Spire Healthcare Group Plc · LSE:SPI
Spire Healthcare — H1 2021 Earnings Presentation
52 slides from Spire Healthcare's earnings presentation, Sep 9, 2021
Slide 1: H1 21 Results Presentation
H1 21 Results Presentation 9 September 2021
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 Cora will moderate the session and unmute your line for you to ask your question Any problems please e mail Laura.Young@ spirehealthcare.com 3
Slide 4: Agenda
Agenda Introduction Sir Ian Cheshire, Chair H1 21 Overview Justin Ash, Chief Executive Officer H1 21 Financial Review Jitesh Sodha, Chief Financial Officer Q&A 4
Slide 5: Introduction
Introduction Sir Ian Cheshire, Chair
Slide 6: Strong foundations in place and ready to move forward
Strong foundations in place and ready to move forward • Approach from Ramsay was unsolicited • 72% voted in favour of the offer at the Court Meeting • Insufficient to meet the 75% acceptance level • We respect the decision of all shareholders • Today’s results demonstrate that Spire Healthcare has a
Slide 7: H1 21 Overview
H1 21 Overview Justin Ash, Chief Executive Officer
Slide 8: Spire Healthcare strategy to improve quality of earnings
Spire Healthcare strategy to improve quality of earnings First choice for Improving NHS key Uncompromising private on patient safety revenue, profit partner patients and cash 8
Slide 9: H1 21 highlights
H1 21 highlights Strengthened quality EBITDA in line with Delivered record Supported the NHS credentials and H1-19 despite private growth in crisis delivered Purpose COVID-19 restrictions Strong platform to deliver growth 9
Slide 10: Q2 performance driven by successful execution of strategy
Q2 performance driven by successful execution of strategy First choice for private patients NHS key partner • Drove higher private mix, lower dependency on • NHS activity down but Spire holding share NHS commissioning • Performed well under contract • Higher ARPC • Strong growth in referrals
Slide 11: Private first strategy continues to deliver
Private first strategy continues to deliver H1 private revenue (£m) and growth 400 7.7%* 350 4.1% 2.5% 2.8% 2.6% 300 250 (42.3%) 200 150 100 50 0 H1 16 H1 17 H1 18 H1 19 H1 20 H1 21 * Relative to H1 19 11
Slide 12: Improved private mix in Q2 21, lower dependency on NHS
Improved private mix in Q2 21, lower dependency on NHS Revenue by payor 100% 2% 2% 90% 22% 80% 44% 70% 60% 50% 46% 40% 37% 76% 30% 20% 29% 10% 18% 0% Q1 21 Q2 21 Self pay PMI NHS Other 12
Slide 13: Customer sentiment improving
Customer sentiment improving 79% of target 53% agree that they audience aware of the are more likely to consider a private 11% strongly agree increase in waiting lists (+1pp) hospital than before as a (+18pp) result (+2pp) Source: Boxclever survey of UK adults for Spire Healthcare 13
Slide 14: Brand awareness growing
Brand awareness growing Prompted Awareness of Spire Healthcare 11 ppt increase in prompted awareness since pre-pandemic 69% 65% 62% 58% 58% Spring 19 Autumn 19 Autumn 20 Spring 21 Summer 21 (pre-campaign) (post-campaign) Source: Spire Brand tracking survey Question: Which of these private healthcare
Slide 15: Customer satisfaction increasing
Customer satisfaction increasing Making a positive difference to our patients’ lives through outstanding personalised care 85% agree that our 93% agree that our 95% agree that our care has made a care was care was positive outstanding personalised difference (+2pp) (+1pp) (+1pp) Source: Spire Health
Slide 16: Market share rebounding
Market share rebounding The addressable market is the volume of procedures undertaken either at a Spire hospital, or at a NHS or independent sector hospital that is local enough to be classed in a Spire hospital's competitive set 16
Slide 17: Total NHS market volumes returning slowly
Total NHS market volumes returning slowly Elective General & Acute GP referrals made 1st Outpatient attendance admissions 60000 60000 40000 50000 50000 35000 30000 40000 40000 25000 30000 30000 20000 15000 20000 20000 10000 10000 10000 5000 0 0 0 Source: NHS England, total private market 17
Slide 18: Uncompromising on patient safety
Uncompromising on patient safety • CQC ready – CQC launched new monitoring framework in April • Moving from pre-announced to unannounced inspections • Quality Improvement strategy underway • GIRFT • Medical Examiner appointed • Strong laboratory network – all with up to date UKAS accreditation • 166
Slide 19: Colleague engagement increased further
Colleague engagement increased further 87% would 84% are proud to recommend Spire 73% are excited work for Spire Healthcare if a friend or about the future (+11pp) Healthcare (+4pp) family member needed treatment (+1pp) Source: Spire Healthcare Colleague survey 2021 19
Slide 20: Improving revenue, profit and cash
Improving revenue, profit and cash • Actively managing COVID-specific costs down • Efficiency programmmes to deliver savings of at least £15m in 2022 • Benefitting from Spire one best way • Benefitting from integrated quality performance framework (QAF) • Further savings expected through procurement
Slide 21: H1 21 Financial Review
H1 21 Financial Review Jitesh Sodha, Chief Financial Officer
Slide 22: Financial Summary
Financial Summary • H1 – delivered ‘trading in line with 2019’ guidance • De-leveraged balanced sheet. Net Debt / EBITDA 2.7x • Exceptional Self-Pay growth, PMI admissions recovering with strong revenues through complexity • NHS Q1 as expected, Q2 lower commissioning • July and August impact of ‘pin
Slide 23: Financial headlines H1 21: P&L
Financial headlines H1 21: P&L Revenue Adjusted EBITDA Adjusted EBIT COVID costs £558.2m £96.0m £48.5m reduced EBITDA by £16m (H1 19: £491.6m) (H1 19: £96.8m) (H1 19: £51.4m) (H1 20: £401.9m) (H1 20: £61.6m) (H1 20: £14.9m) (H1 20: NA) 23
Slide 24: Financial headlines H1 21: balance sheet
Financial headlines H1 21: balance sheet Net bank debt Net Debt/EBITDA Capex ratio improved FCF improved £26.5m 2.7x £24.5m £306.3m (H1 19: £19.7m) (H1 19: £37.7m) (H1 20: £19.5m) (H1 20: £330.6m, (FY 19: 3.0x, (H1 20: (£6.1m)) FY 20: £314.5m) FY 20: 3.9x) 24
Slide 25: Spire Healthcare core assumptions on 2021 operating environment
Spire Healthcare core assumptions on 2021 operating environment Q1 Q2 • High COVID prevalence • Vaccine programme begins to take effect • National lock-down • COVID prevalence • NHS overwhelmed in reducing some areas • Lockdown easing 25
Slide 26: Spire Healthcare core assumptions on 2021 operating environment
Spire Healthcare core assumptions on 2021 operating environment Q1 Q2 NHS Limited commissioning on framework Q1 contract demand NHS volumes slowly returning Private Self-pay strong capacity and Growth in non-surge sites demand PMI growing • Testing, PPE, extra staffing COVID • Maintain safe pathways
Slide 27: Self-pay performance at record levels
Volume 04.01.2021 07.01.2021 10.01.2021 13.01.2021 16.01.2021 19.01.2021 22.01.2021 25.01.2021 28.01.2021 31.01.2021 03.02.2021 06.02.2021 09.02.2021 12.02.2021 15.02.2021 18.02.2021 21.02.2021 24.02.2021 27.02.2021 02.03.2021 05.03.2021 08.03.2021 11.03.2021 14.03.2021 17.03.2021 20.03.2021 23.03.2
Slide 28: PMI volumes trending back to 2019 levels
Volume 04.01.2021 07.01.2021 10.01.2021 13.01.2021 16.01.2021 19.01.2021 22.01.2021 25.01.2021 28.01.2021 31.01.2021 03.02.2021 06.02.2021 09.02.2021 12.02.2021 15.02.2021 18.02.2021 21.02.2021 24.02.2021 27.02.2021 02.03.2021 05.03.2021 08.03.2021 11.03.2021 14.03.2021 17.03.2021 20.03.2021 23.03.2
Slide 29: NHS volumes below historical levels due to muted commissioning
Volume 04.01.2021 07.01.2021 10.01.2021 13.01.2021 16.01.2021 19.01.2021 22.01.2021 25.01.2021 28.01.2021 31.01.2021 03.02.2021 06.02.2021 09.02.2021 12.02.2021 15.02.2021 18.02.2021 21.02.2021 24.02.2021 27.02.2021 02.03.2021 05.03.2021 08.03.2021 11.03.2021 14.03.2021 17.03.2021 20.03.2021 23.03.2
Slide 30: Total Admissions – impact of COVID in July and August
Volume 1500 2500 3500 4500 5500 6500 500 04.01.2021 11.01.2021 18.01.2021 25.01.2021 01.02.2021 08.02.2021 15.02.2021 22.02.2021 01.03.2021 08.03.2021 15.03.2021 22.03.2021 29.03.2021 05.04.2021 12.04.2021 19.04.2021 26.04.2021 03.05.2021 10.05.2021 17.05.2021 24.05.2021 31.05.2021 07.06.2021 2019 1
Slide 31: Higher ARPC reflects private mix and higher acuity
Higher ARPC reflects private mix and higher acuity Q2 21 Q2 19 Variance PMI Self-pay Total private PMI Self-pay Total private PMI Self-pay Total private IPDC admissions 28.6 17.7 46.3 30.1 11.8 41.9 (5.1%) 50.1% 10.4% ARPC (£) 2,721 3,694 3,093 2,491 2,879 2,600 9.2% 28.3% 19.0% IPDC revenue (£m) 77
Slide 32: Lower NHS volumes
Lower NHS volumes Q2 21 Q2 19 Variance Total private NHS Total Total private NHS Total Total private NHS Total IPDC admissions 46.3 17.0 63.3 41.9 22.3 64.2 10.4% (23.9%) (1.4%) ARPC (£) 3,093 2,791 2,952 2,600 2,416 2,536 19.0% 15.6% 16.4% IPDC revenue (£m) 143.2 47.5 190.7 109.1 53.9 163.0 31.3% (
Slide 33: Enquiries
Spire’s weekly relevant enquiries significantly above 2019 14000 2019 2020 2021 12000 10000 Enquiries 8000 6000 4000 2000 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 Week 33
Slide 34: Increased online booking activity in 2021
Increased online booking activity in 2021 • Three-fold increase in bookings made via our portals in H1 21 versus H1 19 • Online bookings provide Spire Healthcare with more visibility over the patient pathway Total online bookings across all portals Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 201
Slide 35: Supportive lenders and extension of Senior Facility maturity
Supportive lenders and extension of Senior Facility maturity Period end net debt to Waiver agreed for June 21 Now in a position to EBITDA 2.7x – lowest testing, ceiling returns to review capital structure Total leverage of 6.0x level since Y/E 2016 4.0x for Dec 21 test and dividend policy June 21 (£
Slide 36: Financial headlines H1 21: Adjusting items and portfolio management
Financial headlines H1 21: Adjusting items and portfolio management • Adjusting Items taken against Operating Profit of £2.3m • The Adjusting items charge is largely comprised of two items: • £2.8m of merger and acquisition costs, largely relating to the attempted takeover bid; and • £0.4m credit re
Slide 37: Investing for growth
Investing for growth • £75-85m planned capex investments Maintenance capex Growth capex • Estate refurbishment and upgrades • MRI and CT scanners Leverage our network • Plain film and diagnostic imaging • Capacity enhancement • Norwich and Edinburgh • Digital development • Net carbon zero by 2030 37
Slide 38: New UK COVID cases building from June 21
New UK COVID cases building from June 21 80000 70000 60000 50000 40000 30000 20000 10000 0 New cases Source: UK Government: https://coronavirus.data.gov.uk/details/download 38
Slide 39: Actively managing controllable COVID costs down
Actively managing controllable COVID costs down £16.2m impact in H1 21 EBITDA due to testing and consumable costs 4 3.5 3 2.5 2 1.5 1 0.5 0 Jan Feb Mar Apr May Jun Test costs Other costs (PPE, additional staff) 39
Slide 40: Exposed to non-controllable COVID costs caused by rising cases
Exposed to non-controllable COVID costs caused by rising cases Reduction in EBITDA due to COVID-specific issues (£m) Jan Feb Mar Apr May Jun Jul Aug Test costs Other costs (PPE, additional staff) Absenteeism Cancellations 40
Slide 41: Spire Healthcare core assumptions for H2 21
Spire Healthcare core assumptions for H2 21 Q1 Q2 H2 • High COVID prevalence • Vaccine programme • COVID prevalence high begins to take effect • Pingdemic • National lock-down • COVID prevalence • Stricter rules for healthcare • NHS overwhelmed in reducing some areas workers • Lockdown easing • Like
Slide 42: Spire Healthcare core assumptions for H2 21
Spire Healthcare core assumptions for H2 21 Q1 Q2 H2 Private Growth in non-surge Self-pay strong Continued exceptional capacity and sites private demand demand PMI growing NHS Commissioning Slow build in Q1 contract demand muted commissioning • Testing, PPE, extra staffing COVID • Maintain safe path
Slide 43: Outlook: Cautiously optimistic in uncertain environment
Outlook: Cautiously optimistic in uncertain environment Cancellations and absence H1 in-line despite continued H2 performance dependent reduced EBITDA in July and impact from COVID on evolution of pandemic August by c.£4m per month Uncertainties from changes in COVID environment and isolation requir
Slide 44: Robust business for the future
Robust business for the future Limited NHS commissioning, Strong demand and efficiency Positive start to 2021 higher COVID-specific costs savings going forwards Making a positive difference to patients’ lives through outstanding personalised care 44
Slide 45: Appendix
S2 Spire Healthcare Appendix Corking after ya
Slide 46: Technical guidance
Technical guidance Technical guidance for 2021 Total rent c.£82m D&A c.£92-96m Capex c.£75-85m Net financing costs c.£82-87m Tax Effective corporate tax rate slightly above the statutory rate of 19% Net bank debt c.£295-335m 46
Slide 47: NHS England contracts negotiated
3 NHS England contracts negotiated • 23 March 2020 – Cost recovery contract • All hospitals, staff, clinical expertise and resources made available to NHS • Cash costs covered including operating costs, overheads, rent and interest plus a cost of capital • Credit to NHS for private work completed •
Slide 48: Revenue by payor
Revenue by payor Q1 21 Q1 19 Variance Q2 21 Q2 19 Variance H1 21 H1 19 Variance (£m) (£m) (%) (£m) (£m) (%) (£m) (£m) (%) PMI 104.3 126.0 (17.2%) 127.0 121.0 5.0% 231.3 247.0 (6.3%) Self-pay 50.1 44.4 13.0% 79.8 44.2 80.6% 129.9 88.6 46.7% Total private 154.4 170.4 (9.4%) 206.8 165.2 25.2% 361.2 335
Slide 49: Operating cost analysis
Operating cost analysis H1 21 (£m) H1 21 (% sales) H1 20 (£m) H1 20 (% sales) H1 19 (£m) H1 19 (% sales) Clinical staff 126.9 22.7% 97.1 24.2% 98.8 20.1% Direct costs 132.8 23.8% 78.9 19.6% 110.7 22.5% Medical fees 44.4 8.0% 29.1 7.2% 51.6 10.5% Cost of sales 304.1 54.5% 205.1 51.0% 261.1 53.1% Gros
Slide 50: Managed cash well
Managed cash well H1 21 (£m) H1 20 (£m) H1 19 (£m) Cash from operating activities 97.0 58.8 97.0 Working capital movement (11.3) 13.2 (11.8) Capex (29.5) (28.1) (21.3) Financing activities (46.4) (47.4) (55.0) Tax - 3.6 1.8 Increase in cash 9.8 0.1 10.7 Opening cash balance 106.3 90.8 47.7 Closing c
Slide 51: Spire target market less anxious than UK population on average
Spire target market less anxious than UK population on average How would you feel about visiting a hospital currently, if you were in need of treatment? All UK adults Spire target audience 9 17 14 Not at all anxious 24 Not at all anxious 21 28 25 20 35 25 25 Not that anxious Not that anxious 34 32 3
Slide 52: Hospital and clinic ratings from CQC, HIW and HIS
Hospital and clinic ratings from CQC, HIW* and HIS† Site Rating Site Rating Site Rating Site Rating Requires Alexandra Improvement Elland Good London East Good Thames Valley Good Brighton/Montefiore Outstanding Fylde Coast Good Manchester Outstanding Tunbridge Wells Good Requires Bristol Good Gatwic
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