Investec 'cautious' on Spire Healthcare, issues 'sell' rating

The private hospital group said in a trading update that it continues to expect 2015 revenue growth in the range of £882m to £888m, and earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of around 18%.

Spire expects full year revenue for the 2016 financial year will rise by around 3% to 5% compared with 2015, assuming a revised tariff by NHS and health service regulator Monitor.

Monitor and NHS have proposed a 1.1% increase in the tariff for the 12 months beginning 1 April for all services paid for by national tariff, including those provided by the private sector.

“Whilst the proposed changes to the NHS tariff were more positive than we forecast (+1.5% versus our 4% decline) our sales estimates are broadly in line with guidance, suggesting a reweighting across the payor groups,” said Investec analyst Cora McCullum.

“We anticipate 3% upgrades to the full year 2016 estimate of EBITDA for both us and consensus, but we maintain our cautious view as we believe valuation fails to fully reflect the modest growth prospects.”