Profits at UK private hospital group Spire Healthcare dropped sharply in the six months to June 30 following an “unprecedented decline” in patient admissions, with the group on Tuesday reiterating its profit warning for the full year.
Operating profit before exceptional and other items fell 41 per cent to £31.6m compared with the same period last year, although revenue only declined 1 per cent to £475.6m. Earnings before interest, tax, depreciation and amortisation was down 21 per cent to £66.1m, while adjusted basic earnings per share fell 53 per cent to 4.1p and net debt rose 5 per cent to £458.1m.
Shares fell 7 per cent in early trade in London.
The group, which warned investors in August that earnings for the year were likely to be “materially lower” than in 2017, said the “disappointing” performance reflected an “unprecedented decline (both in scale and speed) in [National Health Service] admissions” as well as “lower than anticipated growth in private admissions and planned investment in clinical quality and consumer engagement”.
It reiterated its lowered outlook for full-year ebitda, which it said was likely to be between £120m and £125m.
Private hospitals have suffered this year from the effect of NHS cutbacks and a relaxation of rules on patient waiting times. This has prompted a fall in the number of people referred to the private sector, and Spire’s share price has fallen 33 per cent already this year.
As well as the impact of lower revenue, profits for the half year were pushed down by increased costs, both for staff and drugs, and costs relating to the opening of three new hospitals.
However, Spire said its “medium-term outlook” remained positive, as the overall demand for healthcare in the UK continued to rise “ahead of the ability of the NHS to service it”. In particular, it said, it expected demand for “elective care services” to increase as the NHS prioritised the treatment of acute and chronic conditions.
“The headwinds that Spire is facing, as the largest company in the sector by revenues and ebitda, appear to be translating into significant business challenges for many sector participants, which in turn may lead to opportunities for Spire,” said chief executive Justin Ash.
The group is reviewing its non-clinical costs to make savings, he added.
Also on Tuesday, the group announced the appointment of John Forrest as chief operating officer and Jitesh Sodha as chief financial officer.
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