TIDMSPI
RNS Number : 1923L
Spire Healthcare Group PLC
09 September 2021
Spire Healthcare reports its results
for the six months ended 30 June 2021
London, UK, 9 September 2021 , Spire Healthcare Group plc (LSE:
SPI), a leading independent hospital group in the UK, today
announces its interim results for the six months ended 30 June
2021.
Record self-pay revenue and private mix, strong platform for
future
Summary Group results for the six months ended 30 June 2021
Six months ended 30 June (Unaudited)
========================== =======================================================
Variance 2021 Variance 2021
(GBP million) 2021 2020 v 2020 2019 v 2019
Revenue 558.2 401.9 38.9% 491.6 13.5%
Adjusted operating profit
(Adjusted EBIT) 48.5 14.9 NM(1) 51.4 (5.6%)
Adjusting items (2.3) (204.7) NM (0.4) NM
Operating profit (EBIT) 46.2 (189.8) NM 51.0 (9.4%)
Profit / (loss) before
taxation 4.7 (231.3) NM 9.6 (51.0%)
(Loss) /profit after
taxation(2) (16.9) (233.1) NM 7.1 NM
Basic (loss) / profit
per share, pence (4.2) (58.2) NM 1.8 NM
Adjusted profit / (loss)
per share, pence (3) (3.6) (7.3) 50.7% 1.8 NM
EBITDA (4) 96.0 61.6 55.8% 96.8 (0.8%)
FCF (5) 24.5 (6.1) NM 37.7 (35.0%)
Capital investments 26.5 19.5 35.9% 19.7 34.5%
Net bank debt (6) (306.3) (330.6) 7.4% (362.2) 15.4%
========================== ======= ======= ============= ======= =============
1. Not meaningful
2. Loss after tax in H1 2021 is reported after the deferred tax
revaluation impact of the tax rate increase from April 2023 from
19% to 25% of GBP17.7m.
3. Adjusted profit / (loss) per share is stated after the
effects of Adjusting Items.
4. EBITDA is calculated as Operating Profit, adjusted to add
back depreciation, and Adjusting items, referred to hereafter as
'EBITDA'. For EBITDA for covenant purposes, refer to note 15.
5. FCF (Free Cash Flow) is calculated as EBITDA, less rent and
capital expenditure cash flows. 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.
6. Net bank debt is defined as bank borrowings less cash and
cash equivalents.
Included in our interim results are comparatives for both the
prior year (2020) and the previous year (2019). This is to allow
meaningful comparisons as FY20 was affected by the COVID-19
pandemic, specifically from Q2 2020 - Q4 2020. In addition, Q1 2021
was impacted to a lesser degree as the Group remained under a
COVID-19 NHS contract. Q2 2021 reflects a move back towards a pre
COVID-19 trading environment. The comparison to two previous
periods is only expected for FY21, and comparatives are against H1
2020 unless otherwise stated. Additional information in respect of
the Balance Sheet and cash flow for the previous two periods can be
found on our website: www.spirehealthcare.com/investorrelations
.
Operating and financial highlights
-- Good H1 performance with strong 13.5% revenue growth (vs H1
19) despite continued impact from COVID-19 (vs H1 20: 38.9%)
-- Significantly improved private mix. Record self-pay
performance with 46.7% revenue growth (vs H1 19) (vs H1 20:
172.3%)
-- H1 21 EBITDA of GBP96.0m in-line with H1 19 (GBP96.8m) (H1
20: GBP61.6m) despite COVID-19 specific costs of at least GBP16m in
H1 21
-- GBP6.8m provision for holiday accrual (H1 20: GBPnil) which
will unwind over the next 18 months
-- Quality investments delivering further improvements in
consumer ratings - 93% said their clinical care was outstanding
-- Strong cash generation lowering the net debt/EBITDA covenant
ratio to 2.7x (from 3.9x at end 2020 and 3.0x at end 2019)
Developing our business
-- Positive consumer sentiment. TV advertising campaign has
increased brand awareness from 62% to 69% from Q4 20 to Q2 21
-- Further progress on efficiency programmes, expected to
deliver savings of at least GBP15m in FY22, increasing in future
years
-- GBP26.5m investment in facilities and equipment in the
period, including new CT and MRI scanners at six hospitals (H1 20:
GBP19.5m)
-- Colleague engagement increasing with 84% proud to work for
Spire Healthcare, up 4pp on 2020
-- Record number of appointments booked through the Group's
digital portals (56,639 in H1 21 vs 18,508 in H1 19)
Looking to the future
-- Unprecedented demand. NHS waiting list continues to rise, supporting growth in self-pay
-- Underlying performance strong, near term margins impacted by
measures to maintain COVID-secure environment
-- Actively managing down COVID costs within our control, but
increased costs of staff absence and late notice patient
cancellations in July and August as COVID levels increase
-- Securing future workforce with 166 nurse degree apprentices recruited in Q2 21.
Current trading and outlook
We are pleased that H1 trading has met our previous guidance for
2021 trading to return to 2019 levels, subject to COVID-19. H1
revenue is materially ahead of H1 2019, and EBITDA is in line with
H1 2019.
Nevertheless, the future development of the COVID-19 pandemic
remains uncertain for all healthcare providers and Spire Healthcare
will continue to focus on maintaining a COVID-secure environment in
which to treat as many patients as possible. Admissions in July and
August have been impacted by an increased prevalence of COVID-19 in
the UK. Whilst revenues remained in growth, last minute
cancellations due to patients, colleagues and Consultants being
required to self-isolate by NHS Test and Trace have led to higher
labour costs, which impacted EBITDA by c. GBP4m per month on
average in July and August.
However, we expect many of these COVID-related costs will be
offset by improvements in testing and progressive efficiency
measures providing a platform for margin expansion in 2022. Given
the positive underlying trends, we are confident 2021 revenue will
be materially above 2019. We also expect EBITDA to recover from the
July and August levels to trade in line with 2019 over the last
four months of the year, assuming current COVID-19 prevalence does
not rise materially, creating further cancellation and absence.
Should it do so, the operating impacts seen in July and August
could prevail for the rest of the year.
Justin Ash, Chief Executive Officer of Spire Healthcare,
said:
"I am pleased by our performance in the first six months of the
year, which has seen us return to operating profit despite ongoing
COVID costs, due to the exceptional growth in private revenues. We
have been successful in building the Spire Healthcare brand and
responding to the resulting unprecedented demand from private
patients. As waiting lists continue to climb, the Company is
helping patients find options for treatment, be that privately or
by assisting the NHS.
"We are of course experiencing material additional costs arising
from the complexities of delivering safe care in a COVID-secure
environment, which will continue as long as COVID case numbers
remain high in the UK. However, we have successfully driven down
the cost of COVID testing and our continued investment in digital
systems and efficient pathways will deliver significant cost
savings in 2022 and beyond. The long-term prospects for the
healthcare sector are positive and we stand ready to play our part
in addressing waiting lists and supporting the UK's recovery from
the pandemic.
"I am immensely proud of the way our outstanding teams have
continued to provide exceptional care throughout the recent
challenges of the pandemic and the approach from Ramsay Health
Care. I want to thank our colleagues once again for their
dedication and commitment to making a positive difference to
patients' lives."
For further information please contact:
Spire Healthcare +44 (0)20 7427 9169
Cora McCallum, Head 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 hospital group in the
United Kingdom, with 39 private hospitals and 8 clinics across
England, Wales and Scotland.
Spire Healthcare delivered tailored, personalised care to
approximately 750,000 in-patients and daycase patients in 2020, and
is the leading private provider, by volume, of knee and hip
operations in the United Kingdom. The Group's well located and
scalable hospitals have delivered successful and award winning
clinical outcomes, positioning the Group well with patients,
Consultants, the NHS, GPs and Private Medical Insurance ("PMI")
providers. Spire Healthcare treats patients through a variety of
routes including PMI, Self-pay and the NHS, providing the Group
with diversified access to the expected growth opportunities in the
UK healthcare market, which faces significant supply challenges as
a result of NHS budget constraints and increasing demand from a
growing population with a longer life expectancy.
Cautionary statement
This preliminary 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 preliminary 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 preliminary 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, 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 preliminary
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 preliminary
announcement.
The Group is providing the information in this preliminary
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 9am via
Zoom webinar. Please register in advance through this link:
https://spirehealthcare.zoom.us/webinar/register/WN_v-hP3A_sTK2nN_6gHAUDRQ
Operating Review
Overview
Spire Healthcare delivered a strong performance in H1 21 with
record revenue growth and solid underlying margin. The Company has
continued to navigate well through the various challenges presented
by the COVID-19 pandemic, transitioning from supporting the NHS
through a volume-based contract in Q1 21 to a more 'normalised'
trading environment in Q2 21, albeit with significant additional
COVID-19 restrictions. Exceptional private revenue growth of 25% in
Q2 21 versus Q2 19 reflects our clear strategy to focus on private
patients in order to protect the business from the unpredictable
nature of NHS commissioning and provides a solid base for margin
expansion. Our investment in high quality standards and culture
have kept patients safe, are reflected in patient feedback and
underpin the record growth in self-pay.
The COVID-19 pandemic has encouraged people to reprioritise
health and wellbeing, the use of the independent sector to support
the NHS has raised consumer awareness of private healthcare, and
recognition of the Spire Healthcare brand has strengthened due to
the recent TV advertising campaign. All of which places Spire
Healthcare in a strong position to further develop its private
patient proposition.
However, the continued prevalence of COVID-19, and our
relentless focus on patient safety, means near-term operating costs
remain elevated as we maintain safe patient pathways to prevent
COVID-19 from entering our hospitals and manage the disruption
caused by both high colleague and Consultant absenteeism and late
notice patient cancellations.
Longer-term market dynamics remain positive, demand is strong,
especially in self-pay, and we expect COVID related costs to reduce
as the pandemic eases. The Company has the right strategy in place
to meet elevated demand and is making good progress on programmes
to deliver operational improvements, and therefore margin
expansion, from 2022.
On 26 May 2021 it was announced that Ramsay Health Care had made
a bid to acquire Spire Healthcare. The Spire Healthcare Board and
its advisors supported the proposed transaction and it was put
forward to shareholders. The Company respects the view of
shareholders who did not provide sufficient votes to support the
Scheme of Arrangement and is confident that it remains well
positioned for success as a standalone business. This period of
uncertainty is now behind us, and has not impacted the operating
performance of the business. We remain focussed on our Purpose to
make a positive difference to patients' lives through outstanding
personalised care.
Performance
Admissions and revenue growth
On 1 January 2021, Spire Healthcare entered into a new contract
with NHS England (NHSE). This contract was volume-based, rather
than the cost-based contract of 2020, and was designed to
facilitate a smooth transition back to Spire Healthcare's usual mix
of business as the pandemic eased; providing elective surgery to
reduce the NHS waiting lists whilst increasing private activity.
The emergence of a new, highly contagious variant of COVID-19 in
early 2021 placed greater strain on the NHS than in the first wave
and required different independent sector support from that
envisaged.
In early January 2021, NHSE triggered the surge clause for a
number of hospitals, a provision to make all of Spire Healthcare's
resources available to the NHS in the event of a rise in local
COVID-19 infection rates. 13 of the Group's hospitals went into
surge in early 2021, mainly in the South East, but these surge
clauses were lifted by early March. Spire Healthcare worked closely
with NHSE to provide appropriate care for NHS patients, and we are
proud that nine Spire Healthcare hospitals acted as NHS cancer
hubs. Elsewhere, activity, such as urgent cardiac care, was
transferred to be managed by the local Spire Healthcare hospital;
and the cystic fibrosis service managed by Spire Manchester was
extended to the end of March. Despite this, performance in Q1 21
was broadly in-line with the Board's expectations, with self-pay
admissions in non-surge hospitals above Q1 19 levels and higher
average revenue per case for private procedures.
The NHSE contract ended on 31 March 2021, providing Spire
Healthcare with full control of the payor mix in its facilities for
the first time in 12 months. Private revenue growth recovered
strongly in Q2 21, up 25.2% versus Q2 19, driven by a record 80.6%
growth in self-pay revenues. The recovery in PMI has lagged that of
self-pay; whilst Q2 21 PMI admissions are some 5% below Q2 19.
These have been more complex procedures carrying a higher average
revenue per case (ARPC) leading to PMI revenue growth of 5%.
It is widely acknowledged that growing NHS waiting lists are the
most significant issue facing the healthcare system today and that
the independent sector will have an important role to play to help
address the problem. Spire Healthcare stands ready to play its part
and we look forward to building on the strong relationships forged
with local NHS partners during the pandemic.
The Company 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. As indicated at the FY 20 results
announced on 4 March 2021, we expected commissioning through the
NHS Framework to start slowly and build over the course of the
year. To date, NHS commissioning has been lower than anticipated,
with NHS admissions in Q2 21 some 24% below Q2 19 and coming mainly
through the eRS system. These cases have carried an ARPC nearly 16%
above Q2 19 as the NHS has a priority to treat those with greatest
clinical need, which are usually the more complex cases, and who
have been waiting the longest.
Spire Healthcare has signed contracts with most Trusts and CCGs
against the framework, with collaborative arrangements, and is now
well-placed to participate in any increase in commissioning for the
balance of the year. It remains to be seen if funding will be made
available for a material growth in NHS use of the independent
sector, although signals are positive from the government's recent
funding announcement. Spire Healthcare's strong private mix means
the Company is not dependent on such an uplift to deliver revenue
growth in H2 21.
Operating costs
Whilst many sectors in the UK are now able to trade normally,
with little or no COVID restrictions, as a hospital group we
continue with our stringent COVID controls to ensure the safety of
our patients, Consultants and colleagues, and to reduce the risk of
COVID outbreaks within our hospitals. Most of these controls are
mandated by Public Health England (PHE), including more restrictive
return to work policies for healthcare workers who have been in
contact with an infected person than those which apply to the rest
of the population, although these have been eased somewhat
recently. We test our Consultants and colleagues twice a week and
every patient must take a PCR test and self-isolate before
admission. Our safe patient pathways and infection control
procedures are maintained assiduously.
These COVID control measures reduced EBITDA by GBP16.2m in H1
21, including GBP12.2m spent on COVID tests (GBP0.1m in H1 20). We
have been able to reduce the monthly test cost from c.GBP3m in Q1
to less than GBP1m in June through changes to staff testing
protocols and a lower unit price per test. However, as the
prevalence of COVID in the community increased, we saw higher rates
of late notice cancellation of procedures, particularly in Q2,
which reduced EBITDA through lost revenue and costs associated with
the pre-operative process (initial consultation and diagnostics for
example). Staff absenteeism through COVID sickness or
self-isolation requirements also impacted EBITDA. Reported H1 21
EBITDA (GBP96.0m) was broadly in line with H1 19 (GBP96.8m) (H1 20:
GBP61.6m) despite the COVID operating cost burden, due to Spire
Healthcare's strong revenue growth.
Clinical staff costs increased 260bp to 22.7% of revenue in H1
21, versus 20.1% in H1 19 due to the higher absence costs mentioned
previously (H1 20: 24.2%). However efforts to improve the Bank
worker proposition and encourage overtime rather than agency use
has resulted in a reduction in the agency cost proportion of total
clinical staff costs from 7.3% in H1 19 to 6.8% in H1 21 (H1 20:
3.7%), despite agency cost inflation arising from supply
constraints. Labour costs were also impacted by an increased
holiday provision of GBP6.8m (GBPnil in H1 19 and H1 20), as many
colleagues have been unable to take leave due to the COVID-19
restrictions in place in the period and the high clinical workload.
We expect this provision to unwind over the next 18 months.
Despite the COVID-19 pandemic, we continued to invest in our
estate and in high quality equipment and facilities. We invested
GBP26.5m in capital projects in H1 21, above prior years (GBP19.5m
in H1 20, GBP19.7m in H1 19)) but below our planned run-rate as we
slowed investment during Q1 when hospitals were focussed on
supporting the NHS through the peak of the COVID-19 pandemic.
Investments included new CT and MRI machines, plus associated
infrastructure, at six hospitals (Cambridge, Hartswood, Portsmouth,
Norwich, Fylde Coast and Leicester), the installation of a new,
mobile operating theatre at Spire Norwich to increase capacity and
the expansion of the car park at Spire Bristol.
We now plan to invest some GBP75m-85m in FY21, slightly below
our original GBP90m-95m guidance due to the slower rate of
investment in Q1 21, with further investment planned in new MRI and
CT scanners in H2 2021. We are also pleased to announce a planned
GBP8m investment to increase our services and patient capacity in
our two Edinburgh hospitals. Spire Shawfair, which is currently
offering daycase procedures only, will be enhanced through the
addition of three high-grade laminar flow theatres and patient
accommodation to support overnight inpatient cases. Meanwhile, at
Spire Murrayfield, we will increase the number of patient beds and
expand our outpatient services, including the installation of a new
CT machine. This investment will help to meet strong private demand
and create additional capacity to support future NHS Scotland
waiting list initiatives.
Working capital decreased GBP11.3m in the period due to an
increase of debtors arising for the higher private mix and a
reduction in creditors due to payment timing differences, offset by
a fall in inventory. However, the cash position of GBP116.1m at end
of June 2021 is GBP9.8m higher than at year-end 2020 (GBP106.3m)
and GBP25.2m above 30 June 2020 (GBP90.9m). This strong cash
generation results in an improvement in the net debt/EBITDA ratio,
as per the covenant calculation, to 2.7x, a significant improvement
on FY 20 and FY 19 levels of 3.9x and 3.0x respectively.
We are pleased with the significant progress we have made to
reduce leverage and are now below our medium-term target of 3.0x.
We will, therefore, review our capital structure and capital
allocation, including future dividend policy in conjunction with
our next debt refinancing, whilst keeping a close watch on our
leverage ratio as the impact of the pandemic progresses.
Spire Healthcare currently has a Senior Loan Facility of GBP425m
and an undrawn Revolving Credit Facility (RCF) of GBP100m. As
announced at the interim results on 17 September 2020, the maturity
date of the Senior Loan Facility has been extended by one year to
July 2023. The RCF, which is undrawn at present, will remain at
GBP100m until July 2022 and reduce to GBP87m thereafter until July
2023. Whilst an agreement was reached with the lenders to waive the
net debt / EBITDA ratio and interest cover test for June 2021, a
new liquidity measure replaced these tests which requires cash and
cash equivalents, including headroom under undrawn committed
facilities, to remain above GBP50m. For December 2021, the
agreement allows for a maximum net debt / EBITDA ratio of 6x, if
this measure has not already dipped below 4x at any month end from
June to November 2021. As the ratio stood at 2.7x at 30 June 2021,
the limit will revert to 4.0x at 31 December 2021, and the new
liquidity measure referred to above has fallen away from 30 June
2021.
Colleagues and Consultants
We continue to develop strong, positive working partnerships
with the NHS across the country, both at a local and national level
and were delighted to be recognised by the Health Service Journal
who awarded us the Best Healthcare Provider Partnership with the
NHS award at their Partnership Awards in June. We also reached an
agreement with the NHS to welcome surgeons and anaesthetists in
training to undertake placements in our hospitals. Several hundred
doctors in training worked in our hospitals in 2020 and Q1 21 and
we are looking to build on this foundation to provide further
training opportunities in the future, as requested by NHS
partners.
Spire Healthcare is determined to play its part in addressing
the shortage of clinical staff across the healthcare sector by
recruiting and retraining great colleagues and providing
opportunities for clinical leaders of the future to develop
themselves. In the spring, we launched a major new nurse degree
apprenticeship programme in our hospitals in England, in
partnership with the University of Sunderland. The nurse degree
apprenticeship is open to applicants at all stages of life,
including school leavers, university graduates and people looking
to retrain. The programme combines university study and workplace
learning and apprentices obtain a BSc degree at the end. Around
5,000 people applied to the programme, with 166 offers made. 15% of
the successful candidates were colleagues already working at Spire
Healthcare.
In addition to the clinical and non-clinical apprenticeships we
already offer, we are now able to launch programmes for Operating
Department Practitioners and Assistant Practitioners with the
University of Derby, starting in September 2021. During H1 21 we
also launched our 'GROW' learning framework which includes our Step
Up and Stretch initiative for future leaders across the
business.
We have worked hard to continue our overseas nurse recruitment
programme, despite international travel restrictions and are on
track to introduce 250 new clinical colleagues by end 2021, with
over 140 already established in our hospitals.
In late March/early April we conducted our 2021 Colleague
Engagement Survey, including Bank colleagues for the first time. We
saw an outstanding 100% response rate from Bank colleagues, with
87% indicating that they are proud to work for Spire Healthcare.
The response rate from all colleagues was 77% with 84% saying they
felt proud to work for Spire Healthcare, an increase of four
percentage points relative to the 2020 survey.
Strategic initiatives
A number of efficiency programmes are in place to target savings
in the following key areas:
-- Procurement savings through new contracts with new or existing suppliers, and
-- Operational efficiencies through streamlining existing, or
introducing new and digital, processes
We have already delivered savings through procurement and
changes to COVID-19 testing protocols and anticipate further
savings in H2 21 from the areas listed above. Savings are expected
to total at least GBP15m in FY22.
Private patients are key to Spire Healthcare's long-term
strategy. A survey of target consumers was conducted for Spire
Healthcare in H1 21, repeating the questions asked in Q4 20. The
results indicate even greater awareness of the role of the private
sector in supporting the NHS leading more of our target audience to
view private hospital providers in a more positive light, with 53%
agreeing that they are more likely to consider a private hospital
than before as a result (up 2pp). Furthermore, the survey indicated
that 33% of Spire Healthcare's target market has had a medical
diagnosis or treatment cancelled since spring 2020. 80% of our
target audience is now fully vaccinated and levels of anxiety
around vising a hospital for diagnosis and treatment has fallen a
further 8pp with only 29% of our target market fairly or extremely
anxious.
In order to capture the demand presented by this significant
opportunity to increase private activity we launched a TV
advertising campaign in April 2021, which was supported by print
and digital campaigns. Recent survey data shows that almost a third
of our target audience recall seeing the TV advertisement and
prompted awareness of the Spire Healthcare brand has increased from
62% in Q4 20 to 69% in Q2 21.
Our market research tells us that patients want to know what is
wrong with them, quickly, and our digital strategy is designed to
make private healthcare easier for patients to navigate, from
finding out about services on our website, booking an appointment,
through to accessing virtual consultations and diagnostics. We
invested early, in 2019 and 2020, to enhance our ability to
stimulate and capture private demand, and these investments are now
yielding benefits.
Digital developments
The Electronic Pre-Operative Assessment tool has now been
deployed to nine sites, and enhanced through an agile process. We
anticipate full deployment by year end, which should facilitate
administrative cost savings of GBP2m through a significant
reduction in the use of paper within Spire Healthcare. The tool is
also expected to provide a better patient experience and shorter
processing time, thereby freeing up nursing time and hospital
consulting rooms.
Significant progress has been made on the introduction of a new
pricing system which allows central oversight and optimisation of
self-pay pricing across the group. This platform also makes it
easier for Consultants to securely post and amend their own,
independently determined, charges. The pricing tool has been
deployed across 28 sites with the remainder expected to come on
stream by early October.
The Group's digital portals for both our patients and our
partners (Consultants and PMI providers) are seeing record levels
of bookings (56,639 in H1 21 versus 18,508 in H1 19) further
highlighting growing demand for online services. The Group
transferred its outsourced call handling service in the middle of
2020 to improve its capacity to respond to fluctuations in patient
enquiries and take direct bookings, handling over 12,200 calls per
week in August 2021 (up from 8,500 in January 2021). Not only does
this provide the ability to meet the increased demand in enquires
but also allows bookings to be made centrally. Both of these
initiatives are key steps to improving the patient pathway and
making more efficient use of our resources.
We are working towards a comprehensive electronic patient record
as part of our wider Hospital Management System programme. We
continue to build on our investments in SAP, in our Radiology and
Pathology solutions, and our integrations with the NHS rather than
look at a wholesale system replacement, which would be a high cost,
and a high risk, strategy.
It is our Hospital Management System Programme that drives our
key digital transformations for example, ePOA, Pricing Engine and
electronic booking. 2021 will see more development of the digital
patient pathway and in turn, more operational efficiency.
Initiatives will include digital pathology workflow, digital
radiology workflow and automating of patient communications.
Portfolio management
On 31 March 2021 Spire Healthcare reached an agreement with East
Sussex Healthcare Trust (ESHT) to shorten the lease on Spire Sussex
and to transfer operational control of the hospital back to the
Trust. Spire Sussex hospital shares a site with the ESHT NHS
hospital and Spire Healthcare has been operating the facility on
behalf of EHST under a lease and operating agreement which was due
to expire in 2027 but will now expire in 2022.
Spire Healthcare received GBP2m income from the early
termination of the lease with all fittings, fixtures, equipment and
capex responsibility transferring to the Trust on 31 March 2021. On
31 March 2022 colleagues and any remaining assets will transfer to
ESHT under TUPE - Transfer of Undertakings (Protection of
Employment). Spire Sussex generated revenue of GBP8.4m in 2019 with
EBITDA of GBP0.43m.
We continue to push for simplification and efficiency. As part
of this we are rationalising and simplifying the Group legal entity
structure. This will remove 15, or one-third, of the companies in
the Group structure.
Patient safety and clinical quality
Throughout H1 21 we maintained all of the measures we had put in
place in 2020 to keep our sites COVID-secure and our colleagues,
Consultants and patients safe, including safe patient pathways,
restrictions on visitors and a comprehensive testing programme for
patients and colleagues.
One key success during the period was the launch of our Quality
Improvement Strategy in April. This development of a quality
improvement culture, underpinned by a quality improvement
methodology, will build on the progress on safety and quality made
in recent years. Almost 100 colleagues have been trained as quality
improvement practitioners to date, and almost 50 quality
improvement projects are under way. We carried out a colleague
consultation to decide on our quality priority for the year, and
'Improving patient experience' was chosen from a list of 10. There
are three elements to this: improving the admissions process,
improving the discharge process and ensuring we listen to patient
feedback and engagement, including complaints, concerns and
compliments.
The first half of 2021 saw us continue our work to implement the
recommendations of the Independent Inquiry into Ian Paterson, which
reported in early 2020. Spire Healthcare wrote to all patients of
Paterson in December 2020 and some, who had not previously been
contacted, were invited to discuss their treatment. The review is
on-going but has identified that some of these patients were harmed
by Paterson, who was suspended by Spire Healthcare in 2011.
Spire Healthcare has now set up a second compensation fund to
deal with any new claims arising out of treatment by Paterson at
the company's hospitals. The scheme will be administered by two law
firms, Slater and Gordon UK Limited, and Thompsons Solicitors LLP,
who administered the earlier Paterson compensation scheme from
2017, and the costs will be covered by the GBP22m provision held at
year-end 2020.
In recent years, we have had to review the practice of a number
of doctors, including Ian Paterson, contacting patients and
speaking to them about their care. There is no best practice
standard for undertaking these reviews and communicating with
patients, and so we have been developing our own guidance on how to
carry these out, based on our own experiences. We have worked with
the Patients Association to hear and understand patients' insights
and ensure that these are reflected in our guidance. We have shared
our guidance with the NHS and with the wider independent sector,
and over the coming months, we will be jointly leading a project
involving regulators, the NHS and government as part of the
response to the Paterson Inquiry to develop a national toolkit for
patient reviews and recalls.
Our priority for the second half of the year is the development
of an integrated quality assurance and governance framework, with
new key performance indicators, based on the NHS Quality Assurance
Framework (QAF). This will build on progress made in recent years
and will provide a further improved mechanism for the Board and
senior management to oversee and receive assurance on the composite
of performance and quality.
In April 2021 the CQC launched its new monitoring framework. In
essence, the new regime moves from pre-announced to unannounced
inspections, meaning sites have to be inspection ready at all times
and have the necessary documentation to demonstrate consistently
safe, harm-free care and robust governance processes. In addition,
the CQC will also assess compliance with the Medical Practitioners
Assurance Framework, a rigorous industry standard of consultant
oversight published in 2019, which we helped to develop. This is in
line with our guidance that regulatory oversight is likely to
strengthen in the years ahead.
We believe that the new CQC approach will favour the efforts we
have put in over the last 3 years including the creation of our own
internal audit team to ensure we are inspection ready across the
estate.
Doing the right thing
Spire Healthcare announced its ambition to reach net zero carbon
emissions by 2030. In the FY20 results statement published on 4
March 2021. To support this goal we have now appointed Carbon
Champions for each hospital and launched a companywide Carbon
Awareness Campaign. Each Carbon Champion will be provided training
to understand the relationship between energy use and carbon
emissions, be equipped to identify some simple energy savings
opportunities and be able to recognise and act upon bad energy
management practices.
Spire Cardiff has just completed the installation of 78 PV solar
panels on the roof of its outpatients building. Together with
improved roof insulation this is projected to reduce the hospital's
total carbon output. The work is part of a programme of works
across the hospital estate with further PV panel installations
expected to take place at other sites in 2022. From October 2021
Spire Healthcare will procure all of its electricity from renewable
sources.
Colleague wellbeing has remained a high priority, including
mental health which has understandably been impacted throughout the
pandemic. We have continued to recruit and train Mental Health
First Aiders across all parts of the business and raise awareness
of the support available to colleagues. In addition to our Employee
Assistance Programme, early in the year we launched a free,
dedicated colleague support line which is available at all times to
provide help and advice from counsellors and information
specialists.
Outlook
The future development of the COVID-19 pandemic remains
uncertain for all healthcare providers and Spire Healthcare will
continue to focus on maintaining a COVID-secure environment in
which to treat as many patients as possible. Admissions in July and
August have been impacted by an increased prevalence of COVID-19 in
the UK. Whilst revenues remained in growth, last minute
cancellations due to patients, colleagues and Consultants being
required to self-isolate by NHS Test and Trace have led to higher
labour costs, which impacted EBITDA by c. GBP4m per month on
average in July and August.
However, we expect many of these COVID-related costs will be
offset by improvements in testing and progressive efficiency
measures providing a platform for margin expansion in 2022. Given
the positive underlying trends, we are confident 2021 revenue will
be materially above 2019. We also expect EBITDA to recover from the
July and August levels to trade in line with 2019 over the last
four months of the year, assuming current COVID-19 prevalence does
not rise materially. Should it do so, the cost impacts seen in July
and August could prevail for the rest of the year.
Financial review
Selected financial information
Six months ended 30 June (Unaudited)
==============================================================================================
2021 2020 2019
============================== ============================== ==============================
Total Adjusting Total Adjusting Total
before items before items before
Adjusting (note adjusting (note adjusting Adjusting
(GBP million) items 10) Total items 10) Total items items Total
========== ========= ======= ========== ========= ======= ========== ========= =======
Revenue 558.2 - 558.2 401.9 - 401.9 491.6 - 491.6
Cost of sales (304.1) - (304.1) (205.1) - (205.1) (261.1) - (261.1)
========== ========= ======= ========== ========= ======= ========== ========= =======
Gross profit 254.1 - 254.1 196.8 - 196.8 230.5 - 230.5
Other operating
costs (206.2) (2.3) (208.5) (182.0) (204.7) (386.7) (179.1) (0.4) (179.5)
Other income 0.6 - 0.6 0.1 - 0.1 - - -
========== ========= ======= ========== ========= ======= ========== ========= =======
Operating profit
(EBIT) 48.5 (2.3) 46.2 14.9 (204.7) (189.8) 51.4 (0.4) 51.0
Net finance costs (41.5) - (41.5) (41.5) - (41.5) (41.4) - (41.4)
========== ========= ======= ========== ========= ======= ========== ========= =======
Profit / (Loss)
before taxation 7.0 (2.3) 4.7 (26.6) (204.7) (231.3) 10.0 (0.4) 9.6
Taxation (21.6) - (21.6) (2.6) 0.8 (1.8) (2.6) 0.1 (2.5)
========== ========= ======= ========== ========= ======= ========== ========= =======
(Loss) / profit
for the period
(1) (14.6) (2.3) (16.9) (29.2) (203.9) (233.1) 7.4 (0.3) 7.1
========== ========= ======= ========== ========= ======= ========== ========= =======
EBITDA (2) 96.0 61.6 96.8
Basic (loss) /
earnings
per share, pence (4.2) (58.2) 1.8
FCF(3) 24.5 (6.1) 37.7
Capital
investments 26.5 19.5 19.7
Net cash from
operating
activities 85.7 75.6 87.0
Net bank debt
(4) (306.3) (330.6) (362.2)
================== ========== ========= ======= ========== ========= ======= ========== ========= =======
1 Loss after tax in H1 2021 is reported after the deferred tax
revaluation impact of the tax rate increase from April 2023 from
19% to 25% of GBP17.7m.
2 EBITDA is calculated as Operating Profit, adjusted to add back
depreciation, and Adjusting items, referred to hereafter as
'EBITDA'. See page 11 for further information. For EBITDA for
covenant purposes, refer to note 15.
3 FCF (Free Cash Flow) is calculated as EBITDA, less rent and
capital expenditure cash flows. 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.
4 Net bank debt defined as bank borrowings less cash and cash equivalents
Included in our interim results are comparatives for both the
prior year (2020) and the previous year (2019). This is to allow
meaningful comparison as FY20 was affected by the COVID-19
pandemic, specifically from Q2 2020 - Q4 2020. In addition, Q1 2021
was impacted to a lesser degree as the Group remained under a
COVID-19 NHS contract. Q2 2021 reflects a move back towards a pre
COVID-19 trading environment. The comparison to two previous
periods is only expected for FY21, and comparatives are against H1
2020 unless otherwise stated. Additional information in respect of
the Balance Sheet and cash flow for the previous two periods can be
found on our website: www.spirehealthcare.com/investorrelations
.
Revenue
Group revenues increased by 39% to GBP558.2m versus H1 2020 of
GBP401.9m (13.5% increase versus H1 2019 of GBP491.6m). The Group
operated under a COVID-19 specific NHS contract in Q1 2021, with a
minimum volume guarantee. The increase in revenue in H1 21 is
mainly driven by the strong return of private patients as the
Company regained full control of the payor mix from Q2 2021, as the
NHS contract ended. NHS revenue in the period of GBP185.4m (H1
2020: GBP200.4m, H1 2019: GBP143.7m) includes amounts arising from
specific COVID-19 contracts of GBP124.1m (H1 2020: GBP133.7m, H1
2019: GBPnil), with GBP10.1m relating to the FY20 NHS cost recovery
contract being recognised in the period following customer
agreement to volume-based variable consideration and final
costings.
Revenue by payor
Six months ended 30 June (Unaudited)
============== ============================================
Variance Variance
% %
(2021 -
(GBP million) 2021 2020 2020) 2019 (2021 -2019)
============== ===== ===== ======== ===== =============
PMI 231.3 145.8 58.7% 247.0 (6.3%)
Self-Pay 129.9 47.7 172.3% 88.6 46.7%
============== ===== ===== ======== ===== =============
Total Private 361.2 193.5 86.7% 335.6 7.7%
Total NHS 185.4 200.4 (7.5%) 143.7 29.0%
Other 11.6 8.0 45.0% 12.3 (5.8%)
============== ===== ===== ======== ===== =============
Total revenue 558.2 401.9 38.9% 491.6 13.5%
============== ===== ===== ======== ===== =============
Revenue by payor - quarterly analysis
The below table provides additional information regarding the
split of revenue between Q1 and Q2 2021 versus Q1 and Q2 2019. This
is to provide comparable data in respect of the Company's return to
private work in Q2 2021. 2020 data is not provided as it is not
considered comparable as a result of the pandemic impact and the
operation of the specific NHS contract.
Q1 21 Q1 19 Variance Variance H1 21 H1 19 Variance
(GBP million) GBPm GBPm % Q2 21 Q2 19 % GBPm GBPm %
============== ===== ===== ======== ===== ===== ======== ===== ===== ========
PMI 104.3 126.0 (17.2%) 127.0 121.0 5.0% 231.3 247.0 (6.3%)
Self-Pay 50.1 44.4 13.0% 79.8 44.2 80.6% 129.9 88.6 46.7%
============== ===== ===== ======== ===== ===== ======== ===== ===== ========
Total Private 154.4 170.4 (9.4%) 206.8 165.2 25.2% 361.2 335.6 7.7%
Total NHS 125.5 74.3 68.7% 59.9 69.4 (13.6%) 185.4 143.7 29.0%
Other 5.0 6.5 (22.4%) 6.6 5.8 13.2% 11.6 12.3 (5.8%)
============== ===== ===== ======== ===== ===== ======== ===== ===== ========
Total revenue 284.9 251.2 13.4% 273.3 240.4 13.7% 558.2 491.6 13.5%
============== ===== ===== ======== ===== ===== ======== ===== ===== ========
Detailed Revenue Analysis for Q2 2021
In Q2 2021, the Group resumed private work following the lifting
of COVID-19 restrictions and was no longer operating under the NHS
contracts. Detailed revenue data in line with a pre-COVID
environment is therefore available for Q2 2021. The table below
provides the underlying performance of the business where the Group
had full control of the payor mix, and Q2 2019 comparatives have
been provided reflecting the pre-COVID operating environment. The
table has been included to assist in the understanding of future
trends. As Q1 2021 was under the NHS COVID-19 contracts, the
admission data does not provide meaningful comparatives.
(Unaudited) PMI Self-pay Total private NHS Other Total
=================== ====== ======== ============= ======= ===== ======
Q2 2021
IPDC(1) admissions
('000s) 28.6 17.7 46.3 17.0 63.3
ARPC(2) (GBP) 2,721 3,694 3,093 2,791 2,952
IPDC revenue
(GBPm) 77.8 65.4 143.2 47.5 190.7
Outpatient revenue
(GBPm) 49.2 14.4 63.6 12.4 76.0
Total (GBPm) 127.0 79.8 206.8 59.9 6.6 273.3
=================== ====== ======== ============= ======= ===== ======
Q2 2019
IPDC admissions
('000s) 30.1 11.8 41.9 22.3 64.2
ARPC (GBP) 2,491 2,879 2,600 2,416 2,536
IPDC revenue
(GBPm) 75.1 34.0 109.1 53.9 163.0
Outpatient revenue
(GBPm) 45.9 10.2 56.1 15.5 71.6
Total (GBPm) 121.0 44.2 165.2 69.4 5.8 240.4
=================== ====== ======== ============= ======= ===== ======
Variance (%)
IPDC admissions (5.1%) 50.1% 10.4% (23.9%) (1.4%)
ARPC 9.2% 28.3% 19.0% 15.6% 16.4%
IPDC revenue 3.7% 92.6% 31.3% (12.0%) 17.0%
Outpatient revenue 7.2% 39.8% 13.3% (20.0%) 6.3%
=================== ====== ======== ============= ======= ===== ======
Total (%) 5.0% 80.6% 25.2% (13.6%) 13.2% 13.7%
=================== ====== ======== ============= ======= ===== ======
1 Inpatient and daycase
2 Average revenue per case
Cost of sales and gross profit
Gross margin for the first six months of 2021 is 45.5% compared
to 2020 levels of 49.0%, and 2019 levels of 46.9%. Cost of sales
increased in the period by GBP99.0m (GBP43.0m on H1 2019), or 48.3%
(H1 2019: 16.5%), to GBP304.1m (2020: GBP205.1m, 2019: GBP261.1m)
on revenues that increased by 38.9% (H1 19: 13.5%). This is due to
increased costs as a result of COVID-19 to ensure safe patient
pathways and additional Agency and Bank staff to assist in short
notice absences caused by COVID-19 self-isolation requirements. The
margin in H1 2020 was higher as a result of strong private trading
in Q1 2020, and the impact of the NHS cost recovery contract in Q2
2020.
Cost of sales is broken down, and presented as a percentage of
relevant revenue, as follows:
Six months ended 30 June
(Unaudited)
==================================== ===== ========
2021 2020 2019
=================== =============== ===============
% of % of
GBPm % of revenue GBPm revenue GBPm revenue
=============== ===== ============ ===== ======== ===== ========
Clinical staff 126.9 22.7% 97.1 24.2% 98.8 20.1%
Direct costs 132.8 23.8% 78.9 19.6% 110.7 22.5%
Medical fees 44.4 8.0% 29.1 7.2% 51.6 10.5%
===== ======== ===== ========
Cost of sales 304.1 54.5% 205.1 51.0% 261.1 53.1%
=============== ===== ============ ===== ======== ===== ========
Gross profit 254.1 45.5% 196.8 49.0% 230.5 46.9%
=============== ===== ============ ===== ======== ===== ========
Clinical staff costs includes GBP4.4m relating to the provision
for holiday accruals, which is booked in other operating costs.
Adjusting for the provision, gross profit margin was 46.3%, down
only 80bp on H1 19, or 270bp on H1 20.
Hospital operating profit margin (gross profit less indirect
hospital costs) was 24.7% compared to 23.8% in June 2020 and 26.3%
in June 2019, with indirect hospital costs increasing by GBP15.4m
from GBP101.0m in H1 2019 to GBP116.4m in H1 2021 (H1 20: GBP95.5m)
.
Other operating costs
Other operating costs for the six months ended 30 June 2021
decreased by GBP178.2m or 46.1% versus H1 20 to GBP208.5m, mainly
due to a one-off impairment to goodwill of GBP200m recognised in H1
2020. Excluding Adjusting Items, other operating costs have
increased by GBP24.2m, or 13.3% to GBP206.2m (H1 2020: GBP182.0m).
This increase is mainly driven by increased non-clinical staff
costs (which includes GBP2.4m in respect of the provision for
holiday accruals), depreciation and marketing costs. In H1 2019,
other operating costs were GBP179.5m, being 16.2% lower than H1
2021, and excluding Adjusting Items, 15.1% lower at GBP179.1m.
Operating margin for the six months ended 30 June 2021 is 8.3%,
compared to (47.2%) at H1 2020 and 10.4% at H1 2019. Excluding
adjusting items, operating margin is 8.7%, up from 3.7% at H1 2020,
and down from 10.5% at H1 2019.
EBITDA
EBITDA for the Group has increased by 55.8% in the period from
GBP61.6m to GBP96.0m for H1 2021, or decreased by 0.8% from H1 2019
EBITDA of GBP96.8m. The increase in H1 2021 reflects the reducing
limitations placed on the trading operations of the business as a
consequence of both the NHS COVID-19 contract and Government policy
in response to the pandemic.
Share-based payments
During the period, grants were made to Executive Directors and
members of the executive management team under the Company's Long
Term Incentive Plan. For the six months ended 30 June 2021, the
charge to the income statement is GBP1.7m (H1 2020: GBP0.8m), or
GBP1.9m inclusive of National Insurance (H1 2020: GBP0.9m).
Six months ended 30
Adjusting Items June (Unaudited)
=======================
(GBP million) 2021 2020 2019
==================================================== ======= ====== ======
Asset disposals, impairment and aborted project
costs 2.6 200.0 0.3
Hospital set up and closure costs 0.1 0.1 0.1
Remediation of regulatory compliance or malpractice (0.4) 4.6 -
==================================================== ======= ====== ======
Total costs 2.3 204.7 0.4
==================================================== ======= ====== ======
Income tax credit on Adjusting Items - (0.8) (0.1)
==================================================== ======= ====== ======
Total post-tax Adjusting Items 2.3 203.9 0.3
==================================================== ======= ====== ======
Adjusting Items comprise those matters where the Directors
believe the financial effect should be adjusted for, due to their
nature or amount, in order to provide a more comparable measure of
the Group's underlying performance.
In the period, the Group agreed to terminate the lease for our
Sussex Hospital, with the NHS Trust taking over the running of the
hospital from 31 March 2022. As part of this agreement, the Plant,
Property and Equipment were sold to the Trust on 31 March 2021, the
property lease shortened to a period of one year (reduced from 6
years) and a transitional arrangement was agreed. This has resulted
in a GBP0.4m profit being reflected in Asset disposals, offset by
GBP0.2m of sale costs. Offsetting this profit are Mergers and
Acquisition ("M&A") costs of GBP2.8m, largely relating to the
attempted takeover bid by Ramsay Health Care. This results in net
Asset Disposal, Impairment and Aborted Project costs of GBP2.6m in
H1 2021. In the prior period, the Group recognised a one-off
non-cash impairment to Goodwill of GBP200m.
Following the judgment in favour of the Group in its case
against one of its insurers relating to Ian Paterson in H2 2020,
the costs awarded were reviewed as part of the Court process in H1
2021 and the Group received an additional GBP0.4m of income, which
has been recorded as Remediation of Regulatory Compliance or
Malpractice. The insurer has been granted their appeal to the
ruling, and this is expected to be heard at the Court of Appeal in
H2 2021. In the prior period, the Group committed to providing
on-going support to Paterson's patients, following the release of
the Paterson Public Inquiry in February 2020, and provided for
costs of GBP3.2m in ensuring the recommended actions from the
report are fully adhered to.
Hospital set up and closure costs mainly relate to the
maintenance of costs of non-operational sites.
Net finance costs
Net finance costs have remained flat at GBP41.5m (H1 2020:
GBP41.5m, H1 2019: GBP41.4m).
Taxation
The taxation charge for the six months ended 30 June 2021 is
GBP21.6m (H1 2020: GBP1.8m, H1 2019: GBP2.5m). This consists of a
GBPnil (H1 2020: GBPnil, H1 2019: GBP1.3m) charge for corporation
tax and a charge of GBP19.3m (H1 2020: GBP2.5m, H1 2019 GBP1.2m)
for the current year movement on deferred tax, and GBP2.3m (H1
2020: GBP0.7m credit, H1 2019: GBPnil) for a prior year adjustment
to deferred tax. The deferred tax charge includes a one off charge
of GBP17.7m (H1 2020: GBP6.1m, H1 2019: GBPnil)) as a result of the
deferred tax assets and liabilities being revalued from 19% to 25%
following the Government's announcement to increase in the
corporation tax which was due to take place on 1 April 2023.
Profit after taxation
The loss after taxation for the six months ended 30 June 2021
was GBP16.9m (H1 2020: loss GBP233.1m, H1 2019: profit GBP7.1m)
Non-GAAP financial measures
We have provided below financial information that has not been
prepared in accordance with IFRS. We use these non-GAAP financial
measures internally in analysing our financial results and believe
they are useful to investors, as a supplement to IFRS measures, in
evaluating our ongoing operational performance. We believe that the
use of these non-GAAP financial measures provides an additional
tool for investors to use in evaluating ongoing operating results
and trends in comparing our financial results with other companies
in the industry, many of which present similar non-GAAP financial
measures to investors.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with IFRS. Investors are encourage to review
the reconciliation of these non-GAAP financial measures to their
most directly comparable IFRS financial measures provided in the
financial statements table in the press release.
The following information includes references to Adjusted
financial information. This has been produced for illustrative
purposes and does not represent the Group's actual statutory
earnings.
EBITDA
Six months ended 30 June
(Unaudited)
============================
(GBP million) 2021 2020 2019
========================== ======= =========== ======
Operating profit / (loss) 46.2 (189.8) 51.0
Remove effects of:
Adjusting items 2.3 204.7 0.4
Depreciation 47.5 46.7 45.4
EBITDA 96.0 61.6 96.8
========================== ======= =========== ======
Adjusted EBIT
Six months ended 30 June
(Unaudited)
============================
(GBP million) 2021 2020 2019
========================== ======= =========== ======
Operating profit / (loss) 46.2 (189.8) 51.0
Remove effects of:
Adjusting items 2.3 204.7 0.4
Adjusted EBIT 48.5 14.9 51.4
========================== ======= =========== ======
Adjusted profit after tax and adjusted earnings per share
Adjustments have been made to remove the impact of a number of
non-recurring items.
Six months ended 30
June (Unaudited)
=====================================
(GBP million) 2021 2020 2019
==================================================== =========== =========== ===========
Profit / (Loss) before tax 4.7 (231.3) 9.6
Remove effects of:
Adjusting items 2.3 204.7 0.4
==================================================== =========== =========== ===========
Adjusted profit / (loss) before tax 7.0 (26.6) 10.0
Taxation(1) (21.6) (2.6) (2.6)
Adjusted (loss) / profit after tax (14.6) (29.2) 7.4
==================================================== =========== =========== ===========
Weighted average number of ordinary shares in issue
(No.) 400,842,733 400,837,911 400,828,739
==================================================== =========== =========== ===========
Adjusted basic (loss) / earnings per share (pence) (3.6) (7.3) 1.8
==================================================== =========== =========== ===========
(1) Reported tax charge for the period includes a one-off rate change impact of GBP17.7m
Cash flow analysis for the period
Six months ended June
(Unaudited)
=========================
(GBP million) 2021 2020 2019
================================= ======= ======= =======
Opening cash balance 106.3 90.8 47.7
================================= ======= ======= =======
Adjusted operating cash flows 85.7 73.2 85.3
Adjusting items - (1.2) (0.1)
Income tax received - 3.6 1.8
================================= ======= ======= =======
Operating cash flows 85.7 75.6 87.0
Net cash in investing activities (29.5) (28.1) (21.3)
Net cash in financing activities (46.4) (47.4) (55.0)
======= =======
Closing cash balance 116.1 90.9 58.4
================================= ======= ======= =======
Operating cash flows before Adjusting items
The cash inflow from adjusted operating activities was GBP85.7m,
which constitutes a cash conversion rate from GBP96.0m EBITDA of
89.3% (H1 2020: 118.8% conversion of GBP61.6m EBITDA, H2 2019:
88.1% conversion of GBP96.8m). The net cash outflow from movements
in working capital in the period was GBP11.3m (H1 2020: GBP13.2m
inflow, H1 2019: GBP11.8m outflow).
Investing and financing cash flows
Net cash used in investing activities for the period was
GBP29.5m (H1 2020: GBP28.1m, H1 2019: GBP21.3m). Cash outflow for
the purchase of Plant, Property and Equipment in the period
totalled GBP31.6m (H1 2020: GBP28.1m, H1 2019: GBP21.5m), which
included new MRI or CT scanners and associated works at 3
hospitals. Proceeds of GBP2m were received for the sale of Sussex
assets to the NHS Trust in advance of the business operations
moving to the NHS in March 2022.
Net cash used in financing activities for the period was
GBP46.4m (H1 2020: GBP47.4m, H1 2019: GBP55.0m), including lease
and bank interest paid of GBP39.2m (H1 2020: GBP36.8m, H1 2019:
GBP35.9m) and GBP7.2m (H1 2020: GBP10.6m, H1 2019: GBP9.1m) of
lease principal payments. In H1 19, GBP10.0m was paid as an interim
dividend. No dividends have been paid since the cancellation of the
final dividend in 2019 as a result of the uncertainty caused by the
COVID-19 pandemic.
Borrowings
At 30 June 2021, the Group has bank borrowings of GBP422.4m
(December 2020: GBP420.8m, June 2020: GBP420.6m), drawn under
facilities which is due to mature in July 2023.
As at
=============================
30 June 2021 31 December
(GBP million) (Unaudited) 2020 (Audited)
=============================================== ============ ===============
Cash 116.1 106.3
=============================================== ============ ===============
Bank borrowings 422.4 420.8
=============================================== ============ ===============
Bank borrowings less cash and cash equivalents 306.3 314.5
=============================================== ============ ===============
As disclosed in the 2020 year-end financial results, the Group
had reached agreement with its lenders to provide the necessary
financial flexibility to continue to support the NHS for a longer
period than was initially envisaged, this included a covenant
waiver of the net debt / EBITDA ratio and interest cover test for
June 2021 and a new liquidity measure as a consequence of this
arrangement. This test requires cash and cash equivalents,
including headroom under undrawn committed facilities, to remain
above GBP50m. For December 2021 the agreement allows for a maximum
net debt / EBITDA ratio of 6x if this measure has not already
reduced below 4x. As at 30 June 2021 this measure stood at 2.7x,
and the new liquidity measure referred to above has fallen away
from 30 June 2021.
Spire Healthcare currently has a Senior Loan Facility of GBP425m
and an undrawn Revolving Credit Facility (RCF) of GBP100m. The
Senior Loan Facility will mature in July 2023. The RCF will remain
at GBP100m until July 2022 and reduce to GBP87m thereafter until
maturity in July 2023.
As at 30 June 2021, lease liabilities were GBP750.6m (December
2020: GBP749.5m). Refer to note 16 for more detail.
Dividend
As a result of the continued COVID-19 uncertainty, the Board
will not be proposing an interim dividend. No dividends have been
proposed or paid since the start of the pandemic.
Related party transactions
There were no significant related party transactions during the
period under review.
Principal Risks
There are a number of risks facing the Group as disclosed in the
2020 Annual Report. The Governance structures as described in the
2020 Annual Report for the review and management of the Principal
Risks remain the same. The Board has decided that the Principal
Risk concerning EU-UK trading relations reported in the 2020 Annual
Report has now broadened to an overall Principal Risk from supply
chain disruption as described below. Otherwise, the risk profile of
the Group has remained broadly stable in H1 2021 and the Board
anticipates that the Principal Risks described below in summary
will remain the same through to the year-end.
The Principal Risks fall into the following categories:
Clinical
& Patient
Safety People Financial Geopolitical Technology Social Governance
Patient Safety Information
& Clinical Government Governance Compliance
Quality Workforce Macroeconomic & NHS Policy and Security COVID-19/Pandemic & Regulation
PMI market Supply Chain
dynamics Disruption Brand Reputation
Competitor
Challenge
Liquidity
& Covenants
Insurance
& Indemnities
Below is a summary of the Principal Risks facing the Group with
a description of the material mitigations.
Risk Mitigation
Patient Safety & Clinical Quality
There is a risk to the provision of The Group maintains the following
high quality patient care due to: controls to mitigate against a failure
* A shortage of skilled workforce of patient safety and clinical quality:
* A reporting culture from Ward to Board, with a
Freedom To Speak Up Guardian (FTSUG) at each site
* Clinical and non-clinical staff and Consultants
failing to follow guidelines, standards and pol
icies * Incident / red flag staffing reporting
resulting in patient harm
* Continually monitoring clinical standards
* Failing to learn from incidents, complaints,
mortality reviews, patient feedback and Patient
Notification Exercises * A schedule of robust and regular hospital audits
* Failure to act on findings from audits, clinica * Colleague induction, clinical competencies
l requirements and mandated training
outcome measures (including registry data), pee
r
reviews and external inspections * Reporting on clinical outcomes
* Nosocomial COVID-19 infection
In response to the COVID-19 pandemic,
the Group introduced a specific infection
prevention control programme.
Workforce
There is a global shortage of nursing The Group seeks to retain and recruit
and allied healthcare practitioners. staff through a variety of mechanisms
In addition, the Group has an ageing including:
workforce. The COVID-19 pandemic has * A common purpose and a positive workplace culture
caused up to 10%-15% of the workforce
to be absent at its peak.
* Maintaining competitive pay and benefits
* A centralised recruitment process
* An overseas recruitment capability to secure skilled
healthcare workers from outside the EU where
necessary
* Offering apprenticeship programmes to support the
development of clinical and non-clinical teams across
the business
The Group manages immediate staff
shortages through the use of agency
and bank workers.
Macroeconomic
Following the end of the COVID-19 contract, The evidence available to the Group
the business has returned indicates that the COVID-19 pandemic
to normal trading channels (Private has left high levels of pent up demand
and NHS), albeit that these continue for the Group's services.
to be impacted by the pandemic (e.g. The ability for patients to access
access to GP, NHS commissioning levels private care does not appear to be
due to funding uncertainty). constrained financially at this time.
The wider economic outlook remains The Group understands that private
unclear, with the expectation of inflation medical insurance policy renewals
(short term) and the potential for and sales remain stable, and the
higher unemployment following the end Group has itself seen strong growth
of the furlough scheme. in 2021 that is expected to continue
Despite these macroeconomic headwinds while waiting lists remain at record
the expectation is that the primary levels.
growth drivers will remain medium term, In response to macro inflationary
namely record NHS waiting lists, stable/growing pressure we will continue to benefit
PMI lives covered and a growing Self from the inflation mechanisms built
Pay market. into the PMI contracts and will benefit
from our ability to change Self-Pay
pricing quickly via our new pricing
engine.
In addition, the Group will continue
to respond to changing economic circumstances
by optimising our private and NHS
funded work ensuring the Group is
not over reliant on one income source,
supported by an efficient cost base.
PMI market dynamics
The PMI market remains concentrated, The Group works hard to maintain
with the top four companies (Bupa, good relationships and a joint product/patient
AXA, Aviva and VitalityHealth) having health offering with the PMI companies,
a market share estimated at over 85%. which, in the opinion of the Directors,
The Group has individual contractual assists the healthcare sector as
relationships for the provision of a whole in delivering high-quality
its services with all the major PMI patient care.
providers. These contracts come up The Group ensures it has long-term
for renewal on a recurring basis. There contracts in place with its PMI partners
is a risk that renewal of contract to avoid co-termination of contractual
terms cannot be secured on historical arrangements.
terms. The Group believes continuing to
Service line tenders and the introduction invest in its well-placed portfolio
of triage services are expected to of hospitals provides a natural fit
continue medium term as PMIs look to to the local requirements of all
reduce costs. We also expect an increase the PMI providers long term.
in directional networks. The Group continues to invest in
PMI patient volumes remain below historical efficiency programmes to ensure that
levels despite PMI models forecasting it can offer the best combination
growth in 2021. It remains unclear of high quality patient care at competitive
how volumes will recover over the medium prices.
term.
Competitor Challenge
The Group operates in a highly competitive The Group maintains a watching brief
market. New or existing competitors on new and existing competitor activity
may enter the market of one or more and retains the ability to react
of our existing hospitals, or offer quickly to changes in patient and
new services. market demand.
In the current economic environment, The Group considers that a partial
there is a risk that the pressures mitigation of the impact of competitor
on competitors results in irrational activity is ensured by providing
market behaviour manifesting itself patients with high-quality clinical
in low pricing on tenders or self pay. care and by maintaining good working
relationships with GP's and Consultants.
The Group continues to invest in
the brand and deliver an effective
acquisition capability both direct
and via our partners in order to
protect our market position. It has
also strengthened its pricing and
tendering capabilities.
Despite the COVID-19 pandemic, the
Group plans to maintain its investment
into the estate and clinical equipment
to differentiate our proposition.
The Group monitors the market for
opportunities, should they arise,
to acquire or open facilities in
specific geographies creating incremental
volume.
Liquidity & Covenants
The Group may not have sufficient liquidity The Group actively monitors and manages
to meet its financial liabilities as its liquid asset position, its financial
they fall due, or breach financial liabilities falling due and the cover
covenants linked to its borrowings. against its loan covenants. It is
The Group may not be able to refinance actively focussed on cash management
on favourable terms. and capital expenditure.
At the onset of the COVID-19 pandemic,
the Group was able to positively
engage with its banking group with
the result that the Group benefitted
from covenant waivers in 2020. For
June 2021, the banking group has
again agreed to waive the covenant
tests under its current loan agreements.
The Group retains access to an unutilised
GBP100m revolving credit facility
should its current cash position
materially deteriorate.
The Group has a solid asset base
with the ability to promptly leverage
in a short timescale, if required.
The Board has considered the risk
in detail as part of its assessment
of Going Concern for the Group.
Insurance & Indemnities
The Group procures insurance from global The Group reviews and maintains insurance
insurers and syndicates with a presence to mitigate the possibility of a
in the Lloyds of London insurance market. major loss. Adequacy of cover is
reviewed annually with the Group's
The Group could be subject to litigation brokers with coverage being maintained
for actions by third parties or may or increased depending on that advice.
be found liable for damages which may Personal injury claims relating to
not be covered by its insurance policies, patients, third parties and employees
if the claims are in excess of cover are covered by insurance once predetermined
or claims are not covered by deductible levels have been reached.
the Group's insurance due to other The Group engages in consultation
policy limitations or exclusions or information events relating to indemnity
where it has failed to comply with and has developed a bespoke affinity
the terms of the policy. insurance product MedicaInsure to
provide Consultants with a high-quality,
regulated alternative to discretionary
cover. The Group has made robust
representations to government and
the Paterson Inquiry with regard
to the need to end discretionary
indemnity and to regulate the medical
defence organisations. We are also
engaging with medical defence organisations
to explore how alternative insurance
products could reduce the risk associated
with historic models.
Government & NHS Policy
The Group expects NHSE to complete Historically, the Group derived 70%
the establishment of regional Integrated of its revenues from PMI and Self-pay
Care Systems (ICS) over the coming patients that provided a natural
18 months. Meanwhile Scotland and Wales 'hedge' against exposure to Government
will broadly remain unchanged. and NHS policy. Post pandemic, the
It remains unclear what the new NHSE Group is seeing strong private revenues
commissioning models and/or changes that are expected to continue medium
in the tariff structures will be post term.
pandemic. Our expectation is this will The Group has successfully secured
become a combination of direct referrals accreditation on the NHS Frameworks
from GPs, waiting list transfers and in England, Scotland and Wales ensuring
an increasing use of block contracts. access to tender for future contracts.
The economic policy of the Treasury Through the COVID-19 pandemic, the
post the COVID-19 pandemic is also Group has increased its relationships
still unknown. There is a risk that with the government via DoHSC, NHS
future economic policy is unfavourable England and NHS Improvement. Meanwhile
to the healthcare sector as a whole; hospitals have also strengthened
however, the political pressure of their relationships with the local
record waiting lists will ultimately NHS commissioners. Working effectively
result in funding being made available. with the new ICS in each our markets
will be a primary objective for hospital
management teams.
Supply Chain Disruption
The widely reported disruption in the For high volume and or critical medical
Global and UK supply chains because consumable lines, the Group maintains
of a variety of factors, including a centralised supply chain with a
a UK shortage of HGV drivers, could national distribution centre (NDC)
lead to shortages of critical components and its own vehicle and driver fleet,
or products within: typically representing 8 weeks supply.
* Medicines It also stocks centrally some prosthesis
that is supplemented by locally held
Supplier consigned stock. Medicines
* Consumables are delivered direct to hospital.
In 2021, the Group has had to respond
to a number of product shortages,
* Prostheses and has seen some minor shortfalls
in order fulfilment. In all cases
the Group's centralised procurement
* Food function has been able 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.
As a result of the Group's Brexit
planning, the Group does have contingency
menu plans in case fresh food shortages.
Any national shortages in critical
medicines are managed by NHS Supply
Chain. The Group is able to receive
allocations based on its activity.
Information Governance & Security
The Group has to maintain and manage The Group has a governance structure,
a range of physical and digital data with Board oversight, that monitors
assets including patient records, commercial the risk and mitigations for information
information and staff data. governance. To support the governance
Personal data has to be managed in structure the Group has a range of
compliance with the principles set policies and practices covering information
out in the Data Protection Act 2018 governance. All staff have to complete
and the General Data Protection Regulations annual mandatory training on information
(GDPR). governance and data protection.
The level of risk to Spire Healthcare's The Group's IT team have a cyber
IT architecture and systems continues security strategy for continuous
to grow as the volume of cyber security improvement based on industry standards.
threats increases and they become more It covers the processes from identifying
sophisticated. specific risks, to protecting physical
Healthcare and pharmaceutical organisations and digital data assets through to
saw increased hostile cyber activity recovery in the event of a successful
in 2020 as a result of the COVID-19 cyber attack.
pandemic. The group anticipates that
the Healthcare sector will remain a The Group works with a number of
higher risk sector from cyber attacks. industry leading technical partners
to provide:
* multiple layers of business protection through the
use of advanced detection and protection systems
* Regular third-party penetration testing on new and
existing IT systems
COVID-19/Pandemic
Repeated waves of infection occur that To maximise the utilisation of the
risk overwhelming the NHS and forcing hospitals the Group has:
HM Government to re-introduce severe * Encouraged all staff to be fully vaccinated
lock-down measures either regionally
or nationally.
* Negotiated national contracts with the NHS to support
them to provide capacity for treating the backlog of
elective procedures
* Maintained capacity within the contractual
arrangements with the NHS for PMI and Self-Pay
patients (overridden in Surge scenarios)
* Maintained close links with the consultant community
and support them build their private patient
activities
* Maintained the Infection Prevention Control measures
to reduce the risk of cross contamination amongst
staff at Spire Healthcare facilities. These measures
include regularly testing all staff and patients for
COVID-19
Brand Reputation
The COVID-19 pandemic has resulted The Group's primary mitigations against
in a substantial amount of positive damage to its brand reputation is
media coverage for the Group. through the good management of its
Our brand presence within the consumer principal risks, in particular:
and NHS & HM Government is higher than * Patient safety and clinical quality;
at any point.
The Group's future growth depends upon
its ability to maintain, and continue * Cyber security and data protection; and,
to enhance, its reputation amongst
patients, clinicians and other stakeholders.
As the Group's brand presence grows, * Compliance and regulation.
the risk increases that adverse events
such as:
* patient notifications and recalls; In addition, the Group continues
to invest in the awareness and health
of the brand through national advertising,
* mishandling of patient data; or, public relations and centrally coordinated
social media. It also continues to
build its reputation amongst analysts
* a breach of law or regulation and public commentators.
will have a more material impact on
the Group.
Compliance & Regulation
The increasing range and complexity The Group has a ward-to-board system
of the legislation and regulation which of governance that ensures compliance
impact on the Group, plus the fact with law and regulation and provides
that, alongside many other complex the pathways to add different elements
and highly-regulated entities, the of compliance, should regulation/laws
Group fully expects that the legal change and thus the need arise.
and regulatory landscape in which it Key components that support the ward
operates will change and become more to board governance structure for
onerous, complex and demanding, means compliance and regulation include:
that this is considered an area of * A dedicated legal team and company secretary that,
potential risk for the Group and its with external counsel, monitors legal and regulatory
operations. developments and advises the group thereon.
In addition, as the UK makes the transition
from being part of the EU, there will * Regular, role specific, mandatory training for all
be flux in legal and regulatory developments, staff (both clinical and non-clinical) across a range
potentially arising from the interpretation of the most important legal and regulatory compliance
of retained EU law by the UK courts areas, e.g. data protection, health & safety laws and
or from the direction taken by the safeguarding.
UK following the end of the transition
period; it is not possible to determine
with any degree of certainty the speed, * Centralised clinical and non-clinical internal audit
impact or direction of forthcoming teams that carry out site audits and assists
legal or regulatory change. This will hospitals in establishing and maintaining a high
therefore require monitoring, compliance level of internal control.
and assurance.
Directors' responsibility statement
Going Concern
As detailed in the Financial Review, the Group assesses going
concern on a 12 month period to 30 September 2022. At 30 June 2021,
the Group has cash of GBP116.1m and access to a further GBP100m
through a committed and undrawn revolving credit facility.
Given the economic uncertainty arising from the COVID-19
pandemic, the Group has maintained its position of not paying a
dividend. The Group has not had to undertake any further action in
regard of maintaining its liquidity in H1 2021.
The Group confirmed in an update in August 2020 that it had
agreed terms, with effect from the 1 July 2020, for the variation
of the NHS England ("NHSE") contract. The variation was intended to
allow Spire Healthcare to undertake a phased transition back to
normal business, by providing NHS elective care to reduce waiting
lists, whilst increasing private activity in its 35 English
hospitals. The NHSE Contract, and subsequent variation, expired in
line with expectation at the end of December 2020.
In December 2020, the Group announced that it had signed a new
contract with NHSE covering the period from 1 January 2021 to 31
March 2021, to provide a volume-based commitment aimed at reducing
NHS waiting lists when the existing contract ended on 31 December
2020. This new contract aimed to provide a smooth transition for
NHS services from the previous cost-based contract to the new NHS
framework for purchasing additional activity from the independent
sector.
The contract, which covered Q1 2021, provided Spire Healthcare
with liquidity and a greater degree of certainty as the Group
received monthly payments on account, which were then subject to
finalisation with reference to actual volumes in the period, rather
than a cost based approach.
Under the terms of the existing Senior Loan Facility, which was
due to mature in July 2022, the Group must adhere to certain
banking covenants which are linked to its liquidity and trading
performance over the last 12 months. As was announced in March and
April 2020:
-- The Group agreed to support the NHS during the COVID-19
pandemic, which resulted in certain cash costs being covered;
and
-- Its lenders agreed to waive the covenant testing required
under the Company's Senior Facility Agreement for the two
forthcoming scheduled test periods on 30 June and 31 December
2020.
As was announced in September 2020, the Group obtained agreement
from its lenders that net debt to EBITDA and interest cover ratio
covenant testing would be waived for June 2021. For December 2021
the agreement allows for a maximum net debt to EBITDA ratio of 6x
to apply if this measure has not already dipped below 4x at any
month end from June to November 2021. As the ratio stood at 2.7x on
30 June 2021, the limit for this measure will revert to 4x for the
purposes of the next test on 31 December 2021.
As part of the agreement reached with its lenders in September
2020, the Group undertook that available liquidity, the aggregate
of cash and committed but unutilised facilities (any undrawn
element of the Revolving Credit Facility), would not be less than
GBP50m at the end of each month. This requirement fell away from 30
June 2021 as the Group's actual net debt to EBITDA ratio was below
4x.
In addition to this, the maturity date of the Senior Loan
Facility was extended by one year to July 2023.
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. The specific scenarios
covered by the Group's testing are summarised below, further
information on these is provided in the Principal Risks
section.
-- In respect of the on-going uncertainty relating to the
COVID-19 pandemic, the Group has modelled for the risk of extensive
restrictions as a result of lockdowns in late 2021 and early
2022;
-- Downside modelling of a number of risks which result in a
decline in earnings arising from issues connected with the UK/ EU
trade negotiations, a general economic downturn or competitor
action;
-- A key hospital is subject to permanent or temporary
suspension of trade, for example, due to a severe climate event, a
major fire or regulatory matter;
-- The Group is subject to temporary suspension of trade, with a
temporary adverse impact on revenue, for example, as a result of
regulatory action or a successful cyber-attack on key business
systems; and
-- The business is subject to significant uninsured losses
arising from medical malpractice, negligence or similar claims.
For the covenant testing periods ending December 2021 and June
2022, the Directors are confident that the Group has sufficient
headroom to stay within the new covenants, with the mitigations
available (which would include management of working capital and
constrained levels of capital investment), even in its severe but
plausible downside scenarios.
Based on the current assessment of the likelihood of these risks
arising by 30 September 2022, together with their assessment of the
planned mitigating actions being successful, the Directors have
concluded that it is appropriate to prepare the accounts on a going
concern basis.
Each of the Directors confirms that, to the best of their
knowledge:
-- This condensed consolidated interim financial information for
the six months ended 30 June 2021 has been prepared in accordance
with UK adopted International Accounting Standard 34 and Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority, gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
on a consolidated basis.
-- The interim management report, which is incorporated into the
Chief -Executive Officer message, Operating Review and Financial
Review, includes a fair review of the information as required
by:
-- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of the important events that have occurred
during the six months of the current financial year and their
impact on the condensed consolidated interim financial information
and a description of the principal risks for the remaining six
months of the year; and
-- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
impacted the financial position or performance of the Group during
the period and any material changes in the related party
transactions described in the Group's Annual Report and Accounts
for the year ended 31 December 2020.
By order of the Board
Justin Ash Jitesh Sodha
Chief Executive Officer Chief Financial Officer
8 September 2021
Independent review report of Spire Healthcare Group plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the Consolidated
interim income statement, Consolidated interim statement of
comprehensive income, Consolidated interim statement of changes in
equity, Consolidated interim balance sheet, Consolidated interim
statement of cash flows and related notes 1 to 21 We have read the
other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 3, the annual financial statements of the
Group will be prepared in accordance with UK adopted International
Accounting Standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion is based on procedures that are less extensive than
audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
08 September 2021
Condensed financial statements
Consolidated interim income statement
For the six months ended 30 June 2021
Six months ended 30 June (Unaudited)
=================================================================
2021 2020
============================== ================================
Total Adjusting Total Adjusting
before items before items
adjusting (note adjusting (note
(GBP million) Note items 10) Total items 10) Total
=============================== ==== ========== ========= ======= ========== ========= =======
Revenue 6 558.2 - 558.2 401.9 - 401.9
Cost of sales (304.1) - (304.1) (205.1) - (205.1)
=============================== ==== ========== ========= ======= ========== ========= =======
Gross profit 254.1 - 254.1 196.8 - 196.8
Other operating costs (206.2) (2.3) (208.5) (182.0) (204.7) (386.7)
Other income 8 0.6 - 0.6 0.1 - 0.1
=============================== ==== ========== ========= ======= ========== ========= =======
Operating profit 48.5 (2.3) 46.2 14.9 (204.7) (189.8)
Net finance costs 9 (41.5) - (41.5) (41.5) - (41.5)
Profit / (Loss) before
taxation 7.0 (2.3) 4.7 (26.6) (204.7) (231.3)
Taxation 11 (21.6) - (21.6) (2.6) 0.8 (1.8)
=============================== ==== ========== ========= ======= ========== ========= =======
Loss for the year (14.6) (2.3) (16.9) (29.2) (203.9) (233.1)
=============================== ==== ========== ========= ======= ========== ========= =======
Loss for the year attributable
to owners of the Parent (14.6) (2.3) (16.9) (29.2) (203.9) (233.1)
=============================== ==== ========== ========= ======= ========== ========= =======
Loss per share (in pence
per share)
- basic 12 (3.6) (0.6) (4.2) (7.3) (50.9) (58.2)
- diluted 12 (3.6) (0.6) (4.2) (7.3) (50.9) (58.2)
=============================== ==== ========== ========= ======= ========== ========= =======
Consolidated interim statement of comprehensive income
For the six months ended 30 June 2021
Six months to
30 June (Unaudited)
======================
(GBP million) 2021 2020
=============================================================== ========== ==========
Loss for the period (16.9) (233.1)
=============================================================== ========== ==========
Items that may be reclassified to profit or loss in subsequent
periods
Profit / (loss) on cash flow hedges 1.6 (2.3)
Taxation on cash flow hedges (0.3) 0.5
=============================================================== ========== ==========
Other comprehensive income / (loss) for the period 1.3 (1.8)
=============================================================== ========== ==========
Total comprehensive loss for the period attributable to
owners of the Parent (15.6) (234.9)
=============================================================== ========== ==========
Consolidated interim statement of changes in equity
For the six months ended 30 June 2021
Share Share Capital EBT share Hedging Retained Total
(GBP million) Notes capital premium reserves reserves reserve earnings equity
====================== ===== ======== ======== ========= ========= ========= ========= =======
As at 1 January 2020 4.0 826.9 376.1 (0.8) (2.1) (264.2) 939.9
Profit for the period - - - - - (233.1) (233.1)
Other comprehensive
loss for the period - - - - (1.8) - (1.8)
======== ======== ========= ========= ========= ========= =======
Total comprehensive
income - - - - (1.8) (233.1) (234.9)
Share-based payments
(net of tax) 20 - - - - - 0.8 0.8
As at 30 June 2020 4.0 826.9 376.1 (0.8) (3.9) (496.5) 705.8
As at 1 January 2021 4.0 826.9 376.1 (0.8) (3.2) (496.4) 706.6
Loss for the period - - - - - (16.9) (16.9)
Other comprehensive
loss for the period - - - - 1.3 - 1.3
---------------------- ----- -------- -------- --------- --------- --------- --------- -------
Total comprehensive
loss - - - - 1.3 (16.9) (15.6)
Share based payments
(net of tax) 20 - - - - - 1.7 1.7
Balance at 30 June
2021 4.0 826.9 376.1 (0.8) (1.9) (511.6) 692.7
====================== ===== ======== ======== ========= ========= ========= ========= =======
Consolidated interim balance sheet
As at
==============================
30 June
2021
31 December
(GBP million) Notes (Unaudited) 2020 (Audited)
============================================ ===== ============= ===============
ASSETS
Non-current assets
Property, plant and equipment 13 1,520.6 1,535.3
Intangible assets 14 317.8 317.8
Financial asset 1.9 1.6
1,840.3 1,854.7
============================================ ===== ============= ===============
Current assets
Inventories 35.3 37.6
Trade and other receivables 106.4 101.4
Cash and cash equivalents 116.1 106.3
============================================ ===== ============= ===============
257.8 245.3
============================================ ===== ============= ===============
Non-current assets held for sale 5 4.8 4.8
============================================ ===== ============= ===============
262.6 250.1
============================================ ===== ============= ===============
Total assets 2,102.9 2,104.8
============================================ ===== ============= ===============
EQUITY AND LIABILITIES
Equity
Share capital 4.0 4.0
Share premium 826.9 826.9
Capital reserves 376.1 376.1
EBT share reserves (0.8) (0.8)
Hedging reserve (1.9) (3.2)
Retained earnings (511.6) (496.4)
============================================ ===== ============= ===============
Equity attributable to owners of the Parent 692.7 706.6
Total equity 692.7 706.6
============================================ ===== ============= ===============
Non-current liabilities
Bank borrowings 15 420.2 418.6
Lease liability 16 670.7 670.3
Derivatives 17 0.1 1.5
Deferred tax liability 75.8 53.9
============================================ ===== ============= ===============
1,166.8 1,144.3
============================================ ===== ============= ===============
Current liabilities
Bank borrowings 15 2.2 2.2
Lease liability 16 79.9 79.2
Derivatives 17 2.3 2.5
Provisions 18 32.8 33.0
Trade and other payables 19 126.1 136.9
Income tax payable 0.1 0.1
243.4 253.9
============================================ ===== ============= ===============
Total liabilities 1,410.2 1,398.2
============================================ ===== ============= ===============
Total equity and liabilities 2,102.9 2,104.8
============================================ ===== ============= ===============
Consolidated interim statement of cash flows
For the six months ended 30 June 2021
Six months ended
30 June (Unaudited)
======================
(GBP million) Notes 2021 2020
====================================================== ===== ========== ==========
Cash flows from operating activities
(Loss) / profit before taxation 4.7 (231.3)
Adjustments for:
Depreciation 7 47.5 46.7
Adjusting Items, including impairment 2.3 201.2
Share-based payments 20 1.7 0.8
Fair value movement on financial assets (0.6) (0.1)
(Profit) / Loss on disposal of property, plant
and equipment 7 (0.1) -
Finance costs 9 41.5 41.5
====================================================== ===== ========== ==========
97.0 58.8
Movements in working capital:
(Increase)/Decrease in trade and other receivables (5.5) 42.4
Decrease/(Increase) in inventories 2.3 (2.4)
Decrease in trade and other payables (8.0) (28.9)
(Decrease)/increase in provisions (0.1) 2.1
Cash generated from operations 85.7 72.0
Income tax received - 3.6
Net cash from operating activities 85.7 75.6
Cash flows from investing activities
Purchase of property, plant and equipment (31.6) (28.1)
Proceeds of disposal of Sussex assets (Adjusting
Item) 2.0 -
Proceeds of disposal of property, plant and equipment 0.1 -
Net cash used in investing activities (29.5) (28.1)
Cash flows from financing activities
Bank interest paid (6.5) (7.8)
Lease interest paid (32.7) (29.0)
Payment of lease principal (7.2) (10.6)
Net cash used in financing activities (46.4) (47.4)
====================================================== ===== ========== ==========
Net increase in cash and cash equivalents 9.8 0.1
Cash and cash equivalents at beginning of period 106.3 90.8
====================================================== ===== ========== ==========
Cash and cash equivalents at end of period 116.1 90.9
====================================================== ===== ========== ==========
Adjusting items (note 10)
Adjusting items included in the cash flow 2.0 (3.5)
Total Adjusting items (2.3) (204.7)
====================================================== ===== ========== ==========
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 Company is a public limited company, listed on the London
Stock Exchange and is incorporated, registered and domiciled in
England and Wales (registered number 09084066). The address of its
registered office is 3 Dorset Rise, London, EC4Y 8EN.
The condensed consolidated interim financial information for the
six months ended 30 June 2021 was approved by the Board on 8
September 2021.
2. Basis of preparation
The condensed consolidated interim financial information has
been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and with UK
adopted International Accounting Standard 34 "Interim Financial
Reporting". It does not include all the information required for
full annual financial statements and should be read in conjunction
with information contained in the Group's Annual Report and
Accounts for the year ended 31 December 2020. The condensed
consolidated interim financial information has been reviewed, not
audited.
The financial information contained in these interim statements
do not comprise statutory accounts within the meaning of section
434 of the Companies Act 2006. Financial information for the year
ended 31 December 2020 has been extracted from the statutory
accounts which were approved by the Board of Directors on 03 March
2021 and delivered to the Registrar of Companies. The report of the
auditor on those accounts was unqualified, did not draw attention
to any matters by way of emphasis and did not contain statements
under section 498 (2) or (3) of the Companies Act 2006.
Going concern
The Group assesses going concern on a 12 month period to 30
September 2022. The Group has cash of GBP116.1m and access to a
further GBP100m through a committed and undrawn revolving credit
facility.
Given the economic uncertainty arising from the COVID-19
pandemic, the Group has maintained its position of not paying a
dividend. The Group has not had to undertake any further action in
regard of maintaining its liquidity in H1 2021.
The Group confirmed in an update in August 2020 that it had
agreed terms, with effect from the 1 July 2020, for the variation
of the NHS England ("NHSE") contract. The variation was intended to
allow Spire Healthcare to undertake a phased transition back to
normal business, by providing NHS elective care to reduce waiting
lists, whilst increasing private activity in its 35 English
hospitals. The NHSE Contract, and subsequent variation, expired in
line with expectation at the end of December 2020.
In December 2020, the Group announced that it had signed a new
contract with NHSE covering the period from 1 January 2021 to 31
March 2021, to provide a volume-based commitment aimed at reducing
NHS waiting lists when the existing contract ended on 31 December
2020. This new contract aimed to provide a smooth transition for
NHS services from the previous cost-based contract to the new NHS
framework for purchasing additional activity from the independent
sector.
The contract, which covered Q1 2021, provided Spire Healthcare
with liquidity and a greater degree of certainty as the Group
received monthly payments on account, which were then subject to
finalisation with reference to actual volumes in the period, rather
than a cost based approach.
Under the terms of the existing Senior Loan Facility, which was
due to mature in July 2022, the Group must adhere to certain
banking covenants which are linked to its liquidity and trading
performance over the last 12 months. As was announced in March and
April 2020:
-- The Group agreed to support the NHS during the COVID-19
pandemic, which resulted in certain cash costs being covered;
and
-- Its lenders agreed to waive the covenant testing required
under the Company's Senior Facility Agreement for the two
forthcoming scheduled test periods on 30 June and 31 December
2020.
As was announced in September 2020, the Group obtained agreement
from its lenders that net debt to EBITDA and interest cover ratio
covenant testing would be waived for June 2021. For December 2021
the agreement allows for a maximum net debt to EBITDA ratio of 6x
to apply if this measure has not already dipped below 4x at any
month end from June to November 2021. As the ratio stood at 2.7x on
30 June 2021, the limit for this measure will revert to 4x for the
purposes of the next test on 31 December 2021.
As part of the agreement reached with its lenders in September
2020, the Group undertook that available liquidity, the aggregate
of cash and committed but unutilised facilities (any undrawn
element of the Revolving Credit Facility), would not be less than
GBP50m at the end of each month. This requirement fell away from 30
June 2021 as the Group's actual net debt to EBITDA ratio was below
4x.
In addition to this, the maturity date of the Senior Loan
Facility was extended by one year to July 2023.
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. The specific scenarios
covered by the Group's testing are summarised below, further
information on these is provided in the Principal Risks
section.
-- In respect of the on-going uncertainty relating to the
COVID-19 pandemic, the Group has modelled for the risk of extensive
restrictions as a result of lockdowns in late 2021 and early
2022;
-- Downside modelling of a number of risks which result in a
decline in earnings arising from issues connected with the UK/ EU
trade negotiations, a general economic downturn or competitor
action;
-- A key hospital is subject to permanent or temporary
suspension of trade, for example, due to a severe climate event, a
major fire or regulatory matter;
-- The Group is subject to temporary suspension of trade, with a
temporary adverse impact on revenue, for example, as a result of
regulatory action or a successful cyber-attack on key business
systems; and
-- The business is subject to significant uninsured losses
arising from medical malpractice, negligence or similar claims.
For the covenant testing periods ending December 2021 and June
2022, the Directors are confident that the Group has sufficient
headroom to stay within the new covenants, with the mitigations
available (which would include management of working capital and
constrained levels of capital investment), even in its severe but
plausible downside scenarios.
Based on the current assessment of the likelihood of these risks
arising by 30 September 2022, together with their assessment of the
planned mitigating actions being successful, the Directors have
concluded that it is appropriate to prepare the accounts on a going
concern basis.
3. Accounting policies
In preparing the condensed consolidated financial information,
the same accounting policies, methods of computation and
presentation have been applied as set out in the Group's Annual
Report and Accounts for the year ended 31 December 2020. The
accounting policies are consistent with those of the previous
financial year and corresponding interim period with the exception
of the additional policies as set out below:
- Revenue from contracts with customers: the Group is not
providing a revenue split between in-patient/Daycase, out-patient
and other for the six month period ended 30 June 2021. This is on
the basis that, for Q1 2021, the Group operated under an NHS
COVID-19 contract rather than its normal operating model. The
information is therefore not considered meaningful to users. The
policy will remain under review for the full year 2021.
The annual financial statements of the Group will be prepared in
accordance with UK adopted International Accounting Standards (UK
adopted International Financial Reporting Standards ("IFRSs")) in
conformity with the Companies Act 2006.
New standards, interpretations and amendments applied
The Group has not early adopted any standard, interpretation or
amendment that was issued but is not yet effective, nor are they
expected to have a material impact on the Group.
The following amendments to existing standards were effective
for the Group from 1 January 2021. These have not have had a
material impact on the Group.
- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform Phase 2
The Group will transition from LIBOR to a risk free rate ("RFR")
in H2 2021, as has been agreed with lenders. The Group has, or
will, apply the following practical expedients:
-- Contractual changes or cash flow changes required as a result
of the Reform will be treated as a movement in the market rate of
interest
-- Will not treat a derivative as discontinued as a result of
any change required by the Reform
-- Apply the temporary relief from having to meet the separately
identifiable requirement from an RFR instrument is designated as a
hedge of a risk component.
4. Significant judgements and estimates
The preparation of the condensed consolidated interim financial
information required management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amount of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
The significant judgements and estimates used in the application
of the Group's accounting policies are the same as those described
in the Group's Annual Report and Accounts for the year ended 31
December 2020.
5. Non-current assets held for sale
Two properties remain as held for sale in the current
period.
As at
==================================
30 June 31 December
(GBP million) 2021 (Unaudited) 2020 (Audited)
===================================================== ================= ===============
Spire St Saviours property 3.7 3.7
East Midlands Cancer Centre property (Bostocks Lane) 1.1 1.1
Total assets held for sale 4.8 4.8
===================================================== ================= ===============
The Group remains committed to selling the above properties and
the sale process continues. The timescales have been delayed as a
result of the pandemic, but the Group remain confident that the
process will reach completion.
6. Segmental reporting
In determining the Group's operating segment, management has
primarily considered the financial information in the internal
reports that are reviewed and used by the executive management team
and the Board of Directors (in aggregate the chief operating
decision maker) in assessing performance and in determining the
allocation of resources. The financial information in those
internal reports in respect of revenue and expenses has led
management to conclude that the Group has a single operating
segment, being the provision of healthcare services. Admission data
is not included due to the NHS COVID-19 contracts in place during
the periods mean the data is not meaningful.
All revenue is attributable to, and all non-current assets are
located in, the United Kingdom. Revenue by wider customer (payor)
group is shown below:
Six months ended
30 June (Unaudited)
======================
(GBP million) 2021 2020
Insured 231.3 145.8
NHS 185.4 200.4
Self-pay 129.9 47.7
Other 11.6 8.0
============== ========== ==========
Total revenue 558.2 401.9
============== ========== ==========
Group revenues increased by 39% to GBP558.2m (H1 20: GBP401.9m).
The Group operated under an NHS contract in Q1 2021, with a minimum
volume guarantee. The increase in revenue in H1 21 is mainly driven
by the strong return of private patients as the Company regained
full control of the payor mix from Q2 2021, as the NHS contract
ended. NHS revenue in the period of GBP185.4m (H1 2020: GBP200.4m)
includes amounts arising from specific COVID-19 contracts of
GBP124.1m (H1 2020: GBP133.7m), with GBP10.1m relating to the FY20
NHS cost recovery contract being recognised in the period following
customer agreement to volume-based variable consideration and final
costings.
7. Operating profit
Operating profit has been arrived at after charging /
(crediting):
Six months ended
30 June (Unaudited)
======================
(GBP million) 2021 2020
======================================================= ========== ==========
Depreciation of property, plant and equipment 33.3 33.1
Depreciation of right of use assets 14.2 13.6
Impairment charge in respect of goodwill - 200.0
Lease payments made in respect of low value and
short leases 6.7 4.7
Profit on disposal of property, plant and equipment(1) (0.6) -
Staff costs 220.7 176.7
======================================================== ========== ==========
(1 GBP.0.4m of the profit on disposal of Property, Plant and
Equipment is included in Adjusting Items in respect of the
shortening of the lease at Spire Sussex..)
8. Other income
Six months ended
30 June (Unaudited)
======================
(GBP million) 2021 2020
======================================= ========== ==========
Fair value movement on financial asset 0.6 0.1
======================================= ========== ==========
Other income reflects the fair value movement in respect of the
financial asset which was recognised to reflect the on-going profit
share arrangement with Genesis Care which arose as part of the sale
of the Bristol Cancer Centre in 2019.
9. Finance costs
Six months ended
30 June (Unaudited)
======================
(GBP million) 2021 2020
===================================== ========= ===========
Finance income:
Interest income on bank facilities - (0.1)
===================================== ========= ===========
Finance costs:
Interest on bank facilities 8.1 8.5
Interest on obligations under leases 33.4 33.1
Total net finance costs 41.5 41.5
===================================== ========= ===========
10. Adjusting Items
Six months ended
30 June (Unaudited)
======================
(GBP million) 2021 2020
====================================================== ========== ==========
Asset disposals, impairment and aborted project costs 2.6 200.0
Hospitals set up and closure costs 0.1 0.1
Remediation of regulatory compliance or malpractice (0.4) 4.6
====================================================== ========== ==========
Total Adjusting Items 2.3 204.7
====================================================== ========== ==========
Income tax charge / (credit) on Adjusting Items - (0.8)
====================================================== ========== ==========
Total post-tax Adjusting Items 2.3 203.9
====================================================== ========== ==========
Adjusting Items comprise those matters where the Directors
believe the financial effect should be adjusted for, due to their
nature or amount, in order to provide a more comparable measure of
the Group's underlying performance.
In the period, the Group agreed to terminate the lease for our
Sussex Hospital, with the NHS Trust taking over the running of the
hospital from 31 March 2022. As part of this agreement, the Plant,
Property and Equipment were sold to the Trust on 31 March 2021, the
property lease shortened to a period of one year (reduced from 6
years) and a transitional arrangement was agreed. This has resulted
in a GBP0.4m profit being reflected in Asset disposals offset by
GBP0.2m of sale costs. Offsetting this profit are Mergers and
Acquisition ("M&A") costs of GBP2.8m, largely relating to the
attempted takeover bid by Ramsay Health Care. This results in net
Asset Disposal, Impairment and Aborted Project costs of GBP2.6m in
H1 2021. In the prior period, the Group recognised a one-off
non-cash impairment to Goodwill of GBP200m.
Following the judgment in favour of the Group in its case
against one of its insurers relating to Ian Paterson in H2 2020,
the costs awarded were reviewed as part of the Court process in H1
2021 and the Group received an additional GBP0.4m of income, which
has been recorded as Remediation of Regulatory Compliance or
Malpractice. The insurer has been granted their appeal to the
ruling, and this is expected to be heard at the Court of Appeal in
H2 2021. In the prior period, the Group committed to providing
on-going support to Paterson's patients , following the release of
the Paterson Public Inquiry in February 2020, and provided for
costs of GBP3.2m in ensuring the recommended actions from the
report are fully adhered to.
Hospital set up and closure costs mainly relate to the
maintenance of costs of non-operational sites.
11. Taxation
Six months ended
30 June (Unaudited)
======================
(GBP million) 2021 2020
==================================================== ========= ===========
Current tax:
UK Corporation tax charge - -
==================================================== ========= ===========
Total current tax charge - -
==================================================== ========= ===========
Deferred tax:
Origination and reversal of temporary differences 1.6 (2.8)
Impact of Adjusting items - (0.8)
Adjustments to prior periods 2.3 (0.7)
Impact of rate change adjustment 17.7 6.1
==================================================== ========= ===========
Total deferred tax charge 21.6 1.8
==================================================== ========= ===========
Total tax charge 21.6 1.8
==================================================== ========= ===========
The tax charge for the period has been calculated using an
estimate of the effective annual rate of tax for the full year.
This has been applied to the pre-tax profits for the six months
ended 30 June 2021. The Group has separately calculated the tax
rates applicable in respect of Adjusting items for the period as
well as the tax rate change as a result of the substantive
enactment in May 2021 of the Government's decision to increase the
corporation tax rate from 19% to 25% from April 2023. The rate
change therefore reflects the reassessment of deferred tax assets
and liabilities to 25% from 19%, and results in a one-off charge of
GBP17.7m.
12. Earnings per Share (EPS)
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the
period.
Six months ended
30 June (Unaudited)
========================
2021 2020
========================================================== =========== ===========
Loss for the period attributable to owners of the Parent
(GBP million) (16.9) (233.1)
========================================================== =========== ===========
Weighted average number of ordinary shares 401,082,216 401,081,391
Adjustment for weighted average number of shares held
in the Employee Benefit Trust (EBT) (239,483) (243,480)
========================================================== =========== ===========
Weighted average number of ordinary shares in issue (No.) 400,842,733 400,837,911
========================================================== =========== ===========
Basic loss per share (in pence per share) (4.2) (58.2)
========================================================== =========== ===========
For dilutive earnings per share, the weighted average number of
ordinary shares in issue is adjusted to include all dilutive
potential ordinary shares arising from share options.
Six months ended
30 June (Unaudited)
========================
2021 2020
========================================================= =========== ===========
Loss for the period attributable to owners of the Parent
(GBP million) (16.9) (233.1)
========================================================= =========== ===========
Weighted average number of ordinary shares in issue 400,842,733 400,837,911
Adjustment for weighted average number of contingently
issuable shares - -
========================================================= =========== ===========
Diluted weighted average number of ordinary shares in
issue (No.) 400,842,733 400,837,911
========================================================= =========== ===========
Diluted loss per share (in pence per share) (4.2) (58.2)
========================================================= =========== ===========
As the weighted average number for contingently issuable shares
would be anti-dilutive, they are excluded from the above. However,
12,630,653 shares are potentially dilutive in the future.
The Directors believe that EPS excluding Adjusting items
("Adjusted EPS") better reflects the underlying performance of the
business and assists in providing comparable performance of the
group.
Reconciliation of Profit to Profit excluding Adjusting items
("Adjusted profit"):
Six months ended
30 June (Unaudited)
==========================
2021 2020
========================================================= ============ ============
Loss for the period attributable to owners of the Parent
(GBP million) (16.9) (233.1)
Adjusting items (net of taxation) (see note 10) 2.3 203.9
Adjusted loss after tax (GBP million) (14.6) (29.2)
Weighted average number of Ordinary Shares in issue 400,842,733 400,837,911
Weighted average number of dilutive Ordinary Shares 400,842,733 400,837,911
========================================================= ============ ============
Adjusted basic earnings / (loss) per share (in pence (3.6) (7.3)
per share)
Adjusted diluted earnings / (loss) per share (in pence (3.6) (7.3)
per share)
========================================================= ============ ============
As the weighted average number for contingently issuable shares
would be anti-dilutive, they are excluded from the above. However,
12,630,653 shares are potentially dilutive in the future.
13. Property, plant and equipment
(GBP million) Freehold Leasehold Equipment Assets in Sub-total Right of Total
property improvements the course use asset
of construction
======================== ========= ============= ========= ================ ========= ========== =======
Net book value at 1
January 2021 690.2 117.1 152.1 9.2 968.6 566.7 1,535.3
Additions 2.8 4.8 16.4 2.5 26.5 - 26.5
New lease additions - - - - - 9.8 9.8
Disposals and transfers 0.5 (0.2) 1.8 (4.2) (2.1) (1.4) (3.5)
Depreciation (9.0) (4.1) (20.2) - (33.3) (14.2) (47.5)
======================== ========= ============= ========= ================ ========= ========== =======
Net book value at 30
June 2021 684.5 117.6 150.1 7.5 959.7 560.9 1,520.6
======================== ========= ============= ========= ================ ========= ========== =======
Right of use assets are included in the following property,
plant and equipment categories:
Equipment
Leasehold & motor
(GBP million) Property vehicles Total
================================= ========= ========= ======
Net book value at 1 January 2021 565.6 1.1 566.7
Additions 6.6 3.2 9.8
Indexation adjustments - - -
Disposals and transfers (1.4) - (1.4)
Depreciation (13.7) (0.5) (14.2)
Net book value at 30 June 2021 557.1 3.8 560.9
================================= ========= ========= ======
Impairment testing
The Directors consider property and property right of use assets
for indicators of impairment at least annually, or when there is an
indicator of impairment. When making the assessment, the
value-in-use of the property is compared with its carrying value in
the accounts. The value-in-use was calculated in line with the
Group's forecast and sensitivities reflected in the Intangible
impairment review. Where headroom is significant, no further work
is undertaken. Where headroom is minimal, the property is reviewed
in more detail, reviewing the factors driving underperformance. No
impairment charge was taken in the period.
The value-in-use calculations require the Group to estimate cash
flows expected to arise in the future, taking into account market
conditions. In some cases, the cash flow forecasts reflect
significant improvement in hospital performance as management
respond to local market challenges or short-term operational
challenges. The present value of these cash flows is determined
using an appropriate discount rate and market conditions covering
the four and a half-year period to December 2025. The Group has
used a discount rate reflecting the Group's cost of capital of
8.97% (2020 year end: 9.4%), adjusted for the effects of IFRS 16. A
long-term growth rate of 2% has been applied to cash flows beyond
2025.
Management identified a number of key assumptions relevant to
the property impairment calculations, being EBITDA growth, which is
impacted by an interaction of a number of elements and assumptions
regarding revenue, cost inflation, capex maintenance spend,
discount rates and terminal growth rates. These variables are
interdependent and the forecast cash flows reflect management's
expectations based on current market conditions. Management
undertook sensitivity and determined that should the discount rate
increase by 200 basis points (bp) with all other assumptions
remaining equal, sufficient headroom would remain.
14. Intangible asset
(GBP million) Total
=================================== =====
Cost or valuation:
-----
At 31 December 2020 & 30 June 2021 518.8
=================================== =====
Impairment:
-----
At 31 December 2020 201.0
-----
Impairment -
=================================== =====
Total Impairment at 30 June 2021 201.0
=================================== =====
Carrying amount:
-----
At 30 June 2021 317.8
=================================== =====
At 31 December 2020 317.8
=================================== =====
Impairment testing
The Directors treat the business as a single cash-generating
unit for the purposes of testing goodwill for impairment. 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 2025.
Management identified a number of key assumptions relevant to
the value-in-use calculations, being revenue growth, which is
impacted by an interaction of a number of elements of the operating
model, including pricing trends, volume growth and the mix and
complexity of discharges, assumptions regarding cost inflation and
discount rate. These variables are interdependent and the forecast
cash flows reflect management's expectations based on current
market trends.
The Group has used a discount rate reflecting the Group's cost
of capital of 8.97% (2020 year end: 9.4%), adjusted for the effects
of IFRS 16. A long-term growth rate of 2% has been applied to cash
flows beyond 2025.
A sensitivity analysis has been performed in order to review the
impact of changes in key assumptions. For example, an increase of
25 basis points (bp) in the pre-tax discount rate, with all other
assumptions held constant, or, reducing the terminal growth rate to
1.75% in the period beyond 2025, with all other assumptions held
constant, would not result in an impairment charge (H1 2020:
GBP200m impairment was booked).
15. 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. During the year to 31 December 2020, the Group obtained the
agreement of its lenders to make certain amendments to its existing
bank borrowing arrangements, refer to note 2 Basis of preparation
for more information.
As at
==================================
30 June 31 December
(GBP million) 2021 (Unaudited) 2020 (Audited)
=========================================== ================= ===============
Amount due for settlement within 12 months 2.2 2.2
Amount due for settlement after 12 months 420.2 418.6
Total bank borrowings 422.4 420.8
=========================================== ================= ===============
Net debt for the purposes of the covenant test in respect of the
Senior Loan Facility was GBP308.9m (December 2020: GBP318.7m) and
the net debt to EBITDA ratio was 2.7x (December 2020: 3.9x). The
net debt for covenant purposes comprises the senior facility of
GBP425.0m less cash and cash equivalents. EBITDA for covenant
purposes comprises EBITDA for Last Twelve Months (LTM) of pre-IFRS
16 EBITDA of GBP123.8m (2020: GBP90.7m) less the rental of a
finance lease pre-IFRS 16 of GBP9.0m (2020: GBP8.8m).
Terms and debt repayment schedule
The maturity date is the date on which the relevant bank loans
are due to be fully repaid, as at the balance sheet date.
The carrying amounts drawn (after issue costs and including
interest accrued) under facilities in place at the balance sheet
date were as follows:
Margin 30 June 31 December
(GBP million) Maturity over LIBOR 2021 (Unaudited) 2020 (Audited)
============================================= ========== =========== ================= ===============
Senior finance facility(1) July 2023 2.25% 423.6 422.6
============================================= ========== =========== ================= ===============
Revolving credit facility (undrawn committed
facility)(2) July 2023 100.0 100.0
============================================= ========== =========== ================= ===============
(1 the difference between the carrying amount of the facility
and the value of the debt repayment schedule is a modification fee
on the loan extension and is deferred and amortised in accordance
with IFRS 9 loan modification accounting.)
(2 The Revolving credit facility decreases to GBP87m from July
2022.)
Changes in bank borrowings arising from financing activities
(GBP million) Non-cash
1 January Cash flows changes Loan modification 30 June
============== ========= ========== ======== =================== =======
2021
Bank loans 420.8 (6.5) 7.6 0.5 422.4
============== ========= ========== ======== =================== =======
Total 420.8 (6.5) 7.6 0.5 422.4
============== ========= ========== ======== =================== =======
(1 the loan modification relates to fees incurred on the loan
extension which are deferred and amortised in accordance with IFRS
9 loan modification accounting. Non-cash changes reflect interest
charged on the loan.)
(GBP million) Non-cash
1 January Cash flows changes Loan modification 30 June
============== ========= ========== ======== =================== =======
2020
Bank loans 420.8 (7.8) 8.0 0.5 421.5
============== ========= ========== ======== =================== =======
Total 420.8 (7.8) 8.0 0.5 421.5
============== ========= ========== ======== =================== =======
16. Lease liability
Obligations under finance leases
The Group has finance arrangements in place in respect of
hospital properties, vehicles, office and medical equipment. The
leases are secured on fixed and floating charges over both the
present and future assets of material subsidiaries in the Group.
Leases, with a present value liability of GBP750.6m (H1 20:
GBP740.3m), expire in various years to 2042 and carry a blended
implicit interest rate of 9.0% (2020: 9.0%). Rent in respect of
hospital property leases are reviewed annually with reference to
RPI, subject to assorted floors and caps. The discount rate used is
calculated on a lease-by-lease basis, and based on estimates of
incremental borrowing rates.
Changes in lease liabilities arising from financing
activities
(GBP million)
Non-cash Additions Disposals
1 January Cash flows changes / modification 30 June
================== ========= ========== ======== =========== ================ =======
2021
Lease liabilities 749.5 (39.9) 33.4 9.8 (2.2) 750.6
================== ========= ========== ======== =========== ================ =======
Total 749.5 (39.9) 33.4 9.8 (2.2) 750.6
================== ========= ========== ======== =========== ================ =======
(GBP million) Non-cash
1 January Cash flows changes Additions 30 June
================== ========= ========== ======== =========== =======
2020
Lease liabilities 745.3 (39.6) 33.1 1.5 740.3
================== ========= ========== ======== =========== =======
Total 745.3 (39.6) 33.1 1.5 740.3
================== ========= ========== ======== =========== =======
In the period, the Group recognised charges of GBP6.7m (2020:
GBP4.7m) of lease expenses relating to short term and low value
leases for which the exemption under IFRS 16 has been taken. Cash
outflows in respect of these are materially in line with the
expense recognised, resulting in a total cash outflow for all
leases of GBP46.6m (2020: GBP44.3m). The Group has not made any
variable lease payments in the year. The Group is not a lessor for
any leases to external parties. There have been no (2020: no) sale
and leaseback transactions in this period, however the lease in
respect of Sussex was modified to reduce the term from 6 years to
12 months following the agreement for the transfer of the business
to the NHS Trust in March 2022.
Some leases receive RPI increases on an annual basis which
affects both the cash flow and interest charged on those leases.
Except for this increase, cash flows and charges are expected to
remain in line with the current period.
17. Derivatives
The Group has a derivative contract in respect of an interest
rate swap in place:
As at
==================================
30 June 31 December
(GBP million) 2021 (Unaudited) 2020 (Audited)
=========================================== ================= ===============
Amount due for settlement within 12 months 2.3 2.5
Amount due for settlement after 12 months 0.1 1.5
Total derivatives 2.4 4.0
=========================================== ================= ===============
The movement in respect of derivatives reflects GBP1.2m
(December 2020: GBP1.4m) recycled in the period and a GBP0.4m
(December 2020: 2.9m) positive change in fair value. All movements
are reflected within other comprehensive income.
18. Provisions
The movement for the period in the provisions is as follows:
Business
Medical restructuring
(GBP million) malpractice and other Total
================================ ============ ============== =====
At 1 January 2021 29.9 3.1 33.0
Increase in existing provisions 2.6 1.3 3.9
Provisions utilised (1.7) (2.4) (4.1)
At 30 June 2021 30.8 2.0 32.8
================================== ============ ============== =====
Medical malpractice relates to estimated liabilities arising
from claims for damages in respect of services previously supplied
to patients. Amounts are shown gross of insured liabilities. Any
such insurance recoveries of GBP7.4m (December 2020: GBP5.0m) are
recognised in other receivables. This drives the majority of the
movement in the Medical Malpractice provision.
Following the completion of the criminal proceedings against Ian
Paterson, a consultant who previously had practicing privileges at
Spire Healthcare, management agreed settlement with all current and
known civil claimants (and the other co-defendants) and made a
provision for the expected remaining costs in FY20. The provision
is being utilised, but no addition has been made in H1 2021. This
provision remains subject to ongoing review following the
publication of the Public Inquiry report on Paterson issued on 4
February 2020, as the Group continues to assess the potential
impact of the recommendations, but no adjustment has been made in
this period. It is possible that, as further information becomes
available, an adjustment to this provision will be required, but at
this time, it reflects management's best estimate of the costs.
The provision in relation to the Ian Paterson costs has been
determined before taking account of any potential further
recoveries from insurers.
As at 30 June 2021, the remaining Business Restructuring and
Other provisions primarily includes non-patient claims made against
the Group. The Group is in the process of settling or defending
such claims as appropriate.
Provisions as at 30 June 2021 are materially considered to be
current and expected to be utilised at any time within the next
twelve months.
19. Trade and other payables
As at
==================================
30 June 31 December
(GBP million) 2021 (Unaudited) 2020 (Audited)
================================ ================= ===============
Trade payables 43.7 58.0
Accrued expenses 55.3 48.3
Social security and other taxes 8.2 9.8
Other payables 18.9 20.8
Trade and other payables 126.1 136.9
================================ ================= ===============
Accrued expenses includes holiday pay accrued of GBP10.6m
(December 2020: GBP3.8m) due to staff deferring leave to maintain
operations throughout the COVID-19 pandemic and the continued
impact of this into Q2 2021, as well as bonuses accrued during the
year which will be paid in 2022.
Other payables includes an accrual for pensions and payments on
account. Revenue in respect of payments on account are not
recognised until the performance obligation has been met. At June
2021, the balance of payments on account was GBP12.2m (December
2020: GBP7.5m)
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 recognised in
the income statement was GBP1.7m in the six months ended 30 June
2021 (2020: GBP0.8m). Employer's National Insurance is also being
accrued, where applicable, at the rate of 14.3%, which management
expects to be the prevailing rate at the time the options are
exercised, based on the share price at the reporting date. The
total National Insurance charge for the period was GBP0.2m (2020:
GBP0.1m).
A summary of the main features of the schemes are shown
below:
Long Term Incentive Plan
On 18 March 2021, the Company granted a total of 3,595,102
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 2023,
relative total shareholder return ('TSR') (35%) targets on
performance over the three year period to 31 December 2023 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 2031. The Executive
Directors are subject to a 2 year holding period, whilst other
senior management are not.
Deferred Share Bonus Award
On 18 March 2021, the Company granted a total of 138,888 options
to Executive directors, with a vesting date of 18 March 2024. The
options will vest based on a target EBITDA net debt leverage ratio
for the year ending 31 December 2021, and subject to continued
employment.
Sharesave scheme
On 3 May 2019, the Company launched a Sharesave scheme. The
Company has not launched any new Sharesave schemes in the period.
There are no performance conditions in respect of the scheme and
the vesting date is 1 June 2022. Upon vesting, the options will
remain exercisable for 6 months. The IFRS 2 charge has been
calculated using an adjusted Black Scholes model with judgements
including leavers of the scheme (employees who may cease to save)
and dividend yields.
21. Financial risk management and impairment of financial
assets
The Group has exposure to the following risks from its use of
financial instruments:
- credit risk;
- liquidity risk; and
- market risk.
Note 30 in the Annual Report and Accounts 2020 sets out the
Group's policies and processes for measuring and managing risk.
These have not changed significantly during the period to 30 June
2021.
Credit risk and impairment
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's receivables from customers and investment securities.
Trade and other receivables
The Group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. The Group's exposure
to credit risk from trade receivables is considered to be low
because of the nature of its customers and policies in place to
prevent credit risk occurring in normal circumstances. Most
revenues arise from insured patients' business and the NHS. Insured
revenues give rise to trade receivables which are mainly due from
large insurance institutions, which have high credit worthiness.
The remainder of revenues arise from individual self-pay patients
and Consultants. During the period, receivables have increased as
private work has increased as a result of COVID-19 restrictions
being removed, but aged debt has reduced. Individual self-pay
patients continues to be the largest risk for the Group given the
current economic uncertainty. The Expected Credit Loss ("ECL") as
at June 2021 is GBP4.6m (December 2020: GBP5.3m).
The Group establishes an allowance for impairment that
represents its expected credit loss in respect of trade and other
receivables. This allowance is composed of specific losses that
relate to individual exposures and also an expected credit loss
component established using rates reflecting historic information
for payor groups, and forward looking information. Given the
continued economic uncertainty, the Group has considered the
provision required, specifically for self-pay patients and
maintained an adjustment to the provision accordingly, which is in
line with the position at December 2020.
Investments
The Group limits its exposure to credit risk by only investing
in short-term money market deposits with large financial
institutions, which must be
rated at least Investment Grade by key rating agencies.
Interest rate risk
Interest rates on variable rate loans are determined by LIBOR
fixings on a quarterly basis. Interest is settled on all loans in
line with agreements and is settled at least annually.
Variable Total Undrawn facility
30 June 2021 (GBP million) 425.0 425.0 100.0
Effective interest rate (%) 2.90% 2.90%
=============================== ======== ===== ================
31 December 2020 (GBP million) 425.0 425.0 100.0
Effective interest rate (%) 2.88% 2.88%
=============================== ======== ===== ================
The following derivative contracts were in place at 30 June 2021
(December 2020: GBP4.0 million liability):
Carrying value
(GBP million) Interest rate Maturity date Notional Amount Asset / (Liability)
=================== ============= ============= =============== ====================
Interest rate swap 1.2168% July 2022 213.0 (2.4)
=================== ============= ============= =============== ====================
The fair value of the above instrument is considered the same as
its carrying value. In line with disclosures in note 30 of the 2020
Annual report and accounts, the above instrument uses level 2 of
the fair value hierarchy to measure the fair value of the
instrument. The variable rate consideration received by the Group
is 0.0875% as at 30 June 2021, being lower than the hedged rate,
resulting in some exposure on the hedged amount.
Sensitivity analysis
A change in 25 basis points in interest rates at the reporting
date would have increased/(decreased) equity and reported results
by the amounts shown below. This analysis assumes that all other
variables remain constant.
Profit or loss Equity
============================ ============================
(GBP million) 25bp increase 25bp decrease 25bp increase 25bp decrease
30 June 2021
Variable rate instruments (0.5) 0.5 (0.5) 0.5
========================== ============= ============= ============= =============
31 December 2020
Variable rate instruments (0.5) 0.5 (0.5) 0.5
========================== ============= ============= ============= =============
Liquidity risk
The following are contractual maturities, as at the balance
sheet date, of financial liabilities, including interest payments
and excluding the impact of netting arrangements:
30 June 2021 Maturity analysis
========================================================
Carrying Contractual Within 1 Between 1 More than
(GBP million) amount cash flows year and 2 years 2 years
Trade and other payables 117.9 117.9 117.9 - -
Bank borrowings 422.4 450.5 10.8 11.6 428.1
Lease liabilities 750.6 1,698.7 79.9 80.1 1,538.7
============================== ======== =========== ======== ============ =========
1,290.9 2,267.1 208.6 91.7 1,966.8
Derivative interest rate swap 2.4 2.9 2.4 0.5 -
============================== ======== =========== ======== ============ =========
Total 2.4 2.9 2.4 0.5 -
============================== ======== =========== ======== ============ =========
31 December 2020 Maturity analysis
========================================================
Carrying Contractual Within 1 Between 1 More than
(GBP million) amount cash flows year and 2 years 2 years
Trade and other payables 127.1 127.1 127.1 - -
Bank borrowings 420.8 453.4 10.4 10.1 432.9
Lease liabilities 749.5 1,729.1 79.2 79.0 1,570.9
============================== ======== =========== ======== ============ =========
1,297.4 2,309.6 216.7 89.1 2,003.8
============================== ======== =========== ======== ============ =========
Derivative interest rate swap 4.0 4.5 2.6 1.9 -
============================== ======== =========== ======== ============ =========
Total 4.0 4.5 2.6 1.9 -
============================== ======== =========== ======== ============ =========
Capital management
At the balance sheet date, the Group's committed undrawn
facilities, and cash and cash equivalents were as follows:
As at
==================================
30 June 31 December
(GBP million) 2021 (Unaudited) 2020 (Audited)
============================================ ================= ===============
Committed undrawn revolving credit facility 100.0 100.0
Cash and cash equivalents 116.1 106.3
============================================ ================= ===============
Capital commitments
Capital commitments comprise amounts payable under capital
contracts which are duly authorised and in progress at the balance
sheet date. They include the full costs of goods and services to be
provided under the contracts through to completion. The Group has
rights within its contracts to terminate at short notice, and
therefore, cancellation payments are minimal.
Capital commitments at the balance sheet date were GBP26.9m
(December 2020: GBP20.9m).
Bases of valuation
As of 30 June 2021, except for the interest rate swap and the
financial asset, the Group did not hold financial instruments that
are included in level 1, 2 or 3 of the hierarchy.
Management assessed that cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their carrying amounts largely due to the short-term
maturities of these instruments. The carrying value of debt is
approximately equal to its fair value. During the period, there
were no transfers between the levels in the fair value
hierarchy.
A derivative is a financial instrument whose value is based on
one or more underlying variables. The Group uses derivative
financial instruments to hedge its exposure to interest rate risk.
Derivatives are not held for speculative reasons. Fair values are
obtained from market observable pricing information including
interest rate yield curves and have been calculated as follows;
fair value of interest rate swaps is determined as the present
value of the estimated future cash flows based on observable yield
curves.
The financial asset reflects a profit share arrangement with a
partner. There are no market observable prices for the valuation.
Management therefore assesses forward looking information and
appropriate discount rates and risk factors to determine the fair
value. Sensitivities are also taken into account when reviewing the
fair value.
As at 30 June 2021, the Group held the following financial
instruments measured at fair value. There has been no change in the
hierarchy categories during the period.
Maturity analysis as at 30
June 2021
========================= ==============================
Value
Instruments measured at fair Value as as at
value at 30 June 31 December Level
(GBP million) 2021 2020 1 Level 2 Level 3
Financial assets at fair value
through profit or loss
Profit share arrangement 1.9 1.6 - - 1.9
Financial liabilities at fair
value through profit or loss
Interest rate swaps (2.4) (4.0) - (2.4) -
=============================== =========== ============ ======= ========== =========
Financial liabilities at fair
value using hedge accounting
Interest rate swaps (2.4) (4.0) - (2.4) -
=============================== =========== ============ ======= ========== =========
In the period, Spire Healthcare received a profit share in
respect of the financial asset of GBP0.3m. In addition a fair value
movement of GBP0.6m was recognised in the income statement, and
remains unrealised. The movement on the financial liability related
wholly to fair value movements, and is unrealised.
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique.
- Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly, and
- Level 3: techniques which use the inputs which have a
significant effect on the recorded fair value that are not based on
observable market data.
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END
IR DGGDCCUGDGBI
(END) Dow Jones Newswires
September 09, 2021 02:00 ET (06:00 GMT)
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