Trading Update

RNS Number : 4594F

Spire Healthcare Group PLC

12 November 2015

 

Spire Healthcare Group plc

Operational and Trading Update

12 November 2015

London, UK, 12 November 2015: Spire Healthcare Group plc (LSE: SPI), the major UK independent hospital group, provides the following operational and trading update for the ten months ended 31 October 2015.

Summary

Since Spire's update on 21 August 2015 NHS Choose & Book revenues have shown good growth, while NHS Local Contract revenues have continued to decline and were down 39% for the four months ended 31 October. Self-pay revenues have also grown strongly, whilst the PMI market remains static in terms of lives covered.

We now expect full year revenues to show growth of 3.0% to 3.7% (£882 million to £888 million) against previous guidance of 4.0% to 6.0% (£890 million to £907 million). Our EBITDA margin is expected to remain above 18.0% for the year as a whole.

Overall Group trading for the ten months ended 31 October 2015

·      Total Group revenues have grown 4.1%:

o  Inpatient and day case admissions rose 4.0% over the equivalent period in 2014.

o  Underlying* Group revenues grew by 2.8%.

·      Adjusted Group EBITDA (after PLC costs and rent adjustments) has grown 4.0%, at an EBITDA margin of 18.4% (2014 - adjusted margin of 18.4%).

·      Net debt at 31 October 2015 was £410 million, better than expectations, after capital expenditure in the period of £81 million.

·      Group Full Year 2015 guidance revised.

Revenue breakdown by payor group for the ten months ended 31 October 2015

Year-on-year revenue growth	6 months ended 30 June 2015	4 months ended 31 October 2015	10 months ended 31 October 2015	Underlying 6 months ended 30 June 2015	Underlying 4 months ended 31 October 2015	Underlying 10 months ended 31 October 2015
PMI	2.9%	(0.9%)	1.4%	(0.8%)	(2.2%)	(1.3%)
Self Pay	9.5%	1.9%	6.2%	8.0%	7.1%	7.5%
NHS (total)	16.2%	(2.7%)	8.2%	14.4%	(1.0%)	7.9%
NHS Choose & Book	12.0%	12.0%	12.0%
NHS Local Contract	29.4%	(39.0%)	(2.7%)
Other	4.6%	(8.7%)	(0.8%)
Total	7.8%	(1.2%)	4.1%	5.1%	(0.4%)	2.8%

*"Underlying" = Group excluding acquisitions and disposals in the current or comparator period

Trading

·      Following a positive start to the year, the PMI business experienced a slight reduction in revenue as an increasing share of the corporate PMI market was gained by the larger insurers, who tend to adopt a more rigorous approach to claims management. We have been advised by insurers that the overall number of insured lives is flat year-on-year.

·      The underlying Self-pay business has continued to grow strongly in both volume and revenue. Reported Self-pay comparatives for the Group as a whole for the last four months are significantly impacted by acquisitions and disposals in the current and comparator periods.

·      Within the NHS business:

o  Choose & Book revenues have continued to grow strongly. For October 2015, referrals into Spire under Choose & Book were the highest ever monthly total, with Orthopaedics making up 45%.

o  However, as previously announced on 21 August 2015, the impact of the Monitor letter of 3 August has continued to impact adversely our Local Contract NHS work, where we have seen a 39% decline in our revenues over the last four months.

Expectations for Full Year 2015

The outlook for inpatient and day case admissions in November has improved over that reported for the four months ended 31 October 2015 but is unlikely to mitigate entirely the decline in revenues we have seen.

Having regard to the actual trading performance over the last 4 months and the current outlook for November surgical admissions, we now expect:

·      Group revenues for the full year to be between £882 million and £888 million.

·      Group EBITDA for the full year to be between £159 million and £162 million. **

·      Spire's net debt/EBITDA ratio at year end to be on or around 2.7x.

**Note: Adjusted EBITDA margin for FY2014 after PLC and rent costs adjustments was 18.2%

The outlook for the private healthcare market remains positive

·      NHS trusts had an aggregate deficit of almost £1 billion in the first three months of the current NHS financial year (which runs from April to March), already greater than the £820 million aggregate deficit reached in the entire previous NHS financial year.

·      These deficits, together with the retention of Local Contract work within certain trusts, are already having a significant impact on waiting lists:

o  The number of patients waiting for hospital treatment in England increased significantly in August 2015 (the latest month reported) to just over 3.5 million.

o  The actual waiting lists increase in August 2015 (at c.40,000 patients) was the highest ever recorded for that month.

·    Growing NHS deficits will put increasing pressure on waiting lists and drive increased formal or informal rationing of NHS procedures, which will over time significantly grow demand for private care not only from NHS funded patients but also from Self-pay and PMI patients.

The outlook for Spire for 2016

·      PMI: While we anticipate no material growth in PMI claims, we expect to maintain our current market share of the PMI market overall.

·      Self-pay: We anticipate continued strong growth, as NHS waiting lists increase and further rationing takes place and particularly if PMI providers fail to get traction within the market.

·      NHS:

o  We expect continued strong growth in Choose & Book work; and lower volumes for Local Contract work until the pre-election volume uplifts in 2015 work themselves out of the comparators by the end of Q1 2016. We believe that the continuing growth in NHS waiting lists will increasingly lead GPs to encourage patients to select a private hospital under the Choose & Book scheme.

o  In terms of pricing, Monitor is currently expected to announce its final proposals for the revised NHS tariff (to take effect from 1 April 2016) in January 2016.

·      We will provide a further trading update and guidance following the Monitor tariff announcement.

Key business development projects all on schedule and on budget

·      The new six operating theatre block at St Anthony's Hospital remains on track and is expected to complete (along with the new recovery unit and car park) in July 2016.

·      Spire's new hospital in Manchester (a 6-theatre, 72-bed development) remains on track and is expected to complete in Q1 2017.

·      Spire's new hospital in Nottingham (a 4-theatre, 56-bed development) remains on track and is expected to complete in Q1 2017.

·    Spire's major new cancer radiotherapy centre at Chelmsford, housing two state-of-the-art linear accelerators, a wide-bore CT scanner, consultant rooms and an eight bay chemotherapy suite, opened on 5 November 2015.

Comment from Rob Roger

Rob Roger, CEO of Spire, said:

"Despite challenging short term conditions, underlying market dynamics remain highly favourable for Spire, with overall UK healthcare demand outstripping supply, necessitating increased NHS outsourcing over time to the independent sector. We are also working closely with insurers to develop ways to grow the PMI market. Therefore, while we are still in the very early stages of an overall market shift that will move demand significantly into the independent sector, Spire's financial resilience, extensive regional network and development projects underway put us in a strong position to gain market share as this systemic change unfolds."

Full Year Results Announcement

The Company expects to make the announcement of its 2015 full year results on 17 March 2016.

For further information please contact:

Spire Healthcare Antony Mannion, Investor Relations Director Simon Gordon, Chief Financial Officer	[phone] [phone]
Maitland Tom Eckersley	[phone]

About Spire

Spire is a leading independent hospital group in the United Kingdom, with 38 hospitals, 12 clinics and 2 radiotherapy cancer centre across England, Wales and Scotland. The Group delivered tailored, personalised care to more than 260,000 in-patients and daycase patients in 2014, and (outside the NHS) is the leading provider by volume of knee and hip operations in the United Kingdom.

Spire offers in-patient/daycase procedures in areas including orthopaedics, gynaecology, cardiology, neurology, oncology and general surgery and also diagnostic services including imaging and pathology. The Group also offers out-patient services, such as consulting, minor procedures, treatments, health checks and physiotherapy.

 

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