Construction snagging and market challenges hit New Victoria

Construction delays have meant activity falling behind expectations at the New Victoria Hospital

Ongoing construction difficulties and challenging market conditions have meant another difficult year for The New Victoria Hospital in Kingston upon Thames.

The hospital, which is owned by charity the Victoria Foundation, reported a 10% increase in total income to £17.1m for the year ended 31 March 2018 on the back of a 17% jump in activity. However, despite admitting 5,215 patients during the year, it struggled to meet forecast activity growth. In common with other private hospital operators, it reported constraints in the NHS market, with anticipated contracts proving difficult to secure.

At the same time, delays and construction snagging hampered completion of phase 2 of the hospital’s refurbishment programme, which encountered additional costs of £5.4m. The third and final phase of development, which includes a new outpatient department, has also been delayed due to refinancing requirements.

Despite cost-containment measures, total resources expended increased from £17.3m to £19m, resulting in net losses of £2m. Net losses in 2017 amounted to £30.6m but included a £29.3m loss on the revaluation of assets.

The New Victoria has had a difficult few years. Its long-held charitable status came to an end in 2007 when it was sold to The New Victoria Hospital Ltd, a company formed by a group of private investors including the CEO and CFO. However, in 2010, following a default in repayment of debt taken on through Anglo Irish Banking Corporation at the time of sale, the company became the first mainstream private hospital provider to go into administration in over a decade. In April that year, Anglo Irish appointed PWC to ‘restructure the business and seek an investor for the hospital in order to unlock its full potential’. It was subsequently re-acquired by its former charitable owners the Victoria Foundation in 2011, and shortly after embarked on a major refurbishment project.

However, associated bed closures and construction delays have taken their toll and the hospital has been forced to renegotiate funding and loan repayments with its lender HSBC.

Commenting on the results, the trustees said: ‘Following the opening of phase 2 of the redevelopment, the capacity constraints seen prior to this have completely turned, where the hospital now faces the challenges of excess capacity and underutilisation of assets as activity begins to ramp up. This together with the requirements to strengthen the management and processes required in a larger facility has adversely impacted the hospital’s cost base. The hospital recognises that key focus on improving utilisation and resource allocation is imperative during this phase of growth.’