THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION
Spire Healthcare reports its
results
for the year ended 31 December 2023
London, UK, 29 February 2024,
Spire Healthcare Group plc (LSE: SPI) ('Spire Healthcare', 'the
Group' or 'the Company'), a leading independent healthcare group in
the UK, today announces its preliminary results for the year ended
31 December 2023 ('the period' or 'FY23').
Strong full year performance
and confident of future growth
Summary group results for the year
ended 31 December 2023
|
Year
ended 31 December
|
|
£m
|
2023
|
2022
|
Variance
|
Revenue
|
1,359.0
|
1,198.5
|
13.4%
|
Adjusted operating profit
(Adjusted EBIT)
|
130.4
|
105.6
|
23.5%
|
Adjusting items included in
operating profit
|
(4.2)
|
(10.2)
|
NM
|
Operating profit
|
126.2
|
95.4
|
32.3%
|
Profit before taxation
|
34.6
|
3.9
|
NM(1)
|
Profit after taxation
|
27.9
|
8.2
|
NM
|
Basic profit per share,
pence
|
6.8
|
2.1
|
NM
|
Adjusted profit per share, pence
(2)
|
7.9
|
4.2
|
88.1%
|
|
|
|
|
Adjusted EBITDA
(3)
|
234.0
|
203.5
|
15.0%
|
Adjusted FCF
(4)
|
48.0
|
28.0
|
71.4%
|
Net bank debt
(5)
|
315.7
|
250.1
|
26.2%
|
Net bank debt / EBITDA covenant
ratio
|
2.2
|
2.2
|
-
|
1. Not
meaningful
2. Adjusted profit /
(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' refer to page 11. For EBITDA for covenant
purposes, refer to note 17.
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.
Financial and operating
highlights
Strong financial performance with revenue and earnings
significantly ahead of prior year
· Revenue(6) up 13.4% vs FY22 to £1,359.0m, driven
by increasing demand for private healthcare
· Private revenue up 9.5% vs FY22 to £959.7m (FY22: up 14.5%),
with strong growth in PMI
· Adjusted EBIT up 23.5% vs FY22 to £130.4m and Adjusted EBITDA
up 15.0% vs FY22 to £234.0m
· Operating profit up 32.3% vs FY22 to £126.2m, delivered in a
period of macroeconomic uncertainty and in an inflationary
environment
· For
the Hospitals Business (6) revenue up 10.8% vs FY22,
Adjusted EBITDA margin increased to 17.6% (FY22: 17.0%)
· ROCE(7) increased to 7.5% (FY22: 6.2%)
· Net
bank debt / EBITDA covenant ratio maintained at 2.2x at 31 December
2023 (end FY22: 2.2x) after acquisition of Vita Health
Group
· Recommended final dividend of 2.1 pence per ordinary share
(FY22: 0.5 pence per ordinary share)
Continued development of the business in line with
strategy
· 98%
of inspected locations currently rated 'Good' or 'Outstanding' by
regulators in England, Scotland and Wales (end FY22:
98%)
· Acquired Vita Health Group, a provider of mental and physical
health services in England, for a net cash consideration of £73.2m
(see note 24)
· £15m
cost savings achieved as planned; another £60m targeted by the end
of 2026, of which at least £15m will be targeted in 2024
· £84.4m capex (FY22: £90.1m), including a new outpatients and diagnostic centre at Yale, cardiac
services at Manchester and Nottingham, and investment in new
clinics at Abergele and Harrogate
· Progress towards target of becoming net carbon zero by
2030
6. Unless
otherwise stated numbers quoted refer to the Group. The Hospitals
Business relates to business operations performed at hospital
sites. All other Group operations are referred to as 'New Services'
and include the Doctors Clinic Group (DCG), Vita Health Group (VHG)
and the clinics. Revenue and earnings from New Services were not
material in FY23. From FY24, New Services will be presented
separately. Refer tp page 11 for alternative performance
measures.
7. Return on
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. The ROCE outcome includes the
impact of the acquisition of Vita Health Group (VHG) in October
2023 and is stated after taking its actual profit contribution to
the Group for the period to 31 December 2023, adjusting for a full
year effect to annualise the effect of VHG as it has not
contributed a full 12 month EBIT to the Group. Refer to page
12.
Current trading and
outlook
Since the year end, Spire
Healthcare has continued to trade in line with management
expectations. Management remains confident of reaching the
medium-term targets that were set at the Group's Capital Markets
Day in 2022.
In 2024, the Group is planning for
another year of strong overall demand. Private Medical Insurers
(PMIs) are reporting strong increases in policies written,
particularly in corporate, and Spire management expects this trend
to continue. Management believes this will result in more
outpatient activity, which often leads to more inpatient and
daycase treatment.
Management anticipates modest
self-pay (SP) revenue growth in 2024, driven mainly by average
revenue per case (ARPC) and mix management. The Company is
observing certain patients who had previously visited as
self-paying customers now coming to Spire hospitals with PMI
coverage, and we anticipate that this trend will
continue.
The Group's NHS work saw strong
growth in 2023, and in the period ahead, there could be increased
commissioning. Spire Healthcare continues to be well placed to help
the NHS address record waiting lists.
Spire is targeting another year of
strong EBITDA growth, with Adjusted EBITDA guided to be in the
range £255m to £275m for the current financial year. This includes
an EBITDA contribution from VHG of c.£10m and more than £100m
revenue, as previously disclosed. The actual Group outcome will
depend on a number of factors. Supporting factors include growth of
the private business, acceleration of digitalisation/ savings, new
services and NHS commissioning. Potential factors which may impede
the Group's progress include consumer sentiment, the economy,
excessive inflation, high incidence of respiratory illnesses and
NHS budgetary constraints.
Justin Ash, Chief Executive Officer of Spire Healthcare,
said:
"This is a strong set of results,
delivered during a period of macroeconomic uncertainty and in an
inflationary environment, demonstrating that our strategy and
execution is working. The high-quality diagnosis and treatment we
provide in our hospitals continued to meet the demand for fast
access to care throughout 2023, while we broadened our range of
services to meet more of people's healthcare needs out-of-hospital,
in the community and at home. This enabled us to care for over one
million patients for the first time, over the year.
"Our number one priority will
always be quality of care and patient safety, which underpins our
market penetration and consultant support. We have demonstrated
that we can keep this focus whilst driving efficiencies, generating
profit and margin improvement, and delivering long-term shareholder
value. Our strong financial performance in 2023 and our confidence
in the future, underpins the board's recommendation of a full year
dividend of 2.1 pence per share, up significantly over the prior
year. I thank all our colleagues and consultant partners for their
tremendous contribution.
"2024 will be a key year as we
continue to transform the business. Through our programme of
investments in digital platforms, we will be driving further change
and improvement, benefiting patients and colleagues, and generating
significant efficiencies. Our new services will become material
contributors to our operations and financial results, as we strive
to provide a more integrated healthcare offering. I am excited
about our prospects for 2024 and look forward to contributing in
even greater measure to the nation's health in the year
ahead."
The person responsible for making
this announcement is:
Philip Davies, Company
Secretary
For further information please
contact:
Spire
Healthcare
+44 (0)20 7427 9000
Angus Prentice - Director of
Investor Relations
Instinctif
Partners
+44 (0)20 7457 2020
Damian Reece
Guy Scarborough
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 50 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 800 corporate clients.
Working in partnership with over
8,600 experienced consultants, Spire Healthcare delivered tailored,
personalised care to over one million inpatients, outpatients and
daycase patients, and occupational health programme clients, in
2023, and is the leading private provider, by volume, of
knee and
hip operations in the United
Kingdom. It also delivers a range of private and NHS mental health,
musculoskeletal and dermatological services.
Spire Healthcare's well-located
and scalable hospitals have delivered successful and award-winning
outcomes, positioning the group well with patients, consultants,
the NHS, GPs and Private Medical Insurance ('PMI') providers. 98%
of Spire Healthcare's inspected locations are rated 'Good,'
'Outstanding' or the equivalent by health inspectors in England,
Wales and Scotland.
Spire Healthcare is listed on the
London Stock Exchange and is a member of the FTSE 250.
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 9.00am. Please register in advance for
the live webinar of the meeting through the following link:
https://spirehealthcare.zoom.us/webinar/register/WN_M9WnWjkDRzWqDVic-IA8VQ
The webinar will be available for
replay following the meeting through the company's investor
website: https://investors.spirehealthcare.com/home/
Operating review
Overview
Spire Healthcare delivered strong
financial and operational performance during 2023, producing a year
of profitable growth. All headline metrics rose materially
year-on-year (YOY) with increases in revenue, volume, average
revenue per case (ARPC), EBITDA, EBIT and PBT. The performance was
in line with management's expectations and delivered against a
background of high inflation and economic complexity. The Group's
ongoing focus on cost management, with c.£15m saved during the
year, resulted in a strong YOY profit growth, with Adjusted EBITDA
of £234.0m (FY22: £203.5m) and profit before tax of £34.6m (FY22:
£3.9m).
Revenue in FY23 was up 13.4% to
£1,359.0m (FY22: £1,198.5m), driven by increasing demand for
private healthcare, which remained strong throughout the year.
Admissions were up by 5.3% to 276,705. 2023 saw particularly high
demand from private medical insurance (PMI) patients. The Group's
self-pay (SP) business remained robust with volumes exceeding
pre-pandemic levels. SP revenue was up YOY, delivered through a
strong focus on mix, where it targeted more complex, higher margin
treatments in orthopaedics, while scaling back in areas such as
cosmetics.
Going forwards, the Group will
present numbers separately for its Hospitals Business and New
Services - Vita Health Group (VHG), Doctors Clinic Group (DCG) and
the clinics. The New Services, VHG in particular, have lower EBITDA
margins but because they have lower capex requirements, they will
have good flowthrough to PBT. Adjusted EBITDA margin for the
Group's Hospitals Business was 17.6%, up 0.6ppts compared to prior
year. The Group's cost base in 2023 included £6m of IT costs that
relate to cloud-based products that are not capitalised. Adjusted
EBIT margin for the Hospitals Business was 9.9% for the period, up
from 8.8% in FY22. Spire management has now laid the platform for
further margin development to achieve the Group's medium-term
Adjusted EBITDA margin target of at least 21% and Adjusted EBIT
margin target of more than 13% for its Hospitals
Business.
Occurrences of COVID-19 and other
respiratory illnesses do still occur, affecting patients,
colleagues and consultants, but are now part of normal business and
we are managing the associated costs accordingly. The ongoing
shortage of skilled healthcare workers in the UK and around the
world showed little signs of abatement during the period but we
continue to manage this well. It is particularly pleasing to note
that staff turnover fell and colleague engagement scores increased
YOY at Spire Healthcare.
The Group responded well to the
external environment in the period. Despite high UK inflation
prevailing through most of 2023, affecting input costs and wages,
Spire succeeded in growing the business and increasing profits
through careful management of pricing, mix and cost
management.
Further good progress was made
during 2023 to implement the strategy to expand the Group's
healthcare offering. In October 2023, Spire Healthcare acquired VHG
for a net cash consideration of £73.2m. VHG is the largest
independent NHS talking therapies provider and delivers
musculoskeletal and dermatology services, as well as corporate and
occupational health services. The integration of DCG, a provider of
occupational health and GP services, which we acquired towards the
end of 2022, continued during 2023, together with the rollout of
the Group's new clinics. As the Group's broader healthcare offering
continues to be developed, income from this area will become
increasingly material to the Group's performance.
The Group is pleased to announce a
recommended final dividend of 2.1 pence per share (FY22: 0.5 pence
per share), reflecting the Board's confidence in the long-term
prospects of the business.
Managing the business successfully
against a backdrop of inflation and economic complexity
The Group delivered a strong
performance across almost every area of the business in 2023.
Revenue and earnings grew YOY, which was particularly creditable
given a backdrop of high inflation affecting input costs and wages.
Adjusted EBIT rose by 23.5% to £130.4m during FY23 compared to
prior year and Adjusted EBITDA by 15.0% to £234.0m. For the
Hospitals Business, Adjusted EBITDA was up 14.8% vs FY22 to £233.8m
and Adjusted EBITDA margin increased to 17.6%.
Group Profit before tax for FY23
was £34.6m, up significantly on the £3.9m recorded in
FY22.
Spire Healthcare delivered cost
savings of c.£15m during 2023 as planned. Key cost-saving
initiatives included the refinement of best practice establishment
models for hospital operations, the ongoing reorganisation of
hospitals into hubs, sharing of resources and procurement savings.
Improvements in productivity enabled us to reduce FTE per
admission. Another £60m of cost savings is targeted by the end of
2026, of which at least £15m will be targeted in 2024.
The Group continues to benefit
from energy commodity prices fixed in 2021 until Q3 2024, and
management anticipates an additional £2m of expenditure in Q4 24
when these lapses.
As a people business, the support
and investment in Spire Healthcare's workforce is critical to the
health of the Group's business and to delivering good patient
outcomes. Wage rate pressure remains an ongoing consideration for
Spire Healthcare and for healthcare services in the UK more
broadly. Several workforce initiatives were initiated or continued
during 2023 (further detail below) and this led to a YOY
improvement in staff retention and an increase in colleague
engagement. The Group also benefited from a reduction on the use of
agency staff per admission.
Overall, management believes that
the benefits secured from the above actions, combined with the
strategic focus on securing more complex work and the Company's
ability to adjust SP pricing and PMI pricing contractual
arrangements, provide adequate self-help levers to enable the Group
to prosper and deliver profitable, sustainable growth.
Strong cash conversion enabling
ongoing capex investment and M&A
Net bank debt at 31 December 2023
was £315.7m (vs £250.1m at 31 December 2022), with a cash balance
of £49.6m (vs £74.2m at 31 December 2022). The increase in net bank
debt over the period reflects the acquisition of VHG financed by a
combination of cash and debt. The Group entered an interest rate
hedge in July 2022, resulting in 75% of the risk from the senior
loan facility being mitigated until April 2024, after which 50%
will be hedged until February 2026. The Group's funding facilities
were extended by one year to February 2027.
Net debt / Adjusted EBITDA
covenant ratio remained flat at 2.2x as at 31 December 2023 and
2022, even though bank debt has increased due to the acquisition of
VHG.
The Group continued to be cash
generative during the period. Cash inflow from adjusted operating
activities during the period was £228.2m (FY22: £188.1m) which
constitutes a cash conversion rate of 98% (FY22: 92%
conversion).
Capital investment in FY23 was
£84.4m (FY22: £90.1m), in line with the Company's full-year target
range of 6-7% of revenue. Investment in the year
includes the new outpatients and diagnostic centre at Yale,
investment into cardiac services at Manchester and Nottingham,
ophthalmic services at Cambridge, our new clinics, continued major
hospital refurbishment programmes and investment in new equipment,
including further roll-out of robotic surgical
capability.
The strong operational performance
of Spire Healthcare in the period resulted in Adjusted EBIT rising
by 23.5% YOY to £130.4m, leading to a material improvement in ROCE,
up by 1.3ppts to 7.5%. (The ROCE has been adjusted for VHG to
reflect that it has not contributed a full 12 month trading result
to the Group's consolidated financial results.)
Our market
The demand for private healthcare
- from GP and diagnostic services to hospital treatment,
occupational health and talking therapies - remained strong in
2023, with patients seeking prompt, safe and effective diagnosis
and treatment. Demand from SP patients continues to significantly
exceed pre-pandemic levels, while the growth in the PMI business is
being driven by increased awareness among employers and employees
of its benefits in helping people remain in good health.
A number of key trends are
affecting our market:
1. Population
profile
The growing and ageing population
and greater prevalence of long-term conditions continue to be
underlying factors putting pressure on the UK's healthcare
resources.
2. NHS waiting
lists
NHS waiting lists have grown to
record levels, rising to 7.6m pathways in December 2023, up from
7.2m in December 2022, with some people waiting on more than one
pathway. The difficulty for patients lies not only the length of
the lists, but also the length of time people are waiting for
diagnoses and treatments.
3. Private market
Demand for SP healthcare fell
slightly from historic highs in 2023, but demand remains strong,
particularly in our core specialities of hip and knee surgery.
Since the pandemic, PMI penetration has grown significantly - the
most recent LaingBuisson data states that c.7.4m lives are now
covered by private medical cover, and 3.5m each by health cash
plans and dental benefit plans.
4. Healthcare
workforce
The UK healthcare sector continues
to face a severe skills shortage. Attracting and retaining the best
people remains a challenge for all healthcare providers, both
public and private. Rates for agency staff are also rising,
presenting a further challenge.
5. Economic
environment
Following sharp rises in inflation
in the UK in 2022, the rate fell late in 2023, but remains much
higher than the Bank of England's target of 2%. Cost-of-living
pressures are still having a major impact on many people's
disposable income, and higher interest rates have become a factor
for individuals and businesses everywhere. Our core customer is
generally more affluent and more insulated against rising costs,
while our older self-funding customers are mostly far less affected
by mortgage increases.
6. Role for employers in
healthcare
It is increasingly understood that
employers have a role to play in improving the health of their
employees, to enhance the health, protection and wellbeing of
people at work. As a consequence, employers are increasing the
provision of PMI for their employees. Our occupational health (OH)
services are seeing continued demand for employee health support,
and VHG is seeing increased demand from employers for the mental
health and MSK services it provides.
Driving our Purpose and
Strategy
In 2022, Spire Healthcare widened
its Purpose to 'making a positive difference to people's lives',
while broadening our offer of outstanding personalised care to more
people in a wider range of settings. We now aim to be involved in
people's healthcare across both pre- and post-hospital care,
providing support to local communities and responding to increasing
demand for the broad range of healthcare services beyond
hospital-led treatments.
Our strategy is supported by five
key pillars:
· We
will drive hospital
performance, through consistent growth in our existing
hospital estate with increasing margins.
· We
will build on quality and
patient safety to make it a competitive advantage in all our
activities.
· We
will continue to invest in our
workforce through strong recruitment, retention and
development programmes.
· We
will champion
sustainability, as we aim to be recognised as a leader in
our sector.
· We
will develop new services
through selective investments that will attract new patients by
meeting more of their healthcare needs.
All this will help us focus on
delivering a strong financial
performance with a particular emphasis on cash generation,
investment, improving our margin and return on capital, and
delivering strong shareholder returns.
Driving hospital
performance
The core of Spire Healthcare's
business remains the efficient operation of its 39 hospitals.
Overall, hospital performance during the year was strong. Ongoing
significant demand for safe, high quality treatment underpinned
growth in hospital revenue. Overall admissions and revenue were
higher than in FY22, with in-patient and day case admissions 5.3%
ahead of prior year.
Private admissions grew by 3.6%
during the 12-month period compared to prior year, with private
revenue ahead by 9.5%.
PMI revenue grew by 14.3% vs FY22
to £615.7m, reflecting an increase in referrals as demand for PMI
grew. Volume of PMI patients, including admissions and outpatient
procedures, was up 10.1% vs FY22, with admissions up
10.5%.
SP revenue was up YOY by 1.8% to
£344.0m with volumes maintained at levels significantly higher than
pre-COVID. SP admissions and OP procedures reduced by 6.3% versus
FY22. The overall SP market declined. We have maintained the high
levels of revenue from 2022, with ARPC increasing 10.1%. This
revenue has been delivered with management of mix and price. We
have used our digitised pricing engine to generate increased ARPC
and revenue, and we have reduced volumes in cosmetics. We continue to invest selectively in high quality
ophthalmology services but have remained disciplined on pricing in
a competitive market.
Spire Healthcare continued to
support the NHS to reduce waiting lists during the period. It
contributed to the Government's Elective Recovery Taskforce, which
was set up to make better use of the country's healthcare capacity,
and welcomed the emphasis on promoting patient choice which was an
important part of the Taskforce's recommendations. NHS revenue grew
in 2023 by 15.5% to £341.1m compared to last year, while the NHS
tariff increased by 4.1%. We had increased referrals through the
electronic referral system (eRS). Overall NHS volumes, including
admissions and outpatient procedures, were up 6.1% YOY with
admissions up 9.4%. Orthopaedic volumes were up 14% YOY and now
comprise c.58% of all Spire NHS referrals.
The private proportion of total
revenue during FY23 was 70.6% (FY22: 73.1%), 72.3% of hospital
revenue (FY22: 73.2%). This aligns with our aim for private revenue
to be in the range of 70-80%.
The average revenue per case
(ARPC) rose by 6.3% to £3,381. In SP, management has control over
pricing and actively manages it using the Group's digitised pricing
system. Spire Healthcare's PMI prices are adjusted annually in Q1 /
Q2 each year and contain mechanisms linked to inflation, as well as
pricing incentives to capture increased patient flow from insurance
partners. Compared to FY22, PMI ARPC was up 5.1% to £2,896, SP up
10.1% to £4,356 and NHS up 8.4% to £3,392.
Spire Healthcare launched a new,
successful multichannel brand-building campaign 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".
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. A significant
proportion of the Group's operational and capital expenditure is
centred on the delivery of first class healthcare service. 98% of
our inspected hospitals and clinics are currently rated 'Good' or
'Outstanding' by the Care Quality Commission (CQC) or the
equivalent in Scotland and Wales. Three CQC inspections were
performed in 2023: Nottingham - Outstanding (previously
Outstanding); Methley Park - Good (previously Good); and the Orth
Team Centre - Good (initial inspection). We are awaiting
re-inspection of Spire Alexandra, the one remaining site which has
a 'Requires Improvement' rating, and which has not been inspected
since 2016/17. 93% of Spire Healthcare's patients rate the Group's
care as 'Outstanding', up 1ppt vs FY22, while 83% of the Group's
consultant partners rate its care as 'Very Good' or 'Excellent', up
5ppts vs FY22.
Management continues to prepare
for rollout of the new Patient Safety Incident Response Framework
(PSIRF), a new approach to responding to patient safety incidents
across the healthcare sector, which will enable us to investigate
events, when they do happen, in a more responsive and inclusive
way.
Investing in our
workforce
With the ongoing shortage of
skilled healthcare staff in the UK and international market, Spire
Healthcare has continued to invest heavily in its workforce in line
with our strategy.
A number of training and
development courses were delivered during 2023 as part of a
programme to equip current and future leaders of the business. This
included a range of apprenticeship programmes for clinical and
non-clinical colleagues, and almost 4% of permanent colleagues are
in apprenticeship roles.
Spire Healthcare supported
eligible colleagues with a 5.5% salary increase from 1 September
2023, with a 3% rise for colleagues eligible for a bonus, on top of
a 5% rise in 2022 for most eligible colleagues. At that point, the
Group's lowest paid colleagues moved in-line with the Real Living
Wage. In our annual survey of colleagues, 81% recorded that they
were proud to work for Spire Healthcare, up 1ppt versus
FY22.
Spire Healthcare brought
recruitment in-house during H1 2023, which is leading to improved
filling of vacancies and has already generated over £0.5m of
savings. Management is very encouraged that the combined
investments in the workforce are leading to a material reduction in
colleague leaver rates, to the lower levels we sustained before the
pandemic. The Group's 12-month turnover rate was 15.1% in the year
to 31 December 2023, down from 18.8% in the year to 31 December
2022.
Championing
sustainability
Championing sustainability is core
to the Group's strategy and important to our success and future,
and we continue to implement the sustainability strategy we
launched in 2022. The sustainability strategy
covers Spire Healthcare Limited only at this stage; we anticipate
working to bring the rest of the group under the same
plan.
In 2023, we made further progress
towards achieving net zero carbon status by 2030, with investment
during the year in the removal of piped nitrous oxide systems, the
installation of new solar panels, increasing recycling and
generating carbon reduction through the effective management of our
waste, and the optimisation of our building management systems.
Waste is managed more efficiently with 35% (FY22: 30%) now recycled
and we have saved 27,000 litres of water in a trial at two
hospitals. The intensity of the Group's carbon emissions reduced by
12% in 2023 compared to prior year (down 13% in 2022). We are
planning to install solar panels on all our hospitals, with most of
the work completed in 2024, enabling us to make further progress
towards net zero.
Expanding our healthcare
proposition
While running great hospitals
remains central to Spire Healthcare, management is 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. Spire Healthcare wants to take a more proactive role in its
patients' care before and after a stay in hospital. More than that,
the Company wants to be with people throughout their whole
healthcare journey. Further progress towards this ambition of being
a more integrated healthcare provider was made during the
year.
The acquisition of VHG, with a
customer base of 16 NHS integrated care boards and more than 200
corporate clients, enables the Group to expand its capabilities
into low-acuity mental health. In addition, it provides synergies
with the relationships it has already built with corporate and PMI
customers, and occupational health businesses. VHG comes to the
Group with outstanding customer feedback, a proven management team,
and a strong track record in winning new contracts - several of
which will come online in early 2024.
The ongoing integration of DCG,
which was acquired in late 2022, progressed well during 2023.
Company management has restructured the business into two units,
Spire Occupational Health and London Doctors Clinic
(LDC).
Spire Occupational Health
continues to develop in line with the Group's plan. Management's
focus during 2023 has been on integrating the two OH businesses
previously within DCG, Soma Health and Maitland Medical, and
rebranding them as Spire Occupational Health, and the integration
is ongoing in 2024. We also continued to retain and win new clients
including the University of Worcester and F1.
During the year, Spire Healthcare
focused the LDC business in London and South East England, and
closed four LDC clinics in Manchester and Birmingham. The Group has
since opened five new clinics in our core target areas of Bank,
Chiswick, Fulham, Hampstead and Islington. LDC made a small loss in
2023 due to investment in new clinics. The business is expected to
reach profitability in 2024.
Spire Healthcare's GP services
have continued to grow in recent years, with patients attracted by
a high-quality service offering efficient access to a GP near to
where they live, or virtually. Patients also value the longer
appointment times that enable a fuller examination and discussion
of their medical needs with the GP. Taken together, the Spire GP
and LDC businesses now constitute a large, nationwide private GP
network with 18 rapid-access LDC clinics in Greater London and
Spire GP in most hospitals, together delivering around 8,000 GP
appointments each month.
The Group's previously disclosed
plans to target 10 new medical clinics to meet the growing
healthcare needs in our communities, advanced during 2023. We
opened the first of the Company's clinics at Abergele, North Wales
earlier this month. Work to open a second clinic at Harrogate is
underway. The clinics offer ambulatory care, enabling the Group to
build in efficiencies from the start. Some of the clinics will
follow an 'outreach' model, opening close to existing hospitals and
enabling the Group to move some of its outpatient functions and
minor treatments away from its hospitals. Others will be in
completely new parts of the country where the Group does not
currently have a presence, enabling Spire Healthcare to meet the
healthcare needs of more people, and to build relationships with
new consultants.
Dividend
The Directors of Spire Healthcare
have recommended the payment of a final dividend of 2.1 pence per
share for the year ended 31 December 2023. Subject to shareholder
approval at the forthcoming Annual General Meeting on 9 May 2024,
the dividend will be paid on 21 June 2024 to shareholders of the
Company at the close of business on 24 May 2024. This payment is in
line with the Group's clear and sustainable dividend policy whereby
dividends will typically be set at 25-35% of Profit After Tax,
provided bank leverage remains less than 2.5 times.
Board changes
Debbie White and Natalie Ceeney
joined the Board as independent non-executive directors on 1
February 2023 and 1 May 2023, respectively. 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
|
Year
ended 31 December 2023
|
|
Year
ended 31 December 2022
|
|
(£m)
|
Total
before Adjusting items
|
Adjusting
items
(note 9)
|
Total
|
|
Total
before Adjusting items
|
Adjusting
items
(note 9)
|
Total
|
|
Revenue
|
1,359.0
|
-
|
1,359.0
|
|
1,198.5
|
-
|
1,198.5
|
|
Cost of sales
|
(734.8)
|
-
|
(734.8)
|
|
(660.1)
|
-
|
(660.1)
|
|
Gross profit
|
624.2
|
-
|
624.2
|
|
538.4
|
-
|
538.4
|
|
Other operating costs
|
(497.4)
|
(6.7)
|
(504.1)
|
|
(435.8)
|
(10.2)
|
(446.0)
|
|
Other income
|
3.6
|
2.5
|
6.1
|
|
3.0
|
-
|
3.0
|
|
Operating profit
|
130.4
|
(4.2)
|
126.2
|
|
105.6
|
(10.2)
|
95.4
|
|
Finance income
|
1.4
|
-
|
1.4
|
|
-
|
-
|
-
|
|
Finance costs
|
(93.0)
|
-
|
(93.0)
|
|
(91.5)
|
-
|
(91.5)
|
|
Profit before taxation
|
38.8
|
(4.2)
|
34.6
|
|
14.1
|
(10.2)
|
3.9
|
|
Taxation
|
(6.4)
|
(0.3)
|
(6.7)
|
|
2.5
|
1.8
|
4.3
|
|
Profit for the period
|
32.4
|
(4.5)
|
27.9
|
|
16.6
|
(8.4)
|
8.2
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
attributable
to owners of the Parent
|
31.8
|
(4.5)
|
27.3
|
|
17.0
|
(8.4)
|
8.6
|
|
Profit for the year attributable
to non-controlling interest
|
0.6
|
-
|
0.6
|
|
(0.4)
|
-
|
(0.4)
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(1)
|
|
|
234.0
|
|
|
|
203.5
|
|
Basic earnings per share,
pence
|
|
|
6.8
|
|
|
|
2.1
|
|
Adjusted FCF
(2)
|
|
|
48.0
|
|
|
|
28.0
|
|
Net cash from operating
activities
|
|
|
215.5
|
|
|
|
180.1
|
|
Net bank debt
(3)
|
|
|
315.7
|
|
|
|
250.1
|
|
1. Adjusted EBITDA is
calculated as Operating Profit, adjusted to add back depreciation,
and Adjusting items, referred to hereafter as 'Adjusted EBITDA'
refer to page 11. For EBITDA for covenant purposes, refer to note
17.
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 property, plant and
equipment.
3. Net bank debt
is defined as bank borrowings less cash and cash
equivalents
Revenue
Group revenues increased 13.4% to
£1,359.0m (2022: £1,198.5m). The increase is driven by demand for private healthcare which remained strong
throughout the year. The group's self-pay business remained robust
with revenue up YOY delivered through a strong focus on mix, where
it targeted more complex, higher margin treatments in orthopaedics,
while scaling back in high volume but low value areas such as
ophthalmology and cosmetics.
Included in other revenue is
£31.4m related to new Services of which £18.3m of revenue relates
to our recent acquisition of VHG and £13.1m (2022: £0.1m) relates
to The Doctors Clinic Group acquired in the prior year. Revenue and
earnings from new Services were not material in FY23. From FY24,
new Services will be presented separately.
Revenue by location and
payor
|
|
(£m)
|
2023
|
2022
|
Variance
%
(2023-2022)
|
Total revenue
|
1,359.0
|
1,198.5
|
13.4%
|
Of which:
|
|
|
|
Inpatient
|
535.5
|
487.5
|
9.8%
|
Daycase
|
399.9
|
348.0
|
14.9%
|
Out-patient
|
365.4
|
333.1
|
9.7%
|
Other
|
58.2
|
29.9
|
94.5%
|
Total revenue
|
1,359.0
|
1,198.5
|
13.4%
|
Of which:
|
|
|
|
PMI
|
615.7
|
538.7
|
14.3%
|
Self-pay
|
344.0
|
338.0
|
1.8%
|
Total Private
|
959.7
|
876.7
|
9.5%
|
Total NHS
|
341.1
|
295.4
|
15.5%
|
Other1
|
58.2
|
26.4
|
120.5%
|
Total revenue
|
1,359.0
|
1,198.5
|
13.4%
|
1. Other revenue includes fees
paid to the group by consultants (eg for the use of group
facilities and services) and third-party revenue (eg pathology
services to third parties) and rehabilitation, counselling and
physiotherapy revenue from the recent VHG acquisition.
Cost of sales and gross
profit
Gross margin for the year is 45.9%
compared to 2022 of 44.9%. Cost of sales increased in the period by
£74.7m or 11.3% to £734.8m (2022: £660.1m) on revenues that
increased by 13.4% (2022: 8.3%). Increased costs are due to
inflationary pressures, increased agency costs and continued wage
rate expansion. The margin was higher in 2023 due to increased
private volumes, and careful management of pricing, mix and cost
savings.
Cost of sales is broken down, and
presented as a percentage of revenue, as follows:
|
2023
|
2022
|
|
Year
ended 31 December
|
Year
ended 31 December
|
|
£m
|
% of
revenue
|
£m
|
% of
revenue
|
Clinical staff
|
304.1
|
22.4%
|
275.3
|
23.0%
|
Direct costs
|
312.4
|
23.0%
|
280.3
|
23.4%
|
Medical fees
|
118.3
|
8.7%
|
104.5
|
8.7%
|
Cost of sales
|
734.8
|
54.1%
|
660.1
|
55.1%
|
Gross profit
|
624.2
|
45.9%
|
538.4
|
44.9%
|
Other operating costs
Other operating costs, excluding
adjusting items have increased by £61.6m, or 14.1% to £497.4m
(2022: £435.8m). The main driver is increased staff costs due to
continued wage rate expansion and other inflationary pressures.
Depreciation for the year was £103.6m (2022: £97.9m). The increase
is in line with expectations and is largely due to additional
leases relating to medical equipment and RPI increases on
properties. As disclosed in 2022, the prior year benefits from a
reduction in charge of £6.6m (2022: £2.9m) as a consequence of a
revision of the useful life and residual value policy in respect of
freehold properties so that it more closely aligned with external
benchmark information. The useful life was extended from a maximum
of 50 years to a maximum of 60 years, and the group has set the
residual value equal to 20% of cost (previously
nil).
Adjusting items included in
operating costs are explained below. Other operating costs
including Adjusting items for the year ended 31 December 2023
increased by £58.1m or 13.0% to £504.1m (2022: £446.0m)
Operating margin for the year
ended 31 December 2023 is 9.3% (2022: 8.0%). Operating margin,
excluding adjusting items is 9.6%, up from 8.8% at 2022.
Adjusted EBITDA
Adjusted EBITDA for the group has
increased by 15.0% in the period from £203.5m to £234.0m for 2023.
The increase is due to continued growth in private revenue and good
cost management.
Share-based payments
During the period, grants were
made to executive directors and other employees under the company's
Long Term Incentive Plan. For the year ended 31 December 2023, the
charge to the income statement is £3.7m (2022: £2.3m), or £4.1m
inclusive of National Insurance (2022: £2.6m). Further details are
contained in note 27 of the Annual Report and Accounts.
Adjusting items
|
Year
ended 31 December
|
(£m)
|
2023
|
2022
|
Business reorganisation and
corporate restructuring costs
|
2.0
|
4.5
|
Asset acquisitions, disposals,
impairment and aborted project costs
|
3.1
|
4.3
|
Remediation of regulatory
compliance or malpractice costs
|
(0.9)
|
1.1
|
Hospitals set up and closure
costs
|
-
|
0.3
|
Total pre-tax Adjusting items
|
4.2
|
10.2
|
Income tax credit charge on
Adjusting items
|
0.3
|
(1.8)
|
Total post-tax Adjusting items
|
4.5
|
8.4
|
Adjusting items comprise those
matters where the directors believe the financial effect should be
adjusted for, due to their nature, size or incidence, in order to
provide a more accurate comparison of the group's underlying
performance.
Asset acquisitions, disposals,
impairment and aborted project costs of £3.1m mainly relate to
asset acquisitions. In October 2023, the group acquired 100% of the
share capital in Vita Health Group Limited for a net cash
consideration of £73.2m as part of its strategic investment in its
broader healthcare offering. The costs of acquisition of £2.5m have
been incurred in the period. Costs for integration are expected to
continue into FY24. £0.4m of integration related costs have been
incurred following the acquisition of Doctors Clinic Group in
December 2022.
In the prior year, the costs
mainly related to Claremont Hospital and the purchase of the
remaining non-controlling interest, and an impairment of £0.5m was
recognised on the St Saviours property which was sold in H2
2022.
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. This
initiative will be implemented over several phases. In the period,
£2.0m (2022: £4.5m) has been incurred. The initial phase of the
initiative was completed in 2022, with the majority of the project
completed in 2023. It is expected that some costs will be incurred
in 2024 as the project enters into the next strategic
phase.
The group has recognised a credit
of £0.9m during the year in respect of Remediation of Regulatory
Compliance or Malpractice Costs relating to Paterson. This
comprises £2.5m funds received from its insurer and £0.9m reduction
in provision which had been held to resolve the matter. This is
offset by an increased separate provision in respect of Paterson by
£2.5 million (2022: £0.9 million), which relates to a detailed
patient review initiative which commenced in 2021, supporting
patients of Paterson. During 2023 the group has re-evaluated the
expected cost of completing this complex project, and its
associated settlement of patient claims.
Hospital set-up and closure costs
in the prior year mainly relate to the maintenance costs of
non-operational sites.
Net finance costs
Net finance costs remain flat at
£91.6m (2022: £91.5m). This is due to the effectiveness of the
interest rate swaps, interest income on bank deposits offset by
increased interest on the draw down of the revolving credit
facility and a one-off charge of £3.1m in the prior year in respect
of unamortised fees which were recognised in full following the
refinancing of the senior loan facility.
Taxation
The effective tax rate assessed
for the year, all of which arises in the UK, differs from the
standard weighted rate of corporation tax in the UK. The
reconciliation of the actual tax charge to that at the domestic
corporation tax rate is as follows:
|
Year
ended 31 December
|
|
(£m)
|
2023
|
2022
|
Profit before taxation
|
34.6
|
3.9
|
Tax at the standard
rate
|
8.1
|
0.7
|
Effects of:
|
|
|
Expenses and income not deductible
or taxable
|
3.2
|
8.2
|
Tax adjustment for the
Super-deduction allowance
|
(0.8)
|
(2.6)
|
Impairment charge in respect of
held for sale assets (not tax deductible)
|
-
|
0.1
|
One-off impact of revision to
useful economic life and residual value of freehold property
portfolio
|
-
|
(9.0)
|
Adjustments to prior
year
|
(4.2)
|
(1.8)
|
Difference in tax rates
|
0.2
|
0.1
|
Deferred tax not previously
recognised
|
0.2
|
-
|
Total tax
charge/(credit)
|
6.7
|
(4.3)
|
|
|
|
| |
Corporation tax is calculated at
23.5% (2022: 19.0%) of the estimated taxable profit or loss for the
year. The effective tax rate on profit before taxation for the year
is 19.4%, although not truly reflective of the current year
position as a result of adjustments to the prior years (2022: not
meaningful as a result of adjustments in respect of prior years and
movements on deferred tax which are not directly linked to profit).
Excluding the adjustments to prior years in 2023, the effective tax
rate is 31.5%. The adjustments to prior years includes the
recognition of a deferred tax asset in respect of Corporate
Interest restrictions which has recognised a credit of £3.3 million
through adjustments to prior years for deferred tax purposes, as
well as the recognition of deferred tax on acquired losses of £1.9
million in respect of an acquisition. In the prior year, the group
reassessed the useful life and residual value of its freehold
property portfolio. This resulted in a one-off deferred tax credit
of £9.0 million.
Deferred tax is detailed in note
23 of the annual report.
Profit after taxation
The profit after taxation for the
year ended 31 December 2023 was £27.9m (2022: £8.2m).
Alternative performance (non-GAAP)
financial measures
We have provided alternative
financial information that has not been prepared in accordance with
IFRS. We use these alternative 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
alternative 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 alternative financial
measures to investors.
Alternative 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 alternative
financial measures to their most directly comparable IFRS financial
measures provided in the financial statements table.
Adjusted EBITDA, Adjusted EBIT and Hospital Business Adjusted
EBITDA margin
|
Year
ended 31 December
|
|
(£m)
|
2023
|
2022
|
Operating profit
|
126.2
|
95.4
|
Remove effects of:
Adjusting items before interest
and tax
|
4.2
|
10.2
|
Adjusted EBIT
|
130.4
|
105.6
|
Depreciation
|
103.0
|
97.9
|
Amortisation
|
0.6
|
-
|
Adjusted EBITDA
|
234.0
|
203.5
|
|
|
|
For the Hospital Business
|
|
|
Revenue
|
1,327.6
|
1,198.5
|
Adjusted EBITDA
|
233.8
|
203.5
|
Adjusted EBITDA margin
|
17.6%
|
17.0%
|
|
|
| |
Adjusted profit after tax and adjusted earnings per
share
Adjustments have been made to
remove the impact of non-recurring items.
|
Year
ended 31 December
|
|
(£m)
|
2023
|
2022
|
Profit before tax
|
34.6
|
3.9
|
Adjustments for:
Adjusting Items - operating
costs
|
4.2
|
10.2
|
Adjusted profit before
tax
|
38.8
|
14.1
|
Taxation(1)
|
(6.4)
|
2.5
|
Adjusted profit after
tax
|
32.4
|
16.6
|
Profit for the year attributable
to owners of the parent
|
31.8
|
17.0
|
Profit / (loss) for the year
attributable to non-controlling interests
|
0.6
|
(0.4)
|
Weighted average number of
ordinary shares in issue (No.)
|
403,648,886
|
402,679,296
|
Adjusted earnings per share
(pence) attributable to the parent
|
7.9
|
4.2
|
|
|
| |
1. Reported tax charge for the
period adjusted for the tax effect of Adjusting Items
Return on capital employed
Return on 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. In the current year the calculation annualises
the EBIT of the VHG acquisition as it was not part of the group for
the full year. The calculation of return on capital employed is
shown below:
|
Year
ended 31 December
|
(£m)
|
2023
|
2022
|
Adjusted EBIT
|
130.4
|
105.6
|
Adjusted: for full year pro-forma
effect of VHG acquisition
|
6.8
|
-
|
Adjusted EBIT pre VHG
|
137.2
|
105.6
|
|
|
|
Total Assets
|
2,288.1
|
2,159.8
|
Less: Cash and cash
equivalents
|
(49.6)
|
(74.2)
|
Less: Capital
investments
|
(84.4)
|
(90.1)
|
Less: Current
Liabilities
|
(317.6)
|
(283.4)
|
Capital Employed
|
1,836.5
|
1,712.1
|
Return on capital employed %
|
7.5%
|
6.2%
|
Adjusted Free Cash flow
|
Year
ended 31 December
|
(£m)
|
2023
|
2022
|
Adjusted EBITDA
|
234.0
|
203.5
|
Less: Lease payments
|
(100.2)
|
(93.7)
|
Less: Cash flow for the purchase
of property, plant and equipment
|
(84.4)
|
(87.7)
|
Less: Working capital
movement
|
(15.5)
|
(15.0)
|
Less: Adjustments for
non-recurring items
|
14.1
|
20.9
|
Adjusted FCF
|
48.0
|
28.0
|
Cash flow analysis for the
period
|
Year
ended 31 December
|
(£m)
|
2023
|
2022
|
Opening Cash balance
|
74.2
|
202.6
|
Operating cash flows before
recurring items and VHG
|
228.2
|
186.5
|
Less: Adjustments for
non-recurring items and VHG
|
9.9
|
-
|
Operating cash flows before
Adjusting Items and income tax paid
|
218.3
|
186.5
|
Net cash flow from Adjusting Items
(included in operating cash flows)
|
(2.7)
|
(6.4)
|
Income tax paid
|
(0.1)
|
(0.1)
|
Operating cash flows after
operating Adjusting Items and income tax
|
215.5
|
180.0
|
Net cash flow from Adjusting Items
(included in investing cash flows)
|
-
|
3.2
|
Net cash in investing
activities
|
(84.0)
|
(87.2)
|
Cash outflow for acquisition of
subsidiary
|
(73.2)
|
(11.4)
|
Investing cash flows after
investing Adjusting Items
|
(157.2)
|
(95.4)
|
Net cash in financing
activities
|
(82.9)
|
(210.3)
|
Financing cash flows after
financing Adjusting Items
|
(82.9)
|
(213.0)
|
Closing cash balance
|
49.6
|
74.2
|
Closing cash balance
The group's year end cash balance
stood at £49.6m, which reflects a reduction of £24.6m against the
prior year balance of £74.2m. This movement contains two
significant one-off items being the acquisition of VHG for a net
cash consideration of £73.2m and a cash inflow of £40m from the
draw down of the revolving credit facility. Further detailed
information on the cash flow during the period is set out in the
following sections.
Operating cash flows before Adjusting items
The cash inflow from operating
activities before tax, Adjusting items and VHG was £228.2m (2022: £186.5m), which
constitutes a cash conversion rate from £232.2m Adjusted EBITDA pre
VHG of 98% (2022: 92% conversion of £203.5
Adjusted EBITDA). The net cash outflow from movements in working
capital in the period was £15.5m (2022: £15.0m
outflow).
Investing and financing cash flows
Net cash outflow in investing
activities for the period was £157.2m (2022: £95.4m). The cash
outflow relates to the net cash consideration paid for the
acquisition of VHG of £73.2m and the purchase of plant, property
and equipment in the period totalled £84.4m (2022: £87.7m). Capital
investment in the year includes the new outpatients and diagnostic
centre at Yale, investment into cardiac theatres at Manchester and
Nottingham, ophthalmic services at Cambridge and continued major
hospital refurbishment programmes.
Net cash used in financing
activities for the period was £82.9m (2022: £213.0m) Cash outflows
include interest paid and other financing costs of £90.0m (2022:
£94.6m), and £27.2m (2022: £18.5m) of lease liability payments and
£3.1m for the buyback of shares to settle share awards. This is
offset by an inflow of £40m from the draw down of the revolving
credit facility.
Borrowings
At 31 December 2023, the group has
bank borrowings (inclusive of IFRS 9 adjustments) of £365.3m (2022:
£324.3m), drawn under facilities which mature in February
2027.
|
Year
ended 31 December
|
(£m)
|
2023
|
2022
|
Cash
|
49.6
|
74.2
|
Bank borrowings
|
365.3
|
324.3
|
Bank borrowings less cash and cash
equivalents
|
315.7
|
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 31
December 2023 the leverage measure stood at 2.2x (2022:2.2x)
and interest cover of 8.5x (2022:
8.5x).
As at 31 December 2023 lease
liabilities were £891.7m (2022: £866.5m).
Dividend
The directors of Spire Healthcare
have recommended the payment of a final dividend of 2.1 pence per
share for the year ending 31 December 2023. Subject to shareholder
approval at the forthcoming Annual General Meeting on 9 May
2024.
Related party
transactions
There were no significant related
party transactions during the period under review.
Principal Risks
We set out our principal risks
with their material mitigations below. Further detail on our
principal risks will be found in the 2023 Annual Report and
Accounts on pages 64 to 74.
|
|
1. Workforce
|
We seek to retain colleagues
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 5.5% increase for most
eligible colleagues. We will continue to review pay competitiveness
in all the sectors in which we operate
· Offering greater flexibility in employee's roles
· Employee development programmes, eg a nurse training
programme and other apprentice schemes
· Continuous investment in our equipment, facilities and
services to retain high-quality clinicians
In 2023, our risk mitigations have
helped to produce a downward trend in colleague churn
rates.
We seek to recruit colleagues
through:
· A
centralised recruitment process which we brought in-house
2023
· Offering apprenticeship programmes to support the development
of clinical and non-clinical teams across the business
· Building of local bank colleague pools and using digital
solutions to improve access to available shifts
· An
overseas recruitment capability to secure skilled healthcare
workers from outside the EU (in line with World Health Organization
protocols to recruit from only 'green' countries).
The group manages immediate
colleague shortages using agency and bank workers.
|
2. Inflation and wage
inflation
|
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 pricing engine
subject to prevailing market conditions. Our conversion rate from
Out-patient appointment to In-patient procedure remains
stable. Our procurement team maintains a constant review of
pricing and seeks opportunities to mitigate inflationary
increases.
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, and
supported by an efficient cost base.
We responded to wage inflation by
announcing to our staff early in 2023 that the 2023 general pay
increase will be 5.5% for most eligible colleagues, and more for
those near minimum wage.
|
3. 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 situated in 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 eg, 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 December 2024.
|
4. Information governance &
security
|
The data strategy, governance and
security committee monitors the risk and mitigations for data
governance and cyber security. The committee reports into the
executive committee with a separate reporting line to the audit and
risk committee . To support this governance structure, we have a
range of policies and practices, and mandatory staff training
covering data governance and cyber security (eg, central monitoring
of compliance with data subject access requests, data processing
impact assessments and notifications to or from the Information
Commissioners Office) 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
|
5. Digitalisation, automation &
efficiency
|
The digital strategy focuses on an
18-24 month planning horizon to improve the predictability of
investment and outcomes. This will enable Spire to adjust the
priorities and speed of implementation in response to changes in
the macro climate and competitive landscape.
We will utilise best practice
programme governance, supported by third party experts, to deliver
change programmes into the business.
We will use technology to enable
early benefits realisation, for example utilising process
automation to release immediate efficiencies and improvements to
boost productivity and further fund future investments for
digitalisation.
The digital strategy has built-in
focus on innovation and external horizon scanning to ensure we are
not behind the curve compared to competitors (current or
future).
|
6. Brand reputation
|
Our primary mitigations against
damage to our brand reputation is through the good management of
our principal risks, in particular:
· Patient safety and clinical quality
· Cyber
security and data protection
· 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.
|
7. Government and NHS
policy
|
Historically, we derived 70% of
our revenues from PMI and 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.
During the COVID-19 pandemic, we
strengthened our relationships with the Department of Health and
Social Care and NHS England. Meanwhile hospitals have also
strengthened their relationships with the local NHS commissioners.
The Integrated Care Systems (ICSs) 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 ICSs.
Vita Health Group's acquisition
gives us a new opportunity to participate in the NHS tender
market.
We also inputted into the
government's Elective Recovery Taskforce, whose work concluded in
summer 2023.
|
8. Self-pay market
dynamics
|
We invest in high-quality patient
care as this provides an attractive service to self-pay patients
and promotes our brand through word-of-mouth
recommendations.
Since 2022, we have deployed
national multi-channel marketing campaigns highlighting the key
benefits of private healthcare to increase our brand
awareness.
We are expanding the range of
services we offer to capture a greater share of services that have
healthy demand growth (as illustrated by our acquisition of Vita
Health Group).
We are strengthening our
operational capability with further enhancements to the website
(content and functionality) and call centre resilience and
training.
We have adopted sophisticated
pricing capability.
We are promoting patient financing
as a payment option.
|
9. Major infrastructure
failure
|
All our hospitals have a backup
power source provided from diesel powered generators that operates
major circuits of a hospital, but some key equipment is not
covered, eg, 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.
NHS hospitals are obliged to
provide emergency care to everyone but their pressures on ambulance
services can and do lead to delays to emergency transfers on rare
occasions. Mitigation plans are in place and rehearsed at
hospitals.
The chief executive officer chairs
a regular multi-disciplinary winter planning meeting to co-ordinate
response activities to any infrastructure failures.
|
10. Patient safety and clinical
quality
|
We maintain the following controls
to mitigate against a failure of patient safety and clinical
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. We are
migrating to the new Patient Safety Incidence Response Framework
(PSIRF) in 2024 in line with the NHS
· 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 KPIs
· 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)
|
11. Expanding our
proposition
|
We have:
· 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
advisers
· Acquisition due diligence processes using appropriate
third-party expertise
· Board
review and approval of acquisitions
· Post-acquisition project management and integration processes
incorporating learnings from previous acquisitions
The acquisition of Vita Health
Group has opened new commercial opportunities for us, but
importantly also improved our mitigation of this risk.
|
12. 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 invest in high quality patient
care as this provides a high-quality service to the insured
patients of our PMI partners.
We ensure we have long-term
contracts in place with our PMI partners that avoids co-termination
of contractual arrangements.
We believe that continuing to
invest in our well-placed portfolio of hospitals provides a natural
fit to the local requirements of all the PMI providers 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.
|
13. Supply chain
disruption
|
We run a centralised supply chain
with a national distribution centre (NDC) and its own vehicle and
driver fleet. Medical consumables are held at the NDC with an
average of six weeks' supply, medicines and prostheses are being
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. We 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.
We will continue to monitor supply
chain risks considering the continuing geopolitical
volatility.
|
14. Antimicrobial
resistance
|
Our mitigations are:
· Executive level awareness of the government's five-year AMR
strategy
· Participation in, and collaboration with, government's
monitoring of AMR outbreaks
· Requirement on clinicians to follow guidance in line with
government guidelines on the prescribing of antibiotics
· 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' responsibilities
statement
Viability
Assessment of prospects
In accordance with the 2018 UK
Corporate Governance Code, the directors assessed the viability of
the group and have maintained a period of three years for their
assessment. Although longer periods are used when making
significant strategic decisions, three years has been used as it is
considered the longest period of time over which suitable certainty
for key assumptions in the current climate can be made. The
assessment conducted considered the group's current financial
position and forecasted revenue, EBITDA, cash flows, risk
management controls and loan covenants over the three-year period
(which is consistent with the approach for prior years).
Assessment of viability
Further detail on Macroeconomic
related risk is provided in the Risk management and internal
control section in the Strategic Report.
Other specific scenarios covered
by our testing were as follows:
· the
group is subject to temporary suspension of trade, with a temporary
adverse impact on revenue, for example, as a result of a successful
cyber-attack on key business systems;
· the
downside modelling of a number of risks which result in a decline
in earnings, including the loss of a contractual relationship with
a key insurer;
· significant change in government policy resulting in
consultants going on payroll; and
· short
term disruption to trade at a sub-set of hospitals owing to an
extreme weather event.
This review included the following
key assumptions:
· no
change in capital structure given the group refinanced its existing
senior finance facility and revolving credit facility in February
2022; and
· the
government will not make significant change to its existing policy
towards utilising private provision of healthcare services to
supplement the NHS.
Based on the results of this
review, the directors confirm that they have a reasonable
expectation that the group will be able to continue in operation
and meet its liabilities as they fall due over the next three
years.
Going Concern
The group assessed going concern
risk through to 30 June 2025. As at 31 December 2023 the group had
cash of £49.6m, a Senior Loan Facility of £325m and an undrawn
Revolving Credit Facility of £60m. A RCF drawing of £50m was used
for the October 2023 acquisition of Vita Health Group with £10m of
this being repaid by the end of the year. On 3 March 2023, the
group successfully extended the senior loan facility by a further
year. The financial covenants relating to this new agreement are
materially unchanged.
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 30 June 2025, 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 breaches its financial covenant.
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
21% fall in forecast annual revenue before the group breaches its financial
covenant, we believe that the risk of an event giving rise to this
size of reduction in revenue is remote.
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.
By order of the board
Justin Ash
Jitesh Sodha
Chief Executive
Officer
Chief Financial Officer
28 February 2024
Consolidated income
statement
For the year ended 31 December
2023
|
|
2023
|
|
2022
|
(£m)
|
Note
|
Total
before Adjusting
items
|
Adjusting
items
(note
9)
|
Total
|
|
Total
before Adjusting items
|
Adjusting
items
(note
9)
|
Total
|
|
Revenue
|
5
|
1,359.0
|
-
|
1,359.0
|
|
1,198.5
|
-
|
1,198.5
|
|
Cost of sales
|
|
(734.8)
|
-
|
(734.8)
|
|
(660.1)
|
-
|
(660.1)
|
|
Gross profit
|
|
624.2
|
-
|
624.2
|
|
538.4
|
-
|
538.4
|
|
Other operating costs
|
|
(497.4)
|
(6.7)
|
(504.1)
|
|
(435.8)
|
(10.2)
|
(446.0)
|
|
Other income
|
6
|
3.6
|
2.5
|
6.1
|
|
3.0
|
-
|
3.0
|
|
Operating profit (EBIT)
|
7
|
130.4
|
(4.2)
|
126.2
|
|
105.6
|
(10.2)
|
95.4
|
|
Finance income
|
8
|
1.4
|
-
|
1.4
|
|
-
|
-
|
-
|
|
Finance cost
|
8
|
(93.0)
|
-
|
(93.0)
|
|
(91.5)
|
-
|
(91.5)
|
|
Profit before taxation
|
|
38.8
|
(4.2)
|
34.6
|
|
14.1
|
(10.2)
|
3.9
|
|
Taxation
|
10
|
(6.4)
|
(0.3)
|
(6.7)
|
|
2.5
|
1.8
|
4.3
|
|
Profit for the year
|
|
32.4
|
(4.5)
|
27.9
|
|
16.6
|
(8.4)
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
attributable
to owners of the parent
|
|
31.8
|
(4.5)
|
27.3
|
|
17.0
|
(8.4)
|
8.6
|
|
Profit / (loss) for the year
attributable
to non-controlling
interest
|
|
0.6
|
-
|
0.6
|
|
(0.4)
|
-
|
(0.4)
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (in pence per
share)
|
|
|
|
|
|
|
|
|
|
- basic
|
11
|
7.9
|
(1.1)
|
6.8
|
|
4.2
|
(2.1)
|
2.1
|
|
- diluted
|
11
|
7.7
|
(1.1)
|
6.6
|
|
4.1
|
(2.0)
|
2.1
|
|
|
|
|
|
|
|
|
|
|
| |
Consolidated statement of
comprehensive income
For the year ended 31 December
2023
(£m)
|
2023
|
2022
|
Profit for the year
|
27.9
|
8.2
|
Items that may be reclassified to profit or loss in
subsequent periods
|
|
|
(Loss) / Gain on cash flow
hedges
|
(4.2)
|
9.3
|
Taxation on cash flow
hedges
|
0.9
|
(2.2)
|
Other comprehensive (loss) /
profit for the year
|
(3.3)
|
7.1
|
|
|
|
Total comprehensive profit for the
year, net of tax
|
24.6
|
15.3
|
Attributable to:
|
|
|
Equity holders of the
parent
|
24.0
|
15.7
|
Non-controlling
interests
|
0.6
|
(0.4)
|
|
24.6
|
15.3
|
Consolidated statement of changes
in equity
For the year ended 31 December
2023
(£m)
|
Note
|
Share
Capital
(note
16)
|
Share
premium
|
Capital
reserves
(note
16)
|
EBT
share
reserves
(note 16)
|
Hedging
Reserve
(note
16)
|
Retained
earnings
|
Total
Equity
|
Non-Controlling Interest
|
Total
|
As at 1 January 2022
|
|
4.0
|
826.9
|
376.1
|
(0.8)
|
(0.5)
|
(496.1)
|
709.6
|
(4.8)
|
704.8
|
Profit / (loss) for the
year
|
|
-
|
-
|
-
|
-
|
-
|
8.6
|
8.6
|
(0.4)
|
8.2
|
Other comprehensive profit for the
year
|
|
-
|
-
|
-
|
-
|
7.1
|
-
|
7.1
|
-
|
7.1
|
Total comprehensive
profit
|
|
-
|
-
|
-
|
-
|
7.1
|
8.6
|
15.7
|
(0.4)
|
15.3
|
Dividends to non-controlling
interests
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.2)
|
(0.2)
|
Dividends paid in respect of
vested share awards
|
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
-
|
(0.1)
|
Share-based payments
|
20
|
-
|
-
|
-
|
-
|
-
|
2.3
|
2.3
|
-
|
2.3
|
Deferred tax adjustment on
share-based payments reserve
|
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
-
|
(0.1)
|
Issue of new shares
|
|
-
|
3.1
|
-
|
-
|
-
|
-
|
3.1
|
-
|
3.1
|
Utilisation of EBT shares for
share awards
|
|
-
|
-
|
-
|
0.8
|
-
|
(0.8)
|
-
|
-
|
-
|
Purchase of non-controlling
interest
|
|
-
|
-
|
-
|
-
|
-
|
0.5
|
0.5
|
(0.5)
|
-
|
As at 1 January 2023
|
|
4.0
|
830.0
|
376.1
|
-
|
6.6
|
(485.7)
|
731.0
|
(5.9)
|
725.1
|
Profit for the year
|
|
-
|
-
|
-
|
-
|
-
|
27.3
|
27.3
|
0.6
|
27.9
|
Other comprehensive loss for the
year
|
|
-
|
-
|
-
|
-
|
(3.3)
|
-
|
(3.3)
|
-
|
(3.3)
|
Total comprehensive
profit
|
|
-
|
-
|
-
|
-
|
(3.3)
|
27.3
|
24.0
|
0.6
|
24.6
|
Dividends paid
|
|
-
|
-
|
-
|
-
|
-
|
(2.0)
|
(2.0)
|
-
|
(2.0)
|
Share-based payments
|
20
|
-
|
-
|
-
|
-
|
-
|
3.7
|
3.7
|
-
|
3.7
|
Deferred tax adjustment on
share-based payments reserve
|
|
-
|
-
|
-
|
-
|
-
|
(0.3)
|
(0.3)
|
-
|
(0.3)
|
Settlement on vested share
awards
|
|
-
|
-
|
-
|
-
|
-
|
(0.6)
|
(0.6)
|
-
|
(0.6)
|
Purchase of own shares by
EBT
|
|
-
|
-
|
-
|
(3.1)
|
-
|
-
|
(3.1)
|
-
|
(3.1)
|
Issue of own shares by EBT in
respect of share awards
|
|
-
|
-
|
-
|
2.4
|
-
|
2.4
|
-
|
-
|
-
|
Additional interest acquired of non-controlling
interest
|
|
-
|
-
|
-
|
-
|
-
|
(3.2)
|
(3.2)
|
3.2
|
-
|
Financial liability to acquire
non-controlling interests
|
|
-
|
-
|
-
|
-
|
-
|
(9.6)
|
(9.6)
|
-
|
(9.6)
|
Balance at 31 December
2023
|
|
4.0
|
830.0
|
376.1
|
(0.7)
|
3.3
|
(472.8)
|
739.9
|
(2.1)
|
737.8
|
Consolidated balance
sheet
For the year ended 31 December
2023
(£m)
|
Note
|
2023
|
2022
|
ASSETS
|
|
|
|
Non-current assets
|
|
|
|
Property, plant and
equipment
|
12
|
1,618.8
|
1,584.4
|
Intangible assets
|
13
|
438.3
|
345.8
|
Derivatives
|
|
0.4
|
5.0
|
Financial assets
|
|
10.0
|
4.6
|
|
|
2,067.5
|
1,939.8
|
Current assets
|
|
|
|
Inventories
|
|
44.3
|
40.6
|
Trade and other
receivables
|
14
|
121.6
|
100.5
|
Derivatives
|
|
4.0
|
3.6
|
Cash and cash
equivalents
|
|
49.6
|
74.2
|
|
|
219.5
|
218.9
|
Non-current assets held for
sale
|
15
|
1.1
|
1.1
|
|
|
220.6
|
220.0
|
Total assets
|
|
2,288.1
|
2,159.8
|
EQUITY AND LIABILITIES
|
|
|
|
Equity
|
|
|
|
Share capital
|
16
|
4.0
|
4.0
|
Share premium
|
|
830.0
|
830.0
|
Capital reserves
|
16
|
376.1
|
376.1
|
EBT share reserves
|
|
(0.7)
|
-
|
Hedging reserve
|
16
|
3.3
|
6.6
|
Retained loss
|
|
(472.8)
|
(485.7)
|
Equity attributable to owners of
the Parent
|
|
739.9
|
731.0
|
Non-controlling
interests
|
|
(2.1)
|
(5.9)
|
Total equity
|
|
737.8
|
725.1
|
Non-current liabilities
|
|
|
|
Bank Borrowings
|
17
|
361.9
|
321.4
|
Lease liabilities
|
17
|
793.3
|
773.7
|
Financial liabilities
|
23
|
9.6
|
-
|
Deferred tax
liabilities
|
|
67.9
|
56.2
|
|
|
1,232.7
|
1,151.3
|
Current liabilities
|
|
|
|
Bank Borrowings
|
17
|
3.4
|
2.9
|
Lease liabilities
|
17
|
98.4
|
92.8
|
Provisions
|
18
|
16.4
|
21.7
|
Trade and other
payables
|
19
|
197.1
|
164.5
|
Income tax payable
|
|
2.3
|
1.5
|
|
|
317.6
|
283.4
|
Total liabilities
|
|
1,550.3
|
1,434.7
|
Total equity and
liabilities
|
|
2,288.1
|
2,159.8
|
These Consolidated financial
statements and the accompanying notes were approved for issue by
the Board on 28 February 2024 and signed on its behalf
by:
Justin
Ash
Jitesh Sodha
Chief Executive
Officer
Chief Financial Officer
Consolidated statement of cash
flows
For the year ended 31 December
2023
(£m)
|
Note
|
2023
|
2022
|
Cash flows from operating
activities
|
|
|
|
Profit before taxation
|
|
34.6
|
3.9
|
Adjustments to reconcile profit
before tax to net cash flows:
|
|
|
|
Impairment of assets held for sale
(Adjusting items) (see note 9)
|
|
-
|
0.5
|
Fair value adjustment on financial
liability (Adjusting items) (see note 9)
|
|
-
|
0.8
|
(Profit) / loss on disposal of
property, plant and equipment
|
|
(0.3)
|
0.3
|
Adjusting
items - other
|
|
1.5
|
2.5
|
Depreciation of property, plant
and equipment and right-of-use assets
|
|
103.0
|
97.9
|
Amortisation of intangible
assets
|
|
0.6
|
-
|
Finance income
|
|
(1.4)
|
-
|
Finance costs
|
|
93.0
|
91.5
|
Other income
|
|
(3.6)
|
(3.0)
|
Share-based payments
expense
|
|
3.7
|
2.3
|
Movements in working
capital:
|
|
|
|
Increase in trade receivables and
prepayments
|
|
(12.7)
|
(6.9)
|
Increase in inventories
|
|
(3.7)
|
(0.4)
|
Increase in trade and other
payables
|
|
2.2
|
8.2
|
Decrease in provisions
|
|
(1.3)
|
(15.9)
|
Cash generated from
operations
|
|
215.6
|
181.7
|
Tax paid
|
|
(0.1)
|
(0.1)
|
Net cash flows from operating
activities
|
|
215.5
|
181.6
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
Receipt from financial
asset
|
|
0.7
|
0.5
|
Acquisition of a subsidiary, net
of cash acquired
|
|
(73.2)
|
(11.3)
|
Purchase of property, plant &
equipment
|
|
(84.4)
|
(87.7)
|
Proceeds of disposal of property,
plant and equipment
|
|
0.8
|
-
|
Proceeds of disposal of assets
held for sale (Adjusting items)1
|
|
-
|
3.2
|
Interest received on bank
deposits
|
|
1.4
|
-
|
Movement in restricted
cash
|
|
(2.5)
|
-
|
Net cash used in investing
activities
|
|
(157.2)
|
(95.3)
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
Interest paid and other financing
costs
|
|
(17.0)
|
(21.1)
|
Interest on lease
liabilities
|
|
(73.0)
|
(73.5)
|
Payment of lease
liabilities
|
|
(27.2)
|
(20.2)
|
Proceeds from senior loan
facility
|
|
-
|
325.0
|
Repayment of senior loan
facility
|
|
-
|
(425.0)
|
Draw down on revolving credit
facility
|
|
60.0
|
-
|
Repayment on revolving credit
facility
|
|
(20.0)
|
-
|
Proceeds from the issue of new
shares
|
|
-
|
3.1
|
Purchase of own shares
|
|
(3.1)
|
-
|
Purchase of non-controlling
interests (Adjusting item)1
|
|
-
|
(2.7)
|
Settlement on vested share
awards
|
|
(0.6)
|
-
|
Dividend paid to non-controlling
interests
|
|
-
|
(0.3)
|
Dividends paid to equity holders
of the parent
|
|
(2.0)
|
-
|
Net cash used in financing
activities
|
|
(82.9)
|
(214.7)
|
Net decrease in cash and cash
equivalents
|
|
(24.6)
|
(128.4)
|
Cash and cash equivalents at 1
January
|
|
74.2
|
202.6
|
Cash and cash equivalents at 31
December
|
|
49.6
|
74.2
|
Total pre-tax adjusting items is
£4.2m (2022: £10.2m) of which £2.7m (2022: £6.4m) is included in
cash generated from operations.
Notes to the preliminary 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 financial statements for the
year ended 31 December 2023 were authorised for issue by the board
of directors of the company on
28 February 2024.
The company is a public limited
company, which is listed on the London Stock Exchange,
incorporated, registered and domiciled in England and Wales
(registered number: 09084066). The address of its registered office
is 3 Dorset Rise, London, EC4Y 8EN.
2. Basis of preparation
The preliminary financial
information for the year ended 31 December 2023 included in this
report was approved by the board on 28 February 2024. The financial
information set out here does not constitute the company's
statutory accounts for the year ended 31 December 2023 but is
derived from those accounts. Statutory accounts for 2023 will be
delivered following the company's annual general meeting. The
auditor has reported on those accounts; their report was
unqualified and did not draw attention to any matters by way of
emphasis and did not contain statements under s498 (2) or (3) of
the Companies Act 2006.
Going concern
The group assessed going concern
risk for the period through to 30 June 2025. As at 31 December 2023
the group had cash of £49.6m, a Senior Loan Facility of £325m and
an undrawn Revolving Credit Facility of £60m. An RCF drawing of
£50m was used for the October 2023 acquisition of Vita Health Group
with £10m of this being repaid by the end of the year. On 3 March
2023, the group exercised the option to extend the senior loan
facility by a further year. 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 30 June 2025, 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 breaches its financial covenant.
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
21% fall in annual forecast revenue before the group breaches its
financial covenant, we believe that the risk of an event giving
rise to this size of reduction in revenue is remote.
It should be noted that we are in a
period of material geopolitical and macroeconomic 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 this preliminary
announcement, 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 2023, a copy of
this report will shortly be available on the company's website
at www.spirehealthcare.com.
Changes in accounting policy - New
standards, interpretations and amendments applied
The following amendments to
existing standards were effective for the group from 1 January
2023. Other than some additional disclosures, these amendments have not had a material impact on the
consolidated financial statements of the group.
|
Effective date*
|
Amendments to IAS 8 - Definition
of accounting estimates
|
1 January 2023
|
Amendments to IAS 1 and IFRS
Practice Statement 2 - Disclosure of Accounting Policies
|
1 January 2023
|
Amendments to IAS 12 - Deferred
tax related to assets and liabilities arising from a
single
transaction
|
1 January 2023
|
Amendments to IAS 12 -
International Tax Reform-Pillar Two Model Rules
|
1 January 2023
|
IFRS 17 - Insurance
contracts
|
1 January 2023
|
* The
effective dates stated above are those given in the original
IASB/IFRIC standards and interpretations that are consistent with
the endorsement process for use in the UK.
Changes in accounting policy - new
standards, interpretations and amendments in issue, but not yet
effective
As at date of approval of the
group financial statements, the following new and amended
standards, interpretations and amendments in issue are applicable
to the group but not yet effective and thus, have not been applied
by the group:
|
Effective date*
|
Amendments to IAS 1 -
Classification of liabilities as current or
non-current
|
1 January 2024
|
Amendments to IAS 7 and IFRS 7 -
Supplier Finance Arrangements
|
1 January 2024
|
Amendments to IFRS 16 - Lease
Liability in a sale and leaseback
|
1 January 2024
|
Amendments to IAS 21 - Lack of
exchangeability
|
1 January 2025
|
* The
effective dates stated above are those given in the original
IASB/IFRIC standards and interpretations. As the group prepares its
financial statements in accordance with IFRS as issued by the IASB
as endorsed by the UK, the application of new standards and
interpretations will result in an effective date subject to that
agreed by the UK Endorsement process.
4. Critical accounting judgements
and estimates
In the application of the group's
accounting policies, the directors are required to make judgements
and estimates about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
In preparing this preliminary
announcement, the significant judgements and estimates made by
management in applying the group's accounting policies and key
sources of estimation uncertainty were the same as those applied to
the consolidated financial statements for the year ended 31
December 2023.
5. Segmental reporting
In determining the group's
operating segment, management has primarily considered the
financial information in internal reports that are reviewed and
used by the executive management team and board of directors (who
together are the chief operating decision maker of Spire
Healthcare) 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 location (inpatient,
daycase or out-patient) and wider customer (payor) group is shown
below:
(£m)
|
2023
|
2022
|
Inpatient
|
535.5
|
487.5
|
Day case
|
399.9
|
348.0
|
Out-patient
|
365.4
|
333.1
|
Other 1
|
58.2
|
26.4
|
NHS - COVID-19
|
-
|
3.5
|
Total revenue
|
1,359.0
|
1,198.5
|
|
|
|
Insured
|
615.7
|
538.7
|
Self-pay
|
344.0
|
338.0
|
NHS
|
341.1
|
295.4
|
Other 1
|
58.2
|
26.4
|
Total
|
1,359.0
|
1,198.5
|
1 Other revenue includes fees paid
to the group by consultants (eg for the use of group facilities and
services) and third-party revenue (eg pathology services to third
parties) and rehabilitation, counselling and physiotherapy revenue
from the recent VHG acquisition.
Group revenues increased 13.4% to
£1,359.0 million (2022: £1,198.5 million). The increase is
driven by demand for private healthcare which
remained strong throughout the year. The group's self-pay business
remained robust with revenue up YOY delivered through a strong
focus on mix, where it targeted more complex, higher margin
treatments in orthopaedics, while scaling back in high volume but
low value areas such as ophthalmology and cosmetics.
Included in other revenue is £31.4m related to
new services of which £18.3m of revenue relates to our recent
acquisition of VHG and £13.1m (2022: £0.1m) relates to The Doctors
Clinic Group acquired in the prior year. Revenue from new services
were not material in FY23. From FY24, new services will be
presented separately.
6. Other
income
(£m)
|
2023
|
2022
|
Fair value movement on financial
asset
|
2.8
|
2.3
|
Realised profit in respect of
financial asset
|
0.8
|
0.7
|
Settlement from an insurer
(adjusting items)
|
2.5
|
-
|
Total other income
|
6.1
|
3.0
|
The fair value movement and
realised profit in respect of the financial asset reflect the
on-going profit share arrangement with Genesis Care which arose as
part of the sale of the Bristol Cancer Centre sold in
2019.
7.
Operating profit
Arrived at after charging / (crediting):
(£m)
|
2023
|
2022
|
Depreciation of property, plant
and equipment (see note 12)
|
65.5
|
64.2
|
Depreciation of right-of-use
assets (see note 12)
|
37.5
|
33.7
|
Amortisation of intangible
assets
|
0.6
|
-
|
Acquisition-related transaction
costs (adjusting item) (see note 9)
|
2.5
|
1.8
|
Lease payments made in respect of
low value and short leases
|
18.6
|
13.6
|
Provision following a court
judgment related to Ian Paterson (adjusting item) (see note
9)
|
2.5
|
0.3
|
Impairment on assets held for
sale
|
-
|
0.5
|
Movement on the provision for
expected credit losses of trade receivables
|
0.5
|
0.9
|
(Profit) / loss on disposal of
property, plant and equipment
|
(0.3)
|
0.3
|
Fair value adjustment on financial
liability
|
-
|
0.8
|
Staff restructuring
costs
|
2.0
|
4.5
|
Staff costs (net of staff
restructuring costs and including share-based payment
charge)
|
475.2
|
413.9
|
Inventory recognised as an expense
in the current year is disclosed in note 17 of the Annual Report
and Accounts.
8. Finance
income and costs
(£m)
|
2023
|
2022
|
Finance income
|
|
|
Interest income on bank
deposits
|
1.4
|
-
|
Total finance income
|
1.4
|
-
|
|
|
|
Finance cost
|
|
|
Interest on bank
facilities
|
18.5
|
12.4
|
Refinancing fees
|
-
|
1.0
|
Amortisation of fee arising on
facilities extensions/borrowing costs (1)
|
1.5
|
1.5
|
Accelerated amortisation and loss
on extinguishment of loan
|
-
|
3.1
|
Interest on obligations under
leases
|
73.0
|
73.5
|
Total finance costs
|
93.0
|
91.5
|
Total net finance costs
|
91.6
|
91.5
|
1.
£5.0 million of borrowing costs were
capitalised on the refinancing of the senior facility, these are
being amortised. In the prior year £3.1m of unamortised fees on the
old facility were charged to the profit and loss in the year on the
extinguishment of the old facility.
9. Adjusting items
(£m)
|
2023
|
2022
|
Asset acquisitions, disposals,
impairment and aborted project costs
|
3.1
|
4.3
|
Business reorganisation and
corporate restructuring costs
|
2.0
|
4.5
|
Remediation of regulatory
compliance or malpractice costs
|
(0.9)
|
1.1
|
Hospital set up and closure
costs
|
-
|
0.3
|
Total pre-tax adjusting items
|
4.2
|
10.2
|
Income tax credit on adjusting
items
|
0.3
|
(1.8)
|
Total post-tax adjusting items
|
4.5
|
8.4
|
Adjusting items comprise those
matters where the directors believe the financial effect should be
adjusted for, due to their nature, size or incidence, in order to
provide a more accurate comparison of the group's underlying
performance.
Asset acquisitions, disposals,
impairment and aborted project costs of £3.1 million mainly relate
to asset acquisitions. In October 2023, the group acquired 100% of
the share capital in Vita Health Group Limited for £83.0 million as
part of its strategic investment in its broader healthcare
offering. The costs of acquisition of £2.5 million have been
incurred in the period. Costs for integration are expected to
continue into FY24. £0.4 million of integration related costs have
been incurred following the acquisition of The Doctors Clinic Group
in December 2022.
In the prior year, the costs
mainly related to Claremont Hospital and the purchase of the
remaining non-controlling interest, and an impairment of £0.5
million was recognised on the St Saviours property which was sold
in H2 2022.
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. This
initiative will be implemented over several phases. In the period,
£2.0 million (2022: £4.5 million) has been incurred. The initial
phase of the initiative was completed in 2022, with the majority of
the project completed in 2023. It is expected that some costs will
be incurred in 2024 as the project enters into the next strategic
phase.
The group has recognised a credit
of £0.9 million during the year in respect of Remediation of
Regulatory Compliance or Malpractice Costs relating to Paterson.
This comprises £2.5 million funds received from its insurer and
£0.9 million reduction in provision which had been held to resolve
the matter. This is offset by an increased separate provision in
respect of Paterson by £2.5 million (2022: £0.9 million), which
relates to a detailed patient review initiative which commenced in
2021, supporting patients of Paterson. During 2023 the group has
re-evaluated the expected cost of completing this complex project,
and its associated settlement of patient claims.
Hospital set up and closure costs
mainly relate to the maintenance costs of non-operational
sites.
10. Taxation
(£m)
|
2023
|
2022
|
Current tax
|
|
|
UK corporation tax
expense
|
0.9
|
0.1
|
Adjustments in respect of prior
years
|
(1.3)
|
(0.7)
|
Total current tax
credit
|
(0.4)
|
(0.6)
|
Deferred tax
|
|
|
Origination and reversal of
temporary differences
|
10.0
|
(2.6)
|
Adjustments in respect of prior
years
|
(2.9)
|
(1.1)
|
Total deferred tax charge /
(credit)
|
7.1
|
(3.7)
|
Total tax charge /
(credit)
|
6.7
|
(4.3)
|
In addition to the above, a credit
of £0.9 million has been recognised in Other Comprehensive income
(2022: £2.1 million charge) and £0.3 million credit (2022: £0.1
million charge) through equity. The £0.3 million credit through
equity relates to movements on share-based payments, and reflects a
£0.5 million deferred tax charge, offset by a current tax credit of
£0.8 million.
Corporation tax is calculated at
23.5% (2022: 19.0%) of the estimated taxable profit or loss for the
year. The effective tax rate on profit before taxation for the year
is 19.4%, although not truly reflective of the current year
position as a result of adjustments to the prior years (2022: not
meaningful as a result of adjustments in respect of prior years and
movements on deferred tax which are not directly linked to profit).
Excluding the adjustments to prior years in 2023, the effective tax
rate is 31.5%. The adjustments to prior years includes the
recognition of a deferred tax asset in respect of Corporate
Interest restrictions which has recognised a credit of £3.3 million
for deferred tax purposes, as well as the recognition of deferred
tax on acquired losses of £1.9 million in respect of an
acquisition. In the prior year, the group reassessed the useful
life and residual value of its freehold property portfolio. This
resulted in a one-off deferred tax credit of £9.0
million.
The effective tax assessed for the
year, all of which arises in the UK, differs from the standard
weighted rate of corporation tax in the UK. The reconciliation of
the actual tax charge to that at the domestic corporation tax rate
is as follows:
(£m)
|
2023
|
2022
|
Profit before taxation
|
34.6
|
3.9
|
Tax at the standard
rate
|
8.1
|
0.7
|
Effects of:
|
|
|
Expenses and income not deductible
or taxable
|
3.2
|
8.2
|
Tax adjustment for the
super-deduction allowance
|
(0.8)
|
(2.6)
|
Impairment charge in respect of
held for sale assets (not tax deductible)
|
-
|
0.1
|
One-off impact of revision to
useful life and residual value of freehold property portfolio
(deferred tax)
|
-
|
(9.0)
|
Reallocation to equity
|
-
|
-
|
Adjustments to prior
year
|
(4.2)
|
(1.8)
|
Difference in tax rates
|
0.2
|
0.1
|
Deferred tax not previously
recognised
|
0.2
|
-
|
Total tax charge /
(credit)
|
6.7
|
(4.3)
|
Expenses and income not deductible
or taxable relate mostly to depreciation on non-qualifying fixed
assets, disallowable entertaining and legal and professional
fees.
The current year and prior year
charges are driven by expenses not deductible for tax purposes,
offset by adjustments to prior year and the claim of the super
deduction for capital allowance purposes.
The group does not hold any
uncertain tax positions under IFRIC 23 at the year-end (2022:
none).
Pillar Two legislation, reflecting
the OECDs Base Erosion Profit Shifting ('BEPs') framework, seeks to
enforce a minimum tax rate on large and multinational groups in
each jurisdiction in which it operates. This legislation has been
enacted or substantively enacted in the UK, being the only
jurisdiction in which the group operates.
The legislation will be effective
for the group's financial year beginning 1 January 2024. The group
has performed an assessment of the group's potential exposure to
Pillar Two income taxes.
This assessment is based on the
most recent information available regarding the financial
performance of the constituent entities in the group. Based on the
assessment performed, Pillar Two effective tax rates in the UK,
being the only jurisdiction in which the group operates, has been
above 15% in the current and previous financial years, and
management is not currently aware of any circumstances under which
this might change. Therefore, the group does not expect a potential
exposure to Pillar Two top-up taxes.
11. Earnings per share
(EPS)
Basic EPS is calculated by
dividing the profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the year.
|
2023
|
2022
|
Profit for the year attributable
to ordinary equity holders of the parent (£m)
|
27.3
|
8.6
|
Weighted average number of
ordinary shares for basic EPS (No.)
|
404,117,249
|
402,756,797
|
Adjustment for weighted average
number of shares held in EBT
|
(468,363)
|
(77,501)
|
Weighted average number of
ordinary shares in issue (No.)
|
403,648,886
|
402,679,296
|
Basic earnings per share (in pence
per share)
|
6.8
|
2.1
|
For dilutive EPS, the weighted
average number of ordinary shares in issue is adjusted to include
all dilutive potential ordinary shares arising from share options.
Refer to the Remuneration Committee Report in the Annual Report and
Accounts for the terms and conditions of instruments generating
potential ordinary shares that affect the measurement of diluted
EPS.
|
2023
|
2022
|
Profit for the year attributable
to ordinary equity holders of the parent (£m)
|
27.3
|
8.6
|
Weighted average number of
ordinary shares in issue (No.)
|
403,648,886
|
402,679,296
|
Adjustment for weighted average
number of contingently issuable shares
|
9,494,645
|
9,363,470
|
Diluted weighted average number of
ordinary shares in issue (No.)
|
413,143,531
|
412,042,766
|
Diluted earnings per share (in
pence per share)
|
6.6
|
2.1
|
The directors believe that EPS
excluding adjusting items (adjusted EPS) better reflects the
underlying performance of the business and assists in providing a
clearer view of the performance of the group.
Reconciliation of profit after
taxation to profit after taxation excluding Adjusting items
("Adjusted profit"):
|
2022
|
2021
|
Profit for the year attributable
to owners of the parent (£m)
|
27.3
|
8.6
|
Adjusting items (see note
9)
|
4.5
|
8.4
|
Adjusted profit (£m)
|
31.8
|
17.0
|
Weighted average number of
Ordinary Shares in issue
|
403,648,886
|
402,679,296
|
Weighted average number of
dilutive Ordinary Shares
|
413,143,531
|
412,042,766
|
Adjusted basic earnings per share
(in pence per share)
|
7.9
|
4.2
|
Adjusted diluted earnings per
share (in pence per share)
|
7.7
|
4.1
|
12. Property, plant and
equipment
(£m)
|
Freehold
property
|
Leasehold
improvements
|
Equipment
|
Assets in
the course of construction
|
Right-of-use
(ROU)
|
Total
|
Cost:
|
|
|
|
|
|
|
At 1 January 2022
|
845.3
|
177.7
|
480.6
|
10.9
|
825.9
|
2,340.4
|
Additions
|
8.5
|
6.4
|
55.9
|
19.3
|
-
|
90.1
|
Acquisition of a subsidiary (note
24)
|
-
|
-
|
0.6
|
-
|
-
|
0.6
|
Additions to ROU assets
|
-
|
-
|
-
|
-
|
4.
9
|
4.9
|
Adjustments to existing assets (eg
indexation)
|
-
|
-
|
-
|
-
|
34.0
|
34.0
|
Disposals
|
(3.6)
|
(3.7)
|
(71.8)
|
-
|
(0.9)
|
(80.0)
|
Transfers1
|
-
|
-
|
(10.0)
|
-
|
10.0
|
-
|
At 1 January 2023
|
850.2
|
180.4
|
455.3
|
30.2
|
873.9
|
2,390.0
|
Additions
|
7.2
|
12.1
|
42.3
|
22.3
|
-
|
83.9
|
Acquisition of a subsidiary (note
24)
|
-
|
-
|
1.3
|
-
|
1.3
|
2.6
|
Additions to ROU assets
|
-
|
-
|
-
|
-
|
14.7
|
14.7
|
Adjustments to existing assets (eg
indexation)
|
-
|
-
|
-
|
-
|
36.7
|
36.7
|
Disposals
|
(0.7)
|
(2.4)
|
(21.6)
|
(0.4)
|
(0.1)
|
(25.2)
|
Transfer1
|
3.7
|
13.3
|
9.9
|
(26.9)
|
-
|
-
|
At 31 December 2023
|
860.4
|
203.4
|
487.2
|
25.2
|
926.5
|
2,502.7
|
Accumulated depreciation and
impairment:
|
|
|
|
|
|
|
At 1 January 2022
|
189.0
|
54.4
|
320.8
|
-
|
222.7
|
786.9
|
Charge for the year
|
12.3
|
9.3
|
42.6
|
-
|
33.7
|
97.9
|
Disposals
|
(3.1)
|
(3.6)
|
(71.6)
|
-
|
(0.9)
|
(79.2)
|
At 1 January 2023
|
198.2
|
60.1
|
291.8
|
-
|
255.5
|
805.6
|
Charge for the year
|
12.2
|
9.8
|
43.5
|
-
|
37.5
|
103.0
|
Disposals
|
(0.6)
|
(2.4)
|
(21.6)
|
-
|
(0.1)
|
(24.7)
|
Transfers1
|
(0.2)
|
-
|
0.2
|
-
|
-
|
-
|
At 31 December 2023
|
209.6
|
67.5
|
313.9
|
-
|
292.9
|
883.9
|
|
|
|
|
|
|
|
Net book value:
|
|
|
|
|
|
|
At 31 December 2023
|
650.8
|
135.9
|
173.3
|
25.2
|
633.6
|
1,618.8
|
At 31 December 2022
|
652.0
|
120.3
|
163.5
|
30.2
|
618.4
|
1,584.4
|
1 In the prior year management
identified a number of assets which should be reclassified from
Equipment to Right of use. In the current year the transfer from
assets under construction relates to assets which were brought into
use. These have been reflected in the reclassification line in the
note above. There is no overall impact to the carrying value of
property, plant and equipment.
The net book value of land is
£156.3 million (2022:£156.3 million). Nine of the group's freehold
properties are pledged as security against the senior finance
facility, the net book value of these properties are £124 million
(2022: £157.6 million). There were no borrowing costs capitalised
during the year ended 31 December 2023 (2022: Nil).
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 to key assumptions.
In order to estimate the
value-in-use, management has used trading projections covering the
period to December 2028 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, it takes 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
consider the potential financial impact from short-term climate
change scenarios, and the cost of initiatives that have
substantially commenced 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 five-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 was one property triggered
for detailed review in the period owing to the relatively lower
level of headroom. Management has performed a sensitivity analysis
on these properties 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
five-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 property triggered for detail
review has headroom (amount that recoverable amount exceeded the
carrying amount) of £3.9 million. The sensitivity analysis
identified that a reasonably possible change in the EBITDA growth
over the five year period for the triggered property, would result
in the elimination of headroom. The average annual EBITDA growth
over the five years is 8.8%. The annual EBITDA over the five year
period would have to decrease by 16.0% per annum to eliminate the
headroom.
During the year the group moved to
a post IFRS 16 discount rate, the group has used a pre-tax discount
rate of 11.5% (2022: 10.6% adjusted for the effect of IFRS
16). A long-term growth rate of 2.0% has been applied to cash
flows beyond 2028 based on a 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 discount rate, 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.
13. Intangible assets
(£m)
|
Goodwill
|
Customer
contracts
|
IT
projects
|
Mobilisation costs
|
Total
|
Cost or valuation:
|
|
|
|
|
|
At 1 January 2022
|
535.8
|
-
|
-
|
-
|
535.8
|
Acquisition of a
subsidiary
|
11.1
|
-
|
-
|
-
|
11.1
|
Adjustment to prior year goodwill
acquired
|
(0.1)
|
-
|
-
|
-
|
(0.1)
|
At 31 December 2022
|
546.8
|
-
|
-
|
-
|
546.8
|
Acquisition of a
subsidiary
|
65.3
|
20.6
|
4.3
|
2.4
|
92.6
|
Additions
|
-
|
-
|
0.3
|
0.2
|
0.5
|
At 31 December 2023
|
612.1
|
20.6
|
4.6
|
2.6
|
639.9
|
|
|
|
|
|
|
Impairment:
|
|
|
|
|
|
At 31 January 2022 and 31 December
2022
|
201.0
|
-
|
-
|
-
|
201.0
|
Amortisation charge during the
year
|
-
|
0.2
|
0.3
|
0.1
|
0.6
|
At 31 December 2023
|
201.0
|
0.2
|
0.3
|
0.1
|
201.6
|
|
|
|
|
|
|
Carrying amount:
|
|
|
|
|
|
At 31 December 2023
|
411.1
|
20.4
|
4.3
|
2.5
|
438.3
|
At 31 December 2022
|
345.8
|
-
|
-
|
-
|
345.8
|
Acquisition during the
year
On 18 October 2023, the group
acquired 100% of the voting shares of Vita Health Group, a
non-listed company based in England who are a provider of mental
and physical health services in the UK, for a net cash
consideration of £73.2 million generating goodwill of £65.3
million. On acquisition the group acquired £27.3 million of other
intangible assets relating to IT projects, mobilisation costs
related to NHS contracts and customer relationship contracts. In
determining the fair value of intangible assets acquired in line
with IFRS 3 the group obtained an independent valuation of customer
contracts relating to NHS and corporate contracts and recognised
acquired intangibles of £20.1 million.
Impairment testing
The directors treat the hospital
business and The Doctors Clinic Group as separate cash-generating
units for the purposes of testing goodwill for impairment as the
goodwill can be reliably allocated. The goodwill recognised for the
VHG acquisition has not yet been allocated as the initial
accounting is not yet complete. The recoverable amount of goodwill
is calculated by reference to its estimated value-in-use. In order
to estimate the value-in-use, management has used trading
projections covering the period to December 2028 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, it takes into
account both current business and committed initiatives. In
addition, management consider 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 five-year period, capital maintenance spend,
discount rates and long-term growth rates. The assumptions are
based on past experience and external sources of
information.
Management has performed a
sensitivity analysis 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 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.
Cash generating unit
|
Headroom
(the amount that recoverable amount exceeded the carrying
amount)
£m
|
Average
EBITDA growth over the five year period
|
Sensitivity for decrease of average EBITDA per
annum
|
Hospital business
|
793.7
|
9.0%
|
23.2%
|
The Doctors Clinic Group
("DCG")
|
7.2
|
87.9%
|
30.3%
|
The trading projections for the
five-year period underlying the value-in-use reflect a growth in
EBITDA. EBITDA is dependent 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. During the year DCG made a
small loss owing to the effect of integration costs, one off
investments in new clinics and a planned delay in the offer of
in-house laboratory services. This is now rolling out and 2024 is
expected to see a return to profitability, which is factored into
the growth in EBITDA.
During the year the group moved to
a post IFRS 16 discount rate, and has used a pre-tax discount of
11.5% (2022: 10.6% adjusted for the effect of IFRS 16).
A long-term growth rate of 2.0% has
been applied to cash flows beyond 2028 based on long-term view of
inflation and market conditions. Capital maintenance spend is based
on historic run rates and our expectation 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.
14. Trade and other
receivables
(£m)
|
2023
|
2022
|
Amounts falling due within one
year:
|
|
|
Trade receivables
|
74.8
|
59.8
|
Unbilled receivables
|
20.2
|
18.2
|
Prepayments
|
21.9
|
15.7
|
Other receivables
|
10.2
|
11.8
|
|
127.1
|
105.5
|
Allowance for expected credit
losses
|
(5.5)
|
(5.0)
|
Total current trade and other
receivables
|
121.6
|
100.5
|
Unbilled receivables reflects work
in progress where a patient had treatment, or was receiving
treatment, at the end of the period and the invoice had not yet
been raised.
Other receivables includes the
£4.6 million insurance reimbursement right (2022: £5.4 million); as
well as £4.1 million (2022: £2.6 million) reimbursement right
related to the Paterson fund, which is being held by solicitors on
account until payments are made, with any amount not paid out being
returned to Spire Healthcare. During the year, £3.9 million was
paid out of this fund and an additional £5.5 million was paid into
the fund. The amounts paid to the new Paterson fund do not reflect
an investment in a financial asset, but merely a right to
reimbursement should the fund not be utilised in full.
Trade and other receivables of
£12.7 million have been recognised on the acquisition of Vita
Health Group during the year (note 24).
Trade receivables comprise amounts
due from private medical insurers, the NHS, self-pay patients,
consultants and other third parties who use the group's facilities.
Invoices to customers fall due within 60 days of the date of
issue.
The group was successful in its
bid to be included on the NHSE Framework for purchasing additional
activity from the independent sector, which commenced in April
2021. Inclusion on the Framework is at an agreed price for
activity, based on the NHS tariff, but carries no guaranteed
volumes. For contracts under the framework that include an
estimated contract value, billing is in advance for the expected
volume, with a quarterly true-up for actual volumes undertaken. For
contracts under the framework without an estimated contract value
(which can include local agreements), billing is in arrears based
on actual volumes only.
The ageing of trade receivables is
shown below and shows amounts that are past due at the reporting
date (excluding payments on account where there is no right to
offset these at the reporting date). A provision for expected
credit losses has been recognised at the reporting date through
consideration of the ageing profile of the group's trade
receivables and the perceived credit quality of its customers
reflecting net debt due. The carrying amount of trade receivables,
net of expected credit losses, is considered to be an approximation
to its fair value.
The loss allowance as at 31
December 2023 for trade receivables was determined as
follows:
|
Current
|
0-30
days
|
31-90
days
|
91-364
days
|
1-2
years
|
Total
|
Expected loss rate
|
0.0%
|
2.7%
|
16.3%
|
29.0%
|
41.9%
|
5.1%
|
Gross debt (£m)
|
75.3
|
14.8
|
4.3
|
6.2
|
6.2
|
106.8
|
Less payments on account
(£m)
|
|
|
|
|
|
(32.0)
|
Carrying amount of trade
receivables (£m)
|
|
|
|
|
|
74.8
|
Loss allowance (£m)
|
-
|
0.4
|
0.7
|
1.8
|
2.6
|
5.5
|
The loss allowance as at 31
December 2022 for trade receivables was determined as
follows:
|
Current
|
0-30
days
|
31-90
days
|
91-364
days
|
1-2
years
|
Total
|
Expected loss rate
|
0.0%
|
1.8%
|
8.3%
|
29.2%
|
17.5%
|
7.2%
|
Gross debt (£m)
|
27.8
|
16.8
|
8.4
|
8.9
|
8.0
|
69.9
|
Less payments on account
(£m)
|
|
|
|
|
|
(10.1)
|
Carrying amount of trade
receivables (£m)
|
|
|
|
|
|
59.8
|
Loss allowance (£m)
|
-
|
0.3
|
0.7
|
2.6
|
1.4
|
5.0
|
Trade receivables are written off
when there is no longer a reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery
include, amongst others, the failure of a debtor to engage in a
repayment plan with the group, and failure to make contractual
payments for a period of greater than two years past
due.
The group assesses on a
forward-looking basis expected credit losses associated with its
debt instruments carried at amortised cost. The impairment
methodology applied for trade receivables is the simplified
approach, which requires expected lifetime losses to be recognised
from initial recognition of the trade receivables.
Trade receivables after expected
credit losses comprise the following wider customer/payor
groups:
(£m)
|
2023
|
2022
|
Private medical
insurers
|
29.5
|
30.4
|
NHS
|
25.0
|
8.2
|
Patient debt
|
4.1
|
7.2
|
Other
|
10.7
|
9.0
|
|
69.3
|
54.8
|
The movement in the allowance for
impairment in respect of trade receivables during the year was as
follows:
(£m)
|
2023
|
2022
|
At 1 January
|
5.0
|
4.1
|
Provided in the year
|
1.6
|
1.1
|
Utilised during the
year
|
(0.3)
|
(0.2)
|
Released during the
year
|
(0.9)
|
-
|
At 31 December
|
5.5
|
5.0
|
The group applies the IFRS 9
simplified approach to measuring Expected Credit Losses (ECLs) for
trade receivables. Under this standard, lifetime ECL provisions are
recognised for trade receivables using a matrix of rates dependent
on age thresholds and customer types. The ECL rates are determined
with reference to historical performance of each payor age group
during the last two years.
To develop the ECL matrix, trade
receivables were grouped according to shared characteristics
(payor/payor type) and the days past due. As the majority of the
group's debt is receivable from large, well-funded insurance
companies, the National Health Service or from a large number of
individuals, the group has concluded that historical debt
performance of the portfolio during the last two reporting periods
provides a reasonable approximation of the future expected loss
rates for each payor age category.
15. Non-current assets held for
sale
As at 31 December 2023 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 as classified as held for sale.
(£m)
|
2023
|
2022
|
Bostocks Lane (East Midlands
Cancer Centre)
|
1.1
|
1.1
|
|
1.1
|
1.1
|
16. Share capital and
reserves
|
2023
|
2022
|
Authorised shares
|
|
|
Ordinary share of £0.01
each
|
404,126,630
|
404,108,470
|
|
404,126,630
|
404,108,470
|
|
|
|
Issued and fully paid
|
£0.01
ordinary shares
|
|
Shares
|
£'000
|
At 31 December 2023
|
404,126,630
|
4,042
|
At 31 December 2022
|
404,108,470
|
4,041
|
During the year, the authorised
share capital was increased by £181.60 by the issue of 18,160
ordinary shares of £0.01 each.
Share premium
(£m)
|
2023
|
2022
|
At 1 January
|
830.0
|
826.9
|
Issue of new
shares
|
-
|
3.1
|
At 31 December
|
830.0
|
830.0
|
During the year the group issued
18,160 shares to settle share awards of which 18,160 shares were
exercised under the save as you earn 2019 scheme at an average
price of £1.09 per share. The proceeds from the issue of shares
were £29,163.
Capital reserves
This reserve represents the loans
of £376.1 million due to the former ultimate parent undertaking and
management that were forgiven by those counterparties as part of
the reorganisation of the group prior to the IPO in
2014.
EBT share reserves
Equiniti Trust (Jersey) Limited is
acting in its capacity as trustee of the company's Employee Benefit
Trust (EBT). The purpose of the EBT is to further the interests of
the company by benefitting employees and former employees of the
group and certain of their dependants. The EBT is treated as an
extension of the group and the company.
During the year, the EBT purchased
1,339,634 shares and exercised 1,054,620 shares (2022: 88,354
shares issued and 300,491 exercised) in order to settle share
awards in relation to the directors' share bonus award and
Long-Term Incentive Plan.
Where the EBT purchases the
company's equity share capital the consideration paid, including
any directly attributable incremental costs, is deducted from
equity attributable to the company's equity holders until the
shares are cancelled or reissued. As at 31 December 2023, 312,160
shares (2022: 27,146) were held by the EBT in relation to the
directors' share bonus award and Long-Term Incentive Plan. The EBT
share reserve represents the consideration paid when the EBT
purchases the company's equity share capital, until the shares are
reissued.
As with prior years, the company
will continue to fund the Spire Healthcare Employee Benefit Trust
(EBT), a discretionary trust held for the benefit of the group's
employees, for the ongoing acquisition of shares to satisfy the
exercise of share plan awards by employees.
|
2023
|
2023
|
2022
|
2022
|
|
number of
shares
|
£m
|
number of
shares
|
£m
|
At 1 January
|
27,146
|
-
|
239,283
|
0.8
|
Purchased
|
1,339,634
|
3.1
|
88,354
|
-
|
Exercised
|
(1,054,620)
|
(2.4)
|
(300,491)
|
(0.8)
|
At 31 December
|
312,160
|
0.7
|
27,146
|
-
|
Hedging reserve
The balance of £3.3 million at 31
December 2023 (2022: £6.6 million) reflects the £4.4 million debit
(2022: £1.2 million credit) recycled in the period, the fair value
credit of £0.2 million (2022: £8.1 million credit) and the £0.9
million tax credit on the profit (2022: £2.2 million charge) to
give a net movement of a decrease of £3.3 million during the year
(2022: an increase of £7.1 million) on a hedged transaction. See
note 17 for further information.
17. Borrowings
The group has borrowings in two
forms, bank borrowings and lease liabilities as disclosed on the
consolidated balance sheet. Total borrowings at 31 December 2023
were £1,257.0 million (2022: £1,190.8 million). More detail in
respect of these two forms of borrowings are set out
below.
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 £100.0 million of
the Senior Loan Facility. During the year the group exercised its
option to extend the facility by one year the arrangement has a
maturity of February 2027. The financial covenants relating to this
new agreement are materially unchanged. The loan is non-amortising
and carries interest at a margin of 2.05% over SONIA (2022: 2.05%
over SONIA).
The group drew down £60.0 million
on its revolving credit facility to acquire Vita Health Group in
October 2023. Since the acquisition the group has repaid £20.0
million.
(£m)
|
2023
|
2022
|
Amount due for settlement within
12 months
|
3.4
|
2.9
|
Amount due for settlement after 12
months
|
361.9
|
321.4
|
Total bank borrowings
|
365.3
|
324.3
|
Terms and debt repayment
schedule
The maturity date is the date on
which the relevant bank loans are due to be fully
repaid.
The carrying amounts drawn (after
issue costs and including interest accrued) under facilities in
place at the balance sheet date were as follows:
(£m)
|
Maturity
|
Margin
over SONIA
|
2023
|
2022
|
Senior finance facility
|
February
2027
|
2.05%
|
325.3
|
324.3
|
Revolving credit
facility
|
February
2027
|
1.95%
|
40.0
|
-
|
Net debt for the purposes of the
covenant test in respect of the Senior Loan Facility was £315.4
million (December 2022: £250.8 million) and the net debt to EBITDA
ratio was 2.2x (December 2022: 2.2x). The net debt for covenant
purposes comprises the senior facility of £325.0 million, drawn
revolving credit facility of £40.0 million less cash and cash
equivalents of £49.6 million. EBITDA for covenant purposes
comprises Adjusted EBITDA for Last Twelve Months (LTM) of pre-IFRS
16 Adjusted EBITDA of £152.9 million (December 2022: 123.9 million)
less the rental of a finance lease pre-IFRS 16 of £10.0 million
(2022: £9.5 million).
The interest cover for covenant
purposes was 8.5x (2022: 8.5x) and is calculated as the pre-IFRS 16
EBITDA described above over pre-IFRS 16 finance costs
paid.
The senior finance facility
includes a sustainability-linked element connected to environmental
and quality factors. The group also has access to a further £60.0
million through a committed and undrawn revolving credit facility
to February 2027.
Lease liabilities
The group has finance 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 £891.7 million (2022:
£866.5 million), expire in various years to 2046 and carry
incremental borrowing rates in the range 3.2% - 14.6% (2022: 3.1% -
14.6%). Rents in respect of hospital property leases are reviewed
annually with reference to RPI or CPI, subject to assorted floors
and caps. The discount rates used are calculated on a lease by
lease basis, and are based on estimates of incremental borrowing
rates. A movement in the incremental borrowing rate of 1% would
result in an 7.5% movement in lease liability.
In the year, the group recognised
charges of £3.8 million (2022: £3.3 million) of lease expenses
relating to low value leases and £14.8 million (2022: £10.3
million) of lease expense in respect of short-term 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 of £118.8 million
(2022: £105.6 million). The group has not made any variable lease
payments in the year. The group is not a lessor for any leases to
external parties. Where new leases have the right to extend and
management is not reasonably certain to exercise the extension
option, those future cash flows are not reflected in the
above.
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 current year. The cash
flows above do not reflect any termination, extension or break
clause options as management is reasonably certain that the options
will not be exercised. There are no significant restrictions or
covenants which impact the cash flows in respect of these
leases.
See note 12 for more detail on the
depreciation of the Right-of-use (ROU) assets and note 8 for more
detail on the interest expense relating to leases.
Changes in bank borrowings and
leases liabilities arising from financing activities
(£m)
|
1
January
|
Cash
flows
|
Non cash
changes1
|
Additions2
|
31
December
|
2023
|
|
|
|
|
|
Bank loans
|
324.3
|
(17.0)
|
18.0
|
40.0
|
365.3
|
Lease liabilities
|
866.5
|
(100.2)
|
73.0
|
52.4
|
891.7
|
Total
|
1,190.8
|
(117.2)
|
91.0
|
90.8
|
1,257.0
|
(£m)
|
1
January
|
Cash
flows
|
Non cash
changes1
|
Additions2
|
31
December
|
2022
|
|
|
|
|
|
Bank loans
|
427.5
|
(121.1)
|
17.9
|
-
|
324.3
|
Lease liabilities
|
837.8
|
(93.7)
|
73.5
|
48.9
|
866.5
|
Total
|
1,265.3
|
(214.8)
|
91.4
|
48.9
|
1,190.8
|
1 Non-cash changes reflect
interest charged on the loan
2 Additions include both new
leases entered into, indexation of existing leases and acquisitions
of subsidiaries.
Derivatives
The following derivatives were in
place at 31 December:
|
Interest
rate
|
Maturity
date
|
Notional
amount
|
Carrying
value Asset
|
31 December 2023 (£m)
|
|
|
|
|
Interest rate swaps
|
2.7780%
|
Feb
2026
|
243.8
|
4.4
|
31 December 2022 (£m)
|
|
|
|
|
Interest rate swaps
|
2.7780%
|
Feb
2026
|
243.8
|
8.6
|
(£m)
|
2023
|
2022
|
Amount due for settlement within
12 months
|
4.0
|
3.6
|
Amount due for settlement after 12
months
|
0.4
|
5.0
|
Total derivatives
|
4.4
|
8.6
|
The group entered into interest
rate swaps on the 25 July 2022. The movement in respect of
derivatives reflects £4.4 million (December 2022: £1.2 million)
recycled in the period and a £0.2 million credit (December 2022:
£8.1 million credit) in fair value. All movements are reflected
within other comprehensive income.
18. Provisions
(£m)
|
Medical
malpractice
|
Business
restructuring
and other
|
Total
|
At 1 January 2023
|
19.4
|
2.3
|
21.7
|
Increase in existing
provisions
|
3.8
|
-
|
3.8
|
Provisions utilised
|
(7.1)
|
(1.0)
|
(8.1)
|
Provisions released
|
(1.0)
|
-
|
(1.0)
|
At 31 December 2023
|
15.1
|
1.3
|
16.4
|
Medical malpractice relates to
estimated liabilities arising from claims for damages in respect of
services previously supplied to patients. During the period £3.8
million was added due to additional claims received, and £7.1
million utilised and £1.0 million was released. Amounts are shown
gross of insured liabilities. Any such insurance recoveries of £4.6
million (December 2022: £5.4 million) are recognised in other
receivables.
In response to the publication of
the Public Inquiry report on Paterson on 4 February 2020, Spire
Healthcare established a provision in respect of implementing the
recommendations including a detailed patient review and support for
patients. The provision is being utilised, including £9.2 million
in patient claim settlements. The provision to complete the
reviews, settle any claims and costs in respect of other Paterson
items has been increased by £2.5 million. The project is complex
and the process for review and settlement takes some time. 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 and settlement of
claims at this point. The variables include the number of patients
which are found to have been harmed following review, the level of
harm, and the associated compensation claim, as well as the time to
review each case can vary significantly. This provision remains
subject to ongoing review. In addition, and as disclosed in note 9
adjusting items, this was offset by the release of a £0.9 million
provision which had been held to resolve a matter with an
insurer.
As at 31 December 2023, the
remaining business restructuring and other provisions primarily
includes acquisition related provisions related to tax matters
other than income tax which is expected to be utilised or released
as the relevant tax years close for review. During the year the
group settled non-patient claims as appropriate and sought external
counsel on this settlement.
Provisions as at 31 December 2023
are materially considered to be current and expected to be utilised
at any time within the next twelve months, subject to external
factors beyond the group's control.
19. Trade and other
payables
(£m)
|
2023
|
2022
|
Trade payables
|
63.9
|
67.2
|
Accrued expenses
|
65.9
|
58.4
|
Deferred income
|
10.4
|
-
|
Social security and other
taxes
|
15.2
|
9.7
|
Other payables
|
41.7
|
29.2
|
Trade and other
payables
|
197.1
|
164.5
|
Trade and other payables of £26.1
million have been added on the acquisition of Vita Health Group
during the year (see note 24) of which £10.4 million relates to
deferred income related to contract revenue.
Accrued expenses includes general
operating expenses incurred but not invoiced as at the year end, as
well as holiday pay accrued of £2.1 million (2022: £5.2million),
and bonuses accrued during the year and paid during the following
year of £12.7 million (2022: £7.0 million).
Other payables include an accrual
for pensions and payments on account. Revenue is not recognised in
respect of payments on account until the performance obligation has
been met at year end the balance of payments on account was £10.3
million (2022: £11.9 million). In addition other credit balances
re-classed from trade debtors were £32.0 million (2022: £28.2
million), which largely relate to NHS credits. Payments on account
are expected to be utilised against patient procedures within the
following 12 months. The balance of payments on account as at 31
December 2022 were utilised in the current year when the patient
attended the procedure, and not cancelling or deferring treatment,
such payments on account could result in repayment to the patient
should they request so.
20. 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 in respect of LTIPs and SAYE recognised in
the income statement was £3.7 million in the year ended 31 December
2022 (2022: £2.3 million). Employer's National Insurance is 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 year was £0.4 million
(2022: £0.3 million).
The following table analyses the
total cost between each of the relevant schemes, together with the
number of options outstanding:
|
2023
|
|
2022
|
|
Charge
£m
|
Number of
options (thousands)
|
|
Charge
£m
|
Number of
options (thousands)
|
Long Term Incentive
Plan
|
3.0
|
12,394
|
|
1.8
|
12,787
|
Deferred Share Bonus
Plan
|
-
|
449
|
|
-
|
525
|
Save As You Earn (SAYE)
|
0.7
|
3,252
|
|
0.5
|
3,652
|
|
3.7
|
16,095
|
|
2.3
|
16,964
|
A summary of the main features of
the scheme is shown below:
Long Term Incentive Plan
The Long Term Incentive Plan
(LTIP) is open to executive directors and designated senior
managers, and awards are made at the discretion of the remuneration
committee. Awards are subject to market and non-market performance
criteria.
Awards granted under the LTIP vest
subject to achievement of performance conditions measured over a
period of at least three years, unless the committee determines
otherwise. Awards may be in the form of conditional share awards or
nil-cost options or any other form allowed by the plan
rules.
Vesting of awards will be
dependent on a range of financial, operational or share price
measures, as set by the committee, which are aligned with the
long-term strategic objectives of the group and shareholder value
creation. No less than 30% of an award will be based on share price
measures. The remainder will be based on either financial and/or
operational measures. At the threshold performance, no more than
25% of the award will vest, rising to 100% for maximum
performance.
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
2025 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 2033. The
executive directors are subject to a two-year holding period,
whilst other senior management are not.
Deferred Share Bonus
Plan
The Deferred Share Bonus Plan is a
discretionary executive share bonus plan under which the
remuneration committee determines that a proportion of a
participant's annual bonus will be deferred. The market value of
the shares granted to any employee will be equal to one-third of
the total annual bonus that would otherwise have been payable to
the individual. The awards will be granted on the day after the
announcement of the group's annual results. The awards will
normally vest over a three-year period.
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.
Save As You Earn
The Save As You Earn (SAYE) is
open to all Spire Healthcare employees. Vesting will be dependent
on continued employment for a period of three years from grant. The
requirement to save is a non-vesting condition.
21. Commitments
Consignment stock
At 31 December 2023, the group
held consignment stock on sale or return of £24.5 million (2022:
£24.3 million). The group is only required to pay for the equipment
it chooses to use and therefore this stock is not recognised as an
asset.
Capital commitments
Capital commitments comprise
amounts payable under capital contracts which are duly authorised
and in progress at the consolidated balance sheet date. They
include the full cost 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 end of
the year were as follows:
(£m)
|
2023
|
2022
|
Contracted but not provided
for
|
31.6
|
27.0
|
22. Contingent
liabilities
The group had the following
guarantees at 31 December 2023:
· the
bankers to Spire Healthcare Limited have issued a letter of credit
in the maximum amount of £1.5 million (2022: £1.5 million) in
relation to contractual pension obligations.
· under certain lease agreements entered into on 26 January
2010, the group has given undertakings relating to obligations in
the lease documentation and the assets of the group are subject to
a fixed and floating charge.
23. Financial
liabilities
Financial instruments to purchase
non-controlling interest
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 EBITDA performance and the group multiple. The
option can be exercised between two to five years. The expected
future cash flow to settle the obligation is discounted at the
group cost of debt of 8.1%. The financial liability is initially
recognised through equity at the present value of future cash flows
and subsequently recognised at amortised cost.
(£m)
|
2023
|
2022
|
Valuation at 1 January
|
-
|
-
|
Option to purchase non-controlling
interests
|
9.6
|
-
|
Valuation at 31
December
|
9.6
|
-
|
24. Business combinations and
acquisition of non-controlling interests
Acquisitions in 2023
Acquisition of Kingfisher TopCo Limited (together 'Vita Health
Group')
On 18 October 2023, the group
acquired 100% of the voting shares of Kingfisher TopCo Limited
(which in turn owns 100% of the shares of Vita Healthcare Group), a
non-listed company based in England a market-leading provider of
mental and physical health services in the UK, for
£83.0 million and a net
cash consideration of £73.2 million. This acquisition complements
our existing business and aligns well with our strategy of
developing new services and moving into adjacent
markets.
Assets acquired and liabilities
assumed
The fair values of the identifiable
assets and liabilities of Vita Health Group as at the date of
acquisition were:
(£m)
|
Fair
value recognised on acquisition
|
Assets
|
|
Intangible assets (note
13)
|
27.3
|
Plant, property and equipment
(note 12)
|
1.3
|
Right of use assets
|
1.3
|
Trade and other receivables (note
14)
|
12.7
|
Cash
|
9.8
|
|
52.4
|
Liabilities
|
|
Payables
|
(26.1)
|
Income tax and withholding tax
payable
|
(2.3)
|
Deferred tax liability
|
(5.0)
|
Lease liabilities
|
(1.3)
|
|
(34.7)
|
Total identifiable net assets at
fair value
|
17.7
|
Goodwill arising on acquisition
(note 13)
|
65.3
|
Purchase consideration
transferred
|
83.0
|
The initial accounting for the
business combination is not complete due to the timing of the
acquisition which occurred close to the year end. Amounts
recognised, are subject to adjustment in line with IFRS 3 for up to
12 months from acquisition, with goodwill being adjusted
accordingly. Therefore, goodwill has not been allocated.
The fair value of the trade
receivables amounts to £12.7 million. The gross amount of trade
receivables is £13.2 million and it is expected that the full
contractual amounts can be collected.
From the date of acquisition, Vita
Health Group contributed £18.3 million of revenue and profit of
£1.1 million to profit before tax from continuing operations of the
group. If the combination had taken place at the beginning of the
year, revenue from continuing operations would have been £1,450.5
million and loss before tax from continuing operations for the
group would have been £40.1 million.
Goodwill has been recognised to
reflect the synergies which the group believes are available to
expand its offering for mental and physical health services in line
with its strategic plan which reflect intangibles that cannot be
separately quantified. This goodwill is not deductible for tax
purposes.
Purchase consideration
transferred
(£m)
|
Cash flow
on acquisition
|
Net cash acquired with the
subsidiary
|
9.8
|
Cash paid
|
83.0
|
Net cash flow on
acquisition
|
73.2
|
Transaction costs of £2.5 million
were expensed and are included within adjusting items.
Prior year Acquisition of Doctors Clinic Group Limited
(together "The Doctors Clinic Group")
During the year the group reviewed
its goodwill position in respect of The Doctors Clinic Group in
line with IFRS 3 and no adjustment has been recognised.
25. Events after the reporting
period
There have been no other events to
disclose after the reporting date.
Shareholders'
information
Registered Office and Head
Office:
Spire Healthcare group
plc
3 Dorset Rise
London
EC4Y 8EN
Tel +44 (0)20 7427 9000
Fax +44 7427 9001
(Registered in England & Wales
No. 09084066)
Corporate Website
Shareholder and other information
about the company can be accessed on the company's
website:
www.spirehealthcare.com
Financial Calendar
2024 Annual General Meeting
(London)
9 May
2024
Announcement of 2024 half year
results September
2024