - (9.7) 15.5%
=============== ============ ============ ======== ============ ============ ========== ============ ===========
Profit before
taxation 20.4 (15.3) 5.1 44.2 (32.1) 12.1 (57.9%)
Taxation (4.0) 7.1 3.1 (9.5) 6.3 (3.2) (196.9%)
=============== ============ ============ ======== ============ ============ ========== ============ ===========
Profit for
the period 16.4 (8.2) 8.2 34.7 (25.8) 8.9 (7.9%)
=============== ============ ============ ======== ============ ============ ========== ============ ===========
EBITDA (2) 66.1 83.2 (20.6%) (21.1%)
Adjusted,
basic
earnings per
share, pence
(3) 4.1 8.7 (52.9%)
Interim
dividend
per share,
pence 1.3 1.3 -
Operating cash
flows 59.4 75.7 (21.5%)
Capital
investments 33.5 59.5 (43.7%)
Net debt (4) 458.1 436.1 5.0%
=============== ============ ============ ======== ============ ============ ========== ============ ===========
1. Excludes the impact of Spire Manchester, Nottingham and St
Anthony's hospitals (referred to as 'underlying' in this
announcement further details are shown on page 16).
2. Operating profit, adjusted to add back depreciation, loss on
disposal of PPE and exceptional and other items, referred to
hereafter as 'EBITDA'.
3. Calculated as adjusted profit after tax divided by the
weighted average number of ordinary shares in issue. Adjusted
profit is calculated as earnings after tax adjusted for exceptional
and other items and related tax.
4. Net debt is calculated as total debt (comprising obligations
under finance leases and borrowings), less cash and cash
equivalents.
Six months ended 30 June
(Unaudited)
======================================
Variance Underlying
(GBP million) 2018 2017 % % (1)
===================================== ====== ====== ========= ===========
Total revenue 475.6 481.0 (1.1%) (2.4%)
Of which:
PMI 221.4 219.3 1.0% (0.2%)
NHS 140.3 154.5 (9.2%) (10.0%)
Self-pay 87.3 80.6 8.3% 7.0%
Partnerships 13.5 13.7 (1.5%) (3.2%)
Other (2) 13.1 12.9 1.6% (1.6%)
===================================== ====== ====== ========= ===========
475.6 481.0 (1.1%) (2.4%)
===================================== ====== ====== ========= ===========
Of which:
In-patient/daycase 325.3 330.8 (1.7%) (2.8%)
Out-patient 137.2 137.3 (0.1%) (1.6%)
Other 13.1 12.9 1.6% (1.6%)
===================================== ====== ====== ========= ===========
475.6 481.0 (1.1%) (2.4%)
===================================== ====== ====== ========= ===========
Number ('000s)
Total in-patient/daycase admissions 133.7 139.4 (4.1%) (5.3%)
Of which:
PMI volumes 59.6 61.2 (2.6%) (3.6%)
NHS volumes 48.5 53.0 (8.5%) (9.6%)
Self-pay volumes 24.0 23.5 2.1% 0.7%
Partnerships volumes 1.6 1.7 (5.9%) (9.9%)
===================================== ====== ====== ========= ===========
Theatres
Number of theatres (3) 134 133 0.8% -
Theatre utilisation (4) 58% 62% (6.5%) (4.6%)
===================================== ====== ====== ========= ===========
1. Excludes the impact of Spire Manchester, Nottingham and St
Anthony's hospitals (referred to as 'underlying' in this
announcement further details are shown on page 16).
2. Other revenue includes consultant revenue, third-party
revenue streams (e.g. pathology services), secretarial
services.
3. Represents the number of theatres in the Spire Healthcare hospital network.
4. Theatre utilisation is calculated by dividing utilised
theatre hours by maximum theatre hours (maximum theatre hours is
defined as 10 hours per weekday and 7 hours per Saturday for 50
weeks per year).
REVENUE
In-patient/ In-patient/
30 June daycase daycase 30 June
(GBP million) 2017 volume rate Out-patient Other 2018 Growth
========================== ======== ============ ============ ============ ====== ======== =======
Underlying total revenue
(1) 456.6 (16.6) 7.9 (2.1) (0.2) 445.6 (2.4%)
========================== ======== ============ ============ ============ ====== ======== =======
Non underlying revenue 24.4 4.1 (0.9) 2.0 0.4 30.0 23.0%
========================== ======== ============ ============ ============ ====== ======== =======
Total revenue 481.0 475.6 (1.1%)
========================== ======== ============ ============ ============ ====== ======== =======
Group revenue for the six months ended 30 June 2018 decreased by
GBP5.4 million, or 1.1%, to GBP475.6 million (H1 2017: GBP481.0
million). The rate of growth in total revenues was impacted
adversely by the volume of in-patient and daycase admissions
decline, which was not offset by the H1 2018 rate increase.
Revenues were also adversely impacted by the application of NHS
tariff reductions in Q2 2017 which reduced prices for the basket of
services offered to the NHS by Spire by approximately 3.9% with the
impact flowing into Q1 2018, and the reduction in NHS local revenue
as a result of reduced level of local contracting being carried out
by the NHS Trusts following the relaxation of waiting list targets
in mid-2017.
Notwithstanding this decline in NHS reimbursement rates the
Group reported an overall improvement in in-patient and daycase
rate per case:
-- decrease in in-patients and daycase admissions of 4.1% drove
a 2.6% decrease in total revenues;
-- average revenue per case improved in the period, accounting
for a 1.5% increase in total revenues; and
-- Declining outpatient revenue performance had a minimal
decrease in total revenues in the period.
PMI
In-patient/ In-patient/
30 June daycase daycase 30 June
(GBP million) 2017 volume rate Out-patient 2018 Growth
======================== ======== ============ ============ ============ ======== =======
Underlying PMI revenue
(1) 204.1 (4.7) 4.8 (0.6) 203.6 (0.2%)
========================= ======== ============ ============ ============ ======== =======
Non underlying revenue 15.2 1.4 (0.2) 1.4 17.8 17.1%
========================= ======== ============ ============ ============ ======== =======
Total PMI revenue 219.3 221.4 1.0%
========================= ======== ============ ============ ============ ======== =======
Group PMI revenue for the six months ended 30 June 2018
increased by GBP2.1 million, or 1.0%, to GBP221.4 million (H1 2017:
GBP219.3 million). Non underlying PMI revenues increased in the
period by 17.1% as a result of the growth of Spire Manchester, St
Anthony's and Spire Nottingham hospitals since launch.
Underlying PMI revenue decreased by GBP0.5 million, or 0.2%, to
GBP203.6 million (H1 2017: GBP204.1 million).
Of the underlying decline in PMI revenue of 0.2%:
-- a decline of 3.6% in in-patient and daycase admissions during
the period decreased PMI revenues by 2.3%;
-- average revenue per case improved in the period
(notwithstanding an increase in the proportion of daycase patients
treated) which increased PMI revenues by 2.4% over the prior
period; and
-- declining outpatient revenue performance contributed to a
reduction in PMI revenues of 0.3% over the six months ended 30 June
2018.
NHS
In-patient/ In-patient/
30 June daycase daycase 30 June
(GBP million) 2017 volume rate Out-patient 2018 Growth
======================== ======== ============ ============ ============ ======== ========
Underlying NHS revenue
(1) 151.5 (11.5) (1.6) (2.1) 136.3 (10.0%)
========================= ======== ============ ============ ============ ======== ========
Non underlying revenue 3.0 1.3 (0.5) 0.2 4.0 33.3%
========================= ======== ============ ============ ============ ======== ========
Total NHS revenue 154.5 140.3 (9.2%)
========================= ======== ============ ============ ============ ======== ========
Group NHS revenue for the six months ended 30 June 2018
decreased by GBP14.2 million, or 9.2%, to GBP140.3 million (H1
2017: GBP154.5 million). Non underlying NHS revenues increased by
33.3% in the period as a result of the growth of Spire Manchester,
St Anthony's and Spire Nottingham hospitals since launch.
Underlying NHS revenue decreased by GBP15.2million, or 10.0%, to
GBP136.3 million (H1 2017: GBP151.5 million).
Of the underlying decline in NHS revenue of 10.0%:
-- a decrease of 9.6% in in-patient and daycase admissions decreased NHS revenues by 7.6%;
-- average revenue per case declined in the period, due to the
national tariff contributing a decline in NHS revenues of 1.0%:
and
-- decline in outpatient revenues contributed 1.4% to revenue decline in the period;
The underlying revenue decline in NHS revenues is split as
follows:
-- 33.3% decline in local contract NHS revenue compared to prior period; and
-- 5.6% decrease in NHS revenues arising from e-referral
compared to prior period (previously known as 'choose and
book').
Self-pay
In-patient/ In-patient/
30 June daycase daycase 30 June
(GBP million) 2017 volume rate Out-patient 2018 Growth
======================== ======== ============ ============ ============ ======== =======
Underlying Self-pay
revenue (1) 76.1 0.4 3.9 1.0 81.4 7.0%
========================= ======== ============ ============ ============ ======== =======
Non underlying revenue 4.5 1.2 (0.1) 0.3 5.9 31.1%
========================= ======== ============ ============ ============ ======== =======
Total Self-pay revenue 80.6 87.3 8.3%
========================= ======== ============ ============ ============ ======== =======
Self-pay revenue for the six months ended 30 June 2018 increased
by GBP6.7 million, or 8.3%, to GBP87.3 million (H1 2017: GBP80.6
million). Non underlying self-pay revenues increased by 31.1% in
the period as a result of the growth of Spire Manchester, St
Anthony's and Spire Nottingham hospitals since launch.
Underlying Self-pay revenue increased by GBP5.3 million, or
7.0%, to GBP81.4 million (H1 2017: GBP76.1 million).
Of the underlying growth in Self-pay revenue of 7.0%:
-- a 2.1% increase in the volume of in-patient and daycase
admissions had a 0.6% impact on Self-pay revenues;
-- average revenue per case improved in the period which
increased Self-pay revenues by 5.1%; and
-- increase in outpatient revenues contributed 1.3% to Self-pay revenue growth in the period.
Partnerships
Partnership revenue represents agreements and relationships
directly with other bodies who provide their employees, members or
customers access to healthcare treatment. Note in prior periods
some of this revenue has been included within Self-Pay or Other,
the restatement has been shown below. The Group internally reports
Self-Pay as direct to consumer revenue and therefore we have
restated the prior year comparatives to show a clear distinction
between the two revenue streams.
In-patient/ In-patient/
30 June daycase daycase 30 June
(GBP million) 2017 volume rate Out-patient 2018 Growth
=========================== ======== ============ ============ ============ ======== =======
Underlying Partnership
revenue (1) 12.6 (0.4) 0.4 (0.4) 12.2 (3.2%)
============================ ======== ============ ============ ============ ======== =======
Non underlying revenue 1.1 - - 0.2 1.3 18.2%
============================ ======== ============ ============ ============ ======== =======
Total Partnership revenue 13.7 13.5 (1.5%)
============================ ======== ============ ============ ============ ======== =======
Group Partnership revenue for the six months ended 30 June 2018
decreased by GBP0.2 million, or 1.5%, to GBP13.5 million (H1 2017:
GBP13.7 million). Underlying Partnership revenue decreased by
GBP0.4 million, or 3.2%, to GBP12.2 million (H1 2017: GBP12.6
million).
Of the underlying decrease in Partnership revenue of 3.2%:
-- a decline of 9.9% in-patient and daycase admissions during
the period decreased Partnership revenues by 3.2%;
-- average revenue per case improved in the period which
increased Partnership revenues by 3.2%; and
-- declining outpatient revenue performance contributed a
reduction in Partnership revenues of 3.2% over the six months ended
30 June 2018.
Other revenue
Other revenue, which includes fees paid to the Group by
consultants (e.g. for the use of Group facilities and services) and
third-party revenues (e.g. pathology services to third-parties),
increased by GBP0.2 million, or 1.6%, in the period, to GBP13.1
million (H1 2017: GBP12.9 million).
Restated revenue
The Group has restated revenue for 2017, in order to reflect the
measures that management use internally, shown below are the
adjustments made to revenue for 30 June 2017:
30 June
2017
( As previously Partnership 30 June
(GBP million) stated) payors CQUIN 2017 (restated)
============================= === ================== ============ ====== =================
Underlying NHS revenue
(1) 148.8 - 2.7 151.5
Non underlying revenue 2.9 - 0.1 3.0
Underlying Self-pay revenue
(1) 88.7 (12.6) - 76.1
Non underlying revenue 5.7 (1.2) - 4.5
Underlying Partnership
revenue (1) - 12.6 - 12.6
Non underlying revenue - 1.2 (0.1) 1.1
Other 15.6 - (2.7) 12.9
================================== ================== ============ ====== =================
COST OF SALES AND GROSS PROFIT
Cost of sales increased in the period by GBP2.1 million, or
0.8%, to GBP251.6 million (H1 2017: GBP249.5 million). Underlying
cost of sales (excluding Spire Manchester, Nottingham and St
Anthony's hospitals) decreased in the period by GBP0.7 million or
0.3% to GBP232.4 million (H1 2017: GBP233.1 million).
Underlying gross margin for the six months ended 30 June 2018
was 47.8%, compared to 49.0% for the six months ended 30 June 2017
and 48.2% for the twelve months ended 31 December 2017.
On an underlying basis, and as a percentage of relevant
revenue:
Group Underlying Group Underlying
====== ===========
Six months Six months Year ended
ended 30 June ended 30 June 31 December
===================
2018 2017 2018 2017 2017 2017
===================== ======== ======= ======== ======= ====== ===========
Clinical staff 19.8% 18.8% 19.1% 18.0% 19.6% 18.8%
Direct costs 22.5% 22.0% 22.4% 21.9% 22.1% 21.9%
Medical fees 10.6% 11.0% 10.7% 11.2% 11.1% 11.1%
Cost of sales 52.9% 51.8% 52.2% 51.0% 52.8% 51.8%
===================== ======== ======= ======== ======= ====== ===========
Gross profit margin 47.1% 48.2% 47.8% 49.0% 47.2% 48.2%
===================== ======== ======= ======== ======= ====== ===========
Underlying gross profit margin has declined against prior year
as a result of both:
-- Revenue reductions arising from
-- NHS tariff declines in April 2017, 0.6% margin impact on the business
-- Loss of NHS local contracts following a relaxation of waiting list targets in mid-2017
-- Cost pressures specifically in Clinical staff costs driven by:
-- The investment in clinical quality which has increased headcount in some locations
-- Supply side pressures increasing the rate of contracted staff
and requiring the use of premium agency staff where gaps exist in
contracted rotas
Management is focused on, and during H1 2018 has invested
significantly in continuous improvement of recruitment, training
and development process in the business. Medical fees and direct
costs have been controlled in line with activity and case mix, with
Oncology drug cost increases, linked to increased activity
levels.
OTHER OPERATING COSTS
Other operating costs for the six months ended 30 June 2018
decreased by GBP2.0 million, or 1.0%, to GBP207.7 million (H1 2017:
GBP209.7 million). Excluding exceptional and other items, other
operating costs for the period increased by GBP14.8 million, or
8.3%, to GBP192.4 million (H1 2017: GBP177.6 million).
Underlying other operating costs decreased in the period by
GBP7.4 million, or 3.7%, to GBP191.9 million (H1 2017: GBP199.3
million). Excluding exceptional and other items, underlying other
operating costs for the period increased by GBP9.4 million, or
5.6%, to GBP176.6 million. Underlying operating costs were driven
by the focus on strategic investments in areas such as HR, Clinical
Quality and Assurance linked with our strategy to drive clinical
quality and assurance and develop our recruitment and development
capability in an increasingly challenging market.
Group Underlying Group Underlying
================== ================== ======= ==========
Six months ended Six months ended Year ended 31
30 June 30 June December
================== ================== ===================
2018 2017 2018 2017 2017
=============================== ======== ======== ======== ======== ===================
Gross profit margin 47.1% 48.2% 47.8% 49.0% 47.2% 48.2%
Hospital and central overheads (26.3%) (24.3%) (25.7%) (23.9%) (24.2%) (23.6%)
Depreciation (7.2%) (5.9%) (6.5%) (6.1%) (6.2%) (6.1%)
Rent (6.9%) (6.6%) (7.4%) (6.9%) (6.9%) (7.3%)
Loss on disposal of assets - (0.1%) - (0.1%) - (0.1%)
=============================== ======== ======== ======== ======== ======= ==========
Operating margin 6.7% 11.2% 8.2% 11.9% 9.9% 11.1%
=============================== ======== ======== ======== ======== ======= ==========
EBITDA margin 13.9% 17.3% 14.7% 18.1% 16.1% 17.3%
=============================== ======== ======== ======== ======== ======= ==========
EBITDA
EBITDA for the Group declined by 20.6% in the period from
GBP83.2 million in H1 2017 to GBP66.1 million for H1 2018. The
result includes post opening trading losses in Nottingham as the
business establishes itself in a new market. The performance was
also adversely impacted by NHS tariff reductions from Q2 2017.
Underlying EBITDA decreased by 21.1% to GBP65.3 million (H1
2017: GBP82.8 million) and underlying margin declined by 3.4% from
18.1% in H1 2017 to 14.7% in H1 2018, as a result of revenue
reduction and cost increases linked to strategic investments.
Depreciation
Group depreciation charge for the six months ended 30 June 2018
increased by GBP5.8 million, or 20.3%, to GBP34.4 million (H1 2017:
GBP28.6 million).
Underlying depreciation charge for the six months ended 30 June
2018 increased by GBP2.7 million, or 10.4%, to GBP28.6 million (H1
2017: GBP25.9 million).
Rent
Rent of land and buildings for the period increased by GBP0.9
million, or 2.8%, to GBP32.8 million (H1 2017: GBP31.9
million).
Share-based payments
During the period, grants were made to executive directors and
members of the executive management team under the Company's
deferred bonus plan and long term incentive plan. For the six
months ended 30 June 2018, the charge to the income statement was
GBP0.5 million (H1 2017: GBP0.6 million), or GBP0.6 million
inclusive of NI (H1 2017: GBP0.7 million). Further details are
contained in note 16 of this announcement.
Exceptional and other items included in other operating
costs
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
======================================= ========== =======
Ian Paterson claims and related costs (0.6) 27.6
Property impairment 12.6 -
Business reorganisation 1.0 1.3
Hospitals set up and closure costs 1.8 3.2
Total exceptional costs 14.8 32.1
======================================== ========== =======
Other costs
Compliance set-up costs 0.5 -
Total exceptional and other costs 15.3 32.1
======================================== ========== =======
Property impairment relates to the Spire Alexandra hospital;
this is a site that has underperformed in recent years. The
performance in the first six months continued to deteriorate which
has now resulted in impairment being recognised. Business
reorganisation costs include internal group reorganisation costs
associated with the strategic review that commenced in Q4 2017.
Hospital set up and closure costs include the provision of
impairment for fixed assets at the Windsor clinic; this is
subsequent to discussions with the landlord following which Spire
have agreed to terminate the lease early in September 2018, along
with further decommissioning costs of the former Manchester
hospital site. Further details of exceptional and other items are
disclosed in note 8 of this interim announcement.
OPERATING PROFIT BEFORE AND AFTER EXCEPTIONAL AND OTHER
ITEMS
Operating profit after exceptional and other items decreased by
25.2% in the period to GBP16.3 million. Before exceptional and
other items, operating profit decreased by 41.4%, to GBP31.6
million for the six months ended 30 June 2018 (H1 2017: GBP53.9
million). Excluding the results of Spire Manchester, Nottingham and
St Anthony's hospitals in H1 2018, underlying operating profit
before exceptional and other items decreased by 34.8%, from GBP56.3
million to GBP36.7 million.
NET FINANCE COSTS
Net finance costs increased by 15.5% to GBP11.2 million (H1
2017: GBP9.7 million) as a result of applicable interest rates on
borrowings in the period.
TAXATION
The taxation charge for the six months ended 30 June 2018
consisted of a GBP1.9 million charge for corporation tax and a
credit of GBP5.0 million for deferred tax. The effective tax rate
for the six months ended 30 June 2018 was credit 60.8% (before
exceptional and other items 19.6%).
The taxation charge for the six months ended 30 June 2017
consisted of a GBP0.6 million charge for corporation tax and a
charge of GBP2.6 million for deferred tax. The effective tax rate
for the six months ended 30 June 2017 was 26.4% (before exceptional
and other items 21.5%).
PROFIT FOR THE PERIOD
The profit after taxation for the six months ended 30 June 2018
was GBP8.2 million (H1 2017: GBP8.9 million).
ADJUSTED FINANCIAL INFORMATION
This statement was prepared for illustrative purposes only and
did not represent the Group's actual earnings. The information was
prepared as described in the notes set out below.
Non-GAAP financial measures
We have provided in this release financial information that has
not been prepared in accordance with IFRS. We use these non-GAAP
financial measures internally in analysing our financial results
and believe they are useful to investors, as a supplement to IFRS
measures, in evaluating our ongoing operational performance. We
believe that the use of these non-GAAP financial measures provides
an additional tool for investors to use in evaluating ongoing
operating results and trends in comparing our financial results
with other companies in our industry, many of which present similar
non-GAAP financial measures to investors.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with IFRS. Investors are encouraged to
review the reconciliation to these non-GAAP financial to their most
directly comparable IFRS financial measures provided in the
financial statement tables included in this press release.
Adjustments have been made to exclude the trading results of any
new hospital development, closure or disposal in both current and
prior periods. We have therefore excluded the results of Spire
Manchester, Spire Nottingham and Spire St Anthony hospitals in
arriving at 'underlying' in this 2018 interim Report. Manchester
hospital was transitioned to a new and larger site during January
2017 (which resulted in a period of operational closure), the new
hospital in Nottingham was operational in late April 2017 and St
Anthony's was redeveloped in 2017, including the construction of a
new 6 surgical theatre complex which opened in late 2016.
Six months ended 30
June
(Unaudited)
======================
(GBP million) 2018 2017
============================================ ========== ==========
Revenue 475.6 481.0
Adjustments:
New hospital openings (Spire Nottingham
and Spire Manchester hospitals) (16.4) (10.5)
Hospital redevelopment (Spire St Anthony's
Hospital) (13.6) (13.9)
Underlying revenue 445.6 456.6
============================================ ========== ==========
Operating profit before exceptional and
other items 31.6 53.9
Adjustments:
New hospital openings (Spire Nottingham
and Spire Manchester hospitals) 5.4 2.4
Hospital redevelopment (Spire St Anthony's
Hospital) (0.3) 0.6
Underlying operating profit before exceptional
and other items 36.7 56.9
================================================ ====== ======
Depreciation and amortization on underlying
assets 28.6 25.9
================================================ ====== ======
Underlying EBITDA 65.3 82.8
================================================ ====== ======
EBITDA 66.1 83.2
Adjustments:
New hospital openings (Spire Nottingham
and Spire Manchester hospitals) 0.3 (0.5)
Hospital redevelopment (Spire St Anthony's
Hospital) (1.1) 0.1
Underlying EBITDA 65.3 82.8
================================================ ====== ======
Adjusted profit after tax and earnings per share
Adjustments have been made to remove the impact of a number of
significant non-recurring items.
Six months ended
30 June
(Unaudited)
==========================
(GBP million) 2018 2017
=========================================== ============ ============
Profit before taxation 5.1 12.1
Adjustment for:
Exceptional and other items 15.3 32.1
============================================ ============ ============
Adjusted profit before tax 20.4 44.2
Taxation (1a) (4.0) (9.5)
============================================ ============ ============
Adjusted profit after tax 16.4 34.7
============================================ ============ ============
Weighted average number of ordinary
shares in issue (No.) 400,806,961 400,542,797
============================================ ============ ============
Adjusted basic earnings per share (pence) 4.1 8.7
============================================ ============ ============
1a. Reported tax charge for the period adjusted for the tax
effect of exceptional and other items.
CASH FLOWS ANALYSIS FOR THE PERIOD
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
========================================= ========= ========
Opening cash balance 39.2 67.9
========================================== ========= ========
Operating cash flows before exceptional
and other items and income tax paid 62.2 81.2
Exceptional and other items (1b) (1.4) (4.9)
Income tax paid (1.4) (0.6)
========================================== ========= ========
Operating cash flows after exceptional
and other items and income tax paid 59.4 75.7
Net cash used in investing activities (33.4) (59.1)
Net cash used in financing activities (20.1) (19.6)
========================================== ========= ========
Closing cash balance 45.1 64.9
========================================== ========= ========
Closing net indebtedness 458.1 436.1
========================================== ========= ========
1b. Comprising exceptional and other items paid of GBP1.4
million (H1 2017: GBP4.9 million) included within movements in
working capital (H1 2017: GBP0.4 million credit included within
charge).
EBITDA CASH FLOW Conversion rate and DEBT leverage covenant
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
========================================= ========= ========
Operating cash flows before exceptional
and other items and income tax paid 62.2 81.2
========================================== ========= ========
EBITDA 66.1 83.2
========================================== ========= ========
Cash conversion rate 94.1% 97.6%
========================================== ========= ========
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
================== ========= ========
Debt leverage(1) 3.4x 3.1x
=================== ========= ========
1. Total net debt to EBITDA excluding exceptional and
non-recurring items must not be greater that 4:1. Tested
semi-annually.Included within the H1 2018 debt leverage calculation
is some GBP2m of non-recurring items.
Operating cash flows before exceptional and other items and
income tax paid
The cash inflow from operating activities before exceptional and
other items and income tax paid for the six months ended 30 June
2018 was GBP62.2 million, which constitutes a cash conversion rate
from EBITDA for the period of 94.1% (H1 2017: GBP81.2 million or
97.6%). The net cash inflow from movements in working capital in
the period was GBP5.8 million (H1 2017: inflow GBP23.9 million)
mainly due to the increase in trade and other receivables, of this
GBP6.4 million relates a non cash item for the IFRS 9
transition.
Investing and financing cash flows
Net cash used in investing activities for the six months ended
30 June 2018 was GBP33.4 million. Capital expenditure for the
purchase of property, plant and equipment in the period totalled
GBP33.5 million, which included the ongoing upgrades of facilities
notably at Spire Hull, Spire Bushey, Spire Cheshire and Spire
Cambridge Lea Hospitals.
Net cash used in investing activities for the six months ended
30 June 2017 was GBP59.1 million. Capital expenditure for the
purchase of property, plant and equipment in the period totalled
GBP59.5 million, which included the completion of the new Spire
Manchester and Spire Nottingham hospitals and ongoing upgrades of
facilities notably at Spire Hull, Spire Bushey and Spire Cambridge
Lea Hospitals.
Net cash used in financing activities for the six months ended
30 June 2018 was GBP20.1 million (H1 2017: GBP19.6 million),
including interest paid of GBP10.1 million (H1 2017: GBP9.6
million) and final 2017 dividend paid to shareholders of GBP10.0
million (H1 2017: GBP10.0 million).
DIVID
The Board has approved a 2018 interim dividend of 1.3 pence per
share (H1 2017: 1.3 pence) payable on 11 December 2018.
RELATED PARTY TRANSACTIONS
There were no significant related party transactions during the
period under review.
Principal risks
The Board has overall responsibility for the Group's risk
management and internal control systems.
The principal risks and mitigating factors are described in more
detail on pages 52 to 55 of the Group's Annual Report and Accounts
for the year ended 31 December 2017 (a copy of which is available
on the Group's website at www.spirehealthcare.com). The Board have
reconsidered the Group's key risks and believe the only additional
risk to be considered is Brexit and that all remaining risks are
appropriate for the remaining six months period to 31 December
2018.
-- Clinical care
-- Government policy; including the commissioning of NHS services
-- Compliance with laws, regulations and other applicable requirements
-- Insurance
-- Concentration of the PMI market
-- Availability of key medical staff
-- Macroeconomic conditions
-- Competitor challenge
-- Cybersecurity
-- Investment plans and execution
-- Liquidity and covenant risk
-- Brexit
Directors' responsibilities statement
We confirm that to the best of our knowledge:
-- This condensed consolidated interim financial information for
the six months ended 30 June 2018 has been prepared in accordance
with International Accounting Standard 34 ('IAS 34') as adopted by
the EU.
-- The interim management report, which is incorporated into the
Non-Executive Chairman's message, Operating Review and Financial
Review, includes a fair review of the information as required
by:
-- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of the important events that have occurred during the
six months of the current financial year and their impact on the
condensed consolidated interim financial information and a
description of the principal risks for the remaining six months of
the year; and
-- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
impacted the financial position or performance of the Group during
the period and any material changes in the related party
transactions described in the Group's Annual Report and Accounts
for the year ended 31 December 2017.
By order of the Board
Justin Ash Garry Watts
Chief Executive Officer Non-Executive Chairman
17 September 2018
Independent review report to the members of Spire Healthcare
Group plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2018 which comprises the Consolidated
interim income statement, Consolidated interim statement of
comprehensive income, Consolidated interim statement of changes in
equity, Consolidated interim balance sheet, Consolidated interim
statement of cash flows and related explanatory notes 1 to 17 that
have been reviewed. We have read the other information contained in
the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
17 September 2018
Condensed financial statements
Consolidated interim income statement
For the six months ended 30 June 2018
Six months ended 30 June
(Unaudited)
2018 2017
(GBP million) Notes Total Exceptional Total Total Exceptional Total
before and other before and other
exceptional items exceptional items
and other (note and other (note
items 8) items 8)
======================== ====== ============= ============ ======== ============= ============ ========
Revenue 7 475.6 - 475.6 481.0 - 481.0
Cost of sales (251.6) - (251.6) (249.5) - (249.5)
======================== ====== ============= ============ ======== ============= ============ ========
Gross profit 224.0 - 224.0 231.5 - 231.5
Other operating
costs (192.4) (15.3) (207.7) (177.6) (32.1) (209.7)
======================== ====== ============= ============ ======== ============= ============ ========
Operating profit 6 31.6 (15.3) 16.3 53.9 (32.1) 21.8
======================== ====== ============= ============ ======== ============= ============ ========
Finance income - - - - - -
Finance costs 9 (11.2) - (11.2) (9.7) - (9.7)
======================== ====== ============= ============ ======== ============= ============ ========
Profit before taxation 20.4 (15.3) 5.1 44.2 (32.1) 12.1
======================== ====== ============= ============ ======== ============= ============ ========
Taxation 10 (4.0) 7.1 3.1 (9.5) 6.3 (3.2)
======================== ====== ============= ============ ======== ============= ============ ========
Profit for the period 16.4 (8.2) 8.2 34.7 (25.8) 8.9
======================== ====== ============= ============ ======== ============= ============ ========
Profit for the period
attributable to
owners of the Parent 16.4 (8.2) 8.2 34.7 (25.8) 8.9
======================== ====== ============= ============ ======== ============= ============ ========
Earnings per share
- basic (in pence
per share) 12 4.1 (2.1) 2.0 8.7 (6.5) 2.2
Earnings per share
-diluted (in pence
per share) 12 4.1 (2.1) 2.0 8.6 (6.4) 2.2
======================== ====== ============= ============ ======== ============= ============ ========
Consolidated interim statement of comprehensive income
For the six months ended 30 June 2018
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
=========================================== ========= ========
Profit for the period 8.2 8.9
============================================ ========= ========
Other comprehensive income for the period - -
============================================ ========= ========
Total comprehensive income for the period
attributable to owners of the Parent 8.2 8.9
============================================ ========= ========
Consolidated interim statement of changes in equity
For the six months ended 30 June 2018 (Unaudited)
EBT
Share Share Capital share Retained Total
(GBP million) Notes capital premium reserves reserves earnings equity
============================== ====== ========= ========= ========== ========== ========== ========
As at 1 January 2017 4.0 826.9 376.1 (2.2) (169.5) 1,035.3
Profit for the period - - - - 8.9 8.9
Other comprehensive income
for the period - - - - - -
Share-based payments 16 - - - - 0.7 0.7
Deferred tax on share-based
payments - - - - 0.1 0.1
Utilisation of EBT shares
for Directors' Share Bonus
Award - - - 0.8 (0.8) -
Dividend paid 11 - - - - (10.0) (10.0)
============================== ====== ========= ========= ========== ========== ========== ========
Balance at 30 June 2017 4.0 826.9 376.1 (1.4) (170.6) 1,035.0
============================== ====== ========= ========= ========== ========== ========== ========
As at 1 January 2018 4.0 826.9 376.1 (0.9) (168.2) 1,037.9
IFRS 9 transition adjustment 4 - - - - (6.4) (6.4)
Restated as at 1 January
2018 4.0 826.9 376.1 (0.9) (174.6) 1,031.5
Profit for the period - - - - 8.2 8.2
Other comprehensive income
for the period - - - - - -
Share-based payments 16 - - - - 0.5 0.5
Deferred tax on share-based
payments - - - - 0.1 0.1
Utilisation of EBT shares
for Directors' Share Bonus
Award - - - 0.1 (0.1) -
Dividend paid 11 - - - - (10.0) (10.0)
============================== ====== ========= ========= ========== ========== ========== ========
Balance at 30 June 2018 4.0 826.9 376.1 (0.8) (175.9) 1,030.3
============================== ====== ========= ========= ========== ========== ========== ========
Consolidated interim balance sheet
As at
===========================
30 June 31 December
2018 2017
(GBP million) Notes (Unaudited) (Audited)
====================================== ====== ============= ============
ASSETS
Non-current assets
Intangible assets 517.8 517.8
Property, plant and equipment 13 1,021.9 1,036.9
1,539.7 1,554.7
====================================== ====== ============= ============
Current assets
Inventories 29.0 30.1
Trade and other receivables 108.6 104.5
Cash and cash equivalents 45.1 39.2
====================================== ====== ============= ============
182.7 173.8
====================================== ====== ============= ============
Non-current assets held for sale 5.6 5.6
====================================== ====== ============= ============
188.3 179.4
====================================== ====== ============= ============
Total assets 1,728.0 1,734.1
====================================== ====== ============= ============
EQUITY AND LIABILITIES
Equity
Share capital 4.0 4.0
Share premium 826.9 826.9
Capital reserves 376.1 376.1
EBT share reserves (0.8) (0.9)
Retained earnings (175.9) (168.2)
====================================== ====== ============= ============
Equity attributable to owners of the
Parent 1,030.3 1,037.9
Total equity 1,030.3 1,037.9
====================================== ====== ============= ============
Non-current liabilities
Borrowings 14 499.1 498.0
Deferred tax liabilities 67.6 72.6
====================================== ====== ============= ============
566.7 570.6
====================================== ====== ============= ============
Current liabilities
Provisions 15 19.2 17.9
Borrowings 14 4.1 4.0
Trade and other payables 105.2 101.5
Income tax payable 2.5 2.2
====================================== ====== ============= ============
131.0 125.6
====================================== ====== ============= ============
Total liabilities 697.7 696.2
====================================== ====== ============= ============
Total equity and liabilities 1,728.0 1,734.1
====================================== ====== ============= ============
Consolidated interim statement of cash flows
For the six months ended 30 June 2018
Six months ended
30 June
(Unaudited)
===================
(GBP million) Notes 2018 2017
=============================================== ====== ========= ========
Cash flows from operating activities
Profit before taxation 5.1 12.1
Adjustments for:
Depreciation 6 34.4 28.6
Impairment of property, plant and equipment 13.9 -
Share-based payments 0.5 0.7
Loss on disposal of property, plant
and equipment 0.1 0.7
Finance income - -
Finance costs 9 11.2 9.7
=============================================== ====== ========= ========
65.2 51.8
Movements in working capital:
(Increase)/decrease in trade and other
receivables (10.5) 2.3
Decrease/(increase) in inventories 1.1 (0.4)
Increase /(decrease) in trade and other
payables 3.7 (4.8)
Increase in provisions 1.3 27.4
Income tax paid (1.4) (0.6)
Net cash from operating activities 59.4 75.7
Cash flows from investing activities
Purchase of property, plant and equipment (33.5) (59.5)
Proceeds from disposal of property,
plant and equipment 0.1 0.4
Interest received - -
Net cash used in investing activities (33.4) (59.1)
Cash flows from financing activities
Interest paid (10.1) (9.6)
Repayment of borrowings - -
Dividend paid to equity holders of the
Parent (10.0) (10.0)
=============================================== ====== ========= ========
Net cash used in financing activities (20.1) (19.6)
=============================================== ====== ========= ========
Net increase/(decrease) in cash and
cash equivalents 5.9 (3.0)
Cash and cash equivalents at beginning
of period 39.2 67.9
=============================================== ====== ========= ========
Cash and cash equivalents at end of
period 45.1 64.9
=============================================== ====== ========= ========
Exceptional and other items
Exceptional and other items paid included
in the cash flow from operating activities (1.4) (4.9)
Total exceptional and other items 8 (15.3) (32.1)
=============================================== ====== ========= ========
Notes to the consolidated interim financial statements
1. GENERAL INFORMATION
Spire Healthcare Group plc (the 'Company') and its subsidiaries
(collectively, the 'Group') owns and operates private hospitals and
clinics in the UK and provides a range of private healthcare
services.
The Company is a public limited company, which is listed on the
London Stock Exchange, incorporated, registered and domiciled in
England (registered number: 09084066). The address of its
registered office is 3 Dorset Rise, London EC4Y 8EN.
The condensed consolidated interim financial information for the
six months ended 30 June 2018 was approved by the Board on 17
September 2018.
2. BASIS OF PREPARATION
Basis of preparation of interim statements
The condensed consolidated interim financial information has
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS 34 Interim
Financial Reporting, as adopted by the EU. They do not include all
the information required for full annual financial statements and
should be read in conjunction with information contained in the
Group's Annual Report and Accounts for the year ended 31 December
2017. The condensed consolidated interim financial information has
been reviewed, not audited.
The financial information for the year ended 31 December 2017
does not comprise statutory accounts within the meaning of section
434 of the Companies Act 2006 for that year, but it is derived from
those accounts. Statutory accounts for the year ended 31 December
2017 were approved by the Board of Directors on 1 March 2018 and
delivered to the Registrar of Companies. The report of the auditor
on those accounts was unqualified, did not draw attention to any
matters by way of emphasis and did not contain statements under
section s498 (2) or (3) of the Companies Act 2006.
Going concern
During July 2018, the Group renewed its finance facility with a
bank loan that matures in July 2022. The directors have considered
the Group's forecasts and projections, and the risks associated
with their delivery, and are satisfied that the Group will be able
to operate within the covenants imposed by the bank loan facility
for the foreseeable future. In relation to available cash
resources, the directors have had regard to both cash at bank and a
GBP100.0 million committed undrawn revolving credit facility.
Accordingly, they have adopted the going concern basis in preparing
this condensed consolidated interim financial information.
3. ACCOUNTING POLICIES
In preparing the condensed consolidated interim financial
information, the same accounting policies, methods of computation
and presentation have been applied as set out in the Group's Annual
Report and Accounts for the year ended 31 December 2017. The
accounting policies are consistent with those of the previous
financial year and corresponding interim reporting period with the
exception of the adoption of new and amended standards as set out
below.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting standards
('IFRS') as adopted by the EU.
The Group has not early adopted any standard, interpretation or
amendment that was issued but is not yet effective.
3. ACCOUNTING POLICIES (CONTINUED)
IFRS 16 LEASES
The Group is continuing to assess the impact of IFRS 16 Leases
which will be concluded by the end of the year.
New and amended standards adopted by the Group
A number of new and amended accounting standards became
applicable for the current reporting period and the Group had to
change its accounting policies and make adjustments as a result of
adopting the following standards:
IFRS9 Financial Instruments
IFRS 15 Revenue from contracts with customers
The impacts of adoption of these accounting standards are
disclosed in note 4 below. The other standards did not have any
impact on the Group's accounting policies and did not require
retrospective adjustments.
4. CHANGES IN ACCOUNTING POLICIES
IFRS 9 FINANCIAL INSTRUMENTS
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and
Measurement bringing all three aspects of the accounting together
for financial instruments: classification and measurements;
impairment; and hedge accounting.
The adoption of IFRS 9 Financial Instruments from 1 January
2018, resulted in a change of accounting policy and adjustments
through opening retained earnings. The new accounting policy is set
out below.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables.
To measure the expected credit losses, trade receivables have
been grouped based on shared characteristics and the days past due.
The Group has concluded that the expected loss rates for trade
receivables, are a reasonable approximation of the loss rates for
each ageing bucket based on historical debt trends of our portfolio
of customers for the last 2 reporting periods.
The loss allowance as at 1 January 2018 was determined as
follows for trade receivables:
Current 0-30 days 31-90 91-364 1-2 years Total
days days
===================== ======= ========= ===== ====== ========= =====
Expected loss rate 1.1% 6.7% 16.2% 50% 100%
Carrying amount (GBP
million) 36.3 5.9 4.3 3.8 6.9 57.2
Loss allowance 0.4 0.4 0.7 1.9 6.9 10.3
===================== ======= ========= ===== ====== ========= =====
The loss allowance for trade receivables as at 31 December 2017
reconcile to the opening loss allowances on 1 January 2018 as
follows:
(GBP million)
====================================================== =============
At 31 December 2017 - calculated under IAS 39 3.9
Amounts restated through opening retained earnings 6.4
Opening loss allowance at 1 January 2018 - calculated
under IFRS 9 10.3
====================================================== =============
The loss allowance decreased by GBP4.8 million to GBP5.5 million
for trade receivables during the six months to 30 June 2018. The
bad debt provision decrease would have been GBP2.2 million for the
period to bring the provision down to GBP1.7 million under the
incurred loss model of IAS 39.
Trade receivables are written off when there is no longer a
reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the
failure of a debtor to engage in a repayment plan with the Group,
and failure to make contractual payments for a period of greater
than 2 years past due.
4. CHANGES IN ACCOUNTING POLICIES (CONTINUED)
Accounting policy
From 1 January 2018, the Group assesses on a forward looking
basis expected credit losses associated with its debt instruments
carried at amortised cost. The impairment methodology applied for
trade receivables is the simplified approach, which requires
expected lifetime losses to be recognised from initial recognition
of the receivables.
IFRS 15 Revenue from Contracts with Customers
The Group adopted IFRS 15 Revenue from Contracts with Customers
from 1 January 2018 which has not resulted in a material change in
accounting for revenue. In accordance with IFRS 15, the Group has
adopted the new rules using the modified retrospective approach, no
adjustments were required at the date of application.
Accounting policy
PMI, Self-pay, Partnerships and NHS revenue
The Group's patient revenue for PMI, Self-pay, Partnerships and
NHS is recognised when services have been delivered to the patient,
this includes in-patient cases for which services are
simultaneously received and consumed by the patient and outpatient
cases which the revenue is recognised on an individual component
basis when the performance obligations are satisfied.
Other revenue
Other revenue includes consultant revenue, third party revenue
streams such as room rental, medical secretary services, training
and hire of facilities. Revenue from providing these services or
facilities is recognised in the accounting period in which the
services are rendered.
5. SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of the condensed consolidated interim financial
information requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amount of assets and liabilities, income and expense.
Actual results may differ from these estimates.
The significant judgements and estimates used in the application
of the Group's accounting policies are the same as those described
in the Group's Annual Report and Accounts for the year ended 31
December 2017.
6. OPERATING PROFIT
Operating profit for the period has been arrived at after
charging:
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
============================================= ========= ========
Rent of land and buildings under operating
leases 32.8 31.9
Depreciation of property, plant and
equipment 34.4 28.6
Impairment of property, plant and equipment 13.9 -
Loss on disposal of property, plant
and equipment 0.1 0.7
Staff costs 147.8 137.6
============================================== ========= ========
7. SEGMENTAL REPORTING
In determining the Group's operating segment, management has
primarily considered the financial information in the internal
reports that are reviewed and used by the executive management team
and the Board of Directors (in aggregate the chief operating
decision maker) in assessing performance and in determining the
allocation of resources. The financial information in those
internal reports in respect of revenue and expenses has led
management to conclude that the Group has a single operating
segment, being the provision of healthcare services.
Partnership revenue represents agreements and relationships
directly with other bodies who provide their employees, members or
customers access to healthcare treatment. Note in prior periods
some of this revenue has been included within Self-Pay or Other.
The Group internally reports Self-Pay as direct to consumer revenue
and therefore we have restated the prior year comparatives to show
a clear distinction between the two revenue streams.
30 June
2017
( As previously Partnership 30 June
(GBP million) stated) payors CQUIN 2017 (restated)
============================= === ================== ============ ======= =================
Underlying NHS revenue
(1) 148.8 - 2.7 151.5
Non underlying revenue 2.9 - 0.1 3.0
Underlying Self-pay revenue
(1) 88.7 (12.6) - 76.1
Non underlying revenue 5.7 (1.2) - 4.5
Underlying Partnership
revenue (1) - 12.6 - 12.6
Non underlying revenue - 1.2 (0.1)- 1.1
Other 15.6 - (2.7) 12.9
================================== ================== ============ ======= =================
All revenue is attributable to and all non-current assets are
located in the United Kingdom.
Revenue by wider customer (payor) group is shown below:
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
=============== ========= ========
Insured 221.4 219.3
NHS 140.3 154.5
Self-pay 87.3 80.6
Partnerships 13.5 13.7
Other 13.1 12.9
================ ========= ========
Total 475.6 481.0
================ ========= ========
8. EXCEPTIONAL and other ITEMS
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
============================================= ========= ========
Ian Paterson claims and related costs (0.6) 27.6
Impairment of property, plant and equipment 12.6 -
Business reorganisation 1.0 1.3
Hospitals set up and closure costs 1.8 3.2
============================================== ========= ========
Total exceptional costs 14.8 32.1
============================================== ========= ========
Income tax credit on exceptional items (2.6) (6.3)
============================================== ========= ========
Net total 12.2 25.8
============================================== ========= ========
In the six months ended 30 June 2018:
Property impairment relates to the Spire Alexandra hospital;
this is a site that has underperformed in recent years. The
performance in the first six months continued to deteriorate which
has now resulted in impairment being recognised. Business
reorganisation costs include internal group reorganisation costs
associated with the strategic review commenced in Q4 2017. Hospital
set up and closure costs include the provision of impairment for
fixed assets at the Spire Windsor clinic; this is subsequent to
discussions with the landlord following which
8. EXCEPTIONAL and other ITEMS (CONTINUED)
Spire have agreed to terminate the lease early in September
2018, along with further decommissioning costs of the former
Manchester hospital site. All 2018 exceptional costs are expected
to be tax deductible.
In the six months ended 30 June 2017:
Business reorganisation mainly comprised staff restructuring
costs. Hospitals set up and closure costs refer to pre-opening
costs for the new Manchester and Nottingham hospitals and
decommissioning costs for the old Manchester site. Except for the
disposal costs, which were capital in nature, all other exceptional
costs in 2017 are expected to be tax deductible.
Following the completion of the criminal proceedings against Ian
Paterson (a consultant who previously had practicing privileges at
Spire Healthcare) earlier in 2017, Spire has entered into an
agreement in principle to settle all current and known claims
against Spire relating to his practice at Spire. In this connection
Spire has made a provision amounting to GBP27.6m for the potential
cost of such settlement in the results for the period. This
provision has been determined before account is taken of any
potential further recoveries from insurers.
Six months ended
30 June
Other items (Unaudited)
===================
(GBP million) 2018 2017
================================= ========== =======
Compliance set-up costs 0.5 -
================================= ========== =======
Total other items 0.5 -
================================= ========== =======
Deferred tax on properties (4.4) -
Income tax credit on other items (0.1) -
================================= ========== =======
Total post tax other items (4.0) -
================================= ========== =======
Compliance set up costs include amounts incurred in 2018 to meet
the requirements of General Data Protection Regulation ('GDPR')
which was effective from 25 May 2018. The initial tranche of costs
were incurred and recognised in H2 2017 and management expect
further material costs to be incurred to fulfil its expanded
obligations by the end of 2018.
During the current period, the Group reassessed the basis of
deferred tax on two properties that have been classified as held
for sale, this has given rise to a prior year exceptional tax
credit.
9. FINANCE COSTS
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
========================================= ======== =========
Interest on bank facilities 6.6 5.8
Finance charges payable under finance
leases 4.6 4.6
========================================== ======== =========
11.2 10.4
Finance costs capitalised in the period - (0.7)
========================================== ======== =========
Total finance costs 11.2 9.7
========================================== ======== =========
No finance costs were capitalised during the period. In the
prior period they were calculated based on a weighted cost of
borrowing of 2.5%.
10. TAXATION
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
============================================ ========== =======
Current tax
UK Corporation tax arising in the period 1.9 0.6
Total current tax 1.9 0.6
============================================= ========== =======
Deferred tax
Origination and reversal of temporary
differences (0.6) 2.6
Adjustment in respect of prior years (4.4) -
============================================ ========== =======
Total deferred tax charge (5.0) 2.6
============================================= ========== =======
Taxation in the period (3.1) 3.2
============================================= ========== =======
The tax charge for the period has been calculated using an
estimate of the effective annual rate of tax for the full year.
This rate has been applied to the pre-tax profits for the six
months ended 30 June 2018. The Group has separately calculated the
tax rates applicable to exceptional and other items for the period.
Tax rate changes that were substantively enacted at the balance
sheet date have been factored into the calculation of the effective
tax rates.
10. DIVIDS
Six months ended
30 June
(Unaudited)
===================
(GBP million) 2018 2017
================================================= ========= ========
Amounts recognised as distributions to equity
holders in the period:
- final dividend for the year ended 31 December
2017 of 2.5 pence per share 10.0 -
- final dividend for the year ended 31 December
2016 of 2.5 pence per share - 10.0
================================================== ========= ========
10.0 10.0
================================================== ========= ========
An interim dividend of 1.3 pence per share (H1 2017: 1.3 pence),
amounting to a total interim dividend of approximately GBP5.2
million (H1 2017: GBP5.2 million), was proposed by the Board on 17
September 2018. The interim dividend is payable on 11 December 2018
to shareholders who are on the register at 16 November 2018. In
accordance with IAS 10 'Events after the balance sheet date',
dividends declared after the balance sheet date are not recognised
as a liability in this condensed consolidated interim financial
information.
11. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the
period.
Six months ended
30 June
(Unaudited)
==========================
2018 2017
=============================================== ============ ============
Profit for the period attributable to owners
of the Parent (GBP million) 8.2 8.9
================================================ ============ ============
Weighted average number of ordinary shares 401,081,391 401,081,391
Adjustment for weighted average number of
shares held in the EBT (274,430) (538,594)
================================================ ============ ============
Weighted average number of ordinary shares
in issue (No.) 400,806,961 400,542,797
================================================ ============ ============
Basic earnings per share (in pence per share) 2.0 2.2
================================================ ============ ============
For dilutive earnings per share, the weighted average number of
ordinary shares in issue is adjusted to include all dilutive
potential ordinary shares arising from share options.
11. EARNINGS PER SHARE (CONTINUED)
Six months ended
30 June
(Unaudited)
==========================
2018 2017
============================================== ============ ============
Profit for the period attributable to owners
of the Parent (GBP million) 8.2 8.9
=============================================== ============ ============
Weighted average number of ordinary shares
in issue 400,806,961 400,542,797
Adjustment for weighted average number of
contingently issuable shares 1,599,822 1,296,410
=============================================== ============ ============
Diluted weighted average number of ordinary
shares in issue (No.) 402,406,783 401,839,207
=============================================== ============ ============
Diluted earnings per share (in pence per
share) 2.0 2.2
=============================================== ============ ============
12. PROPERTY, PLANT AND EQUIPMENT
Assets
Long in the
Freehold leasehold course
(GBP million) property property Equipment of construction Total
=================== ========== =========== ========== ================= ========
Net book value
At 1 January 2018 575.2 265.4 191.6 4.7 1,036.9
Additions - 14.2 11.4 7.9 33.5
Disposals - - (0.2) - (0.2)
Impairment (12.6) (1.2) (0.1) - (13.9)
Depreciation (4.5) (9.3) (20.6) - (34.4)
At 30 June 2018 558.1 269.1 182.1 12.6 1,021.9
==================== ========== =========== ========== ================= ========
During the period, additions included the ongoing upgrade of
facilities at Spire Hull, Cheshire and Cambridge hospitals.
During the period, impairment was recognised in relation to
leasehold improvements and equipment as part of the termination of
the lease for the Windsor clinic. Impairment of Freehold property
relates to the Spire Alexandra hospital (refer note 8).
Capital expenditure commitments
Capital commitments authorised and contracted for, but not
provided in the accounts as at 30 June 2018 amounted to GBP24.8
million (31 December 2017: GBP65.5 million).
13. BORROWINGS AND FINANCIAL INSTRUMENTS
As at
===========================
30 June 31 December
2018 2017
(GBP million) (Unaudited) (Audited)
================================== === ============= ============
Secured borrowings
Bank loans 426.1 425.1
Obligations under finance leases 77.1 76.9
503.2 502.0
====================================== ============= ============
The bank loans and finance leases are secured on fixed and
floating charges over both the present and future assets of
material subsidiaries of the Group.
Total borrowings (measured at amortised cost)
As at
===========================
30 June 31 December
2018 2017
(GBP million) (Unaudited) (Audited)
=========================================== === ============= ============
Amount due for settlement within 12
months 4.1 4.0
Amount due for settlement after 12 months 499.1 498.0
503.2 502.0
=============================================== ============= ============
13. BORROWINGS AND FINANCIAL INSTRUMENTS (CONTINUED)
Financial instruments
The Group's financial assets and liabilities, other than trade
and other receivables and cash and short-term deposits, held by the
Group at the balance sheet date were as set out below:
More
At 30 June 2018 (Unaudited) 1 year than
Contractual
Carrying cash
(GBP million) amount flows or less 1-2 years 2 years
============================= === ========= ============ ========= ========== =========
Non-derivative financial
liabilities
Secured bank facilities 426.1 442.2 13.7 428.5 -
Obligations under finance
leases 77.1 252.7 8.6 8.9 235.2
Trade and other payables 63.2 63.2 63.2 - -
566.4 758.1 85.5 437.4 235.2
================================= ========= ============ ========= ========== =========
More
At 31 December 2017 (Audited) 1 year than
Contractual
Carrying cash
(GBP million) amount flows or less 1-2 years 2 years
=============================== === ========= ============ ========= ========== =========
Non-derivative financial
liabilities
Secured bank facilities 425.1 445.8 11.5 434.3 -
Obligations under finance
leases 76.9 265.6 8.7 8.7 248.2
Trade and other payables 59.0 59.0 59.0 - -
561.0 770.4 79.2 443.0 248.2
=================================== ========= ============ ========= ========== =========
Bases of valuation
At 30 June 2018, the Group did not hold financial instruments
measured at fair value (31 December 2017: nil).
Management assessed that cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate to their carrying amounts largely due to the short-term
maturities of these instruments.
The carrying value of the other financial instruments, being
finance leases and debt, is approximately equal to their fair
value, based on a review of current terms against market and
expected short term settlements. The debt is presented after the
deduction of GBP1.2 million (31 December 2017: GBP1.8 million) of
issue costs.
14. PROVISIONS
The movement for the period in the provisions is as follows:
Business
Medical reorganisation
(GBP million) malpractice and other Total
======================== ============= ================ =======
At 1 January 2017 14.3 2.4 16.7
Utilised (0.6) (1.0) (1.6)
Additions 29.0 - 29.0
======================== ============= ================ =======
At 30 June 2017 42.7 1.4 44.1
======================== ============= ================ =======
Utilised (30.4) (0.6) (31.0)
Additions 6.2 0.7 6.9
Released (1.7) (0.4) (2.1)
======================== ============= ================ =======
As at 31 December 2017 16.8 1.1 17.9
======================== ============= ================ =======
Utilised (3.1) (0.5) (3.6)
Additions 3.6 1.9 5.5
Released (0.6) - (0.6)
At 30 June 2018 16.7 2.5 19.2
======================== ============= ================ =======
Medical malpractice relates to commitments to patients in
respect of the removal or replacement of the PIP brand of breast
implants, and estimated liabilities arising from claims for damages
in respect of services previously supplied to patients. Amounts are
shown gross of insured liabilities. Any such insurance recoveries
are recognised in other receivables. Following the completion of
the criminal proceedings against I Paterson, a consultant who
previously had practicing privileges at Spire Healthcare,
management agreed settlement with all current and known claimants
(and other co-defendants) and have made a provision for the
expected remaining costs associated with
14. PROVISIONS
the case and the ongoing public enquiry. This provision has been
determined before account is taken of any potential further
recoveries from insurers.
Business reorganisation and other includes staff restructuring
costs, closure costs relating to an onerous contract and provision
for payor claims.
The provisions are shown gross of any expected reimbursement
from insurers of the related risks. The reimbursement is recognised
as a separate receivable when receipt of it is judged sufficiently
probable. The amount in receivables in that respect was GBP9.1
million (31 December 2017: GBP7.5 million).
Provisions as at 30 June 2018 are materially considered to be
current and expected to be utilised at any time within three
years.
15. SHARE-BASED PAYMENTS
During the six months ended 30 June 2018, the Group made further
grants under its existing share-based payment schemes, as
follows:
Long term incentive plan ('LTIP')
On 28 March 2018, the Company granted Justin Ash 576,058 share
options and 1,017,432 share options to other senior managers. The
options will vest based on earnings per share ('EPS') (35%) targets
for the financial year ending 31 December 2020, relative total
shareholder return ('TSR') (35%) targets on performance over the
three-year period to 31 December 2020 and operational excellence
('OE')(30%) targets based on net promotor scores and regulatory
ratings for the current portfolio of hospitals, subject to
continued employment. Upon vesting, the options will remain
exercisable until 28 March 2028.
On 16 April 2018, the Company granted senior management 74,474
share options. The options will vest based on EBITDA (50%) target
for the financial year ending 31 December 2020 and Regulatory
rating (50%) for Manchester hospital, subject to continued
employment. Upon vesting, the options will remain exercisable until
16 April 2028.
For the six months ended 30 June 2018, the total cost recognised
in the income statement was GBP0.5 million (H1 2017: GBP0.6
million). Employer's NI is being accrued, where applicable, at the
rate of 14.3%, which management expects to be the prevailing rate
at the time the options are exercised, based on the share price at
the reporting date. For the six months ended 30 June 2018, the
total NI charge was GBP0.1 million (H1 2017: GBP0.1 million).
16. EVENTS AFTER THE REPORTING PERIOD
2018 interim dividend
The Board has approved a 2018 interim dividend of 1.3 pence per
share, amounting to approximately GBP5.2 million, to be paid on 11
December 2018 to shareholders on the register at the close of
business on 16 November 2018.
Borrowings extension
During July 2018, the Group renewed its finance facility with a
bank loan that matures in July 2022.
Shareholders' information
REGISTERED OFFICE AND HEAD OFFICE:
Spire Healthcare Group plc
3 Dorset Rise
London
EC4Y 8EN
Tel +44 (0)20 7427 9000
Fax +44 (0)20 7427 9001
(Registered in England & Wales No. 09084066)
CORPORATE WEBSITE
Shareholder and other information about the Company can be
accessed on the Company's website:
www.spirehealthcare.com
FINANCIAL CALENDAR
Ex-div date for 2018 interim dividend 15 November 2018
Record date for 2018 interim dividend 16 November 2018
Payment date for 2018 interim dividend 11 December 2018
Announcement of 2018 preliminary results March 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LPMPTMBIBMTP
(END) Dow Jones Newswires
September 18, 2018 04:50 ET (08:50 GMT)
Spire Healthcare (LSE:SPI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Spire Healthcare (LSE:SPI)
Historical Stock Chart
From Apr 2023 to Apr 2024