Spire Healthcare Group Plc · LSE:SPI
Spire Healthcare — H1 2023 Earnings Presentation
46 slides from Spire Healthcare's earnings presentation, Sep 14, 2023
Slide 1: H1 23 Results Presentation
H1 23 Results Presentation 14 September 2023
Slide 2: Disclaimer
Disclaimer These materials contain certain forward-looking statements relating to the business of Spire Healthcare Group plc (the “Company”), including with respect to the progress, timing and completion of the Company’s development, the Company’s ability to treat, attract, and retain patients and c
Slide 3: Zoom Webinar rules of engagement
Zoom Webinar rules of engagement All attendee lines are muted The Chat function is disabled Please submit your name and organisation using the Q&A function Angus will moderate the session and unmute your line for you to ask your question Any problems please email Laura.Young@spirehealthcare.com 3
Slide 4: Agenda
Agenda H1 23 Overview Justin Ash, Chief Executive Officer H1 23 Financial Review Jitesh Sodha, Chief Financial Officer Summary and Outlook Justin Ash, Chief Executive Officer Q&A Any problems please email Laura.Young@spirehealthcare.com 4
Slide 5: H1 23 Overview
H1 23 Overview Justin Ash, Chief Executive Officer
Slide 6: Our strategy: Meet UK Healthcare needs by running great hospitals and developing new services
Our strategy: Meet UK Healthcare needs by running great hospitals and developing new services Drive Hospital Performance Expand Our Proposition Continue growth in our existing hospital Selectively invest to attract patients and estate with increasing margins meet more of their healthcare needs Deliv
Slide 7: H1 23 – Strong H1 performance
H1 23 – Strong H1 performance Adjusted Good progress on EBITDA savings £117.9m On track to deliver at least £15m cost savings in (vs H1 22: up 11.4%) Profit 2023 Revenue before tax £676.5m £20.3m (vs H1 22: up 13.1%) (H1 22: £3.0m; Adjusted up 577%) ROCE EBIT 6.9% £67.8m (H1 22: 5.2%) (vs H1 22: up
Slide 8: Delivering on our purpose
Delivering on our purpose 98% of inspected sites 96% patients rating ‘Good’ or ‘Outstanding’ experience as CQC (or equivalent in Scotland and Wales) ‘Good’ or ‘Very Good’ 87% agree that our 93% agree that 95% agree that care has made a our care was our care was positive difference outstanding person
Slide 9: Strong underlying growth
Strong underlying growth Market: Continued strong demand across payors PMI Self-pay NHS Non-hospital Outstanding growth Remains at historic Growth in eRS Strong demand for highs referrals and private GP orthopaedics Integrating DCG 9
Slide 10: NHS Waiting Lists reached 7.6 million in June 2023
NHS Waiting Lists reached 7.6 million in June 2023 8,000,000 March 2020 Waiting >52 weeks 7,000,000 Wating 18-52 weeks 6,000,000 Waiting <18 weeks Number of people 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Jun-11 Jun-09 Jun-10 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20
Slide 11: Confidence increasing in our target audience
Confidence increasing in our target audience Which one of the following best describes how you feel about your financial situation at the moment? 4% 10% 11% 10% 10% 11% 10% 11% 8% Finding it very difficult on present income 21% 22% 23% 19% 29% Finding it difficult on present income 36% 36% 37% 40% C
Slide 12: Strong underlying growth
Strong underlying growth Market: Continued strong demand across payors PMI Self-pay NHS Non-hospital Outstanding growth Remains at historic Growth in eRS Strong demand for highs referrals and private GP orthopaedics Integrating DCG Revenue up 15.6% Revenue up 2.5% NHS revenue up 17.1% GP revenue up
Slide 13: Thank you to our people
Thank you to our people 13
Slide 14: H1 23 Financial Review
H1 23 Financial Review Jitesh Sodha, Chief Financial Officer
Slide 15: Financial headlines H1 23: P&L
Financial headlines H1 23: P&L Adjusted Adjusted EBIT Adjusted Profit EBITDA £67.8m Before Tax £117.9m +24.2% £22.3m +11.4% +159.3% Revenue (H1 22: £105.8m) (H1 22: £54.6m) (H1 22: £8.6m) £676.5m +13.1% Adjusted EBITDA Adjusted EBIT Statutory Profit (H1 22: £597.9m) Margin Margin After Tax 17.4% 10.
Slide 16: Financial headlines H1 23: balance sheet
Financial headlines H1 23: balance sheet Capex Net bank debt EBITDA covenant ratio £36.1m £248.5m (Net Debt/EBITDA) 2.1x (H1 22: £38.8m) (End FY22: £250.1m) (End FY22: 2.2x) • Full-year capex expected to be in target range of 6-7% of revenue • Net bank debt similar to year end with working capital o
Slide 17: Revenue growth across all payors
Revenue growth across all payors Revenue growth: - Inpatient +10.5% 676.5 - Day case +17.1% - Out-patient +9.7% 800 597.9 700 21.0 13.0 600 170.5 500 NHS 145.6 £m 400 306.6 300 PMI 265.2 200 100 SP 174.1 178.4 0 H1 22 Self-pay PMI NHS Other H1 23 17
Slide 18: Private volumes – strong outpatient and procedures growth
Private volumes – strong outpatient and procedures growth 18
Slide 19: PMI – Continued admission and ARPC growth
PMI – Continued admission and ARPC growth PMI Admissions & OP Procedures PMI Revenue PMI ARPC 120,000 +5.2% +12.5% 350,000 2,900 +15.6% 100,000 300,000 2,800 80,000 250,000 2,700 200,000 60,000 2,600 150,000 40,000 2,500 100,000 20,000 50,000 2,400 - 2,300 - H1 2019 H1 2021 H1 2022 H1 2023 H1 2019 H
Slide 20: Self-pay – Continued admission and ARPC growth
Self-pay – Continued admission and ARPC growth SP Admissions & OP Procedures SP Revenue SP ARPC 70,000 200,000 +2.5% 5,000 60,000 -4.2% +8.5% 4,000 50,000 150,000 40,000 3,000 100,000 30,000 2,000 20,000 50,000 1,000 10,000 - - - H1 2019 H1 2021 H1 2022 H1 2023 H1 2019 H1 2021 H1 2022 H1 2023 H1 201
Slide 21: NHS – Continued admission and ARPC growth
NHS – Continued admission and ARPC growth NHS Admissions & OP Procedures NHS Revenue NHS ARPC 80,000 +6.7% 200,000 3,500 70,000 +6.1% +17.1% 3,000 60,000 150,000 2,500 50,000 2,000 40,000 100,000 1,500 30,000 50,000 1,000 20,000 500 10,000 - - - H1 2019 H1 2021 H1 2022 H1 2023 H1 2019 H1 2021 H1 202
Slide 22: Managing margin and financial return
Managing margin and financial return Organic Growth External variable - ROCE Mix Inflation EBITDA margin Savings Pricing Programme Control 22
Slide 23: Managing margin and financial return – Mid-term targets
Managing margin and financial return – Mid-term targets Revenue CAGR of 5% External ROCE Private mix variable - 70-80% LT target >10% Inflation EBITDA margin LT target >21% Savings Pricing Programme Control: beat £15m in internal FY23 inflation 23
Slide 24: Managing margin and financial return – Performance in H1
Managing margin and financial return – Performance in H1 23 13.1% revenue growth Internal inflation < ROCE 6.9% 72% RPI after Private mix savings EBITDA margin 17.4%, ahead of 17.0% for FY22 On track for >£15m in FY23 6.6% ARPC growth More to come 24
Slide 25: Good progress in H1
Good progress in H1 23 Continued to provide high quality care to meet the strong demand Results in line with our expectations for the full year Delivered strong revenue, EBITDA, EBIT and PBT growth 25
Slide 26: Summary and Outlook
Summary and Outlook Justin Ash, Chief Executive Officer
Slide 27: Our strategy: Meet UK Healthcare needs by running great hospitals and developing new services
Our strategy: Meet UK Healthcare needs by running great hospitals and developing new services Drive Hospital Performance Expand Our Proposition Continue growth in our existing hospital Selectively invest to attract patients and estate with increasing margins meet more of their healthcare needs Deliv
Slide 28: Drive hospital performance – admissions up 7.4%
Drive hospital performance – admissions up 7.4% Increasing Utilisation Operational Efficiency New Acute Services Outpatient Centre, Yale New CT, Gatwick 1st Admin Hub Cardiac Surgery Ophthalmology Centre Juniper House Manchester & Nottingham Cambridge 28
Slide 29: Leading private hip and knee provider
Leading private hip and knee provider Hip & Knee Procedures Volume among independent sector providers Spire Healthcare Competitor A Competitor B Competitor C All others Competitor D Source: Spire Healthcare analysis of NJR data 29
Slide 30: Expanding our proposition
Expanding our proposition • Revenue up 41% LFL OH businesses • Addressing the health crisis behind the waiting list crisis performing to plan • Welcome Government's proposals to incentivise employers to offer OH support to their employees • Revenue up 45% LFL Expanding • Opened one new GP centre in
Slide 31: Spire well positioned through patient journey in age of choice
Spire well positioned through patient journey in age of choice The sooner you’re better, the better 31
Slide 32: Build on Quality / Invest in our Workforce / Champion Sustainability
Build on Quality / Invest in our Workforce / Champion Sustainability • 98% Good or Outstanding Build on Quality • Rolling out NHS England Patient Safety Incident Response Framework (PSIRF) • Material reduction in staff turnover • Completed insourcing of recruitment • Rewarding our colleagues Invest
Slide 33: Recognition for strategic progress made
Recognition for strategic progress made 33
Slide 34: Positive H1 implications for financial objectives
Positive H1 implications for financial objectives Outperform UK hospital market growth volume + ARPC Hospital Growth c.5% CAGR (plus high inflation related increases) Long-term Financial Objectives New Services >£50m of additional revenue – build, buy, partner EBITDA Margin >21% supported by continu
Slide 35: Outlook for H2
Outlook for H2 • Expect to make further good progress and continued delivery of the Group’s strategy • Continued momentum in revenue growth, margin and ROCE improvement • Market demand remains strong • Continued PMI growth and self-pay performance – new marketing campaign • Increase in NHS activity
Slide 36: Summary
Summary Strong financial and operational performance delivered during the period in line with FY23 expectations Momentum has continued; laying good foundations for 2023 and beyond 36
Slide 37: H1 Results Presentation
H1 23 Results Presentation 14 September 2023
Slide 38: Appendix
S2 Spire Healthcare Appendix Covking after ya
Slide 39: Technical guidance
Technical guidance Technical guidance for 2023 Total property rent c.£92-97m (FY22: £93.7m) D&A c.£100-105m (FY22: £97.9m) Capex* c.£80-90m (FY22: £90.1m) Net financing costs c.£90-98m (FY22: £94.6m) Tax** Effective corporate tax rate between 30-40% as a result of deferred tax movements (FY22: NM) N
Slide 40: Revenue by Payor
Revenue by Payor 700 676.5 21.0 597.9 600.6 600 13.0 13.4 558.2 548.0 170.5 11.6 14.4 491.6 489.2 145.6 149.8 500 12.3 12.1 129.1 185.4 400 143.7 142.0 306.6 300 265.2 273.5 242.4 231.3 485.0 247.0 244.8 439.3 437.4 200 404.5 361.2 335.6 335.0 100 178.4 162.1 174.1 163.9 129.9 88.6 90.2 0 2019 H1 20
Slide 41: Maintained higher ARPC – reflects pricing, private mix and acuity
Maintained higher ARPC – reflects pricing, private mix and acuity H1 19 H1 22 H1 23 PMI Self- Total NHS PMI Self- Total NHS PMI Self- Total NHS pay private pay private pay private IPDC admissions 61.6 23.5 85.1 46.8 58.5 35.7 94.2 37.4 65.7 33.6 99.3 42.0 (‘000) ARPC (£) 2,514 2,905 2,622 2,404 2,72
Slide 42: Cost of sales analysis
Cost of sales analysis 400 55% 46.9% 50% 350 46.4% 45.1% 45.5% 45.1% 44.8% 59.9 43.3% 45% 300 52.3 52.3 44.4 46.4 40% 250 51.6 50.6 35% 157.5 140.8 139.5 200 132.8 130.6 30% 113.2 23.8% 24.4% 23.5% 25% 150 110.7 23.2% 23.3% 22.5% 23.1% 23.8% 22.6% 22.7% 23.3% 21.4% 21.3% 20% 20.1% 100 15% 133.9 135.
Slide 43: UK adults and our target audience - Ease of accessing £5k
UK adults and our target audience - Ease of accessing £5k How easily could you access £5,000 for medical treatment if you felt you really needed to? • Target audience remains more resilient than the population at large 8% 12% 12% 12% 10% 8% 28% 26% 29% 28% 27% It would be impossible 14% 18% 19% 30%
Slide 44: Cash flow
Cash flow £m H1 19 H1 21 H1 22 H1 23 Cash from operating activities 97.0 97.0 102.0 115.8 Working capital movement (11.8) (11.3) (10.5) (19.2) Capex (21.3) (29.5) (44.0) (30.8) Other investing activities - - - (2.5) Financing activities (55.0) (46.4) (54.3) (61.8) Repayment of senior loan facility -
Slide 45: Bank leverage ratio
Cash and Net Bank Debt Net Bank Debt (£m) & Leverage 400 4.3 Impact of COVID-19 pandemic 350 3.8 Cash, Net bank debt (£m) 300 Bank leverage ratio 250 3.3 200 150 2.8 100 2.3 50 0 1.8 2018 YE 2019 YE 2020 YE 2021 YE 2022 YE 2023 H1 Cash Net bank debt Leverage 45
Slide 46: Cash & Borrowings
Cash & Borrowings £m 31 Dec 20 31 Dec 21 31 Dec 22 30 Jun 23 Bank borrowings 420.8 427.5 324.3 324.2 Cash 106.3 202.6 74.2 75.7 Net bank debt 314.5 224.9 250.1 248.5 £m 31 Dec 20 31 Dec 21 31 Dec 22 30 Jun 23 Bank borrowings 420.8 427.5 324.3 324.2 Lease liabilities (under IFRS 16) 749.5 837.8 866.5
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