Spire Healthcare Group Plc · LSE:SPI
Spire Healthcare — FY2023 Earnings Presentation
52 slides from Spire Healthcare's earnings presentation, Feb 29, 2024
Slide 1: FY23 Results Presentation
FY23 Results Presentation 29 February 2024
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 Angus will moderate the session and unmute your line for you to ask your question Any problems please email [email protected] 3
Slide 4: Agenda
Agenda FY23 Overview Justin Ash, Chief Executive Officer FY23 Financial Review Jitesh Sodha, Chief Financial Officer Strategic Developments Justin Ash, Chief Executive Officer Outlook for FY24 Justin Ash, Chief Executive Officer Q&A 4
Slide 5: FY23 Overview
FY23 Overview Justin Ash, Chief Executive Officer
Slide 6: Our strategy: deliver strong financial performance underpinned by running great hospitals
Our strategy: deliver strong financial performance underpinned by running great hospitals and developing new services Drive hospital performance Invest in our workforce Continue growth in our existing hospital Recruit, retain and develop a estate with increasing margins great workforce Deliver stron
Slide 7: Delivered strong financial performance
Delivered strong financial performance Adjusted Adjusted Adjusted Profit EBITDA EBIT before tax Up 15.0% Up 23.5% Up 175% Revenue Up 13.4% Another £15m cost Proposed final ROCE dividend of 2.1 savings delivered 7.5% (FY22: £15m) pence per share (FY22: 6.2%) 7
Slide 8: Driven hospital performance
Driven hospital performance Good Mix & Pricing Revenue Private Mix Private Revenue Delivered a further Control up 10.8% 72.3% Up 9.5% £15m savings Weighted Private ARPC +6.8% Hospital Adjusted EBITDA Margin 17.6% (FY22: 17.0%) Delivered margin growth in an inflationary environment Well-positioned to
Slide 9: Invested in our workforce
Invested in our workforce Recruitment brought Commitment to learning Material pay award in-house and development Colleague survey: Colleague survey: Leaver rates to 15.1% * 81% colleagues (FY22: 18.8%) 86% response rate ‘Proud to work for Spire’ (+9ppts vs FY22) Agency use now falling (+1ppt vs FY22
Slide 10: Build on quality
Build on quality 98% of inspected sites rated 93% patients agree that ‘Good’ or ‘Outstanding’ our care was ‘Outstanding’ (FY22: 98%) (+1ppt vs FY22) 230 FTSU Guardians & Ambassadors 96% patients rating 83% of our consultants rate our care as experience as ‘Excellent’ or ‘Very Good’ ‘Good’ or ‘Very G
Slide 11: Championed sustainability and ESG
Championed sustainability and ESG 12% reduction in GHG emission intensity* to 19.9 tCO2e per £m (down 13% in 2022) 47% female Ranked 7th of FTSE 35% representation at 250 companies in Forging waste recycled Exco & board relationships with terms of women in local communities (30% in 2022) level combi
Slide 12: Develop new services
Develop new services London Doctor Clinic Vita Health Group Spire Occupational Health & Clinics Potential market growth - £3bn plus across talking Performing well therapies, MSK & 5 new LDC sites dermatology New client wins (4 closed) Opportunities with Government OH Spire Abergele Clinic open hospi
Slide 13: Thank you to our colleagues
Thank you to our colleagues 13
Slide 14: FY23 Financial Review
FY23 Financial Review Jitesh Sodha, Chief Financial Officer
Slide 15: Strong financial performance in 2023
Strong financial performance in 2023 Adjusted Adjusted Revenue EBITDA EBIT £1.36bn £234.0m £130.4m (FY22: £1.20bn) (FY22: £203.5m) (FY22: £105.6m) Adjusted Profit Before Statutory Profit After ROCE Tax Tax 7.5% £38.8m £27.9m (FY22: 6.2%) (FY22: £14.1m) (FY22: £8.2m) 15
Slide 16: Delivered EBITDA & EBIT margin growth across Group & Hospitals business
Delivered EBITDA & EBIT margin growth across Group & Hospitals business Group Hospitals Business (Incl. Vita, DCG & Clinics) Adjusted EBITDA Adjusted EBITDA Margin Margin 17.2% 17.6% (FY22: 17.0%) (FY22: 17.0%) Adjusted EBIT Adjusted EBIT Margin Margin 9.6% 9.9% (FY22: 8.8%) (FY22: 8.8%) 16
Slide 17: Good cash generation, invested in our business and reduced debt leverage
Good cash generation, invested in our business and reduced debt leverage • Cash conversion* of 98% (FY22: 92%) • Free cash flow up 71.4% to £48m • Full-year capex of £84.4m and in target range of 6-7% of revenue • Borrowed £50m to fund acquisition of VHG; paid down £10m by the year end • Net bank de
Slide 18: Revenue growth across Private and NHS hospital business
Revenue growth across Private and NHS hospital business Total £1,199m Total £1,328m Total +10.8% 27 27 341 NHS +15.5% 295 25.7% 24.6% 877 960 Private +9.5% 73.1% 72.3% FY22 FY23 Private NHS Other 18
Slide 19: PMI – Continued admission and ARPC growth
PMI – Continued admission and ARPC growth PMI Admissions and OP Procedures PMI ARPC / £ PMI Revenue / £’000 250,000 3,000 700,000 +10.1% +5.1% +14.3% 200,000 2,900 600,000 2,800 500,000 150,000 2,700 400,000 100,000 2,600 300,000 2,500 200,000 50,000 2,400 100,000 - 2,300 0 FY 2019 FY 2021 FY 2022 F
Slide 20: Self-pay – Sustained revenue growth through ARPC and management of mix
Self-pay – Sustained revenue growth through ARPC and management of mix SP Admissions and OP Procedures SP ARPC / £ SP Revenue / £’000 120,000 5,000 400,000 -6.3% +10.1% +1.8% 100,000 350,000 4,000 300,000 80,000 3,000 250,000 60,000 200,000 2,000 150,000 40,000 100,000 1,000 20,000 50,000 - - 0 FY 2
Slide 21: Self-pay – Optimised revenue through management of mix
Self-pay – Optimised revenue through management of mix Self-pay admissions Self-pay IPDC revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Ophthalmology Orthopaedics Plasti
Slide 22: NHS – Continued admission and ARPC growth
NHS – Continued admission and ARPC growth NHS admissions and OP procedures NHS ARPC / £ NHS revenue £’000 160,000 4,000 350,000 +15.5% 140,000 +8.4% 340,000 3,500 +6.1% 330,000 120,000 3,000 320,000 100,000 2,500 310,000 80,000 2,000 300,000 60,000 1,500 290,000 280,000 40,000 1,000 270,000 20,000 5
Slide 23: Continued focus on orthopaedics
Continued focus on orthopaedics 23
Slide 24: Reduction in Bank Debt Leverage and Total Debt Leverage
Reduction in Bank Debt Leverage and Total Debt Leverage (IFRS 16 lease liabs) 7.0x 7.0x Bank Debt Leverage (Bank) Total Debt Leverage (Inc. IFRS16 Lease liabilities) 6.0x 6.6x 6.0x 5.9x 5.7x 5.9x 5.0x 5.5x 5.0x 5.0x 4.0x 4.0x 3.9x 3.0x 3.0x 3.3x COVID impact 3.0x 2.0x 2.0x 2.3x 2.2x 2.2x 1.0x Acquis
Slide 25: Capex – disciplined approach, targeting financial returns
Capex – disciplined approach, targeting financial returns Capex Focus Spire Abergele Clinic Capex investment of £84.4m (FY22: £90.1m) comprising • Continuous infrastructure investment • Investment projects, including: • Yale Chesney Court – outpatient & diagnosis • Claremont - new minor operating th
Slide 26: Solar panel and Building Management Controls system installations
Solar panel and Building Management Controls system installations Typical Hospital Solar Array • Energy hedge ends in October 2024 • Additional £2m for gas and electricity in Q4 • Installation of solar panels and building management control systems at each hospital in 2024 • Investment of £12m • 17%
Slide 27: Proud of our progress in FY23
Proud of our progress in FY23 Delivered strong full year results across Revenue, EBITDA, EBIT and PBT in line with our expectations Adjusted basic EPS up from 4.2p to 7.9p per share (+88%) Recommended final dividend 2.1p per share (FY22: 0.5p per share) Growth delivered in an inflationary and comple
Slide 28: Strategic developments
Strategic developments Justin Ash, Chief Executive Officer
Slide 29: Delivering against medium-term financial objectives and framework
Delivering against Spire Healthcare’s medium-term financial objectives and financial framework 2022 2023 In-year achievement Target/framework measure Hospital growth +8.3% +10.8% >5% revenue CAGR Medium-term financial Hospital EBITDA margin 17.0% 17.6% EBITDA >21% objectives Hospital EBIT margin 8.8
Slide 30: Hospital growth prospects >5% per annum
Hospital growth prospects >5% per annum PMI Self Pay NHS 2023 +14.3% revenue YoY +1.8% revenue YoY +15.5% revenue YoY Our view of Modest growth with Strong growth Modest growth 2024/25 mix upside 30
Slide 31: Savings programme – at least £60m additional savings by 2026
Savings programme – at least £60m in additional savings by 2026, driven by four workstreams Driver of savings Percentage of total savings through to 2026 YE Automation & c.50% Digitalisation Centralisation c.10% One best way / c.40% Standardisation 31
Slide 32: Digitalisation strategy
Digitalisation strategy – not a ‘big bang’, but agile and flexible – delivered through bolting-on a series of improvements to integration platform In-house developed solutions Off-the-shelf solutions (e.g. Bookings) (e.g. GHX for P2P) Integration Platform Improving services for Savings Advanced Data
Slide 33: Savings and other levers driving Hospital Adj EBITDA margin >21% by end 2026
Savings and other levers driving Hospital Adj EBITDA margin >21% by end 2026 High Savings programme Adj EBITDA internal Margin Payor acuity and mix >21% Pricing and ARPC control Spire Healthcare Adj EBIT initiatives / Organic volume growth Margin external factors >13% Workforce factors Government po
Slide 34: Outlook for FY24
Outlook for FY24 Justin Ash, Chief Executive Officer
Slide 35: Outlook for 2024
Outlook for 2024 Key Outcomes Key Priorities >£15m of cost savings (H2 weighted) Savings and digitalisation Further progress on workforce Reward framework & investment Vita and Occupational Health strategy Further develop new services 35
Slide 36: Guidance for 2024 – Strong financial performance
Guidance for 2024 – Strong financial performance Group Adj EBITDA £255m to £275m* Adverse Factors Supporting Factors Consumer sentiment / economy Private growth Excessive inflation Acceleration of digitalisation / savings High incidence of respiratory illness New service NHS budgetary constraints NH
Slide 37: Guidance for 2024 – Strong financial performance (cont’d)
Guidance for 2024 – Strong financial performance (cont’d) • Strong start to 2024, continuing momentum from last year • Revenue growth: • Hospital business >5% • VHG revenue >£100m, adjusted EBITDA c.£10m • Reward investment similar to 2023 • Margin improvement, weighted to H2 • Continue to invest in
Slide 38: Capital Markets Event on 17 April 2024
Capital Markets Event on 17 April 2024 Additional detail on our savings programme & margin development Introduction to Vita Health Group Overview of our Occupational Health business 38
Slide 39: Thank you
S2 Spire Healthcare Thank you Covking after ya
Slide 40: Appendix
S2 Spire Healthcare Appendix Covking after ya
Slide 41: Technical guidance
Technical guidance Technical guidance for 2024 Total property rent c.£102m - £107m (FY23: £100.2m) Depreciation & c.£108m - £113m (FY23: £103.6m) Amortisation Capex* c.£95m - £105m (FY23: £84.4m) Net financing costs c.£100m - £105m (FY23: £91.6m) Tax** Effective corporate tax rate between 25% - 35%
Slide 42: Revenue by Payor
Revenue by Payor 700.0 676.5 682.5 21.0 37.2 597.9 600.6 600.0 13.0 13.4 558.2 548.0 170.5 170.6 11.6 14.4 491.6 489.2 500.0 145.6 149.8 12.3 12.1 129.1 185.4 400.0 143.7 142.0 178.4 165.6 174.1 163.9 162.1 300.0 88.6 90.2 129.9 437.4 485.0 474.7 439.3 200.0 404.5 361.2 335.6 335.0 306.6 309.1 247.0
Slide 43: Cost of sales analysis
Cost of sales analysis 400 55% 46.9% 58.3 50% 350 46.4% 45.1% 45.5% 45.1% 44.8% 45.4% 43.3% 59.9 45% 300 52.3 52.3 44.4 46.4 40% 250 51.6 50.6 155.0 35% 157.5 140.8 139.5 200 132.8 130.6 30% 113.2 23.8% 24.4% 23.5% 25% 150 110.7 23.2% 23.3% 23.3% 22.5% 23.1% 23.8% 22.6% 22.7% 23.3% 21.4% 22.7% 21.3%
Slide 44: Private volumes – strong outpatient and procedures growth
Private volumes – strong outpatient and procedures growth New OP consultations IPDC and OP procedures 700,000 350,000 +8% +4% 600,000 300,000 500,000 250,000 400,000 200,000 300,000 150,000 200,000 100,000 100,000 50,000 0 0 FY 19 FY20 FY21 FY22 FY23 FY 19 FY20 FY21 FY22 FY23 44
Slide 45: Maintained higher ARPC – reflects pricing, private mix and acuity
Maintained higher ARPC – reflects pricing, private mix and acuity PMI Self-pay NHS FY19 FY21 FY22 FY23 FY19 FY21 FY22 FY23 FY19 FY21 FY22 FY23 IPDC 121.6 104.9 118.2 130.6 47.6 63.7 69.5 63.9 92.0 75.0 75.1 82.2 admissions (‘000s) ARPC (£) 2,533 2,686 2,756 2,896 2,884 3,683 3,955 4,356 2,434 2,731
Slide 46: Cash flow
Cash flow £m FY23 FY22 FY21 FY20 FY19 Cash from operating activities 231.1 196.7 172.4 160.0 184.9 Working capital movement (15.5) (15.0) 11.4 (3.9) 17.9 Capex (84.4) (87.7) (67.0) (46.3) (60.2) Proceeds from disposal of assets and other 0.4 3.7 88.9* - 11.6 Acquisition cash outflow ** (73.2) (11.3)
Slide 47: Cash and borrowings
Cash and borrowings £m Dec 23 Dec 22 Dec 21 Dec 20 Bank borrowings 365.3 324.3 427.5 420.8 Cash 49.6 74.2 202.6 106.3 Net bank debt 315.7 250.1 224.9 314.5 £m Dec 23 Dec 22 Dec 21 Dec 20 Bank borrowings 365.3 324.3 427.5 420.8 Lease liabilities (under IFRS 16) 891.7 866.5 837.8 749.5 Total borrowing
Slide 48: Net bank debt and total debt under IFRS16
Net bank debt and total debt under IFRS16 Net Bank Debt 2023 YE 2022 YE 2021 YE Total Debt (IFRS 16) 2023 YE 2022 YE 2021 YE £m £m £m £m £m £m Bank Debt (incl. paid fees 365.3 324.3 427.5 Bank Debt (incl. paid fees 365.3 324.3 427.5 and accrued interest) and accrued interest) less Cash 49.6 74.2 202
Slide 49: NHS waiting lists stood at 7.6 million pathways in December 2023
NHS waiting lists stood at 7.6 million pathways in December 2023 8,000,000 March 2020 Waiting >52 weeks 7,000,000 Wating 18-52 weeks 6,000,000 Waiting <18 weeks Number of people 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Dec-09 Dec-18 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Slide 50: More people now think things will be better financially in 12 months
More people now think things will be better financially in 12 months than think things will be worse – a big improvement on last year How do you expect the financial position of your household to change over the next 12 months? 9% 9% 8% 8% 5% 6% 7% 5% 13% 15% 11% A lot worse 17% 20% 18% 20% 20% 23%
Slide 51: UK adults and our target audience - ease of accessing £5k
UK adults and our target audience - ease of accessing £5k How easily could you access £5,000 for medical treatment if you felt you really needed to? • Target audience remains more resilient than the population at large 8% 12% 12% 12% 10% 8% 13% 28% 26% 29% 28% 27% 26% It would be impossible 30% 14%
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 Alexandra1 Edinburgh/Shawfair† Good London East Good Thames Valley Good Improvement Brighton/Montefiore Outstanding Elland Good Manchester Outstanding Tunbridge Wells Good Bristol Good Fylde
Spire Healthcare Group — FY2023 Earnings Presentation on 6ix