NHS contract variation and trading update

Spire Healthcare Group plc

 

("Spire Healthcare", "the Company" or "the Group")

 

NHS contract variation, trading update and notice of interim results

 

13 August 2020

 

Spire Healthcare Group plc (LSE: SPI), a leading UK independent hospital group, confirms it has agreed terms with NHS England (NHSE) for the variation of the NHSE COVID-19 contract and announces an unaudited trading update for the six months ended 30 June 2020.

 

NHSE contract variation

 

The first half of 2020 has been focused on the Company's response to the COVID-19 pandemic. As announced by Spire Healthcare on 21 March, the Company, together with the rest of the independent hospital sector, agreed heads of terms with NHSE, to support its efforts to tackle the pandemic. Similar heads of terms were subsequently concluded between the sector and the NHS in Wales, and Spire Healthcare and the NHS in Scotland. A definitive agreement with NHSE was formally signed on 15 May 2020 (the NHSE Contract).

 

NHSE and independent hospital providers have today agreed terms for the variation of the NHSE Contract. The variation will 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, is expected to remain in place until at least the end of October 2020 but will have a definitive expiry date at the end of December 2020.

 

The most significant variation is to guarantee that a certain minimum capacity in each hospital will be made available for privately funded patients (PMI and self-pay). NHSE will continue to cover cash costs, in line with the original contract. In return, Spire Healthcare, along with other private providers, will commit to a minimum private rebate (a deduction from the NHSE reimbursed costs commensurate with the amount of private care provided), with additional incentives agreed for the private providers for exceeding that minimum rebate subject to delivering NHSE activity.

 

Private activity has been building steadily since the de-escalation phase of the NHSE Contract was triggered on 15 May. Spire Healthcare has implemented safe patient pathways in each of its hospitals, compliant with current guidance, and is confident these will not materially restrict capacity. The Group is committed to offering elective care to as many patients as possible, both NHS and private, and to supporting our Consultant partners to rebuild their practices as quickly as possible.

 

Spire Healthcare is aware that the NHSE has issued termination notices to a certain number of other independent providers' sites, predominantly in Central London, with these sites due to exit the NHSE Contract on 8 September 2020. All of Spire Healthcare's sites in England remain in the NHSE Contract with total admissions currently running at c.80% of the Group's prior year activity on a monthly basis.

 

Trading update

 

Spire Healthcare revenues in January and February rose c.3% versus prior year, with nearly 9% growth in self-pay, but fell from the middle of March as the pandemic impacted the country. The Company made available its capacity, equipment and colleagues to the NHS and treated approximately 46,500 NHS admissions in total in H1 20 (46,800 in H1 19). The majority of admissions were for oncology, with Spire Healthcare providing a safe environment to continue urgent clinical pathways.

 

With cash costs covered during the NHSE Contract period, the Group expects to deliver H1 20 adjusted EBIT in the range of £13-18m on a post-IFRS16 basis (£51.4m in H1 19) and adjusted Loss Before Tax in the range £24-29m before impairments (£10.0m Profit Before Tax in H1 19).

 

Capex spend was c.£20m in H1 20, and the Group anticipates a net bank debt position of c£330m at end June 2020 (£330.0m at end December 2019 and £362.2m at H1 19).

 

Future outlook

 

NHS England has signalled that it expects to conduct a procurement process to tender for providers to help reduce the NHS waiting list, which Spire Healthcare expects to participate in, with contracts likely to commence in Q4 20 or Q1 21.

 

Growing call numbers and bookings, and indications from insurance partners show a steady return of the private market, which, combined with strong NHS demand, provides the Company with confidence for the medium term. Spire Healthcare will now be available to support the NHS to reduce waiting lists whilst growing private activity and remains committed to focussing on its private business over the medium term.

 

The Group expects to publish its interim results for the six months ended 30 June 2020 on 17 September 2020 and expects to provide updated guidance for FY20 at this time.

 

Chief Executive Justin Ash said "We are proud of the role that Spire Healthcare and all its teams and Consultant partners have played in supporting the NHS during the COVID pandemic by providing inpatient, outpatient and daycase services to over 100,000 NHS patients, including urgent cancer surgery, chemotherapy, cardiac surgery, diagnostics and imaging.

 

Our hospitals are now seeing increasing confidence and demand from private patients. The variation in the NHSE Contract will help us to meet this demand, whilst playing a key part in reducing NHSE waiting lists"

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

 

For further information please contact:

 

Spire Healthcare                                                Cora McCallum, Head of Investor Relations	+44 (0)7967 109 731
Instinctif Partners                                              Damian Reece Guy Scarborough	+44 (0)7931 598 593 +44 (0)7917 178 920

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 eight clinics across England, Wales and Scotland.

 

Working in partnership with around 7,300 experienced consultants, Spire Healthcare delivered tailored, personalised care to approximately 810,000 in-patients and daycase patients in 2019, 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. 90% of Spire Healthcare's hospitals are rated 'Good' or 'Outstanding' by the CQC (or the equivalent in Scotland and Wales).

 

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 longer life expectancy.