Shares in a private healthcare company that was one of the top performing flotations last year have slumped after it warned of weakening NHS demand.
Spire Healthcare said yesterday that NHS spending cuts could hit its full-year results.
In a downbeat prediction alongside its half-year figures, Spire said that it expected “near-term weakness in NHS demand” for the rest of the year, although Rob Roger, the chief executive, expected a recovery in the “medium to long term”.
However, shares in Spire closed down 14.2 per cent to close at 344½p.
Spire operates 39 private hospitals and 13 clinics. About a third of its revenue comes from work carried out for the NHS.
Advertisement
Mr Roger said that action taken by NHS Trusts to try to reduce deficits for 2015-16 meant that growth in its NHS business would be largely flat in the second six months.
This could affect its full-year performance, despite reporting a strong first half when it generated a pre-tax profit of £30.8 million on revenue that rose nearly 8 per cent to about £450 million.
Spire said that it expected its earnings and revenues to rise by between 4 per cent and 6 per cent for the year. This is down from an earlier prediction that it would achieve mid- to-high single digit growth.
Mr Roger tried to quell shareholders’ fears by pointing out that sales had improved in its three main patient groups: private medical insurance, self-pay and NHS.
Spire has also benefited from its purchase of St Anthony’s Hospital, in Cheam, Surrey, which has helped to increase sales alongside rigorous cost controls that pushed operating profits up by 10 per cent to £50.6 million.
Advertisement
Mr Roger said that any weakness in NHS demand was likely to be short-lived. “We are confident that the medium to long-term trends in this business remain very positive for Spire and that, when combined with our growing strength in private medical insurance and self-pay, the opportunity to deliver value to shareholders remains compelling.”
Spire has had an eventful history since it was created seven years ago when Bupa sold its hospital estate.
It endured a tough recession under Cinven, its former private equity owner, as many patients saved money by opting back into the NHS. However, since the economy started to recover, the group has experienced a pick-up in performance and attracted a host of blue-chip investors when it floated.
In June, Mediclinic International, a large South African hospital investor, bought a 29 per cent stake in Spire in a gamble that an NHS funding squeeze would push more British patients towards the company’s private alternative.
Mediclinic, which operates the hospital in Pretoria where Nelson Mandela was treated towards the end of his life, bought its £432 million stake from Cinven. Spire’s main rival is BMI, which also has a large South African shareholder and is largely controlled by Netcare, an investment company listed on the Johannesburg Stock Exchange.
Advertisement
Mr Roger said that he remained positive about Spire’s future, adding: “We continue to see an increase in demand for healthcare services in the UK, caused by a combination of a growing, ageing population and advancement in medical technology.”