Spire boosted by patients bypassing NHS queues

It wasn’t immediately obvious what impact Covid-19 would have on private healthcare providers. Eventually, lengthening NHS waiting lists and a steep fall in elective procedures would generate demand from patients who opted to go private to fulfil their clinical needs, but providers weren't immune to the negative impact of the pandemic.

The private hospital group Spire Healthcare (SPI) swung back into the black on strengthening demand from private patients. Operating profit of £46.2m is set against a loss of nearly £190m at the 2020 half-year mark. Free cash flow also returned to positive territory, although a net earnings loss ensued due to a £17.7m charge linked to the reassessment of deferred tax assets.

The hospital group struck successive contracts to ease the burden on the NHS. This mitigated some of the increased cost burdens due to the pandemic, which is just as well given the deals generated nothing in the way of profit.

The Delta variant has resulted in renewed uncertainties, but signs are that the demand surge is set to continue. The improved financial showing over the second quarter largely reflects a record 80.6 per cent growth in self-pay revenues. And Spire recruited 166 nurse degree apprentices in the second quarter and management is confident that improved testing regimes will reduce costs associated with the virus through the northern winter – we shall see.

Shareholders put the kibosh on a recent bid approach by Ramsay Health Care and the shares have risen by 143 per cent over the past 12 months. The group’s net debt came in at £306m, excluding lease liabilities of £751m, leaving its EV/Ebitda ratio broadly in line with the sub-sector average, but it’s overburdened nonetheless, so we keep our powder dry. Hold.

Last IC view: Hold, 249p, 16 Jun 2021