RBC Capital downgrades Spire Healthcare on near-term uncertainties

The bank said that while pent-up demand has the potential to drive Spire's mix and operating margins, risk around patients' confidence and structural operating room efficiency, as well as recovery timing and any second wave, creates "substantial" uncertainty.

"While pent-up demand has increased, there could be some headwinds to a bounce-back, as confirmed by Smith & Nephew's Q1 commentary,” it said. "Smith & Nephew states that ‘multiple [UK] private hospital groups [are] aiming for late June to restart’ - this is in line with our expectations given that the 14-week NHS deal started 30 March."

RBC noted that NHS waiting lists were already at record highs entering the crisis, and a further three months of deferred procedures adds more demand. "We expect that insured and self-pay demand will also have increased, and the potential for Spire to drive improved mix across and within payor groups should help revenue growth and margins," it said.

However, the "new normal" is unclear, RBC added.

"Increased infection control is likely to reduce operating room efficiency, limiting revenue re-acceleration and operating leverage until new working schedules are introduced (longer hours and weekend opening).

"It is also unclear how quickly patients will have confidence to visit hospitals, how quickly Spire will be able to reschedule patients and whether they will need to be re-assessed in an outpatient setting before undergoing surgery."

RBC kept its price target on the shares at 100p.