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19.09.18

Private health giant Spire reveals 20% profit hit after NHS funding cutbacks

NHS funding squeezes have hit private firm Spire Healthcare as it forecasted a large decline in annual profits.

Spire Healthcare has unveiled a 20.6% decline in pre-tax earnings in the six months to the end of June, and now forecasts full-year profits in the range of £120m to £125m; significantly down from the £150m predictions by the firm.

A presentation by the healthcare giant explained that this was linked to declining NHS revenues, more specifically “underlying revenue growth from Private Payors offset by lower NHS revenue, leading to underlying revenue decline of 2.4%.”

Spire chief executive Justin Ash said that “unprecedented depth and speed of decline” in NHS admissions has led to the company’s disappointing first-half results.

He said: “The NHS is sending in less patients than last year for elective surgery, such as hip replacements. While the prolonged decline in NHS volumes had negative margin implications for us, overall our H1 2018 costs were in line with our budget, even after the previously indicated increases in spend on the clinical quality and our private proposition.”

Spire is one of Britain’s largest private healthcare providers, operating 39 hospitals and 11 clinics with around 8,400 full-time staff.

But the 2018 half-year results come after Spire Healthcare issued a profit warning last month, resulting in the company’s shares hitting an all-time low.

Ash added: “More broadly, the headwinds that Spire is facing, as the largest company in the sector by revenues and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), appear to be translating into significant business challenges for many sector participants, which in turn may lead to opportunities for Spire.”

Revenue at the FTSE 250 firm has fallen by 1.1% to £475m, whilst shares in Spire fell by 6.6% at 158 pence each, the worst performer of the FTSE 250 index.

The firm works with NHS referrals as well as self-pay customers and private medical insurance patients.

Regarding the future of the company, its report explained: “Although the Brexit referendum took place two years ago, it is still too early to assess the medium to long term impact of the result on future NHS funding levels, the UK healthcare sector as a whole (including clinical staffing levels) and Spire’s position within that sector.”

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Image credit - rajurahman85

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