REG - Spire Healthcare Grp - Half-year Report
12/09/2024 07:00
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RNS Number : 8593D Spire Healthcare Group PLC 12 September 2024
Spire Healthcare reports its results
for the six months ended 30 June 2024
London, UK, 12 September 2024, Spire Healthcare Group plc (LSE: SPI) ('Spire
Healthcare', 'the Group' or 'the Company'), a leading independent healthcare
group in the United Kingdom, today announces its interim results for the six
months ended 30 June 2024 ('the period' or 'H1 24').
Strong financial performance and delivery of our strategy in H1
Summary and Outlook
Spire Healthcare Group delivered a strong financial performance in the first
half of FY24, improving both earnings and returns. This performance was driven
by continued growth in private revenue, increasing support for the NHS and
improving margin in hospitals. The Group remains on track to deliver the
planned savings, efficiencies and digitalisation initiatives set out at the
Capital Markets Event last April and maintains a positive outlook for FY25.
Management confirms its FY24 guidance for Adjusted EBITDA to be in the
previously stated range (£255-275m).
Justin Ash, Chief Executive Officer of Spire Healthcare, said:
"These are strong results that demonstrate our strategy as an expanded group
is delivering.
"Our private revenue grew in H1, driven by strong growth in private medical
insurance (PMI) which has seen a resurgence amongst working-age people.
Patients are also increasingly switching between self-pay and PMI.
"Our work with the NHS also increased in the first half, partly due to higher
commissioning, increased complexity and patients exercising the right to
choose where they receive treatment. Spire stands ready to work with the new
government to help address NHS waiting lists.
"Our investment in mental health and physiotherapy has also seen good growth,
and we are confident this will continue. Vita plays a vital role in helping
people live healthier lives and get back to work.
"I am also pleased to report that our savings programme remains on track and
we are maintaining our safe and high quality care. We look forward to building
on the Group's performance in the first half and we are entering the second
half confident of further progress."
Financial and operating highlights
H1 24 represents the first six months of the integrated Group comprising the
Hospitals Business and New Services.
Strong revenue and earnings performance ((1))
Group:
· Revenue growth of 12.7% vs H1 23 to £762.5m, of which 5.4%
relates to Hospitals Business ((2)) on a Comparable Basis ((1)) with the
balance from New Services ((2))
· Adjusted EBITDA up 10.8% vs H1 23 to £130.6m; Adjusted EBIT up
11.7% vs H1 23 to £75.7m
· Adjusted profit before taxation increased by 20.2% vs H1 23 to
£26.8m
· Profit before taxation up 11.8% vs H1 23 to £22.7m
· Net bank debt on 30 June 2024 of £323.4m; increase from £248.5m
on 30 June 2023 linked to the acquisition of Vita Health Group (VHG)
· Net bank debt / EBITDA covenant ratio of 2.1x on 30 June 2024
(2.2x at the end of FY23 and 2.1x on 30 June 2023)
Hospitals Business:
· Overall revenue up 5.4% on a Comparable Basis vs H1 23
· Private revenue grew by 5.1% vs H1 23, with PMI revenue up 9.7%
on the back of strong demand and Self-pay (SP) revenue down 3.0%
· NHS revenue increased by 5.2%
· Average revenue per case (ARPC) increased by 4.7% to £3,495;
admissions of 140,657 during H1 24 were flat YOY on a Comparable Basis
· Adjusted EBITDA rose by 6.6% vs H1 23 to £126.3m; Adjusted EBIT
up 6.9% vs H1 23 to £73.2m
New Services:
· Revenue of £59.7m (H1 23: £6.7m) and Adjusted EBITDA of £4.3m
(H1 23: £0.6m loss)
· Vita revenue £53.0m (LFL((3)) H1 23: £41.2m) and Adjusted
EBITDA £5.1m (LFL H1 23: £3.5m)
Good progress against our strategy
· 98% of inspected hospitals and clinics currently rated 'Good' or
'Outstanding' by the CQC or equivalent in Scotland and Wales (end FY23: 98%)
· 97% of inpatient and daycase patients rating overall experiences
as 'Good' or 'Very Good', up 1ppt vs prior year
· Cost savings programme on track to deliver at least £15m cost
savings in 2024
· Employee Reward Framework finalised, due to launch later in 2024
· £51.5m capex investment ((9)) in facilities and equipment (H1
23: £31.0m)
· Active management of portfolio with sale of Tunbridge Wells
hospital
Summary Group results for the six months ended 30 June 2024
Six months ended 30 June (Unaudited)
(£ million) 2024 2023 Variance
Revenue 762.5 676.5 12.7%
Adjusted operating profit (Adjusted EBIT) 75.7 67.8 11.7%
Adjusting items (4.1) (2.0) NM((4))
Operating profit (EBIT) 71.6 65.8 8.8%
Profit before taxation 22.7 20.3 11.8%
Profit after taxation 14.1 12.7 11.0%
Basic earnings per share, pence 3.3 3.1 6.5%
Adjusted basic earnings per share, pence ((5)) 4.7 3.4 38.2%
Adjusted EBITDA ((6)) 130.6 117.9 10.8%
Adjusted profit before tax 26.8 22.3 20.2%
Adjusted profit after tax 19.6 14.2 38.0%
Adjusted FCF ((7)) 18.6 24.0 (22.5%)
Net bank debt ((8)) 323.4 248.5 30.1%
Net bank debt / EBITDA covenant ratio 2.1 2.1 -
1. On 31 March, the Group sold the business operations and assets of Spire
Tunbridge Wells to the local NHS Trust. Therefore, where meaningful we have
presented certain financial information on a 'Comparable Basis' where we have
adjusted for the year-on-year (YOY) impact of Tunbridge Wells.
2. The Hospitals Business relates to business operations performed at
hospital sites. All other Group operations are referred to as 'New Services'
and include the Doctors Clinic Group (DCG), Vita Health Group (VHG) and the
clinics (community facilities that offer a range of diagnostics and treatment
that do not require an overnight stay). Unless otherwise stated, all metrics
are on a Group basis. Refer to page 8 for alternative performance measures and
segmental analysis.
3. Like for like (LFL) numbers are provided for H1 23 which is the
pre-acquisition performance of VHG which was acquired in October 2023
4. Not meaningful
5. Adjusted basic earnings per share is stated before the effects of
Adjusting items.
6. Adjusted EBITDA is calculated as Operating profit, adjusted to add back
depreciation, amortisation, and Adjusting items, referred to hereafter as
'Adjusted EBITDA' refer to page 9. For EBITDA for covenant purposes, refer to
note 18.
7. Adjusted FCF (Free Cash Flow) is calculated as Adjusted EBITDA, less
rent, capital expenditure cash flows and changes in working capital after
adjusting for one-off items which are not related to the normal trading
activity of the business. Rent cash flows are defined as interest on, and
payment of, lease liabilities. Capital expenditure cash flows are defined as
the purchase of plant, property and equipment.
8. Net bank debt is defined as bank borrowings less cash and cash
equivalents.
9. Capital investment includes capital spend on property, plant and
equipment. Refer to note 14.
For further information please contact:
Spire Healthcare +44 (0)20 7427 9000
Angus Prentice - Director of Investor Relations
Instinctif Partners +44 (0)20 7457 2020
Julian Walker
Guy Scarborough
Registered Office and Head Office:
Spire Healthcare Group plc
3 Dorset Rise
London
EC4Y 8EN
Registered number 09084066
About Spire Healthcare
Spire Healthcare (http://www.spirehealthcare.com/) is the largest independent
healthcare provider in the United Kingdom, running 39 hospitals and over 50
clinics, medical centres and consulting rooms across England, Wales and
Scotland. It operates a network of private GPs and provides occupational
health services to over 800 corporate clients. It also delivers a range of
private and NHS mental health, musculoskeletal and dermatological services
under the Vita Health Group brand.
Working in partnership with over 8,600 experienced consultants, Spire
Healthcare delivered tailored, personalised care to over 1 million inpatients,
outpatients and day case patients, and occupational health programme clients,
in 2023. It is the leading private provider, by volume, of knee
(https://www.spirehealthcare.com/treatments/bones-and-joints/knee-replacement/)
and hip
(https://www.spirehealthcare.com/treatments/bones-and-joints/hip-replacement-surgery/)
operations in the United Kingdom as well as being the largest independent
provider of mental health talking therapies to the NHS. Spire Healthcare's
well-located and scalable hospitals have delivered successful and
award-winning outcomes, positioning the group well with patients, consultants,
the NHS, GPs and Private Medical Insurance ('PMI') providers. 98% of Spire
Healthcare's inspected locations are rated 'Good', 'Outstanding' or the
equivalent by health inspectors in England, Wales and Scotland. In a recent
Newsweek global survey, Spire was voted the third most trusted healthcare
provider in the world from a panel of over 70,000 people.
Spire Healthcare is listed on the London Stock Exchange and is a member of the
FTSE 250.
Cautionary statement
This 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 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 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, risks arising
out of health crises and pandemics, changes in tax rates, future business
combinations or dispositions, 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 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 announcement.
The group is providing the information in this 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 9.00 am. Please
register in advance for the live webcast of the meeting through the following
link:
https://spirehealthcare.zoom.us/webinar/register/WN_lnWbJHGcQs2BHYE8b9lcTA
(https://spirehealthcare.zoom.us/webinar/register/WN_lnWbJHGcQs2BHYE8b9lcTA)
The webcast will be available for replay following the presentation through
the Company's investor website: https://investors.spirehealthcare.com/home/
(https://investors.spirehealthcare.com/home/)
Operating review
Group: Strong profit growth in hospitals and new services
Spire Healthcare delivered a strong financial and operational performance in
the first half of 2024, in line with the Group's expectations. The Group saw
strong demand for private and NHS healthcare, underpinning its confidence in
continued growth in 2024 and beyond.
Earnings growth was driven by increased revenue - up 12.7% to £762.5m (H1 23:
£676.5m), including 5.4% from the Hospital Business on a Comparable Basis,
with the balance from New Services. Earnings also benefited from progress made
in our ongoing efficiency programme which is targeting at least £15m of cost
saving in 2024, with most crystallising in H2.
Adjusted EBITDA rose by 10.8% to £130.6m and Adjusted EBIT rose 11.7% to
£75.7m. Adjusted profit before tax for the period was £26.8m (H1 23:
£22.3m). After Adjusting items (see note 10) totalling £4.1m (H1 23:
£2.0m), statutory profit before tax for the period was £22.7m, up 11.8% on
the £20.3m recorded in H1 23. Statutory profit after tax increased by 11.0%
to £14.1m (H1 23: £12.7m).
Hospitals Business: Increased profit and revenue growth and improved margins
The Hospitals Business remains Spire Healthcare's core business activity.
Performance during the first half of the year was strong.
Revenue and adjusted earnings for the first six months were ahead of prior
year. Overall, hospital revenue grew by 5.4% vs H1 23 on a Comparable Basis
(up 4.9% vs H1 23 to £702.8m as reported). This was underpinned by increased
average revenue per case (ARPC). Adjusted EBITDA rose by 6.6% to £126.3m and
Adjusted EBIT rose 6.9% to £73.2m. Driving hospital margin expansion is a
core medium-term financial target. Margins grew with an Adjusted EBITDA margin
of 18.0% (H1 23: 17.7%) and Adjusted EBIT margin of 10.4% (H1 23: 10.2%).
Following a record 2023, admissions were sustained during the first six months
of 2024 and in part reflects our strategy to drive ARPC, by reducing the
volume of lower margin treatments, including ophthalmology and cosmetics, in
favour of higher complexity work.
Activity in the period was broadly unchanged compared to prior year, with
admissions and outpatient (OP) procedures of 225,659 (H1 23: 222,802),
including admissions of 140,657 (H1 23: 141,347). On a Comparable Basis,
admissions were flat YOY. The average revenue per case (ARPC) rose by 4.7% to
£3,495 during H1 24.
Private revenue was ahead by 5.1% vs H1 23 and represented 72.5% (H1 23:
72.4%) of total hospital revenue. This is in line with our target range of
70-80%. ARPC for the Group's private business of £3,489 represents an average
weighted increase of 5.2%.
PMI revenue grew by 9.7% vs H1 23 to £336.4m. Volumes of PMI patients,
including admissions and outpatient procedures, were up 5.8% vs H1 23. This
YOY growth is encouraging and reflects an increase in referrals and the
reported ongoing growth of the medical insurance market, with more corporate
and private policies, which we have seen continue into H2 24. The increased
volume seen in H1 24 included a slightly higher proportion of daycase than
inpatient treatments. Our contracts with PMI providers generally allow for
price adjustments in Q1 / Q2 and contain mechanisms linked to inflation, as
well as pricing incentives to capture increased patient flow from insurance
partners. Compared to H1 23, PMI ARPC was up 4.2% to £2,992.
SP revenue declined by 3% YOY driven by competitiveness and some patients of
working age switching from SP to PMI. ARPC increased 7.5% to £4,618.
NHS revenue grew by 5.2% to £179.3m in the first six months of this year
compared to last year, with increasing referrals through the electronic
referral system (eRS). Overall NHS volumes, including admissions and
outpatient procedures, were up 1.3% YOY and NHS ARPC up 6.4% to £3,509 in H1.
NHS tariff for 2024-25 was released and went live on 1 April 2024, resulting
in a net 0.6% uplift to prices.
Cost-saving initiatives under our on-going efficiency programme which were
completed or progressed during the period include Purchase to Pay (P2P)
roll-out, offering procurement benefits and improvement in administrative
processes; and the Brentwood Patient Administration centre supporting five
hospital locations.
Spire Healthcare completed the sale of Spire Tunbridge Wells to the Maidstone
and Tunbridge Wells NHS Trust ('the Trust') at the end of March 2024 for a
consideration of £9.975m. Since the sale, Spire Healthcare has continued to
run the hospital operations on behalf of the Trust. During the period, the
Group reached an agreement with the NHS to support the Sussex Health system,
helping to reduce their list of long waiter NHS patients by providing
treatment through a group of Spire hospitals in the south of England.
New Services: On track
At the heart of the Group's New Services business is Vita Health Group (VHG),
a market-leading provider of mental and physical health services in the UK,
which it acquired in H2 23. VHG delivered revenue of £53.0m during H1 24,
Adjusted EBITDA of £5.1m and Adjusted EBIT of £3.4m. VHG was successful in
retaining key contracts during H1 24 and performed in line with our
expectations. It remains on track to deliver c.£10m EBITDA for the full year.
Revenue and Adjusted EBITDA from remaining New Services businesses outside of
VHG is immaterial. As a whole, the Group's New Services segment delivered
revenue of £59.7m (H1 23: £6.7m) and Adjusted EBITDA of £4.3m (H1 23:
£0.6m loss) in the first six months. Adjusted EBITDA margin was 7.2% for the
period and Adjusted EBIT margin 4.2%.
The other principal businesses within New Services are Spire Occupational
Health (Spire OH) and London Doctors Clinic (LDC), which offers private GP
services in Greater London. Both businesses performed in line with plan. The
integration of VHG, Spire OH and LDC with the Hospitals Business continued to
plan, and we are starting to see synergies with downstream revenue.
The Group has previously disclosed plans to target 10 new medical clinics to
meet the growing healthcare needs in our communities. We opened the first
clinic at Abergele, North Wales earlier this year and performance is on track.
Work to open a second clinic at Harrogate is well underway and we aim to open
the doors to patients later this year.
Building on quality
Delivery of safe, high-quality patient care is embedded in Spire Healthcare's
purpose, culture and operations. Patient safety is a 24/7 commitment and core
to the work of all colleagues, clinical and non-clinical.
98% of our inspected hospitals and clinics are currently rated 'Good' or
'Outstanding' by the CQC or the equivalent in Scotland and Wales. We are
awaiting re-inspection of Spire Alexandra, our one remaining site which has a
'Requires Improvement' rating, which has not been inspected since 2016/17. In
H1 24, 97% of patients rated their overall care as 'very good' or 'good', a
further improvement on the 96% recorded in 2023.
Investing in our workforce
Successfully recruiting and retaining staff is critical particularly given the
ongoing shortage of skilled healthcare staff in the UK and international
market. As a healthcare service provider, Spire Healthcare recognises and
values the hard work and dedication of all its colleagues, and continues to
invest heavily in its workforce in line with the Group's strategy. Towards the
end of the period, we announced this year's annual salary review. Most
permanent colleagues have been awarded an above-inflation pay increase of
2.75% from 1 September 2024 with a c.5% increase for the lowest paid.
The Group's reward strategy is in progress, ahead of the launch of its Reward
Framework later this year. The framework will help to provide visibility of
progression opportunities as well as to provide a structure for remuneration.
For the first time, we are now fully staffed at almost all sites in line with
the Group's establishment models with colleague vacancies at a record low.
Colleague turnover is at its lowest level for many years. In the most recent
12 months, clinical staff turnover was 12.7%, down from 16.3% this time last
year. This is enabling us to further reduce spend on agency staff, down 39%
year on year.
Strong cash generation, continued capital investment, net debt and return on capital
The cash generated from operations during the first half of 2024 was £112.0m
(H1 23: £96.6m). After accounting for Adjusting items, the Adjusted operating
cash flows were £115.5m (H1 23: £99.5m), or a cash conversion rate of 88.4%
from £130.6m Adjusted EBITDA (H1 23: 84.4% conversion of £117.9m Adjusted
EBITDA).
Capital investment in the period was £51.5m (H1 23: £31.0m), in line with
the Company's full-year target range of 6-7% of revenue. Capital investments
during the period included the building and fitting out of Spire Healthcare
Abergele Clinic, a minor operations unit at Spire Claremont, and refurbishment
works at Spire Portsmouth and Spire Washington.
Net bank debt at 30 June 2024 was £323.4m (31 December 2023: £315.7m), with
a cash balance of £43.0m (31 December 2023: £49.6m) . The Group entered an
interest rate hedge in July 2022, resulting in 75% of the risk from the senior
loan facility being mitigated until April 2024, after which 50% is hedged
until February 2026.
The Group's leverage ratio continued to reduce, resulting in a net debt /
EBITDA covenant ratio of 2.1x at 30 June 2024 (from 2.2x at the end of FY23).
Improving the Group's return on capital employed (ROCE) remains a key focus;
we are targeting at least 10% return over the medium term. On a last 12 months
(LTM) basis, ROCE in H1 24 was 7.6%, up from 6.6% in H1 23 and 7.5% in FY23.
Financial review
Selected financial information
Six months ended 30 June (Unaudited)
2024 2023
(£ million) Total before Adjusting items Adjusting Total Total before Adjusting items Adjusting Total
items
items (note 10)
(note 10)
Revenue 762.5 - 762.5 676.5 - 676.5
Cost of sales (416.4) - (416.4) (362.3) - (362.3)
Gross profit 346.1 - 346.1 314.2 - 314.2
Other operating costs (273.2) (8.8) (282.0) (247.5) (2.0) (249.5)
Other income 2.8 4.7 7.5 1.1 - 1.1
Operating profit (EBIT) 75.7 (4.1) 71.6 67.8 (2.0) 65.8
Finance income 0.4 - 0.4 - - -
Finance costs (49.3) - (49.3) (45.5) - (45.5)
Profit before taxation 26.8 (4.1) 22.7 22.3 (2.0) 20.3
Taxation (7.2) (1.4) (8.6) (8.1) 0.5 (7.6)
Profit for the period 19.6 (5.5) 14.1 14.2 (1.5) 12.7
Adjusted EBITDA ((6)) 130.6 117.9
Basic earnings per share, pence 3.3 3.1
Adjusted FCF((7)) 18.6 24.0
Net cash from operating activities 112.0 96.6
Net bank debt ((8)) 323.4 248.5
1. On 31 March, the Group sold the business operations and assets of Spire
Tunbridge Wells to the local NHS Trust. Therefore, where meaningful we have
presented certain financial information on a 'Comparable Basis' where we have
adjusted for the year-on-year (YOY) impact of Tunbridge Wells.
2. The Hospitals Business relates to business operations performed at
hospital sites. All other Group operations are referred to as 'New Services'
and include the Doctors Clinic Group (DCG), Vita Health Group (VHG) and the
clinics (community facilities that offer a range of diagnostics and treatment
that do not require an overnight stay). Unless otherwise stated, all metrics
are on a Group basis. Refer to page 8 for alternative performance measures and
segmental analysis.
3. Like for like (LFL) numbers are provided for H1 23 which is the
pre-acquisition performance of VHG which was acquired in October 2023
4. Not meaningful
5. Adjusted basic earnings per share is stated before the effects of
Adjusting items.
6. Adjusted EBITDA is calculated as Operating profit, adjusted to add back
depreciation, amortisation, and Adjusting items, referred to hereafter as
'Adjusted EBITDA' refer to page 9. For EBITDA for covenant purposes, refer to
note 18.
7. Adjusted FCF (Free Cash Flow) is calculated as Adjusted EBITDA, less
rent, capital expenditure cash flows and changes in working capital after
adjusting for one-off items which are not related to the normal trading
activity of the business. Rent cash flows are defined as interest on, and
payment of, lease liabilities. Capital expenditure cash flows are defined as
the purchase of plant, property and equipment.
8. Net bank debt is defined as bank borrowings less cash and cash
equivalents.
9. Capital investment includes capital spend on property, plant and
equipment. Refer to note 14.
Revenue
Group revenues increased by 12.7% to £762.5m (H1 23: £676.5m). Hospitals
Business revenue has increased by 4.9% (5.4% on a Comparable Basis((1))) to
£702.8m (H1 23: £669.8m), the increase is due to the ongoing growth in
private medical insurance (PMI) offset by the decline in self-pay driven by
competitiveness and some patients of working age switching from SP to PMI.
Overall revenue growth is underpinned by increased average revenue per case
(APRC) for all payor groups. Revenue for New Services is £59.7m (H1 23:
£6.7m) with the majority of this from Vita Health Group (VHG) which was
acquired in October 2023.
Revenue by location and payor
Six months ended 30 June (Unaudited)
2024 2023 Variance %
(£ million) Hospitals Business New Services Total Hospitals Business New Services Total Hospitals Business New Services Total
Total revenue 702.8 59.7 762.5 669.8 6.7 676.5 4.9% NM(*) 12.7%
Of which:
Inpatient 279.3 - 279.3 272.7 - 272.7 2.4% NM(*) 2.4%
Day case 212.3 0.1 212.4 199.0 - 199.0 6.7% NM(*) 6.7%
Out-patient 197.2 59.5 256.7 183.8 6.7 190.5 7.3% NM(*) 34.8%
Other 14.0 0.1 14.1 14.3 - 14.3 (2.1%) NM(*) (1.4%)
Total revenue 702.8 59.7 762.5 669.8 6.7 676.5 4.9% NM(*) 12.7%
* Not meaningful due to the VHG acquisition in October 2023.
Six months ended 30 June (Unaudited)
2024 2023 Variance %
(£ million) Hospitals Business New Services Total Hospitals Business New Services Total Hospitals Business New Services Total
Of which:
PMI 336.4 0.7 337.1 306.6 0.3 306.9 9.7% NM(*) 9.8%
Self-pay 173.1 3.9 177.0 178.4 4.0 182.4 (3.0%) NM(*) (3.0%)
Total Private 509.5 4.6 514.1 485.0 4.3 489.3 5.1% NM(*) 5.1%
Total NHS 179.3 44.5 223.8 170.5 - 170.5 5.2% NM(*) 31.3%
Other 14.0 10.6 24.6 14.3 2.4 16.7 (2.1%) NM(*) 47.3%
Total revenue 702.8 59.7 762.5 669.8 6.7 676.5 4.9% NM(*) 12.7%
* Not meaningful due to the VHG acquisition in October 2023.
Hospitals Business Revenue on comparable basis (adjusted for the effect of Tunbridge Wells hospital)
Six months ended 30 June (Unaudited)
2024 2023 Variance %
(£ million) Hospitals Business adjusted for the effect of Tunbridge wells hospital Tunbridge Wells hospital Hospitals Business Hospitals Business adjusted for the effect of Tunbridge Wells hospital Tunbridge Wells hospital Hospitals Business Hospitals Business adjusted for the effect of Tunbridge wells hospital Tunbridge Wells hospital Hospitals Business
Total Revenue 699.1 3.7 702.8 663.4 6.4 669.8 5.4% NM(*) 4.9%
* Not meaningful due to period of trading for Tunbridge Wells hospital in H1
2024 being 3 months vs 6 months in 2023
Cost of sales and gross profit
Group cost of sales increased in the period by £54.1m, or 14.9% to £416.4m
(H1 23: £362.3m) on revenues that increased by 12.7% with the majority of the
increase due to the VHG acquisition in October 2023. For the Hospital Business
cost of sales increased by 4.9% to £376.8m (H1 23: £359.3m). Gross margin
for the Hospitals Business for the first six months is 46.4% in line with H1
23.
Cost of sales is broken down, and presented as a percentage of relevant
revenue, as follows:
Six months ended 30 June (Unaudited)
2024 2023
£m % of Group revenue £m % of Group revenue
Clinical staff 188.2 24.7% 144.9 21.4%
Direct costs 164.5 21.6% 157.5 23.3%
Medical fees 63.7 8.4% 59.9 8.9%
Cost of sales 416.4 54.6% 362.3 53.6%
Gross profit 346.1 45.4% 314.2 46.4%
Cost of sales is broken down, and presented as a percentage of relevant
revenue split by operating segment, as follows:
Six months ended 30 June (Unaudited)
Hospitals Business New Services
(£ million) 2024 % of Hospitals Business revenue 2023 % of Hospitals Business revenue 2024 % of New Services revenue 2023 % of New Services revenue
Clinical staff 151.1 21.5% 142.8 21.3% 37.1 62.1% 2.1 31.3%
Direct costs 162.7 23.2% 157.3 23.5% 1.8 3.0% 0.2 3.0%
Medical fees 63.0 9.0% 59.2 8.8% 0.7 1.2% 0.7 10.4%
Cost of sales 376.8 53.6% 359.3 53.6% 39.6 66.3% 3.0 44.8%
Gross profit 326.0 46.4% 310.5 46.4% 20.1 33.7% 3.7 55.2%
Other operating costs
Excluding Adjusting items other operating costs for the six months ended 30
June 2024 increased by £25.7m or 10.4% versus H1 23 to £273.2m.
Operating margin for the six months ended 30 June 2024 is 9.4% compared to
9.7% at H1 23. Excluding Adjusting items, operating margin is 9.9%, down from
10.0% at H1 23.
Adjusted EBITDA
Adjusted EBITDA for the Group has increased by 10.8% in the period from
£117.9m to £130.6m for H1 2024, of which 6.6% relates to the Hospitals
Business, the increase primarily reflects increased PMI and NHS revenue and
efficiency gains in the cost base. Additional growth is due to the acquisition
of VHG in October 2023 delivering £5.1m EBITDA in H1 2024.
Share-based payments
During the period, grants were made to Executive Directors and members of the
executive management team under the Company's Long Term Incentive Plan. For
the six months ended 30 June 2024, the charge to the income statement is
£2.1m (H1 23: £1.5m), or £2.3m inclusive of National Insurance (H1 23:
£1.7m).
Adjusting items
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Business reorganisation and restructuring 1.8 1.6
Asset acquisitions, disposals, impairment and aborted project costs (4.0) 0.4
Remediation of regulatory compliance or malpractice 4.6 -
Hospital set up and closure costs 0.8 -
Amortisation on acquired intangible assets 0.9 -
Total costs 4.1 2.0
Income tax charge / (credit) on Adjusting items 1.4 (0.5)
Total post-tax Adjusting items 5.5 1.5
Adjusting items comprise those matters where the Directors believe the
financial effect should be adjusted for due to their nature or amount, in
order to provide a more comparable measure of the Group's underlying
performance.
Asset acquisitions, disposals, impairments and aborted projects costs includes
a profit of £4.7m relating to the sale of the Group's Tunbridge Wells
hospital to Maidstone and Tunbridge Wells NHS Trust ("Trust") for £9.975m.
Refer to disposal note 27 for more details. In addition, there is £0.7m of
integration and other acquisition costs relating to the VHG acquisition. Costs
in the prior year mainly comprise costs in respect of Doctors Clinic Group
with costs incurred to integrate the Group into the Spire Group.
Business reorganisation and corporate restructuring relates to the Group
announcement of a strategic, group wide initiative in H2 21 that will enable a
more efficient business operating model, including leveraging digital
solutions and technology. As a result of this initiative, additional costs of
£1.5m (H1 23: £1.6m) have been incurred in the period, bringing costs to
date of £9.3m. This initiative is being implemented over several phases and
is likely to be materially completed during 2026 as communicated at our
capital markets event in April 2024. Future costs are not disclosed as a
reliable estimate cannot be made due to the nature of the matter. £0.2m has
been incurred in respect of restructuring costs relating to the Doctors Clinic
Group.
Remediation of regulatory compliance or malpractice costs of £4.6m (December
2023: £2.5m) relate to an increase in the provision established by Spire
Healthcare in respect of implementing the recommendations of the Public
Inquiry including a detailed patient review and support for patients of
Paterson. The project is complex and the process for review and settlement
takes some time. It is possible that, as further information becomes
available, an adjustment to this provision will be required, but at this time,
it reflects management's best estimate of the costs and settlement of claims
at this point. The variables include the number of patients which are found to
have been harmed following review, the level of harm, and the associated
compensation claim, as well as the time to review each case can vary
significantly. This provision remains subject to ongoing review.
Hospital set up costs relate to costs incurred for the set-up of the Abergele
and Harrogate clinics prior to opening. The clinic in Abergele opened in
February 2024. The set up for Harrogate is still on going and is expected to
continue into H2.
£0.9m of amortisation on acquired intangible assets related to the customer
contracts recognised on the acquisition of VHG in October 2023.
Finance costs
Finance costs have increased by £3.8m to £49.3m (H1 23: £45.5m). Mainly due
to interest on the revolving credit facility which was drawn down in October
2023 to fund the acquisition of VHG.
Taxation
The taxation charge for the six months ended 30 June 2024 is calculated using
an estimate of the effective annual rate of tax ("AETR") for the full year,
being c. 29%. This has been applied to the pre-tax profits for the six months
ended 30 June 2024, resulting in a charge of £6.6m. The Group has separately
calculated the tax rates applicable in respect of discrete items, including
exercising of share-based payments and the sale of the Tunbridge Wells
hospital in the period, and adjustments in result of previous periods. These
items result in a further charge of £2.0m. The total charge for H1 24 is
£8.6m (H1 23: £7.6m charge). The charge is a non-cash movement and is caused
by timing differences mainly due to the difference in the tax base versus the
accounting base for assets.
Profit after taxation
The profit after taxation for the six months ended 30 June 2024 was £14.1m
(H1 23: £12.7m). Adjusted profit after taxation for the six months ended 30
June 2024 was £19.6m (H1 23: £14.2m).
Non-GAAP financial measures
We have provided below 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 the 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 of these non-GAAP
financial measures to their most directly comparable IFRS financial measures
provided in the financial statements table in the press release.
The following information includes references to adjusted financial
information. This has been produced for illustrative purposes and does not
represent the Group's actual statutory earnings.
Adjusted EBITDA
Six months ended 30 June (Unaudited)
(£ million) 2024 2023 Variance %
Hospitals Business New Services Hospitals Business New Services Hospitals Business New Services
Total Total Total
Operating profit 70.3 1.3 71.6 66.5 (0.7) 65.8 5.7% NM(*) 8.8%
Remove effects of:
Adjusting items 2.9 1.2 4.1 2.0 - 2.0 45.0% NM(*) 105.0%
Depreciation 53.1 0.3 53.4 50.0 0.1 50.1 6.2% NM(*) 6.6%
Amortisation(#) - 1.5 1.5 - - - NM(*) NM(*) NM(*)
Adjusted EBITDA 126.3 4.3 130.6 118.5 (0.6) 117.9 6.6% NM(*) 10.8%
# Amortisation of £0.9m is included in Adjusting items
* Not meaningful due to the VHG acquisition in October 2023.
Adjusted EBIT
Six months ended 30 June (Unaudited)
(£ million) 2024 2023 Variance %
Hospitals Business New Services Hospitals Business New Services Hospitals Business New Services
Total Total Total
Operating profit 70.3 1.3 71.6 66.5 (0.7) 65.8 5.7% NM(*) 8.8%
Remove effects of:
Adjusting items 2.9 1.2 4.1 2.0 - 2.0 45.0% NM(*) 105.0%
Adjusted EBIT 73.2 2.5 75.7 68.5 (0.7) 67.8 6.9% NM(*) 11.7%
* Not meaningful due to the VHG acquisition in October 2023.
Adjusted profit after tax and adjusted earnings per share
Adjustments have been made to remove the impact of a number of non-recurring
items.
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Profit before tax 22.7 20.3
Remove effects of:
Adjusting items 4.1 2.0
Adjusted profit before tax 26.8 22.3
Taxation (7.2) (8.1)
Adjusted profit after tax 19.6 14.2
Adjusted profit after tax attributable to owners of the Parent 18.9 13.9
Weighted average number of ordinary shares in issue (No.) 403,661,641 403,771,475
Adjusted basic earnings per share (pence) 4.7 3.4
Adjusted Free Cash flow
Six months ended 30 June (Unaudited)
(£m) 2024 2023
Adjusted EBITDA 130.6 117.9
Less: Rental payments (48.2) (47.4)
Less: Cash flow for the purchase of property, plant and equipment (51.5) (31.0)
Less: Working capital movement (14.9) (19.2)
Add: Adjustments for non-recurring items 2.6 3.7
Adjusted Free Cash Flow (FCF) 18.6 24.0
Cash flow analysis for the period
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Opening cash balance 49.6 74.2
Adjusted operating cash flows 115.5 99.5
Adjusting items (3.5) (2.9)
Income tax received - -
Operating cash flows 112.0 96.6
Net cash in investing activities (43.2) (33.3)
Net cash in financing activities (75.4) (61.8)
Closing cash balance 43.0 75.7
Operating cash flows before Adjusting items
The cash inflow from operating activities was £112.0m. After adjusting for
cash from Adjusting items, the Adjusted operating cash flows were £115.5m,
which constitutes a cash conversion rate from £130.6m Adjusted EBITDA of
88.4% (H1 23: 84.4% conversion of £117.9m Adjusted EBITDA). The net cash
outflow from movements in working capital in the period was £14.9m (H1 23:
£19.2m outflow).
Investing and financing cash flows
Net cash used in investing activities for the period was £43.2m (H1 23:
£33.3m). Cash outflow for the purchase of Plant, Property and Equipment in
the period totalled £51.5m (H1 23: £31.0m). Capital investments during the
period included the building and fitting out of Spire Healthcare Abergele
Clinic, a minor operations unit at Spire Claremont, and refurbishment works at
Spire Portsmouth and Spire Washington.
Net cash used in financing activities for the period was £75.4m (H1 23:
£61.8m). Cash outflows include £3.1m for the buyback of shares to settle
share awards, a final dividend payment of £8.5m, lease and bank interest paid
of £48.2m (H1 23: £45.6m) and lease principal payments of £10.6m (H1 23:
£11.1m).
Borrowings
At 30 June 2024, the Group has bank borrowings of £366.4m (December 2023:
£365.3m), drawn under facilities which are due to mature in February 2027.
As at
(£ million) 30 June 2024 (Unaudited) 31 December 2023 (Audited)
Cash 43.0 49.6
Bank borrowings 366.4 365.3
Bank borrowings less cash and cash equivalents 323.4 315.7
In the prior year the Group exercised its option to extend the senior loan
facility by a further year. The financial covenants and agreement terms
relating to this agreement are unchanged, with leverage to be below 4.0x and
interest cover to be in excess of 4.0x. As at 30 June 2024 the leverage
measure stood at 2.1x and interest cover of 8.0x.
As at 30 June 2024 lease liabilities were £885.8m (December 2023: £891.7m).
Refer to note 19 for more detail.
Dividend
The Board will not be proposing an interim dividend. A final dividend for the
year ended 31 December 2023 of 2.1 pence was declared and £8.5m was paid to
shareholders on 21 June 2024.
Related party transactions
Other than as disclosed in note 23 there were no significant related party
transactions during the period under review.
Principal Risks
In our 2023 annual report and accounts we set out our principal risks on pages
64 to 74. Since the publication of the 2023 annual report and accounts for the
purposes of clarity we have:
· sub-divided the principal risk 'information governance and
security' into its constituent parts of information governance and cyber
security (see below)
· reclassified the PMI and self-pay market dynamic risks into a
private market dynamic risk (see below) and described a separate NHS market
dynamic risk that was previously included in government and NHS policy.
In recognition of the scale of the digitalisation programme, we now report a
principal risk of organisational transformation.
The mitigations for our principal risks are described below, the full
description of our principal risks will be disclosed in our 2024 annual report
and accounts. We do not anticipate any material change to our principal risks
between now and the 31 December 2024.
Inflation and wage inflation In response to macro inflationary pressure, we continue to benefit from a
range of inflation mechanisms built into the PMI contracts and will benefit
from our ability to change self-pay pricing quickly via our pricing engine
subject to prevailing market conditions. Our procurement team maintains a
constant review of pricing and seeks opportunities to mitigate inflationary
increases.
We continue to respond to changing economic circumstances by optimising our
private and NHS-funded work, ensuring we are not over-reliant on one income
source, and supported by an efficient cost base.
We responded to wage inflation by announcing to our staff early in 2023 that
the 2023 general pay rise will be 5.5% for most staff, and more for those near
minimum wage. In 2024, we have announced an above inflation pay award of 2.75%
for all colleagues, and c5% for colleagues on the minimum hourly rate.
Private market dynamics We invest in high quality patient care service to our self-pay and insured
patients of our PMI partners.
We ensure we have long-term contracts in place with our PMI partners that
avoids co-termination of contractual arrangements.
We believe that continuing to invest in our well-placed portfolio of hospitals
provides a natural fit to the local requirements of all the PMI providers long
term.
We continue to invest in efficiency programmes to ensure that we can offer the
best combination of high-quality patient care at competitive prices.
Since 2022, we have deployed national multi-media advertising campaigns
highlighting the key benefits of private healthcare to increase our brand
awareness.
We are strengthening our operational capability with further enhancements to
the website (content and functionality) and call centre resilience and
training.
We have adopted sophisticated pricing capability.
We are promoting patient financing as a payment option.
Climate change Flood risk mitigation includes a continued periodic review of our estate in
relation to existing and predicted flood risk zones and investment in improved
roofing and drainage where vulnerabilities have been identified. None of our
current sites are situated in predicted high risk flood zones or in coastal
areas predicted to be at risk from rising sea levels.
Extreme ambient temperature risk mitigation includes an informed investment
plan for upgrade of failing and vulnerable plant. Design of the replacement
and upgrade would account for the predicted increase in ambient temperature
profiles expected within the lifespan of the plant eg, 15 years. Further
mitigation measures include extreme weather warning protocol and Business
Continuity Plans to provide emergency loan HVAC plant.
Energy price risk mitigation includes energy efficiency measures to reduce
consumption and our energy hedging strategy which has seen all our current
energy requirements secured until December 2024.
Cyber security The data strategy, governance and security committee monitors the risk and
mitigations for
cyber security. The committee reports into the executive committee with a
separate reporting line to the audit and risk committee. To support this
governance structure, we have a range of policies and practices, and mandatory
staff training covering cyber security.
Our IT team have a cyber-security strategy for continuous improvement based on
industry standards. It covers the processes from identifying specific risks,
to protecting physical and digital data assets through to recovery in the
event of a successful cyber-attack.
We work with several industry-leading technical partners to provide:
· Multiple layers of security controls providing
advanced detection and protection capabilities
· Regular third-party penetration testing on new
and existing IT systems
· Red-Teaming Exercises to attempt to access our
systems using a variety of real-world techniques
· Managed Security Operations Centre (SOC) to
monitor, analyse and respond to security threats 24x7
Organisational transformation We have a range of mitigations in place:
· Governance - there is a programme hierarchy of
project, programme and steering board committees, which then report into the
Executive and Board committees.
· Executive accountability - There is dual
executive committee representation on all programme boards, with best practice
project management processes in place including disciplined stage gate
reviews, lessons learnt reviews and comprehensive risk and issue management.
· Investment - We are investing in both
communication resource and expanding the Information Technology Operating
Model to ensure there is adequate resource to support the technical aspects of
the change programme.
· Being kind - A set of established principles for
those effected by organisational change, including offering comprehensive
outplacement support and enhanced redundancy packages.
Digitalisation, automation and efficiency The digital strategy focusses on a 18-24 month planning horizon to improve the
predictability of investment and outcomes. This will enable Spire to adjust
the priorities and speed of implementation in response to changes in the macro
climate and competitive landscape.
We will utilise best practice programme governance, supported by third party
experts, to deliver change programmes into the business.
We will use technology to enable early benefits realisation, for example
utilising process automation to release immediate efficiencies and
improvements to boost productivity and further fund future investments for
digitisation.
The digital strategy has built-in focus on innovation and external horizon
scanning to ensure we are not behind the curve compared to competitors
(current or future).
Brand reputation Our primary mitigations against damage to our brand reputation is through the
good management of our principal risks, in particular:
· Clinical quality and governance
· Cyber security
· Workforce
In addition, we continue to:
· Invest in the awareness and health of the brand
through national advertising, public relations and centrally coordinated
social media
· Build our reputation and enhance understanding
among analysts, public commentators, key stakeholders, public bodies and
parliamentarians
· Comprehensive crisis communications planning
Creating social value supports our brand reputation. We contribute to social
value through:
· Delivering good quality healthcare to patients
who need it the most
· Reducing waiting times for NHS patients through
increasing capacity
· Generating positive social impact for colleagues
and communities
· Community efforts to support local businesses and
charities
· Environmental efforts to reduce our impact
· The onward value created by our apprenticeship
programmes
Workforce We seek to retain colleagues through:
· A common purpose and a positive workplace culture
(our employee engagement score provides evidence that this mitigation is
effective)
· A standardised, fair and competitive pay and
reward benefit structure. In 2023, we announced a competitive pay award that
provided a 5.5% increase for most colleagues, and extra to bring all
colleagues up to the living wage. We will continue to review pay
competitiveness in all the sectors in which we operate
· Offering greater flexibility in colleagues' roles
· Employee development programmes, e.g. a nurse
training programme and other apprentice schemes
· Continuous investment in our equipment,
facilities and services to retain high-quality clinicians
In 2023, our risk mitigations have helped to produce a downward trend in
colleague churn rates.
We seek to recruit colleagues through:
· A centralised recruitment process which we
brought in-house 2023
· Offering apprenticeship programmes to support the
development of clinical and non-clinical teams across the business
· Building of local bank colleague pools and using
digital solutions to improve access to available shifts
· An overseas recruitment capability to secure
skilled healthcare workers from outside the EU (in line with World Health
Organization protocols to actively recruit in only 'green' countries)
The group manages immediate colleague shortages using agency and bank workers.
Government policy We have a proactive strategy to establish and build relationships with new
government ministers and advisors in both the health department and other
related departments (e.g. Department for Work and Pensions).
We seek to build relationships with our local MPs, and have written to newly
elected MPs, who cover our physical locations across Great Britain to
introduce them to Spire Healthcare and build their understanding of what we
do.
We are actively engaging with the Independent Healthcare Providers Network
(IHPN) to support IHPN's input into the Darzi review commissioned by the new
government.
Major infrastructure failure All our hospitals have a backup power source provided from diesel powered
generators that operates major circuits of a hospital, but some key equipment
is not covered, eg, MRI scanners. Battery powered uninterrupted power is
provided into specific equipment in theatres to ensure patients remain safe in
the event of a generator failure. These backup power sources are designed to
keep patients in the hospital safe but are not a complete substitute for mains
power.
Our national distribution fleet refuel daily at the end of their shifts to
ensure resilient operational capability.
NHS hospitals are obliged to provide emergency care to everyone but their
pressures on ambulance services can and do lead to delays to emergency
transfers on rare occasions. Mitigation plans are in place and rehearsed at
hospitals.
The chief operating officer chairs a regular multi-disciplinary winter
planning meeting to co-ordinate response activities to any infrastructure
failures.
Clinical quality We maintain the following core processes to monitor clinical quality:
· Quality and safety reporting based on a Quality
Assurance Framework with a standard set of KPI's
· A schedule of robust and regular internal
hospital inspections including the Patient Safety and Quality Reviews, with
action plans for improvement that is centrally monitored
· A schedule of Excellence in Care meetings with
GCD/CN and DoCS to drive assurance and accountability for standards of care
· Consistent reporting of clinical outcome and
effectiveness measures within the hospital and central meeting governance
structures (including medical advisory committee meetings) to ensure that
insights and learning are actioned and shared
These processes are underpinned by:
· A reporting culture of openness and shared
learning from ward to board, with a FTSUG at each site
· Timely incident reporting via a database with
central oversight and development of actions to ensure learning. We utilise
the new Patient Safety Incidence Response Framework (PSIRF) introduced in 2024
· Continuous monitoring of patient experience via
regular surveys with policies and procedures in place to ensure learning from
patient experience feedback (including detractors and complaints)
· Standard Operating Procedure for patient
notification exercises that includes learning and continuous improvement
methodologies
Clinical quality processes and controls are governed by the executive's
safety, quality and risk committee and the board's clinical governance and
safety committee ('CGSC').
Expanding our proposition We have:
· An innovation board bringing together the CEO and
executive committee members of the medical, clinical, commercial and finance
functions to identify healthcare trends and opportunities to develop new
services
· A dedicated director of innovation and
proposition development sourcing specific opportunities to support the group
strategy, leading on development, supported with dedicated IT and project
resource
· A dedicated director sourcing suitable target
acquisitions supported by an expert external financial and tax adviser
· A property lead to handle the assessment and
acquisition of new physical assets with the support of retained property
advisers
· Acquisition due diligence processes using
appropriate third-party expertise
· Board review and approval of acquisitions
· Post-acquisition project management and
integration processes incorporating learnings from previous acquisitions
The acquisition of Vita Health Group has opened new commercial opportunities
for us, but importantly also improved our mitigation of this risk.
Information Governance The data strategy, governance and security committee monitors the risk and
mitigations for data governance and cyber security. The committee reports into
the executive committee with a separate reporting line to the audit and risk
committee. To support this governance structure, we have a range of policies
and practices, (e.g. central monitoring of compliance with data subject rights
requests, data protection impact assessments and notifications to or from the
Information Commissioners Office), and mandatory staff training covering data
governance.
NHS market dynamics We apply a disciplined approach to what procedures we will undertake for the
NHS to optimise the balance of resource utilisation and margin contribution.
We maintain diversification of revenue streams with self-pay, PMI patients and
new business streams.
We continue to invest in the capital base of our hospitals to provide services
needed by the NHS (e.g. diagnostics).
We continue to invest in efficiency programmes to ensure that we can offer the
best combination of high-quality patient care with acceptable margins at NHS
tariff prices.
We have strong relationships with the Integrated Care Systems (ICSs) and
signed contracts with all ICSs.
Vita Health Group's acquisition in 2023 gave us a new opportunity to
participate in the NHS tender market.
Supply chain disruption We run a centralised supply chain with a national distribution centre (NDC)
and its own vehicle and driver fleet. Medical consumables are held at the NDC
with an average of six weeks' supply, medicines and prostheses are being held
at hospital sites.
We must respond to product shortages and global recalls consistently, and we
have seen some minor shortfalls in order fulfilment. In all cases, our
centralised procurement function has been able, with the support of a
permanent presence from the Clinical team, to find alternative supplies to
maintain hospitals' activities.
Fresh food is supplied through a national food distributor who has its own
delivery fleet and directly employs its HGV drivers. Order fulfilment has
remained in the high ninety percentile. We have contingency menu plans in case
of fresh food shortages.
Any national shortages in critical medicines and medical gases are managed by
NHS Supply Chain. We receive allocations based on our activity.
We will continue to monitor supply chain risks considering the continuing
geopolitical volatility.
Antimicrobial resistance Our mitigations are:
· Executive level awareness of the government's
five-year AMR strategy
· Participation in, and collaboration with,
government's monitoring of AMR outbreaks
· Requirement on clinicians to follow guidance in
line with government guidelines on the prescribing of antibiotics
· Access to up-to-date antimicrobial prescribing
via online systems and access to microbiologists at all sites
· Appropriate investigations of post-surgery
infections including review of antibiotics
Directors' responsibility statement
Going Concern
The group assessed going concern risk for the period through to 31 December
2025. As at 30 June 2024 the group had cash of £43.0m and borrowings of
£365m of which £325m is a Senior Loan Facility and £40m drawn Revolving
Credit Facility (RCF). The Group has access to an undrawn RCF of £60m. On 3
March 2023, the group exercised the option to extend the senior loan facility
and RCF by a further year to February 2027. The financial covenants relating
to this agreement are materially unchanged and there have been no
modifications to the agreement terms.
The group has undertaken extensive activity to identify plausible risks which
may arise and mitigating actions, which in the first instance would include
management of working capital and constrained levels of capital investment.
Based on the current assessment of the likelihood of these risks arising by 31
December 2025, together with their assessment of the planned mitigating
actions being successful, the directors have concluded it is appropriate to
prepare the accounts on a going concern basis. In arriving at their
conclusion, the directors have also noted that, were these risks to arise in
combination, it could result in a liquidity constraint or breach of covenant,
however, the risk of this is considered remote.
The group has also assessed, as part of its reverse stress testing, what
degree of downturn in trading it could sustain before it breaches its
financial covenant. This stress testing was based on flexing revenue downwards
with a consistent percentage decline in variable costs, whilst maintaining the
forecast of fixed costs. The testing did not allow for the benefit of any
action that could be taken by management to preserve cash. This testing
suggested that there would have to be at least a 27% fall in annual forecast
revenue before the group breaches its financial covenant, we believe that the
risk of an event giving rise to this size of reduction in revenue is remote.
It should be noted that we remain in a period of material geopolitical and
macroeconomic uncertainty. Whilst the directors continue to closely monitor
these risks and their plausible impact, their severity is hard to predict and
is dependent upon many external factors. Accordingly, the actual financial
impact of these risks may materially vary against the current view of their
plausible impact.
Each of the Directors confirms that, to the best of their knowledge:
· This condensed consolidated interim financial information for the
six months ended 30 June 2024 has been prepared in accordance with UK adopted
International Accounting Standard 34 and Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority, gives a true and
fair view of the assets, liabilities, financial position and profit or loss of
the Company on a consolidated basis.
· The interim management report, which is incorporated into the
Chief Executive Officer message, Operating Review and Financial Review,
includes a fair review of the information as required by:
o DTR 4.2.7R of the Disclosure Guidance 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
o DTR 4.2.8R of the Disclosure Guidance 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 2023.
By order of the Board
Justin Ash Harbant Samra
Chief Executive Officer Chief Financial Officer
11 September 2024
Independent review report of Spire Healthcare Group plc
Conclusion
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 2024 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 notes 1 to 27. 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.
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 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. 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 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.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with UK adopted International Accounting Standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. 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.
Ernst & Young LLP
London, UK
11 September 2024
Condensed financial statements
Consolidated interim income statement
For the six months ended 30 June 2024
Six months ended 30 June (Unaudited)
2024 2023
(£ million) Notes Total before Adjusting Adjusting Total Total before Adjusting items Adjusting Total
items
items
items
(note 10) (note 10)
Revenue 5 762.5 - 762.5 676.5 - 676.5
Cost of sales (416.4) - (416.4) (362.3) - (362.3)
Gross profit 346.1 - 346.1 314.2 - 314.2
Other operating costs (273.2) (8.8) (282.0) (247.5) (2.0) (249.5)
Other income 7 2.8 4.7 7.5 1.1 - 1.1
Operating profit (EBIT) 8 75.7 (4.1) 71.6 67.8 (2.0) 65.8
Finance income 9 0.4 - 0.4 - - -
Finance costs 9 (49.3) - (49.3) (45.5) - (45.5)
Profit before taxation 26.8 (4.1) 22.7 22.3 (2.0) 20.3
Taxation 11 (7.2) (1.4) (8.6) (8.1) 0.5 (7.6)
Profit for the period 19.6 (5.5) 14.1 14.2 (1.5) 12.7
Profit for the period attributable 18.9 (5.5) 13.4 13.9 (1.5) 12.4
to owners of the Parent
Profit for the period attributable 0.7 - 0.7 0.3 - 0.3
to non-controlling interests
Profit per share (in pence per share)
- basic 12 4.7 (1.4) 3.3 3.4 (0.3) 3.1
- diluted 12 4.6 (1.4) 3.2 3.4 (0.4) 3.0
Consolidated interim statement of comprehensive income
For the six months ended 30 June 2024
Six months to 30 June (Unaudited)
(£ million) Notes 2024 2023
Profit for the period 14.1 12.7
Items that may be reclassified to profit or loss in subsequent periods
Net gain on cash flow hedges (net of taxation) 20 0.2 3.4
Other comprehensive income for the period 0.2 3.4
Total comprehensive profit for the year, net of tax 14.3 16.1
Attributable to:
Equity holders of the parent 13.6 15.8
Non-controlling interests 0.7 0.3
Consolidated interim statement of changes in equity
For the six months ended 30 June 2024
(£ million) Notes Share capital Share premium Capital reserves EBT share reserves Retained earnings Total Non-controlling interests Total equity
Hedging reserve
As at 1 January 2023 4.0 830.0 376.1 - 6.6 (485.7) 731.0 (5.9) 725.1
Profit for the period - - - - - 12.4 12.4 0.3 12.7
Other comprehensive profit for the period - - - - 3.4 - 3.4 - 3.4
Total comprehensive income - - - - 3.4 12.4 15.8 0.3 16.1
Dividends paid 13 - - - - - (2.0) (2.0) - (2.0)
Purchase of own shares by EBT - - - (3.1) - - (3.1) - (3.1)
Issue of own shares by EBT - - - 2.0 - (2.0) - - -
Additional interest acquired of non-controlling interests 24 - - - - - (3.2) (3.2) 3.2 -
Financial liability to acquire non-controlling interests 26 - - - - - (9.6) (9.6) - (9.6)
Share based payments (net of tax) 23 - - - - - 0.6 0.6 - 0.6
As at 30 June 2023 4.0 830.0 376.1 (1.1) 10.0 (489.5) 729.5 (2.4) 727.1
As at 1 January 2024 4.0 830.0 376.1 (0.7) 3.3 (472.8) 739.9 (2.1) 737.8
Profit for the period - - - - - 13.4 13.4 0.7 14.1
Other comprehensive profit for the period - - - - 0.2 - 0.2 - 0.2
Total comprehensive income - - - - 0.2 13.4 13.6 0.7 14.3
Dividends paid 13 - - - - - (8.5) (8.5) - (8.5)
Purchase of own shares by EBT - - - (3.1) - - (3.1) - (3.1)
Issue of own shares by EBT - - - 2.5 - (2.5) - - -
Share based payments (net of tax) 23 - - - - - (1.8) (1.8) - (1.8)
As at 30 June 2024 4.0 830.0 376.1 (1.3) 3.5 (472.2) 740.1 (1.4) 738.7
Consolidated interim balance sheet
As at
(£ million) Notes 30 June 2024 31 December 2023 (Audited)
(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment 14 1,614.5 1,618.8
Intangible assets 15 438.0 438.3
Other receivables 16 4.3 -
Derivatives 20 1.5 0.4
Financial asset 10.3 10.0
2,068.6 2,067.5
Current assets
Inventories 45.5 44.3
Trade and other receivables 16 141.8 121.6
Derivatives 20 3.1 4.0
Cash and cash equivalents 43.0 49.6
233.4 219.5
Non-current assets held for sale 17 1.1 1.1
234.5 220.6
Total assets 2,303.1 2,288.1
EQUITY AND LIABILITIES
Equity
Share capital 4.0 4.0
Share premium 830.0 830.0
Capital reserves 376.1 376.1
EBT share reserves (1.3) (0.7)
Hedging reserve 3.5 3.3
Retained earnings (472.2) (472.8)
Equity attributable to owners of the Parent 740.1 739.9
Non-controlling interests (1.4) (2.1)
Total equity 738.7 737.8
Non-current liabilities
Bank borrowings 18 362.7 361.9
Lease liability 19 791.5 793.3
Deferred tax liability 75.5 67.9
Financial liabilities 26 - 9.6
1,229.7 1,232.7
Current liabilities
Bank borrowings 18 3.7 3.4
Lease liability 19 94.3 98.4
Financial liabilities 26 8.0 -
Provisions 21 15.4 16.4
Trade and other payables 22 212.2 197.1
Income tax payable 1.1 2.3
334.7 317.6
Total liabilities 1,564.4 1,550.3
Total equity and liabilities 2,303.1 2,288.1
Consolidated interim statement of cash flows
For the six months ended 30 June 2024
Six months ended 30 June (Unaudited)
(£ million) Notes 2024 2023
Cash flows from operating activities
Profit before taxation 22.7 20.3
Adjustments for:
Depreciation 8 53.4 50.1
Amortisation 8 2.4 -
Non-cash Adjusting items 4.4 (0.9)
Share-based payments 23 2.1 1.5
Movements in financial instruments (1.9) (0.7)
Profit on disposal of property, plant and equipment 8 (5.1) -
Finance income 9 (0.4) -
Finance costs 9 49.3 45.5
126.9 115.8
Movements in working capital:
Increase in trade and other receivables (21.2) (20.7)
Increase in inventories (1.2) (1.8)
Increase in trade and other payables 13.1 7.8
Decrease in provisions (5.6) (4.5)
Cash generated from operations 112.0 96.6
Income tax received - -
Net cash from operating activities 112.0 96.6
Cash flows from investing activities
Purchase of property, plant and equipment (51.5) (31.0)
Purchase of intangible assets (2.1) -
Proceeds of disposal of property, plant and equipment 10.4 0.2
Movement in restricted cash - (2.5)
Net cash used in investing activities (43.2) (33.3)
Cash flows from financing activities
Bank interest paid (10.6) (9.3)
Lease interest paid (37.6) (36.3)
Payment of lease principal (10.6) (11.1)
Payment of share awards (5.0) -
Purchase of own shares (3.1) (3.1)
Dividends paid to equity holders of the parent 13 (8.5) (2.0)
Net cash used in financing activities (75.4) (61.8)
Net (decrease)/increase in cash and cash equivalents (6.6) 1.5
Cash and cash equivalents at beginning of period 49.6 74.2
Cash and cash equivalents at end of period 43.0 75.7
Adjusting items (note 10)
Adjusting items included in the cash flow (3.5) (2.9)
Total Adjusting items (4.1) (2.0)
Notes to the announcement
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, listed on the London Stock Exchange
and is incorporated, registered and domiciled in England and Wales (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 2024 was approved by the Board on 11 September 2024.
2. Basis of preparation
The condensed consolidated interim financial information has been prepared in
accordance with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority and with UK adopted International Accounting
Standard 34 "Interim Financial Reporting". It does 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 2023. The condensed consolidated
interim financial information has been reviewed, not audited.
The financial information contained in these interim statements do not
comprise statutory accounts within the meaning of section 434 of the Companies
Act 2006. Financial information for the year ended 31 December 2023 has been
extracted from the statutory accounts which were approved by the Board of
Directors on 28 February 2024 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 498 (2) or (3) of the Companies Act 2006.
The accounting for the Vita Health Group business combination is not complete
and amounts recognised, are subject to adjustment in line with IFRS 3 for up
to 12 months from acquisition, with goodwill being adjusted accordingly.
Therefore, goodwill has not been allocated at H1 24 and there are no
indicators of impairment.
Going concern
The group assessed going concern risk for the period through to 31 December
2025. As at 30 June 2024 the group had cash of £43.0m and borrowings of
£365m of which £325m is a Senior Loan Facility and £40m drawn Revolving
Credit Facility (RCF). The Group has access to an undrawn RCF of £60m. On 3
March 2023, the group exercised the option to extend the senior loan facility
and RCF by a further year to February 2027. The financial covenants relating
to this agreement are materially unchanged and there have been no
modifications to the agreement terms.
The group has undertaken extensive activity to identify plausible risks which
may arise and mitigating actions, which in the first instance would include
management of working capital and constrained levels of capital investment.
Based on the current assessment of the likelihood of these risks arising by 31
December 2025, together with their assessment of the planned mitigating
actions being successful, the directors have concluded it is appropriate to
prepare the accounts on a going concern basis. In arriving at their
conclusion, the directors have also noted that, were these risks to arise in
combination, it could result in a liquidity constraint or breach of covenant,
however, the risk of this is considered remote.
The group has also assessed, as part of its reverse stress testing, what
degree of downturn in trading it could sustain before it breaches its
financial covenant. This stress testing was based on flexing revenue downwards
with a consistent percentage decline in variable costs, whilst maintaining the
forecast of fixed costs. The testing did not allow for the benefit of any
action that could be taken by management to preserve cash. This testing
suggested that there would have to be at least a 27% fall in annual forecast
revenue before the group breaches its financial covenant, we believe that the
risk of an event giving rise to this size of reduction in revenue is remote.
It should be noted that we are in a period of material geopolitical and
macroeconomic uncertainty. Whilst the directors continue to closely monitor
these risks and their plausible impact, their severity is hard to predict and
is dependent upon many external factors. Accordingly, the actual financial
impact of these risks may materially vary against the current view of their
plausible impact.
3. Accounting policies
In preparing the condensed consolidated 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 2023 except for the application of new standards and amendments
mentioned below effective from 1 January 2024. The accounting policies are
consistent with those of the previous financial year and corresponding interim
period.
The annual financial statements of the Group will be prepared in accordance
with UK adopted International Accounting Standards (UK adopted International
Financial Reporting Standards ("IFRSs")).
New standards, interpretations and amendments applied
The Group has not early adopted any standard, interpretation or amendment that
was issued but is not yet effective.
The following amendments to existing standards were effective for the Group
from 1 January 2024. These have not had a material impact on the Group.
- Amendments to IAS 1 - Classification of liabilities as Current
or Non-Current
- Amendments to IFRS 16 - Lease Liability in a Sale and Leaseback
- Amendments to IAS 7 and IFRS 7 - Disclosures: Supplier Finance
Arrangements
4. Significant judgements and estimates
The preparation of the condensed consolidated interim financial information
required management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amount of assets,
liabilities, income and expenses. 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 2023 with the
exception of those estimates used in the assessment of the medical malpractice
provision in connection with the Ian Paterson claims which are, consistent
with all judgements and estimates, subject to ongoing review. Refer to note 21
for more information.
5. Revenue
All revenue is attributable to, and all non-current assets are located in, the
United Kingdom.
Revenue by location (inpatient, daycase or out-patient) and wider customer
(payor) group is shown below:
Six months ended 30 June (Unaudited)
2024 2023
(£ million) Hospitals Business New Services Total Hospitals Business New Services Total
Inpatient 279.3 - 279.3 272.7 - 272.7
Daycase 212.3 0.1 212.4 199.0 - 199.0
Out-patient 197.2 59.5 256.7 183.8 6.7 190.5
Other(*) 14.0 0.1 14.1 14.3 - 14.3
Total revenue 702.8 59.7 762.5 669.8 6.7 676.5
Insured 336.4 0.7 337.1 306.6 0.3 306.9
Self-pay 173.1 3.9 177.0 178.4 4.0 182.4
NHS 179.3 44.5 223.8 170.5 - 170.5
Other(*) 14.0 10.6 24.6 14.3 2.4 16.7
Total revenue 702.8 59.7 762.5 669.8 6.7 676.5
*Other revenue includes fees paid to the group by consultants (eg for the use
of group facilities and services), third-party revenue (eg pathology services
to third parties).
Group revenues increased by 12.7% to £762.5m (H1 23: £676.5m). Hospitals
Business revenue has increased by 4.9% to £702.8m (H1 23: £669.8m), the
increase is due to the ongoing growth in private medical insurance (PMI)
offset by the decline in self-pay driven by competitiveness and some patients
of working age switching from SP to PMI. Overall revenue growth is underpinned
by increased average revenue per case (APRC) for all payor groups. Revenue
for New Services is £59.7m (H1 23: £6.7m) with the majority of this from
Vita Health Group (VHG) which was acquired in October 2023.
6. Segmental reporting
In determining the group's operating segment, management has primarily
considered the financial information in internal reports that are reviewed and
used by the executive management team and board of directors (who together are
the chief operating decision maker of Spire Healthcare) 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 two operating segments, being
Hospitals Business and New Services.
The Hospitals Business is the Group's core business activity and consists of
hospitals, clinics, medical centres and consulting rooms. They provide
diagnostics, inpatient, day case and outpatient care in areas including
orthopaedics, gynaecology, cardiology, neurology, oncology and general
surgery.
We have aggregated Spire Clinics, Vita Health Group and Doctors Clinic Group
into one operating segment called New Services as they meet the aggregation
criteria under IFRS 8 operating segments. These entities all have similar
economic characteristics such as offering similar services and have a similar
type of customer. These services being primarily focused the primary care
needs of outpatients whether these services are GP services, occupational
health services or mental and physical health services.
Segment performance is evaluated based on profit or loss and is measured
consistently with profit or loss in the consolidated financial statements. The
balance sheet is evaluated on a Group level.
Six months ended 30 June (Unaudited)
2024 2023
(£ million) Hospitals Business New Services Total Hospitals Business New Services Total
Revenue 702.8 59.7 762.5 669.8 6.7 676.5
Cost of sales (376.8) (39.6) (416.4) (359.3) (3.0) (362.3)
Gross profit 326.0 20.1 346.1 310.5 3.7 314.2
Other operating costs (263.2) (18.8) (282.0) (245.1) (4.4) (249.5)
Other income 7.5 - 7.5 1.1 - 1.1
Segment operating profit (EBIT) 70.3 1.3 71.6 66.5 (0.7) 65.8
Finance income, finance costs and taxes are not allocated to individual
segments as these are managed on an overall Group basis. Reconciliation of
segment operating profit to Group profit for the year:
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Segment operating profit (EBIT) 71.6 65.8
Finance income 0.4 -
Finance costs (49.3) (45.5)
Profit before taxation 22.7 20.3
Taxation (8.6) (7.6)
Profit for the year 14.1 12.7
7. Other income
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Fair value movement on financial asset 0.3 0.7
Realised profit in respect of financial asset 0.5 0.4
Movement on financial liability 1.6 -
Profit on disposal of hospital (Adjusting items) 4.7 -
Profit on disposal of property, plant and equipment 0.4 -
Total other income 7.5 1.1
The fair value movement in respect of the financial asset was recognised to
reflect the on-going profit share arrangement with Genesis Care which arose as
part of the sale of the Bristol Cancer Centre in 2019. Profits of £0.5m have
been realised in respect of this arrangement. The movement on financial
liability relates to the change in cash flows relating to the financial
instruments held to purchase own equity instruments refer to note 26 for more
detail.
8. Operating profit
Operating profit has been arrived at after charging / (crediting):
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Amortisation of intangible assets 2.4 -
Depreciation of property, plant and equipment 33.5 32.5
Depreciation of right of use assets 19.9 17.6
Lease payments made in respect of low value and short leases 11.0 8.8
Movement on the provision for expected credit losses of trade receivables 1.2 0.3
Staff costs (excluding staff restructuring costs) 312.9 256.1
Staff restructuring costs 1.8 1.6
Included in staff costs is £43.7m (2023: £4.2m) for New Services of which
£39.3m (2023: Nil) for VHG which was acquired in October 2023. Refer to page
9 for the split by operating segment for depreciation and amortisation.
Cost of sales for the period ended 30 June 2024 includes inventories
recognised as an expense amounting to £138.2m (2023: £133.6m).
9. Finance income and costs
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Finance income:
Interest income on bank deposits 0.4 -
Total finance income 0.4 -
Finance costs:
Interest on bank facilities 10.9 8.7
Amortisation of fee arising on facilities extensions/borrowing costs (*) 0.8 0.5
Interest on obligations under leases 37.6 36.3
Total finance costs 49.3 45.5
Total net finance costs 48.9 45.5
* Borrowing costs of £5.9m were capitalised to the senior finance facility,
these are being amortised over the period of the facility.
10. Adjusting items
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Business reorganisation and corporate restructuring costs 1.8 1.6
Asset acquisitions, disposals and aborted project costs (4.0) 0.4
Remediation of regulatory compliance or malpractice 4.6 -
Hospitals set up costs 0.8 -
Amortisation on acquired intangible assets 0.9 -
Total Adjusting items 4.1 2.0
Income tax charge / (credit) on Adjusting items 1.4 (0.5)
Total post-tax Adjusting items 5.5 1.5
Adjusting items comprise those matters where the Directors believe the
financial effect should be adjusted for due to their nature or amount, in
order to provide a more comparable measure of the Group's underlying
performance.
Asset acquisitions, disposals, impairments and aborted projects costs includes
a profit of £4.7m relating to the sale of the Group's Tunbridge Wells
hospital to Maidstone and Tunbridge Wells NHS Trust ("Trust") for £9.975m.
Refer to disposal note 27 for more details. In addition, there is £0.7m of
integration and other acquisition costs relating to the VHG acquisition. Costs
in the prior year mainly comprise costs in respect of Doctors Clinic Group
with costs incurred to integrate the Group into the Spire Group.
Business reorganisation and corporate restructuring relates to the Group
announcement of a strategic, group wide initiative in H2 21 that will enable a
more efficient business operating model, including leveraging digital
solutions and technology. As a result of this initiative, additional costs of
£1.5m (2023: £1.6m) have been incurred in the period, bringing costs to date
of £9.3m. This initiative is being implemented over several phases and is
likely to be materially completed during 2026 as communicated at our capital
markets event in April 2024. Future costs are not disclosed as a reliable
estimate cannot be made due to the nature of the matter. £0.2m has been
incurred in respect of restructuring costs relating to the Doctors Clinic
Group.
Remediation of regulatory compliance or malpractice costs of £4.6m (December
2023: £2.5m) relate to an increase in the provision established by Spire
Healthcare in respect of implementing the recommendations of the Public
Inquiry including a detailed patient review and support for patients of
Paterson. The project is complex and the process for review and settlement
takes some time. It is possible that, as further information becomes
available, an adjustment to this provision will be required, but at this time,
it reflects management's best estimate of the costs and settlement of claims
at this point. The variables include the number of patients which are found to
have been harmed following review, the level of harm, and the associated
compensation claim, as well as the time to review each case can vary
significantly. This provision remains subject to ongoing review.
Hospital set up costs relate to costs incurred for the set-up of the Abergele
and Harrogate clinics prior to opening. The clinic in Abergele opened in
February 2024. The set up for Harrogate is still on going and is expected to
continue into H2.
£0.9m of amortisation on acquired intangible assets related to the customer
contracts recognised on the acquisition of VHG in October 2023.
11. Taxation
Six months ended 30 June (Unaudited)
(£ million) 2024 2023
Current tax:
UK Corporation tax credit (0.3) (1.4)
Total current tax credit (0.3) (1.4)
Deferred tax:
Origination and reversal of temporary differences 6.6 9.5
Impact of Adjusting items 1.4 (0.5)
Adjustments in respect of previous periods 0.9 -
Total deferred tax charge 8.9 9.0
Total tax charge 8.6 7.6
The tax charge for the period has been calculated using an estimate of the
effective annual rate of tax for the full year (c.29%). This has been applied
to the pre-tax profits for the six months ended 30 June 2024 resulting in a
charge of £6.6m. The Group has separately calculated the tax rates on
discrete items which results in an additional charge of £2.0m. Included in
the impact of Adjusting items is £1.2m for the sale of the Tunbridge Wells
hospital. These discrete items in H1 2024 distort the effective tax rate (ETR)
at H1 24, being 38% on statutory profit, and 27% on an adjusted basis.
The total tax charge for H1 24 is £8.6m, the charge is a non-cash movement
and is caused by timing differences mainly due to the difference in the tax
base versus the accounting base for assets.
Pillar Two Legislation, reflecting the OECDs Base Erosion Profit Shifting
('BEPs') framework is effective for periods beginning 1 January 2024. The
Group continues to only operate in the UK. Based on the Group's assessment,
the Pillar Two effective tax rates continue to be above 15% and therefore the
group does not expect an exposure to Pillar Two top-up taxes.
12. Earnings per Share (EPS)
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)
2024 2023
Profit for the period attributable to owners of the Parent (£ million) 13.4 12.4
Weighted average number of ordinary shares 404,126,715 404,042,101
Adjustment for weighted average number of shares held in the Employee Benefit (465,074) (270,626)
Trust (EBT)
Weighted average number of ordinary shares in issue (No.) 403,661,641 403,771,475
Basic profit per share (in pence per share) 3.3 3.1
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.
Six months ended 30 June (Unaudited)
2024 2023
Profit for the period attributable to owners of the Parent (£ million) 13.4 12.4
Weighted average number of ordinary shares in issue 403,661,641 403,771,475
Adjustment for weighted average number of contingently issuable shares 10,325,017 5,837,070
Diluted weighted average number of ordinary shares in issue (No.) 413,986,659 409,608,545
Diluted profit per share (in pence per share) 3.2 3.0
The Directors believe that EPS excluding Adjusting items ("adjusted EPS")
better reflects the underlying performance of the business and assists in
providing comparable performance of the Group.
Reconciliation of profit to Adjusted Profit (profit excluding Adjusting
items):
Six months ended 30 June (Unaudited)
2024 2023
Profit for the period attributable to owners of the Parent (£ million) 13.4 12.4
Adjusting items (net of taxation) (see note 10) 5.5 1.5
Adjusted profit after tax (£ million) 18.9 13.9
Weighted average number of Ordinary Shares in issue 403,661,641 403,771,475
Weighted average number of dilutive Ordinary Shares 413,986,659 409,608,545
Adjusted basic earnings per share (in pence per share) 4.7 3.4
Adjusted diluted earnings per share (in pence per share) 4.6 3.4
13. Dividends
Six months ended 30 June (Unaudited)
2024 2023 2024 2023
Amounts recognised as distributions to equity shareholders Pence per share Pence per share £million £million
Ordinary shares
Final dividend for the year ended 31 December 2.1 0.5 8.5 2.0
Total dividends 2.1 0.5 8.5 2.0
14. Property, plant and equipment
Leasehold Assets in the course
(£ million) Freehold property improvements Equipment of construction Sub-total Right of use asset Total
Net book value at 1 January 2024 650.8 135.9 173.3 25.2 985.2 633.6 1,618.8
Additions 4.4 7.5 26.8 12.8 51.5 2.5 54.0
Adjustments to ROU - - - - - 3.3 3.3
Disposals - (4.9) (0.9) - (5.8) (2.4) (8.2)
Transfers - 0.1 0.8 (0.9) - - -
Depreciation (6.5) (5.2) (21.8) -- (33.5) (19.9) (53.4)
Net book value at 30 June 2024 648.7 133.4 178.2 37.1 997.4 617.1 1,614.5
The net book value of land is £156.3m (December 2023: £156.3m). The Group
has pledged nine of its freehold properties as security for the senior finance
facility, and the net book value of these properties is £121.9m (December
2023: £124.0m). There were no borrowing costs capitalised during the period
(2023: Nil).
On the 31 March 2024 the Group sold its Tunbridge Wells Hospital business to
Maidstone and Tunbridge Wells NHS Trust for £9.975m and derecognised
property, plant and equipment of £6.2m. As part of the sale agreement the
Group has entered into a sub lease agreement with the Trust to lease the
Tunbridge Wells property (refer to note 19). A right of use asset of £2.4m
was derecognised and a finance lease receivable of £4.4m was recognised. The
finance lease receivable represents the cash flows receivable from the Trust
to settle the lease obligation in the head lease. Refer to note 27 for more
details.
Right of use assets are included in the following property, plant and
equipment categories:
(£ million) Leasehold Property Equipment & motor vehicles Total
Net book value at 1 January 2024 612.3 21.3 633.6
Additions 0.6 1.9 2.5
Adjustments to ROU 3.3 - 3.3
Disposals (2.4) - (2.4)
Depreciation (16.9) (3.0) (19.9)
Net book value at 30 June 2024 596.9 20.2 617.1
Impairment testing
The Directors consider property and property right of use assets for
indicators of impairment semi-annually. As equipment and leasehold
improvements do not generate independent cash flows, they are considered
alongside the property as a single cash-generating unit ("CGU"). When making
the assessment, the value-in-use of the property is compared with its carrying
value in the accounts. Where headroom is significant, no further work is
undertaken. Where headroom is minimal, a detailed assessment is performed for
the property, which includes identifying the factors resulting in limited
headroom and undertaking financial forecasts to assess the level of
sensitivity this has on key assumptions.
In order to estimate the value-in-use, management has used trading projections
covering the period to December 2028 from the most recent board approved
strategic plan. The variables in the cash flows are interdependent and
reflect management's expectations based on past experience and current market
trends, taking into account both current business and committed initiatives.
To the extent that there was a shortfall between the recent actual cash flows
and forecast, the future cash flows have been adjusted to reflect any
initiatives implemented by management to address the underlying cause. In
addition, Management considers the potential financial impact from short term
climate change scenarios, and the cost of initiatives that have substantially
commenced by the Group to manage the longer- term climate impacts.
Key assumptions
Management identified a number of key assumptions relevant to the value-in-use
calculations, being EBITDA growth over the four and a half year period,
capital maintenance spend, discount rates and long term growth rates. The
assumptions are based on past experience and external sources of information.
The trading projections for the four and a half year period underlying the
value in use reflect a growth in EBITDA. EBITDA is based on a number of
elements of the operating model over the longer-term, including pricing
trends, volume growth and the mix and complexity of procedures and assumptions
regarding cost inflation.
Management have performed a sensitivity analysis on properties triggered for
review by using reasonably possible changes for each key assumption, keeping
all other assumptions constant. The sensitivity analysis included an
assessment of the break-even point for each of the key assumptions.
For one property with a headroom (amount that recoverable amount exceeded the
carrying amount) of £4.1m, identified that a reasonably possible change in
the EBITDA growth over the five-year period for the triggered property, would
result in the elimination of headroom. The average annual EBITDA growth over
the five years is 8.8%. The annual EBITDA over the five year period would have
to decrease by 18.0% per annum to eliminate the headroom.
The Group has used a pre-tax discount rate of 11.58% (December 2023: 11.5%). A
long-term growth rate of 2.0% has been applied to cash flows beyond 2028 based
on long term view of inflation, revenue growth and market conditions. Capital
maintenance spend is based on historic run rates and our expectations of the
Group's requirements. The sensitivity testing identified no reasonably
possible changes in the discount rate, capital maintenance and long-term
growth rates that would cause the carrying amount of any CGU to exceed its
recoverable amount.
As a result, management believe that the EBITDA growth assumption constitutes
a source of estimation uncertainty as they consider that there is a risk of a
change to its estimate of this assumptions within the next 12 months.
15. Intangible asset
(£ million) Goodwill Customer contracts IT projects Mobilisation costs Total
Net book value at 1 January 2024 411.1 20.4 4.3 2.5 438.3
Additions - - 1.1 1.0 2.1
Amortisation - (1.2) (0.9) (0.3) (2.4)
Net book value at 30 June 2024 411.1 19.2 4.5 3.2 438.0
Impairment testing
The Directors have reviewed goodwill for indicators of significant impairment
since the most recent financial year end. As at 31 December 2023 the
recoverable amount of goodwill exceeded the carrying amount by c. £800m.
Since the 2023 financial year end there have been no indicators of impairment
and therefore management have not performed a detailed impairment calculation
for the interim period.
16. Trade and other receivables
As at
(£ million) 30 June 2024 (Unaudited) 31 December 2023 (Audited)
Trade receivables 86.9 74.8
Unbilled receivables 23.5 20.2
Prepayments 30.3 21.9
Other receivables 7.8 10.2
148.5 127.1
Allowance for expected credit losses (6.7) (5.5)
Trade and other receivables 141.8 121.6
Other receivables include a balance of £0.1m relating to the recognition of a
finance lease receivable. During the year and as part of the sale of the
Tunbridge Wells hospital the Group entered into a sub lease agreement to lease
the Tunbridge Wells property to the NHS trust. The terms of the sub lease are
the same as the head lease refer to note 19 for more detail. The non-current
portion of the £4.3m of the finance lease receivable is due after more than
one year and £0.1m is due within one year.
17. Non-current assets held for sale
One property remains as held for sale in the current period.
As at
(£ million) 30 June 2024 (Unaudited) 31 December 2023 (Audited)
East Midlands Cancer Centre property (Bostocks Lane) 1.1 1.1
Total assets held for sale 1.1 1.1
The Group's management have committed to sell a parcel of land at Bostocks
Lane as the Group has accepted an offer on the property. The sale is
considered highly probable and the assessment has not changed. It therefore
remains classified as held for sale.
18. Bank Borrowings
The bank loans are secured on fixed and floating charges over both the present
and future assets of material subsidiaries of the Group. During 2023, the
Group exercised the option to extend the facility by a further year. There
have been no modifications to the agreement terms as a result. The
arrangement has a maturity of February 2027. The financial covenants relating
to this agreement and the extension are materially unchanged. The loan is
non-amortising and carries interest at a margin of 2.05% over SONIA (2023:
2.05% over SONIA).
The Group drew down £60.0m on its revolving credit facility to acquire VHG in
October 2023. Since the acquisition the group has repaid £20.0m.
As at
(£ million) 30 June 2024 (Unaudited) 31 December 2023 (Audited)
Amount due for settlement within 12 months 3.7 3.4
Amount due for settlement after 12 months 362.7 361.9
Total bank borrowings 366.4 365.3
Net debt for the purposes of the covenant test in respect of the Senior Loan
Facility was £322.0m (December 2023: £315.4m) and the net debt to EBITDA
ratio was 2.1x (December 2023: 2.2x). The net debt for covenant purposes
comprises the senior facility of £325.0m, drawn revolving credit facility of
£40.0m less cash and cash equivalents of £43.0m. EBITDA for covenant
purposes comprises Adjusted EBITDA for Last Twelve Months (LTM) of pre-IFRS 16
Adjusted EBITDA of £163.5m (December 2023: £152.9m) less the rental of a
property lease pre-IFRS 16 of £10.2m (December 2023: £10.0m).
Terms and debt repayment schedule
The maturity date is the date on which the relevant bank loans are due to be
fully repaid, as at the balance sheet date.
The carrying amounts drawn (after issue costs and including interest accrued)
under facilities in place at the balance sheet date were as follows:
(£ million) Maturity Margin over SONIA 30 June 2024 (Unaudited) 31 December 2023 (Audited)
Senior finance facility February 2027 2.05% 326.4 325.3
Revolving credit facility (undrawn committed facility) February 2027 1.95% 40.0 40.0
Changes in bank borrowings and lease liabilities arising from financing
activities
(£ million) 1 January Cash flows Non-cash changes(*) 30 June
Additions
2024
Bank loans 365.3 (10.6) 11.7 - 366.4
Lease liabilities 891.7 (48.2) 37.6 4.7 885.8
Total 1,257.0 (58.8) 49.3 4.7 1,252.2
* Non-cash changes reflect accrued interest charged on the loan and interest
charge on lease liabilities. Amortised fees of £0.8m are included in non-cash
changes for bank loans.
(£ million) 1 January Cash flows Non-cash changes Additions Loan modification 30 June
2023
Bank loans 324.3 (9.3) 9.2 - - 324.2
Lease liabilities 866.5 (47.4) 36.3 8.4 0.8 864.6
Total 1,190.8 (56.7) 45.5 8.4 0.8 1,188.8
Effect of covenants
The Group's non-current bank borrowings include borrowings amounting to £365m
that contain covenants, which, if not met, would result in the borrowings
becoming repayable on demand. These borrowings are otherwise repayable more
than 12 months after the end of the reporting period. The financial covenants
is for the leverage ratio to be below 4.0x and interest cover to be in excess
of 4.0x. As at 30 June 2024 the Group complied with all covenants as the
leverage measure stood at 2.1x and interest cover of 8.0x and therefore bank
borrowings remain classified as non-current liabilities.
19. Lease liability
The Group has finance arrangements in place in respect of hospital properties,
vehicles, office and medical equipment. The leases are secured on fixed and
floating charges over both the present and future assets of material
subsidiaries in the Group. Leases, with a present value liability of £885.8m
(December 2023: £891.7m), expire in various years to 2046 and carry
incremental borrowing rates in the range 3.2% - 14.6% (2023: 3.2% - 14.6%).
Rent in respect of hospital property leases are reviewed annually with
reference to RPI, subject to assorted floors and caps. The discount rate used
is calculated on a lease-by-lease basis, and based on estimates of incremental
borrowing rates.
During the year the Group sold its Tunbridge Wells Hospital business to
Maidstone and Tunbridge Wells NHS Trust, as part of the sale agreement the
Group has entered into a sub lease agreement with the Trust to lease the
Tunbridge Wells property. The finance lease receivable represents the cash
flows receivable from the Trust to settle the lease obligation in the head
lease.
In the period, the Group recognised charges of £6.3m (2023: £6.6m) of lease
expenses relating to low value leases and £4.7m (2023: £2.2m) of short term
leases for which the exemption under IFRS 16 has been taken. Cash outflows in
respect of these are materially in line with the expense recognised, resulting
in a total cash outflow for all leases of £59.2m (2023: £56.2m). The Group
has not made any variable lease payments in the year. The Group is a lessor to
one lease to external parties and has recognised a finance lease receivable of
£4.4m (2023: Nil) the terms of the sub-lease are the same as those contained
in the head-lease. There have been no (2023: no) sale and leaseback
transactions in this period.
Some leases receive RPI increases on an annual basis which affects both the
cash flow and interest charged on those leases. Except for this increase, cash
flows and charges are expected to remain in line with the current period.
20. Derivatives
The Group has a derivative contract in respect of an interest rate swap in
place:
As at
(£ million) 30 June 2024 (Unaudited) 31 December 2023 (Audited)
Amount due for settlement within 12 months 3.1 4.0
Amount due for settlement after 12 months 1.5 0.4
Total derivatives 4.6 4.4
The Group entered into interest rate swaps on 25 July 2022. The movement in
respect of derivatives reflects £2.6m (December 2023: £4.4m) recycled in the
period and a £2.8m gain (December 2023: £0.2m credit) in fair value. All
movements are reflected within other comprehensive income.
21. Provisions
The movement for the period in the provisions is as follows:
(£ million) Medical Business restructuring Total
malpractice
and other
At 1 January 2024 15.1 1.3 16.4
Increase in existing provisions 4.6 0.2 4.8
Provisions utilised (5.6) - (5.6)
Provisions released ---- (0.2) (0.2)
At 30 June 2024 14.1 1.3 15.4
Medical malpractice relates to estimated liabilities arising from claims for
damages in respect of services previously supplied to patients. Amounts are
shown gross of insured liabilities. Insurance recoveries of £3.9m (December
2023: £4.6m) are recognised in other receivables.
Following the completion of the criminal proceedings against Ian Paterson and
in response to the publication of the Public Inquiry report on Paterson on 4
February 2020, Spire Healthcare established a provision in respect of
implementing the recommendations including a detailed patient review and
support for patients. The provision is being utilised, including £12.2m in
patient claim settlements. The provision to complete the reviews, settle any
claims and costs in respect of other Paterson items has been increased by
£4.6m (December 2023: £2.5m). The project is complex and the process for
review and settlement takes some time. It is possible that, as further
information becomes available, an adjustment to this provision will be
required, but at this time, it reflects management's best estimate of the
costs and settlement of claims at this point. The variables include the number
of patients which are found to have been harmed following review, the level of
harm, and the associated compensation claim, as well as the time to review
each case which can vary significantly. This provision remains subject to
ongoing review.
As at 30 June 2024, Business Restructuring and Other provisions primarily
includes non-patient claims made against the Group. The Group is in the
process of settling or defending such claims as appropriate.
Management have sought external counsel, where appropriate, to determine the
appropriate provision levels.
Provisions as at 30 June 2024 are materially considered to be current and
expected to be utilised at any time within the next twelve months.
22. Trade and other payables
As at
(£ million) 30 June 2024 (Unaudited) 31 December 2023 (Audited)
Trade payables 73.0 63.9
Accrued expenses 62.8 65.9
Deferred income 10.8 10.4
Social security and other taxes 16.2 15.2
Other payables 49.4 41.7
Trade and other payables 212.2 197.1
Accrued expenses includes holiday pay accrued of £2.7m (December 2023:
£2.1m).
Other payables includes an accrual for pensions and payments on account.
Revenue in respect of payments on account are not recognised until the
performance obligation has been met. At June 2024, the balance of payments on
account was £8.0m (December 2023: £10.3m), and other credit balances,
largely relating to NHS credits, were £39.7m (December 2023: £32.0m).
23. Share-based payments
The Group operates a number of share-based payment schemes for Executive
Directors and other employees, all of which are equity-settled.
The Group has no legal or constructive obligation to repurchase or settle any
of the options in cash. The total cost recognised in the income statement was
£2.1m in the six months ended 30 June 2024 (2023: £1.5m). Employer's
National Insurance is also 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. The
total National Insurance charge for the period was £0.2m (2023: £0.2m).
A summary of additional schemes granted in the period are shown below:
Long Term Incentive Plan
On 14 March 2024, the Company granted a total of 2,054,599 options to the
executive directors and other senior management. The options will vest based
on return on capital employed ('ROCE') (35%) targets for the financial year
ending 31 December 2026, relative total shareholder return ('TSR') (20%)
targets over the three year period to 31 December 2026, EBITDA margin (15%)
targets for the financial year ending 31 December 2026 for the Company's
Hospital Business and operational excellence ('OE') (30%) targets based on
employee engagement targets and regulatory ratings for the current portfolio
of hospitals (including Doctors Clinic Group, but excluding new clinics that
open during the performance period and Vita Health Group). The options are
subject to continued employment and, upon vesting, will remain exercisable
until March 2034. The executive directors are subject to a 2-year holding
period.
On 14 March 2024, the Company also granted a total of 235,231 options to
senior management. These options will vest based on return on capital employed
('ROCE') (35%) targets for the financial year ending 31 December 2026,
relative total shareholder return ('TSR') (20%) targets on performance over
the three year period to 31 December 2026, EBITDA margin (15%) targets for the
financial year ending 31 December 2026 for the VHG and operational excellence
('OE') (30%) targets (based on non-market vesting conditions related to access
rates and recovery for mature contracts and employee engagement targets for
the VHG). The options are subject to continued employment and, upon vesting,
will remain exercisable until March 2034.
Deferred Share Bonus Award
On 14 March 2024, the Company granted a total of 221,319 options to executive
directors, with a vesting date of 14 March 2027. There are no performance
conditions in respect of the scheme and is subject to continued employment.
24. Non-controlling interest
On 5 May 2023 Spire Healthcare Limited acquired an additional 24.9% interest
in Montefiore House Limited in consideration of the release and discharge of
outstanding liabilities. Prior to this agreement the Group held a 50.1%
interest. The Group now owns 75% of this entity. The accumulated interest
relating to the 24.9% interest acquired in Montefiore was therefore
reclassified to retained earnings in the prior year. In addition, the Group
entered into an agreement in which both parties can exercise an option for
Spire to purchase the remaining 25% interest in the subsidiary at a future
date. Refer to note 26 for more detail.
25. Financial risk management, impairment of financial assets and commitments
The Group has exposure to the following risks from its use of financial
instruments:
- credit risk;
- liquidity risk; and
- market risk.
Note 31 in the Annual Report and Accounts 2023 sets out the Group's policies
and processes for measuring and managing risk. These have not changed
significantly during the period to 30 June 2024.
Credit risk and impairment
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's receivables from
customers and investment securities.
Trade and other receivables
The Group's exposure to credit risk is influenced mainly by the individual
characteristics of each customer. The Group's exposure to credit risk from
trade receivables is considered to be low because of the nature of its
customers and policies in place to prevent credit risk occurring in normal
circumstances. A large proportion of revenue arise from insured patients'
business and the NHS. Insured revenues give rise to trade receivables which
are mainly due from large insurance institutions, which have high credit
worthiness. The remainder of revenues arise from individual self-pay patients
and Consultants. Individual self-pay patients continue to be the largest risk
for the Group given the current economic uncertainty. The Expected Credit Loss
("ECL") as at June 2024 is £6.7m (December 2023: £5.5m).
The Group establishes an allowance for impairment that represents its expected
credit loss in respect of trade and other receivables. This allowance is
composed of specific losses that relate to individual exposures and also an
expected credit loss component established using rates reflecting historic
information for payor groups, and forward looking information. Given the
continued economic uncertainty, the Group has considered the provision
required, specifically for self-pay patients and maintained an adjustment to
the provision accordingly, which is in line with the position at December
2023.
Investments
The Group limits its exposure to credit risk by only investing in short-term
money market deposits with large financial institutions, which must be rated
at least Investment Grade by key rating agencies.
Interest rate risk
Interest rates on variable rate loans are determined by SONIA fixings on a
quarterly basis. Interest is settled on all loans in line with agreements and
is settled at least annually.
Variable Total Undrawn facility
30 June 2024 (£ million) 365.0 365.0 60.0
Effective interest rate (%) 6.13% 6.13%
31 December 2023 (£ million) 365.0 365.0 60.0
Effective interest rate (%) 5.63% 5.63%
The following derivative contracts were in place at 30 June 2024 (December
2023: £4.4 million asset):
(£ million) Interest rate Maturity date Notional Amount Carrying value Asset / (Liability)
Interest rate swap 2.7780% February 2026 243.8m 4.6
The fair value of the above instrument is considered the same as its carrying
value. In line with disclosures in note 31 of the 2023 Annual report and
accounts, the above instrument uses level 2 of the fair value hierarchy to
measure the fair value of the instrument.
Sensitivity analysis
A change in 25 basis points in interest rates at the reporting date would have
increased/(decreased) equity and reported results by the amounts shown below.
This analysis assumes that all other variables remain constant.
Profit or loss Equity
(£ million) 25bp increase 25bp decrease 25bp increase 25bp decrease
30 June 2024
Variable rate instruments (0.9) 0.9 (0.9) 0.9
31 December 2023
Variable rate instruments (0.3) 0.3 (0.3) 0.3
Liquidity risk
The following are contractual maturities, as at the balance sheet date, of
financial liabilities, including interest payments and excluding the impact of
netting arrangements:
30 June 2024 Maturity analysis
(£ million) Carrying amount Contractual cash outflow/ (inflow) Within 1 year Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years Between 4 and 5 years More than 5
Trade and other payables 185.2 185.2 185.2 - - - - -
Bank borrowings 366.4 431.3 25.5 22.8 383.0 - - -
Lease liabilities 885.8 1,774.2 100.1 100.0 98.0 98.0 97.4 1,280.7
Financial Liability 8.0 8.0 8.0 - - - - -
1,445.4 2,398.7 318.8 122.8 481.0 98.0 97.4 1,280.7
Derivative interest rate swap (4.6) (5.1) (3.3) (1.8) - - - -
Total 1,440.8 2,393.6 315.5 121.0 481.0 98.0 97.4 1,280.7
Maturity analysis
31 December 2023
(£ million) Carrying amount Contractual cash flows Within 1 year Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years Between 4 and 5 years More than 5
Trade and other payables 171.5 171.5 171.5 - - - - -
Bank borrowings 365.3 434.3 24.7 19.9 18.7 371.0 - -
Lease liabilities 891.7 1,818.7 99.8 100.0 98.1 97.8 97.7 1,325.3
Financial liability 9.6 10.7 - 10.7 - - - -
1,438.1 2,435.2 296.0 130.6 116.8 468.8 97.7 1,325.3
Derivative interest rate swap (4.4) (5.0) (4.1) (0.8) (0.1) - - -
Total 1,433.7 2,430.2 291.9 129.8 116.7 468.8 97.7 1,325.3
Capital management
At the balance sheet date, the Group's committed undrawn facilities, and cash
and cash equivalents were as follows:
As at
(£ million) 30 June 2024 (Unaudited) 31 December 2023 (Audited)
Committed undrawn revolving credit facility 60.0 60.0
Cash and cash equivalents 43.0 49.6
Capital commitments
Capital commitments comprise amounts payable under capital contracts which are
duly authorised and in progress at the balance sheet date. They include the
full costs of goods and services to be provided under the contracts through to
completion. The Group has rights within its contracts to terminate at short
notice, and therefore, cancellation payments are minimal.
Capital commitments at the balance sheet date were £30.9m (December 2023:
£31.6m).
Bases of valuation
Management assessed that cash and short-term deposits, trade receivables,
trade payables and other current liabilities approximate their carrying
amounts largely due to the short-term maturities of these instruments. The
carrying value of debt is approximately equal to its fair value. During the
period, there were no transfers between the levels in the fair value
hierarchy.
A derivative is a financial instrument whose value is based on one or more
underlying variables. The Group uses derivative financial instruments to hedge
its exposure to interest rate risk. Derivatives are not held for speculative
reasons. Fair values are obtained from market observable pricing information
including interest rate yield curves and have been calculated as follows; fair
value of interest rate swaps is determined as the present value of the
estimated future cash flows based on observable yield curves.
The financial asset reflects a profit share arrangement with a partner. There
are no market observable prices for the valuation. Management uses the
expected present value technique - method 2 in determining the fair value of
the arrangement. Management uses forward looking and historical trends of the
partner's gross profits, growth rate, risk factors and an appropriate discount
rate to determine the fair value. Sensitivities are also taken into account
when reviewing the fair value.
As at 30 June 2024, the Group held the following financial instruments
measured at fair value. There has been no change in the hierarchy categories
during the period.
Instruments measured at fair value
(£ million)
Value as at 30 June 2024 Value as at 31 December 2023 Level 1 Level 2 Level 3
Financial assets at fair value through profit or loss
Profit share arrangement 7.8 7.5 - - 7.8
Financial liabilities at fair value through profit or loss and using hedge
accounting
Interest rate swaps 4.6 4.4 - 4.6 -
In the period, Spire Healthcare received a profit share in respect of the
financial asset of £0.5m. In addition a fair value movement of £0.3m was
recognised in the income statement, and remains unrealised. The movement on
the interest rates swaps related wholly to fair value movements and is
unrealised.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique.
- Level 1: quoted (unadjusted) prices in active markets for identical assets
or liabilities;
- Level 2: other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly or
indirectly, and
- Level 3: techniques which use the inputs which have a significant effect on
the recorded fair value that are not based on observable market data.
26. Financial liabilities
In 2023, the Group entered into an agreement with the non-controlling interest
of one of its subsidiaries, Montefiore House Limited, in which both parties
can exercise an option for Spire to purchase the remaining 25% interest in the
subsidiary at a future date. The purchase price is calculated in line with
pre-determined metrics which are based on the subsidiary's EBITDA performance
and the Group multiple. The option can be exercised between two to five years.
The expected future cash flow to settle the obligation is discounted at the
Group cost of debt of 8.1%. The financial liability is initially recognised
through equity at the present value of future cash flows (2023: 9.6m) and
subsequently recognised at amortised cost.
(£ million) 2024 2023
Valuation at 1 January 9.6 -
Option to purchase NCI - 9.6
Movement (1.6) -
Carrying amount at 30 June 8.0 9.6
27. Disposals
On 31 March 2024, the Group sold the assets and operations of its Tunbridge
Wells hospital to Maidstone and Tunbridge Wells NHS Trust. The Group
recognised a total profit on disposals in the period of £4.7m. The profit is
reported within Adjusting items (note 10). As part of the sale agreement the
Group has entered into a sub lease agreement with the Trust to lease the
Tunbridge Wells property. Included in the profit is £2.0m relating to the
derecognition of the right of use asset (£2.4m) and recognition of the
finance lease receivable (£4.4m). The finance lease receivable represents the
cash flows receivable from the Trust to settle the lease obligation in the
head lease.
In addition, the Group has entered into a management service agreement whereby
Spire will operate the administration function of the hospital for a fixed
monthly fee at an arm's length basis to allow for the proper transfer of
contracts and operations.
The profit on disposal is as follows:
(£ million) 2024
Consideration received 10.0
Net assets disposed (note 14) (5.8)
Disposal costs (1.5)
Derecognise right of use asset (note 14) (2.4)
Recognise finance lease receivable (note 16) 4.4
Profit on disposal (note 7) 4.7
Deferred tax charge (note 11) (1.2)
Profit on disposal after tax 3.5
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