NETCARE: 2,479 +46 (+1.89%)
Lower NHS referrals dent Spire Healthcare's profit view, shares sink
* Shares falls as much as 28 pct
* Sees 2018 EBITDA to be "materially lower"
* Revenue linked to the NHS fell 9.5 pct in H1
(Adds background on stock; updated shares; adds graphic)
By Justin George Varghese
Aug 6 (Reuters) - Spire Healthcare shares hit a
record low on Monday after it warned of sharply lower full-year
core earnings on fewer referrals from Britain's publicly funded
National Health Service (NHS).
Spire generates a third of its revenue from work carried out
on behalf of the NHS, which has been operating with an about 1
billion pound ($1.3 billion) deficit and a shortage of beds and
Companies such as Spire, BMI Healthcare and Nuffield Health
have helped the NHS cope with the shortage, but their earnings
and revenue have taken a hit as the NHS prioritises emergency
cases and makes cuts elsewhere, focusing on essential health
Spire shares were down 22 percent at 193 pence at 1040 GMT
on London's FTSE 250 index.
"The current difficult market conditions - also seen by
other operators - had a greater impact on our business in the
seven months to July 31, 2018 than we had expected," Chief
Executive Officer Justin Ash said in a statement on Monday.
Revenue linked to the NHS fell 9.5 percent in the
Shares of the company have mostly underperformed the UK
mid-cap index since the company warned on revenue and
core earnings margins last year.
Spire rival Ramsay Health Care, Australia's biggest
private hospital operator also took a charge and cut its outlook
for profit growth in June on a slump in business from the NHS.
Difficult trading conditions and belt-tightening by the NHS
has also forced Netcare, which has been in Britain for
a decade through a controlling stake in BMI Healthcare, to exit
operations in the country.
Spire last year rejected a takeover offer from South African
private hospitals operator Mediclinic International
which has a stake of almost 30 percent. The cash and paper bid
valued Spire shares at around 298 pence.
Spire said it expects revenue growth in the second half of
the year, and sees benefits from its investments in telephony
and central marketing paying off.
The company started cost saving plans in other areas of its
business and now expects capital expenditure for 2018 at 90
million pounds, 10 million pounds lower than a previous
forecast. Capital expenditure was 118 million pounds in 2017.
"With our renewed focus on the private market, we are seeing
encouraging momentum and expect our top line to recover through
the second half of 2018 and increasingly in 2019 and beyond,
while the benefit of our major cost savings initiatives will
accelerate through next year," Ash added.
Ash took over at the end of last October. Jitesh Sodha was
named chief financial officer last month.
"While the announcement of a cost savings plan is helpful,
it is difficult to reconcile this with the overspend in H1
2018," Liberum analysts said in a note.
Spire Healthcare said on Monday its revenue fell 1.1 percent
to about 475 million pounds ($616.7 million) in the first half
of the year.
($1 = 0.7697 pounds)
(Reporting by Justin George Varghese and Arathy S Nair in
Bengaluru; Editing by Amrutha Gayathri, Bernard Orr and Emelia
First Published: 2018-08-06 09:02:15
Updated 2018-08-06 12:58:38
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