TIDMSPI
RNS Number : 3804M
Spire Healthcare Group PLC
14 September 2023
Spire Healthcare reports its results
for the six months ended 30 June 2023
London, UK, 14 September 2023, Spire Healthcare Group plc (LSE:
SPI) ('Spire Healthcare', 'the Group' or 'the Company'), a leading
independent hospital group in the UK, today announces its interim
results for the six months ended 30 June 2023 ('the period' or 'H1
23').
Strong H1 performance in line with full year expectations, with
momentum continuing
Summary Group results for the six months ended 30 June 2023
Six months ended 30 June
(Unaudited)
(GBP million) 2023 2022 Variance
Revenue 676.5 597.9 13.1%
Adjusted operating profit (Adjusted EBIT) 67.8 54.6 24.2%
Adjusting items (2.0) (5.6) NM(1)
Operating profit (EBIT) 65.8 49.0 34.3%
Profit before taxation 20.3 3.0 NM
Profit /(loss) after taxation 12.7 (0.6) NM
Basic earnings / (loss) per share, pence 3.1 (0.1) NM
Adjusted basic earnings per share, pence
(2) 3.4 1.1 NM
Adjusted EBITDA (3) 117.9 105.8 11.4%
Adjusted FCF (4) 24.0 23.7 NM
Net bank debt (5) 248.5 227.8 9.1%
Net bank debt / EBITDA covenant ratio 2.1 2.2 (0.1)
========================================== ======= ======= ==========
1.Not meaningful
2.Adjusted basic earnings / (loss) per share is stated before
the effects of adjusting Items.
3.Adjusted EBITDA is calculated as operating profit, adjusted to
add back depreciation, and adjusting items, referred to hereafter
as 'Adjusted EBITDA'. For EBITDA for covenant purposes, refer to
note 16.
4.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.
5.Net bank debt is defined as bank borrowings less cash and cash
equivalents.
6.Return in capital employed (ROCE) is the ratio of the Group's
Adjusted EBIT to total assets less cash, capital investments made
in the last 12 months and current liabilities.
7.Capital investment includes capital spend on property, plant
and equipment and right of use assets. Refer to note 14.
Financial and operating highlights
Strong revenue and earnings performance
-- Revenue up 13.1% vs H1 22 to GBP676.5m, driven by continued strong demand
-- Private revenue up by 10.4% vs H1 22 with strong growth in
PMI and further growth in self-pay
-- Continued support for the NHS, especially on longest waiting
patients and orthopaedics, with NHS revenue up 17.1%
-- Average revenue per case (ARPC) on a weighted basis up 6.6%
to GBP3,337; admissions up 7.4% vs H1 22 to 141,347
-- Adjusted EBIT up 24.2% vs H1 22 to GBP67.8m and Adjusted
EBITDA up 11.4% vs H1 22 to GBP117.9m
-- Profit before taxation of GBP20.3m (H1 22: GBP3.0m)
-- Profit after taxation of GBP12.7m (H1 22: loss of GBP0.6m)
-- Strong H1 23 performance supported by significantly reduced
impact of COVID-19 relative to comparative prior year period
(particularly affected in Jan-Apr 2022)
-- Net bank debt / EBITDA covenant ratio of 2.1x at 30 June 2023
(2.2x at the end of FY22 and 2.2x at 30 June 2022)
Continued development of the business in line with strategy
-- 98% of inspected hospitals and clinics currently rated 'Good'
or 'Outstanding' by the CQC or equivalent in Scotland and Wales
(end FY22: 98%)
-- Further good progress in the delivery of efficiency
programmes; on track to deliver at least GBP15m cost savings in
2023
-- GBP36.1m capex investment in facilities and equipment (H1 22: GBP38.8m);
-- Integration of The Doctors Clinic Group (DCG) into the business in line with expectations
-- 41% like-for-like increase in the number of GP appointments
across the in-hospital and recently acquired DCG business
-- 5.5% colleague salary increases from 1 September 2023, with
3% rise for colleagues eligible for a bonus; lowest paid colleagues
move in-line with the Real Living Wage
Current trading and outlook
Following the strong financial performance recorded in the first
six months, the second half of the year to date has started in line
with our expectations. The Group has continued to deliver
operational and financial progress in line with our plans, with
sustained growth in revenue, earnings and EBIT margin.
We are confident of achieving our guidance provided at the time
of our FY22 results announcement in March 2023: 'Overall in 2023,
we expect to make further good progress and continued delivery of
the Group's strategy and in particular anticipate continued
momentum in top-line growth, margin improvement and ROCE
improvement.'
Justin Ash, Chief Executive Officer of Spire Healthcare,
said:
"Our strategy is working, as this strong set of results
demonstrates, with top-line momentum and strong profit growth. Our
investments in a high quality service, partnerships with PMI
providers and the NHS, and a compelling self-pay proposition, meant
we treated a record number of patients in the first half of this
year. Our efficiency programmes are on track, and we continue to
manage mix to focus on treatment areas most appropriate for our
acute hospital environment. This is enhancing our margin.
"In line with our strategy to develop adjacent services, we
acquired The Doctors Clinic Group last year and the business is
performing well. Demand for easily accessible private GP services
continues to soar and our occupational health services are a key
platform for employers seeking to retain staff and support their
health needs.
"UK healthcare is entering an era of renewed choice as demand
for healthcare diagnosis and treatment remains strong. By
continuing to invest in innovative services, expanded facilities,
technology, and our brilliant workforce, Spire is ideally
positioned to meet this demand."
For further information please contact:
Spire Healthcare
Angus Prentice - Director +44 (0)20 7427
of Investor Relations 9000
Instinctif Partners
Damian Reece +44 (0)20 7457
Guy Scarborough 2020
Registered Office and Head Office:
Spire Healthcare Group plc
3 Dorset Rise
London
EC4Y 8EN
Registered number 09084066
About Spire Healthcare
Spire Healthcare is a leading independent healthcare group in
the United Kingdom, with 39 hospitals and over 30 clinics, medical
centres and consulting rooms across England, Wales and Scotland. It
operates a network of private GPs and provides occupational health
services to over 700 corporate clients.
Working in partnership with over 8,760 experienced consultants,
Spire Healthcare delivered tailored, personalised care to
approximately 926,500 inpatients, outpatients and day-case patients
in 2022, and is the leading private provider, by volume, of knee
and hip operations in the United Kingdom. The Group's well-located
and scalable hospitals have delivered successful and award-winning
clinical outcomes, positioning the Group well with patients,
consultants, the NHS, GPs and Private Medical Insurance (PMI)
providers. 98% of Spire Healthcare's inspected hospitals and
clinics are rated 'Good', 'Outstanding' or the equivalent by health
inspectors in England, Scotland and Wales.
Cautionary statement
This announcement contains certain forward-looking statements
relating to the business of Spire Healthcare Group plc (the
"Company") and its subsidiaries (collectively, the "Group"),
including with respect to the progress, timing and completion of
the Group's development, the Group's ability to treat, attract, and
retain patients and customers, its ability to engage Consultants
and GPs and to operate its business and increase referrals, the
integration of prior acquisitions, the Group's estimates for future
performance and its estimates regarding anticipated operating
results, future revenue, capital requirements, shareholder
structure and financing. In addition, even if the Group's actual
results or development are consistent with the forward-looking
statements contained in this announcement, those results or
developments may not be indicative of the Group's results or
developments in the future. In some cases, you can identify
forward-looking statements by words such as "could," "should,"
"may," "expects," "aims," "targets," "anticipates," "believes,"
"intends," "estimates," or similar words. These forward-looking
statements are based largely on the Group's current expectations as
of the date of this announcement and are subject to a number of
known and unknown risks and uncertainties and other factors that
may cause actual results, performance or achievements to be
materially different from any future results, performance or
achievement expressed or implied by these forward-looking
statements. In particular, the Group's expectations could be
affected by, among other things, uncertainties involved in the
integration of acquisitions or new developments, changes in
legislation or the regulatory regime governing healthcare in the
UK, poor performance by Consultants who practice at our facilities,
unexpected regulatory actions or suspensions, competition in
general, the impact of global economic changes, risks arising out
of health crises and pandemics, changes in tax rates, future
business combinations or
dispositions, and the Group's ability to obtain or maintain
accreditation or approval for its facilities or service lines. In
light of these risks and uncertainties, there can be no assurance
that the forward-looking statements made in this announcement will
in fact be realised and no representation or warranty is given as
to the completeness or accuracy of the forward-looking statements
contained in this announcement.
The Group is providing the information in this announcement as
of this date, and we disclaim any intention or obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
Analyst and investor meeting
There will be an analyst and investor meeting today at 9.00 am.
Please register in advance for the live webcast of the meeting
through the following link:
https://spirehealthcare.zoom.us/webinar/register/WN_OPdXNsztQf-dpAJW5qbIFw
The webcast will be available for replay following the
presentation through the Company's investor website :
https://investors.spirehealthcare.com/home/
Operating review
Overview
Spire Healthcare delivered a strong financial and operational
performance in H1 23, while maintaining high standards of patient
safety and providing the highest quality care on a daily basis.
Increased revenue, volume and average revenue per case (ARPC),
supported by ongoing focus on cost management, resulted in strong
profit growth in H1. Profit before tax for the first half of the
year was GBP20.3m, up from GBP3.0m in H1 22. The business is on
track to meet the medium-term targets as set out at the Group's
capital markets event on 29 June 2022.
Revenue and earnings for the first six months were materially
ahead of the prior year period. Revenue in H1 23 was up 13.1% to
GBP676.5m (H1 22: GBP597.9m), driven by strong demand. Overall
activity rose in the period compared to prior year, with admissions
up by 7.4% to 141,347.
Performance in the period benefited from significantly lower
COVID-19 cost impact compared to H1 22. The January - April 2022
period was particularly impacted by COVID-19 and resultant
costs.
The Group managed the external environment well in the period.
Against a backdrop of high UK inflation and the well-documented
skilled healthcare staff challenges in the UK, Spire was able to
resource its current growth efficiently, and grow profits, despite
cost input inflation, through pricing, revenue growth and savings
programmes.
Further steady progress was made during the first half of the
year to implement our strategy to grow adjacencies. This included
our investment in new clinics and the ongoing integration of The
Doctors Clinic Group (DCG), a provider of occupational health and
GP services, which we acquired towards the end of last year. DCG is
performing in line with management's expectations.
Driving hospital performance
Running 39 hospitals is the core of Spire Healthcare's business.
Performance during the first half of the year was strong, with
hospital revenue driven by significant demand. Admissions were 7.4%
ahead of those in H1 22 and 7.8% ahead of H2 22, an indication of
ongoing high demand for the Group's healthcare services.
Overall admissions and revenue were higher than in H1 22, as
expected, with exceptionally strong growth in PMI (private medical
insurance) and NHS payor groups, with SP (self-pay) demand
maintaining its high levels.
Overall, private admissions grew by 5.4% (vs H1 22: up 18.6%)
during the six-month period to the end of June 2023 compared to
prior year, with private revenue ahead by 10.4% (vs H1 22: up
21.6%).
PMI revenue grew by 15.6% vs H1 22 to GBP306.6m, reflecting an
increase in referrals and the reported marked growth of the
insurance market, which we have seen continue into H2 2023. Volumes
of PMI patients, including admissions and outpatient procedures,
were up 12.5% vs H1 22.
SP revenue was up 2.5% to GBP178.4m with volumes maintained at
levels significantly higher than pre-COVID. In line with our
strategy to increase the acuity of our services, some high volume
but lower value work has been substituted by higher complexity,
high value work.
NHS revenue grew by 17.1% to GBP170.5m in the first six months
of this year compared to last year, with increasing referrals
through the electronic referral system (eRS). Overall NHS volumes,
including admissions and outpatient procedures, were up 6.1% YOY
with admissions up 12.4%. Orthopaedic volumes were up 17.8% YOY and
now comprise c. 50% of all Spire NHS referrals. NHS tariff for
2023-24 will rise to 4.1%, effective from 1 April 2023, to cover
the cost of the nurses' and doctors' pay awards.
The private proportion of total revenue during H1 23 was 72% (H1
22: 73%). This is in line with our target that private revenue as a
proportion of total revenue should be within the range of
70-80%.
The average revenue per case (ARPC) rose by 6.6% on a weighted
basis to GBP3,337. In SP, we have control over pricing and actively
manage it using our digitised pricing system. Our contracts with
PMI providers generally allow for price adjustments in Q2, with
reference to rates of inflation in the prior year. Compared to H1
22, PMI ARPC was up 5.2% to GBP2,870, SP up 8.5% to GBP4,297 and
NHS up 6.7% to GBP3,298. Pricing adjustments in PMI and SP will
continue to benefit overall private revenue in H2, at higher rates
than H1.
We are pleased to have developed a new advertising campaign
which has just been launched in September 2023, focusing on
patients' desire to get back to their lives by having their health
conditions diagnosed and treated - "the sooner you're better, the
better".
In May 2023, Spire Healthcare Limited acquired an additional 25%
interest in the Montefiore Hospital in consideration of the release
and discharge of outstanding liabilities. The Group now owns 75% of
this entity.
Expanding our proposition
While running great hospitals remains central to Spire
Healthcare, we are responding to the rapid and fundamental changes
taking place in the UK healthcare landscape by making selective
investments in new services that are designed to attract new
patients and meet more of their healthcare needs. Further steady
progress to expand the Group's healthcare proposition was made in
the first six months of the year as the Group worked towards
becoming an integrated healthcare provider, with services in
primary care, diagnosis, occupational health and long-term
condition management.
The ongoing integration of The Doctors Clinic Group (DCG), which
was acquired last December, is progressing well. We are
restructuring the business into two units, Occupational Health and
Primary Care, with further integration into Spire Healthcare teams
for some roles.
Our Spire GP primary care services have experienced strong
growth in recent years with patients attracted by a high quality
service offering efficient access to a GP near to where they live.
Patients also value the longer appointment times that enable a
fuller examination and discussion of their medical needs with the
GP. We saw increased demand for our private GP services during H1
23. The total number of GP appointments rose by 41% and revenue by
45% like for like in H1 23 compared to the prior year period across
DCG and Spire Hospital GP services. The number of referrals from
Spire GPs to appointments with consultants in our hospitals was up
by 28% for H1 23 compared to the prior year period. Work continues
to build greater referral activity from Doctors Clinic Group GPs as
part of the overall integration plan.
As well as expanding Spire Healthcare's GP service offering, the
Group plans to target 10 new medical clinics to meet the growing
healthcare needs in our communities. We remain on target to open
the first of our clinics at Abergele, North Wales, during H2 23 and
are planning to open a second clinic at Harrogate before the end of
the year.
Spire Healthcare's occupational health (OH) business continues
to develop in line with the Group's plan. Our focus during the
period has been on integrating the two OH businesses within DCG and
rebranding. Revenue for our two occupational health businesses,
Soma and Maitland, grew 41% on H1 22, when they were under the
previous ownership.
We welcome the consultation launched on 20 July 2023 by the UK
Government's Department for Work and Pensions seeking views on
proposals aimed at increasing employer use of OH services along
with a joint consultation issued on the same day by HM Treasury and
HM Revenue & Customs on the role of tax incentives in boosting
OH provision by employers. These initiatives provide a clear
indication of the government's support of OH services as a catalyst
for getting people back to work and for promoting health and
wellbeing in the workforce.
We continue to make progress in development long-term condition
management services. Following the launch in December 2022 of a
pilot for a subscription-based, nurse-led Type 2 diabetes care
service at Spire Leicester, we are working to extend the pilot to
Spire Harpenden and our London GP clinics. Those patients already
subscribed have provided very positive feedback on the support and
personalised care provided.
Successfully navigating in an inflationary environment
Adjusted EBIT rose by 24.2% to GBP67.8m during H1 23 compared to
the H1 22 and Adjusted EBITDA by 11.4% to GBP117.9m. This resulted
in an Adjusted EBIT margin of 10.0%, up from 9.1% in H1 22 and 8.5%
in H2 22. Adjusted EBITDA margin for the first six months of 2023
was 17.4%, down from 17.7% recorded in the first half of last year,
but up materially from 16.3% in H2 22; margin growth in H1 23 was
ahead of expectations.
Profit before tax for the period was GBP20.3m, up significantly
on the GBP3.0m recorded in H1 22.
The profit improvements were driven by operational leverage
provided by revenue growth - up 13.1% vs H1 22 for the six-month
period - and pricing increases across SP, PMI and the NHS. Margin
improvement also benefited from progress made in our ongoing
efficiency programme which is targeting at least GBP15m of cost
saving in 2023. Key cost-saving initiatives include refinement of
best practice establishment models for hospital operations, the
reorganisation of hospitals into hubs, sharing of resources and
procurement savings. We continue to benefit from energy commodity
prices fixed at 2021 pricing until Q3 2024.
Wage rate pressure is an ongoing consideration for Spire
Healthcare and UK healthcare more broadly. However, our support and
investment in our workforce (below) are leading to improving staff
retention and good engagement, with reducing use of agency per
admission as a result.
Overall, we believe that the benefits secured from the above
actions, combined with our strategic focus on securing more complex
work and our ability to adjust SP pricing and PMI pricing
contractual arrangements, provide adequate self-help levers to
enable the Group to successfully navigate through the ongoing
inflationary environment. This will remain a key focus of the
Group, as is improving our ROCE which was up at 6.9% on an annual
basis, from 5.4% prior year.
Good cash generation enabling ongoing capex investment and
further reduction in leverage ratio
The Group has continued to be cash generative and further
reduced overall debt levels during the period. The cash inflow from
operating activities was GBP96.6m (H1 22: GBP91.5m). After
adjusting for cash from Adjusting Items, the Adjusted operating
cash flows were GBP99.5m, which constitute a cash conversion rate
from GBP117.9m Adjusted EBITDA of 84.4% (H1 22: 90.5% conversion of
GBP105.8m Adjusted EBITDA).
Capital investment in the first half of 2023 was GBP36.1m and in
line with our plan for this period, with a full-year target range
of 6-7% of revenue. Capital investment during the period included
the funding associated with the completion of a new outpatient and
diagnostic centre at Spire Yale and a new ophthalmology site at
Spire Cambridge. It also included investment in a new MRI unit at
Spire Yale plus a mobile MRI, and CT scanners at Spire Cambridge
Lea, Spire Gatwick Park and Spire Hartswood, the refurbishment of
the Bristol pathology lab as well as other medical equipment.
Net bank debt at 30 June 2023 was GBP 248.5m (vs GBP250.1m at 31
December 2022), with a cash balance of GBP75.7m (vs GBP74.2m at 31
December 2022). During Q1 22, we paid down bank debt by GBP100m as
part of a successful re-financing of the Group's bank facilities.
We also extended the scope of the Group's interest rate hedge in
July 2022, with the result that 75% of the risk from increasing
interest rates is now mitigated until April 2024, dropping back to
50% thereafter for the rest of the term. During H1 23, the Group
exercised the option to extend the bank facility by a further year
to February 2027.
The Group's leverage ratio continued to reduce, resulting in a
net debt / EBITDA covenant ratio of 2.1x at 30 June 2023 (from 2.2x
at the end of FY22).
Building on quality
Delivery of patient safety and high-quality patient care is
central to Spire Healthcare's operations and embedded in our
purpose and culture. 98% of our inspected hospitals and clinics are
currently rated 'Good' or 'Outstanding' by the CQC or the
equivalent in Scotland and Wales. We are awaiting re-inspection of
Spire Alexandra, our one remaining site which has a 'Requires
Improvement' rating, which has not been inspected since 2016/17,
and look forward to demonstrating the improvements made since then.
93% of our patients rate our care as 'Outstanding'.
We are implementing the new NHS England Patient Safety Incident
Response Framework (PSIRF). PSIRF promotes a new, more
proportionate approach to responding to patient safety incidents
within a wider system of improvement, with compassionate engagement
and involvement of those affected by patient safety incidents. It
builds on our open and learning culture.
Like everyone working in healthcare, we have reflected on the
terrible crimes of Lucy Letby, committed at an NHS Trust. It has
reinforced the importance of our sector-leading freedom to speak up
culture, and in the past couple of weeks, we have re-emphasised to
our colleagues and consultant partners that we encourage them to
speak up, that they will be listened to, and supported.
Investing in our workforce
As a healthcare service provider, we recognise and value the
hard work and dedication of all our colleagues. Given the
well-documented shortage of skilled healthcare staff in the UK and
internationally, investing in our workforce is a critical part of
the Group's strategy. We recognise our vital position in addressing
this shortage of clinical staff and therefore endeavour to ensure
that all our colleagues are treated well and properly rewarded. We
announced this year's annual salary review on 25 May, to give
colleagues clarity well in advance of the increases taking effect
in September. Most permanent colleagues have been awarded a 5.5%
salary increase, with a 3% salary increase for colleagues who are
eligible for a bonus. The announcement has received positive
feedback from colleagues. We have also continued to pay all our
colleagues at least the Real Living Wage.
The development of our workforce is critical for us to maintain
the high standards of quality and care delivery that we expect for
our patients and pride ourselves on. It also is imperative that we
provide professional development to attract and retain the very
best people for our hospitals. We will soon be welcoming another 25
nurse apprentices onto our sector-leading nurse apprenticeship
scheme. We already have around 550 apprentices in all, representing
some 5% of the workforce. We are excited to be launching the
Driving Clinical Excellence in Practice Programme for nursing
colleagues over the next few months. The programme is a bespoke
educational initiative that includes a comprehensive framework of
necessary competencies and skills that are aligned to our Spire
values, quality objectives and priorities and a study day that
encourages participants to engage with peers to foster a deeper
sense of community and to explore the values and behaviour of a
Spire nurse. It will encourage reflective practice and professional
conversations amongst our valued nurses to ensure patient care
deliver remains high. It will also support nurse revalidation,
promote better patient outcomes, patient experience and promote
better use of resources.
We brought recruitment in-house during H1 2023, which is already
leading to improved filling of vacancies, and we are very
encouraged that the combined investments in our workforce are
leading to a material reduction in colleague leaver rates, to the
lower levels we sustained before the pandemic.
Championing sustainability
In 2022, we outlined the Group's sustainability strategy, and we
provided further detail on our sustainability ambitions, setting
out specific targets across Environment, Social and Governance
(ESG) in our 2022 annual report. Many of our sustainability
initiatives have been operating for some time. During H1 23, we
made further progress towards our ambition of becoming an ESG
leader in our industry, as we continued to focus our ESG work on
areas of the business likely to have the greatest impact on the
long-term sustainability of the business. Our journey towards
achieving net zero carbon status by 2030 is going well, with
investment during the period in the removal of piped nitrous oxide
systems, further installations of LED lighting technology,
increasing recycling and generating carbon reduction through
effective management of our waste and the optimisation of our
building management systems.
Further details of progress made across the Group's various
ESG/sustainability initiatives will be reported on at the year
end.
Dividend
We anticipate recommending the payment of a final dividend for
the year ending 31 December 2023 in line with the Group's dividend
policy.
Board changes
We welcomed Debbie White and Natalie Ceeney to the Board as
independent non-executive directors during the period. Debbie White
was appointed on 1 February 2023 and Natalie Ceeney joined us from
1 May 2023. Debbie White took over from Martin Angle as the Board's
Senior Independent Director on 12 May 2023. Professor Dame Janet
Husband was appointed Vice Chair from 1 March 2023.
Financial review
Selected financial information
Six months ended 30 June
(Unaudited)
=====================================================================
2023 2022
===================================== ==============================
Adjusting Total Adjusting
Total before items before items
Adjusting (note adjusting (note
(GBP million) items 10) Total items 10) Total
============ ============== ======= ========== ========= =======
Revenue 676.5 - 676.5 597.9 - 597.9
Cost of sales (362.3) - (362.3) (328.4) - (328.4)
============ ============== ======= ========== ========= =======
Gross profit 314.2 - 314.2 269.5 - 269.5
Other operating costs (247.5) (2.0) (249.5) (216.1) (5.6) (221.7)
Other income 1.1 - 1.1 1.2 - 1.2
============ ============== ======= ========== ========= =======
Operating profit (EBIT) 67.8 (2.0) 65.8 54.6 (5.6) 49.0
Finance costs (45.5) - (45.5) (46.0) - (46.0)
============ ============== ======= ========== ========= =======
Profit before taxation 22.3 (2.0) 20.3 8.6 (5.6) 3.0
Taxation (8.1) 0.5 (7.6) (4.4) 0.8 (3.6)
============ ============== ======= ========== ========= =======
Profit / (loss) for the
period 14.2 (1.5) 12.7 4.2 (4.8) (0.6)
============ ============== ======= ========== ========= =======
Adjusted EBITDA (1) 117.9 105.8
Basic earnings/ (loss)
per share, pence 3.1 (0.1)
Adjusted FCF(2) 24.0 23.7
Net cash from operating
activities 96.6 91.5
Net bank debt (3) 248.5 227.8
========================= ============ ============== ======= ========== ========= =======
1 Adjusted EBITDA is calculated as operating profit, adjusted to
add back depreciation, and adjusting items, referred to hereafter
as 'Adjusted EBITDA'. See page 10 for further information. For
EBITDA for covenant purposes, refer to note 16.
2 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.
3 Net bank debt defined as bank borrowings less cash and cash equivalents.
Revenue
Group revenues increased by 13.1% to GBP676.5m (2022:
GBP597.9m). The increase in revenue is mainly driven by the strong
performance of our private business and in particular the recovery
by PMI patients, which increased by 15.6%. Total NHS revenue
increased by 17.1% to GBP170.5m (2022: GBP145.6). Revenue of
GBP6.7m included in other relates to revenue generated by the
Doctors Clinic Group which was acquired in December 2022.
Revenue by location and payor
Six months ended 30 June (Unaudited)
============================ ============================================
(GBP million) 2023 2022 Variance %
============================ ============= ============= ==============
Total revenue 676.5 597.9 13.1%
Of which:
Inpatient 272.7 246.8 10.5%
Day case 199.0 170.0 17.1%
Out-patient 182.6 166.4 9.7%
NHS - COVID-19 1.2 1.7 NM(1)
Other 21.0 13.0 NM(1)
Total revenue 676.5 597.9 13.1%
============================ ============= ============= ==============
Of which:
PMI 306.6 265.2 15.6%
Self-pay 178.4 174.1 2.5%
============================ ============= ============= ==============
Total Private 485.0 439.3 10.4%
Total NHS 170.5 145.6 17.1%
Other 21.0 13.0 NM(1)
============================ ============= ============= ==============
Total revenue 676.5 597.9 13.1%
============================ ============= ============= ==============
(1 Not meaningful)
Cost of sales and gross profit
Gross margin for the first six months of 2023 is 46.4% compared
to 2022 levels of 45.1%. Cost of sales increased in the period by
GBP33.9m, or 10.3% to GBP362.3m (2022: GBP328.4m) on revenues that
increased by 13.1%. The margin improvement was driven by
operational leverage provided by revenue growth, pricing increases
and cost savings from our ongoing efficiency program.
Cost of sales is broken down, and presented as a percentage of
relevant revenue, as follows:
Six months ended 30 June
(Unaudited)
========================================
2023 2022
=================== ===================
GBPm % of revenue GBPm % of revenue
=============== ===== ============ ===== ============
Clinical staff 144.9 21.4% 135.4 22.6%
Direct costs 157.5 23.3% 140.8 23.6%
Medical fees 59.9 8.9% 52.2 8.7%
===== ============
Cost of sales 362.3 53.6% 328.4 54.9%
=============== ===== ============ ===== ============
Gross profit 314.2 46.4% 269.5 45.1%
=============== ===== ============ ===== ============
Other operating costs
Excluding Adjusting items other operating costs for the six
months ended 30 June 2023 increased by GBP31.4m or 14.5% versus H1
22 to GBP247.5m. This increase is mainly driven by annual salary
increases and increased IT costs related to the Groups digital
initiatives. Adjusting Items included in operating costs decreased
by GBP3.6m versus H1 22 and relates mainly to ongoing business
reorganisation and restructuring costs.
Operating margin for the six months ended 30 June 2023 is 9.7%
compared to 8.2% at H1 2022. Excluding adjusting items, operating
margin is 10.0%, up from 9.1% at H1 2022.
Adjusted EBITDA
Adjusted EBITDA for the Group has increased by 11.4% in the
period from GBP105.8m to GBP117.9m for H1 2023. The increase
primarily reflects increased PMI and NHS revenue, and efficiency
gains in the cost base.
Share-based payments
During the period, grants were made to Executive Directors and
members of the executive management team under the Company's Long
Term Incentive Plan. For the six months ended 30 June 2023, the
charge to the income statement is GBP1.5m (H1 2022: GBP1.3m), or
GBP1.7m inclusive of National Insurance (H1 2022: GBP1.5m).
Adjusting Items
Six months ended
30 June (Unaudited)
====================================================== ======================
(GBP million) 2023 2022
====================================================== ========== ==========
Business reorganisation and restructuring 1.6 3.3
Asset acquisitions, disposals, impairment and aborted
project costs 0.4 1.9
Remediation of regulatory compliance or malpractice - 0.3
Hospital set up and closure costs - 0.1
====================================================== ========== ==========
Total costs 2.0 5.6
====================================================== ========== ==========
Income tax credit on Adjusting Items (0.5) (0.8)
====================================================== ========== ==========
Total post-tax Adjusting Items 1.5 4.8
====================================================== ========== ==========
Adjusting Items comprise those matters where the Directors
believe the financial effect should be adjusted for due to their
nature or amount, in order to provide a more comparable measure of
the Group's underlying performance.
During H2 2021, the Group announced a strategic, group wide
initiative that impacts the operating model of the Group to allow a
more efficient governance and reporting structure, as well as a
drive on digital functionality. As a result of this initiative,
costs of GBP1.6m have been incurred in the period. This initiative
will be implemented over several phases and to date costs of
GBP7.3m have been incurred. The initial phase of the initiative was
completed in 2022, the estimated time frame to overall completion
being the end of 2024.
Asset acquisitions, disposals, impairment and aborted project
costs mainly comprise costs in respect of Doctors Clinic Group as
costs are incurred to integrate the Group into the Spire Group. In
the prior year, the costs mainly related to Claremont Hospital and
the purchase of the remaining non-controlling interest, and an
impairment of GBP0.5m was recognised on the St Saviours property
which was sold in H2 2022.
Finance costs
Finance costs have decreased by GBP0.5m to GBP45.5m (H1 2022:
GBP46.0m). Mainly due to the accelerated amortised fees in the
prior period as a result of the refinancing of the senior finance
facility offset by an increase in interest on bank borrowings due
to rising interest rates in the period.
Taxation
The taxation charge for the six months ended 30 June 2023 is
GBP7.6m (H1 2022: GBP3.6m). This consists of a GBP1.4m (H1 2022:
GBPnil) release of a current tax provision and a charge of GBP9.0m
(H1 2022: GBP0.5m) for the current year movement on deferred tax
and GBPnil (H1 2022: GBP3.1m) adjustment in respect of previous
periods to deferred tax. The charge of GBP7.6m is a non-cash
movement and is caused by timing differences mainly due to the
difference in the tax base versus the accounting base for
assets.
Profit after taxation
The profit after taxation for the six months ended 30 June 2023
was GBP12.7m (H1 2022: loss GBP0.6m)
Non-GAAP financial measures
We have provided below financial information that has not been
prepared in accordance with IFRS. We use these non-GAAP financial
measures internally in analysing our financial results and believe
they are useful to investors, as a supplement to IFRS measures, in
evaluating our ongoing operational performance. We believe that the
use of these non-GAAP financial measures provides an additional
tool for investors to use in evaluating ongoing operating results
and trends in comparing our financial results with other companies
in the industry, many of which present similar non-GAAP financial
measures to investors.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with IFRS. Investors are encouraged to
review the reconciliation of these non-GAAP financial measures to
their most directly comparable IFRS financial measures provided in
the financial statements table in the press release.
The following information includes references to adjusted
financial information. This has been produced for illustrative
purposes and does not represent the Group's actual statutory
earnings.
Adjusted EBITDA
Six months ended
30 June (Unaudited)
=================== ======================
(GBP million) 2023 2022
=================== ========== ==========
Operating profit 65.8 49.0
Remove effects of:
Adjusting items 2.0 5.6
Depreciation 50.1 51.2
Adjusted EBITDA 117.9 105.8
=================== ========== ==========
Adjusted EBIT
Six months ended
30 June (Unaudited)
=================== ======================
(GBP million) 2023 2022
=================== ========= ===========
Operating profit 65.8 49.0
Remove effects of:
Adjusting items 2.0 5.6
Adjusted EBIT 67.8 54.6
=================== ========= ===========
Adjusted profit after tax and adjusted earnings per share
Adjustments have been made to remove the impact of a number of
non-recurring items.
Six months ended
30 June (Unaudited)
==================================================== ========================
(GBP million) 2023 2022
==================================================== =========== ===========
Profit before tax 20.3 3.0
Remove effects of:
Adjusting items 2.0 5.6
==================================================== =========== ===========
Adjusted profit before tax 22.3 8.6
Taxation (8.1) (4.4)
Adjusted profit after tax 14.2 4.2
Adjusted profit after tax attributable to owners
of the Parent 13.9 4.3
==================================================== =========== ===========
Weighted average number of ordinary shares in issue
(No.) 403,771,475 401,391,262
==================================================== =========== ===========
Adjusted basic earnings per share (pence) 3.4 1.1
==================================================== =========== ===========
Adjusted Free Cash flow
Six months ended
30 June (Unaudited)
======================
(GBPm) 2023 2022
==================================================== ========== ==========
Adjusted EBITDA 117.9 105.8
Less: Rental payments (47.4) (41.1)
Less: Cash flow for the purchase of property, plant
and equipment (31.0) (44.1)
Less: Working capital movement (19.2) (10.5)
Add: Adjustments for non-recurring items 3.7 13.6
==================================================== ========== ==========
Adjusted Free Cash Flow (FCF) 24.0 23.7
==================================================== ========== ==========
Cash flow analysis for the period
Six months ended
30 June (Unaudited)
================================= ======================
(GBP million) 2023 2022
================================= ========== ==========
Opening cash balance 74.2 202.6
================================= ========== ==========
Adjusted operating cash flows 99.5 95.8
Adjusting items (2.9) (4.3)
Income tax received - -
================================= ========== ==========
Operating cash flows 96.6 91.5
Net cash in investing activities (33.3) (44.0)
Net cash in financing activities (61.8) (154.3)
==========
Closing cash balance 75.7 95.8
================================= ========== ==========
Operating cash flows before adjusting items
The cash inflow from operating activities was GBP96.6m. After
adjusting for cash from Adjusting Items, the Adjusted operating
cash flows were GBP99.5m, which constitutes a cash conversion rate
from GBP117.9m Adjusted EBITDA of 84.4% (H1 2022: 90.5% conversion
of GBP105.8m Adjusted EBITDA). The net cash outflow from movements
in working capital in the period was GBP19.2m (H1 2022: GBP10.5m
outflow).
Investing and financing cash flows
Net cash used in investing activities for the period was
GBP33.3m (H1 2022: GBP44.0m). Cash outflow for the purchase of
Plant, Property and Equipment in the period totalled GBP31.0m (H1
2022: GBP44.1m), which included investment in MRI and CT's,
refurbishment of the Bristol pathology lab and other
building-related works.
Net cash used in financing activities for the period was
GBP61.8m (H1 2022: GBP154.3m). Cash outflows include GBP3.1m for
the buyback of shares to settle share awards, a final dividend
payment of GBP2.0m, lease and bank interest paid of GBP45.6m (H1
2022: GBP47.1m) and GBP11.1m (H1 2022: GBP7.3m) of lease principal
payments.
Borrowings
At 30 June 2023, the Group has bank borrowings of GBP324.2m
(December 2022: GBP324.3m), drawn under facilities which are due to
mature in February 2027.
As at
==================================
30 June 31 December
(GBP million) 2023 (Unaudited) 2022 (Audited)
=============================================== ================= ===============
Cash 75.7 74.2
=============================================== ================= ===============
Bank borrowings 324.2 324.3
=============================================== ================= ===============
Bank borrowings less cash and cash equivalents 248.5 250.1
=============================================== ================= ===============
During the year, the Group exercised its option to extend the
senior loan facility by a further year. The financial covenants and
agreement terms relating to this agreement are unchanged, with
leverage to be below 4.0x and interest cover to be in excess of
4.0x. As at 30 June 2023 the leverage measure stood at 2.1x and
interest cover of 7.4x
As at 30 June 2023, lease liabilities were GBP864.6m (December
2022: GBP866.5m). Refer to note 17 for more detail.
Dividend
The Board will not be proposing an interim dividend. A final
dividend for the year ended 31 December 2022 of 0.5 pence was
declared and GBP2m was paid to shareholders on 21 June 2023.
Related party transactions
Other than as disclosed in Note 22 there were no significant
related party transactions during the period under review.
Principal Risks
In our 2022 Annual Report and Accounts we set out our principal
risks. They remain materially unchanged since then, details of
which can be found on pages 66 to 76 of the 2022 Annual Report and
Accounts. One principal risk reported in 2022 is no longer
considered a principal risk by the Board, that being the risk from
a further outbreak of Covid-19. The Board has also renamed its
macroeconomic principal risk to "Inflation and Wage inflation" to
highlight the specific economic risk to the business. The risks
below are the principal risks and uncertainties remaining for the
last six months of the year. Below, we set out our principal risks
with their material mitigations.
Workforce We seek to retain staff through:
* A common purpose and a positive workplace culture.
* Competitive pay and reward benefits. In 2023, we
announced a competitive pay award that provided a 5%
increase for most staff, and extra to bring all staff
up to the living wage.
* Offering greater flexibility in employee's roles,
including encouraging them to move to our bank if
they are to leaving permanent employment.
* Responding to key employee metrics, for example
providing a network of trainer mental health first
aiders.
* Continuous investment in our equipment, facilities,
and services to retain high-quality clinicians.
We seek to recruit staff through:
* A centralised recruitment processes
* An overseas recruitment capability to secure skilled
healthcare workers from outside the EU where
necessary.
* Offering apprenticeship programmes to support the
development of clinical and non-clinical teams across
the business.
* Building of local bank staff pools
The Group manages immediate staff shortages using agency
and bank workers.
=======================================================================
Inflation and The COVID-19 pandemic has left high levels of pent-up demand
wage inflation for our services that is expected to remain for some years.
The ability for patients to access private care does not
appear to be constrained financially at this time. We understand
that private medical insurance policy renewals and sales
remain stable, and we have seen strong growth in 2022-23
while waiting lists remain at record levels.
In response to macro inflationary pressure, we will continue
to benefit from a range of inflation mechanisms built into
the PMI contracts and will benefit from our ability to change
Self Pay pricing quickly via our new pricing engine. Our
conversion rate from Out-patient appointment to In-patient
procedure remains stable. Procurement maintains a constant
review of pricing and seeks opportunities to mitigate inflationary
increases.
In addition, we continue to respond to changing economic
circumstances by optimising our private and NHS funded work
ensuring we are not over reliant on one income source, supported
by an efficient cost base.
We have responded to wage inflation by announcing to our
staff early in 2023 that the 2023 general pay rise will
be 5% for most staff, and more for those near minimum wage.
=======================================================================
Climate change Flood risk mitigation includes a continued periodic review
of our estate in relation to existing and predicted flood
risk zones and investment in improved roofing and drainage
where vulnerabilities have been identified. None of our
current sites are on predicted high risk flood zones or
in coastal areas predicted to be at risk from rising sea
levels.
Extreme ambient temperature risk mitigation includes an
informed investment plan for upgrade of failing and vulnerable
plant. Design of the replacement and upgrade would account
for the predicted increase in ambient temperature profiles
expected within the lifespan of the plant e.g.,15 years.
Further mitigation measures include extreme weather warning
protocol and Business Continuity Plans to provide emergency
loan HVAC plant.
Energy price risk mitigation includes energy efficiency
measures to reduce consumption and our Energy Hedging strategy
which has seen all our current energy requirements secured
until October 2024.
=======================================================================
Competitor challenge We maintain a watching brief on new and existing competitor
activity and retains the ability to react quickly to changes
in patient and market demand.
We consider that a partial mitigation of the impact of competitor
activity is ensured by providing patients with high-quality
clinical care and by maintaining good working relationships
with GP's and consultants.
We continue to invest in the brand and deliver an effective
acquisition capability both direct and via our partners
in order to protect our market position. We have also strengthened
our pricing and tendering capabilities.
Despite the COVID-19 pandemic, we have maintained investment
into the estate and clinical equipment to differentiate
our proposition.
We monitor the market for opportunities, should they arise,
to acquire or open facilities in specific geographies creating
incremental volume.
=======================================================================
Information We have a governance structure, with Board oversight, that
governance & monitors the risk and mitigations for Data Governance and
security Cyber Security. To support the governance structure, we
have a range of policies and practices, and mandatory staff
training covering Data Governance and Cyber Security.
Our IT team have a cyber-security strategy for continuous
improvement based on industry standards. It covers the processes
from identifying specific risks, to protecting physical
and digital data assets through to recovery in the event
of a successful cyber-attack.
We work with several industry leading technical partners
to provide:
* Multiple layers of business protection using advanced
detection and protection systems,
* Regular third-party penetration testing on new and
existing IT systems.
* Red-Teaming Exercises to attempt to access our
systems using a variety of real-world techniques.
* Managed Security Operations Centre (SOC) to monitor,
analyse and respond to security threats 24x7
=======================================================================
Brand reputation Our primary mitigations against damage to our brand reputation
is through the good management of its principal risks, in
particular:
* Patient safety and clinical quality;
* Cyber security and data protection; and,
* Workforce.
In addition, we continue to invest in the awareness and
health of the brand through national advertising, public
relations and centrally coordinated social media. We also
continue to build our reputation amongst analysts and public
commentators.
=======================================================================
Supply chain We run a centralised supply chain with a national distribution
disruption centre (NDC) and its own vehicle and driver fleet. Medical
consumables are held at the NDC with an average of eight
weeks supply, medicines and prostheses are held at hospital
sites.
We must respond to product shortages and global recalls
consistently, and we have seen some minor shortfalls in
order fulfilment. In all cases, our centralised procurement
function has been able, with the support of a permanent
presence from the Clinical team, to find alternative supplies
to maintain hospitals' activities.
Fresh food is supplied through a national food distributor
who has its own delivery fleet and directly employs its
HGV drivers. Order fulfilment has remained in the high ninety
percentile. Because of the Group's Brexit planning, the
Group does have contingency menu plans in case of fresh
food shortages.
Any national shortages in critical medicines and medical
gases are managed by NHS Supply Chain. We receive allocations
based on our activity.
=======================================================================
Government and Historically, we derived 70% of our revenues from PMI and
NHS policy Self-pay patients that provided a natural 'hedge' against
exposure to Government and NHS policy. Post pandemic, we
are seeing strong private revenues that are expected to
continue medium term.
Through the COVID-19 pandemic, we have strengthened our
relationships with the government via DHSC, NHS England
and NHS Improvement. Meanwhile hospitals have also strengthened
their relationships with the local NHS commissioners. The
Integrated Care Systems (ICS's) are all established and
starting to commission referrals effectively. The impact
on NHS referrals has been minimal.
From a contract perspective we have now signed effective
contracts with all ICS's.
Our CEO, Justin Ash, was a member of the HM Government's
working party on reducing waiting lists.
=======================================================================
Pandemic from We:
new pathogen * maintain awareness of early warnings of potential
pandemics from organisations like the WHO, Dept of
Health, NHSE.
* have a developed Emergency Response Plan in line with
the NHS and our experience of managing the COVID-19
pandemic.
=======================================================================
Diversification We have:
and disintermediation * An Innovation Board bringing together the CEO and
Executive Committee members of the medical, clinical,
commercial and finance functions to identify
healthcare trends and opportunities to develop new
services.
* A dedicated Director of Innovation and Proposition
Development sourcing specific opportunities to
support the Group strategy, leading on development,
supported with dedicated IT and project resource.
* A Dedicated Director sourcing suitable target
acquisitions supported by an expert external
financial and tax adviser.
* A Property Lead to handle the assessment and
acquisition of new physical assets with the support
of retained property advisors.
=======================================================================
Patient safety We maintain the following controls to mitigate against a
and clinical failure of patient safety and clinical quality:
quality * A reporting culture of openness and shared learning
from Ward to Board, with a FTSUG at each site
* Timely Incident reporting via a database with central
oversight and development of actions to ensure
learning.
* Continually monitoring clinical standards, reporting
progress via the Board's Clinical Governance and
Safety Committee ('CGSC').
* Quality and safety reporting based on a Quality
Assurance Framework with a standard set of KPI's.
* A schedule of robust and regular hospital audits
including the Patient Safety and Quality Reviews,
with an action plan for improvement that is
monitored.
* Standard Operating Procedure for Patient Notification
Exercises that includes learning and continuous
improvement methodologies.
* Colleague induction, clinical competencies
requirements and mandated training
* Consistent reporting of clinical outcome and
effectiveness measures within the hospital and
central meeting governance structures (including
Medical Advisory Committee meetings) to ensure that
insights and learning are actioned and shared.
* Continuous monitoring of patient experience via
regular surveys and policies and procedures in place
to ensure learning from patient experience feedback
(including detractors and complaints).
=======================================================================
PMI market dynamics We work hard to maintain good relationships and a joint
product/patient health offering with the PMI companies,
which, in the opinion of the Directors, assists the healthcare
sector in delivering high-quality patient care.
We ensure we have long-term contracts in place with our
PMI partners that avoids co-termination of contractual arrangements.
We believe continuing to invest in our well-placed portfolio
of hospitals provides a natural fit to the local requirements
of all the PMI provider's long term.
We continue to invest in efficiency programmes to ensure
that we can offer the best combination of high-quality patient
care at competitive prices.
=======================================================================
Major infrastructure All our hospitals have a backup power source provided from
failure diesel powered generators that operates major circuits of
an hospital, but some key equipment is not covered, e.g.,
MRI scanners. Battery powered uninterrupted power is provided
into specific equipment in theatres to ensure patients remain
safe in the event of a generator failure. These backup power
sources are designed to keep patients in the hospital safe
but are not a complete substitute for mains power.
Our national distribution fleet refuel daily at the end
of their shifts to ensure resilient operational capability.
In theory, NHS hospitals will still have to take emergency
transfers so Trusts should not withdraw SLAs but there may
be increased frequency of delays to emergency transfers.
Mitigation plans are in place and rehearsed at hospitals
as delays have been experienced occasionally because of
the periodically overstretched ambulance service across
the UK. The COO chairs a regular multi-disciplinary winter
planning meeting to co-ordinate response activities to any
infrastructure failures.
=======================================================================
Antimicrobial Our mitigations are:
resistance * Executive level awareness of the Government's 5-year
AMR strategy
* Participation in, and collaboration with,
Government's monitoring of AMR outbreaks
* Require clinicians to following guidance in line with
national guidelines on the prescribing of antibiotics
in line with Government guidelines.
* Access to up-to-date antimicrobial prescribing via
online systems and access to microbiologists at all
sites
* Appropriate investigations of post-surgery infections
including review of antibiotics.
=======================================================================
Directors' responsibility statement
Going Concern
The Group assessed going concern risk for the period through to
31 December 2024. As at 30 June 2023 the Group had cash of
GBP75.7m, a Senior Loan Facility of GBP325m and an undrawn
Revolving Credit Facility of GBP100m. On 3rd March 2023, the Group
exercised the option to extend the senior loan facility by a
further year, the arrangement matures in February 2027. The
financial covenants relating to this new agreement are materially
unchanged and there have been no modifications to the agreement
terms.
The Group has undertaken extensive activity to identify
plausible risks which may arise and mitigating actions, which in
the first instance would include management of working capital and
constrained levels of capital investment. Based on the current
assessment of the likelihood of these risks arising by 31 December
2024, together with their assessment of the planned mitigating
actions being successful, the Directors have concluded it is
appropriate to prepare the accounts on a going concern basis. In
arriving at their conclusion, the Directors have also noted that,
were these risks to arise in combination, it could result in a
liquidity constraint or breach of covenant, however, the risk of
this is considered remote.
The Group has also assessed, as part of its reverse stress
testing, what degree of downturn in trading it could sustain before
it no longer forecasts a positive cash balance. This stress testing
was based on flexing revenue downwards with a consistent percentage
decline in variable costs, whilst maintaining the forecast of fixed
costs. The testing did not allow for the benefit of any action that
could be taken by management to preserve cash. This testing
suggested that there would have to be at least a 44% fall in annual
revenue before the Group no longer forecast a positive cash
balance. We do not believe that such a reduction of income revenue
is a plausible consequence of the Group's identified principal
risks.
It should be noted that we are in a period of material
geo-political and macro-economic uncertainty. Whilst the Directors
continue to closely monitor these risks and their plausible impact,
their severity is hard to predict and is dependent upon many
external factors. Accordingly the actual financial impact of these
risks may materially vary against the current view of their
plausible impact.
Each of the Directors confirms that, to the best of their
knowledge:
-- This condensed consolidated interim financial information for
the six months ended 30 June 2023 has been prepared in accordance
with UK adopted International Accounting Standard 34 and Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority, gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
on a consolidated basis.
-- The interim management report, which is incorporated into the
Chief -Executive Officer message, Operating Review and Financial
Review, includes a fair review of the information as required
by:
-- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of the important events that have occurred
during the six months of the current financial year and their
impact on the condensed consolidated interim financial information
and a description of the principal risks for the remaining six
months of the year; and
-- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
impacted the financial position or performance of the Group during
the period and any material changes in the related party
transactions described in the Group's Annual Report and Accounts
for the year ended 31 December 2022.
By order of the Board
Justin Ash Jitesh Sodha
Chief Executive Officer Chief Financial Officer
13 September 2023
Independent review report of Spire Healthcare Group plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises the Consolidated
interim income statement, Consolidated interim statement of
comprehensive income, Consolidated interim statement of changes in
equity, Consolidated interim balance sheet, Consolidated interim
statement of cash flows and related notes 1 to 24. We have read the
other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 3, the annual financial statements of the
Group are prepared in accordance with UK adopted International
Accounting Standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London, UK
13 September 2023
Condensed financial statements
Consolidated interim income statement
For the six months ended 30 June 2023
Six months ended 30 June (Unaudited)
================================================================
2023 2022
============================== ================================
Total Adjusting Total Adjusting
before items before items
adjusting (note adjusting (note
(GBP million) Note items 10) Total items 10) Total
============================== ==== ========== ========= ======= ========== ========= =======
Revenue 6 676.5 - 676.5 597.9 - 597.9
Cost of sales (362.3) - (362.3) (328.4) - (328.4)
============================== ==== ========== ========= ======= ========== ========= =======
Gross profit 314.2 - 314.2 269.5 - 269.5
Other operating costs (247.5) (2.0) (249.5) (216.1) (5.6) (221.7)
Other income 8 1.1 - 1.1 1.2 - 1.2
============================== ==== ========== ========= ======= ========== ========= =======
Operating profit (EBIT) 67.8 (2.0) 65.8 54.6 (5.6) 49.0
Finance costs 9 (45.5) - (45.5) (46.0) - (46.0)
Profit before taxation 22.3 (2.0) 20.3 8.6 (5.6) 3.0
Taxation 11 (8.1) 0.5 (7.6) (4.4) 0.8 (3.6)
============================== ==== ========== ========= ======= ========== ========= =======
Profit / (loss) for the
period 14.2 (1.5) 12.7 4.2 (4.8) (0.6)
============================== ==== ========== ========= ======= ========== ========= =======
Profit / (loss) for the
period attributable
to owners of the Parent 13.9 (1.5) 12.4 4.3 (4.8) (0.5)
Profit / (loss) for the
period attributable
to non-controlling interests 0.3 - 0.3 (0.1) - (0.1)
============================== ==== ========== ========= ======= ========== ========= =======
Profit / (loss) per share
(in pence per share)
- basic 12 3.4 (0.3) 3.1 1.1 (1.2) (0.1)
- diluted 12 3.4 (0.4) 3.0 1.0 (1.1) (0.1)
============================== ==== ========== ========= ======= ========== ========= =======
Consolidated interim statement of comprehensive income
For the six months ended 30 June 2023
Six months to
30 June (Unaudited)
======================
(GBP million) 2023 2022
=============================================================== ========= ===========
Profit for the period 12.7 (0.6)
=============================================================== ========= ===========
Items that may be reclassified to profit or loss in subsequent
periods
Net gain on cash flow hedges (net of taxation) 3.4 0.6
Other comprehensive income for the period 3.4 0.6
=============================================================== ========= ===========
Total comprehensive profit for the year, net of tax 16.1 -
=============================================================== ========= ===========
Attributable to:
=============================================================== ========= ===========
Equity holders of the parent 15.8 0.1
Non-controlling interests 0.3 (0.1)
=============================================================== ========= ===========
Consolidated interim statement of changes in equity
For the six months ended 30 June 2023
EBT
Share Share Capital share Hedging Retained Non-controlling Total
(GBP million) Notes capital premium reserves reserves reserve earnings Total interests equity
================ ===== ======== ======== ======== ======== ========= ========= ===== =============== =======
As at 1 January
2022 4.0 826.9 376.1 (0.8) (0.5) (496.1) 709.6 (4.8) 704.8
Loss for the
period - - - - - (0.5) (0.5) (0.1) (0.6)
Other
comprehensive
profit for the
period - - - 0.6 - 0.6 0.0 0.6
================ ===== ======== ======== ======== ======== ========= ========= ===== =============== =======
Total
comprehensive
loss - - - - 0.6 (0.5) 0.1 (0.1) -
================ ===== ======== ======== ======== ======== ========= ========= ===== =============== =======
Issue of new
shares - 2.8 - - - - 2.8 - 2.8
Purchase of
non-controlling
interests 22 - - - - - (0.5) (0.5) 0.5 -
Share-based
payments
(net of tax) 21 - - - - - 1.1 1.1 - 1.1
As at 30 June
2022 4.0 829.7 376.1 (0.8) 0.1 (496.0) 713.1 (4.4) 708.7
As at 1 January
2023 4.0 830.0 376.1 - 6.6 (485.7) 731.0 (5.9) 725.1
Profit for the
period - - - - - 12.4 12.4 0.3 12.7
Other
comprehensive
profit for the
period - - - - 3.4 - 3.4 - 3.4
================ ===== ======== ======== ======== ======== ========= ========= ===== =============== =======
Total
comprehensive
income - - - - 3.4 12.4 15.8 0.3 16.1
================ ===== ======== ======== ======== ======== ========= ========= ===== =============== =======
Dividends paid 13 - - - - - (2.0) (2.0) - (2.0)
Purchase of own
shares by EBT - - - (3.1) - - (3.1) - (3.1)
Issue of own
shares
by EBT - - - 2.0 - (2.0) - - -
Additional
interest
acquired of
non-controlling
interests 22 - - - - - (3.2) (3.2) 3.2 -
Financial
liability
to acquire
non-controlling
interests 24 - - - - - (9.6) (9.6) - (9.6)
Share based
payments
(net of tax) 21 - - - - - 0.6 0.6 - 0.6
As at 30 June
2023 4.0 830.0 376.1 (1.1) 10.0 (489.5) 729.5 (2.4) 727.1
================ ===== ======== ======== ======== ======== ========= ========= ===== =============== =======
Consolidated interim balance sheet
As at
==============================
30 June
2023
31 December
(GBP million) Notes (Unaudited) 2022 (Audited)
============================================ ===== ============= ===============
ASSETS
Non-current assets
Property, plant and equipment 14 1,573.5 1,584.4
Intangible assets 15 345.8 345.8
Derivatives 18 6.8 5.0
Financial asset 7.8 4.6
1,933.9 1,939.8
============================================ ===== ============= ===============
Current assets
Inventories 42.4 40.6
Trade and other receivables 122.0 100.5
Derivatives 18 6.6 3.6
Cash and cash equivalents 75.7 74.2
============================================ ===== ============= ===============
246.7 218.9
============================================ ===== ============= ===============
Non-current assets held for sale 5 1.1 1.1
============================================ ===== ============= ===============
247.8 220.0
============================================ ===== ============= ===============
Total assets 2,181.7 2,159.8
============================================ ===== ============= ===============
EQUITY AND LIABILITIES
Equity
Share capital 4.0 4.0
Share premium 830.0 830.0
Capital reserves 376.1 376.1
EBT share reserves (1.1) -
Hedging reserve 10.0 6.6
Retained earnings (489.5) (485.7)
============================================ ===== ============= ===============
Equity attributable to owners of the Parent 729.5 731.0
Non-controlling interests (2.4) (5.9)
Total equity 727.1 725.1
============================================ ===== ============= ===============
Non-current liabilities
Bank borrowings 16 321.1 321.4
Lease liability 17 770.7 773.7
Deferred tax liability 67.4 56.2
Financial liabilities 24 9.6 -
============================================ ===== ============= ===============
1,168.8 1,151.3
============================================ ===== ============= ===============
Current liabilities
Bank borrowings 16 3.1 2.9
Lease liability 17 93.9 92.8
Provisions 19 17.2 21.7
Trade and other payables 20 171.4 164.5
Income tax payable 0.2 1.5
285.8 283.4
============================================ ===== ============= ===============
Total liabilities 1,454.6 1,434.7
============================================ ===== ============= ===============
Total equity and liabilities 2,181.7 2,159.8
============================================ ===== ============= ===============
Consolidated interim statement of cash flows
For the six months ended 30 June 2023
Six months ended
30 June (Unaudited)
======================
(GBP million) Notes 2023 2022
================================================= ===== ========== ==========
Cash flows from operating activities
Profit before taxation 20.3 3.0
Adjustments for:
Depreciation 7 50.1 51.2
Adjusting Items (0.9) 1.3
Share-based payments 21 1.5 1.3
Fair value movement on financial assets (0.7) (0.9)
(Profit) / Loss on disposal of property, plant
and equipment 7 - 0.1
Finance costs 9 45.5 46.0
================================================= ===== ========== ==========
115.8 102.0
Movements in working capital:
(Increase) in trade and other receivables (20.7) (18.1)
(Increase)/Decrease in inventories (1.8) 1.1
Increase in trade and other payables 7.8 23.7
(Decrease) in provisions (4.5) (17.2)
Cash generated from operations 96.6 91.5
Income tax received - -
Net cash from operating activities 96.6 91.5
Cash flows from investing activities
Purchase of property, plant and equipment (31.0) (44.1)
Proceeds of disposal of property, plant and
equipment 0.2 0.1
Movement in restricted cash (2.5) -
Net cash used in investing activities (33.3) (44.0)
Cash flows from financing activities
Bank interest paid (9.3) (13.3)
Lease interest paid (36.3) (33.8)
Payment of lease principal (11.1) (7.3)
Payment of bank borrowings - (100.0)
Purchase of non-controlling interests - (2.7)
Proceeds from the issue of shares - 2.8
Purchase of own shares (3.1) -
Dividends paid to equity holders of the parent 13 (2.0) -
Net cash used in financing activities (61.8) (154.3)
================================================= ===== ========== ==========
Net increase in cash and cash equivalents 1.5 (106.8)
Cash and cash equivalents at beginning of
period 74.2 202.6
================================================= ===== ========== ==========
Cash and cash equivalents at end of period 75.7 95.8
================================================= ===== ========== ==========
Adjusting items (note 10)
Adjusting items included in the cash flow (2.9) (4.3)
Total Adjusting items (2.0) (5.6)
================================================= ===== ========== ==========
Notes to the announcement
1. General information
Spire Healthcare Group plc (the 'Company') and its subsidiaries
(collectively, the 'Group') owns and operates private hospitals and
clinics in the UK and provides a range of private healthcare
services.
The Company is a public limited company, listed on the London
Stock Exchange and is incorporated, registered and domiciled in
England and Wales (registered number 09084066). The address of its
registered office is 3 Dorset Rise, London, EC4Y 8EN.
The condensed consolidated interim financial information for the
six months ended 30 June 2023 was approved by the Board on 13
September 2023.
2. Basis of preparation
The condensed consolidated interim financial information has
been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and with UK
adopted International Accounting Standard 34 "Interim Financial
Reporting". It does not include all the information required for
full annual financial statements and should be read in conjunction
with information contained in the Group's Annual Report and
Accounts for the year ended 31 December 2022. The condensed
consolidated interim financial information has been reviewed, not
audited.
The financial information contained in these interim statements
do not comprise statutory accounts within the meaning of section
434 of the Companies Act 2006. Financial information for the year
ended 31 December 2022 has been extracted from the statutory
accounts which were approved by the Board of Directors on 1 March
2023 and delivered to the Registrar of Companies. The report of the
auditor on those accounts was unqualified, did not draw attention
to any matters by way of emphasis and did not contain statements
under section 498 (2) or (3) of the Companies Act 2006.
Going concern
The Group assessed going concern risk for the period through to
31 December 2024. As at 30 June 2023 the Group had cash of
GBP75.7m, a Senior Loan Facility of GBP325m and an undrawn
Revolving Credit Facility of GBP100m. On 3rd March 2023, the Group
exercised the option to extend the senior loan facility by a
further year, the arrangement matures in February 2027. The
financial covenants relating to this new agreement are materially
unchanged and there have been no modifications to the agreement
terms.
The Group has undertaken extensive activity to identify
plausible risks which may arise and mitigating actions, which in
the first instance would include management of working capital and
constrained levels of capital investment. Based on the current
assessment of the likelihood of these risks arising by 31 December
2024, together with their assessment of the planned mitigating
actions being successful, the Directors have concluded it is
appropriate to prepare the accounts on a going concern basis. In
arriving at their conclusion, the Directors have also noted that,
were these risks to arise in combination, it could result in a
liquidity constraint or breach of covenant, however, the risk of
this is considered remote.
The Group has also assessed, as part of its reverse stress
testing, what degree of downturn in trading it could sustain before
it no longer forecasts a positive cash balance. This stress testing
was based on flexing revenue downwards with a consistent percentage
decline in variable costs, whilst maintaining the forecast of fixed
costs. The testing did not allow for the benefit of any action that
could be taken by management to preserve cash. This testing
suggested that there would have to be at least a 44% fall in annual
revenue before the Group no longer forecast a positive cash
balance. We do not believe that such a reduction of income revenue
is a plausible consequence of the Group's identified principal
risks.
It should be noted that we are in a period of unprecedented
geo-political and macro-economic uncertainty. Whilst the Directors
continue to closely monitor these risks and their plausible impact,
their severity is hard to predict and is dependent upon many
external factors. Accordingly the actual financial impact of these
risks may materially vary against the current view of their
plausible impact.
3. Accounting policies
In preparing the condensed consolidated financial information,
the same accounting policies, methods of computation and
presentation have been applied as set out in the Group's Annual
Report and Accounts for the year ended 31 December 2022 except for
the application of new standards and amendments mentioned below
effective from 1 January 2023. The accounting policies are
consistent with those of the previous financial year and
corresponding interim period.
The annual financial statements of the Group will be prepared in
accordance with UK adopted International Accounting Standards (UK
adopted International Financial Reporting Standards ("IFRSs")).
New standards, interpretations and amendments applied
The Group has not early adopted any standard, interpretation or
amendment that was issued but is not yet effective, nor are they
expected to have a material impact on the Group.
The following amendments to existing standards were effective
for the Group from 1 January 2023. These have not had a material
impact on the Group.
-- Amendments to IAS 8 - Definition of accounting estimates effective 1 January 2023
-- International Tax Reform - Pillar Two Model Rules -
Amendments to IAS 12 effective 1 January 2023 but not required for
interim periods ending on or before 31 December 2023.
-- Disclosure of Accounting Policies - Amendments to IAS 1 and
IFRS Practice Statement 2 effective 1 January 2023
-- Amendments to IAS 12 - Deferred tax related to assets and
liabilities arising from a single transaction effective 1 January
2023
-- IFRS 17 - Insurance contracts effective 1 January 2023
4. Significant judgements and estimates
The preparation of the condensed consolidated interim financial
information required management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amount of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
The significant judgements and estimates used in the application
of the Group's accounting policies are the same as those described
in the Group's Annual Report and Accounts for the year ended 31
December 2022 with the exception of those estimates used in the
assessment of the medical malpractice provision in connection with
the Ian Paterson claims which are subject to ongoing review.
5. Non-current assets held for sale
One property remains as held for sale in the current period.
As at
==================================
30 June 31 December
(GBP million) 2023 (Unaudited) 2022 (Audited)
===================================================== ================= ===============
East Midlands Cancer Centre property (Bostocks Lane) 1.1 1.1
Total assets held for sale 1.1 1.1
===================================================== ================= ===============
The Group's management have committed to sell a parcel of land
at Bostocks Lane as the Group has accepted an offer on the
property. The sale is considered highly probable and the assessment
has not changed. It therefore remains classified as held for
sale.
6. Segmental reporting
In determining the Group's operating segment, management has
primarily considered the financial information in the internal
reports that are reviewed and used by the executive management team
and the Board of Directors (in aggregate the chief operating
decision maker) in assessing performance and in determining the
allocation of resources. The financial information in those
internal reports in respect of revenue and expenses has led
management to conclude that the Group has a single operating
segment, being the provision of healthcare services.
All revenue is attributable to, and all non-current assets are
located in, the United Kingdom.
Revenue by wider customer (payor) group is shown below:
Six months ended
30 June (Unaudited)
======================
(GBP million) 2023 2022
Insured 306.6 265.2
NHS 170.5 145.6
Self-pay 178.4 174.1
Other 21.0 13.0
============== ========== ==========
Total revenue 676.5 597.9
============== ========== ==========
Group revenues increased by 13.1% to GBP676.5m (2022:
GBP597.9m). The increase in revenue is mainly driven by the strong
performance of our private business and in particular the recovery
by PMI patients, which increased by 15.6%.
Total NHS revenue increased by 17.1% to GBP170.5m (2022:
GBP145.6). Revenue of GBP6.7m included in other relates to revenue
generated by the Doctors Clinic Group which was acquired in
December 2022.
7. Operating profit
Operating profit has been arrived at after charging /
(crediting):
Six months ended
30 June (Unaudited)
======================
(GBP million) 2023 2022
==================================================== ========== ==========
Depreciation of property, plant and equipment 32.5 34.6
Depreciation of right of use assets 17.6 16.6
Lease payments made in respect of low value and
short leases 8.8 6.7
Fair value loss on financial liability - 0.8
Profit on disposal of property, plant and equipment - 0.1
Staff costs 257.7 233.9
===================================================== ========== ==========
8. Other income
Six months ended
30 June (Unaudited)
======================
(GBP million) 2023 2022
============================================== ========== ==========
Fair value movement on financial asset 0.7 0.9
Realised profit in respect of financial asset 0.4 0.3
============================================== ========== ==========
Total other income 1.1 1.2
============================================== ========== ==========
The fair value movement in respect of the financial asset was
recognised to reflect the on-going profit share arrangement with
Genesis Care which arose as part of the sale of the Bristol Cancer
Centre in 2019. Profits of GBP0.4m have been realised in respect of
this arrangement.
9. Finance costs
Six months ended
30 June (Unaudited)
======================
6(GBP million) 2023 2022
=============================================================== ========== ==========
Finance costs:
Interest on bank facilities 8.7 4.8
Amortisation of fee arising on facilities extensions/borrowing
costs (1) 0.5 0.6
Accelerated amortisation and loss on extinguishment of
loan(1) - 3.1
Refinancing fees - 1.0
Interest on obligations under leases 36.3 36.5
Total net finance costs 45.5 46.0
=============================================================== ========== ==========
(1. Borrowing costs of GBP5.0m on the refinancing of the senior
facility and GBP0.9m on the extension of the facility were
capitalised to the senior finance facility, these are being
amortised. In the prior year GBP3.1m of borrowing costs were
charged to the profit and loss on the extinguishment of the old
loan.)
10. Adjusting items
Six months ended
30 June (Unaudited)
======================
(GBP million) 2023 2022
========================================================== ========== ==========
Business reorganisation and corporate restructuring costs 1.6 3.3
Asset acquisitions, disposals, impairment and aborted
project costs 0.4 1.9
Remediation of regulatory compliance or malpractice - 0.3
Hospitals set up and closure costs - 0.1
========================================================== ========== ==========
Total Adjusting items 2.0 5.6
========================================================== ========== ==========
Income tax charge / (credit) on Adjusting items (0.5) (0.8)
========================================================== ========== ==========
Total post-tax Adjusting items 1.5 4.8
========================================================== ========== ==========
Adjusting items comprise those matters where the Directors
believe the financial effect should be adjusted for due to their
nature or amount, in order to provide a more comparable measure of
the Group's underlying performance.
During H2 21, the Group announced a strategic, group wide
initiative that impacts the operating model of the Group to allow a
more efficient governance and reporting structure, as well as a
drive on digital functionality. As a result of this initiative,
additional costs of GBP1.6m have been incurred in the period. This
initiative will be implemented over several phases and to date
costs of GBP7.3m have been incurred. The initial phase of the
initiative was completed in 2022, the estimated time frame to
overall completion being the end of 2024.
Asset acquisitions, disposals, impairment and aborted project
costs mainly comprise costs in respect of Doctors Clinic Group as
costs are incurred to integrate the Group into the Spire Group. In
the prior year, the costs mainly related to Claremont Hospital and
the purchase of the remaining non-controlling interest, and an
impairment of GBP0.5m was recognised on the St Saviours property
which was sold in H2 2022.
11. Taxation
Six months ended
30 June (Unaudited)
======================
(GBP million) 2023 2022
==================================================== ============ ========
Current tax:
UK Corporation tax credit (1.4) -
==================================================== ============ ========
Total current tax credit (1.4) -
==================================================== ============ ========
Deferred tax:
Origination and reversal of temporary differences 9.5 0.5
Impact of adjusting items (0.5) -
Adjustments in respect of previous periods - 3.1
Total deferred tax charge 9.0 3.6
==================================================== ============ ========
Total tax charge 7.6 3.6
==================================================== ============ ========
The tax charge for the period has been calculated using an
estimate of the effective annual rate of tax for the full year.
This has been applied to the pre-tax profits for the six months
ended 30 June 2023. The Group has separately calculated the tax
rates applicable in respect of discrete items, such as the vesting
of the SAYE scheme and release of the Claremont tax provisions, for
the period.
During the period, the UK government substantively enactment of
the Organisation for Economic Co-operation and Development's Global
Anti-Base Erosion Model Rules (Pillar Two), applicable to
accounting periods beginning on or after 31 December 2023. For H1
2023 the Group has adopted the International Accounting Standards
Board's temporary exemption from recording deferred taxes for
Pillar Two. The Group expects to fall within the UK scope of these
rules (Qualifying Domestic Minimum Top Up Tax) and at this stage is
in the process of assessing the impact and are actively monitoring
the development of the rules and associated guidance.
12. Earnings per Share (EPS)
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the
period.
Six months ended
30 June (Unaudited)
========================
2023 2022
========================================================== =========== ===========
Profit / (loss) for the period attributable to owners
of the Parent (GBP million) 12.4 (0.5)
========================================================== =========== ===========
Weighted average number of ordinary shares 404,042,101 401,519,952
Adjustment for weighted average number of shares held
in the Employee Benefit Trust (EBT) (270,626) (128,690)
========================================================== =========== ===========
Weighted average number of ordinary shares in issue (No.) 403,771,475 401,391,262
========================================================== =========== ===========
Basic profit / (loss) per share (in pence per share) 3.1 (0.1)
========================================================== =========== ===========
For dilutive earnings per share, the weighted average number of
ordinary shares in issue is adjusted to include all dilutive
potential ordinary shares arising from share options.
Six months ended
30 June (Unaudited)
========================
2023 2022
======================================================= =========== ===========
Profit / (loss) for the period attributable to owners
of the Parent (GBP million) 12.4 (0.5)
======================================================= =========== ===========
Weighted average number of ordinary shares in issue 403,771,475 401,391,262
Adjustment for weighted average number of contingently
issuable shares 5,837,070 -
======================================================= =========== ===========
Diluted weighted average number of ordinary shares in
issue (No.) 409,608,545 401,391,262
======================================================= =========== ===========
Diluted profit / (loss) per share (in pence per share) 3.0 (0.1)
======================================================= =========== ===========
In H1 2022 the weighted average number for contingently issuable
shares would be anti-dilutive, they are excluded from the above.
However, 8,304,963 shares are potentially dilutive in the
future.
The Directors believe that EPS excluding adjusting items
("adjusted EPS") better reflects the underlying performance of the
business and assists in providing comparable performance of the
Group.
Reconciliation of profit to profit excluding adjusting items
("adjusted profit"):
Six months ended
30 June (Unaudited)
======================================
2023 2022
================================================================ ================== ==================
Profit / (loss) for the period attributable to owners
of the Parent (GBP million) 12.4 (0.5)
Adjusting items (net of taxation) (see note 10) 1.5 4.8
Adjusted profit after tax (GBP million) 13.9 4.3
Weighted average number of Ordinary Shares in issue 403,771,475 401,391,262
Weighted average number of dilutive Ordinary Shares 409,608,545 409,696,225
================================================================ ================== ==================
Adjusted basic earnings per share (in pence per share) 3.4 1.1
Adjusted diluted earnings per share (in pence per share) 3.4 1.0
================================================================ ================== ==================
13. Dividends
Six months ended 30 June (Unaudited)
2023 2022 2023 2022
============================================== ========== ========== ========== ==========
Amounts recognised as distributions to equity Pence Pence
shareholders per share per share GBPmillion GBPmillion
============================================== ========== ========== ========== ==========
Ordinary shares
Final dividend for the year ended 31 December
2022 0.5 - 2.0 -
============================================== ========== ========== ========== ==========
Total dividends 0.5 - 2.0 -
============================================== ========== ========== ========== ==========
14. Property, plant and equipment
(GBP million) Assets in
Freehold Leasehold the course Right of
property improvements Equipment of construction Sub-total use asset Total
============================== ========= ============= ========= ================ ========= ========== =======
Net book value at 1
January 2023 652.0 120.3 163.5 30.2 966.0 618.4 1,584.4
Additions 3.2 3.8 19.9 4.1 31.0 5.1 36.1
Adjustments to ROU - - - - - 3.3 3.3
Disposals and transfers 2.9 13.1 (0.5) (15.7) (0.2) - (0.2)
Depreciation (6.1) (4.8) (21.6) - (32.5) (17.6) (50.1)
============================== ========= ============= ========= ================ ========= ========== =======
Net book value at 30
June 2023 652.0 132.4 161.3 18.6 964.3 609.2 1,573.5
============================== ========= ============= ========= ================ ========= ========== =======
The net book value of land is GBP156.3m (December 2022:
GBP156.3m). The Group has pledged nine of its freehold properties
as security for the senior finance facility, and the net book value
of these properties is GBP160.9 (December 2022: GBP157.6m). There
were no borrowing costs capitalised during the period (2022:
Nil).
Right of use assets are included in the following property,
plant and equipment categories:
Equipment
Leasehold & motor
(GBP million) Property vehicles Total
================================= ========= ========= ======
Net book value at 1 January 2023 601.8 16.6 618.4
Additions 0.5 4.6 5.1
Adjustments to ROU 3.3 - 3.3
Depreciation (15.3) (2.3) (17.6)
Net book value at 30 June 2023 590.3 18.9 609.2
================================= ========= ========= ======
Impairment testing
The Directors consider property and property right of use assets
for indicators of impairment semi-annually. As equipment and
leasehold improvements do not generate independent cash flows, they
are considered alongside the property as a single cash-generating
unit ("CGU"). When making the assessment, the value-in-use of the
property is compared with its carrying value in the accounts. Where
headroom is significant, no further work is undertaken. Where
headroom is minimal, a detailed assessment is performed for the
property, which includes identifying the factors resulting in
limited headroom and undertaking financial forecasts to assess the
level of sensitivity this has on key assumptions.
In order to estimate the value-in-use, management has used
trading projections covering the period to December 2027 from the
most recent board approved strategic plan. The variables in the
cash flows are interdependent and reflect management's expectations
based on past experience and current market trends, taking into
account both current business and committed initiatives. To the
extent that there was a shortfall between the recent actual cash
flows and forecast, the future cash flows have been adjusted to
reflect any initiatives implemented by management to address the
underlying cause. In addition, Management considers the potential
financial impact from short term climate change scenarios, and the
cost of initiatives by the Group to manage the longer- term climate
impacts.
Key assumptions
Management identified a number of key assumptions relevant to
the value-in-use calculations, being EBITDA growth over the four
and a half year period, capital maintenance spend, discount rates
and long term growth rates. The assumptions are based on past
experience and external sources of information.
There is one property triggered for detailed review in the
period owing to the relatively lower level of headroom. Management
has performed a sensitivity analysis on this property using
reasonably possible changes for each key assumption, keeping all
other assumptions constant. The sensitivity analysis included an
assessment of the break-even point for each of the key
assumptions.
The trading projections for the four and a half year period
underlying the value in use reflect a growth in EBITDA. EBITDA is
based on a number of elements of the operating model over the
longer-term, including pricing trends, volume growth and the mix
and complexity of procedures and assumptions regarding cost
inflation. The sensitivity analysis identified that a reasonably
possible change that would result the elimination of headroom for
the property as shown in the table below.
The Group has used a pre-tax discount rate of 11.1% including
the effect of IFRS 16. The sensitivity analysis identified that a
reasonably possible change in the pre-tax discount rate, would
result in the elimination of headroom as shown in the table
below.
For the property triggered for review the table below provides
the headroom and the reasonably possible change identified in the
sensitivity analysis mentioned above which would result in the
elimination of headroom.
Headroom (the EBITDA growth Sensitivity Sensitivity
amount that for the four for decrease for increase
recoverable and half year of EBITDA growth of the pre-tax
amount exceeded period per annum discount rate
the carrying sensitivity
amount)
Property CGU
1 GBP2.5m 2% - 20.5% 15.2% 374 bps
===================== ================== ===================== ===================
A long-term growth rate of 2.0% has been applied to cash flows
beyond 2027 based on long term view of inflation, revenue growth
and market conditions. Capital maintenance spend is based on
historic run rates and our expectations of the Group's
requirements. The sensitivity testing identified no reasonably
possible changes in the capital maintenance and long-term growth
rates that would cause the carrying amount of any CGU to exceed its
recoverable amount.
As a result, management believe that some of the key impairment
review assumptions constitute a major source of estimation
uncertainty as they consider that there is a significant risk of a
material change to its estimate of these assumptions within the
next 12 months.
15. Intangible asset
(GBP million) Total
=================================== =====
Cost or valuation:
-----
At 31 December 2022 & 30 June 2023 546.8
=================================== =====
Impairment:
-----
At 31 December 2022 & 30 June 2023 201.0
-----
Carrying amount:
-----
At 30 June 2023 345.8
=================================== =====
At 31 December 2022 345.8
=================================== =====
Impairment testing
The Directors have reviewed goodwill for indicators of
significant impairment since the most recent financial year end. As
at 31 December 2022 the recoverable amount of goodwill exceeded the
carrying amount by c. GBP400m. Since the 2022 financial year end
there have been no indicators of impairment and therefore
management have not performed a detailed impairment calculation for
the interim period.
16. Bank Borrowings
The bank loans are secured on fixed and floating charges over
both the present and future assets of material subsidiaries of the
Group. On 24 February 2022, the Group successfully refinanced its
debt facilities with a syndicate of existing and new Lenders. As
part of the exercise and in recognition of the fact that the Group
had substantial cash reserves at 31 December 2021, the Group repaid
GBP100.0m of the Senior Loan Facility. During the period, the Group
exercised the option to extend the facility by a further year.
There have been no modifications to the agreement terms as a
result. The new arrangement has a maturity of February 2027. The
financial covenants relating to this new agreement and the
extension are materially unchanged. The loan is non-amortising and
carries interest at a margin of 2.05% over SONIA (2022: 2.05% over
SONIA).
As at
==================================
30 June 31 December
(GBP million) 2023 (Unaudited) 2022 (Audited)
=========================================== ================= ===============
Amount due for settlement within 12 months 3.1 2.9
Amount due for settlement after 12 months 321.1 321.4
Total bank borrowings 324.2 324.3
=========================================== ================= ===============
Net debt for the purposes of the covenant test in respect of the
Senior Loan Facility was GBP249.3m (December 2022: GBP250.1m) and
the net debt to EBITDA ratio was 2.1x (December 2022: 2.2x). The
net debt for covenant purposes comprises the senior facility of
GBP325.0m less cash and cash equivalents. EBITDA for covenant
purposes comprises Adjusted EBITDA for Last Twelve Months (LTM) of
pre-IFRS 16 Adjusted EBITDA of GBP130.3m (December 2022: GBP123.9m)
less the rental of a property lease pre-IFRS 16 of GBP9.8m (2022:
GBP9.5m).
Terms and debt repayment schedule
The maturity date is the date on which the relevant bank loans
are due to be fully repaid, as at the balance sheet date.
The carrying amounts drawn (after issue costs and including
interest accrued) under facilities in place at the balance sheet
date were as follows:
Margin 30 June 31 December
(GBP million) Maturity over SONIA 2023 (Unaudited) 2022 (Audited)
============================================= ========= =========== ================= ===============
February
Senior finance facility 2027 2.05% 324.2 324.3
============================================= ========= =========== ================= ===============
Revolving credit facility (undrawn committed February
facility) 2027 100.0 100.0
============================================= ========= =========== ================= ===============
Changes in bank borrowings and lease liabilities arising from
financing activities
(GBP million) Cash Non-cash
1 January flows changes(1) Additions(1) Other 30 June
======================== ========= ====== =========== ============== ======= =======
2023
Bank loans 324.3 (9.3) 9.2 - - 324.2
Lease liabilities 866.5 (47.4) 36.3 8.4 0.8 864.6
======================== ========= ====== =========== ============== ======= =======
Total 1,190.8 (56.7) 45.5 8.4 0.8 1,188.8
======================== ========= ====== =========== ============== ======= =======
(1. Non-cash changes reflect accrued interest charged on the
loan and interest charge on lease liabilities. Amortised fees of
GBP0.5m are included in non-cash changes for bank loans.)
(GBP million)
Cash Non-cash Loan
1 January flows changes Additions modification 30 June
======================== ========= ======= ======== ========= ============== =======
2022
Bank loans 427.5 (113.4) 8.5 - 1.0 323.6
Lease liabilities 837.8 (41.1) 35.4 10.5 - 842.6
======================== ========= ======= ======== ========= ============== =======
Total 1,265.3 (154.5) 43.9 10.5 1.0 1,166.2
======================== ========= ======= ======== ========= ============== =======
17. Lease liability
The Group has finance arrangements in place in respect of
hospital properties, vehicles, office and medical equipment. The
leases are secured on fixed and floating charges over both the
present and future assets of material subsidiaries in the Group.
Leases, with a present value liability of GBP864.6m (H1 22:
GBP842.6m), expire in various years to 2042 and carry a blended
implicit interest rate of 8.4% (2022: 8.4%). Rent in respect of
hospital property leases are reviewed annually with reference to
RPI, subject to assorted floors and caps. The discount rate used is
calculated on a lease-by-lease basis, and based on estimates of
incremental borrowing rates.
In the period, the Group recognised charges of GBP8.8m (2022:
GBP6.7m) of lease expenses relating to short term and low value
leases for which the exemption under IFRS 16 has been taken. Cash
outflows in respect of these are materially in line with the
expense recognised, resulting in a total cash outflow for all
leases of GBP56.2m (2022: GBP47.8m). The Group has not made any
variable lease payments in the year. The Group is not a lessor for
any leases to external parties. There have been no (2022: no) sale
and leaseback transactions in this period.
Some leases receive RPI increases on an annual basis which
affects both the cash flow and interest charged on those leases.
Except for this increase, cash flows and charges are expected to
remain in line with the current period.
18. Derivatives
The Group has a derivative contract in respect of an interest
rate swap in place:
As at
==================================
30 June 31 December
(GBP million) 2023 (Unaudited) 2022 (Audited)
=========================================== ================= ===============
Amount due for settlement within 12 months 6.6 3.6
Amount due for settlement after 12 months 6.8 5.0
Total derivatives 13.4 8.6
=========================================== ================= ===============
The Group entered into interest rate swaps on 25 July 2022. The
movement in respect of derivatives reflects GBP1.5m (December 2022:
GBP1.2m) recycled in the period and a GBP6.3m credit (December
2022: GBP8.1m credit) in fair value. All movements are reflected
within other comprehensive income.
19. Provisions
The movement for the period in the provisions is as follows:
Business
Medical restructuring
(GBP million) malpractice and other Total
================================ ============ ============== =====
At 1 January 2023 19.4 2.3 21.7
Increase in existing provisions 0.6 - 0.6
Provisions utilised (3.6) (1.0) (4.6)
Provisions released (0.5) - (0.5)
At 30 June 2023 15.9 1.3 17.2
================================== ============ ============== =====
Medical malpractice relates to estimated liabilities arising
from claims for damages in respect of services previously supplied
to patients. Amounts are shown gross of insured liabilities.
Insurance recoveries of GBP4.9m (December 2022: GBP5.4m) are
recognised in other receivables.
Following the completion of the criminal proceedings against Ian
Paterson, a Consultant who previously had practising privileges at
Spire Healthcare, management agreed settlement with all current and
known civil claimants (and the other co-defendants) and made a
provision for the expected remaining costs in FY20. The provision
is being utilised as expected, and no addition has been made in H1
2023. This provision remains subject to ongoing and active review
following the publication of the Public Inquiry report on Paterson
issued on 4 February 2020. It is possible that, as further
information becomes available, an adjustment to this provision will
be required, but at this time, it reflects management's best
estimate of the costs.
The provision in relation to the Ian Paterson costs has been
determined before taking account of any potential further
recoveries from insurers.
As at 30 June 2023, Business Restructuring and Other provisions
primarily includes non-patient claims made against the Group. The
Group is in the process of settling or defending such claims as
appropriate.
Management have sought external counsel, where appropriate, to
determine the appropriate provision levels.
Provisions as at 30 June 2023 are materially considered to be
current and expected to be utilised at any time within the next
twelve months.
20. Trade and other payables
As at
==================================
30 June 31 December
(GBP million) 2023 (Unaudited) 2022 (Audited)
================================ ================= ===============
Trade payables 66.1 67.2
Accrued expenses 60.7 58.4
Social security and other taxes 10.7 9.7
Other payables 33.9 29.2
Trade and other payables 171.4 164.5
================================ ================= ===============
Accrued expenses includes holiday pay accrued of GBP6.0m
(December 2022: GBP5.2m) due to staff deferring leave to maintain
operations throughout the COVID-19 pandemic.
Other payables includes an accrual for pensions and payments on
account. Revenue in respect of payments on account are not
recognised until the performance obligation has been met. At June
2023, the balance of payments on account was GBP9.3m (December
2022: GBP11.9m), and other credit balances, largely relating to NHS
credits, were GBP21.4m (December 2022: GBP28.2m).
21. Share-based payments
The Group operates a number of share-based payment schemes for
Executive Directors and other employees, all of which are
equity-settled.
The Group has no legal or constructive obligation to repurchase
or settle any of the options in cash. The total cost recognised in
the income statement was GBP1.5m in the six months ended 30 June
2023 (2022: GBP1.3m). Employer's National Insurance is also being
accrued, where applicable, at the rate of 14.3%, which management
expects to be the prevailing rate at the time the options are
exercised, based on the share price at the reporting date. The
total National Insurance charge for the period was GBP0.2m (2022:
GBP0.2m).
A summary of additional schemes opened in the period are shown
below:
Long Term Incentive Plan
On 15 March 2023, the Company granted a total of 2,980,384
options to the Executive directors and other senior management. The
options will vest based on return on capital employed ('ROCE')
(35%) targets for the financial year ending 31 December 2025,
relative total shareholder return ('TSR') (35%) targets on
performance over the three year period to 31 December 2026 and
operational excellence ('OE') (30%) targets based on employee
engagement targets and regulatory ratings for the current portfolio
of hospitals, subject to continued employment. Upon vesting, the
options will remain exercisable until March 2034. The Executive
Directors are subject to a 2 year holding period, whilst other
senior management are not.
Deferred Share Bonus Award
On 15 March 2023, the Company granted a total of 168,042 options
to Executive directors, with a vesting date of 14 March 2026. There
are no performance conditions in respect of the scheme and is
subject to continued employment.
22. Non-controlling interest
On 5 May 2023 Spire Healthcare Limited acquired an additional
24.9% interest in Montefiore House Limited in consideration of the
release and discharge of outstanding liabilities. Prior to this
agreement the Group held a 50.1% interest. The Group now owns 75%
of this entity. The accumulated interest relating to the 24.9%
interest acquired in Montefiore has therefore been reclassified to
retained earnings. In addition, the Group entered into an agreement
in which both parties can exercise an option for Spire to purchase
the remaining 25% interest in the subsidiary at a future date.
Refer to Note 24 for more detail.
23. Financial risk management and impairment of financial
assets
The Group has exposure to the following risks from its use of
financial instruments:
-- credit risk;
-- liquidity risk; and
-- market risk.
Note 30 in the Annual Report and Accounts 2022 sets out the
Group's policies and processes for measuring and managing risk.
These have not changed significantly during the period to 30 June
2023.
Credit risk and impairment
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's receivables from customers and investment securities.
Trade and other receivables
The Group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. The Group's exposure
to credit risk from trade receivables is considered to be low
because of the nature of its customers and policies in place to
prevent credit risk occurring in normal circumstances. A large
proportion of revenue arise from insured patients' business and the
NHS. Insured revenues give rise to trade receivables which are
mainly due from large insurance institutions, which have high
credit worthiness. The remainder of revenues arise from individual
self-pay patients and Consultants. Individual self-pay patients
continue to be the largest risk for the Group given the current
economic uncertainty. The Expected Credit Loss ("ECL") as at June
2023 is GBP5.2m (December 2022: GBP5.0m).
The Group establishes an allowance for impairment that
represents its expected credit loss in respect of trade and other
receivables. This allowance is composed of specific losses that
relate to individual exposures and also an expected credit loss
component established using rates reflecting historic information
for payor groups, and forward looking information. Given the
continued economic uncertainty, the Group has considered the
provision required, specifically for self-pay patients and
maintained an adjustment to the provision accordingly, which is in
line with the position at December 2022.
Investments
The Group limits its exposure to credit risk by only investing
in short-term money market deposits with large financial
institutions, which must be rated at least Investment Grade by key
rating agencies.
Interest rate risk
Interest rates on variable rate loans are determined by SONIA
fixings on a quarterly basis. Interest is settled on all loans in
line with agreements and is settled at least annually.
Variable Total Undrawn facility
30 June 2023 (GBP million) 325.0 325.0 100.0
Effective interest rate (%) 5.23% 5.23%
=============================== ======== ===== ================
31 December 2022 (GBP million) 325.0 325.0 100.0
Effective interest rate (%) 3.19% 3.19%
=============================== ======== ===== ================
The following derivative contracts were in place at 30 June 2023
(December 2022: GBP8.6 million asset):
Carrying value
(GBP million) Interest rate Maturity date Notional Amount Asset / (Liability)
=================== ============= ============= =============== ====================
Interest rate swap 2.7780% February 2026 243.8m 13.4
=================== ============= ============= =============== ====================
The fair value of the above instrument is considered the same as
its carrying value. In line with disclosures in note 30 of the 2022
Annual report and accounts, the above instrument uses level 2 of
the fair value hierarchy to measure the fair value of the
instrument.
Sensitivity analysis
A change in 25 basis points in interest rates at the reporting
date would have increased/(decreased) equity and reported results
by the amounts shown below. This analysis assumes that all other
variables remain constant.
Profit or loss Equity
============================ ============================
(GBP million) 25bp increase 25bp decrease 25bp increase 25bp decrease
30 June 2023
Variable rate instruments (0.3) 0.3 (0.3) 0.3
========================== ============= ============= ============= =============
31 December 2022
Variable rate instruments (0.2) 0.2 (0.2) 0.2
========================== ============= ============= ============= =============
Liquidity risk
The following are contractual maturities, as at the balance
sheet date, of financial liabilities, including interest payments
and excluding the impact of netting arrangements:
30 June 2023 Maturity analysis
===================================================== ======== ======== =========
Contractual Between Between Between Between
Carrying cash outflow/ Within 1 and 2 and 3 and 4 and More than
(GBP million) amount (inflow) 1 year 2 years 3 years 4 years 5 years 5
Trade and other
payables 160.7 160.7 160.7 - - - - -
Bank borrowings 324.2 418.9 25.2 26.7 23.8 343.2 - -
Lease liabilities 864.6 1,784.8 93.9 94.0 94.2 92.6 92.9 1,317.2
Financial Liability 9.6 10.7 - 10.7 - - - -
1,359.1 2,375.1 279.8 131.4 118.0 435.8 92.9 1,317.2
Derivative interest
rate swap (13.4) (15.0) (6.6) (5.2) (3.2) - - -
==================== ======== ============== ======= ======== ======== ======== ======== =========
Total 1,345.7 2,360.1 273.2 126.2 114.8 435.8 92.9 1,317.2
==================== ======== ============== ======= ======== ======== ======== ======== =========
31 December 2022 Maturity analysis
===================================================== ======== ======== =========
Between Between Between Between
Carrying Contractual Within 1 and 2 and 3 and 4 and More than
(GBP million) amount cash flows 1 year 2 years 3 years 4 years 5 years 5
Trade and other
payables 154.8 154.8 154.8 - - - - -
Bank borrowings 324.3 394.4 20.2 22.1 20.5 331.6 - -
Lease liabilities 866.5 1,819.1 92.8 93.2 93.6 92.2 92.2 1,355.1
1,345.6 2,368.3 267.8 115.3 114.1 423.8 92.2 1,355.1
Derivative interest
rate swap (8.6) (9.2) (2.9) (3.6) (2.1) (0.6) - -
==================== ======== ============== ======= ======== ======== ======== ======== =========
Total 1,377.0 2,359.1 264.9 111.7 112.0 423.2 92.2 1,355.1
==================== ======== ============== ======= ======== ======== ======== ======== =========
Capital management
At the balance sheet date, the Group's committed undrawn
facilities, and cash and cash equivalents were as follows:
As at
==================================
30 June 31 December
(GBP million) 2023 (Unaudited) 2022 (Audited)
============================================ ================= ===============
Committed undrawn revolving credit facility 100.0 100.0
Cash and cash equivalents 75.7 74.2
============================================ ================= ===============
Capital commitments
Capital commitments comprise amounts payable under capital
contracts which are duly authorised and in progress at the balance
sheet date. They include the full costs of goods and services to be
provided under the contracts through to completion. The Group has
rights within its contracts to terminate at short notice, and
therefore, cancellation payments are minimal.
Capital commitments at the balance sheet date were GBP25.6m
(December 2022: GBP27.0m).
Bases of valuation
Management assessed that cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their carrying amounts largely due to the short-term
maturities of these instruments. The carrying value of debt is
approximately equal to its fair value. During the period, there
were no transfers between the levels in the fair value
hierarchy.
A derivative is a financial instrument whose value is based on
one or more underlying variables. The Group uses derivative
financial instruments to hedge its exposure to interest rate risk.
Derivatives are not held for speculative reasons. Fair values are
obtained from market observable pricing
information including interest rate yield curves and have been
calculated as follows; fair value of interest rate swaps is
determined as the present value of the estimated future cash flows
based on observable yield curves.
The financial asset reflects a profit share arrangement with a
partner. There are no market observable prices for the valuation.
Management uses the expected present value technique - method 2 in
determining the fair value of the arrangement. Management uses
forward looking and historical trends of the partner's gross
profits, growth rate, risk factors and an appropriate discount rate
to determine the fair value. Sensitivities are also taken into
account when reviewing the fair value.
As at 30 June 2023, the Group held the following financial
instruments measured at fair value. There has been no change in the
hierarchy categories during the period.
Instruments measured at fair value
(GBP million)
Value
Value as as at
at 30 June 31 December
2023 2022 Level 1 Level 2 Level 3
Financial assets at fair value
through profit or loss
Profit share arrangement 5.3 4.6 - - 5.3
=============================== =========== ============ ======= ======= =======
Financial liabilities at fair
value through profit or loss
and using hedge accounting
Interest rate swaps 13.4 8.6 - 13.4 -
In the period, Spire Healthcare received a profit share in
respect of the financial asset of GBP0.4m. In addition a fair value
movement of GBP0.7m was recognised in the income statement, and
remains unrealised. The movement on the interest rates swaps
related wholly to fair value movements and is unrealised.
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique.
- Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly, and
- Level 3: techniques which use the inputs which have a
significant effect on the recorded fair value that are not based on
observable market data.
24. Financial liabilities
In the period, the Group entered into an agreement with the
non-controlling interest of one of its subsidiaries, Montefiore
House Limited, in which both parties can exercise an option for
Spire to purchase the remaining 25% interest in the subsidiary at a
future date. The purchase price is calculated in line with
pre-determined metrics which are based on the subsidiary's
performance and the Group multiple. The option can be exercised
between 2 - 5 years. The expected future cash flow to settle the
obligation is discounted at the Group cost of debt of 7.6%. The
financial liability is initially recognised through equity at the
present value of future cash flows and subsequently recognised at
amortised cost.
(GBPm) 2023 2022
================================ ========== ==========
Valuation at 1 January - -
Option to purchase NCI 9.6 -
Carrying amount at 30 June 9.6 -
================================ ========== ==========
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END
IR DGGDCSUBDGXX
(END) Dow Jones Newswires
September 14, 2023 02:00 ET (06:00 GMT)
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