Spire Healthcare Group H2 2024 Earnings Report

Spire Healthcare Group EPS Results

• Actual EPS: GBX 8.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Spire Healthcare Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Spire Healthcare Group Announcement Details

• Quarter: H2 2024
• Date: 3/6/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, March 6, 2025
• Conference Call Time: 4:00AM ET

Spire Healthcare Group (LON:SPI), together with its subsidiaries, owns and operates private hospitals and clinics. It offers various treatments in the areas of allergy and infectious diseases, blood tests, bones and joints, bowel treatments, breast screening and surgery, cancer investigations and treatments, cosmetic surgery, cyst removal, and dental surgery, as well as ear, nose, and throat treatments. The company also provides eye surgery and treatments, family planning, gastroenterology, general medicine, general surgery, haematology, hand surgery, hip and knee treatment, and heart and kidney treatments. In addition, it offers treatments in the areas of men's health, neurosurgery and neurology, paediatrics, pain management, rehabilitation, sports, physiotherapy, podiatry, respiratory medicine, and rheumatology; and scans and investigations, skin treatments, spinal care, sports science, urology, vascular surgery, weight loss, and women's health. Further, the company offers various tests and scans, which include cardiac CT, CT, MRI, ultrasound, and X-ray scans. It offers in-patient, daycase, and out-patient care services through hospitals and clinics across England, Wales, and Scotland. Spire Healthcare Group plc was founded in 2007 and is headquartered in London, the United Kingdom.

Spire Healthcare Group H2 2024 Earnings Call Transcript

Presentation

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Good morning, and welcome to our presentation of the full year results for the year ending thirty one December twenty twenty four. I'm Justin Ashon, Chief Executive of Spire Healthcare. Thank you for joining us. So you've just heard from Sam. Sam and our other patients are at the heart of why we are here, to make a positive difference to people's lives.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And her story touches many areas which are so important to us: quality, personalized care, speed of treatment and being there for our patients in the months and years that follow. And I hope this gives you a strong sense of our purpose and our drive. And with that said, let's now move to our presentation. So to start with, I will give an overview of the year and our outlook. So I'm pleased to be presenting a good set of results this morning with strong strategic delivery and all core metrics in line with guidance.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And we did this against the backdrop where the market and economic environment is changing, an environment where we have to be more agile and responsive than ever. So pulling out some of the key points. We saw strong growth. Group revenues were up over 6% on a comparable basis, in which hospital revenues increased by 5.5%. Margins expanded in both hospital and primary care, delivering adjusted EBITDA of million, up 9%.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And we saw strong flow through to the bottom line with adjusted PBIT of million growing at over 29%. We're pleased that NHS referrals accelerated to 8.8 growth. We responded to that demand and ensured that our focus was on high acuity procedures. Whilst this did lead to a margin impact from higher NHS mix in the second half, driving our capacity utilization was the right thing to do. As we're all aware, the government also announced plans to increase national insurance and the national minimum wage in H2, which we will talk about shortly.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

I'm pleased that in H2, we were able to accelerate our efficiency program, delivering over million in savings compared with our guidance of million. Staff turnover and agency use reduced to an all time low in our hospitals, which brings important workforce stability. We grew our Primary Care business over 15%, thanks to the outperformance of VIDA. And finally, I'm delighted that we now care for over 1,300,000 people demonstrating our scale. Looking forward, like all businesses and employers, we are faced with sizable cost increases in the coming year.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Million in 2025 as a result of national insurance and minimum wage, rising energy costs plus the changing pay on mix I just referred to. We have already started pivoting the business to adapt to this. We will continue to accelerate our efficiencies program, delivering over million in 2025, which is million ahead of our original plan. And this will continue into the following year, delivering million in cumulative savings benefit by the end of twenty twenty six, which is now million above our original guidance. And we are confident we have a strategy that will deliver long and mid term growth.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

We continue to expect above 5% growth in our hospitals, maximizing private mix and price, high acuity work with the NHS and expanding other high growth services. Primary Care will be at least a million EBITDA business in the medium term, supported by more contract wins of which we've already secured million in long term contracts, some small M and A and new clinic openings. And we will also neutralize the cost and margin challenges by 2027. In 2025, we will deliver profitable growth with mid single digit revenue growth and margin expansion leading to an adjusted EBITDA range of million to million. As ever, the only reason we are able to achieve these results is because of our people.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

I'd like to place on record my thanks as ever to all of my colleagues and consultant partners for everything they do for Spire and its patients. And we have many colleague highlights in 2024. We launched the DAISY and IRIS Awards for excellence for our non clinical and nursing colleagues, and these were presented to winners across the country. We hosted over 100 colleagues at our annual long service awards, and we celebrated the opening of our new spa clinics in Harrogate, Abergaly and Norwich. Well done to all those receiving awards and all those involved in these achievements.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

It's also nice to be recognized externally, having won or received top commendations across several independently benchmarked awards. They recognize our commitment to good employment practices and encouraging diversity. Thank you very much. I'll now hand over to Harbund to go through the financials in more detail.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

Good morning, everybody, and thank you, Justin. So it's my pleasure to present our 2024 annual results. I am pleased to report that the group has met guidance on all core measures. Hospital revenue grew by over 5% year on year. And as you just heard from Justin, we accelerated our cost savings program and we grew margins.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

It is great to share that VITA in its first year as part of our group has outperformed against plan with full year revenue of million and an adjusted EBITDA of million. Bringing this together, we have delivered an EBITDA of million for the group, which is an increase of 9% and has resulted in strong expansion in ROCE rising from 7.5% to 8.2%. Before I continue, a quick note, I will present growth on a comparable basis throughout this presentation by assuming Vita was part of the group for the whole of 2023 and by adjusting hospital performance for the sale of Tunbridge Wells, which took place in March 2024. Turning to our hospital business. Total revenue grew by 5.5% to $1,400,000,000 underpinned by both higher volumes and average revenue per case.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

We saw good growth in adjusted EBITDA to GBP 249,700,000.0 and an improvement of 30 basis points in margin to 18%. This was achieved during a period where we saw a more dynamic external environment, including a change in payer mix and the end of our energy hedge in October 2024. This was partially mitigated through pricing action and targeting higher acuity work, as well as our accelerating cost savings program. Adjusted EBIT rose to GBP 143,300,000.0 with margin expansion of 40 basis points, demonstrating our ongoing discipline towards capital investment. In terms of performance by payor, I will start with our private business, which includes PMI and self pay.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

We saw a 1% increase in admissions and outpatient procedures with strong growth in PMI driven by greater coverage of employer policies and in turn more working age patients switching from self pay. While demand for self pay has moderated, we continue to see strong demand in high acuity areas like hip and knee surgery, which along with pricing management resulted in ARPC growth of 3.9%. Overall, we delivered private revenue growth of 4.3%. Looking ahead to 2025, we expect similar growth trends where PMI will continue to benefit from more policies being written, self pay switching and new network contracts. Our strategy for self pay will continue to focus on price and mix management.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

I'll now move on to NHS activity, which is an important part of our business. Admissions and outpatient procedures grew by 4.4%, reflecting our strategy to increase eReferral conversion and support NHS trust, particularly in the area of Orthopaedics. By focusing on the right acuity, we achieved a 5% uplift in ARPC, which compares favorably against the NHS tariff uplift of 3.9% last year. Taken with the growth in volume, this resulted in total NHS revenue growing by 8.8%, which was ahead of expectation. Looking ahead, our strategic partnership will continue.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

Expanding our primary care services business is a key part of our strategy, and Justin will provide more details later. The acquisition of Vito in October 2023 was central to our initial rollout, and it is great that it has performed ahead of plan. Our primary care services business as a whole experienced significant growth in 2024 with revenue reaching million, a 15% increase on a pro form a basis. In 2024, EBITDA margin expanded by three forty basis points, driven by VITA's strong growth. The level of EBITDA converting into EBIT is good at 70% and drove an expansion in EBIT margin of three thirty basis points.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

We expect more margin expansion as our young businesses grow and integrate, though margins may be impacted in the short term as we continue to open new clinics. In summary, primary care is on an exciting growth path. Our efficiency program is ahead of plan with more than £20,000,000 saved in 2024 versus a target of at least £15,000,000 Given our progress, we are now targeting over million in cumulative savings by 2026, up from the million mentioned at our Capital Markets event. We have made significant strides in automation and digitalization. For example, we successfully implemented hospital tablet registration across all sites, making check-in faster.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

Over 1,000,000 patients have now used the system already. We have also opened patient support centers in three locations, centralizing admin functions for a number of our hospitals, as well as driving efficiency. This gives patients improved customer service and also frees up more space for clinical use. Let me now highlight how we are focused on improving the flow from EBITDA to profit before tax to enhance shareholder returns. Adjusted profit before tax has risen by 29.4% with the conversion rate rising to 19.3%, reflecting our effective management of capital investment and finance costs.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

This allows us to recommend another increase in dividend this year to 2.3p per share. Turning to our CapEx program. In 2024, we deployed a greater proportion of our budget towards driving growth and efficiency. In total, we invested million in hospitals. Million of that was deployed towards growth, including the addition of a minor operations unit at Spire Clermont Hospital, five new MRIs as well as digitalization such as hospital check-in tablets.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

We have also made good progress on rolling out solar panels across our estate, which will help offset some of the cost pressure following the maturity of our energy hedge last year. The rest of our CapEx investment in our hospital business around million was dedicated to the maintenance of our estate, including major refurbishments such as that at Spire Washington and on IT equipment and infrastructure. In addition, we have also invested million in our Primary Care business with the opening of clinics in Abigailie, Harrogate and Norwich. Our balance sheet is in excellent shape, having consistently deleveraged over the years. We expect to maintain bank leverage at around two in the normal course of business with the flexibility to extend in the short term for small M and A.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

Additionally, our freehold portfolio has just been independently valued at billion, which compares with a valuation of billion 2 years ago. Looking ahead to 2025, we are confident in delivering mid single digit revenue growth, driven by both our hospitals and increasing demand in Primary Care. We expect adjusted EBITDA to be in the range of million to million and Rocky to be ahead of last year, despite the impact of National Insurance, National Minimum Wage and energy costs. I share Justin's confidence and excitement for the year ahead. Acceleration will be the consistent theme across new services, new clinics and more efficiencies.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

I'll now hand back to Justin. Thank you.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Thank you, Haber. So I'm now going to touch on the pillars of our business model, enabling us to deliver great outcomes for patients alongside strong financial returns. So we have and will continue to build scale and access, both geographically across The UK and by meeting more needs for our patients with services that we can also scale effectively. We're investing in our core hospital business, as you've just heard, and expanding primary care services to provide integrated care and drive referrals. This will go hand in hand with our efficiency drive, which will remove costs from the business without compromising on our leading patient experience and quality.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And our ability to do this is underpinned by prudent financial management and a strong balance sheet supported by the value of our property estate. This is the right strategy and it will continue to deliver returns to shareholders. So we're building a successful integrated healthcare business. The private market, the hospital private market, which is our core business, which you can see on the right hand of this slide, is worth around billion and is growing at about 5% annually. It includes consultations, in hospital diagnostics, imaging, elective procedures, which is the bulk of it and chemotherapy.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

The primary care market is also around billion and it is growing at about 6% per annum combined. So Spire is building a fully integrated healthcare journey We're growing businesses in private GPs and occupational health, addressing the entry point for consumers and employers. Our clinics program combines access to community diagnostics, outpatient treatments and physiotherapy. As the leading independent sector provider of mental health talking therapies, we are really well placed to win in that billion market, which is a bit market growing at 10%. And we are already seeing the benefit of cross referrals from primary care to our hospitals, for instance, from our Abu Dhabi clinic and Vita physio sites.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

So combined, Spire's integrated offering is operating in a fast growing billion market, underpinning the huge opportunity there is for our business. If we look at hospitals, we already have a strong nationwide network of 38 sites. But we may look at infill hospital locations should they become available and where it makes sense. We're one of the leading providers of orthopedic services in the private sector, which will continue to be the core of our business. But we're already expanding into areas where there is opportunity, such as oncology, cardiac services, women's health, robotics and diagnostics.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Within Primary Care Services, we have strengthened significantly through both acquisition and organic build. Vita, as I've said, is the largest outsourced provider of NHS talking therapies in England and has won significant long term contracts with multiple commissioning boards and also recent wins. We opened three new spa clinics in 2024 with plans to develop more than five this year. We're expanding our community physio network and we will grow our occupational health services through more contract wins, potentially supported with some small local M and A to build a regional network. We will also integrate services across the London Doctors' Clinic and SPAR GP businesses to meet growing demand for services like health assessments.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

So by providing a diverse range of integrated services, we can scale more effectively. As I mentioned earlier, we are faced with new and sizable cost increases, but we are already responding. The main program to offset these cost rises are accelerated efficiencies, and we've already outlined the scale of those. As the hospital and primary care businesses expand, we will also optimize capacity utilization further to meet the changing payor mix, and primary care referrals are and will support our private growth in particular. We're on a path to fully neutralize currently visible cost pressures by 2027 and deliver hospital EBITDA margins of more than 21% and EBIT margins of more than 13% targets we have previously outlined.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And we will neutralize those cost pressures without compromising on quality. Clinical excellence and high quality patient care is at the heart of what we do. We've implemented the Patient Incident Response Framework across all hospitals and support colleagues, and it allows our already broad speak up arrangements to be enhanced when standards aren't being met, or more often, where colleagues see something they think can be improved. We're constantly innovating to improve the patient experience. For example, offering twenty three hour hip and knee pathways and growing our cardiology and cardiac provision across more of our network.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And this is feeding into continued high patient satisfaction. So last year, ninety seven percent of our patients rated their experience as good or very good, which was up again one percent on the year before. And increasingly, the business is improving outcomes for patients through technology. Moving to digital histopathology using AI to improve MRI scan times and to improve image quality in diagnostics. And we continue our digitization program, which makes our patient pathways secure and safer.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

So in summary, 2024 was a year of good performance by the business in a dynamic environment. Fundamentals remain strong. We're operating in a market with growing private demand and a continued strategic partnership with the NHS. We're well positioned for growth, leveraging our hospital scale and continuing to expand in the large and fast growing primary care market. Our Accelerated Efficiencies Programme will deliver more cost savings.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

In short, our strategy is delivering. And although exceptional cost pressures have moved our margin targets out by one year, we have a clear plan to deliver them and positive strategic and financial momentum will be maintained in 2025. Thank you very much for listening. You can later on look at a recorded version again should be you'd be so minded as we enter the tech age. I'm now going to invite some colleagues up and we will take some Q and A, which I'll direct the questions and we'll see how we go.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Thank you. Okay. And you've got the names of our colleagues on the screen for those of you who are online. So starting here.

[Seb Jantet, Equity Analyst - Healthcare at Panmure Liberum]

Thanks. Hi. Sebastien Tse with Panmule Liberum. Three questions on there. I'll just ask the first one and then go from there.

[Seb Jantet, Equity Analyst - Healthcare at Panmure Liberum]

So just on self pay, it sounds so from reading the statement, it looks like the decline in self pay accelerated in the second half. And you're guiding to the impact for the full for 2025 being similar. Does that mean you've seen a slight bounce back in the first kind of quarter in terms of self pay? Because if it accelerated in the last quarter, we'd expect it to actually end up being worse this year.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Do you want to ask all three questions and then I'll see if I can splice them cleverly together?

[Seb Jantet, Equity Analyst - Healthcare at Panmure Liberum]

The second one is around the NHS and just understanding kind of you obviously put a lot of eReferral kind of slots out there in the last quarter. I'm wondering what you saw in terms of fill rate for those slots and how does that make your business in some way less predictable having to kind of put slots out there and wait to be filled in the short term? And similarly within that also you're pretty much at the bottom of the range of where you said your NHS would get to. Are you changing that kind of range? Are you expecting that to grow?

[Seb Jantet, Equity Analyst - Healthcare at Panmure Liberum]

And then the last one was more specifically on NHS then. And looking at the latest guidance for the tariffs, there's a strange piece in there about commissioners having to agree limits with private providers in advance. And I'm wondering how you're planning to navigate that and whether you think that actually will be enacted?

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

I think you've asked everyone's questions for them. Right. So I'm going to put PMI in there as well. The member will cover the whole one. So I'll cover the big picture.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

I'll hand over to Peter. I think probably what I'll do is cover the whole market together. So top line, we've laid out clear guidance over the years that we will grow hospitals at more than 5%. We grew at 5.5 in the first half and we grew at 5.5% in the second half. And our guidance is we'll continue to do so.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And that is the nature of our model, which we have a mixed model and we can respond to when demand changes. Now it is quite clear that the market has changed a bit. And Peter can talk about the switch from self pay to PMI and a bit about where the NHS is heading. But I think a key point is we keep demonstrating that our business model is robust. We are hugely responsive.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

So as the market changes, we can tilt. So that's the first point. And I'll let Peter talk about what's happening in each of those pales. Now within that, if you look at NHS guidance, first of all, don't we ever believe everything you read in the press, there is a consultation. Of course, we participate.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

We know Jim very well. He's a very sensible guy. And we know Penny very well. So they will be focused on patients. And they will be listening to consultation.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

There's a consultation every year. I suspect this has had more press coverage because it's a year of change of personnel, etcetera. So I would really just wait to see where that goes. Very constructive engagement with NHS England on various other points. The tariff, others have called out.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

It is clearly important that as we become more of a strategic partner, we at least get inflationary recovery. So we've made that point very clear. It's a consultation. These things evolve. Our position couldn't be clearer.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

But I would avoid running the speculation on these things. They're much better played out behind closed doors, okay? And I feel that the strategic partnership with the NHS and with government in particular is stronger now than it has been for a very long period of time. So if we look at 5.5% of what we're going to achieve and what we've always been able to achieve, can you just talk about what's happening within the payout groups?

[Peter Corfield, Chief Commercial Officer at Spire Healthcare Group]

Let me just start, first of all, though, with the latest spin data that came out yesterday, which looked at quarter three. So if you exclude Central London, which we don't operate in, and Northern Ireland, we outperformed the performance in quarter three at a private level. That was driven by PMI. Self pay was actually in line with the market, okay? So that's the latest position in terms of market share.

[Peter Corfield, Chief Commercial Officer at Spire Healthcare Group]

If we then look at the three payoffs, PMI obviously still remains our strongest payor. We saw good growth. We saw good recovery in terms of offset against inflation. All the insurers continue to talk about an increase in number of lives, okay? And we are well placed with our relationships in order to capitalize on that as we look forward.

[Peter Corfield, Chief Commercial Officer at Spire Healthcare Group]

And I'm confident with our contracts, we'll continue to make sure we recover on our inflation as well. Turning to self pay. Yes, there was a downturn, but that, as I said in Course three, was in line with the market. I guide you towards where we're looking in terms of our recovery on price. We still continue to have a very good strong recovery on price.

[Peter Corfield, Chief Commercial Officer at Spire Healthcare Group]

There's definitely this move from self pay patients of old who've now moved into PMI. We can look at the specialty and the age and you can see that move. So we're capturing those same patients but in the PMI space now. And I'm expecting us to continue to see good recovery in costs as we look forward on self pay, okay? So we've got good pricing control in that space and we've got good mix.

[Peter Corfield, Chief Commercial Officer at Spire Healthcare Group]

And then finally, NHS. I'm confident that we'll continue to remain disciplined. There's good opportunity of growth. You saw that in the numbers for the NHS. But also, I'll guide you again to the average revenue per case, which I've talked at length before about this discipline we have about what work we do, what slots we make available and make and that gives us not only the opportunity to deliver good revenue growth but also gives us the ability to be disciplined about the work we do and efficiency within the operation.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Great. And just a couple of

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

points. NHS, its role actually is to be more predictable. Self pay patients can turn up at quite short notice. When the flow is working, NHS is quite predictable. When it goes up quickly, there's a lag effect to adjusting to it in the P and L.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

When it's predictable, then what it does essentially is give you guaranteed fill rates. So imagine a day which is all NHS, you've had it through ERS, it's very predictable. You can be two or three weeks out and self pay is much less predictable. So there's a quid pro quo, which is self pay is higher margin, it's less predictable. NHS is lower margin, it's more predictable.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

It's worth pointing out that discipline means already there are specialities we don't do for the NHS. We're there are waiting lists. We are a business. So the discussion about tariff isn't just about the numbers. We're actively saying we could do more.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

We can't do work, which either would lose us money or doesn't basically cover all our fixed and variable costs. So I suspect there are opportunities there. So that's broadly how it works overall. So we will see some efficiency gain. And by the way, to answer your trend question, our trends we've given you a range, so we obviously think we've got a pretty good visibility of the trends now.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

The unexpected can happen, but that's broadly how we see it. Does that answer all your questions?

[Seb Jantet, Equity Analyst - Healthcare at Panmure Liberum]

Mostly, but I'll ask them again tomorrow.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

We're having a second go over the analyst tomorrow because it's so much fun.

[Charles Weston, Senior Healthcare Analyst at RBC Capital Markets]

Charles Weston from RBC. Also three questions, please. First of all, you talked about leverage at the end of this year being around about two times, but it was about two times at the end of twenty twenty four. So can you talk about perhaps how you're going to be spending the money and maintaining that sort of leverage? And perhaps give some guidance on CapEx?

[Charles Weston, Senior Healthcare Analyst at RBC Capital Markets]

Secondly, just going back to Seb's point, so if you think about you talked about the 5%, five point five % in the first half and the second half opening more slots NHS as you saw a downturn in PMI. Should we be thinking about the NHS slots being made available to help to deliver that over 5% depending on what you're seeing in PMI and self pay, I. E. If you see more demand in self pay and PMI, you'll offer fewer NHS slots? And then lastly, on Primary Care, you've seen that improvement in margin.

[Charles Weston, Senior Healthcare Analyst at RBC Capital Markets]

You talked a little bit about near term headwinds from opening new clinics, but what could a mature margin in that business look like?

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Okay. Brilliant. So why don't you take the leverage and CapEx points? And then maybe I'll have Derek do just a bit of a recap of the whole services strategy and include the margin point.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

Yes, that's fine. So we're very comfortable in terms of where we are from a leverage perspective. So we're at two overall at the moment, and we're also trending down from a total leverage point of view as well. From our perspective, that's a good place to be. If we go significantly below 2%, then the comment I've had back in the past is that you're possibly under leveraged, which is a nice problem to have as well, right?

[Harbant Samra, CFO & Director at Spire Healthcare Group]

So I suspect we'll be in the region of 2%. The drivers in terms of I mean, how we're thinking about capital surplus this year in cash is pretty much how we were thinking about in 2024, which is a significant chunk of the 67 percent that we use towards which is directed towards hospitals. So the 67% of our revenue, which is direct towards hospitals, the proportion that will go towards growth and efficiency will be pretty similar. I've said before that the money we're spending on transformation digitalization is part of that pot. We will not go outside of that because I'm very conscious about flow through down the P and L.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

If I then think about the wider business, there's the Primary Care piece as well. Justin talked earlier about the GBP 40,000,000 medium term EBITDA forecast. That part of our business is a low CapEx business. So therefore, I mean, I'll let Derek talk about margins in a minute, which is important, but the key thing there is return. So it outstrips or outperforms the wider Groupon return, and it will continue to be that way.

[Harbant Samra, CFO & Director at Spire Healthcare Group]

In terms of the CapEx outlay for that part, it's probably going to be about GBP 50,000,000 to GBP 60,000,000 over a medium term business, so relatively modest.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

Yes. So just to, I suppose, reacquaint people with the business, it's a smaller part of the business, kind of as Harbin said, came in to the group in October '3. So we're talking about the first year of trading. We are a business that centers itself around two service lines at the moment, talking therapies business and an MSK business. In the talking therapy service, we are a highly successful business.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

We've won 85% of the tenders that we've gone for over the last kind of four or five years. It's kind of the backbone of our growth. We think that's going to continue, and we're planning for that to continue into the future. And we have an MSK business that services the NHS. And as Justin says, we're starting to get some flows and add some value kind of around that proposition.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

And we offer services to the three markets: NHS, corporate and private pay. Private pay is quite small at this point. About 75 of our business is NHS, about 25% of it is corporate, tiny bit of private pay. And about 75% of our business is mental health and about 25% of it is MSK. So I think we've had a good year.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

No, sorry. We've had a very good year, right, because we've integrated into a large organization and that's sometimes quite difficult as a smaller kind of player. And the integration has gone really, really well. I think it's gone really well at ex co level. But I think from my own perspective, it's gone well with the team.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

We've had to reorganize the team a bit. We've had to re purpose some of the team. And we've now got a team that's focused on primary care services as a whole rather than the VITA services as well. I think we've got clear priorities. We've got clear accountabilities.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

And as you know, that's always a super important part of kind of starting a journey. So as we start into that journey and as we look at the growth and the million that Harbin has been talking about, I look at it in kind of three ways: NHS and the sort of VITA business in the context of the core. And as I said already, that's about continuing the growth that we've seen to this point and hopefully accelerating it a little bit. Corporate is going to become a bigger part of what we do. The lens that corporate generally looks through is occupational health.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

We have a small occupational health business at the moment. We have just won a large national retailer, which will add a bit of size to the business. And we're looking to add some small tactical acquisitions that we can kind of get national coverage where we can start kind of bidding for those larger and more profitable contracts as we go through 'twenty five and into 'twenty six. And then there's the clinics business. So how we'll be rolling that out is we'll be focusing on MSK to begin with because I think that's the most sensible place to start because you can get feeds from and to the hospitals in that space.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

We will expand the services in the clinics to include kind of more GP services, women's service, women's health, etcetera, etcetera, as we kind of go through the year. But initially, it will be focused on MSK. We think all of our markets have significant growth year on year, but there's also significant growth in the context that there's not huge players out there. It's a very I suppose it goes somewhere from quite fragmented to very fragmented depending upon kind of which market you're talking about. So I think there's a lot of room to go, a lot of headroom to kind of aim for.

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

Going back to Harbin's point and the question, the core of the question, which was margins, I want to concentrate on PBT, right? We can concentrate on EBITDA if we want. And if you compare it to the hospitals, we will be lower, but we're a far lower capital base, right? The capital base that you need to run our business is way lower. The talking therapy service as a, for instance, is largely remote, right?

[Derrick Farrell, CEO - Vita Health Group at Spire Healthcare Group]

Very, very few premises, very few kind of fixed costs kind of inside of that business. So I'm going to try and get the group to concentrate more on the flow for PBT rather than have a fixation on EBITDA. But clearly, that's going to be a focus as well.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Thank you, Derek. More questions?

[Miles Dixon, Research Analyst - Healthcare & Life Sciences at Peel Hunt]

Good morning. Miles Dixon from Peel Hunt. Two, if I can. Firstly, my usual question on CapEx and the split of it, if I can. So you thank you for the guidance this morning on the sixtyforty.

[Miles Dixon, Research Analyst - Healthcare & Life Sciences at Peel Hunt]

How do you see that moving forward, particularly with reference to the Justin, you mentioned the acuity of care becoming increasingly important. Where are you on that journey? And secondly, you talked about the increasing outreach and the benefit to the group from primary care. How is that making you think about your estate portfolio? Is it highlighting pockets that you need to access further and deeper with diagnostics or clinics?

[Miles Dixon, Research Analyst - Healthcare & Life Sciences at Peel Hunt]

Is it making you rethink that? Thank you.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Brilliant. I'll take the second. Do you want to talk about CapEx first?

[Harbant Samra, CFO & Director at Spire Healthcare Group]

Yes. I think the answer to that, Miles, is relatively straightforward. I don't see there being much change between the forty, sixty that we've moved towards. I mean, don't forget, a couple of years ago, we were close to 20. So I think that's a good ratio, and that's where we will be seeing for the foreseeable future.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

So in terms of geographic spread, hospitals, primary care. Hospitals, we're obviously not in London. That's a great market. We've got the London Doctor Clinic there, which is doing very well. That's currently a white spot for us.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Put that to one side, we've got good geographic coverage, but there are still places where we're not and there is potential to grow. So we keep an eye open for what we could do there, right? There's not a large number, but they would just add to the power of our network. If you think about the percentage of people who can access Spire, it's very good, but we could just get a bit better. So we keep an eye on that.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Okay?

[Miles Dixon, Research Analyst - Healthcare & Life Sciences at Peel Hunt]

And perhaps would it change your offering in the primary care space, whether it be commercial if it

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

did have So as regard to primary care, if you take break the businesses down, the clinics which we're building, which are sort of hospital focusing clinics, like the one we opened in Harrogate, is absolutely complementing that network. So you wouldn't build a hospital in Harrogate. You would absolutely build a clinic with an MRI. A lot of the patient base for the Yorkshire area is there. We can't access them until we open Harrogate.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

But now they can be seen, they can have minor treatments, they can have diagnosis and they can be referred to Leeds, just like Abigaili. You wouldn't build a hospital in Abigaili. So Abigaili is already delivering two times its income in referrals to the local hospitals. So the role of those clinics is essentially to be a pipeline into the hospitals. Separately, physio in particular, we've got good national coverage, but we can open more clinics.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

They're also referral. They're really low CapEx. They're rooms essentially. And then occupational health, so first of all, we have won some major contracts for quite small business. So we've got a really nice business.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Derek's done a good job of leading it. But it does help to have some regional coverage. So small and I emphasize small M and A at the right place, in the right place with the right quality would just help us build a platform in which we can go for organic growth. So essentially, we're building an organic growth platform with the potential for some infill in all businesses just to give us more scale.

[Miles Dixon, Research Analyst - Healthcare & Life Sciences at Peel Hunt]

Thank you. And if I can just ask one more to go back to Seb's point in the talk around the potential cap from NHSE. It felt very much that the partnership with the independent sector came from the government and the NHSE put the cap on or the potential of it. How much of that was what they're usually doing, which is putting forward a number of ideas that might cut savings and actually is not something which is central to the government's plans?

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Who knows? Who knows? What I do know is Jim Penny, we have a good relationship with Penny has been here to talk to us about our quality program. Jim, we talk to as a sector and independently. They are very focused on patients.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

They are very sensible. And we'll wait to see what happens. But I would worry less about the to ing and pro ing and just wait to see what comes out of them.

[Miles Dixon, Research Analyst - Healthcare & Life Sciences at Peel Hunt]

And presumably, Jim was nowhere near those plans?

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

You'd have to ask Jim if he wants to take the call. I don't know where he spends his time. Okay?

[Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis]

Thank you. Good morning. Kane Slutskin, Deutsche and Numis. Just on the savings, maybe Harbin, this is for you. Just the additional $20,000,000 sort of is it just much of the same you're doing?

[Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis]

Where have you found that? And how stretched is that $20,000,000 I guess with in context of your aim to sort of neutralize the NI impact by '27. Is there any phasing sort of separately, any phasing in H1 versus H2? If you can just remind us of the shape. And then just on capital allocation, I'm just wondering, you guys had the pretty small buyback last year.

[Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis]

I think was it last year?

[Harbant Samra, CFO & Director at Spire Healthcare Group]

It was.

[Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis]

Yes. It was quite small $5,000,000 Just wondering what your thoughts on that given where maybe the share price is sitting at currently, if there's any sort of thoughts of

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

We'll come to that second. So Kathy is leading our transformation program, which, by the way, just emphasizes the way that we link quality and savings. By having Kathy lead it, it just should be really clear how we combine the two to deliver substantial savings whilst delivering improvements in quality. Cathy, do you want to talk about where the million is coming from and anything about the phasing?

[Cathy Cale, Group Medical Director at Spire Healthcare Group]

Yes. So I think we've shown last year we've got a really good track record of delivery. And actually delivering extra is a recognition that the quantum that we can deliver whilst maintaining the business and keeping our top line growing is larger than we initially thought. So we have a whole spread of programs, which Harband and Justin alluded to. So it ranges from improving our procurement, not only the prices that we pay for things, but also how we do it.

[Cathy Cale, Group Medical Director at Spire Healthcare Group]

So So electronic procurement, so P2P, making sure that we have the right people in the right places doing the right tasks. So improving our effectiveness of delivery with our people, patient support centers, which we talked about. So moving lots of our customer support functions into fewer places that has the benefit of improving efficiency, but also releases space in our hospitals. So some of that program is about repurposing that space. So there's a whole range of things.

[Cathy Cale, Group Medical Director at Spire Healthcare Group]

We have a carefully phased program, which the delivery varies over the year. More is phased towards H2 as you would expect, but actually a lot of our program is also thinking about what we deliver into 2026 as well. So we do have it phased, but it's also about not just this year, but also in the future.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Thank you. Harvande?

[Harbant Samra, CFO & Director at Spire Healthcare Group]

Yes. So came last year, we said we'd do up to five. We actually ended up doing three because we stopped before the year end. Look, we remain alive to the opportunity to do more, but at this point in time, that's not our prime, I guess, focus when it comes to the use of any capital surplus that we might have.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Other questions, please.

[David Adlington, Analyst at J.P. Morgan]

David Anning from JPMorgan. Just one left really, which is just given the pressures the sector is seeing and you mentioned sort of infill acquisition opportunities. Do you expect more acquisition opportunities? And are you seeing price expectations coming down at all?

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

So first of all, in the Primary Care business, the sort of multiples we look at are low to bid single digit multiples. That's one of the attractive features of it, and we're very disciplined about it. In the rest of the sector, I don't know whether we'll see opportunities come up. And if I knew of one already, I'd tell you about it. So we don't know what the multiples are.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

But I think it's worth looking at the sort of multiples that we have paid in the past. So Vito Okay, not hospitals, 7.5 times. If you look at our hospital in Sheffield, I think it was 7.5 or eight times. So we have demonstrated that whatever people's price expectations, we are really disciplined about right site, right quality, right price. This is not bulking up.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

This is looking for specific opportunities and we do so in a way which is return accretive. And it's worth pointing out that the CapEx level did you mention the CapEx level associated with Primary Care?

[David Adlington, Analyst at J.P. Morgan]

Yes, I know. Yes, I know.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

It's a pretty good return to get to million.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

So we're really focused on if we deploy capital, it's to generate a return, no getting carried away.

[David Adlington, Analyst at J.P. Morgan]

Okay.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Any other questions? Great. Any questions online?

[Operator]

We have no more new questions online, so please go ahead with closing remarks. Thank you.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

Okay. Thank you. Look, thank you for your questions and thank you for joining us.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

You can join us again online and then the analysts are joining us again tomorrow morning. So we'll be great friends. So what is the bottom line of what we're seeing here? So what you're seeing is a business which demonstrates again and again that we think forward, okay? So during the course of the last year, we had a change of government, we had a change of attitude to NHS commissioning, we've had a budget which has affected the economy, which has affected the economy, which has announced national minimum wage, National Insurance, mix shift.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

So how have we been thinking about the business? So the first thing is we put a self help program in place three years ago. We've been disciplined in delivering it and we're able as a consequence of having been working on it, both this year and in future years to accelerate the savings. So the first thing is we've got a track record now of responding. And the truth of the matter is if we hadn't seen National Insurance and National Minimum Wage, then even in 2025, we'd be able to absorb the changes in the marketplace.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

That just gives us a year shift. But we're still confident we'll be able to absorb that into 2027, point number one. Point number two, we've always been really disciplined in thinking about pricing in a market in which it's obvious that there's inflation. So you can see in our ARPCs that without losing market share, we're very disciplined on pricing. You will see the benefit of a new insurance contract that we talked about last year, But we're very careful about how we deploy resources with insurers and we're very careful with how we price in self pay.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And I've made it clear that we are focused in our discussions with government on price and we're also focused on our mix with the NHS. Thirdly, the healthcare market is changing. If you look at all the insurers, they're all beginning to integrate their healthcare businesses, they're all beginning to offer GP businesses, Some of them are offering physio businesses. Mental care is fundamental and the fastest growing market. And we've built a business which can respond to it, which critically interfaces with the hospital business.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And by the way, we did an acquisition last year, which has outperformed. And I think that demonstrates that we're disciplined in what we're doing strategically as well as disciplined about execution. We respond quickly. We've seen ahead. We've got all sorts of things going on in the world.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

But what we've proven is we can keep adapting every year profit growth, every year margin growth, every year PBIT growth, every year ROCE improvement, and we're predicting the same for this year. So firstly, we're excited about the future because it's a changing world of healthcare and we are all over it and ahead on it. And secondly, we just know we're going to deliver continued momentum. So thank you very much. Thank you for listening.

[Justin Ash, CEO & Executive Director at Spire Healthcare Group]

And some of you, I'll see you again tomorrow.

Participants

Executives

• Justin Ash, CEO & Executive Director
• Harbant Samra, CFO & Director
• Peter Corfield, Chief Commercial Officer
• Derrick Farrell, CEO - Vita Health Group
• Cathy Cale, Group Medical Director

Analysts

• Seb Jantet, Equity Analyst - Healthcare at Panmure Liberum
• Charles Weston, Senior Healthcare Analyst at RBC Capital Markets
• Miles Dixon, Research Analyst - Healthcare & Life Sciences at Peel Hunt
• Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis
• David Adlington, Analyst at J.P. Morgan