Spire’s (SPI) management always said the group’s recovery would take time. A 21 per cent drop in adjusted cash profits in the first half of 2018 – the new chief executive’s first few months in charge – was therefore perhaps to be expected. What’s worrying is the lack of progress in reducing Spire’s reliance on the cash-strapped NHS, which is the largest single customer and contributed almost 30 per cent of revenues in these numbers.
It’s true, management is aiming to reduce NHS revenues to 20 per cent within five years, but to achieve that Spire has had to spend big on improving the quality of its hospitals. Staff costs rose in the period, while a higher proportion of oncology cases sent drugs costs up. Adjusted operating margins therefore fell from 11.2 per cent to 6.6 per cent, sending like-for-like operating profits down 25 per cent to £16.3m.
The plan to increase the proportion of private revenues is also still at the mercy of patient demand, and while self-pay revenues rose 7 per cent in these numbers that was well below the 14 per cent growth reported in the division in the first half of 2017.
Prior to these results, Numis trimmed its 2018 annual pre-tax profit and EPS forecasts to £54.1m and 10.9p respectively (from £72.3m and 14.4p in 2017), although the broker expects quality improvements will help spark a recovery in 2019.
SPIRE (SPI) | ||||
ORD PRICE: | 162p | MARKET VALUE: | £650m | |
TOUCH: | 162-162.4p | 12-MONTH HIGH: | 307p | LOW: 149p |
DIVIDEND YIELD: | 2.3% | PE RATIO: | 41 | |
NET ASSET VALUE: | 257p* | NET DEBT: | 44% |
Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2017 | 481 | 12.1 | 2.2 | 1.3 |
2018 | 476 | 5.1 | 2.0 | 1.3 |
% change | -1 | -58 | -9 | - |
Ex-div: | 15 Nov | |||
Payment: | 11 Dec | |||
*Includes intangible assets of £518p, or 129p a share |