Spire tumbles on warning of slowdown in NHS work

Private healthcare provider Spire saw its shares fall more than 14 per cent after warning that NHS cost-cutting will dent its revenues in the second half.

Shares in Spire ended the day down 57.1p at 344.5p  a fall of 14.2 per cent. Picture: PA

The company, which runs 39 private hospitals and 13 clinics across the UK, said efforts to address a £2 billion black hole in the NHS budget – including the suspension of penalties for longer waiting lists – meant there would be a “near-term weakness” in demand for its services.

As a result, the firm now expects NHS revenues to be flat in the second half of the year, rather than the single-digit growth it had previously predicted.

Spire chief executive Rob Roger said: “However, we are confident that the medium- to long-term trends in this business remain very positive for Spire and that, when combined with our growing strength in private medical insurance (PMI) and self-pay, the opportunity to deliver value to shareholders remains compelling.”

Despite his upbeat assessment on the outlook, shares in Spire ended the day down 57.1p at 344.5p – a fall of 14.2 per cent.

Investec analyst Cora McCallum said the broker had expected the firm to benefit from strong volumes from the NHS as waiting lists were cleared ahead of the general election in May, “but these do not appear to have materialised”.

She added: “First-half results were weaker than we anticipated, with NHS revenue growth falling short of the 20 per cent growth we expected from the unwinding of pre-election waiting lists.”

The warning over NHS revenues came as Spire – which has two hospitals in Edinburgh and a physiotherapy clinic in Livingston – reported an 8 per cent rise in adjusted underlying earnings to £83.4 million for the six months to the end of June.

Revenues rose 7.8 per cent to £449.8m, with the firm highlighting growth in all its key customer groups of PMI, NHS and self-pay. Spire is the UK’s largest private provider of knee and hip operations.

“Our positive performance in the first half 2015 is encouraging, the company told shareholders yesterday, but added that actions aimed at tackling the NHS budget deficit “has in the last few weeks reduced the flow of cases from the NHS to the independent sector”.

Numis analyst Sally Taylor said that Spire’s first-half revenues had come in slightly below the broker’s forecasts, but its earnings were ahead of City consenus expectations of £81.5m.

She added: “While this recent NHS development creates near-term uncertainty, we note that NHS waiting lists are at the highest level seen since February 2008, which we would expect to drive self-pay markets and expect Spire to continue to benefit from its high quality and transparent pricing model.”

Spire, which dealt with 260,000 patients last year, also said that it will close a hospital in Kent after deciding it would be “uneconomic to develop” the site. Talks with a possible buyer fell through last month and the hospital is expected to shut by the end of next month. The firm took a £6.9m charge in the first half from the writedown of assets and redundancy costs for staff.