We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for real-time alerts, custom portfolio, and market movers
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Spire Healthcare Group Plc | LSE:SPI | London | Ordinary Share | GB00BNLPYF73 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.00 | -0.81% | 246.00 | 245.50 | 247.00 | 250.00 | 245.00 | 250.00 | 432,894 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Health & Allied Services,nec | 1.36B | 27.3M | 0.0676 | 36.46 | 996.18M |
From Apr 2019 to Apr 2024
TIDMSPI
RNS Number : 3616M
Spire Healthcare Group PLC
16 September 2019
Spire Healthcare reports its results
for the six months ended 30 June 2019
London, UK, 16 September 2019, 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 2019.
Successful first half. On track to meet market expectations for FY 19
Summary Group results for the six months ended 30 June 2019
Hot Features
Premium
Six months ended June post Six months ended June
IFRS 16 pre IFRS 16
============================ ============================== ==========================
(GBP million) 2019 2018 Variance 2019 2018 Variance
============================ ========= ======== ========= ======= ======= ========
Revenue 491.6 475.6 3.4% 491.6 475.6 3.4%
Operating profit before
exceptionals 51.4 52.5 (2.1%) 30.7 31.6 (2.8%)
Exceptional and other items (0.4) (15.3) nm(1) (0.4) (15.3) nm
Operating profit 51.0 37.2 37.1% 30.3 16.3 85.9%
Profit before tax 9.6 (2.2) nm 16.7 5.1 227.5%
Profit after tax 7.1 2.1 238.1% 13.6 8.2 65.9%
Basic earnings per share,
pence 1.8 0.5 260.0% 3.4 2.0 70.0%
Dividend paid/proposed
per share, pence (2) 1.3 1.3 - 1.3 1.3 -
EBITDA (3) 96.8 98.9 (2.1%) 63.7 66.1 (3.6%)
Capital investments 19.7 33.5 (41.2%) 19.7 33.5 (41.2%)
Net bank debt (4) (362.2) (381.0) 4.9% (362.2) (381.0) 4.9%
============================ ========= ======== ========= ======= ======= ========
1. Not meaningful
2. An interim dividend of 1.3 pence per ordinary share has been approved by the Board
3. Operating profit, adjusted to add back depreciation, loss on disposal of PPE and exceptional and other items, referred to hereafter as 'EBITDA'
4 Net bank debt defined as bank borrowings less cash and cash equivalents
Group financial performance
-- 3.4% revenue growth to GBP491.6m (2018: GBP475.6m) -- Growth across all three payor groups: PMI sales rose 5.1%, Self-pay +1.4% and NHS +2.5% -- Operating Profit growth to GBP51.0m (2018: GBP37.2m)
-- Net bank debt(4) lowered, with covenant leverage at 3.3x EBITDA (3.3x at end Dec 18, 3.0x at end June 18) versus limit of 4.0x
-- EPS 1.8p (2018: 0.5p), Interim dividend of 1.3p proposed (2018: 1.3p)
Operating highlights
-- Robust private growth of 4.1% sustained from H2 18
-- Positive momentum on quality improvements with new Manchester hospital rated Outstanding. 81% of sites rated Good, Outstanding or equivalent (up from 74% in H1 18, 79% at FY18)
-- Long term pricing agreements signed with AXA PPP Healthcare and Bupa supporting our strategic focus on private patients
-- Digital strategy implementation underway with further rollout of consultant online booking, a successful pilot launch of the MySpire patient portal and a new Consultant App
-- Purpose, our new cultural initiative to raise team engagement and our patient focus, launched across all hospitals and central functions
Developing our business
-- Orthopaedic outpatient facility opened in Manchester on 9 September
-- In discussions with GenesisCare to create a national end-to-end private cancer care pathway
-- GenesisCare will acquire two Spire sites (Baddow Specialist Care Centre and Bristol Cancer Centre) for GBP12m plus 50% gross profit share of chemotherapy services in the Bristol site
Justin Ash, Chief Executive Officer of Spire Healthcare, said:
"This was a good performance with clear signs of our strategic and operational initiatives bearing fruit. We promised 2019 would be a year of stabilisation with revenue growth, continued quality improvement, cash generation and net debt reduction. All have been achieved in H1, with good operating profit performance.
We saw growth in both private insurance and self-pay, with a particularly strong result in private insurance reflecting rising consumer awareness following our marketing campaigns. NHS revenue in the period also outperformed expectations as we worked in close partnership with our local trusts and Clinical Commissioning Groups (CCGs) to selectively open new services that respond to their changing needs. We continue to develop our private revenue streams in key areas such as oncology, including working towards a partnership with GenesisCare to create a national end-to-end private cancer treatment pathway.
We remained uncompromising in our focus on patient safety and quality of care and we now have 81% of sites rated Good, Outstanding or the equivalent. We are delighted that both our new hospitals in Manchester and Nottingham have been rated Outstanding and we now have the highest number of Outstanding sites of any independent provider."
Full year guidance reiterated
We expect continued revenue growth, offset by mix and planned investments.
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 260,000 in-patients and daycase patients in 2018, 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 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.
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 9.30am at 65 Fleet Street London EC4Y 1HT.
A live audio webcast of the presentation will be available via the Company's website at: https://webcast.openbriefing.com/spire-20190916/
Operating Review
Performance
Our key focus for H1 19 was to improve quality, grow revenue, and generate cash. Much progress has been made including the launch of Purpose, our new cultural initiative, which will bring our strategy to life and align our teams and partners in our focus on outstanding, personalised patient care.
Quality
The commitment to clinical quality and governance has translated to an increase in the proportion of our hospitals rated Good or Outstanding by the CQC (or the equivalent in Scotland and Wales) to 81%, which in turn delivers tangible benefits through improved consultant engagement and relationships with PMI providers. Our new Manchester hospital received an Outstanding rating, taking the group total to five, Liverpool retained a Good rating, Fylde Coast was upgraded to Good and we received a positive review of Cardiff. We were disappointed that Leeds was rated Requires Improvement but we are working closely with the CQC to implement the necessary improvements.
Throughout 2019 we have engaged with our wider Senior Leadership Team and Medical Advisory Committee Chairs to define our Purpose, which is "making a positive difference to our patients' lives through outstanding personalised care". The Purpose is now being launched across all hospitals and central functions through dedicated toolkits which also include mechanisms to recognise and reward employees who embody the Purpose.
Revenue growth
All payor groups experienced revenue growth in H1 19, with the strongest in Private Medical Insurance (PMI). Our targeted direct marketing campaigns are stimulating growth in both enquiries and outpatient consultations, whilst also increasing awareness amongst the insured population. These campaigns have stimulated both self-pay and PMI outpatient growth, which has allowed private revenue growth to be sustained at 4.1%.
Representing 50% of sales, PMI is a key long term driver for the business. We have renewed two contracts with our biggest customers, Bupa and AXA PPP Healthcare, both with agreed pricing to provide long term stability. We believe our PMI growth of 5.1% demonstrates market share gains and validates our clear strategy to grow private patient revenues. Part of this growth came from new contract wins towards the end of 2018, whilst revenues associated with existing PMI contracts also grew by 3.8%, stimulated by our marketing campaigns and our investments in quality.
Self-pay growth of 1.4% was lower than previous periods, with the lower growth resulting from a deliberate focus on core clinical procedures and a repositioning away from procedures such as bariatrics. Self-pay orthopaedic inpatient and day case revenues rose 4.1%. Self-pay outpatient enquiries rose 19% in the period and outpatient first appointments rose 7%, demonstrating the growing demand for healthcare consumers to find out "what's wrong with me" quickly, and in a high quality environment. We remain committed to refining our range of services and strategic approach in order to optimise growth in this important segment of the market.
The NHS remains a challenging market but we were able to return to revenue growth of 2.5% in H1 by selectively opening new service lines to meet the changing needs of the local Commissioners. NHS outpatient revenues grew 4.9%, the highest of all three payor groups, and although inpatient and day case activity declined we benefitted from positive revenue mix, with growth in higher revenue total hip and knee replacements offsetting declines in soft tissue repair, and tariff increases from Q2.
Cash generation
Gross margin was broadly flat at 46.9% (2018: 47.1%) despite the continued shift to lower margin day case and outpatient procedures in addition to a greater proportion of oncology admissions, reflecting tight cost control across the business. EBITDA declined, largely due to the accrual of team reward payments for financial and quality delivery for the first time in recent years. Within our newer hospital portfolio, both Manchester and St Anthony's generated increased revenues and profits. Nottingham is growing fast and we anticipate will break even by the end of the year.
We are working hard to rebalance staff costs by filling vacancies with both domestic and international recruits and improving workforce planning. We are also working towards reducing agency costs through improved retention and recruitment, implementing initiatives such as an increase in holiday allowance for contracted staff. We launched the first Save as You Earn scheme at Spire to encourage employee share ownership. This generated a very positive response with subscribers representing nearly 20% of eligible employees.
We have also implemented efficiency savings in procurement whilst identifying further opportunities to reduce costs in the future. Our digital strategy is key to delivering efficiency improvements whilst reducing paperwork and we have made considerable progress in H1 19. The online booking tool for patients, which was piloted in all hospitals by end January, now has over 1,000 registered consultants, making Spire more accessible to patients and easier to do business with. We have developed a patient portal (MySpire) which allows patients to complete their registration forms on-line. This is in pilot launch in two hospitals but will be rolled out more broadly in H2 and is a necessary first step in the development of Spire's electronic pre-assessment platform.
We invested GBP19.7 million (2018: GBP33.5 million) in capital projects during the period, below the rate implied by our FY guidance reflecting caution ahead of Brexit. The pace of investment has now increased and we still expect to deploy up to GBP60m-65m in total by the end of the year. We have consulted with our hospitals and consultants to prioritise capex spend. Some 50% of investment in H1 was used for maintenance with the rest on capacity enhancements including a new theatre and outpatient bedrooms at Spire Bushey and the new orthopaedic outpatient centre at Spire Manchester.
Over the past 18 months we have been extensively planning for a no deal Brexit. Given the uncertainty around the impact of a no deal Brexit we cannot rule out disruption to the business as there may be some circumstances outside of our reasonable control. However, our supply chain is optimised for a period of volatility and we are confident that our planning has been robust such that, at this stage, we believe any potential disruption can be minimised.
Partnership with GenesisCare
Oncology is an important specialty for Spire, with significant potential for profitable expansion, generating 15% revenue growth in H1 19. Today we announce a new partnership with GenesisCare in Bristol, to create an integrated, end-to-end, private cancer proposition. We believe this will present PMI providers with a credible, high quality, alternative to the NHS and an improvement on the current private treatment pathway which often requires a patient to switch between various providers, including the NHS, for diagnosis, treatment planning, chemotherapy, radiotherapy and surgery. We believe such an integrated pathway will deliver an improvement in patient co-ordination and oversight. We anticipate that the agreement in Bristol will form the template for future partnerships and we have signed a Memorandum of Understanding with GenesisCare to work towards rolling out similar care pathways at other sites.
As a first step, GenesisCare has agreed to acquire two sites from Spire: Baddow Specialist Care Centre (which was closed in 2017) and the Bristol Cancer Centre, for a sum of GBP12 million, with staff from the Cancer Centre transferring across to GenesisCare. Spire will retain 50% share of chemotherapy gross profits generated at Bristol and will provide diagnostics and surgery for this location. GenesisCare will contribute its leading expertise in radiotherapy, treatment planning, and innovation in areas such as its electronic multidisciplinary team approach.
In FY18 the Bristol Cancer Centre generated GBP5.0 million revenue and GBP0.9 million EBITDA. We anticipate the disposal will complete on 31 October 2019, subject to appropriate CQC clearance.
Senior appointments
We made two Board appointments in the period. Martin Angle was appointed as an independent Non-Executive Director on 14 March 2019, and replaced Peter Bamford as Deputy Chairman and Senior Independent Director on 16 May 2019. Martin chairs the Nomination Committee and is a member of the Remuneration Committee. Martin brings a wealth of PLC, Board and leadership experience, both as principal and as an adviser.
Jenny Kay was appointed as an independent Non-Executive Director on 1 June 2019 and is a member of the Company's Clinical Governance and Safety Committee. Jenny brings considerable clinical experience, healthcare and NHS expertise to the Board and her appointment supports Spire's commitment to enhancing quality in its hospitals.
We are delighted to have them on board.
Outlook for 2019
We reiterate our outlook for 2019, which remains in line with management expectations. We expect continued revenue growth, offset by mix and planned investments.
Financial review
Selected financial information
Six months ended 30 June (Unaudited)
2019 2018
====================================== ====================================
Total pre Exceptional Total Exceptional
IFRS 16 and pre IFRS and
and other 16 and IFRS 16 other
exceptional items exceptional adjustment items
and other IFRS 16 (note and other (note (note Total
(GBP million) items adjustment 9) Total items 20) 9) (restated)
================ =========== ================ =========== ======= =========== ========== =========== ===========
Revenue 491.6 - - 491.6 475.6 - - 475.6
Cost of sales (261.1) - - (261.1) (251.6) - - (251.6)
================ =========== ================ =========== ======= =========== ========== =========== ===========
Gross profit 230.5 - - 230.5 224.0 - - 224.0
Other operating
costs (199.8) 20.7 (0.4) (179.5) (192.4) 20.9 (15.3) (186.8)
================ =========== ================ =========== ======= =========== ========== =========== ===========
Operating profit 30.7 20.7 (0.4) 51.0 31.6 20.9 (15.3) 37.2
Net finance
costs (13.6) (27.8) - (41.4) (11.2) (28.2) - (39.4)
================ =========== ================ =========== ======= =========== ========== =========== ===========
Profit / (loss)
before taxation 17.1 (7.1) (0.4) 9.6 20.4 (7.3) (15.3) (2.2)
Taxation (3.2) 0.6 0.1 (2.5) (4.0) 1.2 7.1 4.3
================ =========== ================ =========== ======= =========== ========== =========== ===========
Profit / (loss)
for the period 13.9 (6.5) (0.3) 7.1 16.4 (6.1) (8.2) 2.1
================ =========== ================ =========== ======= =========== ========== =========== ===========
EBITDA (1) 63.7 33.1 - 96.8 66.1 32.8 - 98.9
Earnings per
share,
pence 3.5 (1.6) (0.1) 1.8 4.1 (1.5) (2.1) 0.5
Interim
dividend
paid/proposed
per share,
pence
(2) 1.3 1.3
Capital
investments 19.7 33.5
Net cash from
operating
activities 53.9 33.1 - 87.0 59.4 32.8 - 92.2
Bank
borrowings
less cash &
cash
equivalents 362.2 - - 362.2 381.0 - - 381.0
================ =========== ================ =========== ======= =========== ========== =========== ===========
1. Operating profit, adjusted to add back depreciation, profit and loss arising from the disposal of fixed assets, exceptional and other items, referred to hereafter as 'EBITDA'
2. A interim dividend of 1.3 pence per ordinary share has been approved by the Board and will be paid on 10 December 2019
Revenue
Group revenue grew 3.4% to GBP491.6m as seen in the table below. We detail inpatient and daycase revenues separately for the first time to provide greater understanding of our business dynamics. Our day case ratio, defined as day case admissions as a proportion of total inpatient and day case, has risen to 73.1% from 72.3% in H1 18.
Other revenue, which includes fees paid to the Group by consultants (e.g. for the use of Group facilities and services) and third-party revenue
(e.g. pathology services to third-parties), decreased by GBP0.8 million, or 5.4% in the period, to GBP12.3 million (2018: GBP13.1 million).
Revenue by location and payor
Six months ended 30 June
(Unaudited)
============== ============================
Variance
(GBP million) 2019 2018 %
============== ======= ======= ==========
Total revenue 491.6 475.6 3.4%
Of which:
Inpatient 186.8 182.4 2.4%
Daycase 149.0 142.9 4.2%
Outpatient 143.5 137.2 4.5%
Other 12.3 13.1 (5.4%)
Total revenue 491.6 475.6 3.4%
============== ======= ======= ==========
Of which:
PMI(1) 247.0 234.9 5.1%
Self-Pay 88.6 87.4 1.4%
============== ======= ======= ==========
Total Private 335.6 322.3 4.1%
NHS 143.7 140.3 2.5%
Other 12.3 13.1 (5.4%)
============== ======= ======= ==========
Total revenue 491.6 475.6 3.4%
============== ======= ======= ==========
1 PMI restated to include Partnerships. Refer to note 6.
Inpatient and day case admissions declined 1.3% but a focus on more complex procedures drove average revenue per case (ARPC) up 4.6% leading to IPDC revenues up 3.2%. Outpatient revenue growth of 4.5% was the highest since IPO.
Revenue analysis in detail
Six months ended
30 June (Unaudited) PMI(1) Self-pay Total private NHS Other Total
===================== ====== ======== ============= ====== ====== ======
2019
IPDC(2) admissions
('000s) 61.6 23.5 85.2 46.8 132.0
ARPC(3) (GBP) 2,514 2,905 2,622 2,404 2,545
IPDC revenue
(GBPm) 154.9 68.4 223.3 112.5 335.8
Outpatient revenue
(GBPm) 92.1 20.2 112.2 31.2 143.4
Total (GBPm) 247.0 88.6 335.5 143.7 12.3 491.6
===================== ====== ======== ============= ====== ====== ======
2018
IPDC admissions
('000s) 61.1 24.0 85.1 48.5 133.7
ARPC (GBP) 2,404 2,826 2,523 2,277 2,434
IPDC revenue
(GBPm) 147.0 67.8 214.8 110.5 325.3
Outpatient revenue
(GBPm) 88.0 19.5 107.5 29.7 137.2
Total (GBPm) 234.9 87.4 322.3 140.3 13.1 475.6
===================== ====== ======== ============= ====== ====== ======
Variance (%)
IPDC admissions 0.8% (1.9%) 0.0% (3.5%) (1.3%)
ARPC 4.6% 2.8% 3.9% 5.6% 4.6%
IPDC revenue 5.4% 0.9% 4.0% 1.8% 3.2%
Outpatient revenue 4.7% 3.2% 4.4% 4.9% 4.5%
===================== ====== ======== ============= ====== ====== ======
Total (GBPm) 5.1% 1.4% 4.1% 2.5% (5.4%) 3.4%
===================== ====== ======== ============= ====== ====== ======
1 PMI restated to include Partnerships. Refer to note 6.
2 IPDC - inpatient and day case
3 Average revenue per case
PMI revenue for the six months ended 30 June 2019 increased by GBP12.1 million, or 5.1%, to GBP247.0 million (2018: GBP234.9 million) reflecting ARPC increase of 4.6%, due to mix, including a greater proportion of oncology work. Recent contract wins, with insurers directing patients according to quality, and improved volumes due to marketing, has, we believe, delivered market share gains.
Self-pay outpatient revenues rose 3.2% in response to direct marketing campaigns whilst IPDC admissions fell 1.9% through a deliberate repositioning away from bariatric procedures.
NHS eReferral revenue rose by 3.9% in the six months to end June 2019 whilst NHS local revenues declined by 7.3% in the same period. NHS e-Referrals revenue now accounts for 88.7% of underlying NHS revenue in the six months ended June 2019, up from 87.6% in H1 18. NHS ARPC benefitted from a mix shift away from soft tissue repair of shoulders and knees towards more higher revenue joint replacement. The increase in tariff, effective from 1 April, is driving price rises in-line with the guidance we gave at FY18 results.
Cost of sales and gross profit
Gross margin for the first six months of 2019 was broadly flat at 46.9% (2018: 47.1% in 2018), despite the continued migration of care from inpatient to day case and outpatient and a greater proportion of lower margin oncology procedures, reflecting tight cost control across the business. Cost of sales increased in the period by GBP9.5 million, or 3.8%, to GBP261.1 million (2018: GBP251.6 million) on revenues that increased by 3.4%.
Cost of sales is broken down, and presented as a percentage of relevant revenue, as follows:
2019 2018
=================== ===================
Six months ended Six months ended
30 June 30 June
=================== ===================
GBPm % of revenue GBPm % of revenue
=============== ===== ============ ===== ============
Clinical staff 98.8 20.1% 94.2 19.8%
Direct costs 110.7 22.5% 107.0 22.5%
Medical fees 51.6 10.5% 50.4 10.6%
===== ============
Cost of sales 261.1 53.1% 251.6 52.9%
=============== ===== ============ ===== ============
Gross profit 230.5 46.9% 224.0 47.1%
=============== ===== ============ ===== ============
Hospital operating profit margin remained broadly flat at 26.3% (2018: 26.5%) but corporate overheads increased as marketing costs were moved centrally and team incentive payments/share save accruals recommenced post the suspension in 2018. Clinical staff costs increased as expected due to the increase in personnel related to our focus on clinical quality and governance as well as a tightening of the labour market.
Other operating costs
Other operating costs for the six months ended 30 June 2019 decreased by GBP7.3m or 3.9% to GBP179.5 million (H1 2018: GBP186.8 million). Excluding exceptional and other items, other operating costs have increased by GBP7.6 million, or 4.4% to GBP179.1 million (H1 2018: GBP171.5 million). Pre-IFRS 16, other operating costs have decreased by GBP7.5 million from GBP207.7 million to GBP200.2 million.
The increase in operating costs is mainly driven by staff costs, including the accrual of team incentives in 2019 and marketing spend.
Operating margin for the six months ended 30 June 2019 is 10.4%, up from 7.8% in H1 2018. Excluding exceptional and other items, operating margin is 10.5%, down from 11.0% at H1 2018.
IFRS 16
The Group has adopted the new accounting standard IFRS 16 Leases on a fully retrospective basis from 1 January 2019, and therefore the prior period's financial information has been restated to reflect the impact of the new standard. Refer to note 3 and 20 for the IFRS 16 impact.
EBITDA
EBITDA after IFRS 16 for the Group has decreased by 2.1% in the period from GBP98.9 million to GBP96.8 million for H1 2019. Adjusting for IFRS 16, EBITDA has decreased by 3.6% to GBP63.7 million from GBP66.1 million. The decrease is driven by the accrual of team incentives for the first time in recent years.
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 2019, the charge to the income statement is GBP0.3 million (H1 2018: GBP0.5 million), or GBP0.4 million inclusive of National Insurance (H1 2018: GBP0.6 million). In addition, the Group launched a Sharesave scheme available for all employees. Further details are contained in note 18 of this announcement.
Exceptional and other items
Six months ended
30 June (Unaudited)
======================
(GBP million) 2019 2018
===================================================== ========== ==========
Hospitals set up and closure costs 0.1 1.8
Hospital impairment on property, plant and equipment
and write off of aborted hospital costs 0.3 12.6
Other - 0.9
===================================================== ========== ==========
Total exceptional costs 0.4 15.3
===================================================== ========== ==========
Income tax credit on exceptional and other items (0.1) (7.1)
===================================================== ========== ==========
Total post-tax exceptional and other costs 0.3 8.2
===================================================== ========== ==========
In the period, aborted hospitals costs relate to the potential development in Milton Keynes where the decision was taken to not proceed. In the prior period, the impairment costs related to the Spire Alexandra property. Other exceptional costs largely relate to the maintenance costs of non-operational sites, business reorganisation and corporate restructuring costs.
Net finance costs
Net finance costs increased by 5.1% to GBP41.4 million (H1 2018: GBP39.4 million) as a result of an incremental increase in lease costs, higher interest rates on bank borrowings and the effect of amortising the GBP3.3m gain recognised under IFRS 9 in 2018 from the modification of the Senior Loan Facility (see notes 14-16 for further detail). These charges are stated after the adoption of IFRS 16.
Taxation
The taxation charge for the six months ended 30 June 2019 is GBP2.5 million (H1 2018: credit GBP4.3 million). This consists of GBP1.3 million (H1 2018: GBP1.9 million) charge for corporation tax and a charge of GBP1.2 million (H1 2018: credit GBP6.2 million) for deferred tax. H1 2018 includes one off deferred tax credits in respect of the disposal of properties.
Profit after taxation
The profit after taxation for the six months ended 30 June 2019 was GBP7.1 million (H1 2018: GBP2.1 million)
Adjusted financial information
This statement was prepared for illustrative purposes only and did not represent the Group's actual earnings. The information was prepared as described in the notes set out below.
Non-GAAP financial measures
We have provided in this release 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.
EBITDA
Six months ended
30 June (Unaudited)
======================
(GBP million) 2019 2018 (Restated)
====================================================== ===== ===============
Operating profit 51.0 37.2
Adjustments for:
Exceptional and other items 0.4 15.3
Depreciation (including profit/ loss on sale of fixed
assets) 45.4 46.4
Adjusted EBITDA 96.8 98.9
====================================================== ===== ===============
Adjusted profit after tax and adjusted earnings per share
Adjustments have been made to remove the impact of a number of non-recurring items, but include the impact of IFRS 16.
Six months ended
30 June (Unaudited)
============================
(GBP million) 2019 2018 (Restated)
========================================================== =========== ===============
Profit / (loss) before tax 9.6 (2.2)
Adjustments for:
Exceptional and other items 0.4 15.3
Adjusted profit before tax 10.0 13.1
Taxation(1) (2.6) (2.8)
Adjusted profit after tax 7.4 10.3
========================================================== =========== ===============
Weighted average number of ordinary shares in issue (No.) 400,828,739 400,806,961
========================================================== =========== ===============
Adjusted basic earnings per share (pence) 1.8 2.6
========================================================== =========== ===============
(1) Reported tax charge for the period adjusted for the tax effect of exceptional and other items
Adjustments have been made below to present the position if IFRS 16 had not been adopted in the period. This is being illustrated to allow users compare the current period to the previously reported H1 2018 financials.
Six months ended
30 June (Unaudited)
============================
(GBP million) 2019 2018 (Restated)
========================================================== =========== ===============
Profit / (loss) before tax 9.6 (2.2)
Adjustments for:
IFRS 16 - leases 7.1 7.3
Exceptional and other items 0.4 15.3
Adjusted profit before tax 17.1 20.4
Taxation(2) (3.2) (4.0)
Adjusted profit after tax 13.9 16.4
========================================================== =========== ===============
Weighted average number of ordinary shares in issue (No.) 400,828,739 400,806,961
========================================================== =========== ===============
Adjusted basic earnings per share (pence) 3.5 4.1
========================================================== =========== ===============
(2) Reported tax charge for the period adjusted for the tax effect of exceptional and other items and IFRS 16.
Cash flow analysis for the period
Six months ended
June (Unaudited)
=======================
(GBP million) 2019 2018 (Restated)
======================================================== ====== ===============
Opening Cash balance 47.7 39.2
======================================================== ====== ===============
Operating cash flows before exceptional and other items
and income tax paid 85.3 95.0
Exceptional and other items (0.1) (1.4)
Income tax received / paid 1.8 (1.4)
======================================================== ====== ===============
Operating cash flows after exceptional and other items
and income tax paid 87.0 92.2
Net cash in investing activities (21.3) (33.4)
Net cash in financing activities (55.0) (52.9)
===============
Closing cash balance 58.4 45.1
======================================================== ====== ===============
Operating cash flows before exceptional items
The cash inflow from operating activities before tax and exceptional items was GBP85.3 million, which constitutes a cash conversion rate from GBP96.8 million EBITDA of 88.1% (H1 2018: 96.1% conversion of GBP98.9 million EBITDA). The net cash outflow from movements in working capital in the period was GBP11.8 million (H1 2018: GBP4.4 million outflow).
Investing and financing cash flows
Net cash used in investing activities for the period was GBP21.3 million (H1 2018: GBP33.4 million). Cash outflow for the purchase of plant, property and equipment in the period totalled GBP21.5 million (H1 2018: GBP33.5 million), which included a new theatre and outpatient bedrooms at Spire Bushey and a new orthopaedic outpatient centre at Spire Manchester.
Net cash used in financing activities for the period was GBP55.0 million (H1 2018: GBP52.9 million), including interest paid of GBP35.9 million (H1 2018: GBP34.6 million), GBP9.1 million (H1 2018: GBP8.3 million) of lease rental payments and a dividend paid to shareholders of GBP10.0 million (H1 2018: GBP10.0 million).
Borrowings
At 30 June 2019, the Group has bank borrowings (inclusive of IFRS 9 adjustments) of GBP420.6 million (December 2018: GBP420.4 million, June 2018: GBP426.1 million), drawn under facilities which mature in July 2022.
Six months ended
June (Unaudited)
=======================
(GBP million) 2019 2018 (restated)
=============================================== ====== ===============
Cash (58.4) (45.1)
=============================================== ====== ===============
Bank borrowings 420.6 426.1
=============================================== ====== ===============
Bank borrowings less cash and cash equivalents 362.2 381.0
=============================================== ====== ===============
Net debt for the purposes of the net debt / EBITDA covenant was GBP366.6 million and was 3.3x (December 2018: 3.3x, June 2018: 3.0x). The net debt for covenant purposes comprises the senior facility of GBP425.0m less cash and cash equivalents.
The Group has an undrawn revolving loan facility of GBP100.0 million (December 2018: GBP100 million) available until July 2022.
Under IFRS 16, a lease liability is now also recognised for those leases previously classified as operating leases. As at 30 June 2019 lease liabilities were GBP721.2 million (December 2018: GBP726.1 million, June 2018: GBP730.9 million). Refer to note 20 for more detail.
Dividend
The Board has approved a 2019 interim dividend of 1.3 pence per share (H1 2018: 1.3 pence) payable on 10 December 2019.
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 business as disclosed in the 2018 Annual Report. The table below summarises the principal risks and how the Group mitigates these risks:
Risk Mitigation of risk
==================================== =================================================
Patient Safety Spire Healthcare continually monitors
its clinical standards, policies and procedures
and has further strengthened medical governance
and oversight in 2019, reporting plans
and progress via the Board's Clinical
Governance and Safety Committee.
Government & NHS policy The Group maintains direct engagement
with government via Department of Health,
NHS England and NHS Improvement. The Board
closely monitors Government thinking on
healthcare, NHS requirements and associated
tariff structures to consider the need
for cost and/or investment reduction,
whether in the short, medium or long term.
Compliance & Regulation The Group continues to strengthen its
Group-wide risk management framework (and
associated policies and procedures) to
ensure that risks are mitigated as far
as possible, the Executive Committee has
appropriate visibility to ensure robust
decision making, and the Group has the
ability to monitor and react to the changing
regulatory framework of a listed company
in the healthcare sector.
Insurance The Group reviews and maintains insurance
to mitigate the possibility of a major
loss. Adequacy of cover is reviewed annually
with the Group's brokers, with coverage
being maintained or increased depending
on that advice.
Concentration of the private medical The Group works hard to maintain good
insurance ('PMI') market relationships and a joint product/patient
health offering with the PMI companies,
which, in the opinion of the Directors,
assists the healthcare sector as a whole
in delivering high-quality patient care.
The Board believes continuing to invest
in its well-placed portfolio of hospitals
provides a natural fit to the local requirements
of all the PMI providers long term.
Availability of Key Clinical & The Group focuses on staff retention,
Medical Professionals with trends and changes in our staff survey
informing our strategy for engagement
with a focus on incentives, staff development
and training.
Macroeconomic conditions The Group manages risk by regularly reviewing
market conditions and economic indicators
to assess whether actions are required.
Competitor challenge The market has seen continued pressure
in 2019 and the Group maintains a watching
brief on new and existing competitor activity
and retains the ability to react quickly
to changes in patient and market demand.
Cyber security Spire Healthcare's technical IT teams
continually monitor these developments
as a business as usual activity. Working
with a number of specialist and industry
leading technical partners, Spire Healthcare
has created multiple layers of business
protection through the use of advanced
intrusion detection and protection systems,
web access firewalls and advanced content
filtering to combat denial of service
attacks.
Brexit There is currently uncertainty as to whether
the United Kingdom will leave the EU on
the 31 October 2019 and, if it does, under
what circumstances. The Group has undertaken
a Brexit risk assessment. Based on the
information available to the Group, and
its assessment of the most likely scenarios
across all key risk areas, the Group has
plans to minimise disruption. This includes:
utilising its national supply chain and
distribution centre to mitigate stock
shortages for a number of weeks of disrupted
supply; undertaking supplier assurance;
liaising with NHS England and the Department
of Health Brexit planning team; and promoting
the EU settlement scheme to relevant staff.
The Group has contingency plans in place
should Brexit negatively affect consumer
confidence and expects to be able to mitigate
this through prudent cash management and
other cost reduction measures. Brexit
planning is overseen by the Group's Brexit
Preparation Committee which meets regularly
to review the position.
Liquidity and covenant risk The Group actively monitors and manages
its liquid asset position, its financial
liabilities falling due and the cover
against its loan covenants and is actively
focussed on cash management and capital
expenditure.
==================================== =================================================
Directors' responsibility statement
We confirm that to the best of our knowledge:
-- This condensed consolidated interim financial information for the six months ended 30 June 2019 has been prepared in accordance with International Accounting Standard 34 ('IAS 34') as adopted by the EU.
-- The interim management report, which is incorporated into the Non-Executive Chairman's message, Operating Review and Financial Review, includes a fair review of the information as required by:
o DTR 4.2.7R of the Disclosure 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
o DTR 4.2.8R of the Disclosure 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 2018.
By order of the Board
Justin Ash Jitesh Sodha Chief Executive Officer Chief Financial Officer
13 September 2019
Independent review report to the members of Spire Healthcare Group plc
Introduction
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 2019 which comprise 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.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 "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.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, 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.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. 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.
Conclusion
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 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
13 September 2019
Condensed financial statements
Consolidated interim income statement
For the six months ended 30 June 2019
The Group has adopted the new accounting standard IFRS 16 Leases on a fully retrospective basis from 1 January 2019, and therefore the prior period's financial information has been restated to reflect the impact of the new standard. Refer to note 3 and 20 for the IFRS 16 impact.
Six months ended 30 June (unaudited)
2019 2018 (Restated)
======================================= ==================================
Total Exceptional Total Exceptional
excluding and other excluding and other
exceptional items exceptional items
and other (note and other (note
(GBP million) Notes items 9) Total items 9) Total
====================== ===== ============ ================ ======= ============ =========== =======
Revenue 6 491.6 - 491.6 475.6 - 475.6
Cost of sales (261.1) - (261.1) (251.6) - (251.6)
====================== ===== ============ ================ ======= ============ =========== =======
Gross profit 230.5 - 230.5 224.0 - 224.0
Other operating
costs (179.1) (0.4) (179.5) (171.5) (15.3) (186.8)
====================== ===== ============ ================ ======= ============ =========== =======
Operating profit 7 51.4 (0.4) 51.0 52.5 (15.3) 37.2
Finance costs 8 (41.4) - (41.4) (39.4) - (39.4)
====================== ===== ============ ================ ======= ============ =========== =======
Profit / (loss)
before taxation 10.0 (0.4) 9.6 13.1 (15.3) (2.2)
Taxation 10 (2.6) 0.1 (2.5) (2.8) 7.1 4.3
====================== ===== ============ ================ ======= ============ =========== =======
Profit after tax
for the period 7.4 (0.3) 7.1 10.3 (8.2) 2.1
====================== ===== ============ ================ ======= ============ =========== =======
Profit for the
period attributable
to owners of the
Parent 7.4 (0.3) 7.1 10.3 (8.2) 2.1
====================== ===== ============ ================ ======= ============ =========== =======
Earnings per share
(in pence per share)
* Basic 12 1.8 - 1.8 2.6 (2.1) 0.5
* Diluted 12 1.8 (0.1) 1.7 2.6 (2.1) 0.5
====================== ===== ============ ================ ======= ============ =========== =======
Consolidated interim statement of comprehensive income
For the six months ended 30 June 2019
Six months to 30
June (Unaudited)
======================
(GBP million) 2019 2018 (Restated)
=============================================================== ===== ===============
Profit for the period 7.1 2.1
=============================================================== ===== ===============
Items that may be reclassified to profit or loss in subsequent
periods
Net loss on cash flow hedges (2.3) -
Taxation on cash flow hedges 0.4 -
=============================================================== ===== ===============
Other comprehensive income for the period (1.9) -
=============================================================== ===== ===============
Total comprehensive income for the period attributable
to owners of the Parent 5.2 2.1
=============================================================== ===== ===============
Consolidated interim statement of changes in equity
For the six months ended 30 June 2019
Share Share Capital EBT share Hedging Retained Total
(GBP million) Notes capital premium reserves reserves reserve earnings equity
======================= ===== ======== ======== ========= ========= ========= ========= =======
As at 1 January 2018
(reported) 4.0 826.9 376.1 (0.9) - (174.6) 1,031.5
Charge arising from
adoption of IFRS 16 20 - - - - - (62.3) (62.3)
----------------------- ----- -------- -------- --------- --------- --------- --------- -------
As at 1 January 2018
(restated) 4.0 826.9 376.1 (0.9) - (236.9) 969.2
Profit for the period - - - - - 2.1 2.1
Dividend paid 11 - - - - - (10.0) (10.0)
Share-based payments
(net of tax) 18 - - - - - 0.6 0.6
Utilisation of EBT
shares for 2014 LTIP
Awards - - - 0.1 - (0.1) -
======================= ===== ======== ======== ========= ========= ========= ========= =======
As at 30 June 2018
(restated) 4.0 826.9 376.1 (0.8) - (244.3) 961.9
As at 1 January 2019
(reported) 4.0 826.9 376.1 (0.8) (0.5) (178.1) 1,027.6
Charge arising from
adoption of IFRS 16 20 - - - - - (73.5) (73.5)
----------------------- ----- -------- -------- --------- --------- --------- --------- -------
As at 1 January 2019
(restated) 4.0 826.9 376.1 (0.8) (0.5) (251.6) 954.1
Profit for the period - - - - - 7.1 7.1
Other comprehensive
income for the period - - - - (1.9) - (1.9)
----------------------- ----- -------- -------- --------- --------- --------- --------- -------
Total comprehensive
income - - - - (1.9) 7.1 5.2
Dividend paid 11 - - - - - (10.0) (10.0)
Share based payments
(net of tax) 18 - - - - - 0.2 0.2
Balance at 30 June
2019 4.0 826.9 376.1 (0.8) (2.4) (254.3) 949.5
======================= ===== ======== ======== ========= ========= ========= ========= =======
Consolidated interim balance sheet
As at
===============================
30 June
2019
31 December
2018 (Restated)
(GBP million) Notes (unaudited) (Audited)
============================================ ===== ============= ================
ASSETS
Non-current assets
Intangible assets 517.8 517.8
Property, plant and equipment 13 1,540.2 1,578.4
2,058.0 2,096.2
============================================ ===== ============= ================
Current assets
Inventories 31.7 29.4
Trade and other receivables 104.7 94.2
Income tax receivable - 2.0
Cash and cash equivalents 58.4 47.7
============================================ ===== ============= ================
194.8 173.3
============================================ ===== ============= ================
Non-current assets held for sale 5 14.4 2.0
============================================ ===== ============= ================
209.2 175.3
============================================ ===== ============= ================
Total assets 2,267.2 2,271.5
============================================ ===== ============= ================
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 (2.4) (0.5)
Retained earnings (254.3) (251.6)
============================================ ===== ============= ================
Equity attributable to owners of the Parent 949.5 954.1
Total equity 949.5 954.1
============================================ ===== ============= ================
Non-current liabilities
Bank borrowings 14 418.8 418.9
Lease liability 15 655.1 659.7
Derivatives 16 1.9 0.5
Other payables 2.3 2.3
Deferred tax liability 57.3 56.5
============================================ ===== ============= ================
1,135.4 1,137.9
============================================ ===== ============= ================
Current liabilities
Provisions 17 15.5 16.4
Bank borrowings 14 1.8 1.5
Lease liability 15 66.1 66.4
Derivatives 16 0.9 -
Trade and other payables 96.8 95.2
Income tax payable 1.2 -
============================================ ===== ============= ================
182.3 179.5
============================================ ===== ============= ================
Total liabilities 1,317.7 1,317.4
============================================ ===== ============= ================
Total equity and liabilities 2,267.2 2,271.5
============================================ ===== ============= ================
Consolidated interim statement of cash flows
For the six months ended 30 June 2019
Six months ended
30 June (Unaudited)
=======================
(GBP million) Notes 2019 2018 (Restated)
====================================================== ===== ====== ===============
Cash flows from operating activities
Profit / (loss) before taxation 9.6 (2.2)
Adjustments for:
Depreciation 7 45.5 46.3
Impairment of property, plant and equipment and
other exceptional items 0.3 13.9
Share-based payments 18 0.3 0.5
(Profit) / Loss on disposal of property, plant
and equipment 7 (0.1) 0.1
Finance costs 8 41.4 39.4
====================================================== ===== ====== ===============
97.0 98.0
Movements in working capital:
Increase in trade and other receivables (10.5) (10.5)
(Increase)/decrease in inventories (2.3) 1.1
Increase in trade and other payables 1.9 3.7
(Decrease)/increase in provisions (0.9) 1.3
Cash generated from operations 85.2 93.6
Income tax received / (paid) 1.8 (1.4)
Net cash from operating activities 87.0 92.2
Cash flows from investing activities
Purchase of property, plant and equipment (21.5) (33.5)
Proceeds of disposal of property, plant and equipment 0.2 0.1
Net cash used in investing activities (21.3) (33.4)
Cash flows from financing activities
Interest paid (35.9) (34.6)
Payment of lease liabilities (9.1) (8.3)
Dividend paid to equity holders of the Parent 11 (10.0) (10.0)
====================================================== ===== ====== ===============
Net cash used in financing activities (55.0) (52.9)
====================================================== ===== ====== ===============
Net increase in cash and cash equivalents 10.7 5.9
Cash and cash equivalents at beginning of period 47.7 39.2
====================================================== ===== ====== ===============
Cash and cash equivalents at end of period 58.4 45.1
====================================================== ===== ====== ===============
Exceptional and other items (note 9)
Exceptional and other items paid included in the
cash flow (0.1) (1.4)
Total exceptional and other items (0.4) (15.3)
====================================================== ===== ====== ===============
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 range of private healthcare services.
The Company is a public limited company, which is listed on the London Stock Exchange, incorporated, registered and domiciled in England and Wales (registered number 9084066). 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 2019 was approved by the Board on 13 September 2019.
2. Basis of preparation
The condensed consolidated interim financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 Interim Financial Reporting, as adopted by the EU. They do 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 2018. 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. Other than line items which have been restated for IFRS 16, financial information for the year ended 31 December 2018 has been extracted from the statutory accounts which were approved by the Board of Directors on 27 February 2019 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 is financed by a bank loan facility that matures in July 2022. The Directors have considered the Group's forecasts and projections, and the risks associated with their delivery and are satisfied that the Group will be able to operate within the covenants imposed by the bank loan facility for at least twelve months from the date of approval of the condensed consolidated financial information. In relation to available cash resources, the Directors have had regard to both cash at bank and a GBP100 million committed undrawn revolving credit facility.
The Group has undertaken extensive activity to identify and mitigate its exposure to plausible risks which may arise from Brexit. Based on the Directors' current assessment of the likelihood of the Brexit risks arising together with their assessment of the planned mitigating actions being successful, the Directors have concluded 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 2018. The accounting policies are consistent with these of the previous financial year and corresponding interim period with the exception of the adoption of new and amended standards as set out below.
The annual financial statements of the Group are prepared in accordance with International Financial Reporting standard ("IFRS") as adopted by the EU.
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.
New standards, interpretations and amendments applied
The following amendments to existing standards were effective for the Group from 1 January 2019. The Annual Improvements 2015-2017 Cycle and IFRIC 23 have not had a material impact, but IFRS 16 has and is described below.
Effective date*
Annual Improvements 2015--2017 Cycle 1 January 2019
IFRIC 23 1 January 2019
IFRS 16 Leases 1 January 2019
------------------------------------ ---------------
* The effective dates stated above are those given in the original IASB/IFRIC standards and interpretations. As the Group prepares its financial statements in accordance with IFRS as adopted by the European Union (EU), the application of new standards and interpretations will be subject to them having been endorsed for use in the EU via the EU Endorsement mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group's discretion to early adopt standards.
IFRS 16 Leases
IFRS 16 replaces IAS 17 and introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The operating lease cost which the Group previously incurred has be replaced by a depreciation charge on the right-of-use asset (over the term of the lease) as well as an interest charge on the lease liability over the same period.
IFRS 16 has a significant impact for the Group's financial statements owing to its large portfolio of properties which were previously accounted for as operating leases. The impact arising from non-property operating leases is negligible and the Group has elected the recognition exemption for short-term leases (less than 12 months) and low value assets.
The Group has adopted IFRS 16 on a fully retrospective basis on 1 January 2019 utilising the practical expedient to not reassess whether a contract contains a lease. The prior period financial information has been restated to reflect the impact of the new accounting standard (see note 20).
The application of IFRS 16 requires the Group to make judgements that affect the valuation of the lease liabilities and right of use (ROU) assets. These are set out in note 4.
New Accounting Policy with effect 1 January 2019
Leases
At inception, the Group assesses whether a contract is or contains a lease. This assessment involves the exercise of judgement about whether the Group obtains substantially all the economic benefits from the use of that asset, and whether the Group has the right to direct the use of the asset when considering whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group has elected not to separate lease and non-lease components for leases of vehicles.
The Group recognises a right of use (ROU) asset and a lease liability at the commencement of the lease. The ROU is initially measured based on the present value of lease payments, less any incentives received. Initial direct costs and costs to dismantle or restore an asset are included. The ROU is depreciated over the shorter of the lease term or the useful economic life of the underlying asset. The incremental borrowing rate is used to discount the assets over the relevant term. The ROU is subject to testing for impairment if there is an indicator for impairment.
Lease payments generally include fixed payments and variable payments that depend on an index (such as inflation index). When the lease contains an extension or purchase option that the Group considered reasonably certain to be exercised, the cost of the option is included in the lease payments. The incremental borrowing rate is used to discount the lease payments over the term of the lease.
ROU assets are included in the heading Property, Plant and Equipment, and the lease liability is included in the headings Lease Liability (current and non-current) on the Balance Sheet.
The Group has elected not to recognise ROU assets and liabilities for leases where the total lease term is less than 12 months, or for leases of low value equipment. The payments for such leases are recognised in the Income Statement on a straight line basis over the lease term.
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 and 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 2018, except where documented below following the application of IFRS 16 Leases.
Leases
The application of IFRS 16 requires the Group to make certain judgements which affect the value of the ROU asset and lease liability, and these include: determining contracts in the scope of IFRS 16, the contract term and interest rate used for discounting future cash flows.
The lease term is determined by the Group comprising non-cancellable period of lease contracts, periods covered by an option to extend the lease if the Group is reasonably certain to exercise that option and period covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. For lease contracts with an indefinite term, the Group determines the length of the contract to be equal to the average or typical market contract term of the particular type of lease. The same life is then applied to determine the depreciation rate of right of use assets.
The present value of the lease payment is determined using the discount factor (incremental borrowing rate) which is determined by a reference rate (being UK Government bonds or Sterling LIBOR) adjusted by an applicable credit spread or margin to reflect the credit standing of the Group observed in the period when the lease contract commences or is modified. The incremental borrowing rate applied reflects a rate for a similar term to that of the lease.
5. Non-current assets held for sale
In the period, the group agreed a partnership with GenesisCare which involved the sale of Baddow Specialist Care Centre and Bristol Cancer Centre. As a result, the assets have been reclassified as Held for Sale in the period at their carrying value, which is considered lower than the fair value.
Six months ended
30 June (Unaudited)
======================
(GBP million) 2019 2018
================================================= ========== ==========
Spire St Saviours property 2.0 2.0
Baddow and Bristol Cancer Care Centre properties 12.4 -
================================================= ========== ==========
Total assets held for sale 14.4 2.0
================================================= ========== ==========
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.
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) 2019 2018 (restated)
=========================== ===== ===============
Private Medical Insurance* 247.0 234.9
NHS 143.7 140.3
Self-pay 88.6 87.3
Other 12.3 13.1
=========================== ===== ===============
Total revenue 491.6 475.6
=========================== ===== ===============
*PMI also includes revenues previously disclosed as partnerships, being GBP15.2m in the period ended 30 June 2019 (2018: GBP13.5m).
7. Operating profit
Operating profit has been arrived at after charging / (crediting):
Six months ended
30 June (Unaudited)
======================
(GBP million) 2019 2018 (Restated)
================================================ ===== ===============
Depreciation of property, plant and equipment 33.1 34.4
Depreciation on right of use assets 12.4 11.9
Lease payments made in respect of low value and
short leases 5.3 4.5
(Profit) / loss on disposal of property, plant
and equipment (0.1) 0.1
Staff costs 154.1 147.8
================================================= ===== ===============
8. Finance costs
Six months ended
30 June (Unaudited)
======================
(GBP million) 2019 2018 (Restated)
===================================== ===== ===============
Finance income:
Interest income on bank facilities - -
===================================== ===== ===============
Finance costs:
Interest on bank facilities 8.9 6.6
Interest on obligations under leases 32.5 32.8
Total finance costs 41.4 39.4
===================================== ===== ===============
9. Exceptional and other items
Six months ended
30 June (Unaudited)
======================
(GBP million) 2019 2018
===================================================== ========== ==========
Hospitals set up and closure costs 0.1 1.8
Hospital impairment on property, plant and equipment
and write off of aborted hospital costs 0.3 12.6
Other exceptional costs - 0.9
===================================================== ========== ==========
Total exceptional and other costs 0.4 15.3
===================================================== ========== ==========
Income tax credit on exceptional and other items (0.1) (7.1)
===================================================== ========== ==========
Total post-tax exceptional and other costs 0.3 8.2
===================================================== ========== ==========
Hospital set up and closure costs mainly relate to the maintenance of costs of non-operational sites.
Property impairment costs in 2019 relate to the write off of costs associated with a potential development in Milton Keynes. Property impairment in the prior period relates to the Spire Alexandra hospital, where a charge of GBP12.6m was taken.
Other exceptional costs largely relate to business reorganisation and corporate restructuring costs. In the comparative period, other exceptional costs also include amounts relating to certain medical malpractice costs.
As disclosed in the 2018 Annual Report and Accounts, Spire is continuing to pursue legal action against its insurers to seek recoveries of the Ian Paterson settlement and related costs. This may give rise to future exceptional income being recognised in the income statement. In 2019, no costs or income has been incurred or received.
10. Taxation
Six months ended
30 June (Unaudited)
======================
(GBP million) 2019 2018 (Restated)
==================================================== ===== ===============
Current tax:
UK Corporation tax charge 1.3 1.9
==================================================== ===== ===============
Total current tax charge 1.3 1.9
==================================================== ===== ===============
Deferred tax:
Origination and reversal of temporary differences 1.2 (1.8)
Adjustments in respect of prior years - (4.4)
==================================================== ===== ===============
Total deferred tax charge / (credit) 1.2 (6.2)
==================================================== ===== ===============
Total tax charge / (credit) 2.5 (4.3)
==================================================== ===== ===============
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 2019. The Group has separately calculated the tax rates applicable in respect of IFRS 16 adjustments and exceptional and other items for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation for the effective tax rates.
11. Dividends
Six months ended
30 June (Unaudited)
======================
(GBP million) 2019 2018
============================================================= ========== ==========
Amounts recognised as distributions to equity holders
in the period:
* final dividend for the year ended 31 December 2018 of
2.5 pence per share 10.0 -
* final dividend for the year ended 31 December 2017 of
2.5 pence per share - 10.0
============================================================= ========== ==========
10.0 10.0
============================================================= ========== ==========
An interim dividend of 1.3 pence per share (H1 2018: 1.3 pence), amounting to a total interim dividend of approximately GBP5.2m (H1 2018: GBP5.2m), was proposed by the Board on 13 September 2019. The interim dividend is payable on 10 December 2019 to shareholders on the register at 15 November 2019.
12. Earnings per share
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)
============================
2019 2018 (Restated)
=========================================================== =========== ===============
Profit for the period attributable to owners of the Parent
(GBP million) 7.1 2.1
=========================================================== =========== ===============
Weighted average number of ordinary shares 401,081,391 401,081,391
Adjustment for weighted average number of shares held
in the EBT (252,652) (274,430)
=========================================================== =========== ===============
Weighted average number of ordinary shares in issue (No.) 400,828,739 400,806,961
=========================================================== =========== ===============
Basic earnings per share (in pence per share) 1.8 0.5
=========================================================== =========== ===============
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)
============================
2019 2018 (Restated)
=========================================================== =========== ===============
Profit for the period attributable to owners of the Parent
(GBP million) 7.1 2.1
=========================================================== =========== ===============
Weighted average number of ordinary shares in issue 400,828,739 400,806,961
Adjustment for weighted average number of contingently
issuable shares 7,404,052 1,599,822
=========================================================== =========== ===============
Diluted weighted average number of ordinary shares in
issue (No.) 408,232,791 402,406,783
=========================================================== =========== ===============
Diluted earnings per share (in pence per share) 1.7 0.5
=========================================================== =========== ===============
The Directors believe that EPS excluding exceptional charges and other items ("Adjusted EPS") better reflects the underlying performance of the business and assists in providing a clearer view of the performance of the group.
Reconciliation of profit to profit excluding exceptional charges and other items ("Adjusted profit"):
Six months ended
30 June (Unaudited)
=============================
2019 2018 (Restated)
=========================================================== ============ ===============
Profit for the period attributable to owners of the Parent
(GBP million) 7.1 2.1
Exceptional charges and other items (net of taxation)
(see note 9) 0.3 8.2
Adjusted profit (GBP million) 7.4 10.3
Weighted average number of Ordinary Shares in issue 400,828,739 400,806,961
Weighted average number of dilutive Ordinary Shares 408,232,791 402,406,783
=========================================================== ============ ===============
Adjusted basic earnings per share (in pence per share) 1.8 2.6
Adjusted diluted earnings per share (in pence per share) 1.8 2.6
=========================================================== ============ ===============
13. Property, plant and equipment
(GBP million) Freehold Long leasehold Equipment Assets in Total
property property the course
of construction
============================ ========= ============== ========= ================ =======
Net book value at 1 January
2019 as reported 715.5 115.7 177.4 10.6 1,019.2
Transition adjustment for
IFRS 16 - 557.8 1.4 - 559,2
============================ ========= ============== ========= ================ =======
Net book value at 1 January
2019 as adjusted 715.5 673.5 178.8 10.6 1,578.4
============================ ========= ============== ========= ================ =======
Additions 3.5 2.3 7.0 6.9 19.7
Disposals - - - - -
Assets held for sale (10.4) - (2.0) - (12.4)
Transfer from assets under
construction 0.5 - 0.1 (0.6) -
Depreciation (8.5) (15.8) (21.2) - (45.5)
============================ ========= ============== ========= ================ =======
Net book value at 30 June
2019 700.6 660.0 162.7 16.9 1,540.2
============================ ========= ============== ========= ================ =======
Depreciation recognised on right of use assets in the period totalled GBP12.4 million (year ended 31 December 2018: GBP23.8 million), of which GBP12.1 million (2018: GBP23.4 million) relates to long leasehold property and GBP0.3 million (2018: GBP0.4 million) to equipment.
Right of use assets are included in the following fixed assets categories:
Carrying value as at
=====================================================
31 December 30 June
30 June 2018 (Audited) 2018 (unaudited)
(GBP million) 2019 (Unaudited) (Restated) (Restated)
========================================= ================= =============== =================
Long leasehold property:
Right of use - Properties 545.7 557.8 569.5
Equipment:
Right of use - Motor vehicles and trucks 0.9 1.2 0.6
Right of use - office equipment 0.2 0.2 0.3
Total right of use assets 546.8 559.2 570.4
========================================= ================= =============== =================
14. 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. In July 2018, the Group extended the maturity of its bank loan facility for a further 3 years from July 2019 to July 2022 and recorded this as a non-substantial loan modification not resulting in de-recognition. A modification gain of GBP3.3 million was recorded at the date of extension, which in turn decreased the carrying value of the loan held.
As at
==================================
31 December
30 June 2018 (Audited)
(GBP million) 2019 (Unaudited) (Restated)
=========================================== ================= ===============
Amount due for settlement within 12 months 1.8 1.5
Amount due for settlement after 12 months 418.8 418.9
Total bank borrowings 420.6 420.4
=========================================== ================= ===============
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 2019 (Unaudited) 2018 (Audited)
============================================= ========== =========== ================= ===============
Senior finance facility July 2022 2.50% 423.4 423.8
============================================= ========== =========== ================= ===============
Revolving credit facility (undrawn committed
facility) July 2022 100.0 100.0
============================================= ========== =========== ================= ===============
On 23 July 2014, the Group was refinanced, and it entered into a bank loan facility with a syndicate of banks, comprising a five-year, GBP425.0 million term loan and a five-year GBP100.0 million revolving facility. The loan is non-amortising and carries interest at a margin of 2.50% over LIBOR (2018: 2.25% over LIBOR). In July 2018, the Group extended the maturity of its bank loan facility for a further three years to July 2022.
15. Lease liability
The Group has leases in respect of hospital properties, vehicles, office equipment and medical equipment. The leases are secured on fixed and floating charges over both the present and future assets of material subsidiaries of the Group. Future minimum lease payments under leases are as follows:
June 2019 December 2018 (Restated)
==================== ==========================
Present Present
Minimum value of Minimum value of
(GBP million) payments payments payments payments
========================================== ========= ========= ============ ============
Within one year 76.9 66.1 76.7 66.4
After one year but not more than five
years 307.6 213.9 307.5 215.2
More than five years 1,418.3 441.2 1,456.4 444.5
========================================== ========= ========= ============ ============
Total minimum lease payments 1,802.8 721.2 1,840.6 726.1
Less amounts representing finance charges (1,081.6) - (1,114.5) -
Present value of minimum lease payments 721.2 721.2 726.1 726.1
========================================== ========= ========= ============ ============
Leases, with a present value liability of GBP721.2 million (December 2018: GBP726.1 million), expire in various years to 2042 and carry a blended implicit interest rate of 9.0% (December 2018: 9.0%). Rent in respect of hospital properties is reviewed annually with reference to RPI, subject to assorted floors and caps.
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 GBP10.9 million (December 2018: GBP16.8 million).
16. Derivatives
The Group has a derivative contract in respect of an interest rate swap in place:
As at
==================================
30 June 31 December
(GBP million) 2019 (Unaudited) 2018 (Audited)
=========================================== ================= ===============
Amount due for settlement within 12 months 0.9 -
Amount due for settlement after 12 months 1.9 0.5
Total derivatives 2.8 0.5
=========================================== ================= ===============
In the current period, GBP0.4 million has been recycled to the Income Statement.
17. Provisions
The movement for the period in the provisions is as follows:
Business
Medical restructuring
(GBP million) malpractice and other Total
================================ ============ ============== =====
At 1 January 2019 14.7 1.7 16.4
Increase in existing provisions 0.7 0.9 1.6
Provisions utilised (1.4) (0.2) (1.6)
Provisions released (0.9) - (0.9)
At 30 June 2019 13.1 2.4 15.5
================================== ============ ============== =====
Medical malpractice relates to estimated liabilities arising from claims for damages in respect of services previously supplied to patients including commitments in respect of the removal or replacement of the PIP brand of breast implants. Amounts are shown gross of insured liabilities. Any such insurance recoveries are recognised in other receivables.
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). No additional provision has been booked in the period. The provision has been determined before account is taken of any potential further recoveries from insurers.
Business restructuring and other includes staff restructuring costs, the cost of decommissioning two facilities and potential costs associated with the resolution of a customer contract.
The provisions are shown gross of any expected reimbursement from insurers of the related risks. The reimbursement is recognised as a separate receivable when receipt of it is judged sufficiently probable. The amount included in other receivables in that respect was GBP7.3 million (2018: GBP7.7 million).
Provisions as at 30 June 2019 are materially considered to be current. The timing of utilisation is dependent upon certain events, and should any not be settled in 12 months, they are expected to be fully utilised any time within three years.
18. 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 GBP0.3 million in the six months ended 30 June 2019 (2018: GBP0.5 million). 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 GBP0.1 million (2018: GBP0.1 million).
A summary of the main features of the schemes are shown below:
Long Term Incentive Plan
On 25 March 2019, the Company granted a total of 3,252,101 options to the Executive directors and other senior management. The options will vest based on earnings per share ('EPS') (35%) targets for the financial year ending 31 December 2021, relative total shareholder return ('TSR') (35%) targets on performance over the three year period to 31 December 2021 and operational excellence ('OE') (30%) targets based on net promotor scores and regulatory ratings for the current portfolio of hospitals, subject to continued employment. Upon vesting, the options will remain exercisable until 25 March 2029.
Sharesave scheme
On 3 May 2019, the Company launched a Sharesave scheme for all employees, and have issued 3,929,889 options. There are no performance conditions in respect of this 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 and dividend yields.
19. 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 28 in the Annual Report and Accounts 2018 sets out the Group's policies and processes for measuring and managing risk. These have not changed significantly during the period to 30 June 2019.
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 2019 (GBP million) 425.0 425.0 100.0
Effective interest rate (%) 3.52% 3.52%
=============================== ======== ===== ================
31 December 2018 (GBP million) 425.0 425.0 100.0
Effective interest rate (%) 3.26% 3.26%
=============================== ======== ===== ================
The following derivative contracts were in place at 30 June 2019 (December 2018: GBP0.5m):
Carrying value
(GBP million) Interest rate Maturity date Notional Amount Asset / (Liability)
=================== ============= ============= =============== ====================
Interest rate swap 1.2168% July 2022 213.0 (2.8)
=================== ============= ============= =============== ====================
The fair value of the above instrument is considered the same as its carrying value. In line disclosure in note 28 of the 2018 Annual report and accounts, the above instrument uses level 2 of the fair value hierarchy to measure the fair value of the instrument.
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 000) 25bp increase 25bp decrease 25bp increase 25bp decrease
30 June 2019
Variable rate instruments (266) 266 (266) 266
Interest rate swaps 133 (133) 133 (133)
========================== ============= ============= ============= =============
31 December 2018
Variable rate instruments (266) 266 (266) 266
Interest rate swaps 133 (133) 133 (133)
========================== ============= ============= ============= =============
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 2019 Maturity analysis
========================================================
Carrying Contractual Within 1 Between 1 More than
(GBP million) amount cash flows year and 2 years 2 years
Bank borrowings 420.6 473.1 14.9 14.7 443.5
Lease liabilities (present
value) 721.2 1,802.8 76.9 77.1 1,648.8
Derivative interest rate swap 2.8 3.0 0.9 1.0 1.1
============================== ======== =========== ======== ============ =========
Total 1,144.6 2,278.9 92.7 92.8 2,093.4
============================== ======== =========== ======== ============ =========
31 December 2018 Maturity analysis
========================================================
Carrying Contractual Within 1 Between 1 More than
(GBP million) amount cash flows year and 2 years 2 years
Bank borrowings 420.4 481.9 14.3 15.2 452.4
Lease liabilities (present
value) 726.1 1,840.6 76.7 76.9 1,687.0
Derivative interest rate swap 0.5 0.6 0.6 0.2 (0.2)
============================== ======== =========== ======== ============ =========
Total 1,147.0 2,323.1 91.6 92.3 2,139.2
============================== ======== =========== ======== ============ =========
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) 2019 (Unaudited) 2018 (Audited)
============================================ ================= ===============
Committed undrawn revolving credit facility 100.0 100.0
Cash and cash equivalents 58.4 47.7
============================================ ================= ===============
Bases of valuation
As of 30 June 2019, except for the interest rate swap, 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 value amounts largely due to the short-term nature of these instruments. No other assets are measured at FV, nor included in levels 1, 2, 3 of the hierarchy.
The carrying value of other financial instruments, being leases and debt, is approximately equal to their fair value based on review of the current terms against market, except for the floating rate debt, which is after the deduction of GBP4.4 million (December 2018: GBP3.8 million) of issue costs.
During the period, there were no transfers between levels in the fair value hierarchy.
As at 30 June 2019, the Group held the following financial instruments measured at fair value.
Maturity analysis
======================================
Value as
Liabilities measured at fair value at 30 June
(GBP million) 2019 Level 1 Level 2 Level 3
Financial liabilities at fair value
through profit or loss
Interest rate swaps (2.8) - (2.8) -
==================================== =========== ======= ======= =======
Financial liabilities at fair value
using hedge accounting
Interest rate swaps (2.8) - (2.8) -
==================================== =========== ======= ======= =======
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.
20. IFRS 16 - Lease - transitional impact
As a result of the adoption of IFRS 16 Leases on a full retrospective approach, the prior period comparatives have been restated. The impact of this adoption on the comparative numbers in the condensed consolidated financial information is included below:
Income statement transition adjustment
======================================= ================= =========== ==================
As reported As restated
30 June IFRS 16 30 June
(GBP million) 2018 (Unaudited) adjustment 2018 (Unaudited)
======================================= ================= =========== ==================
Revenue 475.6 - 475.6
======================================== ================= =========== ==================
Cost of sales (251.6) - (251.6)
======================================== ================= =========== ==================
Gross Profit 224.0 - 224.0
======================================== ================= =========== ==================
Other operating costs (excluding
those split out below) (140.5) - (140.5)
Other operating costs - operating
leases re-classed under IFRS 16 (32.8) 32.8 -
Other operating costs - depreciation (34.4) (11.9) (46.3)
======================================== ================= =========== ==================
Total operating costs (207.7) 20.9 (186.8)
======================================== ================= =========== ==================
Operating profit/(loss) 16.3 20.9 37.2
======================================== ================= =========== ==================
Finance cost (11.2) (28.2) (39.4)
======================================== ================= =========== ==================
Profit/(loss) before taxation 5.1 (7.3) (2.2)
Taxation 3.1 1.2 4.3
======================================== ================= =========== ==================
Profit/(loss) after taxation 8.2 (6.1) 2.1
======================================== ================= =========== ==================
Profit for the period attributable
to owners of the Parent 8.2 (6.1) 2.1
======================================== ================= =========== ==================
Adjusted EBITDA 66.1 32.8 98.9
======================================== ================= =========== ==================
EPS, Basic 2.0 (1.5) 0.5
======================================== ================= =========== ==================
Adjusted EPS 4.1 (1.5) 2.6
======================================== ================= =========== ==================
Balance sheet
transition
adjustment
=============== ================ =========== ============ =========== ============ ============ ============
As reported IFRS 9 IFRS As restated As reported IFRS As restated
1 January adoption 16 1 January 31 December 16 31 December
(GBP million) 2018 (reported) Adjustment 2018 2018 Adjustment 2018
Assets -
Non-current
assets
Intangible
assets 517.8 - - 517.8 517.8 - 517.8
Property, plant
and
equipment(1) 1,036.9 - 557.6 1,594.5 1,019.2 559.2 1,578.4
================ =========== ============ =========== ============ ============ ============
1,554.7 - 557.6 2,112.3 1,537.0 552.2 2,096.2
Assets -
Current assets
Inventory 30.1 - - 30.1 29.4 - 29.4
Trade and other
receivables 104.5 (6.4) - 98.1 96.2 - 96.2
Cash and cash
equivalents 39.2 - - 39.2 47.7 - 47.7
================ =========== ============ =========== ============ ============ ============
173.8 (6.4) - 167.4 173.3 - 173.3
Non-current
assets held
for sale 5.6 - - 5.6 2.0 - 2.0
================ =========== ============ =========== ============ ============ ============
179.4 (6.4) - 173.0 175.3 - 175.3
================ =========== ============ =========== ============ ============ ============
Total Assets 1,734.1 (6.4) 557.6 2,285.3 1,712.3 559.2 2,271.5
================ =========== ============ =========== ============ ============ ============
Equity
Share capital 4.0 - - 4.0 4.0 - 4.0
Share premium 826.9 - - 826.9 826.9 - 826.9
Capital Reserves 376.1 - - 376.1 376.1 - 376.1
EBT Share
reserves (0.9) - - (0.9) (0.8) - (0.8)
Hedging reserve - - - - (0.5) - (0.5)
Retained
Earnings (168.2) (6.4) (62.3)(2) (236.9) (178.1) (73.5)(2) (251.6)
================ =========== ============ =========== ============ ============ ============
Equity
attributable
to owners of
the Parent 1,037.9 (6.4) (62.3) 969.2 1,027.6 (73.5) 954.1
Total Equity 1,037.9 (6.4) (62.3) 969.2 1,027.6 (73.5) 954.1
================ =========== ============ =========== ============ ============ ============
Non-current
liabilities
Bank
borrowings(3) 492.1 - (68.2) 423.9 487.9 (69.0) 418.9
Lease liability - - 643.2 643.2 - 659.7 659.7
Derivatives - - - - 0.5 - 0.5
Other payables - - - - 2.3 - 2.3
Deferred tax
liabilities(1) 72.6 - (13.1) 59.5 72.2 (15.7) 56.5
================ =========== ============ =========== ============ ============ ============
564.7 - 561.9 1,126.6 562.9 575.0 1,137.9
Current
liabilities
Provisions 17.9 - - 17.9 16.4 - 16.4
Bank
borrowings(2) 9.9 - (8.7) 1.2 10.2 (8.7) 1.5
Lease
liability(1) - - 66.7 66.7 - 66.4 66.4
Trade and other
payables 101.5 - - 101.5 95.2 - 95.2
Income tax
payable 2.2 - - 2.2 - - -
================ =========== ============ =========== ============ ============ ============
131.5 - 58.0 189.5 121.8 57.7 179.5
Total
Liabilities 696.2 - 619.9 1,316.1 684.7 632.7 1,317.4
================ =========== ============ =========== ============ ============ ============
Total equity and
liabilities 1,734.1 (6.4) 557.6 2,285.3 1,712.3 559.2 2,271.5
================ ================ =========== ============ =========== ============ ============ ============
(1) Adjustments relate to the recognition of IFRS 16 assets and liabilities in line with the Leases accounting policy in note 3.
(2) An adjustment is booked to retained earnings on the transition to IFRS 16.
(3) Finance lease liabilities previously recognised have been re-classed from Bank Borrowings to Lease Liability.
The value of deferred tax on transition to IFRS 16 has been adjusted from that reported in the transition note per note 2 of the Annual Report and Accounts 2018. This is due to further assessments being completed post year-end
Cash flow Statement transition adjustment
30 June 30 June
2018 (unaudited) IFRS 16 2018 (Unaudited)
(GBP million) (reported) Adjustment (Restated)
====================================================== ================= =========== =================
Cash flows from operating activities
Profit / (loss) before taxation 5.1 (7.3) (2.2)
Adjustments for:
Depreciation 34.4 11.9 46.3
Impairment of property, plant and equipment 13.9 - 13.9
Share-based payments 0.5 - 0.5
(Profit) / Loss on disposal of property, plant
and equipment 0.1 - 0.1
Finance costs 11.2 28.2 39.4
====================================================== ================= =========== =================
65.2 32.8 98.0
Movements in working capital:
Increase in trade and other receivables (10.5) - (10.5)
Decrease/(increase) in inventories 1.1 - 1.1
Increase in trade and other payables 3.7 - 3.7
(Decrease)/increase in provisions 1.3 - 1.3
Cash generated from operations 60.8 32.8 93.6
Income tax received / (paid) (1.4) - (1.4)
Net cash from operating activities 59.4 32.8 92.2
Cash flows from investing activities
Purchase of property, plant and equipment (33.5) - (33.5)
Proceeds of disposal of property, plant and equipment 0.1 - 0.1
Proceeds of disposal of assets held for sale - - -
Net cash used in investing activities (33.4) - (33.4)
Cash flows from financing activities
Interest paid(1) (10.1) (24.5) (34.6)
Payment of lease liabilities - (8.3) (8.3)
Repayment of borrowings - - -
Dividend paid to equity holders of the Parent (10.0) - (10.0)
====================================================== ================= =========== =================
Net cash used in financing activities (20.1) (32.8) (52.9)
====================================================== ================= =========== =================
Net (decrease)/increase in cash and cash equivalents 5.9 - 5.9
Cash and cash equivalents at beginning of period 39.2 - 39.2
====================================================== ================= =========== =================
Cash and cash equivalents at end of period 45.1 - 45.1
====================================================== ================= =========== =================
(1) Principal payments in respect of finance leases has been re-classed from interest paid into the payments of lease liabilities.
21. Events after the reporting period
2019 interim dividend
For 2019, the Board has recommended an interim dividend of 1.3 pence per share, amounting to approximately GBP5.2 million, to be paid on 10 December 2019 to shareholders on the register on 15 November 2019.
Sale of sites to GenesisCare
On 13 September 2019, the Group signed an agreement with GenesisCare to provide an end-to-end private cancer proposition. As part of this agreement, GenesisCare will acquire the Bristol and Baddow Cancer Care Centres on 31 October 2019 for GBP12.0million consideration. In addition, the Group will be entitled to 50% of chemotherapy related gross profits from the Bristol site. This agreement is not expected to result in a material profit or loss.
Brexit impact on the Group
Spire continues to monitor the developments in respect of the UK's exit from the EU, and in particular the no-deal scenario on 31 October 2019. The Brexit working group, reporting to the Executive Brexit Preparation Committee continues to review the planning put in place ahead of the 29 March 2019 exit date for its appropriateness in line with the moving business, and update its actions accordingly. Given the uncertainty of a no-deal Brexit, this remains a principal risk for the Group.
The key areas of impact have not changed since the publication of the 2018 Annual report and accounts.
Mitigation
We continue to work closely with our key suppliers to understand any developments in their Brexit plans. We have also been undertaking detailed contingency planning for some time to mitigate the impact of a no-deal Brexit in accordance with Government guidance.
We believe we are taking all reasonable steps to ensure that disruption to our patients and other stakeholders is kept to a minimum. However, given the uncertainties around the impact of a no-deal Brexit, we cannot rule out disruption to the business as there may be some circumstances outside of our reasonable control. More information is provided in the principal risk section of this publication.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR BLGDCSBBBGCU
(END) Dow Jones Newswires
September 16, 2019 02:00 ET (06:00 GMT)
1 Year Spire Healthcare Chart |
1 Month Spire Healthcare Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
