Spire Healthcare has lowered its expectations for 2018 as the NHS continues to rein in spending on elective care.
The LSE-listed company said full year results would to be ‘materially lower’ than 2017 following underperformance in the first half. Provisional figures for the six months ended 30 June, show revenue down 1.1% to £475m and EBITDA of around £66m at a margin of approximately 14%.
NHS revenue fell by 9.5% in the first half and Spire said weakness in the market looked set to continue, with new signs of further NHS triaging and rationing emerging in the second half, particularly in orthopaedics.
CEO Justin Ash (pictured) said: ‘The current difficult market conditions – also seen by other operators – had a greater impact on our business in the seven months to 31 July 2018 than we had expected. Nevertheless, through this transitional period we are relentlessly focused on raising our clinical quality to ‘best in sector’ level and we believe this is beginning to bear fruit as a commercial differentiator.’
Self-pay revenue also increased at a lower rate than anticipated at 8.3%, while income from insured patients edged up 0.9%.
Earlier this year, Spire announced plans to reposition the business towards private pay activity as part of its 80/100/200 strategy – its aim of achieving 80% private-pay business alongside a 100% quality rating and £200m EBITDA by 2022.
In the short-term, the strategy also impacted on performance and alongside weaker top line growth, Spire said ‘significant investment’ in its clinical quality and private patient proposition had driven up costs more than originally anticipated. However, it added that cost saving exercises were being initiated in other areas of the business and were expected to reduce its cost base significantly by 2019. In addition, it said capex would be around £90m in 2018 compared to the £100m original guidance and £118m in 2017.
‘With our renewed focus on the private market, we are seeing encouraging momentum and expect our top line to recover through the second half of 2018 and increasingly in 2019 and beyond, while the benefit of our major cost savings initiatives will accelerate through next year,’ said Ash. ‘Our ongoing plans to lead on quality, to move our business model further towards the private payor and to adapt our operating costs to this new model, put us in a strong position against our competitors. We remain confident in our medium to long term prospects and fully committed to the delivery of our 80/100/200 strategy.’