Post-close Trading Update

RNS Number : 9875T

Spire Healthcare Group PLC

12 January 2017

 

Spire Healthcare Group plc

Post-close Trading Update

12 January 2017

Spire Healthcare Group plc (LSE: SPI), the major UK independent hospital group, provides the following update for Financial Year 2016 and preliminary guidance for Financial Year 2017.

Overview of expected outturn for Financial Year 2016

Management expect Group revenues for the Financial Year ended 31 December 2016 of approximately £925m (2015: £885m) and Group EBITDA of approximately £162m (2015: £160m). 

While the overall results for Financial Year 2016 were adversely impacted by recent trading performance at St Anthony's hospital, the Group's underlying performance (excluding St Anthony's) is expected to be towards the top end of the revenue and EBITDA guidance for 2016 (which guided to a range for revenue growth of between 3% and 5% over Financial Year 2015 at a circa 18% margin).

In addition, cash flow has remained strong throughout the year and the Group expects year-end net debt leverage of circa 2.7 times EBITDA, against guidance of 3.0 times EBITDA.

Redevelopment of Spire St Anthony's hospital

St Anthony's is currently undergoing a redevelopment and reconfiguration process which is expected to take longer than initially anticipated by management. Although much of the building programme to establish a new 6 surgical theatre complex was successfully completed on time in the second half of 2016, the work to reconfigure staffing levels, clinical processes and competencies to take full advantage of this additional capacity is still ongoing and is not now expected to be completed until the second half of 2017.

Because of this delay St Anthony's is expected to report an EBITDA loss of approximately £1.5m for Financial Year 2016 (2015: £5m EBITDA profit) on revenues of approximately £30m (2015: £32m), with the majority of the expected EBITDA loss accumulating over the last 2 months of 2016. However, management believes it has fully identified the further requirements at St Anthony's and remains confident of the delivery of the investment case over the medium term.

NHS tariff

NHS Improvement has recently finalised its consultation on NHS tariff for the fiscal year commencing 1 April 2017.  The impact of these changes to prices for the weighted basket of services currently delivered to the NHS by Spire Healthcare is an overall reduction of circa 3.9%, which for the Financial Year ending 31 December 2017 has an adverse 9 months revenue impact of £7m (based on an adverse annualised revenue impact of £11m).  As in previous years, management will pursue strategies to mitigate these pricing pressures over the medium term.

Outlook for Financial Year 2017

Management will provide detailed guidance for the Financial Year ending 31 December 2017 at the Financial Year 2016 results presentation on 2 March 2017. This guidance will take account of the continuing strength of the trading performance in Spire Healthcare's underlying business, the impact of the recovery plan for St Anthony's, the start- up effects of our two new hospitals in Manchester and Nottingham (on track to open in January 2017 and April 2017 respectively) and the impact of the NHS tariff changes, net of efficiency savings. ‎

Management expect the net effect of these factors to result in an EBITDA outcome for 2017 in line with 2016, before the Group returns to mid to high single digit EBITDA growth from Financial Year 2018 onwards.

Chairman's statement

Garry Watts, Executive Chairman, said:

"While it is disappointing that St Anthony's return to profitability has been delayed, we are nevertheless pleased with the robust underlying performance of our established hospitals and remain very positive about the prospects for Spire's business overall. Spire's fundamental business proposition is solid and we continue to be well placed to benefit from opportunities arising from constrained NHS funding and capacity."

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

For further information please contact:

Spire Healthcare:

Antony Mannion, Investor Relations Director	[phone]
Simon Gordon, Chief Financial Officer	[phone]

Maitland:

Tom Eckersley

[phone]

 

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