Spire Healthcare delivers strong H1 financial performance, reiterates guidance

Spire Healthcare Group plc (LON:SPI), a leading independent healthcare group in the United Kingdom, has announced its interim results for the six months ended 30 June 2024.

Summary and Outlook

Spire Healthcare Group delivered a strong financial performance in the first half of FY24, improving both earnings and returns. This performance was driven by continued growth in private revenue, increasing support for the NHS and improving margin in hospitals. The Group remains on track to deliver the planned savings, efficiencies and digitalisation initiatives set out at the Capital Markets Event last April and maintains a positive outlook for FY25.

Management confirms its FY24 guidance for Adjusted EBITDA to be in the previously stated range (£255-275m).

Justin Ash, Chief Executive Officer of Spire Healthcare, said:

“These are strong results that demonstrate our strategy as an expanded group is delivering.

“Our private revenue grew in H1, driven by strong growth in private medical insurance (PMI) which has seen a resurgence amongst working-age people. Patients are also increasingly switching between self-pay and PMI.

“Our work with the NHS also increased in the first half, partly due to higher commissioning, increased complexity and patients exercising the right to choose where they receive treatment. Spire stands ready to work with the new government to help address NHS waiting lists.

“Our investment in mental health and physiotherapy has also seen good growth, and we are confident this will continue. Vita plays a vital role in helping people live healthier lives and get back to work.

“I am also pleased to report that our savings programme remains on track and we are maintaining our safe and high quality care. We look forward to building on the Group’s performance in the first half and we are entering the second half confident of further progress.”

Financial and operating highlights

H1 24 represents the first six months of the integrated Group comprising the Hospitals Business and New Services.

Strong revenue and earnings performance ⁽¹⁾

Group:

·      Revenue growth of 12.7% vs H1 23 to £762.5m, of which 5.4% relates to Hospitals Business ⁽²⁾ on a Comparable Basis ⁽¹⁾ with the balance from New Services ⁽²⁾

·      Adjusted EBITDA up 10.8% vs H1 23 to £130.6m; Adjusted EBIT up 11.7% vs H1 23 to £75.7m

·      Adjusted profit before taxation increased by 20.2% vs H1 23 to £26.8m

·      Profit before taxation up 11.8% vs H1 23 to £22.7m

·      Net bank debt on 30 June 2024 of £323.4m; increase from £248.5m on 30 June 2023 linked to the acquisition of Vita Health Group (VHG)

·      Net bank debt / EBITDA covenant ratio of 2.1x on 30 June 2024 (2.2x at the end of FY23 and 2.1x on 30 June 2023)

Hospitals Business:

·      Overall revenue up 5.4% on a Comparable Basis vs H1 23

·      Private revenue grew by 5.1% vs H1 23, with PMI revenue up 9.7% on the back of strong demand and Self-pay (SP) revenue down 3.0%

·      NHS revenue increased by 5.2%

·      Average revenue per case (ARPC) increased by 4.7% to £3,495; admissions of 140,657 during H1 24 were flat YOY on a Comparable Basis

·      Adjusted EBITDA rose by 6.6% vs H1 23 to £126.3m; Adjusted EBIT up 6.9% vs H1 23 to £73.2m

New Services:

·      Revenue of £59.7m (H1 23: £6.7m) and Adjusted EBITDA of £4.3m (H1 23: £0.6m loss)

·      Vita revenue £53.0m (LFL⁽³⁾ H1 23: £41.2m) and Adjusted EBITDA £5.1m (LFL H1 23: £3.5m)

Good progress against our strategy

·      98% of inspected hospitals and clinics currently rated ‘Good’ or ‘Outstanding’ by the CQC or equivalent in Scotland and Wales (end FY23: 98%)

·      97% of inpatient and daycase patients rating overall experiences as ‘Good’ or ‘Very Good’, up 1ppt vs prior year

·      Cost savings programme on track to deliver at least £15m cost savings in 2024

·      Employee Reward Framework finalised, due to launch later in 2024

·      £51.5m capex investment ⁽⁹⁾ in facilities and equipment (H1 23: £31.0m)

·      Active management of portfolio with sale of Tunbridge Wells hospital

Summary Group results for the six months ended 30 June 2024

1.  On 31 March, the Group sold the business operations and assets of Spire Tunbridge Wells to the local NHS Trust. Therefore, where meaningful we have presented certain financial information on a ‘Comparable Basis’ where we have adjusted for the year-on-year (YOY) impact of Tunbridge Wells.

2.  The Hospitals Business relates to business operations performed at hospital sites. All other Group operations are referred to as ‘New Services’ and include the Doctors Clinic Group (DCG), Vita Health Group (VHG) and the clinics (community facilities that offer a range of diagnostics and treatment that do not require an overnight stay). Unless otherwise stated, all metrics are on a Group basis. Refer to page 8 for alternative performance measures and segmental analysis.

3.  Like for like (LFL) numbers are provided for H1 23 which is the pre-acquisition performance of VHG which was acquired in October 2023

4.  Not meaningful

5.  Adjusted basic earnings per share is stated before the effects of Adjusting items.

6.  Adjusted EBITDA is calculated as Operating profit, adjusted to add back depreciation, amortisation, and Adjusting items, referred to hereafter as ‘Adjusted EBITDA’ refer to page 9. For EBITDA for covenant purposes, refer to note 18.

7.  Adjusted FCF (Free Cash Flow) is calculated as Adjusted EBITDA, less rent, capital expenditure cash flows and changes in working capital after adjusting for one-off items which are not related to the normal trading activity of the business. Rent cash flows are defined as interest on, and payment of, lease liabilities. Capital expenditure cash flows are defined as the purchase of plant, property and equipment.

8.  Net bank debt is defined as bank borrowings less cash and cash equivalents.

9.  Capital investment includes capital spend on property, plant and equipment. Refer to note 14.