TIDMSPI
RNS Number : 1098R
Spire Healthcare Group PLC
04 March 2021
,
Spire Healthcare reports its results
for the year ended 31 December 2020
London, UK, 4 March 2021 , Spire Healthcare Group plc (LSE:
SPI), a leading independent hospital group in the UK, today
announces its preliminary results for the year ended 31 December
2020.
Proud to support the NHS while maintaining liquidity.
Operational platform optimised for future demand
Summary Group results for the year ended 31 December 2020
Year ended Variance
=================== ===================================================================== ======================
2020 2019
=================== ================================== ================================= ========== ==========
Before After Before After Before After
Adjusting Adjusting Adjusting Adjusting Adjusting Adjusting Adjusting Adjusting
(GBPm) items items items items items items items items
=================== ========== ========== ========== ========== ========= ========== ========== ==========
Revenue 919.9 - 919.9 980.8 - 980.8 (6.2%) (6.2%)
Operating (loss) /
profit 67.1 (213.3)(1) (146.2) 97.6 (3.2) 94.4 (31.3%) NM(2)
(Loss) / profit
before
taxation (18.5) (212.5) (231.0) 12.8 (3.2) 9.6 NM NM
(Loss) / profit
after
taxation (20.7) (213.2) (233.9) 9.8 (2.6) 7.2 NM NM
Basic (loss) /
earnings
per share, pence (5.2) (53.2) (58.4) 2.4 (0.6) 1.8 NM NM
EBITDA (3) 161.1 - 161.1 189.0 - 189.0 (14.8%) (14.8%)
FCF (4) 34.7 - 34.7 51.0 - 51.0 (32.0%) (32.0%)
Capital investments 50.8 - 50.8 62.5 - 62.5 (18.7%) (18.7%)
Net bank debt (5) 314.5 - 314.5 330.0 - 330.0 4.7% 4.7%
=================== ========== ========== ========== ========== ========= ========== ========== ==========
1. Includes a GBP200m write down of goodwill in H1 20 primarily
related to historical balances created in 2007 and 2008
2. Not meaningful
3. EBITDA is calculated as Operating Profit, adjusted to add
back depreciation, and Adjusting items, referred to hereafter as
'EBITDA'
4. FCF (Free Cash Flow) is calculated as EBITDA, less rent and
capital expenditure cash flows. Rent cash flows are defined as
Interest on, and Payment of, Lease Liabilities. Capital expenditure
cash flows are defined as the Purchase, and Proceeds on Disposal,
of Property, Plant and Equipment
5. Net bank debt is defined as bank borrowings less cash and cash equivalents
Operating and financial highlights
-- Historic agreements to support the NHS during the COVID-19 pandemic
-- Over 210,000 NHS patients seen in 2020 under the COVID-19 contracts
-- Strong private recovery in Q4, particularly self-pay
-- Clinical quality improved further, 90% of sites rated 'Good',
'Outstanding' or equivalent (up from 85% at FY19)
-- Working capital management drives improvement in net bank
debt to GBP314.5m (GBP330.0m at FY 19)
-- Agreement with lenders to amend June 2021 covenant test, and
maturity of Senior Loan Facility extended by one year to July
2023
-- Reduction in revenue and EBITDA due to impact of COVID-19 pandemic
Developing our business
-- Thank you payment of GBP500 to all colleagues not on a bonus
scheme for their outstanding contribution during COVID, GBP7.3m in
total
-- Agreed new contract with NHSE from 1 January 2021, including
support for NHS cancer and time-critical services in areas of COVID
pressure
-- Accepted onto NHS Framework for elective work from 1 April 2021
-- Invested GBP50.8m in hospital estate and IT infrastructure
(versus GBP62.5m total capital expenditure in 2019)
-- Bookings through digital portals at record levels giving
Spire Healthcare greater visibility of patient pathway
-- 154 nurses recruited from overseas will start in Q1 21, 147
clinical apprentices currently in training
-- Comprehensive rollout of electronic pre-operative assessment
and new pricing system underway
Looking to the future
-- Strong consumer sentiment within our target audience
-- Robust private demand to be targeted by wider marketing investment
-- NHS activity driven by initiatives to support NHS waiting list reduction
-- Significant COVID costs to preserve patient safety but offsetting initiatives underway
-- New target and investment to reach net zero carbon emissions by 2030
Justin Ash, Chief Executive Officer of Spire Healthcare,
said:
"We're immensely proud that, in this challenging year for
everybody, Spire Healthcare's nationwide support for the NHS has
made a positive difference to NHS patients' lives. Thanks to the
tremendous efforts of colleagues across our hospitals, over 210,000
NHS patients have continued to receive vital, high quality care
under extremely demanding conditions. As a business, we focussed on
cash management and accelerating digital programmes, and delivered
a strong return to elective private care in the second half of
2020.
Looking ahead, the investment we've made in our business and our
colleagues means that Spire Healthcare is primed to treat the
growing numbers of private and NHS patients needing elective and
clinically-urgent care, with our continued focus on outstanding
patient care, quality and safety."
Outlook for 2021
Trading in January and February was in-line with the Board's
expectations although with a different mix of work due to the
impact of COVID-19 and lockdown. Underlying trends remain positive
with private enquiries above prior year, a waiting list of private
surgery and significant national unmet demand for both NHS and
private diagnostics and procedures. Notwithstanding the various
costs and uncertainty relating to the evolution of the COVID
pandemic, Spire Healthcare is in a strong position to meet the
increased demand when COVID-19 abates, therefore the Board remains
cautiously optimistic that trading will return to 2019 levels in
2021.
For further information please contact:
Spire Healthcare +44 (0)20 7427 9169
Cora McCallum, Head of Investor Relations
Instinctif Partners +44 (0)20 7457 2020
Damian Reece
Guy Scarborough
Registered Office and Head Office:
Spire Healthcare Group plc
3 Dorset Rise
London
EC4Y 8EN
Registered number 09084066
About Spire Healthcare
Spire Healthcare is a leading independent hospital group in the
United Kingdom, with 39 private hospitals and 8 clinics across
England, Wales and Scotland.
Spire Healthcare delivered tailored, personalised care to almost
750,000 in-patients and day case patients in 2020, and is the
leading private provider, by volume, of knee and hip operations in
the United Kingdom. The Group's well located and scalable hospitals
have delivered successful and award winning clinical outcomes,
positioning the Group well with patients, Consultants, the NHS, GPs
and Private Medical Insurance ("PMI") providers. Spire Healthcare
treats patients through a variety of routes including PMI, Self-pay
and the NHS, providing the Group with diversified access to the
expected growth opportunities in the UK healthcare market, which
faces significant supply challenges as a result of NHS budget
constraints and increasing demand from a growing population with
longer life expectancy.
Cautionary statement
This preliminary announcement contains certain forward-looking
statements relating to the business of Spire Healthcare Group plc
(the "Company") and its subsidiaries (collectively, the "Group"),
including with respect to the progress, timing and completion of
the Group's development, the Group's ability to treat, attract, and
retain patients and customers, its ability to engage Consultants
and GPs and to operate its business and increase referrals, the
integration of prior acquisitions, the Group's estimates for future
performance and its estimates regarding anticipated operating
results, future revenue, capital requirements, shareholder
structure and financing. In addition, even if the Group's actual
results or development are consistent with the forward-looking
statements contained in this preliminary announcement, those
results or developments may not be indicative of the Group's
results or developments in the future. In some cases, you can
identify forward-looking statements by words such as "could,"
"should," "may," "expects," "aims," "targets," "anticipates,"
"believes," "intends," "estimates," or similar words. These
forward-looking statements are based largely on the Group's current
expectations as of the date of this preliminary announcement and
are subject to a number of known and unknown risks and
uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from any
future results, performance or achievement expressed or implied by
these forward-looking statements. In particular, the Group's
expectations could be affected by, among other things,
uncertainties involved in the integration of acquisitions or new
developments, changes in legislation or the regulatory regime
governing healthcare in the UK, poor performance by Consultants
who
practise at our facilities, unexpected regulatory actions or
suspensions, competition in general, the impact of global economic
changes, and the Group's ability to obtain or maintain
accreditation or approval for its facilities or service lines. In
light of these risks and uncertainties, there can be no assurance
that the forward-looking statements made in this preliminary
announcement will in fact be realised and no representation or
warranty is given as to the completeness or accuracy of the
forward-looking statements contained in this preliminary
announcement.
The Group is providing the information in this preliminary
announcement as of this date, and we disclaim any intention or
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Analyst and investor meeting
There will be an analyst and investor meeting today at 9am via
Zoom webinar. Please register in advance through this link:
https://spirehealthcare.zoom.us/webinar/register/WN_7U0TYMn5RvCKmMnQrcMmZg
The webcast will be available for replay following the
presentation through the Company's investor website :
https://investors.spirehealthcare.com/home/
Operating Review
Overview
2020 was a year in which Spire Healthcare played a key role in
supporting the NHS and grew as an organisation. Led from the
centre, our 39 separate hospitals operated cohesively as one Spire
Healthcare, whilst maximising the power of local relationships, and
learning from each other as the pandemic worked its way across the
country. During the year we focussed on improving our relationships
with all stakeholders and strengthening the independent sector's
role as an essential part of the UK's healthcare infrastructure. We
proactively engaged with our PMI partners, implemented closer
engagement with Consultants and, worked tirelessly to safeguard the
health and wellbeing of our colleagues.
The COVID-19 pandemic has encouraged people to reprioritise
health and wellbeing. The use of the independent sector to support
the NHS has also raised consumer awareness of private healthcare
and recognition of the Spire Healthcare brand has strengthened due
to recent positive media coverage.
We continued to develop our response to the COVID-19 pandemic
and accelerated the development of several projects which now place
the Company in a stronger position as we anticipate a transition
back to more normal business over the course of 2021.
Performance
2020 started well with particularly strong growth in self-pay,
however admissions and revenues declined as the COVID-19 pandemic
impacted the country. With the vast majority of private elective
surgery suspended from 1 April, and all capacity made available to
the NHS, H1 20 revenues declined 18% to GBP401.9m (versus H1 19:
GBP491.6m). However, in the second half of the year Spire
Healthcare was able to undertake elective work for both the NHS and
private payors, and a subsequent variation to the NHSE contract,
announced on 13 August, enabled Spire Healthcare to protect a
minimum capacity for private activity, subject to NHS requirements.
Consequently H2 20 revenues increased 5.9% to GBP518.0m (versus H2
19: GBP489.2m), although this was impacted by the structure of the
NHS COVID contracts. Q4 saw exceptionally strong growth in self-pay
revenue with priority given to more clinically-urgent complex
cases, which carry a greater average revenue per case.
The Group received relevant cash cost recovery for its services
from the NHS from 30 March to 31 December 2020, including operating
costs, overheads, use of assets, rent and interest, less a rebate
for any private elective care provided. These contracts, with
payments in advance, combined with a tightly controlled capex
programme and the suspension of the final dividend (which was
announced on 1 April), resulted in an increase in cash and
equivalents on the balance sheet to GBP106.3m (versus GBP90.8m at
FY19). Consequently net bank debt improved to GBP314.5m (GBP330.0m
at end December 2019).
We continued to invest in the future of our business, spending
GBP50.8m on upgrades to hospital facilities and an acceleration of
certain digital efficiency programmes to benefit patients and
colleagues. These investments included the replacement of 700 beds
during the year, representing c.50% of the total portfolio, four
new scanners (two MRI and two CT), a theatre suite refurbishment at
Spire Liverpool and a new multi-storey car park at Spire
Bristol.
Current status of NHS England contract
On 1 January 2021, Spire Healthcare entered into a new contract
with NHS England (NHSE). This contract is volume based, rather than
the previous cost-based contract, and was designed to facilitate a
smooth transition back to Spire Healthcare's usual mix of business
as the pandemic eases; providing elective surgery to reduce the NHS
waiting lists whilst increasing private activity. The emergence of
a new, highly contagious variant of COVID in early 2021 has placed
greater strain on the NHS than in the first wave and has required
different independent sector support from that envisaged under the
new contract.
In early January 2021 NHSE triggered the surge clause for a
number of hospitals, a provision to make all of Spire Healthcare's
resources available to the NHS in the event of a rise in local
COVID infection rates. 13 of the Group's hospitals went into surge
in early 2021, mainly in the South East, but the majority of these
surge clauses have now been lifted. Spire Healthcare has worked
closely with NHSE to provide appropriate care for NHS patients, and
we are proud that nine Spire Healthcare hospitals are currently
acting as NHS cancer hubs. Elsewhere, activity, such as urgent
cardiac care, have been transferred to be managed by the local
Spire Healthcare hospital and the cystic fibrosis service managed
by Spire Manchester has been extended to the end of March. Despite
this, performance in Q1 has been broadly in-line with expectations
with self-pay admissions in non-surge hospitals above prior year
levels and higher average revenue per case for private
procedures.
Unlike the first wave, when there was a national curtailment of
elective surgery, certain time-critical private activity has
continued during this period, even in surge sites, with
out-patients and diagnostic services largely unaffected. This means
that Spire Healthcare has established a waiting list of private
work which is expected to be delivered over the remainder of the
year.
Relevant enquiries remain above prior year levels, with double
digit growth in self-pay revenues in Q4 20 and January 2021,
providing reassurance that private activity will rebound strongly
when the pandemic abates. Whilst PMI revenue improved in Q4 20
versus Q3 20, the recovery is stronger in self-pay. There is some
evidence to suggest that private customers are choosing self-pay
because they feel it is easier and quicker to access care, and
partly, we believe, due to the need for insured patients to gain a
referral from their GP to access treatment, at a time when GP
appointments are restricted due to COVID measures.
Spire Healthcare was successful in its bid to be included on the
NHSE Framework for purchasing additional activity from the
independent sector, which is expected to commence in April 2021.
Inclusion on the Framework is at an agreed price for activity,
based on NHS tariff, but carries no guaranteed volumes. Activity
will be determined by local Commissioners' (CCGs and trusts)
requirements, therefore the relationships that have formed between
Spire Healthcare's hospital directors and their local NHS
counterparts during the pandemic will be critical to ensure Spire
Healthcare receives an appropriate share of the work available. We
anticipate that commissioning through the NHS Framework will build
over the year. The NHS has a priority to treat those with greatest
clinical need and who have been waiting the longest. We therefore
anticipate a more acute mix of work in Q2 with a return to a more
normal mix later in the year.
Cash position
Spire Healthcare currently has a Senior Loan Facility of GBP425m
and an undrawn Revolving Credit Facility (RCF) of GBP100m. As
announced at the interim results on 17 September, the maturity date
of the Senior Loan Facility has been extended by one year to July
2023. The RCF will remain at GBP100m until July 2022 and GBP87m
thereafter until July 2023. The Group has also reached agreement
with its lenders to provide the necessary financial flexibility to
continue to support the NHS with a waiver of the net debt / EBITDA
ratio and interest cover test for June 2021. A new liquidity
measure replaced these tests and requires cash and cash
equivalents, including headroom under undrawn committed facilities,
to remain above GBP50m. For December 2021 the agreement allows for
a maximum net debt / EBITDA ratio of 6x, if this measure has not
already dipped below 4x at any month end from June to November
2021. At 31 December 2020 the net debt / EBITDA ratio was 3.9x.
As disclosed in the interim results, in-line with IFRS
requirements, the Company performs a review of the carrying value
of goodwill every reporting period. The current view of the market
in the medium and long term remains substantially unchanged from
the last review. In H1 20, when assessing the carrying value of the
historical goodwill balance, the Group recognised the effect of
prevailing financial market conditions on the cost of capital which
is used to discount future cash flows to their current value;
accordingly Spire Healthcare took a non-cash charge in the period
to reduce historical goodwill from GBP517.8m to GBP317.8m. This
historical goodwill relates primarily to the original acquisition
of hospitals to create Spire Healthcare in 2007 and 2008 and the
impairment charge of GBP200m has been treated as an Adjusting
item.
Strategic initiatives
Spire Healthcare's Purpose, to make a positive difference to our
patient's lives through outstanding personalised care, forms the
bedrock on which we base all strategic decisions. We are pleased
that during H2 20, when we started collecting data, 83% of patients
agreed that Spire Healthcare had made a positive difference to
their lives, 92% agreed our teams had offered outstanding care and
94% agreed that their care was personalised. We will continue to
track these measures of our Purpose, and strive to improve the
result in the years ahead. Despite the pressures of the pandemic,
we used 2020 as an opportunity to enhance our capability to deliver
our Purpose.
The Group moved quickly to ensure treatment pathways were
COVID-secure, protecting patients and colleagues alike. Critically
the 'green' pathways allowed a return to admissions at 95% of prior
year levels by the end of the summer; a significant achievement
given the inevitable restrictions of social distancing, infection
control and use of PPE, and a welcome route to treatment for many
patients.
The associated costs of COVID compliance amounted to GBP32m in
2020. We believe we will be able to lower these during 2021,
through reducing the cost of COVID testing, pricing adjustments,
and the easing of some restrictions later in the year. COVID
security will nonetheless remain a key part of hospital care for
months or years to come and costs may increase if testing guidance
or protocols change.
The pandemic has provided a platform to accelerate the delivery
of certain digital efficiency programmes, which either improve the
patient experience by making it easier to access our services, or
improve the interaction with our colleagues.
In early March 2020, Spire Healthcare secured licences to
facilitate virtual patient consultations, with 59,300 consultations
taking place in FY 20 (20,000 in H1 20). The Group also hosted many
successful virtual training and continuing professional development
events for General Practitioners enabling Spire Healthcare to
maintain engagement with the local medical community, and thereby
protecting and developing an important source of patient referrals.
The use of virtual consultations has been well received by patients
and has freed-up valuable out-patient capacity in Spire Healthcare
hospitals so will remain a vital part of service delivery in the
future.
The Group's digital portals for both patients and our partners
are seeing record levels of bookings (58,190 in FY20 versus 43,920
in FY19) further highlighting growing demand for online services.
The Group also transferred its outsourced call handling service in
June to improve its capacity to respond to fluctuations in patient
enquiries and take direct bookings, handling over 8,500 overflow
calls per week in January 2021. Not only does this provide the
ability to meet the increased demand in enquires but also allows
some bookings to be made centrally. Both of these initiatives are
key steps to improving the patient pathway and making more
efficient use of our resources.
The introduction of electronic pre-operative assessment (ePOA)
was prioritised and piloted during 2020 in three Spire Healthcare
sites (Spire Nottingham, Spire Hartswood and Spire Leicester). Full
implementation of ePOA across all sites is now underway, which
should significantly reduce the use of paper within Spire
Healthcare whilst facilitating a better patient experience and
shorter processing time, thereby freeing up nursing time and
hospital consulting rooms.
Significant progress has been made on the development of a new
pricing system which will allow central oversight and optimisation
of self-pay pricing across the group. This platform will also make
it easier for Consultants to securely post and amend their own,
independently determined, charges. The project is now in pilot in
Spire Fylde Coast, Spire Liverpool, Spire Norwich and Spire St
Anthony's, with rollout to all hospitals expected over the course
of the year.
The Company also launched two new platforms with an aim to
improve the HR function during 2020. The first is a new
Oracle-based people management platform which consolidates four
existing HR systems (HR, payroll and two recruitment systems) into
one. This development aims to significantly reduce the paper and
administrative burden within HR whilst providing greater control
and transparency in payroll. The rollout experienced mixed success,
with disruption to accurate payments experienced by many colleagues
primarily as a result of different approaches to remuneration for
non-contracted hours across the portfolio of hospitals. We
apologised to those affected, and are working hard to correct
errors through changes to the system. The experience highlighted
the importance of a more integrated 'one Spire' way of working.
The second, Ryalto, is an app for Spire Healthcare colleagues,
which provides access to news and information about the business,
enabling a greater sense of connection to the Company, particularly
for hospital-based colleagues who are not able to access email
whilst at work. The improved communication has been very well
received and the live, interactive application is providing a
transformation to our ability to connect with, and listen to, our
colleagues. This Cloud-based system will be developed further to
allow managers to book bank and/or temporary workers and will link
to the Group's payroll systems.
COVID-19 response and activity
The COVID-19 pandemic required Spire Healthcare to react quickly
and remain adaptable to a frequently changing operating
environment, as clinical regulations and policies evolved. These
developments necessitated structural changes to managerial
engagement, communication and reporting, which led to all 39 Spire
Healthcare hospitals becoming more aligned operationally and
working more efficiently as one organisation. This way of working
should ensure a more streamlined decision making and communications
process throughout the Group going forwards.
NHS activity
Spire Healthcare is proud of the role it is playing to partner
with the NHS and ensure vital healthcare services are maintained.
Net revenues from the COVID-19 contracts in England, Wales and
Scotland totalled GBP362.7m in FY 20, leading to total NHS revenue
of GBP430.0m (FY 19: GBP285.7m). As of 31 December 2020 the Company
has seen over 210,000 NHS patients under the COVID-19 contracts.
Over 90,800 NHS patients were admitted for treatment including
27,300 for urgent cancer care. In certain regions the local NHS
trust transferred whole service lines, such as chemotherapy or
cystic fibrosis, to be managed by the local Spire Healthcare
hospital, and in other areas Spire Healthcare provided clinical
teams and equipment such as ventilators to support the provision of
care in the local NHS hospital. This collective response to the
COVID-19 pandemic has strengthened Spire Healthcare's relationship
with the NHS, both at a local and national level, and the Company
has received significant positive feedback from Consultants,
colleagues and patients.
Colleagues and Consultants
Spire Healthcare worked hard to support its colleagues during
the COVID-19 pandemic. The contract with the NHS protected the
employment of all clinical colleagues whilst, where appropriate,
administrative colleagues were retrained and redeployed to perform
a range of vital roles. Some colleagues volunteered to work in the
Nightingale hospitals or their local NHS trusts and, whilst a
maximum of 39 colleagues were furloughed at any point in time, no
one experienced a reduction in salary as Spire Healthcare topped up
the Government contribution. On 21 December, the Group announced
that it had committed to refund all payments received under the
furlough scheme. The Company has, in addition, announced an
exceptional financial COVID-19 gift of GBP500 to all colleagues not
on a bonus scheme, to thank them for their contribution. The
GBP7.3m cost of this payment has been met by the Company and not
charged to the NHS.
As a result of these efforts, and despite the challenging
environment, colleagues have reported feeling increasingly engaged
and confident in the future of the Group, as evidenced by the
results of a colleague survey in July. 80% of all colleagues
reported that they were proud to work for Spire Healthcare. For
three months at the start of the NHS COVID-19 contracts, Garry
Watts, Justin Ash and Jitesh Sodha agreed a 20% salary reduction,
and an equivalent sum of money has been donated to the NHS
Charities Together.
The COVID-19 pandemic significantly impacted the Consultants who
have practising privileges at Spire Healthcare, with minimal
private activity possible during the peak of the pandemic. Spire
Healthcare ensured regular communication with this important
stakeholder group and expanded its internal communications team to
include a Head of Consultant Communications.
Patient safety and clinical quality
Spire Healthcare remains unwavering in its commitment to patient
safety and clinical quality. The COVID-safe patient pathways that
were established in all hospitals in late May enabled a return to
near normal operating capacity from mid-Q3 until the end of the
year.
Two hospitals were inspected by the CQC in 2020 (versus 11 in
2019), and two were inspected virtually by Healthcare Inspectorate
Wales (one in 2019), all received Good or Positive reports, meaning
that 90% of the Group's sites are rated Good or Outstanding, up
from 85% at end FY19.
Spire Healthcare is aiming to be the largest provider of complex
care outside London with five Critical Care Units in the portfolio
following the opening of a new unit in Spire Nottingham at the
beginning of the pandemic. This strategy will remain a key focus in
2021 with up to three further critical care units planned for this
year.
The Company is working through the recommendations arising from
the Independent Inquiry into Mr Ian Paterson, published on 4
February 2020, and has written to all living patients of Paterson
for whom it had records, to make sure that their care had been
fully reviewed, that the outcome of the reviews had been fully
communicated and that, if required, they are getting the support
and care that they need. We are determined to minimise the chances
of another practitioner like Paterson ever operating in our
hospitals again, and all of the actions and interventions described
in the report, together with the changes we have made in recent
years, will help us to do this. The Group has recognised an
additional charge during the year accordingly (see note 9 for more
detail).
Doing the right thing
Doing the right thing is one of Spire Healthcare's six values.
In 2016 the Group set a five year target to reduce CO(2) e (carbon
dioxide equivalent emissions) from electricity and natural gas by
15% per pound of revenue by 2020, from the baseline year of 2015.
This energy reduction target was achieved ahead of schedule in
2017, and by end 2020 the Company's CO(2) e per pound of revenue
was reduced by 34%.
In December 2020 the Spire Healthcare Board approved a
decarbonisation strategy, designed to achieve net zero carbon
emissions by 31 December 2030. Some GBP16.0m of investment over the
next 10 years has been ring fenced to help achieve this aim and, as
a first step, from October 2021 the Company will procure 100% of
electricity from renewable sources.
During 2020 Spire Healthcare colleagues were keen to contribute
to their local communities in other ways beyond the invaluable care
they provide every day. This involved many charity initiatives. In
particular, in December, every hospital collected food and raised
money for local food banks, in partnership with the Trussell Trust.
Spire Healthcare then match-funded up to GBP250 for each site,
meaning a total of GBP20,000 was raised. We are very grateful to
our food supplier, Bidfood, who converted our financial donations
into food and then provided a generous supplementary food
donation.
We placed a particular emphasis on supporting our colleagues
during the crisis, both operationally and financially, providing
support packs and training along with robust individual colleague
risk assessments and making adjustments to keep our people safe. We
used digital platforms to maintain strong communication which
comprised comprehensive mental health support programmes, and Let's
Talk debates to foster a strong listening and learning culture.
These debates started with a very positive engagement on Black
Lives Matter which, amongst other initiatives, is helping us to
build new programmes that support our succession plans and grow
more Black leaders of the future. The Let's Talk programme is now
extending to other areas of diversity, inclusion and matters of
importance to our teams, and builds on our successful and sector
leading apprenticeship programme.
As a healthcare company, a focus on environmental, social and
governance (ESG) is an inherent part of Spire Healthcare's
business, and is firmly embedded in its Purpose to make a positive
difference to patients' lives though outstanding personalised care.
The Company has been working on a comprehensive ESG strategy which
it expects to launch in 2021 with appropriate KPIs and targets;
further information will be provided in due course.
Senior appointments in 2020
Professor Clifford Shearman (Cliff) joined Spire Healthcare as
an independent Non-Executive Director on 1 October 2020 and joined
the Clinical Governance and Safety Committee from 1 January
2021.
This appointment increases the number of Board members with
clinical experience to four, strengthening Spire Healthcare's
clinical governance and reflecting the Group's commitment to
patient safety and clinical quality. Professor Shearman was a
Consultant vascular surgeon for 26 years and is currently Vice
President of the Royal College of Surgeons. Professor Shearman is
also non-executive director at the Royal Bournemouth and
Christchurch NHS Foundation Trust.
Dr. Catherine Cale joined Spire Healthcare as Group Medical
Director on 26 October 2020. Catherine has served on Boards as
Medical Director in three organisations, each in different parts of
the health sector, most recently with Hillingdon Hospitals NHS
Foundation Trust in London. Catherine worked alongside Professor
Tim Briggs as Clinical Ambassador for the Getting It Right First
Time (GIRFT) initiative in London until February 2019, and
maintains strong links with the programme. Catherine trained in
Paediatric Immunology and Infectious Diseases and is a Fellow of
the Royal College of Pathology.
To strengthen further the medical support for hospitals and
Consultants, Spire Healthcare has recruited a Medical Governance
Lead. In addition, it has developed three new Regional Medical
Director posts, one for each of the three geographical business
units (North, Central and South). This is in addition to the
existing Responsible Officer post. The investment in this structure
is expected to further improve the medical performance standards,
and enhance the clinical voice throughout the business, reinforcing
the Group's commitment to patient safety and clinical quality.
Gillian Fairfield was appointed Group General Counsel on 1
September. Gillian is a senior lawyer with over 20 years of
experience in corporate law, regulatory, finance, and governance
and has worked with listed companies across a number of sectors.
Gillian has also previously worked as a partner in the corporate
division of international law firm Herbert Smith Freehills LLP and
has served as non-executive director and committee member of Lonmin
plc, a FTSE-listed public company.
Looking to the future
The impact of COVID-19 will remain for much of the first half of
2021, but the overall positive dynamics in our market have not
changed with lengthening waiting lists and significant demand in
both the NHS and private sector resulting from the postponement of
elective procedures during the pandemic.
Spire Healthcare's Purpose and underlying strategy is unchanged,
and the Company emerges from 2020 as a stronger organisation; the
positive relationships formed with all key stakeholders will, we
believe, provide a strong foundation for the business in the years
ahead.
First choice for private patients
Private patients are key to Spire Healthcare's strategy. The
limited ability to access elective care during the COVID pandemic
has led to the creation of a private waiting list for the first
time. A survey of target consumers conducted for Spire Healthcare
indicates that awareness of the role of the private sector in
supporting the NHS has led our target audience to view private
hospital providers in a more positive light, with 33% agreeing that
they are more likely to consider a private hospital than before as
a result. Furthermore, the survey indicated that 34% of Spire
Healthcare's target market has had a medical diagnosis or treatment
cancelled since spring 2020. There is a significant opportunity for
the Company to increase private activity and in 2021 we anticipate
a wider marketing campaign to help potential patients understand
how to access private healthcare. Our market research tells us that
patients want to know what is wrong with them, quickly, and our
digital strategy is designed to make private healthcare easier for
patients to navigate, from finding out about services on our
website, booking an appointment, through to accessing virtual
consultations and diagnostics.
To support rapid diagnosis, we anticipate investing GBP20m in
imaging equipment this year and will continue with modernisation
projects designed to transition our manual paper-based processes to
digital solutions. The introduction of ePOA and the pricing engine
are important steps on this journey, we expect to focus on our
pathology and order communications platforms next as we progress
towards the creation of a full electronic patient record.
Key partner to the NHS
The capacity provided by Spire Healthcare will make a critical
contribution to minimising the scale of the long-term NHS waiting
list and the duration of waiting times, and to the recovery of the
health system more broadly in 2021 and beyond. The recent White
Paper published by the Government seeks to evolve the structure of
the NHS by implementing Integrated Care Systems and simplifying the
procurement process for healthcare services. The changes are still
under review but we are encouraged by the proposals to strengthen
patient choice and the Any Qualified Provider process, which
signals that the independent sector remains a vital part of the
nation's healthcare infrastructure.
Uncompromising on patient safety
Patient safety and clinical quality is at the heart of
everything we do, and we are proud that 90% of our sites are now
rated Good or Outstanding by the CQC, or equivalent body in Wales
and Scotland. Only four of the Group's 39 hospitals are rated
requires improvement and these hospitals have not had a rated
inspection for over four years. We are hopeful that the CQC will
re-inspect the sites soon and believe we have taken the appropriate
steps to be positively re-rated.
A large part of the investment in quality and safety related to
increasing the number of clinical colleagues, particularly in
pre-assessment. Our colleagues are essential to our Purpose, and
are fundamental to our service delivery. We consistently receive
positive feedback from patients regarding the care they have
received from our colleagues. Despite the challenging circumstances
created by COVID, over the course of the year we have reduced staff
turnover from 15% to 12% and underlying staff absence through
sickness from 5.5% to 4.5% of contracted hours; however an
additional 4.5% of contracted hours were lost due to COVID-related
absence in 2020. We remain focussed on improving recruitment,
reward, training and retention in order to reduce reliance on
agency staff. We have placed a particular emphasis on ensuring that
when colleagues join us they have a positive experience, and the
proportion of new joiners leaving in one year fell from 35.2% in
2019 to 33.1% in 2020.
Agency costs as a proportion of total clinical costs fell from
7.7% in 2019 to 4.7% in 2020 as we acted to reduce unnecessary
costs in the early phase of the first contract when NHS surgical
activity was low. We anticipate an increase in 2021 as activity
builds but aim to reduce this over time, which will further improve
the patient experience, whilst lowering our clinical staff
costs.
Following the successful recruitment of 175 nurses from the
Philippines in 2018 and 2019, Spire Healthcare has recruited a
further 154 nurses from overseas who will join the Company in Q1 21
to ensure it has sufficient clinical staff to safely meet expected
demand. Approval has also been received to recruit an additional
125 overseas nurses in 2021, with a focus on theatre colleagues.
These nurses come with high clinical skills, and are supported by a
comprehensive induction programme before they transition to
providing care in our hospitals. We are proud that Spire Healthcare
has plans in place to use all of its apprenticeship levy
contributions made during the year and currently has 262
apprentices in training, of which 147 are clinical roles. This
makes Spire Healthcare a leading provider of apprenticeships and we
plan to expand this programme further in 2021, making a meaningful
contribution to training the UK's nurses of the future. In 2020
Spire Healthcare also had over 900 doctors receiving training under
NHS mentor supervision in its sites, playing an important role in
supporting the doctors of the future.
The Company continues to invest in patient safety and clinical
quality and is currently developing a standard operating procedure
for patient notification exercises, which does not currently exist
in UK healthcare, to ensure further quality improvements through
shared learnings.
Improving revenue, profit and cash
Our focus on patient safety and clinical quality helps to
attract patients, which in turn supports revenue growth. The
recovery in elective activity is likely to drive margin improvement
which can be further enhanced through cost efficiency programs. We
have a number of key projects planned, many of which have digital
transformation at the core. These include electronic patient
records, pathology order communications and remote CT reading. With
improved capital allocation we continue to strive to improve cash
generation to reduce debt and improve leverage.
2021 will see a material impact from the costs of COVID
compliance. These costs amounted to GBP32m in 2020 but we believe
we will be able to lower these in 2021, by reducing the costs of
COVID testing, pricing adjustments, and through the easing of some
restrictions later in the year. The impact of this cost increase is
accommodated in the Company's guidance. COVID security will
nonetheless remain a key part of hospital care for months or years
to come and costs may increase if testing guidance or protocols
change.
Financial review
Selected financial information
Year ended 31 December
Year ended 31 December 2020 2019
Adjusting Adjusting
Total before items Total before items
Adjusting (note Adjusting (note
(GBPm) items 9) Total items 9) Total
==================================== ============ ========= ======= ============ ========= =======
Revenue 919.9 - 919.9 980.8 - 980.8
Cost of sales (464.1) - (464.1) (529.4) - (529.4)
==================================== ============ ========= ======= ============ ========= =======
Gross profit 455.8 - 455.8 451.4 451.4
Other operating
costs (389.1) (213.3) (602.4) (353.8) (3.2) (357.0)
Other income 0.4 - 0.4 - - -
==================================== ============ ========= ======= ============ ========= =======
Operating (loss)
/ profit (EBIT) 67.1 (213.3) (146.2) 97.6 (3.2) 94.4
Net finance costs (85.6) 0.8 (84.8) (84.8) - (84.8)
==================================== ============ ========= ======= ============ ========= =======
(Loss) / profit
before taxation (18.5) (212.5) (231.0) 12.8 (3.2) 9.6
Taxation (2.2) (0.7) (2.9) (3.0) 0.6 (2.4)
==================================== ============ ========= ======= ============ ========= =======
(Loss) / profit
for the period (20.7) (213.2) (233.9) 9.8 (2.6) 7.2
==================================== ============ ========= ======= ============ ========= =======
EBITDA (1) 161.1 - 161.1 189.0 - 189.0
Basic (loss) / earnings
per share, pence (5.2) (53.2) (58.4) 2.4 (0.6) 1.8
FCF (2) 34.7 - 34.7 51.0 - 51.0
Capital investments 50.8 - 50.8 62.5 - 62.5
Net cash from operating
activities 159.7 - 159.7 201.7 - 201.7
Net bank debt (3) 314.5 - 314.5 330.0 - 330.0
==================================== ============ ========= ======= ============ ========= =======
1. EBITDA is calculated as Operating Profit, adjusted to add
back depreciation, and Adjusting items, referred to hereafter as
'EBITDA'. See page 11 for further information
2. FCF (Free Cash Flow) is calculated as EBITDA, less rent and
capital expenditure cash flows. Rent cash flows are defined as
Interest on, and Payment of, Lease Liabilities. Capital expenditure
cash flows are defined as the Purchase, and Proceeds on Disposal,
of Property, Plant and Equipment
3. Net bank debt is defined as bank borrowings less cash and cash equivalents
Revenue
Group revenues declined 6.2% to GBP919.9m (FY 19: GBP980.8m) due
to the suspension or restriction of private activity during the NHS
COVID-19 contracts. NHS revenue of GBP430.0m includes GBP362.7m
revenue from the COVID-19 contracts, net of rebates for private
activity. The NHS COVID-19 contracts are reimbursed on a cost
recovery basis and therefore the detail of revenue by location
(inpatient, day case or Out-patient) is not available.
Revenue by location and payor
Year ended 31 December
=============== ==========================
Variance
(GBPm) 2020 2019 %
=============== ======= ====== =========
Total revenue 919.9 980.8 (6.2%)
Of which:
Inpatient 188.3 370.5 (49.2%)
Day case 170.3 298.9 (43.0%)
Out-patient 181.9 286.9 (36.6%)
NHS - COVID-19 362.7 - NM(1)
Other 16.7 24.5 (31.8%)
Total revenue 919.9 980.8 (6.2%)
=============== ======= ====== =========
Of which:
PMI 337.6 491.8 (31.4%)
Self-Pay 135.6 178.8 (24.1%)
=============== ======= ====== =========
Total Private 473.2 670.6 (29.4%)
Total NHS 430.0 285.7 50.5%)
Other 16.7 24.5 (31.8%)
=============== ======= ====== =========
Total revenue 919.9 980.8 (6.2%)
=============== ======= ====== =========
(1 Not meaningful)
Cost of sales and gross profit
The COVID-19 pandemic and subsequent contracts with the NHS,
which resulted in revenue based on a cost recovery basis, in
addition to the different mix of work undertaken during the year,
distorts both the cost profile and its proportion of revenue.
Comparisons with prior periods are therefore not meaningful.
Gross profit increased by 1.0% (2019: 4.1%) to GBP455.8m (2019:
GBP451.4m). Gross margin increased by 350bp (2019: a decline of
60bp) to 49.5% ( 2019: 46.0%). Cost of sales decreased in the
period by GBP65.3m, or by 12.3%, to GBP464.1m (2019: GBP529.4m) on
revenues that decreased by 6.2%.
Cost of sales is broken down, and presented as a percentage of
relevant revenue, as follows:
2020 2019
=================== ===================
Year ended 31 Year ended 31
December December
=================== ===================
GBPm % of revenue GBPm % of revenue
=============== ===== ============ ===== ============
Clinical staff 212.6 23.1% 203.3 20.7%
Direct costs 192.8 21.0% 223.9 22.8%
Medical fees 58.7 6.4% 102.2 10.4%
===== ============
Cost of sales 464.1 50.5% 529.4 54.0%
=============== ===== ============ ===== ============
Gross profit 455.8 49.5% 451.4 46.0%
=============== ===== ============ ===== ============
Hospital operating profit margin (gross profit less indirect
hospital costs) was 26.4% compared to 25.2% in 2019.
Other operating costs
Other operating costs for the year ended 31 December 2020
increased by GBP245.4m or 68.7% to GBP602.4m (2019: GBP357.0m). The
main driver for this increase is a one-off non-cash charge for
impairment relating to goodwill as reported in H1 2020 of GBP200m
which has been reported as an Adjusting item. Excluding Adjusting
Items, other operating costs have increased by GBP35.3m, or 10.0%
to GBP389.1m (2019: GBP353.8m).
The increase in other operating costs is mainly driven by
increased COVID-19 related costs including GBP11.0m for testing, as
well as increased staff costs.
Operating margin for the year ended 31 December 2020 is negative
15.9%, down from a positive 9.6% in 2019. Excluding Adjusting
Items, operating margin is 7.3%, down from 10.0% at 2019.
EBITDA
EBITDA for the Group has decreased by 14.8% in the period from
GBP189.0m to GBP161.1m for 2020. The decrease is driven by a fall
in revenue following restrictions over private activity during the
COVID-19 pandemic, which is partially offset by decreased cost of
sales, namely direct costs and medical fees.
Share-based payments
During the period, grants were made to Executive Directors and
other employees under the Company's Long Term Incentive Plan. For
the year ended 31 December 2020, the charge to the income statement
is GBP1.7m (2019: GBP1.0m), or GBP1.9m inclusive of National
Insurance (2019: GBP1.1m). In addition, the Group has a Share save
scheme which was launched in 2019. Further details are contained in
note 27 of the Annual Report and Accounts.
Adjusting items
Year ended 31 December
(GBPm) 2020 2019
====================================================== =========== ===========
Asset disposals, impairment and aborted project costs 200.3 (0.1)
Remediation of regulatory compliance or malpractice 12.8 1.9
Hospitals set up and closure costs 0.2 0.3
Business reorganisation and corporate restructuring - 1.1
====================================================== =========== ===========
Total operating costs 213.3 3.2
Interest receivable on Adjusting item (0.8) -
====================================================== =========== ===========
Total pre-tax other costs 212.5 3.2
Income tax charge / (credit) on Adjusting Items 0.7 (0.6)
====================================================== =========== ===========
Total post-tax other costs 213.2 2.6
====================================================== =========== ===========
Adjusting items comprise those matters where the Directors
believe the financial effect should be adjusted for, due to their
nature or amount, in order to provide a more accurate comparison of
the Group's underlying performance.
In the period, the Group booked an impairment charge in respect
of goodwill of GBP200m (see note 13 for more detail) and posted a
GBP0.3m impairment on an asset held for sale following a change to
the property market brought about by the pandemic.
In the prior period, asset disposals, impairment and aborted
project costs netted a credit of GBP0.1m comprising: a credit of
GBP2m in connection with the reversal of an impairment charge on a
property which had been classified as held for sale, offset by the
GBP0.1m impairment on classification of another asset as held for
sale; a further charge of GBP0.3m taken for aborted project costs
relating to a potential hospital development at Milton Keynes; and
a write down of GBP1.5m against non-sterile Single Use Devices as a
consequence of the Medical Device Regulations (MDR) change.
The Group has recognised GBP12.8m (2019: GBP1.9m) of charges
relating to Remediation of Regulatory Compliance or Malpractice
Costs, this includes the following two matters:
-- During the year, a judgment was received in favour of the
Group in its case against one of its insurers relating to Ian
Paterson and the Group was awarded GBP11.6m, including GBP0.8m of
interest. The net difference of GBP10.8m is reported within
Remediation of Regulatory Compliance or Malpractice Costs and
GBP0.8m is shown in the above table as Interest Receivable on
Adjusting Items. The insurer has sought to appeal the ruling at the
Court of Appeal and the Group is awaiting the outcome of this
request. The Group is committed to providing on-going support to
Paterson's patients, and following the release of the Paterson
Public Inquiry in February 2020, the Group has incurred, or
provided for, costs of GBP22.2m during the year.
-- During 2020 the Group reached a settlement with the
Competition and Marketing Authority (CMA) as disclosed in the RNS
announcement released on 1 July 2020. Professional costs in respect
of the CMA investigation have also been recognised, bringing the
total cost recognised in the period to GBP1.3m.
During the prior year the GBP1.9m remediation charge related to
two separate regulatory compliance issues. One of the issues
related to the temporary closure of a specific site to make
improvements following a CQC inspection. The second issue related
to expected, but uncertain costs for a regulatory compliance
matter.
Hospital set up and closure costs mainly relate to the
maintenance of costs of non-operational sites.
In the prior year, business reorganisation and corporate
restructuring costs of GBP1.1m primarily related to internal group
reorganisation costs associated with a strategic review in 2019
which specifically covered Clinical and Operational functions.
Those costs were excluded from adjusted operating profit as they
related to a fundamental change in how those areas were organised
and functioned.
Net finance costs
Net finance costs remained static at GBP84.8m (2019: GBP84.8m).
However net finance costs included Adjusting items of GBP0.8m, for
interest income on the RSA judgment (see note 9 for further
details). Excluding Adjusting items, net finance costs increased by
0.9% (2019: 10.6%) to GBP85.6m (2019: GBP84.8m).
Taxation
The effective tax rate assessed for the year, all of which
arises in the UK, differs from the standard weighted rate of
corporation tax in the UK. The reconciliation of the actual tax
charge to that at the domestic corporation tax rate is as
follows:
Year ended 31 December
========================
(GBPm) 2020 2019
================================================== ============= =========
(Loss) / profit before taxation (231.0) 9.6
================================================== ============= =========
Tax at the standard rate (43.9) 1.8
Effects of:
Expenses and income not deductible or taxable 5.6 2.8
Impairment charge in respect of goodwill (not tax
deductible) 38.0 -
Adjustments to prior year (2.4) (1.5)
Difference in tax rates 5.8 (0.4)
Deferred tax not previously recognised (0.2) (0.3)
================================================== ============= =========
Total tax charge 2.9 2.4
================================================== ============= =========
The effective tax rate on profit before taxation for the year
was negative (1.3%) (2019: positive 25.0%), which is mainly driven
by the effects of revaluing deferred tax assets and liabilities to
19% following the abolishment of the rate reduction to 17% due in
April 2020, and the permanent difference relating to the GBP200m
impairment charge. Without these items, the effective tax rate is
9.4% (2019: 29.2%). Deferred tax is detailed in note 23 of the
Annual Report and Accounts.
As announced in the budget on 3 March 2021, the Government are
intending to increase the corporation tax rate from 19% to 25% from
April 2023. As this rate was not substantively enacted at the
balance sheet date, it has not been used to calculate the deferred
tax balances. If the net deferred tax liability as at 31 December
2020 were to reverse at the tax rate of 25% the net deferred tax
liability would increase by GBP17.0m.
Profit after taxation
The loss after taxation for the year ended 31 December 2020 was
GBP233.9m (2019: Profit GBP7.2m).
Adjusted financial information
This statement was prepared for illustrative purposes only and
did not represent the Group's actual earnings. The information was
prepared as described in the notes set out below.
Non-GAAP financial measures
We have provided in this release financial information that has
not been prepared in accordance with IFRS. We use these non-GAAP
financial measures internally in analysing our financial results
and believe they are useful to investors, as a supplement to IFRS
measures, in evaluating our ongoing operational performance. We
believe that the use of these non-GAAP financial measures provides
an additional tool for investors to use in evaluating ongoing
operating results and trends in comparing our financial results
with other companies in the industry, many of which present similar
non-GAAP financial measures to investors.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with IFRS. Investors are encouraged to
review the reconciliation of these non-GAAP financial measures to
their most directly comparable IFRS financial measures provided in
the financial statements table in the press release.
EBITDA and Adjusted EBIT
Year ended 31 December
========================
(GBPm) 2020 2019
====================================================== ============= =========
Operating (loss) / profit (146.2) 94.4
Remove effects of:
Adjusting items before interest and tax(1) 213.3 3.2
====================================================== ============= =========
Adjusted EBIT 67.1 97.6
Depreciation (including profit/ loss on sale of fixed
assets) 94.0 91.4
EBITDA 161.1 189.0
====================================================== ============= =========
(1 Adjusting items before tax total GBP212.5m including the
GBP0.8m interest receivable on the RSA judgment awarded to Spire
Healthcare. Interest receivable is not included in EBIT or
EBITDA.)
Adjusted profit after tax and adjusted earnings per share
Adjustments have been made to remove the impact of a number of
non-recurring items.
Year ended 31 December
========================
(GBPm) 2020 2019
========================================================== =========== ===========
(Loss) / profit before tax (231.0) 9.6
Adjustments for:
Adjusting Items - operating costs 213.3 3.2
Adjusting items - interest receivable (0.8) -
========================================================== =========== ===========
Adjusted (loss) / profit before tax (18.5) 12.8
Taxation(1) (2.2) (3.0)
========================================================== =========== ===========
Adjusted (loss) / profit after tax (20.7) 9.8
========================================================== =========== ===========
Weighted average number of ordinary shares in issue (No.) 400,835,795 400,828,739
========================================================== =========== ===========
Adjusted (loss) / earnings per share (pence) (5.2) 2.4
========================================================== =========== ===========
1 Reported tax charge for the period adjusted for the tax effect of Adjusting Items
Cash flow analysis for the period
Year ended 31 December
========================
(GBPm) 2020 2019
======================================================= =========== ===========
Opening Cash balance 90.8 47.7
======================================================= =========== ===========
Operating cash flows before Adjusting Items and income
tax paid 158.9 205.5
Adjusting Items (2.8) (2.7)
Income tax received / (paid) 3.6 (1.1)
======================================================= =========== ===========
Operating cash flows after Adjusting Items and income
tax 159.7 201.7
Net cash in investing activities (46.3) (48.6)
Net cash in financing activities (97.9) (110.0)
===========
Closing cash balance 106.3 90.8
======================================================= =========== ===========
Operating cash flows before Adjusting items
The cash inflow from operating activities before tax and
Adjusting items was GBP158.9m (2019: GBP205.5m inflow), which
constitutes a cash conversion rate from GBP161.1m EBITDA of 99%
(2019: 109% conversion of GBP189.0m EBITDA). The net cash outflow
from movements in working capital in the period was GBP3.9m (2019:
GBP17.9m inflow). This movement largely represents the accrued
income at year end of GBP35.0m (2019: GBP13.0m) and the increase in
provision of GBP19.9m (2019: decrease of GBP3.3m).
Investing and financing cash flows
Net cash used in investing activities for the period was
GBP46.3m (2019: GBP48.6m). Cash outflow for the purchase of plant,
property and equipment in the period totalled GBP46.6m (2019:
GBP60.6m), which included theatre refurbishments in Liverpool, a
new MRI in Southampton, a new CT at St Anthony's, a new boundary
wall and car park at Spire Bristol and the implementation of Safe
Pathways across all hospitals. The total capital investment in the
year in respect of additions of plant, property and equipment
amounted to GBP50.8m (2019: GBP62.5m) and the difference between
additions and the cash outflow during the year will result in an
additional cash outflow during 2021 upon receipt of invoice.
Net cash used in financing activities for the period was
GBP97.9m (2019: GBP110.0m), including interest paid and other
financing costs of GBP84.5m (2019: GBP75.5m), and GBP13.4m (2019:
GBP19.3m) of lease liability payments. No dividend has been paid to
shareholders (2019: GBP15.2m).
Borrowings
At 31 December 2020, the Group has bank borrowings (inclusive of
IFRS 9 adjustments) of GBP420.8m (2019: GBP420.8m), drawn under
facilities which mature in July 2023.
Year ended 31 December
========================
(GBPm) 2020 2019
===================================================== =========== ===========
Cash 106.3 90.8
===================================================== =========== ===========
Bank borrowings 420.8 420.8
===================================================== =========== ===========
Bank borrowings less cash and cash equivalents ("net
bank debt") 314.5 330.0
===================================================== =========== ===========
During the course of the year, the Group negotiated bank waivers
and put in place a new liquidity covenant (see the going concern
section in note 2 for more detail).
The Group has an undrawn revolving credit facility of GBP100.0m
(2019: GBP100.0m) available until July 2022 and a reduced balance
of GBP87m available to July 2023.
Net debt for the purposes of the covenant test in respect of the
Senior Loan Facility was GBP318.7m (2019: GBP334.2m) and the net
debt to EBITDA ratio was 3.9x (2019: 3.0x). The net debt for
covenant purposes comprises the senior facility of GBP425.0m less
cash and cash equivalents. EBITDA for covenant purposes comprises
pre-IFRS 16 EBITDA of GBP90.7m (2019: GBP120.5m) less the annual
rental of a finance lease pre-IFRS 16 of GBP8.8m (2019:
GBP8.6m).
Interest cover is 4.0x (2019: 4.8x).
As at 31 December 2020 lease liabilities were GBP749.5m (2019:
GBP745.3m). Refer to note 17 for more detail.
Dividend
No dividend is proposed for the year ended 31 December 2020.
Related party transactions
There were no significant related party transactions during the
period under review.
Principal Risks
The Principal Risks fall under the following categories:
Clinical & Patient Safety Technology
1. Patient Safety & Clinical Quality 10. Information Governance & Security
People Social
2. Workforce 11. Covid-19 pandemic
12. Brand Reputation
Financial Governance
3. PMI market dynamics 13. Compliance and Regulation
4. Macroeconomic
5. Competitor Challenge
6. Insurance & Indemnity
7. Liquidity & Covenants
Geopolitical
8. Government and NHS Policy
9. UK-EU Trade Relations
Risk Risk Mitigation
==================== ====================================================================
1. Patient In response to the COVID-19 pandemic, the Group introduced
Safety and a specific infection prevention control programme to minimise
Clinical Quality the risk of hospital acquired COVID-19 infections that
included:
* Red, Amber & Green patient pathways,
* PPE ,
* Testing of patients, colleagues and Consultants.
The Group maintains controls to mitigate against a failure
of patient safety and clinical quality:
* A reporting culture of openness and shared learning
from Ward-to-Board, with a FTSUG at each site
* Incident reporting via a database with central
oversight
* Continual monitoring of clinical standards, reporting
progress via the Clinical Governance and Safety
Committee ('CGSC'). A schedule of robust and regular
hospital audits including the Patient Safety and
Quality Reviews, with an action plan for improvement.
* Colleague induction, clinical competencies
requirements and mandated training
Reporting on clinical outcomes with workforce and Consultants
including the Chairs of hospital Medical Advisory Committees.
====================================================================
2. Workforce The Group seeks to retain staff through:
* A common purpose and a positive workplace culture.
* Maintaining competitive pay and benefits.
* Responding to key metrics such as staff turnover,
rookie staff levels (less than one-years' service),
vacancy rates and levels of positive engagement from
staff surveys.
* Continuous investment in its equipment, facilities
and services to retain high-quality clinicians.
The Group seeks to recruit staff through:
* A centralised recruitment processes
* An overseas recruitment capability to secure skilled
healthcare workers from outside the EU where
necessary.
* Offering apprenticeship programmes to support the
development of clinical and non-clinical teams across
the business.
* Working with the Royal Colleges to offer
Consultant-training opportunities in the private
sector.
* Building of local bank staff pools
The Group manages immediate staff shortages with agency
and bank workers.
====================================================================
3. PMI Market The Group works hard to maintain good relationships and
Dynamics a joint product/patient health offering with the PMI companies,
which, in the opinion of the Directors, assists the healthcare
sector as a whole in delivering high-quality patient care.
The Group ensures it has have long-term contracts in place
with its PMI partners to avoid co-termination of contractual
arrangements.
The Group believes continuing to invest in its well-placed
portfolio of hospitals provides a natural fit to the local
requirements of all the PMI providers' long term. The Group
continues to invest in efficiency programmes to ensure
that it can offer cost effective high quality patient care
====================================================================
4. Macroeconomics The evidence available to the Group indicates that the
COVID-19 pandemic has left high levels of pent up demand
for the Group's services.
The ability for patients to access private care does not
appear presently to be constrained financially. The Group
understands that private medical insurance policy renewals
and sales remain healthy, and the Group has itself seen
higher enquiries from self-pay patients than in 2019 with
a rapid recovery in self-pay patient care seen in Q4 2020.
In the medium to long term, the Group seeks to have flexibility
to respond to changing economic circumstances with a blend
of private and NHS funded work that does not leave the
Group over reliant on one income source, supported by an
efficient cost base.
====================================================================
5. Competitor The market has seen increased pressure in 2019 and the
Challenge Group maintains a watching brief on new and existing competitor
activity and retains the ability to react quickly to changes
in patient and market demand.
The Group considers that a partial mitigation of the impact
of competitor activity is ensured by providing patients
with high-quality clinical care and by maintaining good
working relationships with General Practitioners and Consultants.
The Group continues to invest in the brand and deliver
an effective acquisition capability both direct and via
our partners in order to protect our market position. It
has also strengthened its pricing and tendering capabilities.
Despite the COVID-19 pandemic, the Group plans to maintain
its investment into the estate and clinical equipment to
differentiate our proposition.
The Group monitors the market for opportunities, should
they arise, to acquire or open facilities in specific geographies
creating incremental volume.
====================================================================
6. Insurance The Group reviews and maintains insurance to mitigate the
& Indemnity possibility of a major loss. Adequacy of cover is reviewed
annually with the Group's brokers with coverage being maintained
or increased depending on that advice.
Personal injury claims relating to patients, third parties
and employees are covered by insurance once predetermined
deductible levels have been reached.
The Group engages in consultation information events relating
to indemnity and has developed a bespoke affinity insurance
product MedicaInsure to provide Consultants with a high-quality,
regulated alternative to discretionary cover. The Group
has made robust representations to Government and the Paterson
Inquiry with regard to the need to end discretionary indemnity
and to regulate the medical defence organisations
====================================================================
7. Liquidity The Group actively monitors and manages its liquid asset
and Covenants position, its financial liabilities falling due and the
cover against its loan covenants is actively focused on
cash management and capital expenditure.
At the onset of the COVID-19 pandemic, the Group was able
to engage positively with its banking group with the result
that the Group benefited from covenant waivers in 2020.
For June 2021, the banking group has again agreed to waive
the covenant tests under its current loan agreements, and
provide additional headroom for the December 2021 covenant
tests as set out in the Going Concern section of Note 2
to the Financial statements. Note 2 also describes the
extended facility to 2023.
The Group retains access to an unutilised GBP100m (reducing
to GBP87m from July 2022 until July 2023) revolving credit
facility should its current cash position materially deteriorate.
The Group has a solid asset base with the ability to leverage
in a short timescale, if required.
The Board has considered the risk in detail as part of
its assessment of the viability of the Group.
====================================================================
8. Government Historically, the Group derived 70% of its revenues from
& NHS Policy PMI and Self-pay patients that provided a natural 'hedge'
against exposure to Government and NHS policy. Post pandemic,
the Group will seek to recover its private revenues as
far as possible to restore that hedge.
The Group has successfully secured accreditation on the
NHS Framework to be considered for future contracts.
Through the COVID-19 pandemic, the Group has increased
its relationships with the Government via DoHSC, NHS England
and NHS Improvement. Contact is both directly and through
the Independent Healthcare Providers Network where the
Group contributed staff across working groups set up to
manage the private sector's response to the COVID-19 pandemic.
====================================================================
9. UK-EU Trade In 2019, the Group undertook a risk assessment. It developed
Relations comprehensive plans across all key risk areas to minimise
disruption, including: utilising its national supply chain
and distribution centre to efficiently utilise stock; undertaking
supplier assurance; liaising with NHS England and the Department
of Health planning team and promoting the EU settlement
scheme to relevant staff.
In 2021, the Group's Brexit Steering Committee continues
to monitor the Group's resilience to the identified key
risk areas. The Group has maintained its pre-Brexit key
supply levels as a precautionary measure. To date there
has been minimal disruption to the Group's operations.
====================================================================
10. Information The Group has a governance structure, with Board oversight,
Governance that monitors the risk and mitigations for information
& Security governance. To support the governance structure the Group
has a range of policies and practices covering information
governance. All staff have to complete annual mandatory
training on information governance and data protection.
The Group's IT team have a cyber-security strategy for
continuous improvement based on industry standards. It
covers the processes from identifying specific risks, to
protecting physical and digital data assets through to
recovery in the event of a successful cyber-attack.
The Group works with a number of industry leading technical
partners to provide:
* multiple layers of business protection through the
use of advanced detection and protection systems,
* Regular third-party penetration testing on new and
existing IT systems.
* Assessment of maturity of control environment against
international control frameworks
====================================================================
11. COVID-19 To maximise the utilisation of the hospitals the Group
Pandemic has:
* Negotiated a short-term contract from 1 Jan 2021 - 31
March 2021 based on activity with a minimum activity
underpin.
* Negotiated national contracts with the NHS to support
them to provide capacity for treating the backlog of
elective procedures.
* Maintained capacity within the contractual
arrangements with the NHS for PMI and Self-pay
patients (overridden in Surge scenarios).
* Maintained close links with the Consultant community
and support them build their private patient
activities.
* Maintained the Infection Prevention Control measures
to reduce the risk of cross contamination amongst
staff at Spire Healthcare facilities. These measures
include regularly testing all staff and patients for
COVID-19.
The Group is supporting the national vaccination programme.
Frontline clinical staff will be prioritised with NHS frontline
clinical staff.
====================================================================
12. Brand Reputation The Group's primary mitigations against damage to its brand
reputation is through the good management of its principal
risks, in particular:
* Patient safety and clinical quality;
* Cyber security and data protection; and,
* Compliance and regulation.
Specifically in 2021 the Group will:
* Continue to support the NHS through the COVID-19
pandemic;
* Continue to focus on enhanced infection prevention
control to minimise patient and staff risk from
COVID-19
* Substantially complete its response to the
recommendations of the Independent Inquiry into the
issues raised by Ian Paterson
* Launch its first national television advertising
campaign focused on its core purpose.
The Group has built greater capability to manage its social
media, online presence and public relations during 2020.
====================================================================
13. Compliance The Group has a Ward-to-Board system of governance that
& Regulation ensures compliance with law and regulation and provides
the pathways to add different elements of compliance, should
regulation/laws change and thus the need arise
Key components that support the Ward-to-Board governance
structure for compliance and regulation include:
* A dedicated legal team and company secretary that,
with external counsel, monitors legal and regulatory
developments and advises the group thereon.
* Regular, role specific, mandatory training for all
staff (both clinical and non-clinical) across a range
of the most important legal and regulatory compliance
areas, e.g. data protection, health & safety laws and
safeguarding.
* Centralised clinical and non-clinical internal audit
teams that carry out site audits and assists
hospitals in establishing and maintaining a high
level of internal control.
====================================================================
Directors' responsibilities statement
Viability
Assessment of prospects
In accordance with the 2018 UK Corporate Governance Code, the
Directors assessed the viability of the Group and have maintained a
period of three years for their assessment. Although longer periods
are used when making significant strategic decisions, three years
has been used as it is considered the longest period of time over
which suitable certainty for key assumptions in the current climate
can be made. The assessment conducted considered the Group's
current financial position and forecasted revenue, EBITDA, cash
flows, risk management controls and loan covenants over the
three-year period (which is consistent with the approach for prior
years).
Assessment of viability
Further detail on both Macroeconomic related risk and COVID-19
is provided in the Risk management and internal control section in
the Strategic Report.
Other specific scenarios covered by our testing were as
follows:
-- a key hospital is subject to permanent or temporary
suspension of trade, for example, due to a major fire or regulatory
matter;
-- the Group is subject to temporary suspension of trade, with a
temporary adverse impact on revenue, for example, as a result of a
successful cyber-attack on key business systems;
-- the downside modelling of a number of risks which result in a
decline in earnings, including the loss of a contractual
relationship with a key insurer;
-- significant change in Government or NHS policy; and
-- the business is subject to significant uninsured losses
arising from medical malpractice, negligence or similar claims.
This review included the following key assumptions:
-- no change in capital structure given the Group extended its
existing senior finance facility and revolving credit facility to
mature in July 2023; and
-- the Government will not make significant change to its
existing policy towards utilising private provision of healthcare
services to supplement the NHS.
The Group has also assessed, as part of its reverse stress
testing, what degree of downturn in trading it could sustain before
it no longer forecasts a positive cash balance. This stress testing
was based on flexing revenue downwards with a consistent percentage
decline in variable costs, whilst maintaining the forecast of fixed
costs. The testing did not allow for the benefit of any action that
could be taken by management to preserve cash. This testing
suggested that there would have to be at least a 35% fall in annual
revenue before the Group no longer forecast a positive cash
balance. We do not believe that such a reduction of income revenue
is a plausible consequence of the Group's identified principal
risks.
Based on the results of this analysis, the Directors confirm
that they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due
over the next three years.
Going Concern (see note 2. Basis of Preparation for more
detail)
The Group has undertaken extensive activity to identify
plausible risks which may arise and mitigating actions. Further
information on these is provided in the section on Viability above.
Based on the current assessment of the likelihood of these risks
arising by the 31 March 2022, together with their assessment of the
planned mitigating actions being successful, the Directors have
concluded that it is appropriate to prepare the accounts on a going
concern basis.
Each of the Directors confirms that, to the best of their
knowledge:
-- The preliminary financial information, which has been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 (and
IFRSs adopted pursuant to Regulation(EC) No 1606/2002 as it applies
in the European Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
on a consolidated and individual basis; and
-- The preliminary announcement includes a fair summary of the
development and performance of the business and the position of the
Company on a consolidated and individual basis, together with a
description of the principal risks that it faces.
By order of the Board
Justin Ash Jitesh Sodha
Chief Executive Officer Chief Financial Officer
3 March 2021
Consolidated income statement
For the year ended 31 December 2020
2020 2019
============================== ================================
Total Adjusting Total Adjusting
before items before items
Adjusting (note Adjusting (note
(GBPm) Note items 9) Total items 9) Total
============================ ==== ========== ========= ======= ========== ========= =======
Revenue 5 919.9 - 919.9 980.8 - 980.8
Cost of sales (464.1) - (464.1) (529.4) - (529.4)
============================ ==== ========== ========= ======= ========== ========= =======
Gross profit 455.8 - 455.8 451.4 - 451.4
Other operating costs (389.1) (213.3) (602.4) (353.8) (3.2) (357.0)
Other income 6 0.4 - 0.4 - - -
============================ ==== ========== ========= ======= ========== ========= =======
Operating (loss) / profit 7 67.1 (213.3) (146.2) 97.6 (3.2) 94.4
Finance income 8 0.1 0.8 0.9 0.2 - 0.2
Finance cost 8 (85.7) - (85.7) (85.0) - (85.0)
============================ ==== ========== ========= ======= ========== ========= =======
(Loss) / profit before
taxation (18.5) (212.5) (231.0) 12.8 (3.2) 9.6
Taxation 10 (2.2) (0.7) (2.9) (3.0) 0.6 (2.4)
============================ ==== ========== ========= ======= ========== ========= =======
(Loss) / profit for the
year (20.7) (213.2) (233.9) 9.8 (2.6) 7.2
============================ ==== ========== ========= ======= ========== ========= =======
(Loss) / profit for the
year attributable
to owners of the Parent (20.7) (213.2) (233.9) 9.8 (2.6) 7.2
============================ ==== ========== ========= ======= ========== ========= =======
(Loss) / earnings per
share (in pence per share)
- basic 11 (5.2) (53.2) (58.4) 2.4 (0.6) 1.8
- diluted 11 (5.2) (53.2) (58.4) 2.4 (0.6) 1.8
============================ ==== ========== ========= ======= ========== ========= =======
Consolidated statement of comprehensive income
For the year ended 31 December 2020
(GBPm) 2020 2019
================================================================= ======= =====
(Loss) / profit for the year (233.9) 7.2
================================================================= ======= =====
Items that may be reclassified to profit or loss in subsequent
periods
================================================================= ======= =====
Net loss on cash flow hedges (net of taxation) (1.1) (1.6)
================================================================= ======= =====
Other comprehensive loss for the year (1.1) (1.6)
================================================================= ======= =====
Total comprehensive (loss) / income for the year attributable
to owners of the Parent (235.0) 5.6
================================================================= ======= =====
Consolidated statement of changes in equity
For the year ended 31 December 2020
Share EBT share
Capital Capital reserves Hedging
(note Share reserves (note Reserve Retained Total
(GBPm) Note 16) premium (note 16) 16) (note 16) earnings Equity
======================= ==== ======== ======== ========== ========= =========== ========= =======
As at 1 January 2019 4.0 826.9 376.1 (0.8) (0.5) (257.2) 948.5
Profit for the year - - - - - 7.2 7.2
Other comprehensive
loss for the year - - - - (1.6) - (1.6)
----------------------- ---- ======== ======== ========== ========= =========== ========= =======
Total comprehensive
income - - - - (1.6) 7.2 5.6
Dividend paid 20 - - - - - (15.2) (15.2)
Share-based payments 21 - - - - - 1.0 1.0
As at 1 January 2020 4.0 826.9 376.1 (0.8) (2.1) (264.2) 939.9
Loss for the year - - - - - (233.9) (233.9)
Other comprehensive
loss for the year - - - - (1.1) - (1.1)
----------------------- ---- -------- -------- ---------- --------- =========== ========= =======
Total comprehensive
loss - - - - (1.1) (233.9) (235.0)
Share-based payments 21 - - - - - 1.7 1.7
Balance at 31 December
2020 4.0 826.9 376.1 (0.8) (3.2) (496.4) 706.6
======================= ==== ======== ======== ========== ========= =========== ========= =======
Consolidated balance sheet
For the year ended 31 December 2020
(GBPm) Note 2020 2019 (restated)
============================================ ==== ======= ===============
ASSETS
Non-current assets
Property, plant and equipment 12 1,535.3 1,563.4
Intangible assets 13 317.8 517.8
Financial assets 1.6 1.5
1,854.7 2,082.7
============================================ ==== ======= ===============
Current assets
Inventories 37.6 32.0
Trade and other receivables 14 101.4 73.0
Income tax receivable - 3.6
Cash and cash equivalents 106.3 90.8
============================================ ==== ======= ===============
245.3 199.4
============================================ ==== ======= ===============
Non-current assets held for sale 15 4.8 5.1
============================================ ==== ======= ===============
250.1 204.5
============================================ ==== ======= ===============
Total assets 2,104.8 2,287.2
============================================ ==== ======= ===============
EQUITY AND LIABILITIES
Equity
Share capital 16 4.0 4.0
Share premium 826.9 826.9
Capital reserves 16 376.1 376.1
EBT share reserves (0.8) (0.8)
Hedging reserve 16 (3.2) (2.1)
Retained earnings (496.4) (264.2)
============================================ ==== ======= ===============
Equity attributable to owners of the Parent 706.6 939.9
============================================ ==== ======= ===============
Total equity 706.6 939.9
============================================ ==== ======= ===============
Non-current liabilities
Bank Borrowings 17 418.6 419.1
Lease liabilities 17 670.3 667.8*
Derivatives 17 1.5 1.5
Deferred tax liabilities 53.9 51.4
============================================ ==== ======= ===============
1,144.3 1,139.8
============================================ ==== ======= ===============
Current liabilities
Bank Borrowings 2.2 1.7
Lease liabilities 17 79.2 77.5*
Derivatives 17 2.5 1.0
Provisions 18 33.0 13.1
Trade and other payables 19 136.9 114.2
Income tax payable 0.1 -
============================================ ==== ======= ===============
253.9 207.5
============================================ ==== ======= ===============
Total liabilities 1,398.2 1,347.3
============================================ ==== ======= ===============
Total equity and liabilities 2,104.8 2,287.2
============================================ ==== ======= ===============
*(For details of prior period restatement, see note 2 Basis of
Preparation)
These Consolidated financial statements and the accompanying
notes were approved for issue by the Board on 3 March 2021 and
signed on its behalf by:
Justin Ash
Chief Executive Officer
Jitesh Sodha
Chief Financial Officer
Consolidated statement of cash flows
For the year ended 31 December 2020
(GBPm) Note 2020 2019
======================================================= ==== ======= ========
Cash flows from operating activities
(Loss)/profit before taxation (231.0) 9.6
Adjustments for:
Impairment of goodwill (Adjusting items) 13 200.0 -
Impairment of assets held for sale (Adjusting items) 15 0.3 0.1
Adjusting items - other 9.4 -
Depreciation 12 94.0 91.6
Reversal of impairment on assets held for sale 15 - (2.0)
(Profit)/loss on disposal of property plant and
equipment 6 - (0.2)
Finance income 8 (0.1) (0.2)
Finance costs 8 85.7 85.0
Share-based payments 21 1.7 1.0
======================================================= ==== ======= ========
160.0 184.9
Movements in working capital:
(Increase)/Decrease in trade and other receivables (15.5) 8.1
(Increase) in inventories (5.6) (2.6)
Increase in trade and other payables 18.5 15.7
Increase/(decrease) in provisions (1.3) (3.3)
======================================================= ==== ======= ========
Cash generated from operations 156.1 202.8
Tax received/(paid) 3.6 (1.1)
======================================================= ==== ======= ========
Net cash from operating activities 159.7 201.7
======================================================= ==== ======= ========
Cash flows from investing activities
Interest received 0.1 0.2
Income from financial asset 0.2 -
Purchase of property, plant and equipment (46.6) (60.6)
Proceeds on disposal of property, plant and equipment - 0.2
Proceeds on disposal of assets held for sale - 11.6
======================================================= ==== ======= ========
Net cash used in investing activities (46.3) (48.6)
======================================================= ==== ======= ========
Cash flows from financing activities
Interest paid and other financing costs (18.1) (17.4)
Interest on lease liabilities (66.4) (58.1)
Payment of lease liabilities (13.4) (19.3)
Dividends paid to equity holders of the Parent 20 - (15.2)
Net cash used in financing activities (97.9) (110.0)
======================================================= ==== ======= ========
Net increase in cash and cash equivalents 15.5 43.1
Cash and cash equivalents at 1 January 90.8 47.7
======================================================= ==== ======= ========
Cash and cash equivalents at 31 December 106.3 90.8
======================================================= ==== ======= ========
Adjusting items (note 9)
Adjusting items paid included in the cash flow (2.8) (2.7)
Total Adjusting items 9 (212.5) (3.2)
======================================================= ==== ======= ========
Notes to the preliminary announcement
1. General information
Spire Healthcare Group plc (the 'Company') and its subsidiaries
(collectively, the 'Group') owns and operates private hospitals and
clinics in the UK and provides a range of private healthcare
services.
The financial statements for the year ended 31 December 2020
were authorised for issue by the Board of Directors of the Company
on
3 March 2021.
The Company is a public limited company, which is listed on the
London Stock Exchange, incorporated, registered and domiciled in
England and Wales (registered number: 09084066). The address of its
registered office is 3 Dorset Rise, London, EC4Y 8EN.
2. Basis of preparation
The preliminary financial information for the year ended 31
December 2020 included in this report was approved by the Board on
3 March 2021. The financial information set out here does not
constitute the Company's statutory accounts for the year ended 31
December 2020, but is derived from those accounts. Statutory
accounts for 2020 will be delivered following the Company's annual
general meeting. The auditor has reported on those accounts; their
report was unqualified, did not draw attention to any matters by
way of emphasis and did not contain statements under s498 (2) or
(3) of the Companies Act 2006.
Going concern
As detailed in the Financial Review section, at 31 December 2020
the Group had unrestricted cash of GBP106.3m and access to a
further GBP100m through a committed and undrawn credit
facility.
Given the economic uncertainty arising from the COVID-19
pandemic, during April 2020 the Group announced that it had
cancelled its final dividend for the financial year ended 31
December 2019. In addition to this, the Group also took the
decision to defer certain capital investment which was planned for
2020, in order to strengthen its liquidity position. The Group has
not had to undertake any further action in regard of maintaining
its liquidity.
Under the terms of the existing Senior Loan Facility, which was
due to mature in July 2022, the Group must adhere to certain
banking covenants which are linked to its liquidity and trading
performance. As was announced in March and April 2020:
-- The Group agreed to support the NHS during the COVID-19
pandemic, which resulted in certain cash costs being covered;
and
-- Its lenders agreed to waive the covenant testing required
under the Company's Senior Facility Agreement for the two
forthcoming scheduled test periods on 30 June and 31 December
2020.
The Group confirmed in a further update in August 2020 that it
had agreed terms, with effect from the 1 July 2020, for the
variation of the NHS England ("NHSE") contract. The variation was
intended to allow Spire Healthcare to undertake a phased transition
back to normal business, by providing NHS elective care to reduce
waiting lists, whilst increasing private activity in its 35 English
hospitals. The NHSE Contract, and subsequent variation, expired
in-line with expectation at the end of December 2020.
In December 2020, the Group announced that it had signed a new
contract with NHSE, to provide a volume-based commitment aimed at
reducing NHS waiting lists when the existing contract ended on 31
December 2020. This new contract aimed to provide a smooth
transition for NHS services from the previous cost-based contract
to the new NHS framework for purchasing additional activity from
the independent sector. The new contract has a definitive end date
of 31 March 2021 and could be terminated before this by NHSE with
six weeks' notice, which has not occurred. The contract also allows
NHSE to access further capacity, under certain conditions, in
locations where there are a high concentration of COVID-19
cases.
The new contract provides Spire Healthcare with liquidity and a
greater degree of certainty as the Group receives monthly payments
on account, which is then subject to finalisation with reference to
actual volumes in the period.
As was announced in September 2020, the Group obtained agreement
from its lenders that net debt to EBITDA and interest cover ratio
covenant testing would be waived for June 2021. For December 2021
the agreement allows for a maximum net debt to EBITDA ratio of 6x
to apply if this measure has not already dipped below 4x at any
month end from June to November 2021. If the ratio does fall below
this, then the maximum leverage ratio reverts to 4x at 31 December
2021.
From September 2020 the Group undertook that available
liquidity, the aggregate of cash and committed but unutilised
facilities (any undrawn element of the Revolving Credit Facility),
would not be less than GBP50m at the end of each month.
In addition to this, the maturity date of the Senior Loan
Facility was extended by one year to July 2023.
Notwithstanding the above, given the economic uncertainty of the
COVID-19 pandemic, the Group has modelled for a number of scenarios
in its assessment of going concern and viability (see the viability
section on page 15 for more detail), covering the risk of extensive
lockdowns continuing well into the first half of 2021.
Further detail on COVID-19 is provided in the Principal Risks
section.
For the covenant testing periods ending June and December 2021,
the Directors are confident that the Group has sufficient headroom
to stay within the new covenants, with the mitigations available,
even in its severe but plausible downside scenarios.
The Group has undertaken extensive activity to identify
plausible risks which may arise and mitigating actions. Further
information on these is provided in the Principal Risks section.
Based on the current assessment of the likelihood of these risks
arising by 31 March 2022, together with their assessment of the
planned mitigating actions being successful, the Directors have
concluded that it is appropriate to prepare the accounts on a going
concern basis.
In arriving at their conclusion, the Directors have also noted
that were these risks to arise in combination, this could result in
liquidity constraints however they believe that the risk of this is
remote.
Prior period adjustment
A historical lease was categorised as non-current lease
liability in error in the balance sheet for the year ended 31
December 2019, and therefore GBP9.5m has been reclassified to
current lease liability in the prior period. The prior period
balance sheet has therefore been restated.
No third balance sheet is presented given the prior year
adjustment is a reclassification between balance sheet
categories.
3. Accounting policies
In preparing this preliminary announcement, the same accounting
policies, methods of computation and presentation have been applied
as set out in the Group's Annual Report and Accounts for the year
ended 31 December 2020, a copy of this report will shortly be
available on the Company's website at www.spirehealthcare.com.
Changes in accounting policy
New standards, interpretations and amendments applied
The following amendments to existing standards were effective
for the Group from 1 January 2020. Other than some additional
disclosures, these amendments have not had a material impact.
Effective date*
Amendments to IFRS 3 Definition of a Business 1 January 2020
Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate 1 January 2020
Benchmark Reform
Conceptual Framework for Financial Reporting 1 January 2020
Amendments to IAS 1 and IAS 8 Definition of Material 1 January 2020
----------------------------------------------------- ---------------
* The effective dates stated above are those given in the
original IASB/IFRIC standards and interpretations that are
consistent with the endorsement process for use in the EU.
New standards, interpretations and amendments in issue, but not
yet effective
As at date of approval of the Group financial statements, the
following new and amended standards, interpretations and amendments
in issue are applicable to the Group but not yet effective and
thus, have not been applied by the Group:
Effective date*
====================================================== ===============
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 1 January 2021
16 Interest Rate Benchmark Reform Phase 2
====================================================== ===============
Amendments to IFRS 3 Business Combinations - Reference 1 January 2022
to the Conceptual Framework
====================================================== ===============
Amendments to IAS 16 - Property, Plant and Equipment: 1 January 2022
Proceeds before Intended Use
====================================================== ===============
Amendments to IAS 37 - Onerous Contracts - Costs of 1 January 2022
Fulfilling a Contract
====================================================== ===============
IFRS 9 Financial Instruments - Fees in the "10 per 1 January 2022
cent" test for derecognition of financial liabilities
====================================================== ===============
Amendments to IAS 1 - Classification of liabilities 1 January 2023
as Current or Non-Current
====================================================== ===============
* The effective dates stated above are those given in the
original IASB/IFRIC standards and interpretations. As the Group
prepares its financial statements in accordance with IFRS as issued
by the IASB as endorsed by the UK, the application of new standards
and interpretations will result in an effective date subject to
that agreed by the UK Endorsement process.
The Directors do not expect the adoption of these standards,
interpretations and amendments to have a material impact on the
Consolidated or Company financial statements in the period of
initial application.
4. Critical accounting judgements and estimates
In the application of the Group's accounting policies, the
Directors are required to make judgements and estimates about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
In preparing this preliminary announcement, the significant
judgements and estimates made by management in applying the Group's
accounting policies and key sources of estimation uncertainty were
the same as those applied to the consolidated financial statements
for the year ended 31 December 2020.
5. Segmental reporting
In determining the Group's operating segment, management has
primarily considered the financial information in internal reports
that are reviewed and used by the executive management team and
Board of Directors (who together are the chief operating decision
maker of Spire Healthcare) in assessing performance and in
determining the allocation of resources. The financial information
in those internal reports in respect of revenue and expenses has
led management to conclude that the Group has a single operating
segment, being the provision of healthcare services.
All revenue is attributable to, and all non-current assets are
located in, the United Kingdom.
The NHS COVID-19 contracts are reimbursed on a cost recovery
basis and therefore the detail of revenue by location (inpatient,
day case or Out-patient) is not available.
Revenue by location (inpatient, day case or Out-patient) and
wider customer (payor) group is shown below:
(GBPm) 2020 2019
=============== ===== =====
Inpatient 188.3 370.5
Day case 170.3 298.9
Out-patient 181.9 286.9
NHS - COVID-19 362.7 -
Other 16.7 24.5
=============== ===== =====
Total revenue 919.9 980.8
=============== ===== =====
NHS 430.0 285.7
Insured 337.6 491.8
Self-pay 135.6 178.8
Other (1) 16.7 24.5
=============== ===== =====
Total 919.9 980.8
=============== ===== =====
1 Other revenue includes fees paid to the Group by Consultants
(e.g. for the use of Group facilities and services) and third-party
revenue (e.g. pathology services to third-parties).
Group revenues declined 6.2% to GBP919.9m (2019: GBP980.8m) due
to the suspension or restriction of private activity during the NHS
COVID-19 contracts. NHS revenue of GBP430.0m includes GBP362.7m
revenue from the COVID-19 contracts, net of rebates for private
activity, of which GBP10.8m relates to income relating to an
embedded operating lease (for the duration of one month during the
surge period of the NHS England contract) for the use of Spire
Healthcare hospitals as a result of a technical aspect of IFRS 15
and IFRS 16 as set out in note 3 of the Annual Report &
Accounts.
6. Other income
(GBPm) 2020 2019
================================================== ==== ====
Unrealised fair value movement on financial asset 0.4 -
Fair value movement on financial asset 0.4 -
================================================== ==== ====
Other income reflects the fair value movement in respect of the
financial asset. The financial asset relates to the profit share
arrangement with Genesis Care for the Bristol Cancer Centre sold in
2019.
7. Operating (loss) / profit
Arrived at after charging / (crediting):
(GBPm) 2020 2019
========================================================== ===== =====
Depreciation of property, plant and equipment (see note
12) 66.0 65.1
Depreciation of right of use assets (see note 12) 28.0 26.5
Lease payments made in respect of low value and short
leases 11.1 11.3
Income awarded from a judgment related to Ian Paterson
offset by related costs in the period (1) (see note 9) 11.4 0.3
Charge / (reversal) of impairment on assets held for
sale (see note 15) 0.3 (2.0)
Impairment of property, plant and equipment (see note
12) - 0.1
Impairment charge in respect of goodwill 200.0 -
Profit on disposal of property, plant and equipment (see
note 12) - (0.2)
Staff restructuring costs (see note 18) 1.5 0.6
Staff costs (net of Government Job Retention Scheme grant
and staff restructuring costs) 349.9 312.7
Repayment of Government Job Retention Scheme grant 0.2 -
========================================================== ===== =====
(1 The income awarded from a judgment totalled GBP11.6m,
including GBP0.8m of interest receivable not included in operating
profit. This is offset by GBP22.2m of Ian Paterson related
costs.)
Impairment losses and reversals of impairment are included in
other operating costs.
8. Finance income and costs
(GBPm) 2020 2019
=========================================================== ===== =====
Finance income
Interest on the RSA judgment (included in Adjusting items) (0.8) -
Interest income on bank deposits (0.1) (0.2)
----------------------------------------------------------- ----- -----
Total finance income (0.9) (0.2)
=========================================================== ===== =====
Finance cost
Interest on bank facilities 17.5 17.0
Amortisation of fee arising on facilities extensions
(1) 0.9 0.9
IFRS 9 gain arising on facilities extension (1) (0.3) -
Interest on obligations under leases 67.6 67.1
Total finance costs 85.7 85.0
=========================================================== ===== =====
Total net finance costs 84.8 84.8
=========================================================== ===== =====
(1. GBP3.3m that was recorded at the date of the 2018 extension
and GBP0.3m recorded at the date of the 2020 extension. These are
being amortised. See note 17 for more detail.)
9. Adjusting items
(GBPm) 2020 2019
========================================================== ===== =====
Asset disposals, impairment and aborted project costs 200.3 (0.1)
Remediation of regulatory compliance or malpractice costs 12.8 1.9
Hospital set up and closure costs 0.2 0.3
Business reorganisation and corporate restructuring costs - 1.1
Total Adjusting items in operating costs 213.3 3.2
Interest receivable on Adjusting items (0.8) -
========================================================== ===== =====
Total Adjusting items before tax 212.5 -
Income tax charge / (credit) on Adjusting items 0.7 (0.6)
========================================================== ===== =====
Total post-tax Adjusting items 213.2 2.6
========================================================== ===== =====
Adjusting items comprise those matters where the Directors
believe the financial effect should be adjusted for, due to their
nature or amount, in order to provide a more accurate comparison of
the Group's underlying performance.
In the period, the Group booked an impairment charge in respect
of goodwill of GBP200m (see note 13 for more detail) and a GBP0.3m
impairment on an asset held for sale following a change to the
property market brought about by the pandemic.
In the prior period, asset disposals, impairment and aborted
project costs netted a credit of GBP0.1m comprising: a credit of
GBP2m in connection with the reversal of an impairment charge on a
property which had been classified as held for sale, offset by the
GBP0.1m impairment on classification of another asset as held for
sale; a further charge of GBP0.3m taken for aborted project costs
relating to a potential hospital development at Milton Keynes; and
a write down of GBP1.5m against non-sterile Single Use Devices as a
consequence of a future Medical Device Regulation (MDR) change.
The Group has recognised GBP12.8m (2019: GBP1.9m) of charges
relating to Remediation of Regulatory Compliance or Malpractice
Costs, this includes the following two matters:
-- During the year, a judgment was received in favour of the
Group in its case against one of its insurers relating to Paterson
and the Group was awarded GBP11.6m, including GBP0.8m of interest.
. The net difference of GBP10.8m is reported within Remediation of
Regulatory Compliance or Malpractice Costs and GBP0.8m is shown in
the above table as Interest Receivable on Adjusting Items. The
insurer has sought to appeal the ruling at the Court of Appeal and
the Group is awaiting the outcome of this request. The Group is
committed to providing on-going support to Paterson's patients, and
following the release of the Paterson Public Inquiry in February
2020, the Group has incurred, or provided for, costs of GBP22.2m
during the year.
-- During 2020, the Group reached a settlement with the
Competition and Marketing Authority (CMA) as disclosed in the RNS
announcement released on 1 July 2020. Professional costs in respect
of the CMA investigation have also been recognised, bringing the
total cost recognised in the period to GBP1.3m.
During the prior year the GBP1.9m remediation charge related to
two separate regulatory compliance issues. One of the issues
related to the temporary closure of a specific site to make
improvements following a CQC inspection. The second issue related
to expected, but uncertain costs for a regulatory compliance
matter.
Hospital set up and closure costs mainly relate to the
maintenance of costs of non-operational sites.
In the prior year, business reorganisation and corporate
restructuring costs of GBP1.1m primarily related to internal group
reorganisation costs associated with a strategic review in 2019
which specifically covered Clinical and Operational functions.
Those costs were excluded from adjusted operating profit as they
related to a fundamental change in how those areas were organised
and functioned.
10. Taxation
(GBPm) 2020 2019
==================================================== ===== =====
Current tax
UK corporation tax expense 0.1 -
UK corporation tax adjustment to prior years - (0.4)
==================================================== ===== =====
Total current tax / (credit) 0.1 (0.4)
==================================================== ===== =====
Deferred tax
Origination and reversal of temporary differences (0.6) 4.3
Effect of change in tax rate 5.8 (0.4)
Adjustments in respect of prior years (2.4) (1.1)
==================================================== ===== =====
Total deferred tax charge 2.8 2.8
==================================================== ===== =====
Total tax charge 2.9 2.4
==================================================== ===== =====
Corporation tax is calculated at 19.0% (2019: 19.0%) of the
estimated taxable profit or loss for the year. The effective tax
rate on profit before taxation for the year was negative (1.3%)
(2019: 25.0%), which is mainly driven by the effects of revaluing
deferred tax assets and liabilities to 19% following the
abolishment of the rate reduction to 17% due in April 2020, and the
permanent difference relating to the GBP200m impairment charge.
Without these items, the effective tax rate is 9.4% (2019: 29.2%).
Deferred tax is detailed in note 23 of the Annual Report and
Accounts.
The effective tax assessed for the year, all of which arises in
the UK, differs from the standard weighted rate of corporation tax
in the UK.
The reconciliation of the actual tax charge to that at the
domestic corporation tax rate is as follows:
(GBPm) 2020 2019
============================================================== ======= =====
Profit/(loss) before taxation (231.0) 9.6
============================================================== ======= =====
Tax at the standard rate (43.9) 1.8
Effects of:
Expenses and income not deductible or taxable 5.6 2.8
Impairment charge in respect of goodwill (not tax deductible) 38.0 -
Adjustments to prior year (2.4) (1.5)
Difference in tax rates 5.8 (0.4)
Deferred tax not previously recognised (0.2) (0.3)
Total tax charge 2.9 2.4
============================================================== ======= =====
Expenses and income not deductible or taxable relate mostly to
depreciation on non-qualifying fixed assets, disallowable
entertaining, legal claims, professional fees and equity income
(e.g. dividends).
The charge above is driven mainly by the revaluation of deferred
tax assets and liabilities to 19% from 17% as a result of the
substantive enactment in March 2020 of the Government's decision to
cancel the reduction to 17% from 1 April 2020.
The Group does not hold any uncertain tax positions under IFRIC
23 at the year-end (2019: none).
As announced in the budget on 3 March 2021, the Government are
intending to increase the corporation tax rate from 19% to 25% from
April 2023. As this rate was not substantively enacted at the
balance sheet date, it has not been used to calculate the deferred
tax balances. If the net deferred tax liability as at 31 December
2020 were to reverse at the tax rate of 25% the net deferred tax
liability would increase by GBP17.0m.
11. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year.
2020 2019
========================================================== =========== ===========
Profit for the year attributable to owners of the Parent
(GBPm) (233.9) 7.2
========================================================== =========== ===========
Weighted average number of ordinary shares 401,081,391 401,081,391
Adjustment for weighted average number of shares held
in EBT (245,596) (252,652)
========================================================== =========== ===========
Weighted average number of ordinary shares in issue (No.) 400,835,795 400,828,739
========================================================== =========== ===========
Basic earnings per share (in pence per share) (58.4) 1.8
========================================================== =========== ===========
For dilutive earnings per share, the weighted average number of
ordinary shares in issue is adjusted to include all dilutive
potential ordinary shares arising from share options. Refer to the
Remuneration Committee Report for the terms and conditions of
instruments generating potential ordinary shares that affect the
measurement of diluted EPS.
2020 2019
========================================================= =========== ===========
Profit for the year attributable to owners of the Parent
(GBPm) (233.9) 7.2
========================================================= =========== ===========
Weighted average number of ordinary shares in issue 400,835,795 400,828,739
Adjustment for weighted average number of contingently
issuable shares - 6,485,214
========================================================= =========== ===========
Diluted weighted average number of ordinary shares in
issue (No.) 400,835,795 407,313,953
========================================================= =========== ===========
Diluted earnings per share (in pence per share) (58.4) 1.8
========================================================= =========== ===========
As the weighted average number for contingently issuable shares
would be anti-dilutive, they are excluded from the above. However,
9,372,916 shares are potentially dilutive in the future.
The Directors believe that EPS excluding Adjusting items
("Adjusted EPS") better reflects the underlying performance of the
business and assists in providing a clearer view of the performance
of the Group.
Reconciliation of profit after taxation to profit after taxation
excluding Adjusting items ("Adjusted profit"):
2020 2019
========================================================== ============ ======================
Profit for the year attributable to owners of the Parent (233.9) 7.2
(GBPm)
Adjusting items (see note 9) 213.2 2.6
========================================================== ============ ======================
Adjusted profit (GBPm) (20.7) 9.8
Weighted average number of Ordinary Shares in issue 400,835,795 400,828,739407,313,953
Weighted average number of dilutive Ordinary Shares 400,835,795
========================================================== ============ ======================
Adjusted basic earnings per share (in pence per share) (5.2) 2.4
Adjusted diluted earnings per share (in pence per share) (5.2) 2.4
========================================================== ============ ======================
As the weighted average number for contingently issuable shares
would be anti-dilutive, they are excluded from the above. However,
9,372,916 shares are potentially dilutive in the future.
12. Property, plant and equipment
Assets
in the Right of
Freehold Leasehold course use
(GBPm) property improvements Equipment of construction Total
=================================== ========= ============= ========= ================ ========== =======
Cost:
=================================== ========= ============= ========= ================ ========== =======
At 1 January 2019 876.2 129.8 426.5 10.6 733.9 2,177.0
Additions 9.2 4.4 32.0 16.9 - 62.5
Additions to ROU assets - - - - 8.9 8.9
Adjustments to existing
assets (e.g. indexation) - - - - 21.4 21.4
Disposals (19.3) (0.4) (15.3) - - (35.0)
Transfers 0.5 6.6 1.9 (9.0) - -
Assets held for sale - - - (1.1) - (1.1)
Adjustment(1) - - - - (15.4) (15.4)
At 1 January 2020 866.6 140.4 445.1 17.4 748.8 2,218.3
Reallocation between categories(2) 3.6 1.9 (5.5) - - -
Additions 7.7 7.8 26.7 8.6 - 50.8
Additions to ROU assets - - - - 0.4 0.4
Adjustments to existing
assets (e.g. indexation) - - - - 14.7 14.7
Disposals (7.4) (0.9) (20.9) - - (29.2)
Transfers - 14.8 2.0 (16.8) - -
At 31 December 2020 870.5 164.0 447.4 9.2 763.9 2,255.0
=================================== ========= ============= ========= ================ ========== =======
Accumulated depreciation
and impairment:
=================================== ========= ============= ========= ================ ========== =======
At 1 January 2019 160.7 33.0 249.1 - 158.1 600.9
Charge for year 14.4 6.0 44.7 - 26.5 91.6
Disposals (8.8) (0.3) (13.1) (0.1) - (22.3)
Impairment (note 9) - - - 0.1 - 0.1
Adjustment(1) - - - - (15.4) (15.4)
At 1 January 2020 166.3 38.7 280.7 - 169.2 654.9
Reallocation between c
ategories(2) 1.2 0.8 (2.0) - - -
Charge for the year 17.6 8.0 40.4 - 28.0 94.0
Disposals (7.4) (0.9) (20.9) - - (29.2)
Transfers 2.6 0.3 (2.9) - - -
At 31 December 2020 180.3 46.9 295.3 - 197.2 719.7
=================================== ========= ============= ========= ================ ========== =======
Net book value:
At 31 December 2020 690.2 117.1 152.1 9.2 566.7 1,535.3
=================================== ========= ============= ========= ================ ========== =======
At 31 December 2019 700.3 101.7 164.4 17.4 579.6 1,563.4
=================================== ========= ============= ========= ================ ========== =======
(1 Adjustment to correct overstatement of the Cost and
Accumulated depreciation, impact on the net book value is
GBPnil)
(2 Management identified a number of assets which should be
reclassified from Equipment to Leasehold improvements and Freehold
property to better reflect the life of the assets. These have been
reflected in the reclassification line in the note above. There is
no overall impact to the carrying value of plant, property and
equipment)
No assets are subject to restrictions on title or pledged as
security for liabilities. There were no borrowing costs capitalised
during the year ended 31 December 2020 (2019: Nil).
Impairment testing
The Directors consider property and property right of use assets
for indicators of impairment at least annually, or when there is an
indicator of impairment. As equipment and leasehold improvements do
not generate independent cash flows, they are considered alongside
the property. Due to the current COVID-19 position, and economic
uncertainty, management reviewed all properties for impairment.
This is achieved by comparing the value-in-use of the property with
its carrying value in the accounts. The value-in-use was calculated
in-line with the Group's forecast and sensitivities reflected in
the Intangible impairment review (most likely approach). Where
headroom was significant, no further work was undertaken. Where
headroom was minimal, the property was reviewed in more detail,
comparing the latest hospital specific forecast as well as
considering previous growth trends to assess if an impairment was
required. No impairment charge was taken.
The value-in-use calculations require the Group to estimate cash
flows expected to arise in the future, taking into account market
conditions. In some cases, the cash flow forecasts reflect
significant improvement in hospital performance as management
respond to local market challenges or short-term operational
challenges. The present value of these cash flows is determined
using an appropriate discount rate and market conditions covering
the five-year period to December 2025.
Management identified a number of key assumptions relevant to
the property impairment calculations, being EBITDA growth, which is
impacted by an interaction of a number of elements and assumptions
regarding revenue, cost inflation, capex maintenance spend,
discount rates and terminal growth rates. These variables are
interdependent and the forecast cash flows reflect management's
expectations based on current market conditions. Management
undertook sensitivity analysis and determined that should the
discount rate increase by 75 basis points (bp) with all other
assumptions remaining equal, sufficient headroom would remain. In
addition, given the uncertainty regarding COVID-19, Management
undertook sensitivity analysis and determined that should the
terminal growth rate decrease by 100 bp with all other assumptions
remaining equal, sufficient headroom would remain.
13. Intangible assets
(GBPm) Goodwill
========================================================= ========
Cost or valuation:
At 1 January 2019, 31 December 2019 and 31 December 2020 518.8
========================================================= ========
Impairment:
At 1 January 2019 and 31 December 2019 1.0
========================================================= ========
Impairment charged in year 200.0
========================================================= ========
At 31 December 2020 201.0
========================================================= ========
Carrying amount:
At 31 December 2020 317.8
========================================================= ========
At 1 January 2019 and 31 December 2019 517.8
========================================================= ========
Impairment testing
The Directors treat the business as a single cash-generating
unit for the purposes of testing goodwill for impairment. The
recoverable amount of goodwill is calculated by reference to its
estimated value-in-use (using the most likely approach). In order
to estimate the value-in-use, management has used trading
projections covering the period to December 2025.
Management identified a number of key assumptions relevant to
the value-in-use calculations, being revenue growth, which is
impacted by an interaction of a number of elements of the operating
model, including pricing trends, volume growth and the mix and
complexity of discharges, assumptions regarding cost inflation and
discount rate. These variables are interdependent and the forecast
cash flows reflect management's expectations based on current
market trends. The COVID-19 pandemic has caused additional
estimation and judgement into the forecasts. Management have
reviewed their expectation based on the current environment and the
impact of the new NHSE contract in Q1 2021.
The Group has used a discount rate reflecting the Group's cost
of capital of 9.4% (2019: 8.6%), adjusted for the effects of IFRS
16. A long-term growth rate of 2.0% has been applied to cash flows
beyond 2025.
In assessing the carrying value of the historical goodwill
balance, the Group has recognised the effect current financial
market conditions have had on the cost of capital which it uses to
discount future cash flows to current value; accordingly it has
taken an impairment in the period to reduce historical goodwill
from GBP517.8m to GBP317.8m . This impairment charge of GBP200m has
been treated as an Adjusting item.
A sensitivity analysis has been performed in order to review the
impact of changes in key assumptions. For example, an increase of
100 basis points (bp) in the pre-tax discount rate to 10.4 % with
all other assumptions held constant, would result in a further
impairment of approximately c. GBP120m. Similarly, given the
COVID-19 uncertainty , reducing the terminal growth rate by 100 bp
in the period beyond 2025, with all other assumptions held
constant, would also result in an additional impairment of
approximately c. GBP 190m, or taking a 2.5% reduction on the
terminal value, with all other assumptions held constant, would
result in an additional impairment of GBP19m.
14. Trade and other receivables
(GBPm) 2020 2019
========================================== ===== =====
Amounts falling due within one year:
Trade receivables 35.4 42.7
Unbilled receivables 35.0 13.0
Prepayments 18.3 15.2
Other receivables 18.0 5.8
========================================== ===== =====
106.7 76.7
Allowance for expected credit losses (5.3) (3.7)
========================================== ===== =====
Total current trade and other receivables 101.4 73.0
========================================== ===== =====
Unbilled receivables includes one-off accrued income of GBP30m
due from NHS England following the contract variation which took
effect from 1 July 2020. This is expected to be settled in H1 2021,
subject to customer agreement in respect of volume based variable
consideration. The balance of unbilled receivables reflects work in
progress where a patient had treatment, or was receiving treatment,
at the end of the period and the invoice had not yet been raised
.
Other receivables includes the GBP11.6m receivable following the
RSA judgment, cash received in January 2021 (see note 9 for more
detail), and the GBP5m insurance reimbursement right (2019:
GBP5.6m).
Trade receivables comprise amounts due from private medical
insurers, the NHS, patients, Consultants and other third parties
who use the Group's facilities. Invoices to customers fall due
within 60 days of the date of issue. Under normal trading
conditions (which applied until the end of March, some of the
agreements with NHS customers operate on the basis of monthly
payments on account with quarterly reconciliations, which can lead
to invoices being paid after their due date. From March, under the
COVID-19 NHS contracts, invoices were raised and settled on a
weekly basis. The NHS England contract included volume based
adjustments which were subject to calculation and agreement at the
end of the contract, and therefore included in unbilled receivables
at the year end.
The ageing of trade receivables is shown below and shows amounts
that are past due at the reporting date (excluding payments on
account). A provision for expected credit losses has been
recognised at the reporting date through consideration of the
ageing profile of the Group's trade receivables and the perceived
credit quality of its customers reflecting net debt due. The
carrying amount of trade receivables, net of expected credit
losses, is considered to be an approximation to its fair value.
The loss allowance as at 31 December 2020 for trade receivables
was determined as follows:
Current 0-30 days 31-90 days 91-364 1-2 years Total
days
========================= ======= ========= ========== ====== ========= =====
Expected loss rate 1.9% 14.7% 33.3% 45.5% 21.9% 12.2%
Gross debt (GBPm) 26.5 3.4 2.7 4.4 6.4 43.4
Less payments on account
(GBPm) (8.0)
-----
Carrying amount of trade
receivables (GBPm) 35.4
------- --------- ---------- ------ --------- -----
Loss allowance (GBPm) 0.5 0.5 0.9 2.0 1.4 5.3
========================= ======= ========= ========== ====== ========= =====
The loss allowance as at 31 December 2019 for trade receivables
was determined as follows:
Current 0-30 days 31-90 days 91-364 1-2 years Total
days
========================= ======= ========= ========== ====== ========= ======
Expected loss rate 0.6% 5.7% 10.6% 35.0% 35.7% 5.1%
Gross debt (GBPm) 52.6 8.7 4.7 4.0 2.8 72.8
Less payments on account
(GBPm) (30.1)
------
Carrying amount of trade
receivables (GBPm) 42.7
------- --------- ---------- ------ --------- ------
Loss allowance (GBPm) 0.3 0.5 0.5 1.4 1.0 3.7
========================= ======= ========= ========== ====== ========= ======
Trade receivables are written off when there is no longer a
reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the
failure of a debtor to engage in a repayment plan with the group,
and failure to make contractual payments for a period of greater
than 2 years past due.
The Group assesses on a forward looking basis expected credit
losses associated with its debt instruments carried at amortised
cost. The impairment methodology applied for trade receivables is
the simplified approach, which requires expected lifetime losses to
be recognised from initial recognition of the trade
receivables.
Trade receivables after expected credit losses comprise the
following wider customer/payor groups:
(GBPm) 2020 2019
========================= ==== ====
Private medical insurers 21.5 23.2
NHS 1.0 7.2
Patient debt 3.4 3.2
Other 4.2 5.4
========================= ==== ====
30.1 39.0
========================= ==== ====
The movement in the allowance for impairment in respect of trade
receivables during the year was as follows:
(GBPm) 2020 2019
========================= ===== =====
At 1 January 3.7 4.7
Provided in the year 1.9 0.8
Utilised during the year (0.3) (0.4)
Released during the year - (1.4)
========================= ===== =====
At 31 December 5.3 3.7
========================= ===== =====
The Group applies the IFRS 9 simplified approach to measuring
Expected Credit Losses (ECLs) for trade receivables. Under this
standard, lifetime ECL provisions are recognised for trade
receivables using a matrix of rates dependant on age thresholds and
customer types. The ECL rates are determined with reference to
historical performance of each payor age group during the last two
years.
To develop the ECL matrix, trade receivables were grouped
according to shared characteristics (payor/payor type) and the days
past due. As the majority of the Group's debt is receivable from
large, well-funded insurance companies, the National Health Service
or from a large number of individuals, the Group has concluded that
historical debt performance of the portfolio during the last two
reporting periods provides a reasonable approximation of the future
expected loss rates for each payor age category with the exception
this year for the impact of COVID-19 on individual patient debt.
The ECL matrix is refreshed at each reporting date. Trade
receivables are not modified after initial recognition. Payments on
account are excluded from the calculation. No collateral is held in
respect of trade receivables. Expected credit losses are calculated
on a collective basis and are not allocated to individual financial
assets.
The Group has not changed the methodology in respect of the
Expected Credit Loss (ECL) calculations due to the COVID-19
pandemic. The Group's customer profile includes large organisations
that have stable credit ratings, and the payment profiles have
remained stable for historical debts. The exception to this
reflects Patient Debt where economic circumstances can have a
significant impact and given the current economic uncertainty,
remains the highest risk for the Group. Therefore management have
reviewed this Group in isolation and provided for additional
coverage based on the impact of the economic uncertainty by
increasing the expected loss rate.
15. Non-current assets held for sale
As at December 2020, the Group's management remain committed to
sell one property, Spire St Saviours Hospital, which closed in
2015. The property is still expected to be sold within twelve
months, remains classified as held for sale and is presented
separately in the consolidated balance sheet. Impairment of GBP0.3m
has been charged during the year (2019: GBP2.0m reversed) to reduce
the carrying value to the proceeds now expected from the sale.
In addition, the Group's management have committed to sell a
parcel of land at Bostocks Lane. Negotiations are complete and the
buyer has submitted a planning application to the authorities. The
COVID-19 pandemic has slowed this process, as with St Saviours,
however management remain committed to the sale and expect to
complete within twelve months. This land therefore remains as
classified as held for sale.
(GBPm) 2020 2019
===================================================== ==== ====
Spire St Saviours Hospital property (note 9) 3.7 4.0
Bostocks Lane (East Midlands Cancer Centre) (note 9) 1.1 1.1
===================================================== ==== ====
4.8 5.1
===================================================== ==== ====
16. Share capital and reserves
2020 2019
=============================== =========== ===========
Authorised shares
Ordinary share of GBP0.01 each 401,081,391 401,081,391
=============================== =========== ===========
401,081,391 401,081,391
=============================== =========== ===========
Issued and fully paid GBP0.01 ordinary
shares
========================
Shares GBP'000
=============================== =========== ===========
At 31 December 2020 401,081,391 4,010
=============================== =========== ===========
At 31 December 2019 401,081,391 4,010
=============================== =========== ===========
Capital reserves
This reserve represents the loans of GBP376.1m due to the former
ultimate parent undertaking and management that were forgiven by
those counterparties as part of the reorganisation of the Group
prior to the IPO in 2014.
EBT share reserves
Equiniti Trust (Jersey) Limited is acting in its capacity as
trustee of the Company's Employee Benefit Trust ('EBT'). The
purpose of the EBT is to further the interests of the Company by
benefiting employees and former employees of the Group and certain
of their dependants. The EBT is treated as an extension of the
Group and the Company.
During 2020, the EBT purchased no shares (2019: nil shares
acquired).
Where the EBT purchases the Company's equity share capital the
consideration paid, including any directly attributable incremental
costs, is deducted from equity attributable to the Company's equity
holders until the shares are cancelled or reissued. As at 31
December 2020, 239,283 shares (2019: 252,652) were held by the EBT
in relation to the Directors' Share Bonus award and Long-Term
Incentive Plan.
(number of shares) 2020 2019
===================== ======== =======
At 1 January 252,652 252,652
Exercised - 2017 LTIP (13,369) -
- 239,283 252,652
===================== ======== =======
At 1 January 2020, the EBT held 252,652 shares. During the year
2020, 13,369 shares were exercised. There were no new purchases of
shares and at 31 December 2020 the EBT held 239,283 shares.
At 1 January 2019 and 31 December 2019, the EBT held 252,652
shares.
The EBT share reserve represents the consideration paid when the
EBT purchases the Company's equity share capital, until the shares
are reissued.
Hedging reserve
The balance of GBP3.2m at 31 December 2020 (2019: GBP2.1m)
reflects the GBP1.4m (2019: GBP0.8m) recycled in the period, the
fair value charge of GBP2.9m (2019: GBP2.8m) and the GBP0.4m tax
credit on the loss (2019: GBP0.4m) to give a net movement of
GBP1.1m during the year (2019: GBP1.6m) on a hedged transaction.
See note 17 for further information.
17. Borrowings
Bank borrowings
The bank loans are secured by a share pledge over the
shareholdings of material subsidiaries of the Group. On 23 July
2014, the Group was refinanced, and it entered into a bank loan
facility with a syndicate of banks, comprising a five-year,
GBP425.0m term loan and a five-year GBP100.0m Revolving Credit
Facility (RCF). The loan is non-amortising and carries interest at
a margin of 2.25% over LIBOR (2019: 2.50% over LIBOR).
In July 2018, the Group extended the maturity of its bank loan
facility for a further 3 years from July 2019 to July 2022 and
recorded this as a non-substantial loan modification not resulting
in de-recognition. A modification gain of GBP3.3m was recorded at
the date of extension, which in turn decreased the carrying value
of the loan held.
In September 2020 the Group further extended the maturity of its
senior loan facility of GBP425.0m for a further year from July 2022
to July 2023. The RCF will remain at GBP100.0m until July 2022 when
it will then reduce to GBP87.0m until July 2023. This was also
recorded as a non-substantial loan modification not resulting in
de-recognition and a modification gain of GBP0.3m was recorded at
the date of extension, which in turn decreased the carrying value
of the loan held.
(GBPm) 2020 2019
=========================================== ===== =====
Amount due for settlement within 12 months 2.2 1.7
Amount due for settlement after 12 months 418.6 419.1
=========================================== ===== =====
Total bank borrowings 420.8 420.8
=========================================== ===== =====
Terms and debt repayment schedule
The maturity date is the date on which the relevant bank loans
are due to be fully repaid.
The carrying amounts drawn (after issue costs and including
interest accrued) under facilities in place at the balance sheet
date were as follows:
(GBPm) Maturity Margin over 2020 2019
LIBOR
=========================== ========== =========== ===== =====
Senior finance facility(1) July 2023 2.25% 422.6 423.2
=========================== ========== =========== ===== =====
1 the difference between the carrying amount of the facility and
the value of the debt repayment schedule relates to the fees on the
loan extensions, which are amortised in accordance with IFRS 9
The Group also has access to a further GBP100m through a
committed and undrawn revolving credit facility to July 2022, when
it will reduce as detailed above.
Changes in bank borrowings arising from financing activities
Non cash Loan modification(2)
(GBPm) 1 January Cash flows changes(1) 31 December
=========== ========= ========== =========== ==================== ===========
2020
Bank loans 420.8 (18.1) 17.5 0.6 420.8
Total 420.8 (18.1) 17.5 0.6 420.8
=========== ========= ========== =========== ==================== ===========
(1 Non-cash changes reflect interest charged on the loan)
(2 the loan modification relates to fees incurred on the loan
extension, which are amortised in accordance with IFRS 9)
Non cash Loan modification
(GBPm) 1 January Cash flows changes 31 December
=========== ========= ========== ======== ================= ===========
2019
Bank loans 420.4 (17.4) 16.9 0.9 420.8
Total 420.4 (17.4) 16.9 0.9 420.8
=========== ========= ========== ======== ================= ===========
Lease liabilities
Obligations under finance leases
The Group has finance in respect of hospital properties,
vehicles, office and medical equipment. The leases are secured on
fixed and floating charges over both the present and future assets
of material subsidiaries in the Group. Leases, with a present value
liability of GBP749.5m (2019: GBP745.3m), expire in various years
to 2042 and carry incremental borrowing rates in the range
4.5-12.9% (2019: 4.5-12.9%). Rent in respect of hospital property
leases are reviewed annually with reference to RPI, subject to
assorted floors and caps. The discount rate used are calculated on
a lease by lease basis, and are based on estimates of incremental
borrowing rates.
Changes in lease liabilities arising from financing
activities
(GBPm) Non cash
1 January Cash flows changes Additions(1) 31 December
================== ========= ========== ======== ============== ===========
2020
Lease liabilities 745.3 (79.8) 68.9 15.1 749.5
================== ========= ========== ======== ============== ===========
Total 745.3 (79.8) 68.9 15.1 749.5
================== ========= ========== ======== ============== ===========
(1 Additions include both new lease entered into and indexation
of existing leases. See note 12 for more detail.)
(GBPm) Non cash
1 January Cash flows changes Additions 31 December
================== ========= ========== ======== =========== ===========
2019
Lease liabilities 726.1 (77.4) 84.1 12.5 745.3
================== ========= ========== ======== =========== ===========
Total 726.1 (77.4) 84.1 12.5 745.3
================== ========= ========== ======== =========== ===========
In the year, the Group recognised charges of GBP11.1m (2019:
GBP11.3m) of lease expenses relating to short term and low value
leases for which the exemption under IFRS 16 has been taken. Cash
outflows in respect of these are materially in-line with the
expense recognised, resulting in a total cash outflow of GBP90.9m
(2019: GBP88.7m). The Group has not made any variable lease
payments in the year. The Group is not a lessor for any leases to
external parties. There have been no (2019: no) sale and leaseback
transactions in this period.
Some leases receive RPI increases on an annual basis which
affects both the cash flow and interest charged on those leases.
Except for this increase, cash flows and charges are expected to
remain in-line with current year.
See the Right Of Use (ROU) section of note 12 for more detail on
depreciation of the Right of Use (ROU) assets and note 8 for more
detail on the interest expense relating to leases.
Derivatives
The following derivatives were in place at 31 December:
Interest Maturity Notional Carrying
rate date amount value Liability
======================== ======== ========= ======== ================
31 December 2020 (GBPm)
Interest rate swaps 1.2168% July 2022 213.0 (4.0)
------------------------ -------- --------- -------- ----------------
31 December 2019 (GBPm)
Interest rate swaps 1.2168% July 2022 213.0 (2.5)
======================== ======== ========= ======== ================
(GBPm) 2020 2019
=========================================== ==== ====
Amount due for settlement within 12 months 2.5 1.0
Amount due for settlement after 12 months 1.5 1.5
=========================================== ==== ====
Total derivatives 4.0 2.5
=========================================== ==== ====
The movement in respect of the derivative reflects GBP1.4m
(2019: GBP0.8m) recycled in the period and a GBP2.9m (2019:
GBP2.8m) change in fair value. All movements are reflected within
other comprehensive income.
18. Provisions
Business
restructuring
(GBPm) Medical malpractice and other Total
================================ =================== ============== =====
At 1 January 2020 10.2 2.9 13.1
Increase in existing provisions 23.1 3.6 26.7
Provisions utilised (2.8) (2.8) (5.6)
Provisions released (0.6) (0.6) (1.2)
================================ =================== ============== =====
At 31 December 2020 29.9 3.1 33.0
================================ =================== ============== =====
Medical malpractice relates to estimated liabilities arising
from claims for damages in respect of services previously supplied
to patients. Amounts are shown gross of insured liabilities. Only
when the reimbursement right from insurance recoveries is virtually
certain is a separate asset recognised, as such insurance
recoveries of GBP5.0m (2019: GBP5.6m) are recognised in other
receivables.
Following the completion of the criminal proceedings against Ian
Paterson, a Consultant who previously had practising privileges at
Spire Healthcare, in 2017, management agreed settlement with all
known civil claimants (and the other co-defendants). Spire
Healthcare continues to provide on-going support to Paterson's
patients, and following the publication of the Public Inquiry
report issued on 4 February 2020, continues to hold a provision for
its current estimate of the future anticipated costs. It is
possible that, as further information becomes available, an
adjustment to this provision will be required, but at this time, it
reflects management's best estimate of the obligation.
The provision in relation to the Ian Paterson costs has been
determined before account is taken of any potential further
recoveries from insurers.
Business restructuring and other primarily includes staff
restructuring costs. The Group has settled with the Competition and
Marketing Authority (CMA) as disclosed in the RNS announcement
released on 1 July 2020, and GBP1.2m was settled in August
2020.
Provisions as at 31 December 2020 are materially considered to
be current and expected to be utilised at any time within the next
twelve months.
19. Trade and other payables
(GBPm) 2020 2019
================================ ===== =====
Trade payables 58.0 58.5
Accrued expenses 48.3 33.9
Social security and other taxes 9.8 8.0
Other payables 20.8 13.8
Trade and other payables 136.9 114.2
================================ ===== =====
Accrued expenses includes the repayment made during 2021 of the
government grant previously received, for furloughed staff,
amounting to GBP0.2m. In addition, accrued expenses includes
general operating expenses incurred, but where an invoice was yet
to be received at the year end, as well as holiday pay accrued
during the year due to staff deferring leave to maintain operations
throughout the COVID-19 pandemic, and bonuses accrued during the
year and paid during 2021.
Other payables include an accrual for pensions and payments on
account. Revenue is not recognised in respect of payments on
account until the performance obligation has been met. At year end
the balance of payments on account was GBP7.5m (2019: GBP5.3m).
20. Dividends
(GBPm) 2020 2019
======================================================= ==== ====
Amounts recognised as distributions to equity holders
in the year:
- final dividend for the year ended 31 December 2019
not approved (2019: 2.5 pence) - 10.0
- interim dividend for the year ended 31 December 2020
not declared (2019: 1.3 pence) - 5.2
======================================================= ==== ====
Total - 15.2
======================================================= ==== ====
A final dividend of 2.5 pence per share for the year ended 31
December 2019 amounting to a total final dividend of approximately
GBP10.0m, which was expected to the proposed at the Company's
Annual General Meeting in May 2020 was removed following the
uncertainty caused by the COVID-19 pandemic. No interim dividend
was proposed, nor is a final dividend for the year ended 31
December 2020 in light of the
COVID-19 environment.
21. Share-based payments
The Group operates a number of share-based payment schemes for
Executive Directors and other employees, all of which are equity
settled.
The Group has no legal or constructive obligation to repurchase
or settle any of the options in cash. The total cost in respect of
LTIPs and SAYE recognised in the income statement was GBP1.7m in
the year ended 31 December 2020 (2019: GBP1.0m). Employer's
National Insurance is being accrued, where applicable, at the rate
of 14.3%, which management expects to be the prevailing rate at the
time the options are exercised, based on the share price at the
reporting date. The total National Insurance charge for the year
was GBP0.2m (2019: GBP0.2m).
The following table analyses the total cost between each of the
relevant schemes, together with the number of options
outstanding:
2020 2019
==================== ====================
Number Number
Charge of options Charge of options
GBPm (thousands) GBPm (thousands)
========================== ====== ============ ====== ============
Long Term Incentive Plan 1.6 10,193 0.8 5,120
Deferred Share Bonus Plan - 244 - -
Save As You Earn (SAYE) 0.1 3,222 0.2 3,764
========================== ====== ============ ====== ============
1.7 13,659 1.0 8,884
========================== ====== ============ ====== ============
A summary of the main features of the scheme is shown below:
Long Term Incentive Plan
The Long Term Incentive Plan ('LTIP') is open to Executive
Directors and designated senior managers, and awards are made at
the discretion of the Remuneration Committee. Awards are subject to
market and non-market performance criteria.
Awards granted under the LTIP vest subject to achievement of
performance conditions measured over a period of at least three
years, unless the Committee determines otherwise. Awards may be in
the form of conditional share awards or nil-cost options or any
other form allowed by the Plan rules.
Vesting of awards will be dependent on a range of financial,
operational or share price measures, as set by the Committee, which
are aligned with the long-term strategic objectives of the Group
and shareholder value creation. Not less than 30% of an award will
be based on share price measures. The remainder will be based on
either financial and/or operational measures. At the threshold
performance, no more than 25% of the award will vest, rising to
100% for maximum performance.
On 6 April 2020, the Company granted a total of 5,638,223
options to the Executive directors and other senior management. The
options will vest based on earnings per share ('EPS') (20%) targets
for the financial year ending 31 December 2022, relative total
shareholder return ('TSR') (40%) targets on performance over the
three year period to 31 December 2022 and operational excellence
('OE') (40%) targets based on employee engagement targets and
regulatory ratings for the current portfolio of hospitals, subject
to continued employment. Upon vesting, the options will remain
exercisable until 1 April 2030.
Deferred Share Bonus Plan
The Deferred Share Bonus Plan is a discretionary executive share
bonus plan under which the Remuneration Committee determines that a
proportion of a participant's annual bonus will be deferred. The
market value of the shares granted to any employee will be equal to
one-third of the total annual bonus that would otherwise have been
payable to the individual. The awards will be granted on the day
after the announcement of the Group's annual results. The awards
will normally vest over a three-year period.
On 6 April 2020, the Company granted a total of 243,973 options
to Executive directors, with a vesting date of 6 April 2023. The
options will vest based on a target EBITDA net debt leverage ratio
for the year ending 31 December 2020, and subject to continued
employment.
Save As You Earn
The Save As You Earn ("SAYE") is open to all Spire Healthcare
employees. Awards are subject to non-market performance criteria.
Vesting will be dependent on continued employment for a period of 3
years from grant. The requirement to save is a non-vesting
condition.
On 3 May 2019, the Company launched the SAYE scheme. The Company
has not launched any new SAYE schemes in the period. There are no
performance conditions in respect of the scheme and the vesting
date is 1 June 2022. Upon vesting, the options will remain
exercisable for 6 months. The IFRS 2 charge has been calculated
using an adjusted Black Scholes model with judgements including
leavers of the scheme (employees who may cease to save) and
dividend yields.
22. Commitments
Consignment stock
At 31 December 2020, the Group held consignment stock on sale or
return of GBP22.8m (2019: GBP23.2m). The Group is only required to
pay for the equipment it chooses to use and therefore this stock is
not recognised as an asset.
Capital commitments
Capital commitments comprise amounts payable under capital
contracts which are duly authorised and in progress at the
consolidated balance sheet date. They include the full cost of
goods and services to be provided under the contracts through to
completion. The Group has rights within its contracts to terminate
at short notice and, therefore, cancellation payments are
minimal.
Capital commitments at the end of the year were as follows:
(GBPm) 2020 2019
================================ ==== ====
Contracted but not provided for 20.9 16.7
================================ ==== ====
23. Contingent liabilities
The Group had the following guarantees at 31 December 2020:
-- the bankers to Spire Healthcare Limited have issued a letter
of credit in the maximum amount of GBP1.5m (2019: GBP1.5m) in
relation to contractual pension obligations and statutory insurance
cover in respect of the Group's potential liability to claims made
by employees under the Employers' Liability (Compulsory Insurance)
Act 1969;
-- under certain lease agreements entered into on 26 January
2010, the Group has given undertakings relating to obligations in
the lease documentation and the assets of the Group are subject to
a fixed and floating charge.
24. Events after the reporting period
There have been no events to disclose.
Shareholders' information
Registered Office and Head Office:
Spire Healthcare Group plc
3 Dorset Rise
London
EC4Y 8EN
Tel +44 (0)20 7427 9000
Fax +44 7427 9001
(Registered in England & Wales No. 09084066)
Corporate Website
Shareholder and other information about the Company can be
accessed on the Company's website:
www.spirehealthcare.com
Financial Calendar
2021 Annual General Meeting (London) 13 May 2021
Announcement of 2021 half year results September 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
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END
FR SSUSFLEFSEFD
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March 04, 2021 02:00 ET (07:00 GMT)
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