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Spire haunted by clinical issues

The private hospital group is earnings positive, but malpractice issues linger
March 6, 2020

Spire Healthcare (SPI) revealed flat adjusted operating profit on the prior year, a reflection of a 60 basis point reduction in the gross margin. Yet the financials take a backseat to the rehabilitation of the group’s clinical reputation – or at least, its attempts to do so. 

IC TIP: Sell at 114.5p

The recently released Paterson Inquiry, set up in the wake of the conviction of former cancer surgeon Ian Paterson, revealed widespread regulatory and procedural failures. Of Mr Paterson’s former patients who gave evidence to the inquiry, 92 were treated privately at hospitals run by Spire, and five were NHS patients treated by Spire. 

Within weeks of the release of the inquiry, the group confirmed that it had launched an investigation into Michael Walsh, a shoulder surgeon who was suspended and reported to the General Medical Council by Spire in April 2018. At the end of January, in response to media coverage, the group updated the market on the situation regarding Habib Rahman, an orthopaedic consultant who was suspended by the group last year.

Consensus forecasts are for EPS of 6.8p for 2020, rising to 8.4p in 2021. 

SPIRE HEALTHCARE (SPI)   
ORD PRICE:114.5pMARKET VALUE:£459m
TOUCH:114.2-115.2p12-MONTH HIGH:145pLOW: 95p
DIVIDEND YIELD:3.3%PE RATIO:64
NET ASSET VALUE:234p*NET DEBT:£1.075bn **
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201588573.615.03.7
201692673.213.43.8
201793222.74.203.8
2018 (restated)931-5.60neg3.8
20199829.601.83.8
% change+5---
Ex-div:28 May   
Payment:23 Jun   
*Includes intangible assets of £518m, or 129p a share. **Includes lease liabilities of £745m.