Spire expects first-half decline but confident of recuperation

Private healthcare provider Spire remained confident in hitting full-year targets even though market conditions remained challenging throughout the start of its trading year, which will lead to lower first-half revenues and earnings.

Spire had seen revenues to the end of April end "in line with expectations", characterised by good self-pay growth, while, revenues from private medical insurance dropped slightly and NHS revenues declined as a result of volume reductions and tariff effects.

The FTSE 250 group, it had similarly noted back in March, told the market on Thursday that the current revenue trends, combined with a significant extra investment in both clinical quality and enhancements to its private payor proposition, would bring about a reduction in its first-half earnings. But directors are confident that the second half performance will make up for the weaker first.

After reporting a 24% drop in annual profits, Spire shares hit a three-year low in March but the private healthcare operator maintained its dividend as new boss Justin Ash said he was "encouraged by the excellent opportunity" ahead.

Ash said there would be "some incremental investments to improve our delivery in several key areas, including clinical quality and customer care, the private proposition, and operational excellence, which will result in 2018 operational expenditure slightly above market expectations".

For 2018 he expects PMI & NHS e-referral revenues to be flat with further declines in NHS local contract work, alongside "continued strong growth" in self-pay.

Analysts also expect 2018 to be weighted towards the second half in light of tougher comparatives, improving performance at Manchester, St Anthony's and Nottingham alongside the more favourable NHS Tariff. Full year guidance is for EBITDA to be flat on 2017.

House broker Numis said in light of a tough first-half comparison with last year, improving performance at Manchester and St Anthony’s and Nottingham, alongside a more favourable NHS Tariff, it expects an improving performance into the second half.

Next visible news is the detailed interim results due in September.

As of 1020 BST, Spire shares had lost 2.74% to 248.20p.