Unprecedented decline in NHS revenue hits growth at Spire

Spire Healthcare said today that an unprecedented decline in NHS activity had produced flat revenue growth in the year ended 31 December 2018.

NHS revenue fell by 7.2% during the year but was offset by PMI revenue growth of 1.5% and an 8.7% rise in self-pay, resulting in total revenue of £931.1m (2017: £931.7m).

EBITDA fell from £150m to £119.4m while adjusted profit after tax came in at £27.5m against £57.9m in 2017.

The Group flagged the disappointing results in a trading update in January. However, it reported strong operating cash flows with EBITDA conversion of 105%, the fourth consecutive year greater than 100%. Net debt also decreased to £453.8m, with covenant leverage at 3.67x EBITDA at the year end, revised to 3.27 times going forwards.

CEO Justin Ash said the company had made good strategic progress in what had been a ‘challenging year’. 

‘The unprecedented decline in NHS revenue was offset by growth in our private business, which is clear evidence that we are pursuing the right strategy. Spire Healthcare has a significant opportunity. People are living longer and they want their lives to be healthier and more active. We have seen marked growth in diagnostics, our private GP network, and in areas such as cancer treatment where our 20 Macmillan-accredited oncology sites are providing care for more patients than ever in this critical service area,’ he said.

The company announced its 80/100/200 strategy last April, by which it plans to deliver an 80% private pay business, alongside a 100% quality rating and £200m EBITDA by 2022. This looks ambitious given the current performance and the planned figures were played down in these results but Spire said it remains committed to its vision ‘to become the go-to UK independent healthcare brand, famous for clinical quality and customer care’.

‘Patients will continue to exercise choice as they seek quality, convenience and a response to lengthening NHS waiting lists. In line with our strategy, we are investing in the right place at the right time to meet this opportunity,’ said Ash.

‘Our short term growth ambitions were impacted by NHS volatility in 2018 and we executed planned investments in patient safety and quality. We enjoy robust balance sheet strength, with a high-quality property estate valued at more than £1.1bn, and generated positive cash flow for the first time in three years.’

Looking ahead, he added: ‘We are taking a measured approach to 2019, which will be a year of consolidation. We expect modest revenue growth, and will see the full year effect of investments coming through, whilst we will continue to achieve further efficiencies. We are focused on cash generation and debt reduction, placing Spire in a strong position for future EBITDA growth.Our strategy is absolutely the right one for Spire so that we continue to be well positioned to reinforce our leading role in the independent sector and UK healthcare sector as a whole.’